Archive for April 4th, 2012
The Austrian Central Bank will join Germany’s Bundesbank in rejecting as collateral bank bonds guaranteed by member states receiving aid from the European Union and the International Monetary Fund.
“We will do that as well,” Christian Gutlederer, a spokesman for the Vienna-based institution, said by phone today.“We are talking about minimal amounts. It will have very little impact on overall collateral.”
The Bundesbank was the first of the region’s central banks to make use of a change in European Central Bank collateral rules announced on March 23. The ECB no longer obliges members to accept bank bonds guaranteed by governments “whose credit assessment does not comply with the benchmark for establishing its minimum requirement for high credit standards.”
But we were told that Germany was not suspending acceptance…… I guess that was a lie eh?
Looks like it.
Prime Minister Mariano Rajoy said Spain’s situation is one of “extreme difficulty”and signaled that his budget cuts are less painful than a bailout would be, as demand for the nation’s debt slumped at an auction.
Wait….. Greece was contained we were told.
That’s a lie too?
Of course it is. You knew it was. And it still is.
The biggest lie of all is that The United States can continue to spend its way to prosperity with borrowed money, that The Fed can continue to provide the “free money” that the federal government then consumes with its handouts and economic distortions, and this will continue on forever and Unicorns will crap out pretty colored candies.
The truth is that eventually bankers, including central bankers, get tired of being people’s patsies and getting paid back with devalued money. They then say “no mas” and that’s the end of the game.
The Feral Government in the United States has had more than four years to do something about the outrageous excesses of the “ought nots” and in fact did nothing other than giving the pigs at the trough more and more promises to pay that could not be, and will not be, repaid.
This was done to continue to pretend that pensions were solvent, that retirements were secure, that Medicare and Medicaid could continue to be provided and that the economy would “eventually” expand once again and make all of this outrageous deficit spending “money good.”
The entire thing was a scam from 2008 onward.
I warned McCain’s campaign in early 2008. In the middle of 2008 I similarly warned Obama’s campaign as well. Obama made noises early on like he understood, but then turned around and blew Jamie Dimon and Lloyd Blankfein under their respective desks, refused to enforce the rule of law, refused to act to force the leverage out of the system and in fact sat back and chuckled while Kanjorski essentially extorted FASB to make legal bank accounting fraud.
We don’t even have a third party, such as the Libertarians, that will stand up and in a loud, united voice demand a cessation of the frauds. In fact, their presumptive nominee has said in a debate, on video, that “nobody committed any crimes” and yet we not only have state chapters endorsing him the Florida Chair has done so as well.
Not even the so-called “Party of Principle” will take a stand for what’s right and refuse to endorse candidates and support them unless they stop performing obscene acts on the banksters who are robbing everyone in America whether it be from hinky derivative deals, perjury, bogus MBS transactions stuffed full of lies or God-knows-what-else. Jefferson County Alabama anyone?
Maybe I was wrong to get involved with the Libertarians. Maybe I’m just wasting my time while they play circle-jerk and patty-cake with the very same banksters (and perhaps that is because they’d like some hinky loans too!) Maybe this is nothing other than a time and money sink for me when I could be doing something useful, like (for instance) jacking off. At least I’d get some satisfaction doing that.
The problem is this: You can’t make a bad debt good by claiming it’s good.
You can shift money around so nobody sees exactly who stole what from whom, but the loss is still there and if you keep funding this sort of jackassery then the distortions grow larger by the literal day right up until someone raises a flag and says “uh, that’s bullshit.”
Then it all comes crashing down on your head.
If you remember one of my predictions for this year was that “it” would start in Europe. Not here, Europe. But it will come here. It must, because we refused to do the smart thing and force those who could have taken down their leverage to do so. Yes, it would have bankrupted some of them.
Yes, politically this would have been “inexpedient” in that they couldn’t have made massive campaign contributions any more. Yes, it would have (temporarily) led to more unemployment.
