FedUpUSA

Archive for March, 2011

The Federal Reserve is one giant black box of financial mysticism in our economy.  At least that is what the Fed wants the public to think so it can remain shrouded in mystery.  Since the crisis slammed our economy and the bailouts started in mass, calls for greater Federal Reserve transparency have been echoed in a non-partisan voice.  The protectors of the Fed are largely part of the banking syndicate that have used this institution as one giant washer machine to recycle taxpayer money and convoluted the true intent of the original bailouts.  Some in the public seem to think that the bailouts have all been repaid and suddenly the economy is back on even footing.  Nothing can be further from the truth.  To the contrary, the digital printing press is humming at a feverish pitch but the mainstream media has failed to convey the biggest financial story in any meaningful way.  How can a multi-trillion dollar swindle occur with very little media scrutiny?  The media would rather focus on Dancing with the Stars or some other flavor of the day reality show instead of confronting the financial system that runs our economy.

Federal Reserve still holding onto crisis like position

In more stable times, the Federal Reserve held roughly $750 billion of traditional security holdings like U.S. Treasuries.  This is largely a role of a central bank until in late 2007 the Fed started breaking its historical mandate and venturing into uncharted territory purchasing whatever the banks flung its way.  Today the Fed holds over $2.5 trillion in a grab bag of securities.  We really don’t know the quality of what is being held but if structures like Maiden Lane are any indication the Fed is holding onto toxic debt waste of the bubble days.

Yet Bloomberg has won a first in the 98 year history of the Fed to actually have a court order release the details of the Fed’s bailout actions:

“(Bloomberg) The order marks the first time a court has forced the Fed to reveal the names of banks that borrowed from its oldest lending program, the 98-year-old discount window. The disclosures, together with details of six bailout programs released by the central bank in December under a congressional mandate, would give taxpayers insight into the Fed’s unprecedented $3.5 trillion effort to stem the 2008 financial panic.

“I can’t recall that the Fed was ever sued and forced to release information” in its 98-year history, said Allan H. Meltzer, the author of three books on the U.S central bank and a professor at Carnegie Mellon University in Pittsburgh.”

Keep in mind this is occurring contrary to the Federal Reserve’s initial desires.  If it were in their hands you would not even have a clue what was going on in their black box.  $3.5 trillion in bailout actions to stop the 2008 financial panic yet taxpayers have no access to the crucial information as to how all this occurred.  We already know from the way the stock market and banks are ripping through profits where the bailouts were geared.  In the meantime the middle class contracts even further.

Spending tomorrow’s money

Part of the reason the Fed is still holding onto a record amount of securities is that we are spending more than we earn as a nation.  For the fiscal year, we are in the hole to the tune of $640 billion.  In the last fiscal year we ran a $1.2 trillion deficit so this year we are on track either to tie or pass that mark.  This of course is completely unsustainable.  Part of the reason we ended up in this financial crisis in the first place is because we were spending more than we were earning.  So the solution is to spend more than we earn yet again?

This is a very big problem and given the rising costs of items like Medicare it is likely to continue even with a growing economy because of our aging population and rapidly rising healthcare costs.  The only way to address these issues is to either curb healthcare costs or find other sources of revenue or to expand the economy.  Last month we spent $47 billion on the Department of Defense.  How long can we simply continue to spend money that we don’t have?  Is it any wonder that over the last decade the U.S. dollar has taken a massive beating?

People may not see the direct correlation to their daily lives but the fact that we now have a higher structural unemployment rate with lower wages and increasing costs of daily goods should tell you that Americans are paying for all of the above by a slowly decreasing quality of life.  Take a look at the agricultural index over the last few years:

The agricultural index is up 96 percent from the low reached in late 2008.  This translates into higher food costs and many are feeling it even though the CPI with the heavy weighting on housing does not reflect this change.

