We are in the middle of the Second Great Depression and as I predicted several years ago during the height of the credit bubble boom, it will take many years to escape this collapse and worse, it will probably lead to many wars and maybe, WWIII. The relaxation of regulations of banking systems led directly to this mess. The creation of the entire galaxy of bizarre paper entities which I call collectively, the Derivatives Beast, led to the creation of a huge shadow financial entity that is bigger than the value of everything on earth. This is what the world’s top bankers are clinging to keep alive. This is what hasn’t blown up…yet. Meanwhile, whole nations slide off the economic cliff.
The entities holding 90% of the various derivative contract paper are freaking out because of a number of rules imposed by various international organizations or major countries like the US might cause the derivatives business to crash totally. As is must. But they don’t like this and don’t want this to happen. They get most of their phantom wealth via gaming the derivatives markets. The US has made a feeble attempt at reining in some of the worst practices of the top five bankers: Volcker Rule Draws a Barrage of Bank Lobbying – Bloomberg
“Regardless of how the final rule turns out, it will be a shock to the U.S. financial system, as banking entities will need to take extraordinary measures to attempt to implement it,” Barry Zubrow, executive vice president of JPMorgan Chase & Co. said in a 67-page letter. Goldman Sachs Group Inc. (GS) and Morgan Stanley submitted letters by midnight last night. Mark Lake, a spokesman for Morgan Stanley, and David Wells, a spokesman for Goldman Sachs, said the companies wouldn’t publicly release or comment on the letters.
The rule, named after former Federal Reserve Chairman Paul Volcker, was included in the 2010 Dodd-Frank Act in an effort to restrict risky trading at banks that operate with federal guarantees. Five U.S. regulators released the 298-page proposal seeking comment on how it would affect market-making, liquidity, foreign institutions and private equity and hedge fund investments.
I have a very easy solution to one part of our financial problems: send the US navy to all the many ports and islands across the planet that host tax havens for our many billion and millionaires. Arrest Romney for hiding his wealth overseas. Arrest Bloomberg, too. Force them to cough up all the loot. Force everyone who has exploited international banking systems set up for tax evasion. Accuse them of treason if they are part of our government or are holding elective offices.
Charge them with fraud! They ran for office in order to evade taxes, after all! And then monkeyed with the tax code so they could evade even more taxes. Greece is going bankrupt due to the entire population evading taxes and ditto is happening to Italy. But it is also happening here which is why the ‘reduce spending’ mantra about our own deficits always fails. We can cut and cut and cut again and all that happens is, the millionaires who control our government cut their own taxes even further.
The normal progression of events is, in good times you save money and raise taxes and make the cost of credit higher. In bad times, you drop the cost of credit, lower taxes and spend more government money on society, thus ‘evening out’ the business cycle which tends heavily towards boom or bust. Instead, we have a reverse system: lower taxes and make credit easier and easier during boom times and restricting government spending and raising taxes in bad times.
In the EU, taxes are going up, not down. Britain just raised their high VAT to 20% which is totally strangling the economy and at the same time, government spending is being cut ruthlessly! In the US, they are cutting the deficit for the government but lowering taxes even more…for the rich. But fees and local taxes, charges of various sorts and penalties are going up, not down. As the government sells off more functions to privatizers, the costs for these go up. Worse, the real problem with depressions isn’t a drop in the value of assets, it is the fall in the value of LABOR.
Workers get paid less and less. Wages collapse. Taxes collected from workers collapse. Workers spend less and less and this feeds back into the downward spiral as we see already in Japan. As wages fall, all systems decrease until people are reduced to living like medieval peasants. The collapse in peasant economies can last for centuries. Many centuries, a thousand years or more.
It is a death trap. But the first world is moving all its working class into this peasant death trap! This is the entire problem.
Britain’s AAA credit rating was thrown into doubt after the ratings agency Moody’s said the ongoing euro crisis and a credit squeeze on the banking sector put the country at a higher risk of defaulting on its debts.
Moody’s said that countries including the UK, France and Italy would be put on negative watch after citing “uncertainty” over Europe’s handling of its ongoing debt crisis.
The possible loss of the UK’s much coveted triple-A status will be a bitter blow for the chancellor George Osborne who has staked his reputation on distancing Britain from the ailing eurozone
To keep their credit rating up, they will impose more taxes, cut government spending even more and force workers to have lower and lower wages. The UK, like the US, is one of the nations with the least sovereign wealth and the most foreign debt. Japan holds most of its debts but ran trade surpluses all the way until this year. Now, Japan has taken a fatal turn for the worse and is not only running immense government deficits, is totally incapable of taxing its rich families who are now relocating their wealth, their factories and even families overseas from Japan, it now runs a trade deficit and more and more factories are relocating outside of Japan.
Japanese workers paid for the credit bubble by seeing wages fall drastically. Lifetime employment is a thing of the past and nearly half of the population is contract workers or part time workers. This is rising in the US, too. In many industries, wages have fallen by 30-40%. Union workers work alongside younger workers who get barely more than the minimum wage and virtually no benefits. In another 10 years, the last of the union workers will be gone and it will be all low wage labor and this means no recovery of US business in domestic markets and low tax returns for the government due to low wages.
The profits from wage repression will move offshore into sheltered bank accounts run by hedge funds and the top five US banks. So the money drain will accelerate with us being unable to tax it once the profits are made. A double loss for our government.
