FedUpUSA

Archive for December 28th, 2009

Why the ‘Angry Mob’ Is Angry

By Wendi Lynn G

Yes, yes, call us names like “astroturfer,” “teabagger,” and “angry mob.” Such is the motif of our accusers in government who seem to think that we’re angry because “our party” isn’t in power, all the while neglecting the log within their own eyes that blocks their view of the truth. This hypocrisy and ignorance exemplify the reality behind why we’re angry. Using the Saul Alinsky tactic of badgering serves only to pour gasoline upon the very fires of anger that they ignited. And this fire has only begun to burn. The Santa Ana winds are not far off over the mountains.

Our anger comes not simply because we are poor sports. We are not racists who abhor the idea of “a black man in the White House,” because in truth, we have wanted to see that bridge crossed for years. We are not “just angry people” — quite the contrary, which underscores the point. Conservatives are not usually angry, nor are we protesters. That we show up to a protest at all is a huge statement itself and expressive enough of our anger. When we do protest, we don’t vandalize local merchants, topple cars and set them on fire, or require the police to control us or cart us off to jail. We’re not violent people — but we are human, and we do get angry. We’re just regular folks who prefer to not protest or make a stink about anything. We just want to live our lives in peace. What lights our fire is any threat to that peace and the freedom that provides it. 

In September 2008, before the financial crisis came to the fore, I fought on two fronts: I didn’t want then-Senator Obama to win the election, and I didn’t want the TARP bill to pass. For the first time in my life, I called my local elected officials and the McCain Campaign Headquarters. I begged, through tears of frustration, for Senator McCain not to support the TARP legislation. If ever I needed the “Maverick” to show up, it was then, for both the bill and the election. I was hugely disappointed on both counts. My frustration escalated to shouting matches at my TV set every time I heard the lies, spin, and audacious deception that, for the first time in our history, elected someone radically far left into the White House. On election night, I grieved from knowing, knowing what was to come: something utterly unlike the America in which I grew up with such hope and patriotic pride. I wasn’t alone in this, but at the time, I didn’t know it.  

From day one of Obama’s presidency, the dismantling commenced. We have continued to call and write to our elected officials. “We don’t want the bailouts, spending, cap-and-trade, ObamaCare,” etc. On April 15, 2009, I joined thousands across the country in attending our first protest. We wanted to be heard by our representatives. We believed that in addition to reading letters and fielding calls — if they even did that — perhaps our visibility would finally capture their attention.  Then, at a town hall, the president un-presidentially and mockingly dismissed us, saying we were “waving tea bags around” like we’re just a joke! As our disapproval and disagreement with the Obama agenda has grown ever louder, we have essentially asked, “can you hear us now?!” And the answer has been further dismissal, lack of acknowledgment, and blatant media attacks utilizing the aforementioned Saul Alinksy skill set.  

We’re trying in every way legally and officially possible to make clear that we don’t want the radical meal we’re being forced to eat. We fervently do not want to “fundamentally transform” America. But there is such a huge disconnect from our world to our representatives’. It’s as if we are ghosts whom they can’t see or hear! When someone refuses to listen, going so far as to ignore you, don’t you shout louder? Doesn’t it anger you? When you’re attacked and belittled because you have to shout to be heard and you’re still ignored, doesn’t that infuriate you? These people miss that we passionately don’t want what they want. The more they refuse to hear us, the more we try to make them. We are not going away. 

We’re justly and increasingly angry because our reps not only refuse to hear us, but they also chastise us for wanting to be heard. How else would they expect us to react when we feel so helpless and hopeless? No matter what we want, say, or do, our government is going to force us to eat a meal we never ordered. In addition, we keep saying, “no, we don’t want this,” but they keep putting affirmations in our mouths and proceeding with their radical agenda anyway. We are not enjoying the governmental rape of our country. We said “no,” and “no” means “no” in every language. Why doesn’t this matter? Every poll reflects the president’s rapidly declining approval rating — for good reason. And still, Robert Gibbs flippantly dismisses it. How are “we the people” supposed to feel? Certainly we do not feel happy, or even just mildly upset, about being disregarded. Far-left ideologues who supposedly espouse “compassionate” causes have no compassion for how we feel, nor do they have a clue that we are an angry mob of their own creation.

We take comfort in knowing (if only for ourselves, because clearly, they have forgotten) that “we the people” hold the power of our votes. Our elected officials will hear us in 2010 and 2012. Even so, if we do not stop this train wreck now; we may never be able to undo the damage being forced upon us. 