The banking system is inundated with toxic loans.  Many sit in the balance sheet of the Federal Reserve since no one in the open market wants to touch this junk.  Anyone really looking to buy a strip mall in the middle of the desert?  Because of this, the Fed wants to lure in more and more home buyers with artificially low interest rates and hopes to unload some of these homes at a time when inflation can eat away some of the bubble mania.  Yet prices rose so high and so quick that the Fed is still at their peak in terms of their holdings.  That is why the Fed is still keeping rates near zero percent:

So what is the banking and government solution to our predicament?  Keep deficit spending and allow the banks to use the Fed as their corporate mark to market suspension account for all the bad loans of the last decade.  Slowly over time the cost will be shifted to working and middle class Americans in a process designed to strip and destroy the middle class.  All of this is intentional and calculated.  If the Fed had the best interest of the public they would have been open and transparent about their bailouts from day one.  So here we are, a very long time into the crisis of 2007/2008 when the Fed ushered in unprecedented bailouts and we are only now about to find out who really got what.  Will this even be covered in the media?

My Budget360

Glenn Beck is currently running a video, apparently leaked from a faction of ‘socialist’ groups, or so they are identified.

Well, this is going to raise some ire, I’m sure, but I don’t disagree with what is being said on the video. 

Yes, you read that correctly.  Anyone who has been following FedUpUSA for any length of time knows a few things about us, first and foremost:  we’re about as pro-Constitution as it gets, but few people understand what that means.  And yes, I’m speaking to many Tea Party groups, as well as conservative groups right along with left-leaning liberal-progressives.  What does it mean to be Constitutional?  It means that the rule of law is applied EQUALLY to all.  There are NO exclusions.  Do we have that now?  No.  Have we had it in the past 100 years?  No.  Therein lies the problem I’m going to lay out for you here. 

We don’t have a political problem – we have a problem of corruption and the loss of the rule of law.  The ‘equal protection under the law’ promise in the 14th Amendment does not mean ‘everyone is equal.’  It doesn’t mean some are more equal than others.  It means that each law should be applied to everyone regardless of race, political affiliation, creed, ethnicity, religion, or economic status.  Do we have that?  No.   This is not a political problem, it’s a ’failure to recognize what is wrong’ problem.  And I’m going to prove it to you.

The following is the Socialist Party Platform of 1912, the emphasis and strike-throughs are added by me to help you understand the paradox of what we face.

The Socialist Constitutional Rule of Law party declares that the capitalist LAW-EXEMPT kleptocratic system has outgrown its historical function, and has become utterly incapable of meeting the problems now confronting society. We denounce this outgrown system as incompetent and corrupt and the source of unspeakable misery and suffering to the whole working class.

Under this system the industrial equipment of the nation has passed into the absolute control of a plutocracy which exacts an annual tribute of hundreds of millions of dollars from the producers. Unafraid of any organized resistance, it stretches out its greedy hands over the still undeveloped resources of the nation-the land, the mines, the forests and the water powers of every State of the Union.

In spite of the multiplication of laborsaving machines and improved methods in industry which cheapen the cost of production, the share of the producers grows ever less, and the prices of all the necessities of life steadily increase. The boasted prosperity of this nation is for the owning class alone. To the rest it means only greater hardship and misery. The high cost of living is felt in every home. Millions of wage-workers have seen the purchasing power of their wages decrease until life has become a desperate battle for mere existence.

Multitudes of unemployed walk the streets of our cities or trudge from State to State awaiting the will of the masters to move the wheels of industry. The farmers in every state are plundered by the increasing prices exacted for tools and machinery and by extortionate rents, freight rates and storage charges.

Capitalist LAW-EXEMPT kleptocratic concentration is mercilessly crushing the class of small business men and driving its members into the ranks of propertyless wage-workers. The overwhelming majority of the people of America are being forced under a yoke of bondage by this soulless industrial despotism.

It is this capitalist LAW-EXEMPT kleptocratic system that is responsible for the increasing burden of armaments, the poverty, slums, child labor, most of the insanity, crime and prostitution, and much of the disease that afflicts mankind.

