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Is the U.S. Going Broke?
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Author Topic: Is the U.S. Going Broke?  (Read 54606 times)
Kokopelli
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« Reply #60 on: October 19, 2008, 04:11:44 AM »

[I.M.E.  "George Bush has been in office for 7 1/2 years. The first six years the economy was fine."

To me this is a statement of someone who doesn't really understand how we got here. Go back and read my previous posts. We didn't get here in a few days. The economy hasn't been balanced in a good 15 year, probably more like 25 or more years.  Ever since Greenspan started juicing the money supply we have been on a track for the current consequences.  Greenspan created an inflationary environment by having the fed discount rate lower than the inflation rate causing assets to rise in price.  Institutions could borrow cheap short and lend at a much higher rate long, thus injecting billions into the monetary system. The Carry Trade was very lucrative but at the same time highly inflationary.

The problems with inflation is the unintended consequences. Most inflation http://en.wikipedia.org/wiki/Inflation is created is thru debt and the fractional reserve banking system.  http://en.wikipedia.org/wiki/Fractional_reserve_banking_system

In the early days of monetary expansion (inflation), rising asset prices were welcomed by every one but the poor. Those with the assets benefit and those without pay more and more of their earnings from labor for everything.  Inflation is class warfare! Inflation is insidious TAXATION that transfers wealth from the working class to those who control the money and assets. Inflation is truly Taxation without Representation. This is the ultimate Monopoly game and most people are not even players, just Pons or indentured serfs.

What I don’t understand is why anyone would defend any of those who perpetuated this? Ignorance I guess. At least read and understand the Constitution and our history. We had a Revolutionary War about this kind of abusive system. Jefferson fought hard to instill a fair system in our Constitution and to prevent this kind of system from reoccurring during his life time. What we are going thru isn’t new. Lies, half truths, misrepresentations, bribery and corruption aren’t either. This is how most ruling classes try to maintain their power. That and threat and force!

The real problem with to much accumulation of wealth in one smallish group is that they have nothing productive to do with it so they use it and their time to game the system. They gamble with the rest of our futures. They move companies off shore for more profits. They loan the money out on high risk schemes at extremely high leverage to make more profit. Once a large amount of wealth is accumulated, it has to grow and make profit, at any expense. There is no morals with money or corporations. They grow or die. There is Nothing in their structure about taking care of the planet or the citizens or even being sustainable, it is all about quarterly earnings statements and everything is used to maintain the growth in those. Clean air, pension funds, clean water, your health or welfare are of no concern to a CEO who has been trained to make money.

Bubbles are a result of to much money chasing to few real profits so they chase asset value, real at first but in the end, the only thing left is the story. The first asset bubble of this current inflationary period (the Greenspan Era) was in stocks in the late 1990's that ended with the crash in 2000. Stocks of companies that made no profit were valued in the hundreds of billions. To much money chasing to little real value but believing in the same old story that “this time is different”. As economist Herbert Stein once wrote, "If something cannot go on forever, it will stop,". http://en.wikipedia.org/wiki/Herbert_Stein  The next asset bubble was in housing which ended in 2005.  Another BS story about how “this time is different”.  The asset bubble that caused the most havoc has been the commodities asset bubble which may or may not be ending now.  This one only took away from the consumer and left nothing. Not even hope. The entire game may be near its end. Or Not! We may have one more great inflation left before the entire system fails.

You really can't blame this solely on either party as both have been involved in different ways. It really started accelerating with Ronald Reagan and his anti regulation and  "Trickle Down Economics " theories. The most  egregious event was when Republican Phil Gramm, in 1998, led the charge to repeal Glass Steagal http://en.wikipedia.org/wiki/Glass_Steagal_Act which was put in place in 1933 to keep the banks from doing just what happened with leverage and exotic investment instruments.  Glass Steagal also contained the provisions for the creation of the FDIC which wasn’t repealed by Gramm-Leach-Bliley Act.  The Republicans had a majority in the House and Senate but the bill was signed by a Democratic President Clinton. 

Then along came Bush who believed in NO regulation so he put people at the head of the regulatory agencies who believed like him and most oversight went out the window.  With out the previous repeal of Glass Steagal, his ideology wouldn’t have been enough to cause the melt down of today but adding his philosophy to the previous actions ended up being catastrophic. He also believed as did the Democrats in this ridiculous “Ownership Society”.   Both parties had their hands in Fanny and Freddies tills. Both parties are corrupted by lobbyist and campaign funding by big business. Just look at the ties between Secretary Paulson and Goldman Sacks. Or Cheney and Halliburton.  Neither party is looking out for your best interests. And the only time they even bother to lie to you is during an election when they need your vote. The rest of the time they just ignore us and do what is best for themselves.

We really have a one party system with two factions. We have a Corpocracy which is a system where Capital accumulation is more important than We the People.  Throughout the last few Presidencies we have lost many of our rights to fear and greed and the consequences are/will be devastating to We the People. 

The real problem is/was the accumulation of enormous debts, which is how those at the top expanded their wealth and power. We the People have the burden of debts and they have the income from them. Debts have to be serviced. In other word, you have to make payments on it. Some estimate that the total US debt exceeds $70 trillion and still growing. It could be much more with the inclusion of the derivatives created since the repeal of Glass Steagal. We, as a people, now have so much debt to service that it is impossible. That is why people started defaulting.  The Subprime Crisis is not just a few idiots who took loans that they couldn't repay but a whole nation that is addicted to debt. The collapse just started with subprime which was a last ditch effort of the bankers to continue their expansion of the debt bubble. They make their money off the creation of debt and need to create more to exist (so now they moved to bail out debt).  The problem which started with Subprime spread to Prime loans, auto loans, student loans, and now to commercial and corporate loans.  We are a Subprime Nation.

AND the solution to this insanity is to borrow more or create more money (more inflation). Which, IF it is able to stabilize the banking system, will only lead to more inflationary pressures as oil and food have reached a critical stage where production is less than demand. A stage called contango.  Look it up. The US has lost its grip on reality. 

