Posts Tagged ‘depression


The solution to the economic crisis

With all the doom-laden media braying constantly about our terrible economies it is easy to forget that our financial system is only one of many that have existed over time, some of which were very efficient at avoiding every one of the problems we are being submerged with – by design – today. A lot of people are working on extremely effective alternative financial systems, but unsurprisingly the Rothschild and Murdock owned press act as though they don’t exist, never report on them, and thus help maintain the terrible system their paymasters have put into place. The truth is the current system of international finance is an expensive farce that benefits a minute minority, and concentrates worldwide power in the most unsavoury hands known to mankind to the detriment of everyone and just about everything. Anyone who does not understand that has obviously not been living on the same planet as the rest of us the last few years – or prefers staying in a comfortable delusional state rather than accept the reality of the ridiculously wasteful and dehumanising systems inflicted on us increasingly every day. However, luckily there are plenty of brave individuals out there who have a total understanding of this and are doing their utmost to promote more equitable systems, despite being hindered at every stage by the financial oligarchy and the political minions who have allowed them to achieve such obscene levels of power.

Probably one of the most succinct and brilliant explanations of a tried and tested system that reintroduces fairness into the marketplace while at the same time stimulating hugely the economy and castrating the parasitic international banks, is that of soft-spoken monetary genius Richard Cook. His “Cook Plan” is the result of three decades of careful reflection while working in the heart of the White House treasury department, where he had a unique position to grasp the intricate workings of national and international finance.

His work is of striking pertinence today. He has reinforced each aspect with the help of a multitude of other economists and monetary reformers worldwide.

I strongly recommend watching this 2 hour series of videos where Richard Cook manages to condense two centuries of economic history, clear and concise explanations of many of the terms and mechanisms of economics that are essential but far too many people ignore, and finally explain the simplest, highly ethical solutions that would stop this entire artificial economic crisis – and the untold suffering associated with it – immediately. If you only want to put up with one economy lesson in your life – let it be this one !

It is divided into 6 parts each covering a high density of information, so try to find a moment when you are clear and focused to watch it. Then spread the video to anyone you know with half a brain, and start pestering your elected “representatives” to pass legislation that would rapidly transform society into a far more equitable place, at no cost except to faceless international institutions who would lose their ill-earned sinecure.

The plan was proposed to the G-20 a few years ago backed by the signatures of many prominent economists and was ignored, unsurprisingly.

The same thing happened when it was presented to the US congress.

It’s high time for a change. That change can only come from the people.

To think there are a number of alternative systems out there that are almost as good, and we have to put up with the current can of worms run by a small number of soulless yes-men and psychopaths for their selfish interests who are devouring the planet while doing their best to line their pockets with our collective futures.

It must be understood that there are monetary and economic systems that make the kind of rampant abuse prevailant today almost impossible. Here is one of them:

Part One:

Part Two:

Part Three:

Part Four:

Part Five:

Part Six:


A dose of humour to help survive the ongoing financial, ecological, and humanitarian disasters facing us

It is important to be aware of the terrible things going on around the world, but also to sit back and laugh once in a while ! So many dreadful things are happening every day it is easy just to get lost in a miasma of despair, while drowning in a flood of conflicting, emotionally charged news stories, blogs and reports. This can also lead to confusion because it is easy to lose your own point of view, your own reference position, when submerged by a host of yapping, contradictory opinions spouting from all corners on the net on just about any subject.

It’s in these moments that twisting things around – seeing or inventing the funny side – can help detach you from details you can get lost in, or even protect you from losing your rational judgment of an event by being overcome by emotional factors – remember that an information source truth or factualness has nothing to do with the skill of it’s writers in producing strong emotions in the reader. And strong emotions provoked can change your mental makeup, incrementally altering any solid point of view over time, because strong emotions or sensations always make a more indelible imprint on our minds than rational understanding even if rationality has a better handle on the real world. Your psyche cares a lot more about emotions and sensations than anything happening “out there” in reality. Reality has little to do with it.  Goebbels designed a great propaganda system for Hitler based on these concepts… the USSR and China used similar methods in their education and propaganda systems – and most successful journalists, writers and bloggers use similar techniques to acquire a large audience. This can be great when combined with  a really good source of information, but have terrible consequences when it fills people with illusions.

This is also why politicians continuously try to stimulate the “lower emotions” – their skill in this being totally independent of the worthiness – or lack of the same – of the cause they are promoting.

So what do you do to keep your head in a position where innumerable vested interests are trying to sway you this  way and that ?

You can step back, and make funny – even if you have to resort to absolute cynicism – the most desperate seeming situation – and thus force your intellect to play with your emotions, breaking their toehold and making life difficult for any false certitudes…

I’ve found a very good, fairly irreverent site to visit when all the economic/financial news starts becoming overwhelming: the Borowitz Report

The writer takes companies, people or events from current news stories and writes bogus, fictitious articles that say exactly what didn’t happen, and illustrate via the absurd the collective insanity of our society.

