CLICK HERE LARGE PRINT EDITION: ZIRP MAKES FREE TRADE PROBLEMS MUCH WORSE « Culture of Life News 2
The people at the very heart of this utter implosion of the US economic system are still very much in power. The slight shifting of the guard means nearly nothing will change. This is because everyone wants the previous status quo to return. This is why the bail outs of banks and industry do not include nationalizing both and then setting up tariffs and barriers to protect both. Instead of closely examining all the factors at work here, the rescue parties all focus on one thing: propping up what was going on before. And this leads to the complete and utter destruction of the American Empire.
To prove this, I picked at random, two stories from 2005 which clearly illustrated in cartoons, what is going wrong. Actually, I have reams and reams of cartoons that show what really must change and why. So here is from October, 2005, back when stock markets were beginning their final ascent to their peaks and the housing boom was still growing bigger and bigger:
Professor Barnanke invented the “Global Glut” to explain why hostile foreign governments are offering us seemingly unlimited loans. He thinks they are doing this because America is a good investment. I say, they are setting a trap.
Global banking chiefs have continued to welcome the nomination of Ben Bernanke to succeed Alan Greenspan as US Federal Reserve chairman.
If approved, Mr Bernanke is set to take over from Mr Greenspan early next year.
Bank of England governor Mervyn King said Mr Bernanke had the required “intellectual and personal qualities”.
The European Central Bank (ECB) described Mr Bernanke as “a highly respected central banker and a remarkable economist”.
“I will be happy to have the possibility to develop with him the same fruitful cooperation and enjoy the same confidence and friendly relationship that I had with Alan Greenspan,” said ECB president Jean-Claude Trichet.
You bet, they are all overjoyed. The Greenspan mess is great for them. They, like our ruling class, want this gravy train to continue. Do remember, our ruling class hates America and despises American workers. Destroying these entities is top of their “to do” list. Making Americans weak, in debt, powerless, is highly important to them. This serfizing of America is a long term project. Already, they are getting us used to the idea that the lowest classes should be allowed to drown like rats.
It is important for us to revisit past writings here. Right now, Obama is putting together his dream team. I say, it is a nightmare hodgepodge team. Because none of the members seem to understand even the slightest, how free trade is destroying us. And most certainly, no one understands how free funny money in the ZIRP system will complete our total destruction.
I see some attempts at fixing this enormous mess via things like nationalizing the Federal Reserve, for example. That is an important step forwards, of course. But if it is not accompanied by higher taxes AND higher social spending at home, it is useless. The return to the gold standard is good, too. But ONLY if it is used for managing world trade, not for domestic consumption. All our focus has to be on two things: reducing the temptation to run up infinite debts and reducing our dependence on imports. Balancing the Federal budget is easy if we charge fees for imports, for example.
Cheap oil is a menace, too. Not one of our trade rivals who are destroying our native industries, has cheap oil. They all tax gasoline very, very harshly. This sharply cuts down on oil imports which balances trade budgets, for example. Also, nearly all of the biggest trade rivals who have advanced industries also have value added taxes on consumer goods. The VAT doesn’t exist in the US. We have general sales taxes that vary from state to state and none of this goes to the Federal budget. Here is another very old story of mine:
Our President isn’t sober. Neither is our Congress. Nor are our industry captains nor seemingly anyone. Drunk on open credit, endless looting of the world’s savings, careening along, charging everything to the credit cards, refusing to pay taxes to keep things afloat, obviously, they have way too much money and way too much credit to spend.
Bennett blew his way through the entire profits he made off of his goofy “Virtues” books, gambling naked in Vegas. One CEO spent all his company’s money on birthday parties. Another recently was caught stealing $400 million for fancy houses and artwork. They all have not only gigantic salaries, they have this open ended need to throw money away just to show off that they can do it. This human need to show off has infected everything.