Under this system the working class is exposed to poisonous conditions, to frightful and needless perils to life and limb, is walled around with court decisions, injunctions and unjust laws, and is preyed upon incessantly for the benefit of the controlling oligarchy of wealth. Under it also, the children of the working class are doomed to ignorance, drudging toil and darkened lives.

In the face of these evils, so manifest that all thoughtful observers are appalled at them, the legislative representatives of the Republican and Democratic parties remain the faithful servants of the oppressors. Measures designed to secure to the wage-earners of this Nation as humane and just treatment as is already enjoyed by the wage-earners of all other civilized nations have been smothered in committee without debate, the laws ostensibly designed to bring relief to the farmers and general consumers are juggled and transformed into instruments for the exaction of further tribute. The growing unrest under oppression has driven these two old parties to the enactment of a variety of regulative measures, none of which has limited in any appreciable degree the power of the plutocracy, and some of which have been perverted into means of increasing that power. Anti-trust laws, railroad restrictions and regulations, with the prosecutions, indictments and investigations based upon such legislation, have proved to be utterly futile and ridiculous.

Nor has this plutocracy been seriously restrained or even threatened by any Republican or Democratic executive. It has continued to grow in power and insolence alike under the administration of Cleveland, McKinley, Roosevelt and Taft.

We declare, therefore, that the longer sufferance of these conditions is impossible, and we purpose to end them all. We declare them to be the product of the present system in which industry is carried on for private greed, instead of for the welfare of society. We declare, furthermore, that for these evils there will be and can be no remedy and no substantial relief except through Socialism application of Constitutional governance under which industry will be carried on for the common good held to the rule of law and every worker receive the full social value of the wealth he creates.

Society is divided into warring groups and classes, based upon material interests. Fundamentally, this struggle is a conflict between the two main classes, one of which, the capitalist class, owns the means of production, and the other, the working class, must use these means of production, on terms dictated by the owners.

The capitalist LAW-EXEMPT kleptocratic class, though few in numbers, absolutely controls the government, legislative, executive and judicial. This class owns the machinery of gathering and disseminating news through its organized press. It subsidizes seats of learning-the colleges and schools-and even religious and moral agencies. It has also the added prestige which established customs give to any order of society, right or wrong.

The working class, which includes all those who are forced to work for a living whether by hand or brain, in shop, mine or on the soil, vastly outnumbers the capitalist class. Lacking effective organization and class solidarity, this class is unable to enforce its will. Given such a class solidarity and effective organization, the workers will have the power to make all laws and control all industry in their own interest. All political parties are the expression of economic class interests. All other parties than the Socialist  Constitutional Rule of Law party represent one or another group of the ruling capitalist LAW-EXEMPT kleptocratic class. Their political conflicts reflect merely superficial rivalries between competing capitalist LAW-EXEMPT kleptocratic groups. However they result, these conflicts have no issue of real value to the workers. Whether the Democrats or Republicans win politically, it is the capitalist LAW-EXEMPT kleptocratic class that is victorious economically.

The Socialist Constitutional Rule of Law party is the political expression of the economic interests of the workers. Its defeats have been their defeats and its victories their victories. It is a party founded on the science and laws of social development the rule of law. It proposes that, since all social necessities today are socially individually produced, the means of their production and distribution shall be socially individually owned and democratically controlled all that do so, subjected to the rule of law equally applied.

In the face of the economic and political aggressions of the capitalist LAW-EXEMPT kleptocratic class the only reliance left the workers is that of their economic organizations and their political power. By the intelligent and class conscious use of these, they may resist successfully the capitalist LAW-EXEMPT kleptocratic class, break the fetters of wage slavery, and fit themselves for the future society, which is to displace the capitalist LAW-EXEMPT kleptocratic system. The Socialist Constitutional Rule of Law party appreciates the full significance of class organization and urges the wage-earners, the working farmers and all other useful workers to organize for economic and political action, and we pledge ourselves to support the toilers of the fields as well as those in the shops, factories and mines of the nation in their struggles for economic justice and fair and equal application of the law.

