FedUpUSA

Archive for December 5th, 2011

Bill Still takes on all the Republican candidates in a debate on the economy.

www.Still2012.com

The European debt Bubble has burst, and the repricing of risk and debt cannot be put back in the bottle.

It’s really this simple, Europe: either rebel against the banks or accept decades of debt-serfdom. All the millions of words published about the European debt crisis can be distilled down a handful of simple dynamics. Once we understand those, then the choice between resistance and debt-serfdom is revealed as the onlychoice: the rest of the “options” are illusory.

1. The euro enabled a short-lived but extremely attractive fantasy:the more productive northern EU economies could mint profits in two ways: A) sell their goods and services to their less productive southern neighbors in quantity because these neighbors were now able to borrow vast sums of money at low (i.e. near-”German”) rates of interest, and B) loan these consumer nations these vast sums of money with stupendous leverage, i.e. 1 euro in capital supports 26 euros of lending/debt.

The less productive nations also had a very attractive fantasy: that their present level of productivity (that is, the output of goods and services created by their economies) could be leveraged up via low-interest debt to support a much higher level of consumption and malinvestment in things like villas and luxury autos.

According to Europe’s Currency Road to Nowhere(WSJ.com):

Northern Europe has fueled its growth through exports. It has run huge trade imbalances, the most extreme of which with these same Southern European countries now in peril. Productivity rose dramatically compared to the South, but the currency did not.This explains at least part of the German export and manufacturing miracle of the last 12 years. In 1999, exports were 29% of German gross domestic product. By 2008, they were 47%—an increase vastly larger than in Italy, Spain and Greece, where the ratios increased modestly or even fell. Germany’s net export contribution to GDP (exports minus imports as a share of the economy) rose by nearly a factor of eight. Unlike almost every other high-income country, where manufacturing’s share of the economy fell significantly, in Germany it actually rose as the price of German goods grew more and more attractive compared to those of other countries. In a key sense, Germany’s currency has been to Southern Europe what China’s has been to the U.S.

Flush with profits from exports and loans, Germany and its mercantilist (exporting nations) also ramped up their own borrowing–why not, when growth was so strong?

But the whole set-up was a doomed financial fantasy.The euro seemed to be magic: it enabled importing nations to buy more and borrow more, while also enabling exporting nations to reap immense profits from rising exports and lending.

Put another way: risk and debt were both massively mispriced by the illusion that the endless growth of debt-based consumption could continue forever.The euro was in a sense a scam that served the interests of everyone involved: with risk considered near-zero, interest rates were near-zero, too, and more debt could be leveraged from a small base of productivity and capital.

But now reality has repriced risk and debt, and the clueless leadership of the EU is attempting to put the genie back in the bottle.Alas, the debt loads are too crushing, and the productivity too weak, to support the fantasy of zero risk and low rates of return.

The Credit Bubble Bulletin’s Doug Nolan summarized the reality succinctly: “The European debt Bubble has burst.” Nolan explains the basic mechanisms thusly: The Mythical “Great Moderation”:

For years, European debt was being mispriced in the (over-liquefied, over-leveraged and over-speculated global) marketplace. Countries such as Greece, Portugal, Ireland, Spain and Italy benefitted immeasurably from the market perception that European monetary integration ensured debt, economic and policymaking stability.Similar to the U.S. mortgage/Wall Street finance Bubble, the marketplace was for years content to ignore Credit excesses and festering system fragilities, choosing instead to price debt obligations based on the expectation for zero defaults, abundant liquidity, readily available hedging instruments, and a policymaking regime that would ensure market stability.

Importantly, this backdrop created the perfect market environment for financial leveraging and rampant speculation in a global financial backdrop unsurpassed for its capacity for excess. The arbitrage of European bond yields was likely one of history’s most lucrative speculative endeavors. (link via U. Doran)

In simple terms, this is the stark reality: now that debt and risk have been repriced, Europe’s debts are completely, totally unpayable.There is no way to keep adding to the Matterhorn of debt at the old cheap rate of interest, and there is no way to roll over the trillions of euros in debt that are coming due at the old near-zero rates.