DeLay of Texas can’t keep track of all the loot pouring through his pockets, for example. His daughter conducted champagne hot tub parties in Vegas. The Bush twins spend a fortune drinking, too, for that matter. All the lobbyists and GOPers spend money like crazy, they think, there is no limit, why not?
The poor saps in the GOP went on a bacchanalian fling after winning power via the Supreme Court overruling the normal vote counting methods which we see today in the Minnesota Senate race. Back int 2005, I noted that they and Wall Street were having one big blast of a party, consuming the entire planet’s savings. Under the rule of the born again Christian Coalition, gambling and whoring spread like a cancer across all US communities even as sober businesses fled overseas.
The captains of finance stuffed their pockets with record bonuses that were barely taxed by a government running extremely deeply in the red. During the entire frat rat Harvard/Yale blow-out party, the US overspent its own budget by record amounts and no one lifted a pinky to raise taxes on capital gains. No, the push was always to drop these minimal taxes to zero. Even when I was in the House hearings for Bernanke and Paulson’s unconstitutional bail out bill, the only reason the GOP House members voted against it was, it didn’t have capital gains tax cuts.
Now that I have established that not everyone was clueless as to ‘what will happen next?’ we can read today’s awful news with a clear conscience:
(Bloomberg) — Barack Obama may ask Congress next year to approve a stimulus plan of around $850 billion, an amount that has grown as the U.S. economy sinks deeper into recession, an adviser to the president-elect said.
Obama’s transition team believes the amount, about 6 percent of the U.S.’s $14 trillion economy, is needed to reverse rising unemployment, said the adviser, who spoke on condition of anonymity. The sum would exceed initial estimates by House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, as well as surpassing what some economists and the International Monetary Fund say is required.
The IMF has absolutely no control over things here. Nor do the American voters. The funds that flowed into our election system comes mostly from the idiots who are rapidly destroying our nation. They want to have the party resume. Now that the gnomes in the Democratic Party are in control, they plan to have lots and lots of fun. No one has said a thing about fixing our trade deficit and Obama tried to get a Hispanic elected official to be our trade negotiator. A man who has never said, he wants tariffs and barriers to prevent our own industrialists from manufacturing overseas and then importing goods to the US.
The outsourcing mania is due to tax rules, trade deals that removed all controls and protections from depredations from cheaper labor venues. All this does is raise the profit margins for our industrial leaders who suck down the entire amount in the form of bonuses and stock options. This force is getting much worse, not better. It is now so alarming, they are openly closing factories here and opening them elsewhere, using these ‘rescue funds’ from the government itself.
The difference between the two amounts was his bonus, a rich reward for the robust earnings made by the traders he oversaw in Merrill’s mortgage business.
Mr. Kim’s colleagues, not only at his level, but far down the ranks, also pocketed large paychecks. In all, Merrill handed out $5 billion to $6 billion in bonuses that year. A 20-something analyst with a base salary of $130,000 collected a bonus of $250,000. And a 30-something trader with a $180,000 salary got $5 million.
But Merrill’s record earnings in 2006 — $7.5 billion — turned out to be a mirage. The company has since lost three times that amount, largely because the mortgage investments that supposedly had powered some of those profits plunged in value.
Unlike the earnings, however, the bonuses have not been reversed. Pay was tied to profit, and profit to the easy, borrowed money that could be invested in markets like mortgage securities. As the financial industry’s role in the economy grew, workers’ pay ballooned, leaping sixfold since 1975, nearly twice as much as the increase in pay for the average American worker….
Clawing back the 2006 bonuses at Merrill would not come close to making up for the company’s losses, which exceed all the profits that the firm earned over the previous 20 years. This fall, the once-proud firm was sold to Bank of America, ending its 94-year history as an independent firm.
And I highlight the obvious here: the pay of the executives, which was barely taxed, took off when the goofy Reagan tax cuts began to ravage government budgets. The profits from all this came from not one but two sources: outsourcing work and then reimporting the product, thus killing our trade balance. And easy borrowed money. A great deal of which was via the infamous and often barely understood ‘Japanese carry trade’ which flooded the entire planet with immense amounts of faux US dollars. These dollars are being eaten up by the Derivatives Beast.
