A look inside the heart and soul of us all.
–Commentary–by DaveM
All my life I have heard of Christians saying never to use God’s name
in vain. Going into the subject of what God’s name actually is will
be another discussion in itself, so I will not go into that in this
article. What I want to focus on is the main way I see Religious
entities and followers using god’s name to bring profit to themselves
and to give the people more hell on earth then any devil ever could.
And the blind followers continue to do so… I give you proof:
Maybe We Should Blame God for the Subprime Mess
By David Van Biema -Time Magazine, business & tech
Has the so-called Prosperity gospel turned its followers into some of
the most willing participants — and hence, victims — of the current
financial crisis? That’s what a scholar of the fast-growing brand of
Pentecostal Christianity believes. While researching a book on black
televangelism, says Jonathan Walton, a religion professor at the
University of California at Riverside, he realized that Prosperity’s
central promise — that God will “make a way” for poor people to enjoy
the better things in life — had developed an additional, dangerous
expression during the subprime-lending boom. Walton says that this
encouraged congregants who got dicey mortgages to believe “God caused
the bank to ignore my credit score and blessed me with my first
house.” The results, he says, “were disastrous, because they pretty
much turned parishioners into prey for greedy brokers.”
Others think he may be right. Says Anthea Butler, an expert in
Pentecostalism at the University of Rochester in New York: “The
pastor’s not gonna say, ‘Go down to Wachovia and get a loan,’ but I
have heard, ‘Even if you have a poor credit rating, God can still
bless you — if you put some faith out there [that is, make a big
donation to the church], you’ll get that house or that car or that
apartment.’ ” Adds J. Lee Grady, editor of the magazine Charisma: “It
definitely goes on, that a preacher might say, ‘If you give this
offering, God will give you a house.’ And if they did get the house,
people did think that it was an answer to prayer, when in fact it was
really bad banking policy.” If so, the situation offers a look at how
a native-born faith built partially on American economic optimism
entered into a toxic symbiosis with a pathological market.
Although a type of Pentecostalism, Prosperity theology adds a
distinctive layer of supernatural positive thinking. Adherents will
reap rewards if they prove their faith to God by contributing heavily
to their churches, remaining mentally and verbally upbeat and
concentrating on divine promises of worldly bounty supposedly strewn
throughout the Bible. Critics call it a thinly disguised pastor-
enrichment scam. Other experts, like Walton, note that for all its
faults, the theology can empower people who have been taught to see
themselves as financially or even culturally useless to feel they are
“worthy of having more and doing more and being more.” In some cases
the philosophy has matured with its practitioners, encouraging good
financial habits and entrepreneurship.
But Walton suggests that a decade’s worth of ever easier credit acted
like a drug in Prosperity’s bloodstream. “The economic boom ’90s and
financial over extensions of the new millennium contributed to the
success of the Prosperity message,” he wrote recently on his personal
blog as well as on the website Religion Dispatches. And not
positively. “Narratives of how ‘God blessed me with my first house
despite my credit’ were common. Sermons declaring ‘It’s your season to
overflow’ supplanted messages of economic sobriety,” and “little
attention was paid to … the dangers of using one’s home equity as an
ATM to subsidize cars, clothes and vacations.”
With the bubble burst, Walton and Butler assume that Prosperity
congregants have taken a disproportionate hit, and they are curious as
to how their churches will respond. Butler thinks some of the flashier
ministries will shrink along with their congregants’ fortunes. Says
Walton: “You would think that the current economic conditions would
undercut their theology.” But he predicts they will persevere, since
God’s earthly largesse is just as attractive when one is behind the
economic eight ball.
A recent publicly posted testimony by a congregant at the Brownsville
Assembly of God, near Pensacola, Fla., seems to confirm his intuition.