You can Blame only the Democrats if you want but it is the entire government that is the problem. We don’t need to get rid of government, we just need one that works for We the People rather than only the corporate and financial sectors. Don’t fall for the lines of No Government as that is a road to anarchy and extreme chaos. What we need is a government that actually works.   For most people “Trickle Down Economic” has not worked nor has the inflationary actions of the FED.  Anything beyond very moderate inflation creates deflation and misery in the end. We are headed towards that road. Many have already reached it.

House prices declining is deflationary. Stock prices declining is deflationary. And now commodity prices declining is deflationary, although some being in contango will not stay that way long. What the FED wants to do is to reverse this trend and kick the inflationary trend back into gear. So that those in power can stay in power and you and I become more serf like (more debts to pay) The IRS is like the Sheriff of Nottingham taking anything left after inflation takes its bite.  I personally do not think that is possible to turn inflation back on without first wiping out most of the existing debts first but we'll see. Unfortunately deflation is very destabilizing and painful so the FED and Treasury are doing everything possible to prevent it. Jury is still out on whether it is possible. Either way, the US is in for some drastic changes.

It is the fault of both the Democrats and the Republicans but the most blame goes to the current administration and its dogma against any and all regulations. We don’t even have safe food any longer, toys with lead paint, vitamins with all kinds of added junk and we certainly don’t have a safe financial system due to them. Most of their insane ideology is just starting to show up as the consequences of many actions will not apparent for many years after their implementation.  We have moved into an era of Orwellian theater where War is Peace and torture isn’t torture and giving up our freedom from government intrusion in our lives is security.

"Those who desire to give up freedom in order to gain security, will not have, nor do they deserve, either one."– Benjamin Franklin ...
« Last Edit: October 22, 2008, 04:12:12 AM by Kokopelli » Logged
Kokopelli
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« Reply #61 on: October 19, 2008, 05:56:40 AM »

The Same Old Delusions
by J. R. Nyquist
Weekly Column Published: 10.17.2008
Print

I If you believe that peace and prosperity can continue forever, your belief is a delusion. History teaches that peace and prosperity are repeatedly interrupted by wars and economic crises. History is cyclical, bust follows boom, and peace alternates with war. The dangerous delusions of pre-1914, of the 1920s and 30s will occur again and again. Men have attempted to prevail through violence in the past, and they will attempt to prevail through violence in the future. They believed in a bubbled stock market before, and they will believe again. They trusted Hitler at Munich and they accept the Russian lies today.

If a country has experienced surprise attacks, as in the case of America (when the Japanese attacked Pearl Harbor in 1941, or when Arab terrorists attacked the World Trade Center in 2001) there is something in the character of the country that invites a future surprise. Only today’s attacker may be more ingenious than the Japanese admirals, more bloodthirsty than al Qaeda gangsters. A surprise attack may occur when a country is laid low by financial disorders – by a futile attempt to extend prosperity through borrowing, by a futile bailout of banks by a government that doesn’t realize how close it is to bankruptcy. Even now we hanker after political candidates who tell us what we want to hear. We are told that the government can solve our problems. But as Ronald Reagan said in his First Inaugural Address, “In this present crisis, government is not the solution to our problem; government is the problem.”

The government cannot prevent a market correction. The government cannot make unprofitable businesses profitable. The bubbles in the stock market and real estate must burst. This is what all bubbles do. By intervening, government merely deepens and extends the damage. What must happen, of course, is simple. Ronald Reagan, who assumed the presidency during a severe economic crisis 27 years ago explained: “It is time to check and reverse the growth of government, which shows signs of having grown beyond the consent of the governed.”

The government must stop its ongoing expansion into every sphere. Its role should be limited. During the present crisis, Washington should concentrate on three things: preserve the nuclear deterrent, maintain civil order, and prevent starvation if the economy collapses. The government cannot prevent an economic downturn. It never could do this. What is required is faith in the market, which none of our leaders apparently have. None carry forward the legacy of Reagan. Venezuela’s aspiring Marxist dictator, Hugo Chavez, mocked President Bush on Wednesday as “Comrade Bush” because the Republican president took a left turn during the present financial crisis. “Bush is to the left of me now,” Chavez joked. If the United States government can buy up banks, what possible criticism can it have with regard to Chavez?

Once upon a time we deluded ourselves with the notion that communism was dead. But ideas do not die, and ideologues do not change their ideas so easily. The ruse of yesterday sets up the comeback of today. Drunken Boris paved the way for Putin’s paw, outstretched toward Germany. What comes next in the period of “grey terror” is anyone’s guess. Perhaps it will be the bombing of a significant financial target, like the U.S. Treasury. Perhaps a metaphorical neutron bomb will be detonated on the Western financial exchanges. Recent cyber-raids on the World Bank’s data center opens the way to a crippling financial blow. It is not the KGB’s plan to merely round up Russian “oligarchs.” If you haven’t understood the Revolution as yet, I will explain it in plain language. The world bourgeoisie is to be liquidated once and for all.

Imagine if a cyber attack could wipe out the financial system by eliminating financial data from computers. Does anyone realize how vulnerable we’ve made ourselves? If Pearl Harbor was achievable by the Japanese admirals, what can the KGB accomplish today? The World Bank is said to be under a “Cyber Siege.” As Fox News reported last week, “The World Bank Group’s computer network – one of the largest repositories of sensitive data about the economies of every nation – has been raided repeatedly by outsiders for more than a year….” In fact, the invaders had “full access … for nearly a month in June and July.” Readers of this column will remember what the Russian government was predicting in July; namely, that America was about to experience a “crisis of its existence.”

How did they know?

