MILKING THE GLOBAL FINANCIAL COWS

 

Paulson went before Congress. They debated about whether the $700 [$2 trillion] billion bank bail bill was for rescuing Americans who are too deep in debt on ridiculous home loans or if this money is only for gnomes so they can go party. Paulson was not arrested. Another chance to fix things was blown, of course.

And we visit Japan who boasts that they have lots and lots of cash and are not worried about a global depression. Welcome to Japan’s wonderful 0% interest depressed world! And we visit the Iceland Derivatives Beast Fire sale. And examine some more charts and graphs that show how messed up everything is.

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One year ago today:

Money MattersNovember 18, 2007: Oil, War and Inflation: Blaming The Wrong People Like China

The continuous debt machine is now grinding its gears. Normally, when a country runs out of capacity to take on more debt, they stop spending, their economy contracts and they have a recession or they default on international loans. But the US isn’t a normal nation. We can keep on buying oil we cannot afford because we can make money whenever we wish and no one, the IMF nor the World Bank or anyone can or wants to stop us.

 

Paulson Clashes With Congress, Warns Against Using Bailout as a `Panacea’

Treasury Secretary Henry Paulson rejected using the government’s financial-rescue program as a “panacea” for economic difficulties, clashing with lawmakers who want the funds to help beleaguered homeowners.

“The rescue package was not intended to be an economic stimulus or an economic recovery package,” Paulson said in testimony to the House Financial Services Committee in Washington. The Troubled Asset Relief Program was designed to stabilize financial markets and the flow of credit and “is not a panacea for all our economic difficulties.”

Representative Barney Frank, who heads the House panel, cut off Paulson during the question-and-answer session, saying “the bill couldn’t have been clearer” in also being aimed at reducing foreclosures. Paulson told lawmakers he has no plans to use the second half of the $700 billion program, indicating it will be up to the incoming Obama administration to resolve the matter.

 

Frank is wrong about the bail out bill being clear about anything at all.  It was offered in a state of panic and passed in a panic.  The panic was everyone, Republican and Democrat, getting on the gravy train.  So many gravy trains have left Congress this last 8 years, it could feed this entire planet on Thanksgiving Day.  For the next 1,000 years.  Periodically, I get various links from readers here that have really bizarre analysis of what is going on.  For example, more then one commentator has breezily said, ‘We don’t have to examine why this is happening.’  Or, ‘We don’t have time to place blame’ or other variations on the ‘Who cares what roads we took to this dead end cliff.’  

 

But alas, this is highly important!  Congress dares not examine the roots of this mess because this requires looking into the mirror.  Neither party has the stomach for this.  Because both wanted total global empire no matter how much this cost.  Neither party wants to face the facts: we cannot run a totally different economic and monetary system as our top rivals and survive under present international laws and treaties.

 

The battle over the concept of ‘free trade’ has to be fought.  It is one of the major battles and it involves getting our ‘allies’ very, very angry with us.  Just like the free ride on the back of our expensive military must be ended.  Not one of our ‘allies’ will want this, either.  The post-WWII patriotic pattern has been for patriotism being all about world domination, not protection of the US, itself.  The US had to fight Germany and Japan because the rotting British and French empires were collapsing.  The entire concept of the UN was to have an international way of running the planet, not using the US to run the planet…at our own expense.

 

Back to our bubble popping and causing total financial chaos: the bubble was obvious back during Clinton’s last years.  We saw with horror, the ridiculous Dot Com bubble grow.  When it popped, few people were very surprised.  But Greenspan dropped interest rates while Bush cut taxes. Both moves were greeted with mostly glee.  Both men became increasingly popular as this flood of irresponsible lending poured on our heads.  We all thought we would just hold out our hats and scoop up the loot as it poured out of DC.  And Tokyo.

 

For those years were also the Japan Carry Trade boom years.  Paulson’s $700 billion bank bail bill cannot save homebuyers who ran up gigantic debts.  Many of these people didn’t even buy houses, they happily re-financed older mortgages and ran up their debts to the new limits of the value of their properties.  So there was a general debt orgy going on that was preventable and obviously dangerous from the get-go.