When the pay for finance industry gnomes shot upwards, this was a bubble. It should have been cut down to size via the very simple method of increasing taxes on these clowns. This would have fixed the budget deficit, paid for the wars that the financial community obviously loved since it increased US Treasury sales overseas and they could get easy fees out of selling our debts to our trade rivals and outright potential enemies. When trade partners bought US Treasuries and all our other debts and deficits, they strengthened the dollar and thus, improved their own trade profits with us. No one was more outrageous in all this than both China and Japan.
(Bloomberg) — The yen fell from near a 13-year high against the dollar and tumbled versus the euro after Japan’s government signaled it may intervene in the foreign- exchange market for the first time in four years.
Finance Minister Shoichi Nakagawa said he has “the means” to limit the yen’s advance, which undermines Japanese exporters by raising prices for overseas customers. The dollar erased its annual gain against the euro on bets the Federal Reserve’s near- zero interest-rate policy will reduce the appeal of U.S. assets. The pound tumbled to a record against the euro for a ninth day….
The last time Japan intervened on its own, it sold a record 20.4 trillion yen in 2003 and 14.8 trillion yen in the first quarter of 2004, when the yen rose as high as 103.42 per dollar. Japan hasn’t bought yen since 1998, when it spent 3.05 trillion yen as the currency reached as low as 147.66. The Group of Seven, which comprises the U.S., Japan, Germany, the U.K., France, Italy and Canada, propped up the dollar in 1995, when it declined to a post-World War II low of 79.75 yen….
“The Bank of Japan is set to cut rates to 0.15% overnight and open the door to quantitative easing,” wrote Fiona Lake, a Hong Kong-based analyst at Goldman Sachs Group Inc., in a note to clients. “Contrary to history, the yen is likely to benefit given the Bank of Japan’s experience with this policy framework compared to elsewhere.”
This week, the yen rose to 86 to the dollar. This is a complete catastrophe for Fortress Japan! Japan is being utterly hammered by the violence of the unwinding of the Japanese carry trade. This unwinding is also hammering all other markets like the oil market. The hedge funds, most of which are really piratical Ponzi schemes shoveling mountains of debt on top of all properties and industries of this planet, have been forced to unwind their oil deals they made last year. This, in turn, is causing oil prices to collapse.
I remember Iran warning the stupid Saudis to not overproduce oil last July. They knew this would happen and are royally pissed that the fat little rabbits running Saudi Arabia were spooked by Citigroup and others into flooding the commodities markets. The US wants desperately for cheap oil. We got it. But it only makes things here much, much worse in the long run. Japan is happy that oil is cheap but then, they have very high taxes on gasoline. Like Europe, they didn’t like high oil prices. But the RATIO differential between the cost before the oil price hikes and afterwards, when it dropped, was much smaller in Asia and Europe than in the US. More: Europe’s strong currency protected them from much of the rise in oil prices.
Note in this news story how the G7 propped up the dying dollar in…1995. Now, what did Japan do that year? HAHAHA. This is when they began two things: holding US dollars in a FOREX reserve which took off like a rocket, rising from $80 billion to a trillion dollars. And they dropped Bank of Japan rates to 0%. They pegged the yen to be around 120 to the dollar. And fight like devils to gain this.
(Bloomberg) — Americans seeking mortgages aren’t getting the full benefit of record low yields on Treasuries and government-supported mortgage bonds, blunting U.S. efforts to curb the housing crisis.
While the average rate on a fixed 30-year mortgage fell to 5.18 percent last week from 6.47 percent in October, according to Mortgage Bankers Association data, the historical relationship between home loans and mortgage bonds shows rates should be at least half a percentage point lower. Though the U.S. is paying nothing to borrow in some cases, homebuyers are paying about $730 more a year then they would otherwise on a $200,000 mortgage.