In the defeat or victory of the working class party in this new struggle for freedom lies the defeat or triumph of the common people of all economic groups, as well as the failure or triumph of popular government. Thus the Socialist Constitutional Rule of Law party is the party of the present day revolution which makes the transition from economic individualism capture to socialism economic freedom, from wage slavery to free co-operation, from capitalist LAW-EXEMPT kleptocratic oligarchy to industrial democracy a free Republic.

Having a problem disagreeing with the bolded portions?

It’s not a coincidence. The corrupt system that they complain of, however, is NOT ‘capitalism’; they are mis-identifying the problem.  By 1912, we already had a pretty well corrupted and captured government. That is, rules for some but not for others, because the elite and wealthy could buy Members of Congress to vote the way they wanted them to.  The problems were all the same as we see now, but there was even a deeper divide then between the ‘haves’ and ‘have nots’.  While we were ‘free’ we were not REALLY free. No more so than we are now, today.

Their answer is basically a new Mayflower Compact – but they fail to see that the same people in power under the current (and previous) mislabeled ‘capitalist system’ would be in charge of the NEW collective-good, socialist system they propose.

They don’t get it any more than most of us do today – on EITHER side of the political spectrum.  This is because it is not a political problem, it is a rule of law problem.

We don’t have capitalism, we have a captured government, otherwise known as an oligarchy or plutocracy, which is where the rule of law is not applied equally to all; some are more equal to others and their preferential treatment is due to the power of their money enabling them to purchase representation that the rest of us cannot.  The deck is stacked.  The game is rigged.  It’s a closed system, and 99% of us are NOT part of it.

Socialism, while sounding like it might remedy such imbalances, really SOLIDIFIES the power and concentrates it further.  This is what most advocating for such a system fail to recognize.  These people fail to closely examine history.  However, so do those advocating for a return to Constitutional governance.  This cannot be acheived either, not without identifying what is currently wrong.  And they entirely miss the mark when they continue to support Wall Street and banking as bastions of capitalism and free markets.  It is anything but.

Either way, this video is correct – the banks must be brought down to have real and true socialsm, and they must also be brought down in order to have real and true capitalism. Thus, common need, but different goals.   PARADOX!  However, the goals are only different because both sides fail to identify the real and true problem:  It is not political system, it is loss of the rule of law.   This is what is causing everyone so much pain, no matter what their political affiliation.  This is what is destroying our economy bit by bit and day by day.

Currently, as it was then, and as it has been throughout history, the banks have no one to answer to because they alone control the quantity of money - therefore, they are exempt from rules of law that apply to everyone else. They either get brought down, or the rule of law needs to come down on them like an anvil.

How many will grasp and understand the paradox?  That’s the real question – because at this point, it is a huge trap being laid. For all of us.  On both sides of the aisle.  Warring between left and right will continue to keep us all from realizing the true problem.

While the answer is simple, it’s implementation is not:

Convince those that are advocating for socialism that what they are railing against is not the failure of capitalism (it hasn’t really existed for over 100 years), but is more accurately, the capture of government through those who pay for representation in order to be exempt from the law.

Convince those that are advocating for a reapplication and return to the Constitution that this cannot be accomplished without removal of those who have captured our government and who pay for representation in order to be exempt from the law.

In both cases, the influence and power of those who control the quantity of money over our government must be stopped.  Nothing short of this will make any difference at all in whatever political system we have now or will end up with in the future.  It has been this way since the beginning of fiat currency.

WAKE UP AMERICA!  STOP THE LOOTING & START PROSECUTING!

Now this is a change….

Former FirstCity Bank executives Mark A. Conner, 44, and Clayton A. Coe, 41, each face conspiracy and bank fraud charges, the U.S. Attorney’s Office said in a release. Conner is charged separately with conducting a continuing financial crimes enterprise and allegedly netted, along with an unknown number of co-conspirators, more than $5 million.

