So you think Morgan Stanley diving 8% today is bad eh?
Don’t look at Bank of America, down 8.5%.
Or Citibank, down 9.5% (and don’t forget they reverse-split, so this is really a stock price just over $2)
I hope you folks in Congress are happy with yourselves and the destruction you are about to wreak on the American economy. Oh sure, the economy has been slowing, but I hope you realize that the “slowdown” is despite blowing 12% of GDP in borrowed funds – a pace of borrowing that you cannot sustain.
No, the news is that a new credit lock-up is imminent. One that you can’t respond to this time, as you spent your bullets with the continued enabling of fraud and lies.
LET’S PUT WHAT CONGRESS HAD BETTER PAY ATTENTION TO ON THE TABLE WHERE EVERYONE CAN SEE IT:
IF THIS CRAP DOESN’T STOP IN THE IMMEDIATE FUTURE GDP IS ABOUT TO CONTRACT BY 25% OR MORE AS GOVERNMENT DEFICIT SPENDING WILL BE FORCED TO STOP INTO A LOCKED-UP CREDIT MARKET.
Let’s go down a few bullet points, shall we?
- Brooksley Born was right. She warned you a decade ago. In fact, she told you that this exact act that is causing the problem again after it did in 2008 — fraudulently traded CDS where the seller had no money to pay — would cause a collapse. You ignored her in favor of Greenspan and literally ran her out of town on a rail. Nobody has apologized and worse you didn’t fix it after Lehman blew up!
- CDS sold without the ability to pay are active frauds. In the formal insurance business they’re called “side letters” — the company sells you “insurance” at a stupidly-cheap price with the written assurance that you will never actually claim on it, simply so you can say you’re covered. Insurance companies have been caught doing this before and prosecuted for it. Banks, when they do it with a wink and a nod by trading these things knowing full well the counterparty has no money get a pass. In fact there has been no demand that they prove cash margin capacity on a daily basis even though this was the centroid of the collapse in 2008.
- The market has had enough of the lies. You got away with it in 2009 by making formally lying about current values of assets legal in the many-times-mentioned Kanjorski hearing. But the actual value of these instruments doesn’t change predicated on what you claim. The truth is what it is, and the truth is that the “assets” stink like dead fish.
Here’s the problem when you get down to it: Another credit lockup is imminent. If it happens the government will not be able to respond to it as there’s nothing to do it with. Transactions will go to “cash on delivery or with order, or no deal” and you will be forced to stop the deficit spending. That will contract GDP by 12% all on its own, then add in the lockup and multiplier effects and 25% is probably a conservative estimate of the damage that is about to occur.
Are you ready? No, not just Congress – everyone reading this.
I’ll tell you this with certainty — most Americans are not and a huge percentage certainly will not deal with the loss of government “cheese” at all. Congress doesn’t give a damn and never has — they thought they could lie their way out of this after 2008. I know this for a fact because Douchenozzle McCain’s own advisers were well-aware of exactly what sort of scams had been run and refused to counsel he speak against it, nor did he speak against it. Ryan’s “plan” had embedded 5% or better GDP “growth” numbers as the core of the plan but were not discussed, never mind that we’ve not managed that at any time since the downturn nor can we substantiate it off growth numbers in the 2000s. Worse, the success of such a plan presumes no debt growth in excess of that amount otherwise the hole just gets deeper and you get in more and more trouble, but in point of fact there was no time in the last 30 years when that has happened, and as such there’s no reason to believe it will happen now!
GOVERNMENT came in during the 2008 time frame and said “We won’t let the banks fail.” Ok, but now GOVERNMENTS are on the edge of failure! Who bails them out? The answer is nobody.