Never mind actually paying down debt, sovereign, corporate and private–the repricing of risk and debt mean even the interest payments are unpayable. Consider this chart of one tiny slice of total EU debt:

There is no way to push the repricing genie back in the bottle, and so there is no way to roll over this debt and add to it–and to support the high-cost structure of Euroland’s welfare-state governments and their astounding debt, then debt must be added, and in staggering quantities.

Austerity won’t put the repricing/bubble burst genie back in the bottle.A funny thing happens when more of the national income is diverted to debt service (making interest payments and rolling over existing debt into new higher-interest debt): there is less surplus available for investment and consumption, which means that both productivity based on investment and consumption based on debt will plummet.

This leaves the nation with lower productivity and lower GDP, which means there is also less tax revenues being collected and more bankruptcies as companies and individuals accept the reality that their debts cannot be paid.

The repricing genie responds to this decline in national income, surplus and taxes by repricing risk of default even higher, and so the interest rate is also repriced higher. This makes servicing the mountain of existing debt even more costly, and so even less national income is available for consumption, investment and taxes.

This is called a positive feedback loop: each action reinforces the other, i.e. a self-reinforcing feedback loop.Debt and risk are repriced higher, the burden of debt service reduces national income available for investment, consumption and taxes, which further reprices risk higher, and so on.

So you see, Europe, there is only one choice:either accept the endless debt serfdom of ever-rising interest payments and lower income and productivity, or rebel against your pathetic lackey leadership and renounce the entire mountain of unpayable debt. Grasp the nettle and renounce the euro as the fundamental cause of your fantasy and collapse, and revert to national currencies which enable the market to discover the price of your underlying productivity and ability to borrow money.

Renouncing the euro does not mean renouncing the freedoms of the European Union: the two are only bound at the hip in the minds of your enfeebled leadership, who are in thrall to the leveraged-26-to-1 banks that are poised on the edge of insolvency.

Let the banks implode in bankruptcy, clear the worthless “assets” of debt from the books, and let the market price currencies and everything else.The only other choice is debt-serfdom.

All the other schemes and proposals are simply variations of one single fantasy: that the feckless leadership can fool the repricing genie with parlor tricks. They can’t.Everybody with any understanding of the situation knows that the debt bubble has already burst, and risk and debt cannot be repriced back to fantasy levels.

That repricing has already occurred, and cannot be revoked or shoved back in the bottle. The Great European Debt Bubble has already burst, and so now it boils down to a simple choice: debt serfom or open rebellion against the banks that profited so handsomely from the euro-fantasy.

There is no middle ground, as the debt cannot be repaid, not now and not in the future. It cannot be reshuffled, masked, or hidden; it can only be renounced.

It’s your choice, Europe; choose wisely.If you want a model for sanity and growth, look to Iceland. They renounced their unpayable debts and debt-serfdom, and let the market reprice their currency, debt and risk. The nightmare is past for them; they chose wisely. Now it’s your turn to choose.

The debt-serfdom will fall to you, not the banks or your Elites.

Charles Hugh Smith – Of Two Minds

That’s all I could come up with when watching this….

Bloomberg Video

Seriously.

Not only did the entire Bankster population of Europe and The United States know about the pendency of this mess but they actually caused it by assisting Greece in lying its way into the Euro in the first place!  Nor is Greece alone.  The majority of Europe’s governments are attempting to spend more than they take in via taxes just as is the United States!

This sort of nonsense is exactly why we will go straight off the cliff here in the United States and in Europe generally.  We simply refuse, as nations, as people, to tell our Government that lying, cheating and stealing is unacceptable and we will not tolerate or consent to a government that fails to prosecute and imprison those who engage in this sort of “business tactic.”

Yes, I know, it’s somewhat difficult to get your arms around exactly how you got robbed.  But virtually everyone knows it happened by now.  The “OWS” folks understand they got ripped off.  They don’t understand the how, but they sure get the “what” and “who.”

Well guess what – the so-called “Press” is supposed to exist for the purpose of expounding upon who, what, when, where and why.

The people got the  “who”, they got the “what”.  So now we have “when” (the last 30 years), “where” (in DC and on Wall Street) and “why” (greed, avarice, and political promises the politicians knew were impossible to keep.)

This is supposed to be some sort of “revelation”?  You’re kidding, right?  The very banksters who caused the mess should have seen it coming? 