Brownsville is not even a classic Prosperity congregation — it relies
more on the anointing of its pastors than on Scriptural promises of
God. But the believer’s note to his minister illustrates how magical
thinking can prevail even after the mortgage blade has dropped. “Last
Sunday,” it read, “You said if anyone needed a miracle to come up. So
I did. I was receiving foreclosure papers, so I asked you to anoint a
picture of my home and you did and your wife joined with you in prayer
as I cried. I went home feeling something good was going to happen. On
Friday the 5th of September I got a phone call from my mortgage
company and they came up with a new payment for the next 3 months of
only $200. My mortgage is usually $1,020. Praise God for his Mercy &
Grace.”
And pray that the credit market doesn’t tighten any further.
Wall Street tumbles amid global sell-off
By JOE BEL BRUNO, AP Business Writer
Monday, October 6th, 2008
NEW YORK - Wall Street tumbled again Monday, joining a sell-off around the world as fears grew that the financial crisis will cascade through economies globally despite bailout efforts by the U.S. and other governments. The Dow Jones industrials skidded nearly 500 points and fell below 10,000 for the first time in four years, while the credit markets remained under strain.
The markets have come to the sobering realization that the Bush administration’s $700 billion rescue plan won’t work quickly to unfreeze the credit markets, and that many banks are still having difficulty gaining access to cash. That’s caused investors to exit stocks and move money into the relative safety of government debt.
Over the weekend, governments across Europe rushed to prop up failing banks. The German government and financial industry agreed on a $68 billion bailout for commercial-property lender Hypo Real Estate Holding AG, while France’s BNP Paribas agreed to acquire a 75 percent stake in Fortis’s Belgium bank after a government rescue failed.
The governments of Germany, Ireland and Greece also said they would guarantee bank deposits.
The Federal Reserve also took fresh steps to help ease seized-up credit markets. The central bank said Monday it will begin paying interest on commercial banks’ reserves and will expand its loan program to squeezed banks.
Investors took a bleak view of the future, seeing no end to the crisis in the near term.
“This is a psychologically important moment that we passed below the 10,000 level,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research. “But, the issues are worldwide. The fact is people are scared and the only thing they’re doing is selling.”
In midmorning trading, the Dow Jones industrial average fell 443.08, or 4.29 percent, to 9,882.30, dropping below 10,000 for the first time since Oct. 29, 2004. At one point, the Dow was down nearly 600.
Broader indexes also tumbled. The Standard & Poor’s 500 index shed 53.12, or 4.83 percent, to 1,046.11; and the Nasdaq composite index fell 101.07, or 5.19 percent, to 1,846.32. The Russell 2000 index of smaller companies dropped 29.31, or 4.73 percent, to 590.09.
There were only 78 advancing stocks on the New York Stock Exchange, compared to 3,080 decliners. Volume came to 512.4 million shares.
In Asia, the Nikkei 225 closed 4.25 percent lower. Europe’s stock markets also declined, with the FTSE-100 down 6.31 percent, Germany’s DAX down 8.29 percent, and France’s CAC-40 down 8.76 percent.
The anxiety was again obvious in the credit markets. The yield on the three-month Treasury bill slipped to 0.33 percent from 0.50 percent late Friday. Demand for bills remains high because of their safety; investors are willing to take extremely low returns just to have their money in a secure place.
Investors also moved into longer-term Treasury bonds. The yield on the 10-year note fell to 3.45 percent from 3.60 percent late Friday.
Banks’ hesitation to lend to one another and to many businesses and individuals is the result of the bad mortgage debt that the financial rescue is supposed to sweep up. But it’s still unclear how quickly financial institutions will be able to hand that debt to the U.S. government and convince the markets they are healthy again.
There has been some hope that perhaps the Fed, in concert with other central banks, might cut interest rates to help stimulate the economy. With oil prices well off their midsummer highs and indicators pointing to a slower economy, the Fed’s worries about inflation are less than they had been, making it easier to justify a rate cut.
Investors might get some indication about a potential rate cut with several policymakers slated to speak this week. Dallas Fed President Richard Fisher and Chicago Fed President Charles Evans will speak on the U.S. economy on Monday. Federal Reserve Chairman Ben Bernanke is due to speak on Tuesday.