Need a laugh ? Check out these hilarious recent stories:

Have fun ! And make space for it in your lives…


Why a global financial collapse and how to survive it

I’m going to write a post on each important forecast of the Web Bot project over the next few days. These issues are so important that it is a good idea to have a look at their real probabilities of coming to pass.

So let’s start with the forecast collapse of the dollar, leading to systemic collapse of the whole economic system, or at least the Anglo-American part of it – which should severely affect everyone worldwide.

If you haven’t read it already, this post contains very good links and explanations – the comments are interesting too:

Originally today I was going to write another long, convoluted post with all sorts of links and documents, but this morning I stumbled upon an article that goes far to explain the reasons behind the continuing US economic collapse that can be readily expanded to understand our worldwide predicament. It also touches on some of the solutions possible to reinvent markets where value is not continually destroyed in the current devious manner. One thing that the mainstream media never seems to mention are the numerous other monetary and economic systems mankind has developed over time that actually benefit everyone participating. And then they claim to “inform” people…

I find it quite encouraging that many deadly serious economists are starting to condemn our current economic system in the same tone I’ve been using for the last few years ! It’s about time; with most western economies stupidly depending on loans from international financial institutions for everything from their budgets to waging war, international big players have a ridiculously unjustified influence on the policies and well-being of supposedly independant states. These states are slowly finding themselves more and more subordinate to foreign bureaucracies and money, and this is definitely not improving their economies, standards of living, education, health, or just about any other sector. If it was, we would not be in the mess we are in ! QED…

The hope of the wealthy elites – that through this collapse people will be scared into creating a handfull of international currencies to centralise institutionalised vampirism – must be dashed at all costs, unless we want to see the same soulless entities responsible for the current crisis gaining absolute control of all the worlds wealth they do not already possess.

Luckily people seem to waking up to this scenario all around the world and are thinking of creative solutions.

An excellent video on the global financial collapse seen through the eyes of the level headed Argentine intellectual Adrian Salbuchi:

Global Financial Collapse Part 1

Global Financial Collapse Part 2

Another good guy who says it “as it is”

He has been studying global economics for decades, is the founder of the Argentine Second Republic movement, and being from Argentina is uniquely positioned to understand the causes and effects of depression on a country, following Argentina’s collapse from being one of the five richest countries in the world to one of the poorest, most indebted nations.

Take heed, western world !


Web-Bot forecasts global financial collapse and revolution

I’ve always thought that the internet, if used in an intelligent way, could be a tool for understanding part of the human unconsciousness, at least that of the subculture that has the money for a computer and the literacy to write something – This does unfortunately exclude many other subcultures completely who don’t happen to fulfill these criteria and tend to get totaly forgotten by everyone these days, and whose own collective unconsciousness has few ways of interacting with the world via modern technology, but at least we can get a better grasp on the inner worlds of the masses of computer users that populate the web  – most of the industrialised world and it’s activities.

A group of linguists and computer scientists who have pushed this approach to the extreme are those responsible for the Web-Bot project. For those of you who have never heard of it their Web-Bot is a very complex and ambitious program involving millions of “bots” that scour the net daily; I’ll try to explain my understanding of it: They put out requests for the bots to scan for various theme words that appear with high frequency, and the bots grab any text found anywhere on the net that contains the theme, keeping words preceding and following the theme word. Those then get filtered, categorized and counted, with the result being a list of associations with the theme word, in order of occurence, with dates, etc. This they have engineered into a kind of forecast system, not of the absolute future, but of a combination of human expectations and all the real data, news etc. that resides on the web in any shape or form.

The system is far from perfect, and has some known drawbacks, but does very well forecasting very big, worldwide events, and events that depend on a lot of web based data.

So, seeing all the Doom and Gloom currently circulating throughout the trend research community, from LEAP predicting global systemic crisis to Gerald Celente pronouncing “the first shots in the second American revolution have been fired”, I thought I would get the mighty Web-Bot’s take on our near future. I was not disappointed ! Quite a read !

The Web-Bot’s forecasts, and the interpretations of the Web-Bot team are extremely alarming – they seem to have evolved considerably in their outlook on the world since they started making stock market forecasts twelve years ago.

