Oh, No! Not Another One?

 

Quite often you can see things otherwise invisible when you look at a big picture.. For example if you were flying from San Fran to Bangor, ME, no one in your interactions along the way would be able to tell you what was happening across the entire route in real time.  You simply trust that and hope all will end well.

But if you are at a console watching air traffic control across the entire United States, and noticing how suddenly those little plane shapes disappear whenever they cross the Mississippi anywhere between Memphis and Cedar Rapids, you know from that anomaly that something must be wrong… You don’t know what, but only you see it from looking at the macro picture, a hole developing into which those entering, never return.

Which is why some of us like to look at macro math.  Basically it is stuff that no one else thinks is important and for most of daily living, they are correct.  But if you are used to looking at the same picture every day and one day it is different, a person familiar would notice that.  No one else would.  Imagine waking up one morning and walking through your house and quickly looking up from your footsteps, seeing that portrait you have hanging on the wall has its subject facing left, instead of right… You would be unnerved, right?  Yet a visitor to your place, would not notice.

Here is where we are. We are already in a free-fall towards another financial crises which if not addressed quickly, will repeat 2008-9 and possibly be bigger. It is strongly possible that this summer quarter’s financial reports leaking out in October, will cause a crash similar to what happened 8 years ago….

I’m sure this is a surprise to you as it was me. I sure you are as skeptical of my telling of it, as you would be my insisting I saw my portrait whose image had been flipped during the night..  Main stream’s financial media and both political parties are still asleep and dreaming of the promise that the economy is buoyed and is roaring back.  Just like how we all get surprised when acquaintances of ours, actively healthy people, suddenly confide they’ve been diagnosed with terminal cancer.  That is the cruel side of life. Sometimes the outside does not properly show the hidden condition on the inside.

What has not been shown in all our financial reports, is the massive amount of quantitative easing buoying these glowing results.  QE for short, is where government prints money costing nothing, and then spends it on something. They could loan it.  They could donate it.  They can buy stock with it. They can do anything with printed money that can be done with circulated money… And in a recession, this policy works… (which is why we do it)… Businesses get loans and stay afloat; banks get loans and keep their doors open. But the last recession was 8 years ago, and across the world’s financial markets, certain actors still are doing it…

So in our newscasts we appear to have a great recovery just before the elections. Our stock market is high, our unemployment is quite low, and our corporate profits continue to rise.  Is their any other way to measure it?

But does it make a difference to you if the reason the stock market is high because many of the stocks are now owned by government entities involved in quantitative easing, bought at low times to boost prices keeping plummeting crashes from continuing?  Does it make a difference that corporate profits are continuing because of massive increases in corporate debt primarily taken on to avoid showing a negatively balanced profit sheet, debt often owed to government entities which bought them up when no one else would to help keep their prices high… Does it make a difference if I told you that despite all the newly minted private sector jobs now being generated at reduced wage levels from skeletons of the older jobs now gone, the entire total income now being generated by all those working, is less per person than was before the great recession of 2008-9?  But you knew all this, right?

When put all together, the bottom line is that our economy is actually in a recession if measured by “real” corporate profits being down,  by “total amount of generated wages” impacting the economy being down,  by corporate “revenue streams” across our business world, being down,  by our “stock market minus QE infused purchases” being down,… but the supports provided by QE hide these facts from us all.  And it is not just here in the US. It is even a bigger global problem. There is the EU who prints money for every Southern European economic crises.  There is Japan who prints money to prop up everything. There is the ongoing problem in China. There is Britain who is now pumping to keep Brexit from collapsing its economy. Globally in just one quarter, we witnessed QE soar to never-before-seen levels. and it hasn’t stopped climbing.

Have you noticed how even with bad economic news, stocks go up?  That should not be — a reality which is obvious to grasp when parsed this way….

“Uh-oh, looks like you are going to lose a lot of money/  Oh! No problem, I’ll just buy more stocks at a higher price then..”  Time in and time out, this is exactly what happens.

QE is buying those stocks… and we’ve reached the level where there are so many, there is no one there to sell them too… Bond yields are negative and yet they keep buying.

“We are therefore in uncharted waters and it is impossible to predict the unintended consequences of very low interest rates, with some 30% of global government debt at negative yields, combined with quantitative easing on a massive scale” —Chairman Lord Jacob Rothschild of Rothschild Investment Trust

Notice how across the globe, governments are now buying up $180 billion a month or $30 billion per month higher than all the QE in the world at the peak of the Recession (2009).