 

Home Prices Tumble in 80% of U.S. Cities as Foreclosures Drive Down Values

Home prices fell in four out of every five U.S. cities in the third quarter, a record spurred by distressed foreclosure sales across the country.

The median price of a U.S. home declined 9 percent from a year earlier and sales of properties with mortgages in default accounted for at least a third of all transactions, the Chicago- based National Association of Realtors said today. Prices fell in 120 U.S. metropolitan areas, rose in 28 and were unchanged in four, the biggest share of declines in data going back to 1979.

The financial turmoil sparked by the collapse of the U.S. subprime mortgage market has caused $666 billion of losses for U.S. banks, lenders and insurers. U.S. companies slashed 1.4 million jobs in the last six months, the biggest cut since 1975.

 

Home prices never fall gently back to the beginning level of a bubble.  Ditto, stocks. Instead, they always collapse well below that point.  This is why being able to see a bubble and stop it is so important.  Supposedly, this is one of the few jobs the Fed is supposed to do: raise interest rates when there is a wild bidding orgy causing ANYTHING of value to shoot upwards suddenly.

Consumer confidence is now at 38 points.  During the bubble, the average was at or over 100 points.  There is a slight upsurge after June as oil prices fell.  But the exploding mess became quite obvious by the end of September.  Now, the average consumer sees little light at the end of this tunnel.  This happens to track nearly exactly, the Historical ABX Graphs.

 

See how, from the end of June to mid-September, the value of these dying indexes stabilized or even rose.  Then, going into October, it all begins to plunge towards zero.  The AA to BBB indexes are all rapidly zeroing out at this point.  The AA index is now at 6 and the BBB is now at 4.  They all started out at 100 less than a year ago when the Markit  website was launched.

 

The last index news issued by Markit was the end of September.  It informed us that they are postponing the launch of ‘the Markit ABX.HE 05-2 index. The ABX.HE is a tradable synthetic index of U.S. sub-prime asset-backed securities.’ For some reason, I do believe this is one leaky tub that won’t see any sailing in any future.   Here is their last press_releases/2008/november/06:

Markit and Creditex, in partnership with 14 major credit derivative dealers, today announced the results of a Credit Event Auction that determined a price to facilitate the settlement of credit derivative trades referencing the subordinated debt of Kaupthing Banki hf.

At 3:45 pm GMT today, the final price for Kaupthing subordinated debt for the purpose of settling credit derivative transactions was determined to be 2.375%.
At 2:00 pm GMT today, the final price for Kaupthing senior debt for the purpose of settling credit derivative transactions was determined to be 6.625%.

 

While looking for information about this particular Derivatives Beast fire sale, I found another story about the same event only it is rather different, from November 4, 2008:

 

The Derivatives Beast Eats Iceland!

 

Hedge Funds Review – First European credit event auction held for Landsbanki Islands

Creditex and Markit together with 14 major credit derivative dealers, have determined a price to facilitate the settlement of credit derivative trades referencing the senior debt of Landsbanki Islands in Europe’s first ever credit event auction.

The final price for Landsbanki senior debt for the purpose of settling credit derivative transactions was determined to be 1.25%.

 

What is going on here?  Is this why all the central bankers are so anxious to zero out interest rates?  After all, none of this super-low rate stuff is filtering down to the real world markets.  Mortgages are certainly not going at 1.25%.  In Japan, the super-low rates are not being handed out to anyone except the very few, very connected people.  Otherwise, the Japanese people would have been on the same spending binge as Europeans, Americans and former British colonies.

 

This sale is from the spectacular belly-flop of the entire Icelandic banking system.  It destroyed the currency.  It is destroying the government and perhaps, the sovereignty of Iceland.  Iceland had to throw itself to the very harsh mercies of the IMF.  Which the US and Europe used to use with great ruthlessness in order to collect fees and funds from nations in distress.  This month, the IMF utterly changed its tune. 