I think I detect just a touch of cynicism in their reports…

Amongst other things they forecast within the next two years (!):

– The imminent collapse of the dollar, followed by most of the global financial system (by late October the markets should show some serious wobble…)

– Epidemics from laborotary originated diseases AND the vaccinations used to treat them

– Mass refusal of obligatory vaccination

– Global famine – the worst in memory

– Riots, “refuseniks”, revolts, lawlessness

– Numerous assassinations of members of the oligarchy, their underlings, and even TV & media personalities representing their interests

– Insurrection against the elite in the US, that eventually goes global, when many revelations about the extent of their nefarious activities emerge (whistleblower and “save my skin” epidemic)

– New forms of insurrection eschewing violence, but many other violent groups

– Intensification of earthquakes and freak weather, winds, floods, “life threatening moments” – human migration from coastal areas

– big problems with the global fisheries – rapid die-off of many fish

– Creation of alternative markets, black markets

– Disasterous attack of Israel on Iran, leading to lethal global fallout after a nuclear “accident”

– Isreal being very surprised by Iranian (+ allies) defences and being vitrified by atomics

– In 2010, mansions and palaces of the wealthy will be burned down. Symbols of corporate power will be attacked by mobs

– The Vatican, suspected of storing food, will be burned and looted by hungry mobs (apparently a lot of linguistic fire references in our future !) after using gas or chemical weapons in defence

– collapse of many forms of infrastructure

– Attempts at restricting movement and martial law by governments that fail fairly fast, but after a lot of casualties

– Succesful long term sustainable “breakaway civilization” movements that simply step away from society to make their own

– Big, terminal problems for our Governments that are forced to clean up their act or be replaced

…and a litany of other hootin’ tootin’, rock n’rolling, earth shaking, paradigm shifting, planet busting stuff !

One point they dwell on and return to often is the revelation of the extent of the evil activities of our psychopathic elites by whistleblowers, betrayals, backstabbing, etc… Well, anyone reading this Blog will know what I think of that. ‘Bout bloody time !

And that’s even before you get to the “SpaceGoatFarts” section where the Web-Bot project dumps all the strange linguistic artefacts that don’t fit in anywhere else, or that are otherwise beyond the pale. Here apparently we should expect contact with aliens good and bad, on and off-planet, with hostile acts on both sides – starting with NASA trying to bomb the moon ! Dammit, Fox Mulder was right…

A word of warning before freaking out: there is a “built in error toward the most extreme connotations available in language and trend interpretation.” “The information presented uses words that presume the worst-case for future manifestation of the collective unconsciousness” say the Web-Bot team.

Unfortunately Web-Bot has correctly predicted many large scale events in the past well before they happened, and the worst case scenario came to pass: both 9-11 and the current economic crash amongst other things.

If a quarter of their forecast occurs, even to a lesser degree, we are in for the wildest – and most dangerous – times in our lives.

Just in case the Web-Bot is right, maybe we should start thinking of ways of attenuating the more extreme events now. I for one, will discourage any form of violent revolution (except in self-defence, of course) – there are so many more intelligent forms of civil disobedience that are far more effective; I think Ghandi proved that. So if people out there want to kick over the sand castle, please think carefully about what you are doing – and the consequences – first. Violence attracts repression like a magnet so is counter productive. Besides, it seems there will be easily enough violence to go around anyway.

See you soon; I’m off back to my (breakaway civilisation)


Revealing quotes about our economic system

As a follow-up to the “we’re all doomed” post & comments, I thought it would be appropriate to quote a few famous bankers and politicians on financial and banking policy. If you haven’t, please read that post first and the comments.

It seems we have all been dupes for well over a century believing we could leave in the hands of a few self-serving people almost total financial power over our industries, services and lives.

No wonder the world is in such a mess !

First the comments of a few American presidents:

Let’s start with good old Jeff. It seems that he saw it all coming:

If the American people ever allow private banks to control the issue of their  currency, first by inflation, then by deflation, the banks…will deprive the people of  all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)

I believe that banking institutions are more dangerous to our liberties than standing armies. – Thomas Jefferson

… The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating. -Thomas Jefferson

Madison gets to the point:

History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by  controlling money and its issuance. -James Madison

How about Andrew Jackson ?

If congress has the right under the Constitution to issue paper money, it was  given them to use themselves, not to be delegated to individuals or corporations. -Andrew Jackson

Abe Lincoln’s point of view:

The Government should create, issue, and circulate all the currency and  credits needed to satisfy the spending power of the Government and the buying power of  consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity. -Abraham  Lincoln

Roosevelt ?

Issue of currency should be lodged with the government and be protected from domination by Wall Street. We are opposed to…provisions [which] would place our currency and credit system in private hands. – Theodore Roosevelt

Hmm, seems like they were all pretty much against the current system. So what happened ?

Despite the warnings of many of his predecessors, Woodrow Wilson signed the 1913 Federal Reserve Act changing the American financial structure radically. A few years later he wrote:

I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of  credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most  completely controlled and dominated Governments in the civilized world. No longer a  Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men. -Woodrow  Wilson

Now for the other side; let’s hear what some of the bankers have said about all this. Maybe we are misunderstanding their aims and intentions ?