Frederick Dickson, chief market strategist at D.A. Davidson & Co., believes investors are eager for any signs about the well being of the economy.
“Wall Street at this point is shifting its attention from whether Congress was going to act on the emergency stabilization bill to the realization that the economy is slowing significantly faster than most analysts had expected,” he said. “The downturn has shifted from first gear to about third gear in about two weeks.”
Oil prices fell to an eight-month low below $90 a barrel on speculation that the spreading financial crisis will exacerbate a global economic slowdown and further cut demand for crude oil. Light, sweet crude tumbled $3.82 to $90.06 a barrel on the New York Mercantile Exchange.
In corporate news, ailing Hartford Financial Services Group Inc. received a $2.5 billion investment from European insurer Allianz. Hartford’s market value was halved last week on concerns it needed more capital to survive, but shares recovered $2.97, or 11 percent, to $31.29 on Monday.
EBay Inc. fell $1.14, or 6 percent, to $17.81 after announcing it will cut about 1,000 jobs, reducing its work force by 10 percent, to streamline the company. The online auction site expects restructuring charges of about $70 million to $80 million, mostly during the fourth quarter.
Wells Fargo & Co. said late Sunday its takeover agreement with Wachovia Corp. will go forward after a state appeals court blocked a lower court ruling that favored rival bidder Citigroup Inc. Wells Fargo said it will “continue working toward the completion of its firm, binding merger agreement” with Wachovia.
Shares of Wells Fargo rose 67 cents, or 2 percent, to $33.77, while Citi fell $1.71 cents, or 9.3 percent, to $16.68. Wachovia fell 18 cents, or 2.9 percent, to $6.03.
Eli Lilly & Co. said its board approved an acquisition of ImClone Systems Inc. for more than $6 billion. The deal, which also has been approved by ImClone’s board, will create one of the leading oncology franchises in the biopharmaceutical industry. Eli Lilly fell $1.90, or 4.7 percent, to $39.35, while ImClone rose $1.76, or 2.7 percent, to $66.76.
–Commentary– by DaveM
Do you need more proof that the United States Stock Exchange controls the world through its global economy? The United States Congress and Senate have now become speculators themselves in this $700 Billion dollar plan to “bailout” OUR nations Economy. Gambling with OUR Tax dollars, has done nothing but cause a global panic… Shouldn’t we be panicing too?
Suspension of Elections/War With Iran Imminent
Brandon Dean
WizardOfOswald.com
October 4th, 2008
Hank Paulson, extortionist extraordinaire
The Bailout Smokescreen
Sound American economics promoters have been pulling their hair out for years warning Americans of what is happening right now. What the mainstream economic “experts” and bankers call the “business cycle” is nothing more than the grinding of the economy up and down through compounded debt bubbles. These debt bubbles usually deflate into “recessions,” but sometimes burst into “depressions.” The sub-prime mortgage collapse is a perfect example of this.
Now the Congress, with this bailout-which was roundly rejected by the American people-has once again slapped the people in the face by passing it, even referring to it in genuine Orwellian fashion as “the Rescue Plan.”
To imply that a few dozen of the richest individuals in this country (most of whom received multi-million dollar bonuses this last year) need to be given more of OUR money after losing all of theirs through bad business decisions is like saying O.J. Simpson didn’t just go to jail today for kidnapping and armed robbery (because he did).
The most important factor, however, is that this “$700 billion” number is a smokescreen. As of the week before the bailout was first rejected by the House, the Federal Reserve had already lent out over a TRILLION dollars to failing lenders. This is two weeks ago now. The number has shot up since then…
So while we’ve been bitching and moaning about this “bailout” in Congress, the Fed has already surpassed their obscene price tag in spades.
Please understand what is happening right now: the rats are scurrying from the burning and sinking ship of our economy. This is completely pre-planned, as one of the few things standing between total world domination and the New World Order is these united States, and our super-power status. This status served the NWO well for decades, but our usefulness to their nefarious purposes has expired, I’m afraid. Now they are ready for their one world government-itching for it-and we must be turned into a third world nation before all can be set in place.