Of course they saw it coming!  They created it for chrissake and it was intentional.  They not only saw it coming they knew it would come and they further expected and anticipated robbing you, the taxpayer, to pay for it.

There is only one question remaining: Are you going to sit for this or start demanding indictments, prosecutions and imprisonment lest the situation degenerate into one where the mathematics destroy sustainability of basic civil infrastructure and order?

What you are about to read should absolutely astound you.  During the last financial crisis, the Federal Reserve secretly conducted the biggest bailout in the history of the world, and the Fed fought in court for several years to keep it a secret.  Do you remember the TARP bailout?  The American people were absolutely outraged that the federal government spent 700 billion dollars bailing out the “too big to fail” banks.  Well, that bailout was pocket change compared to what the Federal Reserve did.  As you will see documented below, the Federal Reserve actually handed more than 16 trillion dollars in nearly interest-free money to the “too big to fail” banks between 2007 and 2010.  So have you heard about this on the nightly news?  Probably not.  Lately Bloomberg has been reporting on some of this, but even they are not giving people the whole picture.  The American people need to be told about this 16 trillion dollar bailout, because it is a perfect example of why the Federal Reserve needs to be shut down.  The Federal Reserve has been actively picking “winners” and “losers” in the financial system, and it turns out that the “friends” of the Fed always get bailed out and always end up among the “winners”.  This is not how a free market system is supposed to work.

According to the limited GAO audit of the Federal Reserve that was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the grand total of all the secret bailouts conducted by the Federal Reserve during the last financial crisis comes to a whopping $16.1 trillion.

That is an astonishing amount of money.

Keep in mind that the GDP of the United States for the entire year of 2010 was only 14.58 trillion dollars.

The total U.S. national debt is only a bit above 15 trillion dollars right now.

So 16 trillion dollars is an almost inconceivable amount of money.

But some other dollar figures have been thrown around lately regarding these secret Federal Reserve bailouts.  Let’s take a look at them and see what they mean.

$1.2 Trillion

A recent Bloomberg article made the following statement….

The $1.2 trillion peak on Dec. 5, 2008 — the combined outstanding balance under the seven programs tallied by Bloomberg — was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

The $1.2 trillion figure represents the peak outstanding balance on these loans, not the total amount of all the loans.  On December 5, 2008 the “too big to fail” banks owed this much money to the Federal Reserve.  Many of them could not pay these short-term loans back right away and had to keep rolling them over time after time.  Each time a short-term loan got rolled over that represented a new loan.

$7.7 Trillion

Bloomberg is reporting that the Federal Reserve had made a total of $7.77 trillion in financial commitments to the big banks by the end of March 2009….

Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.

But as mentioned above, a one-time limited GAO audit of the Federal Reserve that was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act covered an even broader time period and revealed even more bailout loans.

According to the GAO audit, $16.1 trillion in secret loans were made by the Federal Reserve between December 1, 2007 and July 21, 2010.  The following list of firms and the amount of money that they received was taken directly from page 131 of the GAO audit report….

Citigroup – $2.513 trillion
Morgan Stanley – $2.041 trillion
Merrill Lynch – $1.949 trillion
Bank of America – $1.344 trillion
Barclays PLC – $868 billion
Bear Sterns – $853 billion
Goldman Sachs – $814 billion
Royal Bank of Scotland – $541 billion
JP Morgan Chase – $391 billion
Deutsche Bank – $354 billion
UBS – $287 billion
Credit Suisse – $262 billion
Lehman Brothers – $183 billion
Bank of Scotland – $181 billion
BNP Paribas – $175 billion
Wells Fargo – $159 billion
Dexia – $159 billion
Wachovia – $142 billion
Dresdner Bank – $135 billion
Societe Generale – $124 billion
“All Other Borrowers” – $2.639 trillion

This report was made available to all the members of Congress, but most of them have been totally silent about it.  One of the only members of Congress that has said something has been U.S. Senator Bernie Sanders.

The following is an excerpt from a statement about this audit that was taken from the official website of Senator Sanders….

“As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world”

So where is everyone else?

Why aren’t leading Republicans and leading Democrats crying bloody murder over this report?

This scandal should have been front page news for months when it was revealed.

But it wasn’t.