But it would also now be over and we would now be really recovering economically.
Instead, we’re still on the edge of the cliff and one by one our fingers are losing their nails, while my level of disgust reaches new highs by the day.
President Barak Obama gave a speech to newspaper executives about the recently passed Republican budget in the House of Representatives. It proposes to cut spending by more than $5 trillion over the next ten years. Yesterday’s speech was, basically, a declaration of war against the GOP and its vision of the government’s budget. The President said, “This Congressional Republican budget is something different altogether. It is a Trojan horse disguised as deficit reduction plans. It is really an attempt to impose a radical vision on our country. It is thinly veiled social Darwinism. It is antithetical to our entire history as a land of opportunity and upward mobility for everybody who is willing to work for it. A place where prosperity doesn’t trickle down from the top but grows outward from the heart of middle class.” (Click here for the full transcript of President Obama’s speech.)
It didn’t take long for the Republicans to fire back. The AP reports, “House Speaker John Boehner said Obama is resorting to ‘distortions and partisan potshots’ — while standing behind policies that the speaker says ‘have made our country’s debt crisis worse.’ And a Mitt Romney spokeswoman says Obama’s in no position to lecture about ‘responsible federal spending.” (Click here for more from the AP.) Folks, it is officially “game on,” and every American should be scared speechless about this budget showdown. It is unlike any the nation has ever faced.
The country has never been more in debt, and this comes at a time when countries like China are shunning U.S. Treasuries. There are more than 12 million “officially unemployed.” (The unofficial is 22 million.) Home prices are falling despite near record low mortgage rates. The BRICS nations are actively seeking an alternative to the U.S dollar for settlement of trade, which could threaten the dollar’s reserve currency status. We are threatening financial war with any country that trades with Iran, and the nation is facing yet another shooting war in the Middle East. The only question is will it come before or after the election.
Last August, Congress raised the debt ceiling by $2.1trillion in exchange for at least $2.1 trillion in budget cuts over the next 10 years. A so-called “Super Committee” of Democrats and Republicans was supposed to agree on a deficit reduction plan, but they couldn’t agree on a single dime of spending cuts or tax increases. That’s right, the deficit was not cut, but the nation went in the hole by another $2.1 trillion. Currently, the deficit is more than $15.6 trillion, and the debt ceiling stands at nearly $16.4 trillion. (Click here to see the U.S. debt clock.) Some predict the U.S. will hit the debt ceiling or, better put, run out of money by September 2012— two months before the November election. Zerohedge.com charted the trajectory of the nation’s debt a few weeks ago.
Can you see the budget battle shaping up in this election year? Republicans will want deep cuts to social programs and not a lot of tax increases. Democrats will want tax increases and to minimize cuts to social programs. Neither side wants to give an inch, especially in an election year. This is the exact same deadlock that took shape last year. Now, both sides want to play political football with the nation’s finances, and the country is running out of time to get its financial house in order before we suffer the same fate as Greece. This will be a monumental budget battle that may crush the nation as we know it. I think it is a safe bet the next increase to the debt ceiling will be in the neighborhood of $2 trillion.
In the aftermath of the budget battle last year, the credit rating of the U.S. was downgraded. There is no doubt it will be downgraded again. Only this time, will the government, also, be shut down? Will the dollar tumble in value? Will the present administration take the money of federal retirement accounts to keep the country from falling into the black hole of insolvency? Will the 47 million people on food stamps be cut off? Will the stock market crash? Will the government stop paying some or all of its bills? Will this turn into a national security issue? Will enemies of the U.S. attack while the donkeys and elephants play chicken with the lives and fortunes of more than 300 million Americans? Will the coming budget war threaten America’s survival? The answer to these questions may all be YES, and no one should be under the illusion that this nightmare could not become reality. I’ve said it before, and I’ll say it again: The country needs statesmen, but what we have are bagmen who are pandering to the special interests that fund them.