Now jump to the crux of the problem.

Did you notice the climb of negative yield debt just in the past 8 months. Aren’t negative yields dangerous?

Can be. Already one third of all sovereign debt yields negative interest rates. That means that investors are effectively paying borrowers to lend to them. The Bank of Ireland and Royal Bank of Scotland already charge depositors interest, as opposed to paying depositors interest.   That’s bizarre. Not to mention unsustainable.

At the current rate of decline, the entire global market will be in subzero land by the end of the year.

 

Around 45% of the global “fixed income” market is now “compromised” by central bank buying.” 

This is compounded by the new fact that nearly half of the bond buyers in the world don’t care about price because they print money out of nothing.   So what does this look like? Take Japan, for example.

Japan’s biggest banks are running out of room to sell their government bond holdings, pushing the central bank closer to the limits of its record monetary easing.   Finding willing sellers is a headache for Governor Haruhiko Kuroda as the central bank prepares to review policy at next month’s board meeting, amid growing concern among economists that he has few tools left to revive the economy. Record bond buying has already saddled the Bank of Japan with more than a third of outstanding sovereign notes, draining liquidity from the market and making it more volatile.

As proof of this trend, on August 9th, the Bank of England couldn’t find enough bonds to buy.

In plain terms it is as if you were now living solely off borrowed money and constantly getting new loans just to make the payments on your past due old loans and then suddenly, not being able to get any new loans anymore……

As we can see from the first chart above, Japan’s “need” is near $90 billion a month, which means once the loans potential dries up… there is an $90 billion dollar hole into which everything collapses…

Don’t underestimate what is happening here, the BoJ is buying a lot more than just sovereign bonds.

The Bank of Japan’s controversial march to the top of shareholder rankings in the world’s third-largest equity market is picking up pace.  Already a top-five owner of 81 companies in Japan’s Nikkei 225 Stock Average, the BOJ is on course to become the No. 1 shareholder in 55 of those firms by the end of next year, according to estimates compiled by Bloomberg from the central bank’s exchange-traded fund holdings.

 

Japan may be the extreme example, but they are hardly alone.  

The balance sheet assets of the world’s six major central banks hit a new all-time record, increasing to $16.9 trillion from $4.9 trillion 10 years ago, a 239 percent increase.  All the major global central banks are buying up financial assets to the point that global liquidity is drying up. In other words, the central banks are becoming the markets.  Markets have become so distorted by central bank activity that they are no longer transmitting very useful information about the economy at all.”

Bad as this may sound, this is still not the real problem  Here is the REAL scary problem. These low negative rates in safe bonds are sending buyers out in droves to the unsafe markets to find any yield, even small ones of 5%.  In these markets the risk looms so large for so small a payoff, that one day’s trade can wipe a years of yield right off the books.

Volume in emerging markets have soared double their previous record in volume sold since March.

But that is just one example

Junk bonds, rallied 48% this year, even while junk bond defaults have hit five year highs.

Corporate debt.

Corporations are issuing record amounts of debt, and investors and QE are gobbling it up.

Companies worldwide are poised to raise more than $100 billion so far this month, the most for the period in Bloomberg data going back to 1999…. The average yield on sterling-denominated corporate bonds has fallen to a record-low 2.19 percent, according to Bank of America Merrill Lynch index data. Globally, the average is near the lowest ever at 2.3 percent, the data show.

More than $2.3tn of dollar-denominated debt has already been issued by companies and banks since the year began, including three of the ten largest corporate bond sales on record, Dealogic data show.   Which makes perfect sense…until you factor in that corporations are defaulting on debts at a near crisis level.

The year is half over and we are already at the 60% level of 2009……….

According to a new report from Standard & Poor’s Global Ratings, corporate debt around the world is massively on the rise and could skyrocket to $75 trillion from the $51 trillion it’s at now…. What’s more – S&P estimates that two out of five corporations are highly leveraged (meaning they’ve taken on too much debt). About 43% to 47% of corporations globally are at a financial risk level.

EBITDA = (Earnings Before Interest,Taxes, Depreciation, Amortization)
Far, far above the 2009 recession levels…

But why are corporations the world over, all taking on debt at the same time (we are just finding out now because reports are filtering out from June 2016)?….

Because operating cash flow doesn’t cover it.

 

In Q2, companies generated $425 billion in operating cash flows. Only $151 billion was invested in fixed assets. The lack of investment is the bane of the US economy. And:

 $110 billion went into dividend payments.    