 

For they fear uprisings in Europe and the US if they get too harsh.  On the other hand, the IMF begged OPEC to give them more capital…that pesky capital profits comes up again and again!  And OPEC said, ‘Hey, the price of oil is falling like interest rates.  Nope.  Can no do!’  Back to the Icelandic Derivatives Beast Feast:  Bloomberg.com: Iceland close to $6 billion IMF Deal Europe

Iceland may sign a $6 billion International Monetary Fund-led loan deal by Nov. 19 after it reached an agreement on how to repay depositors at the overseas unit of one of its failed banks, Prime Minister Geir Haarde said…..The island, which had the fifth-highest per capita income in the world last year, needs the financing for imports and to create enough foreign reserves to support a free-floating currency. The central bank has predicted the economy may contract 8.3 percent next year after the currency plummeted following the collapse of the country’s three largest banks .

 

Norway is lending a good part of this IMF-directed loan.  The Faroe Islands are adding $50 million.  These islands were once some of the poorest places on earth.  Faroe Islands-based Eik Bank acquires Danish investment management firm Privestor Fondsmaeglerselskab A/S.   Now, like all the other tiny pirate coves that used to eke by, fishing and doing other mundane chores, now it is a hedge fund paradise.  Like Iceland.  So, all of these pirates are going to join up with energy export nations to bail each other out, I guess.

 

This takes us to yet another aspect of the global collapse: these tiny islands have gotten very rich and helped a bunch of gnomes, pirates and hell hounds to get very rich.  These places are huge holes in the bucket.  They encourage and enable lawlessness, tax evasion and lack of self-control.  The sky is the limit since the tiny principalities, Queen of England islands, gambling dens and points of departure from the 19th century, are all using the same schemes to do the same things.  And this is to undermine national control of banking and finances.

 

These guys are getting set in cement now.  When a big offshore bank that was leeching off of England went bankrupt, Jersey Island was not punished for this.  Instead, the British government had to bail the bank out.  And Jersey Island merrily continues its wayward, semi-legal way.  Banks that move to these places should be shoved overboard.  Not General Motors.

 

Instead, we see discussions about killing our major industrial base and turning over our entire automobile industry to foreigners [who are now demanding loans from us, too!] while at the same time, pirate coves used for wild speculation that destroyed global finances are being coddled.  Iceland was no longer one of the poorest nations on earth.  They were one of the richest.  So they can afford to pay up.

 

Berkshire Credit Risk on AAA-Rated Debt Soars in Sign of Investor Anxiety

The cost to protect against Berkshire being unable to meet its debt payments, based on credit-default swaps, is more than four times that of rival insurer Travelers Cos. At those levels, the swaps are typical of companies rated Baa3 by Moody’s Investors Service, one level above junk. The price may have risen on concern that the billionaire’s firm could lose a $37 billion bet on world stock market values more than a decade from now.

 

Boo hoo.  This organization is owned by one of the richest men on earth.  And they don’t like paying the risk rate?  The whole economic system is at risk now.  There are no safe havens.  And besides, the real rate of interest is not 1% or less.  That is fake.  But this is what they all want, of course.  Santa Claus, find Rudolf and get his nose red, fast!

 

Bloomberg.com:  Goldman Targeted by Investor Complaints of Naked Short-Selling 

Investors in the $591 billion high- yield, high-risk loan market are accusing Goldman Sachs Group Inc. of naked short selling to profit from record price declines.

At least two fund managers complained verbally to officials of the Loan Syndications and Trading Association, saying they believe Goldman helped drive down prices by using the technique, according to people with knowledge of the objections. New York- based Goldman is acting against its clients by trying to profit at their expense, the investors said.

 

Arrest Paulson.  What does it take?  Just like all the pirate coves should be shut down, so should Goldman Sachs.  They have infiltrated our Treasury and huge hunks of our government.  Did this mean, we did better and better?  Or did these clowns loot America and drive us deep into bankruptcy?  I don’t think there is much debate about this.

 

By the way, I see complaints about Obama’s financial team.  Alas, all the top dogs here that get any support of the media, are part of the same social circles.  They have to belong to the various tricky organizations and go to Bilderberger meetings, etc.  And they all agree that fine tuning this mess will save us.  This is because they want to save themselves and their wealth, not us other humans.  We are on the ‘debit’ side of their books.  I don’t see anyone trying change quite yet because we are not bankrupt.  We know from human psychology, people deep in debt will frantically find more and more debt before going under.  Even days before bankruptcy, they will be scrounging for loans.