Nearly four years after the financial crisis began, regulators on Tuesday finally agreed to the criteria they will use to decide which parts of the shadow banking system to regulate, but they still haven’t imposed tougher standards on a single insurer, hedge fund, private-equity shop or money-market mutual fund. Failure to do so exposes the U.S. economy to unnecessary dangers.
How about putting a stop to counterfeiting?
Yes, let’s just call this what it is: counterfeiting of our nation’s currency by these institutions. And we haven’t stopped it because if we do then we’re forced to face reality, and that’s a bad thing from the point of view of all the pigs at the trough — including those in DC.
For the first three months the Federal Government added $359.1 billion in new debt to the Federal Balance sheet. This is approximately $1.4 trillion, or 9.4% of the economy.
To put this into proper perspective one must understand that this is 9.4% of alleged “demand” for goods and services that does not actually exist. That is, it is fake demand, as you and I do not earn enough money to pay for those goods and services. By conjuring this new debt out of thin air the government is presenting to the economy a claim of demanded goods and services that doesn’t really exist and never did.
We have been told that the economy “de-levered”. This is a lie.
What reduction of leverage? The Federal Government has simply stepped in to prevent the removal of that excess leverage. And by doing so it has taken over the role of the “shadow banking system” in propping up demand — replacing what was blatant and outrageous counterfeiting of our nation’s currency.
There has been no enforcement because the people in DC — including Bernanke — know damn well that the day that this leverage comes out mathematically a deflationary depression cannot be avoided.
But the idea that we can continue to avoid the need to adjust our economy back down to that which we can actually pay for with real production and real earnings is a fallacy. Eventually one must stop borrowing more and more money to present a false picture of demand. Your only option is to do it voluntarily or be forced into it when the lenders realize they will never get repaid and cut up your credit line.
There are those who think there is some way to avoid the pain that has to be taken in the economy. That we can avoid telling seniors the truth — their “Medicare” was never funded and won’t be, because it can’t be. That students now amassing $100,000 in debt to get a degree in sociology were fools and lived high on the hog beyond their ability to pay — and thus will go bust (as will the schools that led them on.)
That everyone cannot have a pony, to be blunt.
I’m quite surprised that the charade has gone on as long as it has, to be frank. I didn’t think we’d get through 2010; the 2009 scam in allowing the banks to “extend and pretend” would blow long before now. That they got more than a year beyond my wildest expectation without it all coming apart has been a rather rude surprise.
But no small part of that surprise came about because I never believed our elected and appointed officials were so dumb as to try to run this scheme this far out, for this long. They know the disaster that waits around the corner. They know full well, especially Bernanke, that the real monetary inflation over the last few decades looks like this:
The hubris displayed by these jackasses thinking that mathematics — the basics of exponential functions and the ever-larger amount of distortion that must be added just to tread water — can be cheated is astounding. It boggles the mind to believe that any man, or any set of policies, can cheat math; that sort of magical thinking borders on what infested the dark ages in the form of alchemy.
I believe that Bernanke, and the rest of the FOMC, are coming to realize that their grand scheme not only didn’t work but can’t. Oh sure, there is one constant in Washington DC — you will never hear anyone there say “I fucked up.” Three little words that are simply never spoken within the beltway.
The not-so-amusing part of this mess is that not only does Bernanke know how far he’s in the soup but I suspect he knows how far Obama has shoved him down the bowl of the toilet. Obama’s recent tirades against the United States Supreme Court has now led to a formal rebuke and “homework assignment” in one of the Courts of Appeals. His revisionism has departed from reality to the point that the Journal’s outline this morning reads like something of Aesop.
But all of this comes from the same delusion — that the leverage of the last 30 years, and the political promises, could somehow be met and the people who were alleged “beneficiaries” would get their “free cheese.”