$61 billion was used for takeovers (OK, that’s down from last year)    

$137 billion was blown on financially engineering their earnings via share buybacks.

So operating cash flows were $35 billion short. That happened quarter after quarter. Hence debt ballooned to 32% of total assets at non-financial firms, the highest since 2008, another propitious year.

As you can see in order not to disappoint shareholders, corporate entities are taking on low interest debt simply to keep their profits looking pretty for the short term.  As seen above one could easily avoid debt by

• a) cutting dividend payments,
• b) stop taking over other businesses, or
• c) stop buying back your stock to increase earnings/share…..

No, but none of these superfluous options got cut back, debt was taken on to cover them…

(As an aside, if anyone is wondering what is still wrong with the American economy, the number of whopping total of $61 billion applied to takeovers compared to an anemic $151 billion into capital investment, says it all… )

You must be wondering!  With all this bad news, why is the stock market climbing so precipitously?  Who would put money into a struggling company laden with debt (32% of assets) which cannot meet profit targets without taking on even more debt?  Let me guess. You? You are going to go out and buy some debt laden stock right now, correct?  Of course, you’ll put your whole retirement plan on it, correct?

Well, yes. If you have anyone minding your money, a mutual fund perhaps, I’m sorry, but this has already happened to you.  For in the short term, it has become the only way to get any yield at all.

Today’s precarious stock market scenario only makes sense when compared to negative bond yields… From the comparison chart above, you can see that this is a new phenomenon.  Accounting for the negative bond yields, today, you make 70% more in stocks than you do in bonds…

With a bubble stretched this thin, and with ample covering up so much bad financial news, the danger becomes very real that a tiny pinprick from somewhere, whether coming from student loans, junk bonds, emerging market bonds, corporate bonds, equities, or sub-prime car loan bonds, causes negative losses more than the ability of one to pay……

When disaster finally happens there will be another rush for the exits everywhere, and that is where the fatal flaw in the system will be exposed: there is no liquidity in the markets….

The World Bank estimates the ratio of non-performing loans to total gross loans in 2015 reached 4.3 percent. Before the 2009 global financial crisis, they stood at 4.2 percent.     If anything, the problem is starker now than then: There are more than $3 trillion in stressed loan assets worldwide, compared to the roughly $1 trillion of U.S. subprime loans that triggered the 2009 crisis….

Mr. Businessman calls up his bank… I need a loan right now, quick!   ….. Sorry says the bank. We’re out of money…..

The one solution?  Pretty painful.. Raise interest rates,.  which will result in downward pressure globally on all portfolios, dropping overinflated stock like its hot, but… will dothe necessary job of stopping corporate debt-load from continuing to grow and return us to more accurate reporting. Raising the interest rates act like chemo therapy to the economy, providing long-term healing by actually killing off parts of the living body to keep a malignancy from spreading to healthy tissues… When given the choice, very few of us choose to die forthright, instead resign to taking the chemo.  As we struggle with the decision, at the end of our thought process we all succumb to choosing that option at the end, coming to the realization that either way, we die, and at least therapy provides us the option of more time….

These implications hitting in October are anyone’s guess to their impact on this election year.

Charity

So I’m listening to WDEL and the case of food giveaway and thinking wow that’s nice; $11.50 for a case of food that will last a weekend. How nice would that be for a family out of work?

But then I think: “Gee, I’m in bad straits, and it’s getting worse.. and my own family is the one who I need to take care of…”

Then someone named Charlene comes on and tells about when she was a single mother and had no money, how much a donation of a bookbag had meant to her… She had no other way of getting one, and someone told her that if she went down to the Breakfast Mission she could pick one up. She railed on how humbled she felt that someone would think of donating a bookbag for someone who they didn’t know to use …..”What wonderful people” she exclaimed….

$11.50.

And then I remembered the night before Thanksgiving, picking up some odd items needed for once a year recipes, ( the bulk buying had already been done), and spending $56 dollars on one flimsy bag of stuff that I really didn’t need… 5 cases of food for 5 families… I then thought of the crappy candle I bought for a fund raiser that was done because someone had bought from my fundraiser too…$24 dollars… 2 cases of food for 2 families…

I really can’t by presents for people who don’t need them when there is stuff like this that is far more important…. Perhaps I could give a card that said I donated a case of food in your name with the money I would have spent on you for the Holidays…but…that sounds tacky and kind of grossly self serving…

I think it is better not to say anything at all, just don’t give them anything this year…And I do have a family that is my first priority… But in discussing this with others, the consensus seems to be that settling for low budget presents that are liked, and spending half of the holiday money where it is really important, such as a case of food, might be how we balance it out this year…

I was impressed that giving was up this year over last…
because the economy sure the hell isn’t…..