Yes, my heart is pounding, and I feel like I’m living the nightmare in fighting to be heard. I want more than anything to finally wake up and say, “Oh, thank God…it was only a dream.” I want to return to a life where I’m not concerned about the uncertainty of a future where I can still pursue dreams. Once at the “post” part of PTSS, I can return to being part of the regular folk, peacefully living life. But as long as I live in this nightmare, this “angry mobstress” will continue to fight against the radical “remaking” of America so that we can remain America, with liberty and justice for all. As one of the “regular folks,” I really wish I had another choice.

Wendi is a writer and blogger residing in the San Francisco Bay Area. She is currently working on her first book. Her blog can be found at rightmakesmight4all.blogspot.com

There is an interesting interview in Barron’s with two hedge fund managers called Shorting the Economic Recovery.

The fund managers who correctly predicted the housing collapse and the rise in gold, now predict the economy’s next leg down. The second theme in the article is on capitalism, fractional reserve lending and what the government should have done.

Here are some interesting interview snips pertaining to capitalism and fractional reserve lending. The rest of the article is by subscription only.

PERHAPS ONE OF THE greatest failings in the run-up to the financial meltdown was a lack of perspective — an inability by many market participants to see the big picture. Not so with Kevin Duffy and Bill Laggner, principals of the Dallas-based hedge fund Bearing Asset Management. With the help of their proprietary credit-bubble index, developed in 2004, the managers sounded early warnings on housing and credit excesses, and capitalized handsomely on their forecasts by shorting Fannie Mae, Freddie Mac, money-center banks and brokers, builders, mortgage insurers and the like.

Students of the Austrian school of economics, which espouses a free-market philosophy that ascribes business-cycle booms and busts to government meddling with interest rates, the pair is solidly in the contrarian camp, believing that the worst for the markets may be yet to come.

Barron’s: You’ve said that perhaps the most redeeming feature of capitalism is failure. Please explain.

Duffy: Any healthy system needs a way to correct error and remove waste. Nature has extinction, the economy has loss, bankruptcy, liquidation. Interfering in this process lengthens feedback loops. Error and waste are allowed to accumulate, and you ultimately get a massive collapse.

Capitalism is primarily attacked by two groups: utopians who wish to impose a more “compassionate” system, and political capitalists who want to enjoy the fruits of success without bearing the pain of failure. They use the coercion of the state to gain privileges, at the expense of everyone else.

As a country we’ve become less tolerant of economic failure. The result has been a series of interventions, such as meddling in the credit markets, promoting homeownership and creating a variety of safety nets for investors. Each crisis leads to an even greater crisis. The solution is always greater doses of intervention. So the system becomes increasingly unstable. The interventionists never see the bust coming, then blame it on “capitalism.”

Barron’s: What would you have done differently as the credit bubble was bursting and the Fed and the Treasury were declaring that the world would come to an end without an $800 billion bailout package?

Duffy: Allow those who essentially bet wrongly to fail, instead of bailing out people with friends in high places.

Barron’s: What about the argument that a financial panic would have ensued and crushed the little guy?

Duffy: The little guy actually has been crushed. The little guy is always going to be the last one in the soup line. So he will get a bone tossed to him, like cash for clunkers. But if you are Goldman Sachs or if you have got essentially the red bat-phone to Washington, D.C., you are first in line.

Laggner: There is still a multi-trillion dollar shadow banking system that FASB [the Financial Accounting Standards Board] wants to address next year. The central planners have already spent $3.15 trillion on various bailouts, credit backstops, guarantees, etc., and given approximately $17.5 trillion of government commitments, etc., while allowing many of these institutions to remain in place, with the same people running them.

Barron’s: What else could have been done?

Laggner: We could have isolated the money centers and put them in temporary receivership. Then, we could have created — with a mere $100 billion — a thousand community banks. If you believe in fractional reserve lending [in which banks lend multiples of their deposits], something we don’t support, they could have created a trillion dollars in new credit that would have flowed to small and medium-sized businesses. Those are the parts of the economy that are choking.

Barron’s: What kind of financial reform would you like to see?

Laggner: We don’t believe in a central bank. The idea that banks can speculate with essentially free money from the [Federal Reserve], which ultimately is the taxpayer, and that when they lose money the Fed bails them out and then passes that invoice to the taxpayer — that whole model is broken and needs to go away.