That’s a lie, and it’s one that we had better get out in front of and deal with, whether we want to or not. We must tell the truth. Our legislators are no better at this than Obama is, despite the Journal’s protests to the contrary, and Mittens Romoney is one of the chief architects of leverage abuse himself. He will no more balance the budget and withdraw the morphine that we have built our current house of cards on than will Obama.
There is no solution to be found in more fraud. And make no mistake — the claims being made in this regard are nothing more or less than frauds. Our Central Bankers are fraud enablers — they knew damn well that the so-called “MBS” had no mortgages in them, for example, and that these loans were being written to people who had no money, no job, no assets and no ability to pay. They didn’t care because if they blew the whistle on this scam and shut it off the banks and non-bank institutions, such as insurance companies and pensions, would have been instantly rendered insolvent.
But pretending you’re solvent doesn’t make it so, and continuing to do the same thing that rendered you insolvent makes you more insolvent. In this regard Paul Volcker’s brush with the banks is instructive — he knew they were all broke after they made disastrously bad loans without regard to ability to pay but while he provided them forebearance on their marks he also told them that they had to get that crap off the balance sheet and stop lying or he would close them down.
In short, he told them to get the leverage out of the system and do it in a reasonably-contemporary fashion — or else. They complied because the alternative was that they were all out of business and they knew it.
This time around we’ve done nothing of the sort. We’ve not done anything aobut the scams and frauds. The claim of “de-leveraging” is a damned lie; all we’ve done is shifted who’s carrying the leverage, adding ever-more to the Federal Government in a puerile and futile attempt to prevent recognition of the truth.
It won’t work folks. It never has in the past and it won’t this time. All it will do is make things much, much worse. As we have seen massive shifts in the markets and a dramatically “straight up” sort of market mentality has taken over the dangers have gone through the roof. The markets, addicted to the morphine provided by The Fed and Obama, are now at the point of being so addled that the “hot money” bubble risks bringing not just recession but a literal collapse of our government’s funding.
If you believe this is hyperbole you’re simply dead wrong. The deferment of bad debts does not make them disappear, and when the root of the problem is compounding deferment makes the problem much worse, as the distortions compound as well. We are now in a position where a literal 30% or more of our economy exists through nothing more than compounded leverage abuse and should the Federal Government’s deficit spending disappear through choice or externality an immediate contraction in GDP of more than 10% would result.
We still have the ability to choose to do the right thing, but that choice is soon to disappear.
To those who say that the “powers that be” will never allow this to happen, the simple reality is that the choice isn’t theirs to make. If you believe it is then it is incumbent upon you to demonstrate through mathematics how they’re going to achieve what you claim will occur.
Discussion (registration required to post)
If you knew that you could live in luxury for the rest of your life but that by doing so it would absolutely destroy the future for your children, your grandchildren and your great-grandchildren would you do it? Well, that is exactly what we are doing as a nation. Over the past several decades, we have stolen 15 trillion dollars from future generations so that we could enjoy a dramatically inflated level of prosperity. Our 15 trillion dollar party has been a lot of fun, but what we have done to our children and our grandchildren has been beyond criminal. We ran up the greatest mountain of debt in the history of the planet and we are sticking them with the bill. Sadly, both political parties have been responsible for the big spending that has been going on. Both Democrats and Republicans have run up huge budget deficits when in power. But instead of learning the hard lessons of the past, both political parties continue to vote for even more debt. They would rather continue to steal trillions of dollars from future generations than have the party end and have to face the consequences.
And the consequences will be dramatic when the party ends. During fiscal year 2011, the U.S. government spent 3.7 trillion dollars but it only brought in 2.4 trillion dollars. That means that the U.S. government spent about 1.3 trillion dollars that it did not have. It is important to understand that even if the U.S. government spent that 1.3 trillion dollars on really stupid things, that money still got into the pockets of ordinary Americans who then spent it on things like food, gas, housing, etc. In turn, most of those that received money from providing those goods and services would spend it on other things.