To Bail, Or Not To Bail….

That is the question: Whether it’s nobler in this nation’s mind to suffer those slings and arrows bestowed upon us by our outrageous misfortune, or…. to take arms against a gigantic financial sea of troubles, and by opposing…. end them?

Our two choices; fight or flee.

We can bail out the U. S. automobile industry…. or we can pass…

if we pass, then what happens to the United States if we allow the automobile industry to fail? Obviously, our cars will all be foreign automobiles, which we will have no choice but to buy, since American car parts also will become nonexistent.

Which means….

That with every car purchased…. we are sending an awful lot of money to other countries….when what we really need,….. is an awful lot of money coming into this country…

Again we have the giant vacuum cleaner sucking ….this time it is our national wealth going up the nozzle…. Because of today’s folly, our competitors get richer… and we grow poorer, and poorer, and poorer…

The end of America must be at hand…. in just a few car payments….. for really? How in as bad of shape as we are, can we make up that much money?

From all the press reports that I have seen or hearings that I have heard, no one has yet placed this big picture before the American people.

The effort not to bail out our automobile industry, is sort on the same equivalent of not choosing to fight WWII after Pearl Harbor was bombed, just to punish the arrogance of those Navy admirals who were caught sleeping with their pants down…. Back then, Americans immediately lined up to enlist.

Today they pontificate and argue; eventually they choose not to fight.

We could have used this opportunity to meld society’s wishes with an entire industry, and make cars that run on water… free water… (Search, they are out there already)…. Make something the rest of the world needs and will pay heftily to receive…. Then, once coffers are full, the American people sell back to private companies, and with the profits, write down the Bush Presidency’s deficit. Win, win, win.

Most of you don’t know… during WWII we figured out how to build a Liberty Ship in 6 days… When Hitler heard that… he muttered the war was over…. Great things can happen if we bail out the automobile plants, and with their expertise, we launch a commercial product that will save America…

As Hamlet discovered… when the buzzer buster ball lands in your hands, you take the shot……

Wall Street Journal Acknowledges Fannie and Freddie Are Not To Blame

It is a common theme among Republicans on crack. Fannie and Freddie, two institutions designed to help poor people, are the reason for this crises today… Both Fannie and Freddie, more supportive of Democrats than Republicans made good scapegoats in the Republican’s attempts so shift the blame away from themselves…

They needed to. Heaven help the Republican Party if the world found out that McCain’s former financial adviser, Phil Gramm was the person responsible for unleashing the black hole of collapse we see today…

Fannie and Freddie lost 14 billion. The global economy lost 2.4 trillion. That’s chump change. You see the real problem and the Wall Street Journal which up until now has always defended Republican positions, (even to the point of still denying that global warming is a problem), says it flat out: This episode was caused by Republican deregulation and Republican budgeting down of manpower in those few regulatory agencies left. The Wall Street Journal firmly fingers Republican laissez faire attitudes as the reason there is no money…

Both Fannie and Freddie are currently holding their values much higher than any of those other banks who contributed heavily to the Republican party’s coffers..

So if either Christine O’Donnell, Frank Knotts, Rick Jensen, David Anderson, or WGMD hosts try to blame democrats on their next post or talk show, call in and remind them….”That’s not what the Wall Street Journal said….” They said it was the Republican’s fault… (seriously, … they did… it’s right here….)

Suckers

Bernie Sanders, (I) Vt.

Around 5:30 this afternoon an amendment was offered by Bernie Sanders, (I) Vt. to be attached to what is becoming known as “The Bail-out Bill”.

The amendment proposes to make a minor adjustment in the tax rate of individuals making over $500,000 a year or families making $1 million a year..  The adjustment, which would be barely felt by those with such high incomes, would raise $300 billion in just 5 years, almost half of the bailout proposed by Paulson…

This amendment would shift the cost of the bailout away from main street to those who prospered under the Bush administration…  Those who suffered under the Bush administration would not be responsible.

Sounds good…   I believe someone receiving a $100 million dollar bonus created from thin air out of tricky accounting, would certainly step up and patriotically be willing pay the cost… But Just in case they hesitate, this amendment proposed by Bernie Sanders, couldn’t hurt…

The only sad part, is that if we could have so easily raised $300 billion in such a short time…. with our Federal government borrowing close to a trillion from the Chinese……why didn’t we?