And Guess what?

Not only did the Federal Reserve give 16.1 trillion dollars in nearly interest-free loans to the “too big to fail” banks, the Fed also paid them over 600 million dollars to help run the emergency lending program.  According to the GAO, the Federal Reserve shelled out an astounding $659.4 million in “fees” to the very financial institutions which caused the financial crisis in the first place.

In addition, it turns out that trillions of dollars of this bailout money actually went overseas.  According to the GAO audit, approximately $3.08 trillion went to foreign banks in Europe and in Asia.

So why were our dollars being used to bail out foreign banks while tens of millions of American families were deeply suffering?

That is a very good question.

Also, it is important to remember that many of these bailout loans were made at below market interest rates, and this enabled many of these financial institutions to rake in huge profits.

According to a recent Bloomberg article, the big banks brought in an estimated $13 billion by taking advantage of the Fed’s below-market rates….

While the Fed’s last-resort lending programs generally charge above-market interest rates to deter routine borrowing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time.

The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland’s RBS Citizens NA unit with $10 billion, Fed data show.

So once the financial crisis was over, were adjustments made to the financial system to make sure that this type of thing would never happen again?

Of course not.

Today, the “too big to fail” banks are larger than ever.  The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.

So now they are more “too big to fail” than ever.

But this is what happens when we allow unelected central bank bureaucrats to run our financial system.

Most Americans do not realize this, but the truth is that the Federal Reserve is not part of the government.  In fact, it is about as “federal” as Federal Express is.  The Federal Reserve has admitted that they are a privately owned institution in court many times, and you can see video of a Federal Reserve employee admitting that the Federal Reserve is privately owned right here.

The Federal Reserve is an out of control monster that is throwing around trillions of dollars whenever it wants to.  Nobody should be allowed to do this.  Nobody should be allowed to give bailouts to banks and corporations without the express permission of the U.S. Congress and the president of the United States.

This is a point that I made in my article yesterday.  The Federal Reserve decided this week that it is going to provide “liquidity support” to Europe.  If the American people do not like this move, that is just too bad.  We do not get a say in the matter.

Are you starting to understand why I keep pushing the idea that it is time to shut down the Federal Reserve?

Please share this information about the secret 16 trillion dollar Federal Reserve bailout with your family and your friends.

If we can get enough people to wake up, perhaps there is still time to change the direction that this country is headed.

The Economic Collapse

Perhaps this is what we should all do….

If OWS really wanted to hit the banks where it hurts, they wouldn’t have wasted their time camping out in the cold and holding up signs till their fingers turned blue.

They’ve have taken out every new credit card they could get. Lots of them. Card after card.

The latest news on Occupy Wall Street

They would have done what Wall Street does. They would have borrowed every nickel they could.

And then they would have high-tailed it to the Bahamas.

Mai-tais in the Jacuzzi. The presidential suite. These kids are 26 and unemployed. How good does this sound?

And when the money was gone, they’d have said to the banks, “Too bad, suckers. Sue us!”

Good luck with that.

Immoral and unethical?  Who cares?

As you saw on 60 minutes last night, and as I’ve been documenting for 4-1/2 years, the banksters don’t give a damn about either the law, morals or ethics.

Neither does Congress.

The bleating from “the man” last night in that 60 minutes piece about Sarbox and whether CEO’s “knew” about the misconduct of their firms is an intentional lie.  The entire purpose of Sarbox was to hold CEOs and CFOs accountable for knowing the business integrity of their firms — that is, to remove what had been until then a common excuse that “they didn’t know” by adding a statutory requirement that they learn, understand and know exactly what their firms are doing.

There is no way to put this in any other context: Congress and the White House not only don’t care if the banksters rob you, they are actively condoning and assisting in the theft.

As a result there are only two course of action that are both legal and logically defensible:

• Find a way to screw them to the maximum lawful extent.  Civil judgment?  Become judgment proof and who cares?  Spend their money and don’t pay it back.  Perhaps it’s time for a general strike of a different form — a general debt strike where everyone pulls every dime they have from a bank and simply refuses to pay any debt, erecting the middle finger to the banking system.  Screw ‘em.