The bank hath benefit of interest on all moneys which it creates out of nothing. -William Paterson, founder of the Bank of England in 1694, then a privately owned bank.

Let me issue and control a nation’s money and I care not who writes the laws. -Mayer Amschel Rothschild (1744-1812), founder of the House of Rothschild.

The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests. -The Rothschild brothers of London writing to associates in New York, 1863.

I am afraid the ordinary citizen will not like to be told that the banks can and do create money. And they who control the credit of the nation direct the policy of Governments and hold in the hollow of their hand the destiny of the people. – Reginald McKenna, as Chairman of the Midland Bank, addressing stockholders in 1924.

The banks do create money. They have been doing it for a long time, but they didn’t realise it, and they did not admit it. Very few did. You will find it in all sorts of documents, financial textbooks, etc. But in the intervening years, and we must be perfectly frank about these things, there has been a development of thought, until today I doubt very much whether you would get many prominent bankers to attempt to deny that banks create it. -H W White, Chairman of the Associated Banks of New Zealand, to the New Zealand Monetary Commission, 1955.

And that was in 1955… They have come a long way since then in streamlining and globalising their operations all the way up to the current disaster.

All the currently proposed solutions to this economic mess portrayed by our media only offer alterations to the system in place, or even worse, centralisation of all banking into “regulatory bodies” run by the very groups that created this iniquitious system to start with. A clear case of “wolves guarding the henhouse” don’t you think ?

The big question is: can anyone do anything about it, anywhere ?

Feel free to post any ideas in the “comments” section (link at the top of the post) Any more good quotes would be welcome too


We’re all Doomed – says trend guru Gerald Celente

Well, not necessarily actually, especially if you are to believe the latest mainstream economic forecasts of an upturn… But all is not as it seems; in fact, we are doomed to a total collapse of the world economy if you listen to trend tracking wizard Gerald Celente. He publishes the Trends Journal and his company has an astonishingly high success rate – 96% if I remember rightly – predicting future trends and major events.

(you might have to wait a minute for the videos to load)

I quite like Celente; he seems like an honest, staightforward fellow and I love his accent. His magazine and videos are worth checking out, although a lot of it is pretty obvious if you are good at reading between the weblines out there.

I’m just surprised so many people were caught unawares by the whole financial collapse: I understood the nature of the vast ponzi scheme called international finance in 2002 just by reading up about it. It’s pretty obvious that a system that by nature continuously erodes the monetary value of everything while hugely increasing the money supply to enrich a few through the debt/loan system is doomed to failure sooner or later – governments have fallen into the same trap the poor house buyers fell into – the major difference being that governments can keep borrowing money pledging future generations of their citizenry into debt slavery, whereas the average house owner can’t. Either way everyone loses out except the big banksters at the top. Especially when rising prices eventually prevent the citizenry from even paying their taxes – as is already happening in parts of the US … This can only start a deadly slide that will result in entire countries falling apart, social disorder, crime and general chaos.

If the justice systems on this planet were really interested in dispensing justice, all the top financiers would be up there for fraud and crimes against humanity ! As a result of their selfish actions, millions are going to lose everything they have worked for their entire lives to achieve and millions more will simply starve to death or kill each other. Some countries will be forced to start wars to sieze valuable ressources or distract rebellious citizenry…

Until a lot of people realize that we need a new worldwide financial system based on commodities (or anything of real value would do) that is set up as a NON-PROFIT system by people who have NOTHING to do with the current banksters, things will just get worse, and humanity will very likely be plunged into a new dark age. The top financiers, their families, cronies and vassals in the governments, will be responsible for the destruction of our civilisation… Money, and it’s creation and control, has far too much effect on our lives and now the whole planet – through globalisation – to be left in the hands of these deceitful profiteers ! Of course, they feel the whole system is wonderful, so we can expect them to fight tooth and nail to retain control. Given the lack of organised resistance to their hegemony, they will probably be able to continue their extortion until the whole planet is reduced to debt-slavery. We’re not far from that now.

There are plenty of solutions to the problems we face (I can post a few if people are interested), but that will change nothing until the current system is stopped in it’s tracks and a new system is implemented worldwide.

Here is a good in depth explanation why the US economy is doomed ; the british one will suffer (and is suffering) for similar reasons:

“It’s going to get worse before it get’s worse”:

– Doug Roberts, chief investment strategist for Channel Capital

Let’s not kid ourselves any longer about the economy, because ‘facts’ as John Adams was fond of saying ‘are stubborn things.’ And the facts are fairly plain that this is no run-of-the-mill recession, not your common economic cold that comes round once every season. No, this is a full blown outbreak of killer flu that is spreading rapidly to pandemic proportions, and we have yet to come up with any vaccine. The Tamiflu TARP program rolled out by Bush, Paulson, and Bernanke had little effect. It prolonged the lives of a few banks and insurance companies, and allowed some of our larger institutions to absorb the first phase of the collapse. JP Morgan Chase picked up Bear Stearns and WaMu, Wells Fargo took on Wachovia, BofA rescued Countrywide and Merrill Lynch. Now these banks, once thought healthy enough to give blood transfusions to their failing brethren, are suddenly swept up with the same mortal fever. Stock in Citigroup and BofA is withering away day by day as the market continues it’s vote of no confidence.