Government’s actions, including ours, were fundamentally stupid. There have been no apologies, no “I’m sorry’s”, no recantations and no solutions put forward by either political party, because solutions require recognition that what we did for the last 30 years was fundamentally dishonest and that means the people responsible have to admit running a scam on the public. You can’t inflate out of it either because then those who earn in the lower 80% of the curve literally starve. It would take a quite-literal $25 trillion in nakedly-emitted currency to “print out of the hole” and doing so would drive the value of the dollar down by eighty percent, instantly giving us $12+ gasoline, $15 gallons of milk and $6+ loaves of bread. What are you going to do when fully half of the population shows up in Washington DC, having walked there as they can’t afford to drive, and burns the city to the ground with their last gallon of gasoline? Don’t kid yourselves; this is exactly where the “solution” of “printing” out of this mess leads.
There’s been no demand for honesty among our financial institutions and there’s been no honesty coming from Congress either. The claims that “everyone over 50 will have their Social Security and Medicare” ARE LIES. The fact that our banks are sound is, as the market sees it, A LIE. We have “benefited” in the markets to the extent we have thus far (and that’s not been by much!) simply because we’re the nation with crabs while everyone else has AIDS and is about to expire.
That doesn’t make us healthy – it just means we die last.
But die we shall unless we cut the crap and the time to do so has essentially expired.
The truth is that the leverage in the system — the debt — is unsustainable. Congress must cut off all deficit spending right now. We must force those institutions that are over-levered to take their lumps and whatever happens to their stock price happens. If they’re insolvent then the bondholders must take their lumps, and if that bankrupts pensions then the PBGC has to step in to the extent it can.
If you made me Emperor I would do what the Dutch did after Tulip Mania with one small difference:
Every CDS and other derivative writer shall post cash margin nightly on a central exchange, without exception and without offset or “netting.” If they are unable to then the contract they “wrote” would be deemed fraudulent in the inducement for want of ability to perform and declared void. This would immediately expose all of the underlying “value” of these “assets” for good or bad, and those would then have to be marked to the market and reserved against with current dollars. If you can’t do it then your doors are closed and it’s off to bankruptcy court for you. No ifs, ands or buts.
Too much leverage is the problem and bankruptcy is the only solution as it clears both sides of the balance sheet. Pretending everything is ok does nothing except make the problem worse.
We went from a necessary 25% contraction in the size of government to a forty-three percent one in three years by refusing to tell the truth. We do not have time to fuck around with this any longer!
I fully understand that doing the right thing would result in a monstrous economic hit in the immediate term. However, it’s the only way. The long-term survival of our national financial and political system are at stake here.
THE LIES MUST STOP HERE AND NOW BECAUSE IF THEY DON’T THE CREDIT SYSTEM IS GOING TO LOCK UP AGAIN, AND THE “WE’LL LET YOU LIE AND CLAIM IT’S ALL OK” CARD HAS ALREADY BEEN PLAYED. AS I SEND THIS THE MARKET IS LITERALLY COLLAPSING, WITH DOWN VOLUME NEAR 20:1.
Yeah, there will be bounces and there will be up days, but you can’t ignore the facts – the market is coming apart at the seams, the bond market and credit markets are telling you that credit is about to lock up again (look at “high yield”), base metals are telling you the economy is headed for a Depression (copper in particular), the European Union is on the verge of fracturing, China’s stock market is in freefall and what’s worse, firms that are reliant on credit markets with less-than-excellent credit ratings or otherwise are reliant on leverage are getting literally destroyed on a daily basis with 10% or greater stock price declines.
All of this says that a credit market lockup is imminent – either actions are taken to stop it now or you better hide under the desk.
You’re out of time and you’re out of scams Congress. Either face the truth or watch as what will happen unfolds – and yes, it’s your responsibility.
All of this is yours and it belongs to every one of you personally.
Congress, you deserve what’s coming and the people should throw your asses — every one of you — into the street. You’ve had four years to resolve this with 100% knowledge of what happened and have intentionally, willfully and with full knowledge screwed every American sequentially — not once, but now twice with your lies, scams and schemes intertwined with those of the Wall Street “mavens.”