• Tell “the banksters” and “the system” to go blow it out their backside.  Refuse to do business with these institutions or anyone who does.  Shun them all.  Oh, you’d like your car fixed? Go see the (Government Motors) dealer.  You want your kid to have a job?  Not here — sorry, being a politician is not a member of a protected class.  You want a haircut?  Go buy some clippers from WalMart and give yourself a mohawk – they’ll still sell to you, but we, the independent barber shop, won’t.

 What other lawful options do we have left folks?  We have on our southern border not only gun running now but money laundering as well.  Oh, you didn’t think that Wachovia was the only one involved in that did you?  Well, you’d be wrong about that too – the DEA, it turns out (you know, the supposed “good guys”) has been smuggling millions of dollars of drug proceeds for the bad guys who, incidentally, are shooting at people in our country as well as in theirs. 

Yeah.

What’s left folks?  We have banksters stealing anything that’s not nailed down, we have two douche-nozzle Senators (including McCain who unfortunately was released from the Hanoi Hilton so he could commit violence against the Constitution here at home) trying to give The President unitary authority to become Stalin and establish his own cadre of “disappearance squads” whenever he wants (can I please request that McCain be the first one this authority is used upon so he can experience a bit more torture, since it appears his last stint was insufficient for him to obtain cognitive clarity on why it’s wrong) and we have Congress claiming to want budget discipline but intending to blow a brand new $200 billion hole in the deficit before the end of the year. 

In other words they’re all liars and thieves and will steal everything — first your money, then your house, and finally should you not like that they’ll take your liberty and even your life as well. 

Sounds a lot like Colonial 1775 to me.

Tea Party?  What Tea Party?  You mean the whiners who sent out this missive this morning (in part)?

We the people wanted serious reform in Washington. We wanted out-of-control spending stopped. We wanted Obamacare repealed. We wanted change.

We only got the status quo from Washington.

With Republicans controlling the House, and with the Democrats’ filibuster-proof majority broken in the Senate, a conservative agenda should have advanced. Certainly Harry Reid would have stopped parts of it, and Obama might have even vetoed some of it. But we could have at least tried to make progress.

Unfortunately, every time there was a fight, the Republicans backed down. When the budget battle was fought, we should have cut $100 billion; instead we got only $352 million.

Yes Steve Southerland, you didn’t block the stupidity.  Yes Cathy McMorris-Rodgers, you did not block the stupidity.  Yes Jeff Miller, you did not block the stupidity.  Yes Michelle Bachmann, you did not stop the stupidity.

Instead you, and all so-called “Tea Partiers” folded your tents and “supported” the “mainstream” Rethuglican party.  You know, the one that McCain belongs to?  The one that apparently hasn’t figured out that torture and Stalinesque games are supposed to be against the Constitution here in the United States?  The one that claims to be for The Rule of Law and yet will not demand enforcement of the law against the banksters from Mozilo to MF Global to everyone else who’s been ripping off the American public for the last 30 years?

4th Amendment?  That’s an inconvenient distraction; let’s pass The Patriot Act and repeal it by stealth!  1st Amendment?  Ditto when what’s being said isn’t what the Rethuglicans Party wants to hear (never mind that nobody ever bothers trying to censor opinions they agree with!)  5th Amendment?  Kelo anyone?  2nd Amendment?  What’s this permit crap — since when do you need permission to exercise a right? 

None of the people in the so-called “Tea Party” or the broader Rethuglicans support any of the above and none of them believe in either actual rights or The Constitution.

Yes, that party of liars and traitorous two-bit bastards.  The one that turned into “Guns (except the ones we don’t want you to have, when and where we don’t want you to have them), Gays (kill them all — the gas chamber will do just fine) and God (believe in ours the way we want you to damnit or we’ll send you to hell, via Gitmo if necessary)”, right?

A party that I once supported, but has now gone so far to the right that it’s indistinguishable from fascism “in the raw” in the worst sort of way, exactly as other parties have throughout history in such storied places like Russia and Germany.

And why?  Oh that’s simple: This is one of the two parties that has serially lied to the people for more than 30 years about what was able to be delivered in government services with the level of taxation it supported, and now that this Ponzi Scheme threatens to collapse upon their heads they’re grasping for any means of retaining power available to them, including the initiation of force and violence against the people when, not if, it does.

Happy Holidays.