The problem has been dissected, injected, and bandaged up with bailout money, but the basic illness of the banks has never been addressed—they are carrying trillions of toxic securities that no one knows how to value. The solution to that is simple: just offer them for sale. The market will tell you what the value is in a heartbeat, for a thing is only worth what someone else is willing to pay you for it. The banks, however, don’t want to hear the voice of the market, preferring instead their own foolish dream that the securities they hold are still worth something close to their nominal values. With housing values down over 40% in California, and defaults and foreclosures still rising, how can a bank think their mortgage backed securities still retain their nominal values? That’s like a stubborn homeowner in Lee County Florida refusing to lower the price on his home because he paid $250,000 for it in 2005, even though it would still have trouble selling at $50,000 today. Here’s another stubborn fact. Because of the incredible leveraging the banks foolishly engaged in, even a modest decline in the value of these “securities” wipes out their capital. The result is insolvency. The banks are effectively dead men walking, financial zombies.

With the urgency of a CDC strike team, President Obama and his new team of economic advisors have been urging congress to take quick action on yet another rescue plan. The market greeted Geithner’s Tarp II announcement on February 10 with a 380 point skid, for it seemed nothing more than the same medicine that has done nothing to break the fever thus far. Will it be enough to save the banking system and revitalize the economy? Many astute economists have grave doubts. For those stubborn facts begin to mount up day by day, until they form what seems to be an insurmountable truth.

Even the International Monetary Fund (IMF) is finally waking up to the severity of the pandemic. Bloomberg reported:“Advanced economies are already in a depression and the financial crisis may deepen unless the banking system is fixed, International Monetary Fund Managing Director Dominique Strauss-Kahn said. “The worst cannot be ruled out.” Reuters chimed in reporting: “The dynamics of the financial markets as well as the global nature of the current downturn both have similarities to the depression of the 1930s, said Janet Yellen, president of the San Francisco Federal Reserve Bank.” Ambrose Evans-Pritchard was even more direct in his assessment of Europe. reported: “th international business editor for the Daily Telegraph in London, says debating the risk of a full-blown depression is pointless. “There’s no risk,” Evans-Pritchard told in a wide-ranging interview. “We’re in it. It’s begun.” ..He pointed out that, during the past six months, the world’s major economies contracted at rates more severe than those of the 1930s.” Yes, even the financial gurus are starting to get the picture.

The pundits in the mainstream press did not even have the intelligence to call our current situation a “recession” until a full year had elapsed. I have little doubt that they will also not see what appears obvious to me, and increasingly many others as well that, while we are not there yet in terms of certain key benchmarks, we are well on our way to a full blown “depression.” Some have played the game right down the middle, calling our present situation a “Great Recession.” The truth of the matter remains—it’s the 11th hour now, and a make or break effort is being mounted by the new administration to try to stop the economy from sliding further.

Financial Blog “Whisky & Gunpowder” comments: “It will be called a “depression” if today’s economic tempest slips out of the government’s control. From a financial point of view, a depression is a period when the distortions of an inflationary boom are liquidated — a mass die-off of the economically misbegotten. From an economic point of view, it’s a period when the general standard of living decreases significantly.” And that’s an understatement.

A close advisor to UK Prime Minister Gordon Brown was rather blunt in his assessment of the situation there. The UK Independent reported: “Britain is facing its worst financial crisis for more than a century, surpassing even the Great Depression of the 1930s, one of Gordon Brown’s most senior ministers and confidants has admitted.In an extraordinary admission about the severity of the economic downturn, Ed Balls even predicted that its effects would still be felt 15 years from now. … He warned that events worldwide were moving at a “speed, pace and ferocity which none of us have seen before” and banks were losing cash on a “scale that nobody believed possible.”

R Word vs D Word – What’s the Difference?

At one time all periods of economic declines were called “depressions,” but after the big events of 1929-1938 the word “recession” was coined to distinguish less severe downturns from that crisis. Ray Dalio of Bridgewater Associates explains the difference between recession and depression this way: “You can describe a recession as an economic retraction which occurs when the Federal Reserve tightens monetary policy normally to fight inflation. The cycle continues until the economy weakens enough to bring down the inflation rate, at which time the Federal Reserve eases monetary policy and produces an expansion.”