It’s Over

As of 1:45 today the House of Representatives failed the American people… By a vote of 228 to 205 (official talley for those watching live), the House resolution to shore up Main Street failed…

Once again, reality took a back seat to moral ambiguity.

Almost serendipitous in its timing, the moment the vote was solidified, the stock market dropped below where it was when Bush was sworn in…

If you are one of those people who determine their self respect by how much they are financially worth, you have some personal accounting to do…..

The American Dream of what could have been… is over.

As someone who watched the events proceed, to my chagrin, I believe history will eventually look at the numbers, and say that when Democrats had the option to save America, they chose to run the other way instead…. It could be because of pressure coming from sources like this……….

But right now, billions are pouring into the US Market to stem the flow… Will it be enough?

Leaked Details of Yesterday’s Bailout Agreement

Leaked to CBS news by Progressive Democrats... Here is the email which was circulated earlier Sunday afternoon…

1) Pay-for similar to the [Rep. John] Tanner proposal

2) Strengthen tranches language

3) Executive Compensation

4) Warrants

5) Proxy access

Principal mtg.

Attendees:

Reps. Frank, Rangel, Emanuel and Blunt; Sens. Dodd, Reed, Schumer, Conrad, Baucus, Gregg; Sec. Paulson and treasury staff; (27 staffers) SBUC, HFSC, House and Senate Leadership staff.

The outstanding issues are below and there resolution are noted:

Solved (Treasury will offer compromise language)

Broadening authority beyond purchases
Issue: Whether to expand authority to explicitly permit Treasury to
provide guarantees or loans.
Issue: Add full guarantee program framework and reporting.

Solved (out of the package but was raised/pushed by Senate Dems.)

Use of Profits for affordable housing
Issue: Whether 20% of profits on ultimate disposition of assets
should be used for Affordable Housing Fund

Solved (in the package)

Foreclosure mitigation
Issue: Whether to include a requirement that Treasury adopt a
systematic program for reduction in foreclosures.

Solved (in the package but properties will not be made available to
states and local governments)

Assistance to homeowners
Issue: Whether to require the FHA, Federal Reserve, and FDIC to:(1) adopted systematic approach to preventing foreclosure; (2) make foreclosed properties available at a discount to state and local governments receiving emergency assistance; and (3) encouraging loan servicers to engage in loan modifications and make properties available to state and local governments.

The Collapse IS the Republican’s Fault

Those of you coming to this post late, move on.  You will not get it…

But if one looks across the right’s blogosphere, one sees a concerted ratcheting up of a campaign, any campaign to blame President Clinton for the problems we face today..  They have to. They are going to lose this upcoming election so bad.. that they will join the waste bin of political parties and are scrambling to find something, anything that could possibly shift the blame over to someone, anyone other than the greediness of their party…

Shirley has a video montage, which if you had no clue what what happening, might make you believe against your own credibility, that someway, somehow Democrats were responsible…  In it there are a lot of graphs showing rising lines over the entire period of the Bush presidency, and then a precipitous fall, and a disclaimer blaming Clinton for the Bush presidency… lol

Likewise Tyler Nixon has a rant that is stylistically hard to read through, extremely so…. Complete with fallible logic and long ranting of angry diction, he vainly tries to tie today’s debacle to ex-President Clinton, and offer that segway as the reason we are now failing so miserably in the last years of the Bush presidency….(if I am incorrect, forgive me, it was so hard to read)

Hube carries the Weasel List and guess what.. topping the chart is a piece on how Clinton is to blame for today’s mess…

Maria Evans has tried that approach and in order to get there, she had to use circular reasoning and tactics ranging from subject changing and fact stretching, just to sneak in the weakest of defenses, in her attempt to ignore that our biggest problem stems from the Commodity Futures Modernization Act of 2000.

It’s the half truth email campaign all over again, although this time, it is taking place across the blogs…  One will see one of these posts pointing fingers back 8 years ago and blaming Clinton, with three or four people at the end saying “here, here”

Here is what is funny… It’s the same three or four people… All of them have written a post, and the other three suddenly pile on…

If it was true, it would be democracy in action..  When its false, it is just sad.

A large part of the confusion is that none of these spokespersons really understand the complicated way that derivatives work and cannot even read the complicated language written in the bills themselves…

They are therefore susceptible to being told what the problem is and being pointed to the wrong direction and sent out to champion their cause… Remember the boat these very people are in… We probably should show them a little sympathy, for they are facing a personal meltdown, similar to what one faces whenever ones belief structure is suddenly proven to be nothing of a fabrication… Sort of like that of a creationist, figuring out that the dinosaur bones he is fingering,  don’t really fit into his 4000 BC creation date time line…….