Conner could face up to life in prison if convicted, and Coe could face up to 30 years, according to federal guidelines.

Criminal charges this time?  I’m somewhat impressed, given that this appears to be more-or-less a first.  Oh sure, there was the TBW stuff, but those weren’t really banks – they were people who screwed with Colonial, more-or-less.

“At the heart of this indictment is an abuse of power by key insiders, who are charged with tricking their own colleagues into approving millions of dollars in commercial loans to fund the defendants’ own personal business activities, and to enrich themselves at the bank’s expense,” U.S. Attorney Sally Quillian Yates said.

How does this not apply to basically all of the TBTF institutions?  After all, this entire mess was all about their personal homes in the Hamptons, yachts and other similar things, right?

Wait a second… I think I get it.  If you “make” billions in salary and bonuses by writing eighty percent of your paper with trashy loans, fail as a business but then succeed in extorting $14 trillion from The Federal Government and Federal Reserve (not my numbers, those are from SIGTARP) to save your sorry firm’s ass then it’s all ok. 

It’s only if you fail to extort the government and the bank blows up that you get indicted?

The Market-Ticker

2011 has already been the most memorable year in ages and we haven’t even reached April yet.  Revolutions have swept the Middle East, an unprecedented earthquake and tsunami have hit Japan, civil war has erupted in Libya, the price of oil has been soaring and the entire globe is teetering on the brink of economic collapse.  It seems like almost everything that can be shaken is being shaken.  Unfortunately, it does not appear that things are going to settle down any time soon.  The Japanese economy has been dealt a critical blow, the European sovereign debt crisis could flare up again at any moment and the U.S. economy could potentially plunge into another recession by the end of the year.  The global economy and world financial markets were really struggling to recover even when things were relatively stable.  If all of this global instability gets even worse it could literally rip world financial markets apart.

Yes, things really are that bad.  The mainstream media has been really busy downplaying the economic impact of the disaster in Japan and the chaos in the Middle East, but the truth is that these events have huge implications for the global economy.  Today our world is more interconnected than ever, so economic pain in one area of the planet is going to have a significant effect on other areas of the globe.

The following are 10 economic disasters which could potentially rip world financial markets to shreds….

#1 War In Libya

Do you think that the “international community” would be intervening in Libya if they did not have a lot of oil?  If you actually believe that, you might want to review the last few decades of African history.  Millions upon millions of Africans have been slaughtered by incredibly repressive regimes and the “international community” did next to nothing about it.

But Libya is different.

Libya is the largest producer of oil in Africa.

Apparently the revolution in Libya was not going the way it was supposed to, so the U.S. and Europe are stepping in.

Moammar Gadhafi is vowing that this will be a “long war”, but the truth is that his forces don’t stand a chance against NATO.

Initially we were told that NATO would just be setting up a “no fly zone”, but there have already been reports of Libyan tank columns being assaulted and there has even been an air strike on Moammar Gadhafi’s personal compound in Tripoli.

So since when did a “no fly zone” include an attempt to kill a foreign head of state?

Let there be no mistake – the moment that the first Tomahawk cruise missiles were launched the United States declared war on Libya.

Already the Arab League, India, China and Russia have all objected to how this operation is being carried out and they are alarmed about the reports of civilian casualties.

Tensions around the globe are rising once again, and that is not a good thing for the world economy.

On a side note, does anyone recall anyone in the Obama administration even stopping for a moment to consider whether or not they should consult the U.S. Congress before starting another war?

The U.S. Constitution specifically requires the approval of the Congress before we go to war.

But very few people seem to care too much about what the U.S. Constitution says these days.

In any event, the flow of oil out of Libya is likely to be reduced for an extended period of time now, and that is not going to be good for a deeply struggling global economy.