Duffy: To get to the heart of the problem, we need to address fractional-reserve banking, which is causing the instability. We have essentially socialized deposit insurance and prevented the bank run, which used to impose discipline on this unstable system. At least it had some check on those who were acting most recklessly. Until we address the root of the problem, we are going to have a series of crises, greater responses and intervention, and more bubbles — and the system will keep perpetuating itself.

Misguided Blaming Of Capitalism

Duffy hits the nail on the head when it comes to regulation and intervention: The interventionists never see the bust coming, then blame it on “capitalism.”

Intervention created Fannie Mae, Freddie Mac, and the “AAA” rating of pure junk via government sponsorship of Moody’s Fitch, and the S&P.

Furthermore, FDIC regulation designed to prevent bank failures and runs on banks did nothing of the kind. Instead, the FDIC created a false sense of security for decades, followed by a massive collapse of banks, including the largest bank failures in history.

In 2009, 140 banks failed and that number will likely be topped in 2010.

FDIC is a moral hazard as well as Ponzi scheme of immense proportion. It allows marginal banks to raise needed funds by offering above market government guaranteed CDs. Such guarantees helped fund ridiculous condo projects by Bank United, Corus Bank, and others. Indeed, many regional banks jumped on board with enormous leverage in commercial real estate.

Very few understand how destabilizing FDIC is to the banking system.

Fractional Reserve Lending Disaster

I also agree with Laggner that Fractional Reserve Lending is a bad idea.

For example, if Fannie and Freddie had to back up their mortgages 100% with bonds of matching duration instead of the mere 3% now in place, if 100% reserves were required on checking accounts, and if there was no FDIC, it is highly doubtful things would have gotten so out of hand.

Laggner suggests the creation of 1000 new community banks with deposits of $100 billion would have kicked off a $trillion in lending. I disagree on this point given that reserves are not the primary lending constraint as noted in Fictional Reserve Lending And The Myth Of Excess Reserves.

Excess Reserve Recap

1) Lending comes first and what little reserves there are (if any) come later.
2) There really are no excess reserves.
3) Not only are there no excess reserves, there are essentially no reserves to speak of at all. Indeed, bank reserves are completely “fictional”.
4) Banks are capital constrained not reserve constrained.
5) Banks aren’t lending because there are few credit worthy borrowers worth the risk.

In Laggner’s scenario, unless those 1000 banks did not care about losses, points number 4 would and 5 would have come into play.

Of course government could have decided to bankroll capital losses at those new banks, just as it now does with Fannie Mae and Freddie Mac.

Please see All Hail The Grand Poobah; Blank Checks For Fannie and Freddie for a discussion of Obama’s Christmas eve decision to cover an unlimited amount of losses at the mortgage-finance giants Fannie Mae and Freddie Mac over the next three years.

Interestingly, the legislation that created Fannie and Freddie explicitly states that its securities are not backed by the government. Supposedly, the GSE’s were to receive no direct government funding or backing.

Both president Bush and president Obama (as well as the treasury departments under each administration) have shown little concern for such technicalities. Increasingly presidents are of the mind “we have to destroy capitalism to save it” or as President Bush stated (and Obama practices)“I’ve abandoned free-market principles to save the free-market system.”

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

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Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Visit http://www.sitkapacific.com/account_management.html  to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Bloomberg is reporting Tanker Glut Signals 25% Drop on 26-Mile Line of Ships.

A 26-mile-long line of idled oil tankers, enough to blockade the English Channel, may signal a 25 percent slump in freight rates next year.

The ships will unload 26 percent of the crude and oil products they are storing in six months, adding to vessel supply and pushing rates for supertankers down to an average of $30,000 a day next year, compared with $40,212 now, according to the median estimate in a Bloomberg News survey of 15 analysts, traders and shipbrokers.

That’s below what Frontline Ltd., the biggest operator of the ships, says it needs to break even.

Traders booked a record number of ships for storage this year, seeking to profit from longer-dated energy futures trading at a premium to contracts for immediate delivery, according to SSY Consultancy & Research Ltd., a unit of the world’s second- largest shipbroker. Ships taken out of that trade would return to compete for cargoes just as deliveries from shipyards’ largest-ever order book swell the global fleet.

“The tanker market has been defying gravity,” said Martin Stopford, a London-based director at Clarkson Plc, the world’s largest shipbroker. Stopford has covered shipping since 1971.

More than half of the ships are in European waters, with the rest spread out across Asia, the U.S. and West Africa. Lined up end to end, they would stretch for about 26 miles.