Those acts deregulating the 1933 and 1934 bills, which were buried and sneaked through the Omnibus Bill of 2000, are the root causes of today’s calamity….  There are several other factors piling on to this, and it is upon one of these, the Fannie Mae and Freddie Mack debacle which did have Democratic sponsors, that our lost Republican friends have seized upon in their attempt to cast all blame upon the honorable Bill Clinton  ( lol that always makes them see red).  But blaming Freddie’s and Fannie’s misappropriations for today’s crises, is like blaming all of Coca Cola’s products for the massive toothache that has knocked you off your feet…   Yes, a contributing factor perhaps, but had you used proper dental hygiene……..combined with regular checkups, …… and what about those Pepsi products? Well you see the point…

Since in today’s American soul, like it or not, they will see Republicans responsible for all of this; and only by screaming and pointing the finger loud enough at Bill Clinton, will any Republican’s possibly break over 5%…..  lol   When the next election cycle rolls around, a new party with a different name, will rise to take their place…

This assault on truth was certainly to be expected… But it is also to be jeered.  Imagine, blaming a president from 8 years ago…  Think about it for a moment… Blaming a president from 8 years ago… How ineffective does that make the current president look?    “Oh our president was busy doing coke and didn’t see it coming, and that makes it Clinton’s fault…”  Yeah, right,  I  don’t think so…..   lol  If Clinton is really to be blamed, then why when we had a REPUBLICAN PRESIDENT, REPUBLICAN SENATE, REPUBLICAN HOUSE, REPUBLICAN SUPREME COURT, (anything else?) was nothing substantial done to prevent it?  And when the Democrats finally took over, it was the REPUBLICAN SENATE who repeatedly invoked the laws of cloture in order to prevent these timely reforms from being passed? And you expect any of us to vote you up for another term? lol.

So just exactly how silly are you Republican’s today?   Lets see if I can put it into perspective…

Your high school junior son or daughter refuses to turn in their homework for a week,  and blames it on something that happened to them in third grade. lol

Or in driving way too fast to get to a Republican Party Emergency Meeting, hastily called to figure how to stem the mass exodus of voters over to the Democratic Party, you get pulled over by one of Delaware’s finest, and you say “Gee, sorry officer, you’ll have to let me go… You see eight years ago…..”   lol

Or when told the book you last checked out is overdue, you begin with  “Ma’am,   eight years ago……” lol

Of course being too preoccupied with their own self absorption, they fail to realize how ridiculous their claims sound to people who really don’t give a shit about the “Republican Party”

For if they were concerned about America, they would have researched and understood that the problem is not Bill Clinton… The problem is Phil Gramm. The silver bullet he used to kill America is the clause numbered 208 which he slipped through a humongous 11,000 page Omnibus Bill thereby removing the protections legislated as far back as the NEW DEAL, which were done to insure that never again would a Great Depression occur on American soil….

The repeal of that specific regulation which Phil Gramm sneaked through, removed without a vote, hey, removed without even a debate,… all our protections… And so, here we are….   The fourth largest bank disappears overnight….  Ka poof….  And soon we will mortgage the entire future of the United States of America on the hope that a fund twice that size, over 700 billion, won’t disappear in just two nights…  lol

And you won’t hear any Republicans mention it,….  other than Republican members of Congress. For it is the current Republican members of Congress, that small group still remaining fiscally responsible, who are the very ones saying that section 208, that Phil Gramm rider abolishing parts of the 1933 and 1934 law, needs to be pulled right now…..

What this proves is nothing more, than that there are people who are in the know, and people who are NOT in the know…  Those in the know (and I am proud to say most of them are “smart Republicans”) fully understand that Phil Gramm’s piece of legislation is what drove us us over the edge, and that we need to remove it and return to the law the way it was written after the last time we fucked up this big….

Those people NOT in the know…. will continue to blame Clinton’s policy of 8 years ago for what was actually a weak link embedded in their own failed philosophy…

So how does one deal with those well-intentioned self-preservationist, but poorly aimed accusations?  You know what I mean…. a long list of diatribes interposed with names like Barney Frank, Robert Rubins, Frank Raines, all who were involved with the sloppiness of both Fannie and Freddie?