The sophistication of the World Bank “cyber siege” points to government-directed espionage. According to Fox News, “Investigators discovered that the intruders were using a so-called ‘cluster’ of IP addresses from Macao, China.” Of course, the real hackers spoofed the Chinese IP addresses to lead investigators astray. They would never leave an honest trail back to themselves. One casts about for some country other than China, and one country draws our attention above all others. One of Russia’s top banks is called MDM, which recently reported an almost threefold increase in net profits. While banks are crumpling in Europe and America, MDM’s has prospered. An October 10 Wall Street Journal article links MDM to the suspicious financial transactions of a Kremlin-connected tycoon. The article offers the following clue: “Bush administration officials have been growing increasingly concerned about possible infiltration of Western companies and financial markets by suspected organized-crime figures with ties to the Russian government….”

Are we beginning to catch on, at long last?

It may be too little, too late. Today’s conservative politicians – in Europe and America – are not really conservative. They do not understand economics. They do not uphold the successful traditions and practices of the past. Like Hugo Chavez, they are “comrades” at heart. One more example suffices to prove the point. According to reporters in Brussels, Prime Minister Silvio Berlusconi said on Wednesday that he embraces Russia completely. “I consider Russia to be a Western country,” he explained, “and my plan is for the Russian Federation to be able to become a member of the European Union in the coming years.” In this formulation it would be more realistic to say that Berlusconi favors Europe’s role as a satellite of the Russian Federation. “I had this vision for years,” said Berlusconi.

We should not underestimate the delusional thinking of today’s “conservative” politicians. Americans tend to be naïve, and conservatives everywhere have adopted this position. They underestimate the threat from abroad. They think their country is invincible, that their prosperity is on a firm foundation. This kind of thinking, however, is subversive of genuine security and prosperity. Men must struggle for what they have, and they must struggle to preserve it. Complacency has no place in this reality, and no future. Those who only see our economic stupidities in respect of the current crisis have seen but half the picture. Pearl Harbor and 9/11 were characteristic events, occurring in accordance with the national tendency of the United States to neglect its security while in pursuit of economic objectives. There are many dimensions to the current crisis, including the ideological divide which threatens our national unity. All these elements are connected, however, to the threat from abroad. All these elements can be exploited by our enemy.

 

Copyright © 2008 Jeffrey R. Nyquist
Global Analysis Archive
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Kokopelli
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« Reply #62 on: October 19, 2008, 07:02:19 AM »

It Still Ain't Gonna Work
Plus, A Quick Technical Look at Gold
BY TIM W. WOOD

As the market declined into the 2002 low we began to see more manipulation and efforts to hold the market up than ever before. In the wake of these desperately irresponsible acts, interest rates declined, the money supply expanded, banks embarked on ridiculously irresponsible lending practices and the housing bubble was born as was the commodity bubble. These acts by the Fed were a deliberate attempt to hold back the deflationary wrath of Kondratieff Winter, which is all about the purging of excess credit from the system. So, what do the geniuses in charge do? They promote more credit. Now that really makes sense, doesn’t it? Just as the economic cycle was trying to naturally deflate and purge itself of the credit excesses in 2001 and 2002, the brainiacs in charge stepped in and flooded the economy with more of what was ailing it. Credit.

I have said all along, in both print and in interviews, that the efforts to hold the market up during the 2003 to 2007 period would only make matters worse. Every time the market would soften during this timeframe, they would again step in with more of the insane practices to keep things going. As a result, they were able to stretch the 4-year cycle advance that began in 2002 into the second longest 4-year cycle since the inception of the Dow Jones Industrial Average in 1896. If we think about this it makes sense because we were, after all, seeing the inflating of the largest credit bubble in history.

Then, in October 2007 a classic Dow theory non-confirmation occurred as the stock market was also pressing into the overdue 4-year cycle top. For the record, I want to make it perfectly clear that cycles have nothing to do with Dow theory. Cycle theory and Dow theory are two totally different disciplines, but they can be used independently to complement each other. As an example of this, I knew that the 4-year cycle top had stretched into 2007 and that 81% of the 4-year cycle tops since 1896 have occurred in conjunction with a classical Dow theory non-confirmation. When I combined this with the other high probability “DNA Markers” that I have developed in relation to 4-year cycle tops and bottoms, this sent a very clear message in regard to a major market top. It was then on November 21, 2007 that a bearish Primary Trend change occurred under classic Dow theory.

Since that time we have seen increasingly more and more drastic measures to rescue the market. However, on November 21, 2007 the Dow theory spoke and according to the great Dow theorist of the 1920’s, William Peter Hamilton, the stock market barometer was then forecasting “stormy conditions.” Since the original Dow theory warning that was sounded by the non-confirmation in October 2007, the Industrials have fallen 40%. The Transports have fallen nearly 30%. The S&P 500 has dropped over 45% and China’s Shanghai Index has dropped by over 68%. So, yes, the Dow theory has spoken and it has proven correct. Yet, the politicians remain completely clueless about just what is occurring here, and they continue to think they can “fix it.” Oh, they have “fixed” things okay. It is because of these idiots that economic conditions have deteriorated to the point that they have. All the while, they continue to think that by throwing more good money on top of bad that somehow this economic crisis can be resolved.

Think about this for a minute. We have people trying to fix a problem that never even saw the problem coming and that are too ignorant to understand that they are part of the problem. They are why things have escalated to this point. Them trying to “fix” things is what got us this deep into this mess in the first place. What a joke this is. On top of the politicians, we have the mainstream media that is clearly lost as well. Just today I heard on CNBC that we already need yet another stimulus package. Hello, didn’t we just have the largest bailout in history less than 2-weeks ago? Haven’t we seen countless bailouts from AIG to Freddie and Fannie to mention a few and already we “need another bailout”? Please, people! They just don’t get it. Now we need a bailout or stimulus package every other week? It Ain’t Gonna Work! Just as I have said since 2003 and into the 2007 top, all this is doing is making matters worse, and I now think it is checkmate. As I see it, the market is again setting up for another potentially very nasty leg down.