Notice that both the onset and abatement of a recession is linked, at least in Dalio’s mind, to deliberate actions taken by the Fed involving monetary policy. What we saw this time, however, was a sudden downturn after 9/11 that the Fed battled with the usual monetary controls, by lowering interest rates, which stimulates borrowing and lending, but they left the valve open too long. The result was the housing boom. Typically, when the economy overheats we see inflation, and we certainly saw that on a grand scale when housing prices skyrocketed during the boom due to speculation.(The government doesn’t include housing in its core inflation index, however, even though it makes up the greatest monthly expense.) Inflation is fought by raising interest rates to slow the velocity and supply of credit and money and cool off an overheated economy. But did the Fed raise rates to cool off the wild speculation that characterized the big lending and spending surge of 2002 to 2006? Quite the opposite. The Fed reacted again by further lowering rates and easing! This immediately told me that something was seriously wrong. It was not inflation that the Fed feared, but the massive buildup of debt that would force deleveraging, and create deflation. Look at our debt relative to the time of the Great Depression:


When the highly leveraged real estate loan base that makes up a significant portion of this debt began to fail, it created a real crisis in the securities and money markets. Banks and investment firms that were leveraged at 30-1, 40-1, 80-1, could suddenly see their capital base wiped out by even a modest decline in the “assets” their securities bets were riding on. This is, in fact, what happened. The Fed knew this when these securities were suddenly “exposed” to great risk and their perceived value was no longer certain. Things once thought to be sure bets, with AAA ratings, were suddenly suspect, perhaps even worthless! Here’s how the banks set up the game:


The Fed also knew there would have to be a massive de-leveraging, a shedding of these bad securities, which would cause tremendous deflation. It therefore reacted by lowering rates and pouring on liquidity to try and keep the banks from collapsing while it planned a way to manage the de-leveraging process “in an orderly fashion.” While they have prevented a complete collapse, the core problem has not been fixed because the monetary policy is now trying to correct for amounts of accrued debt that are simply too massive. There are over $6.6 trillion in mortgage backed securities out there. That’s the easy one. The game got more and more interesting. Banks and brokers began to make bets against the success or failure of these securities. That game got way out of hand, and we now have $50 trillion in these so called “Credit Default Swaps,” a sum nearly equal to the world GDP. These morphed further into the massive “derivatives” positions that now total $600 trillion! Derivatives were essentially insurance policies on the other securities, (like swaps), and they were placed by thousands of hedge funds the world over. Did it ever occur to these geniuses that the cumulative total of their derivative insurance bets exceeded the total GDP of the world by ten times!

Wikipedia has it correct when it states: “Derivatives massively leverage the debt in an economy, making it ever more difficult for the underlying real economy to service its debt obligations and curtailing real economic activity, which can cause a recession or even depression.” It was the bad derivatives that basically killed Bear Stearns and Lehman Brothers to start the great unraveling. The balloon has popped. The process underway now is an equally massive de-leveraging and debt deflation. Can it be controlled?

Dalio explains: “Basically what happens is that after a period of time, economies go through a long-term debt cycle… At cycle peaks, assets are bought on leverage at high-enough prices that the cash flows they produce aren’t adequate to service the debt. The incomes aren’t adequate to service the debt. Then begins the reversal process, and that becomes self-reinforcing, too. In the simplest sense, the country reaches the point when it needs a debt restructuring.”

Another word for this debt restructuring is “bankruptcy.” It’s as if you simply had so many credit cards that you could not even make your minimum payments any longer. Now more and more former “consumers” and companies are facing bankruptcy as they realize their debts are simply to large to carry or service any longer. Economist Martin Wolf is correct when he says “ somebody is going to have to bear these losses, and we can’t get anywhere unless we first recognize and admit the losses.” This is what that well massaged word “transparency” is all about. In layman’s terms we call it “telling the truth.”

Preserving The Status Quo

Pandit-sm: It’s tough being a CEO of a major bank or corporation these days. You get people talking about your salary. You can’t use the private jet any more. Congressmen ask embarrassing questions. Hell, you can’t even pick out the rugs and office furniture you like! The NY Times had the audacity to write an article asserting that it was impossible to expect anyone in New York to try and live on a paltry half million, the $500,000 salary cap Obama wants for CEO salaries. The Times wrote: “Private school: $32,000 a year per student. Mortgage: $96,000 a year. Co-op maintenance fee: $96,000 a year. Nanny: $45,000 a year. We are already at $269,000, and we haven’t even gotten to taxes yet.” Gawd! Try walking away from your bloated mortgage like millions of other Americans were forced to do, and rent a modest home. Put your kids in public school. Fire the Nanny and learn to clean your own mess! To this the Times retorts: “Sure, the solution may seem simple: move to Brooklyn or Hoboken, put the children in public schools and buy a MetroCard. But more than a few of the New York-based financial executives who would have their pay limited are men (and they are almost invariably men) whose identities are entwined with living a certain way in a certain neighborhood west of Third Avenue: a life of private schools, summer houses and charity galas that only a seven-figure income can stretch to cover.”