#2 Revolutions In The Middle East

Protests just seem to keep spreading to more countries in the Middle East.  On Friday, five Syrian protesters were killed by government forces in the city of Daraa.  Subsequently, over the weekend thousands of protesters reportedly stormed government buildings in that city and set them on fire.

Things in the region just seem to get wilder and wilder.

Even in countries where the revolutions are supposed to be “over” there is still a lot of chaos.

Have you seen what has been going on in Egypt lately?

The truth is that all of North Africa and nearly the entire Middle East is aflame with revolutionary fervor.

About the only place where revolution has not broken out is in Saudi Arabia.  Of course it probably helps that the United States and Europe don’t really want a revolution in Saudi Arabia and the Saudis have a brutally effective secret police force.

In any event, as long as the chaos in the Middle East continues the price of oil is likely to remain very high, and that is not good news for the world economy.

#3 The Japanese Earthquake And Tsunami

Japan is the third largest economy in the world.  When a major disaster happens in that nation it has global implications.

The tsunami that just hit Japan was absolutely unprecedented.  Vast stretches of Japan have been more thoroughly destroyed than if they had been bombed by a foreign military power.  It really was a nation changing event.

The Japanese economy is going to be crippled for an extended period of time.  But it is not just Japan’s economy that has been deeply affected by this tragedy.

According to the Wall Street Journal, the recent disaster in Japan has caused supply chain disruptions all over the globe….

A shortage of Japanese-built electronic parts will force GM to close a plant in Zaragoza, Spain, on Monday and cancel shifts at a factory in Eisenach, Germany, on Monday and Tuesday, the company said Friday.

Not only that, GM has also suspended all “nonessential” spending globally as it evaluates the impact of this crisis.

The truth is that there are a whole host of industries that rely on parts from Japan.  Supply chains all over the world are going to have to be changed as a result of this crisis.  There are going to be some shortages of certain classes of products.

Japan is a nation that imports and exports tremendous quantities of goods.  At least for a while both imports and exports will be significantly down, and that is not good news for a world economy that was already having a really hard time recovering from the recent economic downturn.

#4 The Japan Nuclear Crisis

Even if the worst case scenario does not play out, the reality is that the crisis at the Fukushima Dai-ichi nuclear plant is going to have a long lasting impact on the global economy.

Already, nuclear power projects all over the world are being rethought.  The nuclear power industry was really starting to gain some momentum in many areas of the globe, but now that has totally changed.

But of much greater concern is the potential effect that all of this radiation will have on the Japanese people.  Radiation from the disaster at the Fukushima Dai-ichi nuclear plant is now showing up in food and tap water in Japan as an article on the website of USA Today recently described….

The government halted shipments of spinach from one area and raw milk from another near the nuclear plant after tests found iodine exceeded safety limits. But the contamination spread to spinach in three other prefectures and to more vegetables — canola and chrysanthemum greens. Tokyo’s tap water, where iodine turned up Friday, now has cesium.

Hopefully the authorities in Japan will be able to get this situation under control before Tokyo is affected too much.  The truth is that Tokyo is one of the most economically important cities on the planet.

But right now there is a lot of uncertainty surrounding Tokyo.  For example, one very large German real estate fund says that their holdings in Tokyo are now “impossible to value” and they have suspended all customer withdrawals from the fund.

Once again, let us hope that a worst case scenario does not happen.  But if we do get to the point where most of the population had to be evacuated from Tokyo for an extended period of time it would be absolutely devastating for the global economy.

#5 The Price Of Oil

Most people believe that the U.S. dollar is the currency of the world, but really it is oil.  Without oil, the global economy that we have constructed simply could not function.

That is why it was so alarming when the price of oil went above $100 a barrel earlier this year for the first time since 2008.  Virtually everyone agrees that if the price of oil stays high for an extended period of time it will have a highly negative impact on the world economy.

In particular, the U.S. economy is highly, highly dependent on cheap oil.  This country is really spread out and we transport goods and services over vast distances.  That is why the following facts are so alarming….