Smart financiers know that the best profits from lending comes when the SPREAD between the Fed rate and what they charge to make money out of thin air, is greatest. The housing bubble happened when the Fed was at 1% and lending was at 5%. Niravana! When the spread narrowed, the entire lending business collapsed. So we have a big, fat spread again. The bankers hope to use this to enrich themselves.
Only problem is, we are in a deep, deep recession that is now a depression. Who can borrow when no one can be certain, they will have a job tomorrow? Especially, since our rulers who are bribed by the rich, are busy destroying our industrial base?
American International Group Inc., which already has suffered more than $60 billion in writedowns and losses, may have to absorb almost $30 billion more because of flaws in the way its holdings are valued.
An examination of AIG’s credit-default swaps guaranteeing more than $300 billion of corporate loans, mortgages and other assets not covered by a $152.5 billion federal rescue shows the New York-based insurer may value some of its positions at levels that don’t reflect distress in the markets, according to an analyst at Gradient Analytics Inc. and a tax consultant who teaches at Columbia University Business School in New York. Executives at two firms that have similar investments say they account for the securities differently than AIG does.
“Every time I look at their statements I find something new,” said Donn Vickrey, executive vice president of Gradient Analytics in Scottsdale, Arizona. He estimated that AIG may need to take at least $28 billion in additional writedowns on swaps covering European corporate loans and prime residential mortgages, as well as collateralized loan and debt obligations.
The Derivatives Beast was NOT tamed by the stupid sales of Lehman and AIG garbage CDOs. It is still munching away. Eating easy paper faux dollar wealth. This is now nearly a trillion dollars that has vanished out of the AIG door. And, there is NO END IN SIGHT. We have another $300 billion to go! On top of the $50 billion Madoff fraud.
(Bloomberg) — General Motors Corp., Ford Motor Co. and Chrysler LLC will shutter about 59 factories over the next month as they struggle to adapt to the worst sales in 26 years and await a verdict on a U.S. rescue of the industry.
The closings show how far automakers are going to conserve cash and prune output under the pressures of a shrinking U.S. market, dwindling access to credit for dealers and demands for advance payments by some GM and Chrysler parts suppliers.
“No one is immune,” said Ed Kim, director of industry analysis for consulting firm AutoPacific Inc. in Tustin, California. The industry is “imploding to a degree I’ve never imagined could happen, and at a speed I’d never expected.”
The auto industry owners like the offshore, evil and well-named Cerberus are quite happy to shut down ALL US operations. And then reopen minus the UAW. The trick is to do this without going bankrupt and having the financiers lose their loot. This is a very tricky operation. One that can cause riots, insurrections and demands for guillotining the rich.
The rescue operation has to be carefully packaged so it helps a maximum of rich donors to our election process and keeps the workers sufficiently pacified, they don’t go and have a revolution or something like we are seeing in Greece today. Now, let’s read the next GM story:
(Bloomberg) — General Motors Corp., the biggest automaker in the U.S. and Mexico, increased production of $12,625 Chevrolet Aveos south of the border while seeking a bailout to keep domestic plants from closing.
The Detroit-based company and competitors such as Ford Motor Co. shifted more manufacturing to Mexico this year to capitalize on wages less than an eighth of those in the U.S. and factories that make fuel-efficient models. Through November, Mexican plants turned out 5 percent more vehicles than a year earlier, versus an estimated decline of 30 percent in the U.S.
Mexico is so far weathering the collapse of the global auto industry better than its North American neighbors. Even with a projected decrease in production of as much as 20 percent in 2009, the world’s 10th-largest maker of light vehicles will still suffer less than the U.S. or Canada, according to Eduardo Solis, president of the Mexican Automobile Industry Association.