Forgive me if I get a bit indelicate here, but to that I simply say: Get over it! This sense of entitlement the wealthy have, with their precious “identities” entwined with their big spending habits is a sham. It’s disgusting. There are 37.5 million Americans now living below the poverty line. Do these executives know what that is? For a single person, the US Department of Health & Human Services defines the poverty line in the lower 48 states to be an annual income of $10,400. Someone with a half million dollar income makes that amount every week! For a family of five, the official poverty line is $24,800. Millions of Americans live this way, with annual incomes half the size of executive Nanny salaries. Forgive me if I waste no tears over these whining, fat-cat executives, wringing their hands over the prospect of getting paid only $500,000. They largely created the mess that the rest of us will live with for the next ten years….Poor little Rich Dads.

The hidden truth in the situation described above is this—the effort now is to try, by any means possible, to preserve the status quo. We hear talk of unfreezing the credit markets, getting consumers spending again, getting the economy back on track for continued growth. To do this, the same institutions that speculated so wildly, the same men who leveraged their assets 40-1, are simply being reinforced and bailed out with public money. Their resistance to living on “only” half a million per year is but a sideshow. What they really want is to get the good old game started again—but every con game depends upon the gullibility of the mark, the sucker out there who believes enough in the potential fairness of the game to want to play. That confidence has been so severely damaged by men like Bernie Madoff and so many others. Nobody trusts the value of the misnamed “securities” that were once so wildly traded. Investors have fled to cash positions, or to gold and treasury bonds. The stock market has suffered a severe crash, and the Great Game has been exposed for what it was—a fraud. No more slicing and dicing of securities into tranches to sell the risk of a loan off to some other mark in the game. It’s over. Look how the activity has trickled off to nothing…


Government policy has been to try and simply save and restore the old financial system that has proved itself bankrupt, and taken the whole country down with it. Yet no one in government seems willing to admit the stubborn facts about our situation. Charles Hugh Smith (Of Two wrote: “Despite the current gloom, the U.S. is firmly entrenched in a complacent faith that traditional methods like Keynsian borrowing/spending will “repair” the U.S. economy. The basic complacency is this: Everything will bounce back in a quarter or two; all we need to do is patch things over until 2010, when everything will return to endless prosperity… As we examine the “solutions” being offered—borrow and spend, borrow and spend, we see the same old tired script being played out… Where is the recognition that any economy fundamentally dependent on cheap, abundant oil and ever-rising debt, tax revenues and consumer spending is mortally wounded?”

Geithner’s Plan

When Geithner announced the next phase of the government rescue plan the markets quickly reacted by dropping 380 points on the day, almost 5% of their net worth. Many believed the reaction was due to a lack of details revealed in the plan, or perhaps to an inability to see how it was different than the Paulson TARP fiasco. But popular news blog “The Big Picture” had this to say: “Wall street was hoping for another multi-billion, no strings attached, taxpayer funded giveaway. Instead, they got something much tougher than they expected.” This was perhaps in reference to tougher regulation and a “stress test” before public funds would be committed to an ailing bank. Then we learn that the results of government audits of the big banks would not be made public. They’ll take your money, but you can’t see their books.

On the other side of this argument, Andy Kessler of “Seeking Alpha” had this explanation for the market reaction: “The Treasury secretary seems stuck on keeping the banks we have in place. But we don’t need zombie banks overstuffed with nonperforming loans—ask the Japanese. Mr. Geithner wants to “stress test” banks to see which are worth saving. The market already has. Despite over a trillion in assets, Citigroup is worth a meager $18 billion, Bank of America only $28 billion. The market has already figured out that the banks and their accountants haven’t fessed up to bad loans and that their shareholders are toast.” It remains to be seen just how tough the new Obama Administration is going to be on the Good Old Boyz, and just how much more punishment the market itself is going to deal out in the trading pits. I’ll suspend judgment until I see what actually happens as this plan goes forward.

The big names in the banking industry were up on the hill in mid-February to explain what they did with the first $350 billion train load of free money they were given at taxpayer expense—and perhaps why no one can get an auto loan these days.

The NT times was gracious in quoting a rival LA Times op-ed columnist who expressed what so many feel now about our Alpha Plus banking elite with their $87 ,000 area rugs: “I want show-trial sweating and stammering. I want their nine-figure bonus checks endorsed over to the rest of us. I want my 401(k) money back. I want blood; I’m a vegetarian, but I’d make an exception for a smoking plate of C.E.O. en brochette.”