*The average price of a gallon of gasoline in the United States is now 75 cents higher than it was a year ago.

*In San Francisco, California, the average price of a gallon of gasoline is now $3.97.

*According to the Oil Price Information Service, U.S. drivers spent an average of $347 on gasoline during the month of February, which was 30 percent more than a year earlier.

*According to the U.S. Energy Department, the average U.S. household will spend approximately $700 more on gasoline in 2011 than it did during 2010.

#6 Food Inflation

Many people believe that the rapidly rising price of food has been a major factor in sparking the revolutions that we have seen in Africa and the Middle East.  When people cannot feed themselves or their families they tend to lose it.

According to the United Nations, the global price of food hit a new all-time high earlier this year, and the UN is expecting the price of food to continue to go up throughout the rest of this year.  Food supplies were already tight around the globe and this is certainly not going to help things.

The price of food has also been going up rapidly inside the United States.  Last month the price of food in the United States rose at the fastest rate in 36 years.

American families are really starting to feel their budgets stretched.  According to the U.S. Labor Department, the cost of living in the United States hit a brand new all-time record high in the month of February.

What this means is that U.S. families are going to have less discretionary income to spend at the stores and that is bad news for the world economy.

#7 The European Sovereign Debt Crisis

Several European governments have had their debt downgraded in the past several months.  Portugal, Spain, Greece and Ireland are all in big time trouble.  Several other European nations are not far behind them.

Right now Germany seems content to bail the “weak sisters” in Europe out, but if that changes at some point it is going to be an absolute nightmare for world financial markets.

#8 The Dying U.S. Dollar

Right now there is a lot of anxiety about the U.S. dollar.  Prior to the tsunami, Japan was one of the primary purchasers of U.S. government debt.  In fact, Japan was the second-largest foreign buyer of U.S. Treasuries last year.

But now as Japan rebuilds from this nightmare it is not going to have capital to invest overseas.  Someone else is going to have to step in and buy up all of the debt that the Japanese were buying.

Not only that, but big bond funds such as PIMCO have announced that they are stepping away from U.S. Treasuries at least for now.

So if Japan is not buying U.S. Treasuries and bond funds such as PIMCO are not buying U.S. Treasuries, then who is going to be buying them?

The U.S. government needs to borrow trillions of dollars this year alone to roll over existing debt and to finance new debt.  All of that borrowing has got to come from somewhere.

#9 The U.S. Housing Market

The U.S. housing market could potentially be on the verge of another major crisis.  Just consider the following facts….

*In February, U.S. housing starts experienced their largest decline in 27 years.

*Deutsche Bank is projecting that 48 percent of all U.S. mortgages could have negative equity by the end of 2011.

*Two years ago, the average U.S. homeowner that was being foreclosed upon had not made a mortgage payment in 11 months.  Today, the average U.S. homeowner that is being foreclosed upon has not made a mortgage payment in 17 months.

*In September 2008, 33 percent of Americans knew someone who had been foreclosed upon or who was facing the threat of foreclosure.  Today that number has risen to 48 percent.

#10 The Derivatives Bubble

Most Americans do not even understand what derivatives are, but the truth is that they are one of the biggest threats to our financial system.  Some experts estimate that the worldwide derivatives bubble is somewhere in the neighborhood of a quadrillion dollars.  This bubble could burst at any time.  Right now we are watching the greatest financial casino in the history of the globe spin around and around and around and everyone is hoping that at some point it doesn’t stop.  Today, most money on Wall Street is not made by investing in good business ideas.  Rather, most money on Wall Street is now made by making shrewd bets.  Unfortunately, at some point the casino is going to come crashing down and the game will be over.

Most people simply do not realize how fragile the global economy is at this point.

The financial crash of 2008 was a devastating blow.  The next wave of the economic crisis could be even worse.

So what will the rest of 2011 bring?