So extra government spending can definitely stimulate the economy. The problem is that we have been doing it permanently. Since 1975, we have added more than 15 trillion dollars to the national debt. This has fueled a false prosperity that was way beyond what we could afford.
If the U.S. government tried to go to a balanced budget now, our standard of living would crash and there would be riots in the streets. The American people have been enjoying false prosperity for so long that they have lost any notion of what “normal” actually is.
Think of it this way. If your family makes $40,000 this year and you spend an extra $20,000 on your credit cards, your family would be enjoying a false sense of prosperity.
You could do that year after year as long as the credit card companies keep loaning you more money.
But debt always catches up with you in the end.
It is the same thing with the United States.
We have been running up our national credit card balance and the interest payments have become quite painful.
The U.S. government spent over 454 billion dollars just on interest on the national debt during fiscal 2011.
That is 454 billion dollars that the people of the United States do not receive anything in return for.
So in order to keep up with interest on the national debt and to enjoy a standard of living that is beyond our means we now have to run deficits that are in excess of a trillion dollars every single year.
And a trillion dollars is a staggering amount of money.
If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.
Since Barack Obama was elected, the U.S. government has added about 5 trillion more dollars to the national debt.
That kind of debt is a recipe for national financial suicide.
How are we supposed to explain to our children that we are passing a debt of $15,579,852,946,457.64 down to them?
At this point, the United States government is responsible for more than a third of all the government debt in the entire world.
The 15 trillion dollar party that we have been enjoying has been amazing, but all of that debt is soon going to bring us a tremendous amount of pain.
And there is really no way out under our current financial system. As our population ages, government budget deficits are projected to spiral wildly out of control in future years.
Already, entitlement programs are starting to cause massive problems. For example, mandatory federal spending surpassed total federal revenue for the first time ever in fiscal 2011. That was not supposed to happen until 50 years from now.
If the federal government used GAAP (Generally Accepted Accounting Principles) like all publicly-traded corporations are required to do, the situation would be much worse.
The truth is that the U.S. government never had a “balanced budget” during the end of the Clinton administration. The federal government was borrowing gigantic amounts of money from the Social Security trust fund to finance regular government operations. It was a big fraud. Under GAAP, there would have been huge budget deficits during those years.
And even under the non-GAAP numbers used by the U.S. Treasury Department, the U.S. national debt still increased every single year during the Clinton administration.
So let’s get real.
Our national financial situation has always been much worse than we have been told.
It has been estimated that our current budget deficits would be in the neighborhood of 4 to 5 trillion dollars under GAAP.
And looking down the road a bit, we are facing a tsunami of unfunded liabilities that is absolutely nightmarish.
In other words, we have committed ourselves to tens of trillions of dollars of expenses that we don’t have any money for.
According to Professor Laurence J. Kotlikoff, the U.S. is facing a “fiscal gap” of over 200 trillion dollars in the coming years. The following is a brief excerpt from a recent article that he did for CNN….
The government’s total indebtedness — its fiscal gap — now stands at $211 trillion, by my arithmetic. The fiscal gap is the difference, measured in present value, between all projected future spending obligations — including our huge defense expenditures and massive entitlement programs, as well as making interest and principal payments on the official debt — and all projected future taxes.
And it just keeps getting worse. Recently it was revealed that Obamacare will add 17 trillion dollars more to our long-term unfunded obligations.
Basically what we have done is we have committed future generations to a life of endless debt slavery to pay for our debts and for the financial promises that we have made.
How could we be so stupid?
Of course this entire fraudulent system is going to completely collapse before we get too much farther down the road anyway. Right now the whole thing is essentially being held together by chicken wire and duct tape.
Most Americans do not realize this, but the Federal Reserve bought approximately 61 percent of all government debt issued by the U.S. Treasury Department in 2011.
Normally, the Federal Reserve is not supposed to be doing this.
But right now there are not nearly enough buyers of U.S. government debt at the super low interest rates that the U.S. government wants to pay. A recent Money News article explained that foreigners have been increasingly shying away from U.S. debt….