Yet when asked by Rep. Jackie Speier of California whether the banks presently receiving taxpayer money at 5% interest would be willing to lower the rates they charge the borrowers (taxpayers all) on credit cards, the CEOs all quietly stated, unequivocally: “No.” No, Mr. Taxpayer. We squandered your deposits in disastrous securities schemes, driving our banks to insolvency. We took your tax dollars, but hell no, you’ll pay us that 30% interest on your credit cards, come hell or high water. Well, Mr. Banker, hell, if you have been noticing lately, is well on the way. Because of the greed, incompetence, and fraud of this trusted crop of financial gurus, a generation of Americans is about to be tested as never before in this crisis. How will we fare? At the moment the promise of hope that Obama brought to the White House has most of us waiting for a turnaround that may never come.

Consider this: the $9.5 trillion already committed to the banking industry is more than the cost of all wars America has ever fought. It was reported to be enough to pay off virtually every mortgage in the nation, which would have stopped all the defaults, foreclosures and subsequent pain cold. Sharon Astyk adds: “It could have paid for free health care for every American, cradle to grave for a century. It was enough to build renewable energy infrastructure that could have softened the crisis, to re-insulate our houses, to provide basic food and health care to the world’s poor. The same trillions we were told we didn’t have when it was needed by those who wanted educations, basic medical care, decent shelter, a home, hope, a decent life, but we had a plenty for the banks and the wealthiest people in the world.”

Ilargi of “Automatic Earth” put it this way in his Feb 12th post: “We just hope for things to get better, and prepare for a year or two at most of doing with a little less, while our governments turn our economies around and the party can start anew. We simply refuse to ask ourselves what happens if the turnaround never comes, just as we refuse to act as if that were even possible. So we sit around and wait while our money is wasted on doomed rescue attempts for long since lost institutions that have hurt us all our lives to begin with, and we can’t get ourselves to rise up and do what must be done to minimize the suffering of our children and friends and mitigate the disasters looming on the horizons of our lives.”

That’s a fairly severe, yet frank, assessment. Recession, Great Recession or Depression—call it what you will, we are all in the maelstrom now and I have seen no clear path to a solution. My own thinking is to simply let the existing system fail, and then start over. But God only knows what level of pain and dislocation that would cause. One thing is certain—our lives are going to get leaner and much more difficult for the foreseeable future. Things are not going to return to the old “normal” way of life we are accustomed to. Now we are pressed to discover a new normal, and one at a decidedly lower level than our old life styles.

There is no question that the banks are in deep trouble, a quagmire of their own making. I went in to make a deposit at one of the big national banks recently, noticing that each teller window had been newly decked out with placards advertising a new savings account plan. It reminded me of the mailed advertisement I received from WaMu on a similar plan just a week before that bank failed. The banks are desperate for new capital. They’ll take our dollars any way they can–by direct deposit through the front door, or by Fed delivered taxpayer funds by the back door. Another prominent sign was labeled “INVESTMENTS” and it touted them as some kind of savings to grace a rosy future in stocks and mutual funds. I smiled, realizing that these markets have been an elevator with but one button of late–Down.

This is the one great aspect that the media continues to miss. The new “stimulus” plan is just treating the Main Street symptoms of the crisis–the lost jobs, the frozen credit, the foreclosures. The massive debt at the deep core of our insolvent banking system is not being faced or addressed. As Bill Clinton might put it: “It’s the securities, stupid!” That’s where the real crisis lies.

The dark heart of the crisis we face is the huge exposure of our financial institutions to securities of “questionable value.” Banks have only written down some $350 billion in announced losses to date. But there are those trillions and trillions in securities out there, and they have not been dealt with yet. They have notional values that are held “off” the balance sheet. If given a fair market value and moved “on” the balance sheet, the banks would be wiped out many times over.

In my thinking, the whole effort to prop up the system to date has been merely buying time. How to deal with this massive deleveraging? We cannot resolve this crisis with tax money, because there isn’t even enough of that to run the government. We already run on a $1.3 trillion deficit. How long can we continue to raise money through treasury bond offerings? There are rumblings that the very credit rating of Uncle Sam himself is suspect.

Watch the bond markets… The next point of crisis will be there. Any sudden movement of investor funds out of treasuries will be a very bad sign. A “flight from treasuries” will signal that we are indeed at the 11th hour of this crisis, and that the powers that be may have run out of control rods. If this happens they will have only one solution left–the printing press–and the end of that road leads to sudden and rapid inflation.

Note: there are plenty of people explaining the same things, but the mainstream media seems to shy away from most of them – especially the ones providing solutions – and presumably prefers being complicit in the theft of everything of value contained in the western world. As I type, the mega rich are making the most of our current crisis to buy up everything of value in many countries around the globe – land, businesses, vital ressources (water tables, minerals, etc…) – for a fraction of their worth.

For some people it does not matter how much money is worth – as long as you have most of it.

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