HAHAHA. Of course, the outsourcing, offshoring business is booming. It is INCREASING, not decreasing. All trade rivals want more of our industries, not less. And the owners of our own government want the same. Speaking of Mexico, here is some snippets from emails I got from a reader who does business in both Mexico and America:
Hi Elaine: Yes indeed everything is getting very mean and tough for the commons citizens. Just last night we were chatting with neighbor, he said his friend, just a common bomb sleak well dress but penniless got kidnapped in Tijuana.
Guess for how much? only for $ 1000.00 dlls!!!!! it’s very difficult to find a job, maquiladoras have shut down, so no way to make a living in a decent way, everything is so corrupt!! I was watching Mexican Televisa, they mention the military check point. Well the two cases they metion one of them a pregnant woman was shot because she was afraid to stop, so militars shot at her and wounder her.
Another case is Monterrey ” La Bella Airosa” another family was shut to death because the militar said “they looked suspicious to them” just shot and later find out what happened!! we’re having in Mexica dictatorship just like in the times of Porfirio Diaz another motherland seller.
I think all this fight againts drugs is just a way of controling mases for the winners, in Tijuana there are organizations of Dissapeared people. A lots of cases families have lost family members this way. There is another case of a Doctor, this doctor from IMSS, a public hospital. This Doctor was fired because he dared to protest all the insecurity people are forced to live. Now he’s jobless, firts he got kidnaped and release a week later. A lot of Tijuana hospital whether public or private, the wounded ones from gunfire are either go inside the hospital and shot them again or take them away to kill them somewhere else. It’s terrilbe!
I forgot to mention two cases of kidnaping. One of these cases is related to the family of a young wealthy boy. Marti family, the kidnapers got the money for the rescue. After they got it they killed the boy. The family was on TV Televisa, with such outrage because the loved one was murder.
Also another teenager, the teenager was kidnaped and dissapeared for more than a year. Finally was found buried in the mountains inside of a house. Also the money was paid to release her, these wealthy people were screaming with such outrage.
I just finish to talk to one of my customers from L A. They told me another story about the current situation in Tijuan. They went to Tijuana to buy merchandise for their store. One of their suppliers said that a businessman was transporting blankets in a truck. He was stopped by some men, more like paramilitars and his merchandise was confiscated and also his money!!
This is more or less like the movie “The Godfather” with Alpacino and Marlons Brancon>
Mexico is looking more or less like Colombia and has to do with Iniciativa Merida. Im sure you know about that.
President Bush has been pushing very hard to have the iniciative stablished before he leaves power. From what I read from the Counterpuch its to control natural resources of Mesoamerica, Plan Puebla Panama and stop the flod of Central Americans and Also Mexicans. Plus along with all the economic crisis, people are being lancklock!!
Mexico is what many laissez faire people want for the US. It is not Germany or even Japan, it is China without a pseudo-communist government. Outrage in China is rising and the workers there are very activist and push back against their very powerful government. The last rigged election in Mexico whereby a rich right wing guy educated in the US ‘won’ but only by using obvious strong-armed tactics, has led to Mexico’s social condition worsening.
The safety valve of sending workers illegally over the borders is now ending. The US and Mexican border is now less and less a ‘free trade’ ideal as both countries cause trade to grind to a halt via vehicle inspections, police intimidations and outright theft. But the industrial power’s ‘trade’ is growing, not diminishing. The US corporations have NO barriers at all and have the full cooperation of the corporatist techno-rulers at the apex. But, like Greece, Mexico can erupt in even greater violence. The rich have to realize, their wealth is meaningless if armed gangs are roaming the streets, seeking to kidnap or kill.
Social chaos is dangerous. We don’t want to emulate this sort of system. Even hyper-controlling Japan is collapsing as criminality spreads as desperate people, even the elderly, are driven into crime due to the enforced depression there under the ZIRP system. Many alarmed economics writers are worried that our own ZIRP system will fail, socially, too.
And it will! This is why I focus not on cheaper lending but fixing what ails us. Which is trade, cheap oil that has caused our trade deficit to be much, much worse and nationalizing both our central bank and increasing taxes on capital gains. All things our leaders absolutely refuse to do.
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