Think about something. Did anyone in the mainstream media warn you about this stock market decline, or the commodity bubble, or the housing top, or the credit crisis? No, and they have never warned of any decline in the past. Rather, the media and the politicians both spout babble about why everything is okay. This was also true during the 1929 decline as well.

Following are a few examples of the 1929 to 1931 babble. Please compare these quotes to the price action in the first chart below.

September 1929
“There is no cause to worry. The high tide of prosperity will continue.” –- Andrew W. Mellon, Secretary of the Treasury.

October 14, 1929
“Secretary Lamont and officials of the Commerce Department today denied rumors that a severe depression in business and industrial activity was impending, which had been based on a mistaken interpretation of a review of industrial and credit conditions issued earlier in the day by the Federal Reserve Board.” –- New York Times

December 5, 1929
“The Government’s business is in sound condition.” –- Andrew W. Mellon, Secretary of the Treasury

December 28, 1929
“Maintenance of a general high level of business in the United States during December was reviewed today by Robert P. Lamont, Secretary of Commerce, as an indication that American industry had reached a point where a break in New York stock prices does not necessarily mean a national depression.” –- Associated Press dispatch.

January 13, 1930
“Reports to the Department of Commerce indicate that business is in a satisfactory condition, Secretary Lamont said today.” – News item.

January 21, 1930
“Definite signs that business and industry have turned the corner from the temporary period of emergency that followed deflation of the speculative market were seen today by President Hoover. The President said the reports to the Cabinet showed the tide of employment had changed in the right direction.” – News dispatch from Washington.

January 24, 1930
“Trade recovery now complete President told. Business survey conference reports industry has progressed by own power. No Stimulants Needed! Progress in all lines by the early spring forecast.” – New York Herald Tribune.

March 8, 1930
“President Hoover predicted today that the worst effect of the crash upon unemployment will have been passed during the next sixty days.” – Washington Dispatch.

May 1, 1930
“While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover. There is one certainty of the future of a people of the resources, intelligence and character of the people of the United States – that is, prosperity.” – President Hoover

June 29, 1930
“The worst is over without a doubt.” – James J. Davis, Secretary of Labor.

August 29, 1930
“American labor may now look to the future with confidence.” – James J. Davis, Secretary of Labor.

September 12, 1930
“We have hit bottom and are on the upswing.” – James J. Davis, Secretary of Labor.

October 16, 1930
“Looking to the future I see in the further acceleration of science continuous jobs for our workers. Science will cure unemployment.” – Charles M. Schwab.

October 20, 1930
“President Hoover today designated Robert W. Lamont, Secretary of Commerce, as chairman of the President’s special committee on unemployment.” – Washington dispatch.

October 21, 1930
“President Hoover has summoned Colonel Arthur Woods to help place 2,500,000 persons back to work this winter.” – Washington Dispatch

November 1930
“I see no reason why 1931 should not be an extremely good year.” – Alfred P. Sloan, Jr., General Motors Co.

January 20, 1931
“The country is not in good condition.” – Calvin Coolidge.

June 9, 1931
“The depression has ended.” – Dr. Julius Klein, Assistant Secretary of Commerce.

August 12, 1931
“Henry Ford has shut down his Detroit automobile factories almost completely. At least 75,000 men have been thrown out of work.” – The Nation.

http://www.financialsense.com/Market/wood/2008/images/1017_clip_image002.gif

I have also been asked about gold and gold stocks. Well, I have been telling my subscribers for months that the evidence suggests that the 9-year cycle in gold has peaked, and through my eyes this is why gold has been declining. As for gold stocks, below I have a monthly XAU/Gold ratio chart along with my Trend Indicator. When price is moving up on this chart it is telling us that gold stocks are out performing physical gold, which is bullish for gold and the gold stocks. When price is moving down, the opposite is, of course, true. As an example of this, let’s look at the period between the May 1996 top and the August 1998 top. During this timeframe gold fell from roughly 410 to 271, or 35%. All the while, the XAU fell from 150 to 51, or 66%. So, as this chart suggested, the XAU was the weaker of the two. If we take the bullish period between October 2000 and May 2002, gold advanced from 266 to 331, or some 24%. But during that same period, the XAU advanced from 41 to 84, which was up some 105%. As this chart suggested during that timeframe, the XAU was the strongest. More recently, the monthly Trend Indicator turned back down in October 2007. This downturn served as a warning of a pending top in gold and gold stocks, which occurred in March 2008 at the 9-year cycle top. Since that time gold is off some 21% and the XAU is off just over 57%. So again, the downturn of price on this chart, along with the downturn of the monthly Trend Indicator, serves as evidence that we have been, and so far continue to be, in an environment in which gold stocks will be weaker than gold. This is in turn a bearish environment for gold and I do not look for this to change until we see an upturn on this chart that is confirmed by an upturn of the monthly Trend Indicator.

1017.02

Tim W. Wood

Copyright © 2008 All rights reserved.
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billy-bob
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« Reply #63 on: October 20, 2008, 03:49:45 PM »

I really don't have the time or the energy to worry about it.  All it amounts to is a bunch of speculators and ignorant people producing a mass psychological paranoia amongst the masses!
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GOD , I'm still here!
Kokopelli
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« Reply #64 on: October 21, 2008, 07:46:58 AM »

I really don't have the time or the energy to worry about it.  All it amounts to is a bunch of speculators and ignorant people producing a mass psychological paranoia amongst the masses!


Yes but they control the big picture and that means your standard of living.

Ignore what they do at your own peril.