 

The top investment bankers are very politically savvy.  They don’t want to see or hear the rest of us.  They tremble at night, fearing someone might trouble their glad-handing each other.  This is why their meetings are secret.  And held in difficult places.  The less they see of us, the better.  

 

Now, off to Japan to see how they are coping with all this:

 

*Bloomberg.com: Japan’s `Least Ugly’ Economy May Beat U.S., Europe in Crisis

Japan’s newly declared recession may be a chance to show that the world’s second-largest economy can finally outperform the U.S. and Europe.

As the West faces the worst financial crisis since the Great Depression, Japan will contract at a fraction of the pace of its major counterparts next year, according to the Organization for Economic Cooperation and Development.

Almost two decades of sub-par growth and an aversion to business and consumer debt have produced a leaner economy. The country’s banks are cash-rich and still able to lend, exporting manufacturers such as Toyota Motor Corp. have increased their efficiency and households have a mountain of savings that should buoy spending during the downturn.

“The economy, corporations and households have been through a process of restructuring,” said Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo. “Japan doesn’t have to recalibrate its economy as much as the others because it wasn’t flying that high.”

 

Under the radar we fly!  The central bank of Japan is very cash-rich.  So is China’s banking system.  I keep saying, when doing world finances or trade, one has to imitate or thwart competitors.  The Chinese certainly do this with greatest care.  Indeed, China finally overtook Japan as the main entity funding the US budget deficit.  The pirate islands do this, too.

 

This steams me greatly!  For they are all enabling our Congress and Presidents to spend far, far over our ability to ever pay off loans!  There seems no limit.  So last month, while all the graphs above show a collapse, the US budget deficit shot up by half a trillion…in one month!  One month!  We do this for one year and it will be an extra $6 trillion.  And thanks to all these off-shore entities sucking it all down, we can’t stop our politicians from doing this.  For it vanishes from American eyes.  But it is very much attached to our wallets.

 

Japan can’t wait to show us how they are outperforming us.  Only something is raining on their parade: the population is collapsing.  It is as if there is this Black Plague that is killing only children.  The Pied Piper who comes directly from the Cave of Wealth and Death, has been playing in Japan on his thighbone flute.  The Burgermeister and his advisors hope to cheat the Pied Piper.  But he is carting off their future children and thus, dooming them to utter destruction.   

 

Nikkei Net Interactive – Japan Business News Online

Real GDP Down 2nd Straight Qtr, Possibly Auguring Long Slide

TOKYO (Nikkei)–Japan’s real gross domestic product contracted for a second consecutive quarter in the July-September period, confirming that the economy is in recession and spurring concern about a prolonged deterioration.
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More Office Space, But Fewer Firms Moving In

TOKYO (Nikkei)–The supply-demand imbalance in the office rental market is worsening in Tokyo and major regional cities, as companies are reluctant to change or expand their office space amid the economic downturn.
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Kirin Offers A$8bn For Coca-Cola Amatil

TOKYO (Nikkei)–Kirin Holdings Co. (2503) announced Monday it has made a takeover offer for leading soft drink company Coca-Cola Amatil Ltd. for 8 billion Australian dollars, the largest foreign acquisition bid ever by a Japanese food company.
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Asian Export Hubs To Partner On Trade Reinsurance

TOKYO (Nikkei)–Japan and eight Asian trading partners will agree to cooperate on reinsurance for exporters to keep commerce flowing smoothly in the region, The Nikkei learned Monday.
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Ford To Sell 20% Stake In Mazda

TOKYO (NQN)–Ford Motor Co. will sell about a 20% stake in Mazda Motor Corp. (7261) for roughly 52 billion yen, reducing its ownership from 33.4%, the Japanese automaker announced Tuesday.
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Suzuki Looks To India As GM Capital Tie-Up Ends

TOKYO (Nikkei)–Though Suzuki Motor Corp. (7269) on Monday announced that its 27-year capital tie-up with General Motors would end, the Japanese automaker appears confident moving forward, as it seems that its 50% share of the promising Indian market will remain intact for some time.