“In 2009, such foreign purchases of U.S. debt amounted to 6 percent of GDP and has since falled by over eighty percent to a paltry 0.9 percent.”
Instead of interest rates on U.S. Treasuries rising to attract additional investors, the U.S. Federal Reserve has been intervening to make up the difference.
This is essentially “monetizing the debt” and it is something that Ben Bernanke promised that he would never do.
But he is doing it.
If the Federal Reserve was not buying up all this debt, interest rates on U.S. debt would soar and so would U.S. government interest payments.
Yes, this is a giant Ponzi scheme and it cannot last for long.
Of course all of this could have been avoided if our politicians had not been running up such massive amounts of debt all these years.
Some have suggested that our problems could be solved by simply increasing taxes on the wealthy.
Well, the truth is that the top 5 percent of all income earners already pay nearly 50 percent of all federal taxes and soaking them even more will not even come close to solving the federal budget crisis.
For example, if Bill Gates gave every single penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.
And as Bill Whittle has shown, you could take every single penny that every American earns above $250,000 and it would only fund about 38 percent of the federal budget.
So taxing the wealthy will certainly not solve all of our problems.
In fact, when you tax the wealthy and the “somewhat wealthy” it slows economic growth in a number of different ways.
Number one, they have less money to spend into the economy.
Number two, they have less money to invest in business activities.
Number three, it gives wealthy individuals and corporations more of an incentive to move out of the United States. As I have written about previously, the global elite are already hiding about 18 trillion dollars in offshore banks. The U.S. government keeps trying to tap into all of that offshore wealth, but the elite always seem to be a few steps ahead of the game.
Yes, we should try to close loopholes in the tax system, but the truth is that the root cause of our problem is that the federal government is simply spending way, way too much money.
Right now, spending by the federal government accounts for about 24 percent of GDP. Back in 2001, it accounted for just 18 percent.
But our politicians always want to put off spending cuts for another day because they know that immediate spending cuts would really hurt the economy.
For example, just check out this recent quote from White House Chief of Staff Jack Lew….
“The time for austerity is not today,” Lew told NBC News “Meet the Press.” “If we were to put in austerity measures right now, it would take the economy in the wrong way.”
Yes, the Obama administration definitely does not want to hurt the economy with an election coming up in a few months.
So when will it be time to seriously cut government spending?
The day never seems to arrive.
But even though the federal government has been pumping more than a trillion extra dollars into the economy every year, the economy has not shown much improvement. The percentage of working age Americans that have jobs has barely budged for over two years.
Yes, the policies of the Obama administration have stabilized the U.S. economy for the moment, but if he was actually going to tell the truth he would say something like this….
“By mortgaging the future of our children and our grand-children I have stabilized our economic statistics for the short-term. Unfortunately, I am going to have to continue to financially abuse future generations to keep us from falling into another Great Depression. Meanwhile, I am making our long-term financial problems far, far worse. But the most important thing is that I win re-election so that I can continue to be president. Thank you for being so selfish and so willing to destroy the future of your children. Vote for me in 2012 and let the party continue!”
Unfortunately, the party is going to come crashing to an end at some point.
Right now, the global financial system is based on the U.S. dollar and on U.S. government debt.
There will come a time when the rest of the world is going to get sick and tired of watching this Ponzi scheme play out and they are going to completely lose faith in the U.S. dollar and in U.S. government debt. In fact, there are already signs that this is starting to happen.
When faith in our currency and our debt is completely gone, it will be nearly impossible to get back and the game will be over.
The false prosperity that we are experiencing right now is about as good as things are going to get.
Enjoy it while you still can, because when it is gone that will be the end of it.
Both the Democrats and the Republicans have failed us. They played fast and loose with our future and they never planned for the long-term.
Now we are facing a collapse of unprecedented magnitude that most Americans will never even see coming.
A horrifying economic collapse is coming.
You better get ready for it.