Those who fail to plan > Plan to fail!
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Admin
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« Reply #65 on: October 21, 2008, 09:22:40 AM »

Wall Street's 'Disaster Capitalism for Dummies'

14 reasons Main Street loses big while Wall Street sabotages democracy

By Paul B. Farrell, MarketWatch
Last update: 7:10 p.m. EDT Oct. 20, 2008

ARROYO GRANDE, Calif. (MarketWatch) -- Yes, we're dummies. You. Me. All 300 million of us. Clueless. We should be ashamed. We're obsessed about the slogans and rituals of "democracy," distracted by the campaign, polls, debates, rhetoric, half-truths and outright lies. McCain? Obama? Sorry to pop your bubble folks, but it no longer matters who's president.
Why? The real "game changer" already happened. Democracy has been replaced by Wall Street's new "disaster capitalism." That's the big game-changer historians will remember about 2008, masterminded by Wall Street's ultimate "Trojan Horse," Hank Paulson. Imagine: Greed, arrogance and incompetence create a massive bubble, cost trillions, and still Wall Street comes out smelling like roses, richer and more powerful!
     
       
Yes, we're idiots: While distracted by the "illusion of democracy" in the endless campaign, Congress surrendered the powers we entrusted to it with very little fight. Congress simply handed over voting power and the keys to trillions in the Treasury to Wall Street's new "Disaster Capitalists" who now control "democracy."
Why did this happen? We're in denial, clueless wimps, that's why. We let it happen. In one generation America has been transformed from a democracy into a strange new form of government, "Disaster Capitalism." Here's how it happened:

    *
      Three decades of influence peddling in Washington has built an army of 42,000 special-interest lobbyists representing corporations and the wealthy. Today these lobbyists manipulate America's 537 elected officials with massive campaign contributions that fund candidates who vote their agenda.
    *
      This historic buildup accelerated under Reaganomics and went into hyperspeed under Bushonomics, both totally committed to a new disaster capitalism run privately by Wall Street and Corporate America. No-bid contracts in wars and hurricanes. A housing-credit bubble -- while secretly planning for a meltdown.
    *
      Finally, the coup de grace: Along came the housing-credit crisis, as planned. Press and public saw a negative, a crisis. Disaster capitalists saw a huge opportunity. Yes, opportunity for big bucks and control of America. Millions of homeowners and marginal banks suffered huge losses. Taxpayers stuck with trillions in debt. But giant banks emerge intact, stronger, with virtual control over government and the power to use taxpayers' funds. They're laughing at us idiots!

Amazing isn't it, Wall Street's Disaster Capitalists screwed up, likely planned or let happen this meltdown and recession. Yet America's clueless taxpayers just reward them by giving the screw-ups massive bailouts, control over more than $2 trillion of tax money, and the power to clean up the mess they made. Oh yes, we are dummies!
This end game was planned for years in secret war rooms on Wall Street, in Corporate America, in Washington and the Forbes 400. Democracy is too cumbersome. It had to be marginalized for Disaster Capitalism to take over. Reagan, Bush and Paulson were Wall Street's "Trojan Horses."
Naomi Klein summarizes the game in "Shock Doctrine: the Rise of Disaster Capitalism." This "new economy" generates enormous profits feeding off other peoples' misery: Wars, terror attacks, natural catastrophes, poverty, trade sanctions, subprime housing meltdowns and all kinds of economic, financial and political disasters. Natural (Katrina) or manmade (Iraq), either way "disaster capitalism" creates fortunes.
So you, me and the other 300 million better get out of denial. America is no longer a democracy. Voting is irrelevant. Best case scenario: We're a plutocracy, a government ruled by the wealthy, the richest 1%, the Forbes 400, the influential wealthy elite, while the other 99% are their "servants." Meanwhile, the inflation-adjusted income of wage-earners has declined for three decades.
Worst case scenario: America's no democracy and as a result of the meltdown and the surrender of our power to Wall Street's new Disaster Capitalism we are morphing into what one WWII dictator called "corporatism," a "merger of state and corporate power," kind of like what's going on now with Goldman Sachs' ex-boss as de facto president.
Wolves in sheep's clothing
Yes, a strong charge. But like a lot of our readers, I don't like what's happening to America. I'm a patriot. I volunteered for the Marines. Served four years. Volunteered for Korea. I don't like how our freedoms, rights and value system are being subverted in the name of greed, arrogance, self-righteous intolerance and other false gods.
We know for the last eight years disaster capitalists ignored obvious warnings of a coming meltdown. They apparently planned it. They road the bull, got very rich. Now they have the ultimate disaster capitalist weapons, trillions in tax money, virtual control of government.
That's why I fear we're on the edge of a dangerous line between Wall Street's version of disaster capitalism and a toxic "merger of state and corporate power." The wolf is in sheep's clothing. Wall Street pretends we're a democracy. Yet America more closely resembles the kind of "corporatism" that Laurence W. Britt wrote about five years ago in Free Inquiry magazine.
We adapted his historical analysis of 14 key traits for today's discussion. Notice how they have a huge impact your investments and retirement:
1. Wall Street rich get first priority
Think "bailout." Wall Street's greedy con game spins out of control globally. Millions of homeowners misled, lose. Who gets hundreds of billions first? Wall Street's con men.
2. National security obsession
Think of the expansion of executive powers in the name of national security: Preemptive wars, wiretapping private citizens, Gitmo, torture; driven by a dark wealthy neocon elite.
3. Superpower with massive military
Think of our $3 trillion Iraq/Afghan War. Disaster capitalists love the thrill of military power. We outspend all nations, over half the federal budget to strut before the world.
4. Extreme nationalism
Signs are everywhere: Flags, lapel pins, "support the troops" slogans, all to get huge military budgets passed. Challenge them and you're un-American and unpatriotic.
5. Rally the masses by scapegoating enemies
Think "axis of evil," mushroom clouds, "Islamofascists," more terrorist attacks on the homeland. Propaganda creates "enemies" in the public's mind and distracts from real issues.
6. Corruption and cronyism
Think earmarks, no-bid defense contracts, paid mercenaries outnumbering military in Iraq, superlobbyist Jack Abramoff, biofuels, bridge to nowhere, millions donated to campaigns.
7. Obsession with crime
Think of prison-building as just another investment opportunity, rather than focusing on reforming our criminal justice system. Stoke irrational fear of criminals and extremists.
8. Labor and low wages
Think corporate earnings versus the wages paid to workers. No "trickling down," leaves more for tricklers: Rich insiders, stockholders. Wages dropping as CEO salaries skyrocket.
9. Contempt for human rights
Think of abuses of habeas corpus, loss of right to trial, bogus charges, plus "demonizing" the victims, all in the name of national defense and homeland security.
10. Mass media manipulation
Think of leaking false information, Joseph Wilson, Valerie Plame, Scooter Libby, Colin Powell's United Nation's testimony, Condoleezza Rice's mushroom clouds, WMDs, all to suppress the truth.
11. Obsession with sexism
Think of paternalism, antigays, antiabortion, subordinate women -- then codify the system as the law of the land reinforcing a male-dominated society, punish violators.
12. Disdain for intellectuals
Think of conservative intellectuals Francis Fukuyama and Bill Buckley. Contrast them to Sarah Palin and Joe Sixpack conservatism, Bush's funding cuts for arts and science education.
13. Religion in government
Think of all the faith-based programs versus antiscience in drug approvals, creationism vs. evolution, Ten Commandments enshrined in public buildings, public money to churches.
14. Fraudulent elections
Think of police and prosecutorial intimidation and threats to voters, challenging minority voters, ballots disappearing, party election officials committing outright fraud.
Yes, officially America is still a democracy. We have enough signs and rituals to support that illusion. But the truth is America has become a plutocracy run by and for the wealthy. And since Wall Street's Disaster Capitalism coup de grace, we are rapidly morphing into a dangerous new government.