Well, nobody knows for sure, but a lot of experts are not optimistic.

David Rosenberg, the chief economist at Gluskin Sheff and Associates, is warning that the second half of the year could be very rough for the global economy….

The Economic Collapse

In a rare victory for common sense, the Supreme Court has rejected appeals by banks and the Fed that disclosure of the emergency loans by the Fed to various banks in 2008 were “trade secretes”. The court gave the Fed 5 days to release the information.

Please consider Fed Must Release Loan Data as High Court Rejects Appeal

The Federal Reserve will disclose details of emergency loans it made to banks in 2008, after the U.S. Supreme Court rejected an industry appeal that aimed to shield the records from public view.

“The board will fully comply with the court’s decision and is preparing to make the information available,” said David Skidmore, a spokesman for the Fed.

The order marks the first time a court has forced the Fed to reveal the names of banks that borrowed from its oldest lending program, the 98-year-old discount window. The disclosures, together with details of six bailout programs released by the central bank in December under a congressional mandate, would give taxpayers insight into the Fed’s unprecedented $3.5 trillion effort to stem the 2008 financial panic.

“I can’t recall that the Fed was ever sued and forced to release information” in its 98-year history, said Allan H. Meltzer, the author of three books on the U.S central bank and a professor at Carnegie Mellon University in Pittsburgh.

Under the trial judge’s order, the Fed must reveal 231 pages of documents related to borrowers in April and May 2008, along with loan amounts. News Corp. (NWSA)’s Fox News is pressing a bid for 6,186 pages of similar information on loans made from August 2007 to November 2008.

The records were originally requested under FOIA, which allows citizens access to government papers, by the late Bloomberg News reporter Mark Pittman.

As a financial crisis developed in 2007, “The Federal Reserve forgot that it is the central bank for the people of the United States and not a private academy where decisions of great importance may be withheld from public scrutiny,” said Matthew Winkler, editor in chief of Bloomberg News. “The Fed must be accountable to Congress, especially in disclosing what it does with the people’s money.”

The Clearing House Association contended that Bloomberg is seeking an unprecedented disclosure that might dissuade banks from accepting emergency loans in the future.

Bloomberg initially requested similar information for aid recipients under three other Fed emergency programs. The central bank released details for those facilities and others in December, after Congress required disclosure through the Dodd- Frank law.

The New York-based Clearing House Association, which has processed payments among banks since 1853, includes Bank of America NA, Bank of New York Mellon, Citibank NA, Deutsche Bank Trust Co. Americas, HSBC Bank USA NA, JPMorgan Chase Bank NA, U.S. Bank NA and Wells Fargo Bank NA.

In trying to shield the documents from disclosure, the Clearing House invoked a FOIA exemption that covers trade secrets and commercial or financial information obtained from a person and privileged or confidential.”

The cases are Clearing House Association v. Bloomberg, 10- 543, and Clearing House Association v. Fox News Network, 10-660.

Information-Wise, a Big Yawn

The argument that information represents “trade secrets” is of course preposterous, as is the idea that “disclosure that might dissuade banks from accepting emergency loans in the future”. If banks need money to survive, they will take it.

We will know soon enough, but I expect the information to be a big yawn. We will see some loan amounts and names but everyone knows the names anyway. Perhaps there will be some excitement over loans to foreign banks.

Important Step in the Right Direction

Whatever excitement there is, will last all of a day. However, this was an important step in the right direction, that removes some unwarranted secrecy at the Fed.

The Fed hides behind a cloak of secrecy, doing what they want, when they want, with no disclosure, and no accountability to anyone.

Five Steps to Eliminate the Fed

The first step is a full disclosure of what happened. The second step is a full and complete audit. The third step is a plan to phase out the the Fed. The fourth step is Congressional approval of that plan. The fifth and final step is removal of the Fed itself.

This first step was a very small one actually, but every trip begins with a single step. It will take years to get rid of the Fed. I am hoping I live to see the day it happens.

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