Storing Crude

Traders are storing enough crude at sea to supply the 27- nation European Union for more than three days. Royal Dutch Shell Plc, Europe’s biggest oil company; London-based BP Plc; JPMorgan Chase & Co.; and Morgan Stanley were among those that sought vessels for storage.

The storage trade is profitable so long as the spread between energy contracts exceeds ship rental, insurance and financing costs. A year ago, the spread between the first and sixth Brent crude-oil contracts traded on the London-based ICE Futures Europe exchange was 23 percent. Now, it’s 4 percent.

Speculation is one of the things propping up energy prices. Belief in a sustainable recovery is another, and rampant money supply growth in China is a third.

Regardless, with contango spreads tightening, demand for 26 miles of oil tankers will collapse.

Crude Prices

Click on chart for sharper image.

The floating storage trade is becoming riskier and riskier. The spread all the way out to January 2011 is only $7 and there is certainly no guarantee or even likelihood oil prices will be that high then. One also has to factor in lease and crew costs.

It was one thing to store oil when crude was below $40 and future months were much higher. Risk factors are much higher now and the floating tanker trade will soon be unwound.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Visit http://www.sitkapacific.com/account_management.html  to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Last Thursday, Treasury issued an Update on Status of Support for Housing Programs. One of the key points was to increase the cap on Treasury’s funding commitment “to accommodate any cumulative reduction in net worth over the next three years”.

Here were the reasons given:

Treasury will also amend the terms of its agreements with Fannie Mae and Freddie Mac to support their ongoing stability. The steps outlined today are necessary for preserving the continued strength and stability of the mortgage market.
emphasis added

and

The amendments to these agreements announced today should leave no uncertainty about the Treasury’s commitment to support these firms as they continue to play a vital role in the housing market during this current crisis.

Why not just be explicit and explain the reasons for the change?

I speculated on Saturday that this might have something to do with more modifications. Others thought this was possible, from MarketWatch:

The government may put a mortgage-modification effort, called the Home Affordable Modification Program, or HAMP, into overdrive in coming years, pushing for reductions in the principal outstanding on home loans overseen by Fannie and Freddie, Bose George, an analyst at Keefe, Bruyette & Woods, wrote in a note to investors Monday.

Others thought this was wrong, from housing economist Tom Lawler today:

[A] few folks postulated that the Treasury’s move to explicitly up the government’s potential support for Fannie and Freddie might be related to plans by the Treasury to expand the HAMP to include a principal reduction plan, which would accelerate losses on HAMP modifications. I have no clue what’s going on in the minds of Treasury officials, I very much doubt that any such change in the cards soon.

Note: of course HAMP already allows principal reductions, but servicers receive no additional subsidy for principal reduction.

Credit Suisse argued that this increases the prospect of “large-scale voluntary buyouts” of delinquent mortgages guaranteed by Fannie and Freddie. Other analysts have argued this could be related to the adoption of FAS 166/167 in January.

And still another analyst suggested Fannie and Freddie would become the world’s biggest SIVs, and he viewed this as an attempt to hold down mortgage rates after the conclusion of the Fed’s program to purchase MBS.

Dean Baker wrote at the HuffPost: Fannie Mae and Freddie Mac: Just a Four-Letter Word?

Since Fannie and Freddie went into conservatorship in September of 2008, it has been explicit policy that the government would back up their debt. Originally, $200 billion was committed for this purpose. That amount was subsequently doubled to $400 billion … [T]he Obama administration should make its case to the public and explain how losses could conceivably run above $400 billion (credit markets don’t need reassurance against inconceivable events).

And that is really the bottom line: Why did Treasury release this on Christmas Eve with essentially no explanation. This has just lead to speculation and confusion. Why not be explicit? Why should we have to guess?

“What we’ve got here is … failure to communicate.” (from Cool Hand Luke)

You don’t see them standing on corners rattling cups for change. You don’t see them holding up cardboard “Will Work for Food” signs at busy intersections or playing musical instruments on O’Hare walkways.

They are the thousands of homeless families in the suburbs that shuffle from couch to couch at the homes of friends and relatives, or sleep in cars, shelters, businesses and rundown motels.

They are people like Angela and David Johnson, and their two children – Riley, 7, and Deagan, 5 – a suburban family that, like thousands of others, started off with a bright future but through either bad decisions or circumstances ended up scratching and clawing for day-to-day existence in the cold shadows of homelessness.
LINK HERE