http://www.marketwatch.com/news/story/14-reasons-main-street-loses/story.aspx?guid={F63EC448-D9C1-4138-AC18-97BF0FE68EE3}&print=true&dist=printMidSection
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billy-bob
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« Reply #66 on: October 21, 2008, 05:42:24 PM »

I have an overabundance of FAITH and I believe that I will survive; no matter what THEY do.  I have a few tricks up my sleeve too.
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gemgal
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« Reply #67 on: October 23, 2008, 10:35:21 AM »

OK Everyone! Yes sh-- has hit the fan and may get worse.....SO WHAT! What are YOU doing to protect yourself,friends and family in THIS environment NO MATTER WHAT the USA or World does????
 I'd love to see all this BS turned into real life helpfullness on this forum!  The wise/educated/insightefull have know this would happen for SO long...but  knowing doesn't help anyone! 
 Billy-Bob dear-WHAT are your tricks???   Kokopelli how have YOU actually in real life protected yourself and assets ? For us who have some cash and NO debt WHAT DO WE DO NOW????? Get out of all banks and money markets? or what????? Just buy food and survivailist products or what????
   Lets get some innovating ANSWERS for those who are still afloat and want to help others!!!! 
  Thankyou my friends....sorry I'm so intense but lets HELP each other instead of just complaining/talking!      LOL  !!!!!  GG
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Kokopelli
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« Reply #68 on: October 24, 2008, 05:17:37 AM »

Hi Gemgal,

It is difficult to plan for chaos. It can spin one way and then another and it is always trying to throw a wrench in the works.

Currently, I am mostly in cash. I do have extra food in the house and some small stores of other items that would be useful, like toilet paper and diesel for my generator.  I try and keep everything in repair and have a good supply of firewood.  I believe that self sufficiency is the road to take. It is the safest one at this point. Be as self contained as possible. Buy heritage seeds for next year's garden and secure a place for one if you haven't already. Fenced for deer and rabbits and squirrels.

If we continue on our course of deflation, this will mean that the huge pyramid of debts that have been accumulated by the public, public entities and corporations will crash and most economic activity will slow way down or stop. Then having cash would be a good thing to have. You would be able to be one of those who could take an opportunity of a lifetime and buy things really cheap.

If those in power succeed in pumping this deflating balloon back up, then contolling leveraged assets would be the way to go as printing money is inflationary. What they are doing though is trying desperately to stop the deflation monster.  BUT hyper inflation is a likely possibility and a  very difficult environment for everyone.  That is a possibility if they succeed. It could also capsize this great economy and accelerate the deflationary scenario yet leaving almost no one with cash or cash equivalents. Worst case scenario.

Today, it looks like deflation is accelerating but in a chaotic world with leaders who are entirely disconnected to our reality, no one really knows how this will turn out.

Greenspan at the Congressional hearings yesterday gave a performance more like a cartoon character. He really thought the banks wouldn't do this to themselves as it wasn't in their self interest... I guess he has never studied history or human nature. What an educated moron. Yet he was the leader of the morons and the Ostrich Society. Well, him and W, who thought that no regulation was good for business. Like having a football game with no rules. Winner take all and can use even the spectators any way they want... JUST WIN! What a bunch of fools... or Narcissists! 

What are your thoughts about what to do?



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I.M.E.
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« Reply #69 on: October 24, 2008, 06:25:29 AM »

Kokopelli has good advice in his second paragraph.  In addition to his suggestions, I know people who have cash buried.  Those who are more concerned have gold buried.  My money is mostly in long term CD's.  That's a problem since I will have to pay an early withdrawal penalty to get to it.  I'm going to hope that the Feds keep bailing out banks until my CD's mature and I can split them up into $100K CD's in different banks.  (FDIC)
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billy-bob
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« Reply #70 on: October 25, 2008, 10:27:44 AM »

Besides having an abundance of faith, I also have survival training under my belt, and the knowledge to stay calm and exist in reasonable fashion.  If you need to know what to do, talk to some of the old timers, if you can find them, or do research on the internet and/or books at the survival store in CJ.  I can remember when I only had pennies and somehow it came to pass that I survived becauce I could; anticipate, improvise, and adapt.  I am still doing it today, because I don't freak out because chicken little says the sky is falling.
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« Reply #71 on: October 30, 2008, 04:50:50 AM »

Wall Street Won't Surrender on Bonuses, Veterans Say (Update1)

By Christine Harper

Oct. 30 (Bloomberg) -- Wall Street's chief executives will hunker down and pay bonuses this year in the face of the worst financial crisis since the Great Depression, a taxpayer bailout and mounting political outcry, industry veterans say.