Meanwhile, the world’s #1 sovereign wealth nation is being asked to rescue everyone from these follies: China warms to euro rescue efforts – Asia-Pacific – Al Jazeera English
Wen said on Tuesday that China was “full of confidence in its own future” and hoped to see Europe “maintain stability and prosperity” as well.
But Wen stopped short of saying whether China would buy bonds in a bailout fund designed to rescue debt-stricken EU countries…(On the other hand, meanwhile) The talks between EU and Chinese officials are expected to also touch on a European law imposing charges on airline carbon emissions. China has said it will prohibit its airlines from paying the charges, aimed at curbing emissions of climate-changing gases.
China has smart leaders. Wen is waiting for the EU to tell the US to stop ringing China with our naval bases and military forces and to stop the US from talking about Chinese internal affairs. The US will bail out the EU by printing oodles of fiat dollars as we have done repeatedly in the last several years. But this devalues the dollar which is why everything we have to buy to stay alive these days are so inflated.
Just this week, gas shot up another $0.20. This is due to US and EU pushing relentlessly for more wars with oil producers who are Muslims. But the fact is, the US is seeing ruinous levels of inflation with ZIRP (zero percent) interest rates. We have the cheap credit but it is only for bankers. It doesn’t filter down to consumers who have to pay usurious rates! The Home ATM machine that spat out endless dollars as property values rose is now broken beyond repair.
Needless to say, the mortgage deal that led to paying some trivial fines after breaking every real estate rule meant no bankers went to prison for fraud and theft while the housing market now drags down the government. For the government, that is, all tax payers, is now mostly responsible for any losses due to wild lending and defective foreclosures. This, in turn, becomes impossible if the richest Americans focus mainly on tax avoidance.
The ZIRP rates for lending is causing countries like China to question the sanity of the US system: Bernanke defends Fed’s low-rate stance – Xinhua | English.news.cn
When questioned about unintended consequences of maintaining low interest rate, mainly the shrink of return on savings and greater risk taking, Bernanke said although low interest rate would erode the earnings on savings, savers don’t necessarily hold treasury bonds, they may also hold corporate debts, stocks or a variety of other securities, and performance of securities depend importantly on the strength of economy.
Bernanke also argued that risk taking “to some extent” would move people from very conservative positions to riskier positions, which would be helpful for the economic recovery. “But we won’t go too far,” he added.
The ZIRP rates had one effect that makes all of what Bernanke says, total rubbish: it fed a gold bubble. The value of gold shot up as the value of savings collapsed. People simply moved things from savings which is the capital base for all lending, to gold which is much more ‘inert’ and basically isolates savings from the banking system! As for not going ‘too far’? The Bank of Japan not only has had ZIRP rates for two entire decades, it also soaked up trillions in Japanese government debts and the end result is a near-total collapse of the entire Japanese society!
“The U.S. economy has been gradually recovering from the recent deep recession, but the pace of the recovery has been frustratingly slow,” he said in the prepared testimony. He urged lawmakers to reduce the long-term budget deficit, but noted sharp changes in fiscal policy in a short time would hurt economy.
This so-called ‘Great Depression expert’ is an idiot. I said this from day one when he first entered the Federal Reserve. I read his stuff and was thoroughly disgusted with his analysis of the Great Depression. He is asking the government to cut the deficit when we are in a serious depression! But then doesn’t want it cut too much! Just slowly cut it. He doesn’t talk about how to bring back all the hidden wealth of the super rich who have squirreled it outside of the country. He doesn’t talk about raising the wages of workers so they can pay higher taxes and buy more goods.
Instead, he wants us to be ‘riskier’. Huh? Oh, invest in the Chinese markets! Yes! A growing economy with many risks but huge rewards! Indeed.
The government is slaying everything in sight except for our assassination death machine programs: Big NASA Budget Cuts to Slash Mars Missions, Experts Say. The Chinese communists are focused on replacing us in space. They have a 100% chance of succeeding. While we spread killer drones and spy robots all over the place, they are going to the moon and beyond. While we focus on stealing oil and killing Muslims, the Chinese are focused on trade deals that make China stronger, not weaker.
Japan has to go along with these endless oil/Muslim wars so they went along with shutting down trade with Iran but…PM: Japan seeks waiver from US penalties on Iran. NONE of our allies want this embargo. But the controlling interests in Tel Aviv want it so this is what we get! Will AIPAC and Bibi get their war? – Opinion – Al Jazeera English
In a letter to AIPAC executive director, Howard Kohr, McCollum described what happened next. In short, she was threatened by an AIPAC official from her district, called a “terrorist supporter” and warned that her behaviour “would not be tolerated”. In response, McCollum told AIPAC not to come near her office again until it apologised.
McCollum was not, of course, the only legislator threatened that way. She is, however, the only one in memory who went public.
As one who worked on Capitol Hill for 20 years, I know that many, if not most, legislators who vote with AIPAC complain about its strong-arm tactics – but only in private. In fact, some of the most zealous defenders of Netanyahu and faithful devotees of the lobby complain most of all. Among staff, AIPAC’s arrival in their offices during the conference is a source of dread. Hill staff, much like legislators themselves, like to think they are perhaps a little important. AIPAC eliminates that illusion. Although AIPAC calls its requests “asks”, they are, in fact, “tells” – and “no” is not a permissible response. (Staffers who like AIPAC, and there are a few, tend to work with it hand-in-glove, which is how AIPAC invariably knows what is going on even before the elected representatives do.)
This strong-arming our ‘representatives’ so they vote against our best interests is a complete disaster for our society, our economy and our public health.
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