Acknowledge it. and then say this…

Whether or not Fannie or Freddie Mack were kept insolvent by Democrats, matters rather little in lieu of the overwhelming problem faced by us today. Even more, it is irrelevant. Our financial system is large enough where it could absorb the dissolution of a large institution.

It is the impossibility of dealing with the dissolution of all of them at once, which creates not only a problem, but this huge crises.

Basically we woke up and realized our entire financial system wais unsound…It’s based on…..confidence… There was nothing there to back it up….just like there was nothing in 1929 to protect anyone’s money then….

Bear Sterns failed not because of Fannie and Freddie Mack..Lehman Brothers failed not because of Fannie and Freddie Mack…Goldman and Sachs failed not because of Fannie and Freddie Mack…Morgan Stanley failed not because of Fannie and Freddie Mack….AIG failed not because of Fannie and Freddie Mack…WaMu failed not because of Fannie and Freddie Mack.  All the others still standing who will fail,…will not fail because of Fannie and Freddie Mack…

They will fail because of Phil Gramm’s change to the Securities Act of 1933 and 1934, and act which was supposed to prevent a large magnitude  catastrophic collapse from ever happening again. A rider (Section 208) which was slipped in, sight unseen during a conference session by Phil Gramm, that was never debated, and never voted upon by either body…

But they won’t listen to logic.. So therefore I have improved upon their tactic of repeating something an infinite (almost lol) number of times, to make it true..  For as any Republican well knows, truth is not what it is, but what a Republican says it is…  lol.

So look through the schematic below, and try to read each line ….

The Economic Crash is the Republican’s Fault. The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault.. The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The  Economic Crash is the Republican’s Fault. The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault.. The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The  Economic Crash is the Republican’s Fault. The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault.. The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault… The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault..  The Economic Crash is the Republican’s Fault.  The Economic Crash is the Republican’s fault.  The Economic Crash is the Republican’s fault…

This is the logic behind their thinking…  I hope my satire of their dramatizations opens their eyes to just how silly they look to the rest of us….

By Friday, By Friday, By Friday, By Friday…

What’s the rush?

Figured out why.

Tuesday September 30th ends the third quarter… Fixing the deal by Friday, gives every financial company the opportunity to make their adjustments over the weekend; adjustments like shifting their bad debt over to the Federal Government.

Only then their third quarter will look rosy… and the market’s confidence will be restored.

The Great crash of 1929 was caused by rather bad third-quarter financial reports… Like this year, the financial year of 1929 was full of ups and downs… But there was always hope…  After the third quarter performed far less than expectations, most decided the ride was over and it was time to get out.

All at the same time.

The first collapse took place the first Thursday after the quarter ended, the second on the Monday after (apparently Friday was a good day),  and the third, the most famous… a day later….. The bubble had burst.

Apparently the Financial Institutions have been holding back.  What they report for this third quarter will drop everyone’s jaw…(look for a mind blower in the hedge fund department with leverages at levels 40:1)

That is why this administration is pushing too hard for and is so adamant that by this Friday, the deal must be done… “It must be done by this Friday!”

I will allow you to draw your own conclusions… (just make sure it is in a protected FDIC insured account).

Burris, Dodd, and Paulson

All have put their marks on what to do about what someone said was one quadrillion of debt hanging over our heads, ready to drop on our country like a comet from deep space…

Sploosh.

Dodd’s bill is supposedly 44 pages*, Paulson’s is who knows how big. Burris is one page…

When faced with a large volume of legislation, one’s first reaction should be “what are they trying to hide”. Equally important is to consider on the other hand, when presented with one sheet of paper, one should question what is getting swept under the “broad brush” and will cause greater problems later..

If you wipe everything off the table and look at each other across a blank space… the answer is obvious… Pick a spot ten years from now and work backwards as to which alternative will cost us the least….

Ok.. so will it cost us less to bail out the bad loans, or let them fail and build us out of a Great Depression… When you look at the last Great Depression, we can still see some of its legacy.. The TVA, Hoover Dam, Golden Gate Bridge, Empire State Building, windbreaks across the Midwest, as well as walking thorough any small town in America and reading the building cornerstones proudly displaying the numbers 1930 something ….

Looking across the table at each other, one must consider whether we will be better to spend 700 billion on things we can see, that work for us, or on securities that can lose value again…if they ever regain it.

Do we hit bottom and build ourselves up… or to we float in a payment due limbo land where we never have enough money to make ourselves a better nation… We are making payments back on bad debt.

Is it in our best interests?