Odds that Wall Street will forgo the payouts are ``slim to none,'' said John Gutfreund, 79, president of New York-based Gutfreund & Co. and the former chief executive officer of Salomon Brothers Inc. ``They're going to have to be a little bit sensitive because politicians, whether they like it or not, are part of their lives now.''

Year-end payments at the nine banks that received $125 billion from the U.S. Treasury are under investigation by U.S. Representative Henry Waxman and New York Attorney General Andrew Cuomo, who are demanding details on the companies' compensation plans. Three of the firms, Goldman Sachs Group Inc., Morgan Stanley and Merrill Lynch & Co., have already set aside $20 billion to pay bonuses this year.

The payouts typically account for about two-thirds of compensation at the biggest Wall Street firms. The bonuses are accrued throughout the year in line with revenue.

``Financial institutions that have accepted federal assistance should be required to face consequences from their earlier bad decisions and cancel those bonuses,'' Senator Olympia Snowe, a Maine Republican, said in a statement on Oct. 28.

Poor Performers

Few of the nine companies receiving money from the U.S. Treasury are performing well this year. Only Wells Fargo & Co. has a higher share price, up 6 percent this year, with the rest showing declines ranging from 18 percent at JPMorgan Chase & Co. to 72 percent at Morgan Stanley. State Street Corp. is the only firm to report increased profits. Merrill Lynch has reported five straight quarterly losses.

``The public pressure might mitigate against bonuses at the levels we've seen recently, and that's in sync with the economic issues,'' said Fred Joseph, 71, co-head of Morgan Joseph & Co. in New York and the former CEO of Drexel Burnham Lambert Inc. ``There will be bonuses this year, but I think they may be reduced by a larger percentage.''

For some bankers, a smaller payout would come as a surprise. More than one-third of Wall Street employees surveyed by a recruitment Web site between Oct. 13 and Oct. 21 said they expect a bigger bonus this year. Two-thirds of the 1,300 people surveyed said they still expect some year-end award, according to eFinancialCareers.com, owned by New York-based Dice Holdings Inc.

`Bonus Season'

Waxman, a California Democrat and chairman of the House Committee on Oversight and Government Reform, sent letters on Oct. 28 to the nine banks that are receiving money in the U.S. Treasury's capital purchase program requesting details of their compensation plans.

Cuomo sent letters yesterday to the nine companies requesting detailed accounting of expected payments to top executives in the ``upcoming bonus season,'' including information on the expected bonus pool for this year.

House Speaker Nancy Pelosi of California and Senate Majority Leader Harry Reid of Nevada, both Democrats, urged Treasury Secretary Henry Paulson to put restrictions on severance pay for executives that participate in the bailout.

The nine companies receiving the initial $125 billion from the Troubled Asset Relief Program, or TARP, are Goldman Sachs, Morgan Stanley, Merrill Lynch, Citigroup Inc., JPMorgan, Wells Fargo, Bank of America Corp., Bank of New York Mellon Corp. and State Street.

Outrage

``Wall Street bank executives are set to walk away with billions of bonuses at the end of this year,'' Barack Obama, the Democratic presidential candidate, said in a campaign speech on Oct. 28. ``We call that an outrage.''

Citigroup, in an e-mailed statement, said it will cooperate with ``federal and state inquiries about our global expenditures for wages, health insurance and other benefits, which we believe reflect compensation best practices.''

The New York-based bank said it will also adhere to constraints on executive pay imposed under TARP. Spokespeople for the other firms targeted by Waxman and Cuomo either declined to comment yesterday or said they will cooperate with the inquiries.

John McCain, Obama's Republican opponent, told supporters in Miami yesterday that ``I'm going to make sure we take care of the working people who were devastated by the excesses, greed and corruption of Wall Street and Washington.''

Joseph, the former Drexel CEO, said companies that don't pay bonuses risk losing employees who are unwilling to settle for salaries. Salaries in the industry range from about $80,000 to $600,000 a year.

`Serious Exodus'

``A lot of guys wouldn't want to work this hard just for salaries,'' he said. ``You'd have a serious exodus from the business by a lot of really talented people -- they'd become CFOs of companies, go to firms that didn't participate in the TARP program, go to hedge funds, or start hedge funds.''

Hedge funds, which have lured top traders from securities firms in the past, may cut as many as 10,000 jobs this year as the industry suffers the steepest losses in more than two decades, according to Options Group, a financial services recruitment and consulting firm in New York. More than 149,000 finance jobs have been eliminated worldwide since the middle of last year, according to data compiled by Bloomberg.

Gutfreund, the former Salomon CEO, said Wall Street executives are likely to find ways to pay bonuses and manage the political uproar.

``I'm sure there are creative ways,'' he said. ``There are all kinds of devices to cover yourself in terms of paying people.''

http://www.bloomberg.com/apps/news?pid=20601109&sid=aX6xQJdexEEo&refer=home
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« Reply #72 on: November 06, 2008, 07:09:00 AM »

The Paulson Plan: Compelling Banks to Lend at Bazooka Point


For now, you can force banks to take money, but you can't force them to lend it. Let's explore this theory starting with a look at the Drama Behind a $250 Billion Banking Deal.

    The chief executives of the nine largest banks in the United States trooped into a gilded conference room at the Treasury Department at 3 p.m. Monday. To their astonishment, they were each handed a one-page document that said they agreed to sell shares to the government, then Treasury Secretary Henry M. Paulson Jr. said they must sign it before they left.

    The chairman of JPMorgan Chase (JPM), Jamie Dimon, was receptive, saying he thought the deal looked pretty good once he ran the numbers through his head. The chairman of Wells Fargo (WFC), Richard M. Kovacevich, protested strongly that, unlike his New York rivals, his bank was not in trouble because of investments in exotic mortgages, and did not need a bailout, according to people briefed on the meeting.