 

The US is in full retreat.  The Japanese automakers shoot forwards, across the globe.  But by having this fake depression at home, they have doomed themselves.  For they are feeling the real depression harder than the US.  This has political ramifications.

`Funeral Director’ Aso Struggles to Hold On as Japan Faces Election Delay

Taro Aso was so confident that he would call a quick election after becoming Japan’s prime minister in September that he postponed moving into the official residence.

Two months later, Aso’s plans, and his government, are in tatters. The global financial crisis has put the election on the back burner; meanwhile, public-opinion polls show that most Japanese disapprove of his performance. His 5 trillion yen ($51 billion) plan to boost growth was labeled “incoherent” last week by the Mainichi newspaper and “chaotic” by the Asahi.

The result is that chances are increasing Aso, 68, will become the third Japanese leader to resign since September 2007.

“Aso announced such a sloppy economic package that he’ll be too busy explaining it to call elections,” says Yasunori Sone, a political science professor at Keio University in Tokyo. “It’s getting more likely that the next election will be held by another leader” because Aso’s Liberal Democratic Party probably will force him to step down.

Aso’s woes are boosting the opposition Democratic Party of Japan and its leader, Ichiro Ozawa, ahead of elections that must be held by September 2009. The DPJ already controls the upper house of the parliament, having won it in July of last year.

Defeat would be an enormous blow to the LDP, which has ruled Japan for all but 10 months since it was formed in 1955.

 

Political instability on top of one party rule: the Chinese will laugh at this one.  Japan is held up as a shining example of democracy to the rest of Asia, particularly China.  China correctly sees this as one-party rule.  The previous rulers of Japan urged everyone into suicide charges.  So long as they died for the Emperor, this was OK.  Today, it is barely any different.  

 

I don’t know if the Japanese people will revolt.  I saw in the news today that in Spain, where the Japanese have built factories, the workers there  are literally storming the barricades.  Americans are similar to the Japanese.  We have two parties but barely.  Mostly, they eat out of the same dishes and do the same things.  The social differences are mere flavorings.    But this is very bad.  We need yin/yang elections.  And certainly, not having two parties in Japan has been nearly fatal. 

 

AFP: Indian banks smug as banking crisis rolls past

For years Indian banks chafed at the cautious regulatory hand of the central bank as they watched their foreign counterparts make massive profits from high-risk lending and ambitious derivative plays.
Now it seems that the steadying hand they resented for so long has helped insulate India’s banks from much of the negative fallout of the current global problems, officials said.
Banking regulation “has actually paid off for the country,” chief government economic advisor Arvind Virmani said.

 

Quite frankly, China also raised reserve ratios and other conservative things.  So maybe India and China will take revenge on the rest of the wanna be world conquerers.  There are a number of commentators in the news who nit-pick China on all sorts of things.  But this doesn’t change the dynamics of China.

 

For example, the melamine mess: it seems that the US shouldn’t talk so harsh about what is in milk!  Just for example.  I could go on and on about milk.  Once upon a time, happy cows went out into fields and lounged about like my dear Chip and Dale, my oxen.  And the ladies got milked in the morning and evening.  Now, they are injected with hormones and milked several times a day.  This makes their udders have sores, etc.  So they have all sorts of medicines.  And you never, ever see happy cows chewing cuds in the country.  They are locked in concentration camp barns which stink to high heaven!

 

ACK.  And the milk is filled with crud and note how US children are ‘big boned’ and showing all sorts of signs of excess growth?  And strange sexual development?  Yet, no one is outlawing pumping harmones into cows.  But we want to hammer China about their own bovine scandals?  Indeed.  We should muck out our own messy stables, first.  Outlaw all drugs with milk cows!  And free these poor creatures so they can sit under an oak tree and enjoy the sights and sounds of nature and let the cowbirds pick at the insects in their fur and thus, groom them!  Give these poor cows more sunlight!  And some love in return for the bounty they give us.  They are not machines.

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