If you are one holding that debt, yes, it will save your ass… You will clear the debt off of your books, and you can again begin showing the money you are actually making, which is unchanged, as a profit and not a payment back on some bad debts… This is bankruptcy protection under a different name. Bankruptcy protection is an American tradition, one that is considered scandalous until it becomes the best option available…. But instead of saying these banks will not pay, you’re out… we are saying these banks will not pay, your government will…..

Now if that relaxes fears and those mortgages continue to get paid by consumers to banks, costing our nation less than the line of credit we are extending them, then this policy is sound and we mover forward with little pain. But if those mortgages are not paid, we citizens get 800 billion less than we can spend on anything else…. That is the cost of the Iraq war so far. That is interestingly the same amount of our national debt owned by China….

Jumping ahead, we need to figure out from which arena it’s best to drive our economy forward… Our government?  Or the private sector?

What we know from history, is that during the last Great Depression, the Great Depression did not rise out of its doldrums until we mobilized our nation against the Germans and Japanese…… So that speaks volumes against allowing our government to build us up…

What we also know from history, is that sometimes without government intervention, depressions caused by bubbles bursting in air, last thirty, forty, and sometimes result in a conqueror wandering in and taking advantage of the economic weakness and inability of that nation to provide for the common defense….

So let’s look: Where is the Money?

The government prints money; it doesn’t earn it.   Workers spend money.   They earned it.   Businesses don’t print money, they don’t earn money, they provide services for which money is spent.  They transfer that money taken in,… to those employees responsible for those services which they sold… They keep some for themselves, so they too can buy groceries.

When people have more money than they need to live, the economy is considered to be stable and growing. When people have less money then they need to live on, the economy is in bad shape….

Above is the basic economy broken down in it simplest form.. There is a part missing…. Can you guess which?

Stocks… or what is more appropriate, the “virtual economy”.  One can live and die there as well.

It is best explained by an example… Assume I am living comfortably today, and after deducting all my fixed cost expenses, food, shelter, transportation, utilities, etc. I have some money left over… I could put it in my mattress, but that does no one any good and the crackling noise while sleeping tends to itch me and keep me awake… Instead I choose to invest that money in a new venture called Delaware Talk Radio…. Perhaps when I someday ask for my money back, I will get more than I put in… At least that is my expectation….

Now because I was willing to part with my mattress money, this new venture Delaware Talk Radio gets off the ground; the hardware is bought, the employees get paid, and the ad revenue starts flowing into the pot…. From that pot, once a month loan payments are made to cover the amounts pre-funded…. If the business earns more than it pays out, it is successful….. So because of my little bit of pocket change, and the graciousness of the financial institution assisting the operation, several people now have jobs that were not there before, and can now buy licorice at the local Food Lion… Also those companies selling the technical equipment required for this venture, grease the economy’s wheels with the payments Delaware Talk Radio has given them…

Now, on paper,  the same can be done if the government chooses to build a giant skyscraper in say …Russell, Kansas… For fun, let’s call it the Tower of Babel…. The Government demands taxes from its constituents, meaning that less money on each person’s local front is now available for spending in their local economy. Nevertheless, that money is still collected and then used to hire people, contractors, materials. Those receiving some of this government money then spend their income on those things they need. The economy around Russell, Kansas does fine… Their A & W Root Beer Stand, as well as their Dairy Queen, become number one in each of their companies…. slowly the money flows outward to other localities funneling goods and services toward Russell, Kansas.

The difference is how fast.

Can one better develop a new bacteria within a laboratory, or by letting nature take its course in a swamp….

The necessary mutations occur at a greater rate in the natural swamp… just by the sheer numbers of transactions…

The conclusion I got from writing this was actually the opposite of where I thought I was going when I began… Billions of tiny little transactions have more economic power than great single works of power… To pull us out of the next Great Depression we must drop all pretense and choose a path that will optimally benefit us at some point in 10 years time….

History offers us the template which demands it… This great experiment which I mentioned above, was tried out over the course of the last one… Great Depression that is….

Our nation chose the free enterprise system…. The Soviets chose the government approach….. We borrowed tons of money to pay contractors during WWII…and that put Americans to work and flooded our economy with dollars… The Soviets put their limited resources into government enterprises, and have only just recently pulled themselves out of their Great Depression , under Putin’s oil driven private investment plans…..

Spread the risk among as many participants as is possible. Funnel the money to the ground floor.

Doing what is best for private investment, seems to be the best way to dig ourselves out of our hole.

.