    But by 6:30, all nine chief executives had signed — setting in motion the largest government intervention in the American banking system since the Depression and retreating from the rescue plan Mr. Paulson had fought so hard to get through Congress only two weeks earlier.

    What happened during those three and a half hours is a story of high drama and brief conflict, followed by acquiescence by the bankers, who felt they had little choice but to go along with the Treasury plan to inject $250 billion of capital into thousands of banks — starting with theirs.

    In addition to the capital infusions, which will be made this week, the government said it would temporarily guarantee $1.5 trillion in new senior debt issued by banks, as well as insure $500 billion in deposits in non interest-bearing accounts, mainly used by businesses.

    All told, the potential cost to the government of the latest bailout package comes to $2.25 trillion, triple the size of the original $700 billion rescue package, which centered on buying distressed assets from banks. The latest show of government firepower is an abrupt about-face for Mr. Paulson, who just days earlier was discouraging the idea of capital injections for banks.

Compelling Banks to Put New Cash to Work

Bloomberg is reporting Paulson Lacks Leverage to Compel Banks to Put New Cash to Work:

    Treasury Secretary Henry Paulson persuaded nine major U.S. banks to accept $125 billion in government investment. Getting them to lend it out may prove a tougher sell. [Mish note: The other $125 billion goes to hundreds or thousands of smaller banks]

    "The truth of the matter is, they can't put a gun to their head and say you have to lend this money," said Charles Horn, a former official at the Office of the Comptroller of the Currency, part of the Treasury Department, and now a partner at the Mayer Brown law firm in Washington.

    Treasury officials acknowledge they can't force banks to get the taxpayer money into the hands of their customers. Instead, officials are betting that the government's investment will create conditions where banks have a greater incentive to earn profits from lending than to hoard money to shore up their balance sheets.

    "It's in their economic interest," said David Nason, the Treasury's assistant secretary for financial institutions, in an interview with Bloomberg Television.

Bazooka Theory

There seems to be a fine line between ...

1) Illegally forcing supposedly well capitalized banks at bazooka point to take money on questionable terms

2) And illegally forcing those same banks at bazooka point to lend it

Self Preservation

I hope that fine dividing line holds and I also hope banks do the responsible thing (nothing) because Paulson is acting like a complete fool. It is in no one's best interest to lend that much money. We are in this mess because banks lent money to anyone and everyone including those with no possible means of paying the money back.

The US is in a recession, consumers are cutting back discretionary spending, there is rampant overcapacity in every sector but energy, and there is no reason to go on a lending spree. Furthermore, there is no reason for any qualified buyer to want to borrow. Why would any responsible party want to expand in this environment? The only people who want to borrow significant sums of money now are the very people banks should not want to lend to.

Thus the best thing banks can do with that money is sit on it. Yet the penalty for sitting on it is the difference between what the Fed will pay on bank reserves and the 5% interest banks have to pay at bazooka point for borrowing money they did not want in the first place. If banks do start lending like Paulson wants, defaults are guaranteed to increase dramatically.

Pretend Lending And LIBOR

LIBOR is based on rates for bank to bank lending. That lending is simply not happening as noted in

LIBOR and the TED Spread Still Show Extreme Stress

The problem to consider is that many adjustable rate mortgages are based on LIBOR and if LIBOR is elevated when those rates reset, there is going to be a massive increase in foreclosures.

If the goal is to get LIBOR down, then I propose the following: Bank of America lends money to Citigroup (C) who lends money to Wells Fargo who lends money to JPMorgan who lends money to Bank of America (BAC). We can have a big circle of all 9 banks forced at bazooka point to take money, to lend money to each other. LIBOR comes down and everyone is happy.

That is not a serious proposal of course, even though pretend lending makes far more sense than massive amounts of real lending.

Interview with Paul Kasriel

Long time readers have seen me refer to an Interview With Paul Kasriel, economist and director of economic research at the Northern Trust many times. The interview is from December 2006 but it is timeless. Here is one key snip, but if you haven't yet read it I suggest reading the entire article.

    Mish: Would you say that consumer debt in the US as opposed to the lack of consumer debt in Japan increases the deflationary pressures on the US economy?
    Kasriel: Yes, absolutely. The latest figures that I have show that banks' exposure to the mortgage market is at 62% of their total earnings assets, an all time high. If a prolonged housing bust ensues, banks could be in big trouble.

    Mish: What if Bernanke cuts interest rates to 1 percent?
    Kasriel: In a sustained housing bust that causes banks to take a big hit to their capital it simply will not matter. This is essentially what happened recently in Japan and also in the US during the great depression.

    Mish: Can you elaborate?
    Kasriel: Most people are not aware of actions the Fed took during the great depression. Bernanke claims that the Fed did not act strong enough during the great depression. This is simply not true. The Fed slashed interest rates and injected huge sums of base money but it did no good. More recently, Japan did the same thing. It also did no good. If default rates get high enough, banks will simply be unwilling to lend which will severely limit money and credit creation.

Banks Unwilling To Lend

And so here we are. The Fed slashed interest rates to 1.50% and banks are unwilling to lend.

All the Fed and Treasury have accomplished so far was to put over a trillion dollars of taxpayer money at risk, and in doing so caused long term interest rates to spike up. This of course puts still more pressure on the housing sector. Someone needs to tell Paulson to go to hell but no one at the table had enough courage to do it.

http://seekingalpha.com/article/100001-the-paulson-plan-compelling-banks-to-lend-at-bazooka-point
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I.M.E.
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« Reply #73 on: November 06, 2008, 07:11:38 PM »

While I don't believe Obama is the messiah, at least he did say the economy will be the first thing he addresses.  Perhaps, his replacements will have a better plan.  The coming year will be very interesting.
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CJ Resident
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wtf?


« Reply #74 on: November 10, 2008, 01:08:58 AM »

It just never ends:
http://www.msnbc.msn.com/id/27635885
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