Those whose “credit” has been falsely propping up our economy are now taking their bonuses and splitting town, under the auspices of bad decisions and bankruptcy.
Will Elections Be Suspended?
John McCain Bushing it up…
A couple weeks ago, when this bailout business first came to light, John McCain (the POW who willingly propagandized for the Viet Cong, and blocked the search for MIA’s and POW’s known to still be in Vietnam) said he would suspend his election campaign until this whole bailout thing got “straightened out.” Well, they’ve straightened it out, alright…
“It’s only there trying to fool the public,
but when it comes down to fooling you,
now honey that’s quite a different subject…”
—Smokey Robinson
Was this a test for the suspension of the upcoming presidential election? I mean, a judge just ordered Barack Hussein Obama to hand over his birth certificate {link is now dead} in order to prove he was born in the united States. McCain’s about to keel over, and Bush seems to be relaxed and quasi-fluent for the first time in his presidency (sort of…).
War with Iran?
The Iranian Army is ready to defend its homeland, in contrast to the untrained and under-supplied Iraqis
After the events of the past few months, including the Georgian/North Ossetian/Russian War, and now the Wall Street Bailout-both of which received piles of media attention-I have to take a step back and try to peer through the smoke of battle. Is there anything being hidden behind that smoke, or is the bailout the real news?
War is on the move. The U.S. sent a supposed “aid ship” in the form of a Navy combat vessel to the Georgian coast, in an obvious provocation to the Russians. The Russians replied by threatening back.
The U.S. and Israel both were involved behind the scenes of the Georgian War. Iran is not intimidated by the U.S. at all. Is anyone else seeing the buildup here? Georgia is a perfect position to occupy prior to an invasion of Iran, and we have been aiding, advising and arming the Georgians since 2003.
I suppose only time will tell… We’ve been waiting for the imminent invasion of Iran for about two years now, and either the war hawks are intimidated by the response of the American people, or their plans have gone awry. I can think of no other explanation–they couldn’t possibly care about the fact that we have no money and our military is dangerously and hopelessly over-extended globally. Watch for a false flag attack in the near future. I think they’re too afraid at this point to take out a whole city with a nuke, but this financial terrorism can only be interpreted as an introductory phase for worse terrorism to come, and may be correctly interpreted as a false flag attack itself.
copyright Brandon Dean, 2008
(Reuters) - California may need an emergency loan of up to $7 billion
from the federal government within weeks, the Los Angeles Times on
Friday quoted Gov. Arnold Schwarzenegger as saying in a letter to U.S.
Treasury Secretary Henry Paulson.
In the letter dated October 2, Schwarzenegger called for the passage
of the $700 billion financial industry bailout plan which the U.S.
House of Representatives is expected to vote on Friday, the Times
said.
“Absent a clear resolution to this financial crisis, California and
other states may be unable to obtain the necessary level of financing
to maintain government operations and may be forced to turn to the
federal treasury for short-term financing,” Schwarzenegger wrote in
the letter, according to the paper.
A top Schwarzenegger aide followed up the letter with a call to the
Treasury secretary on Thursday night, the paper said.
The California governor’s office and the U.S. Treasury department
could not immediately be reached for comment.
Credit markets worldwide have frozen up in the two weeks since the
failure of U.S. investment bank Lehman Brothers, prompting concerns
that issuers will run into trouble rolling over previous loans.
In the letter, Schwarzenegger noted California’s plans to issue $7
billion in revenue anticipation notes in the coming days to fund short-
tern cash needs — now put in doubt by the crisis in the credit
markets.
On Wednesday, California Treasurer Bill Lockyer said the most populous
U.S. state’s cash reserves may be exhausted near the end of October,
and various state-funded services are at risk of grinding to a halt.
He said the planned notes sale was at risk from the uncertainty
gripping financial markets and the U.S. government’s lack of response
to it.
Lockyer, who manages the bonds of the biggest issuer of public debt in
the United States, said the credit market was simply frozen because
financial institutions were afraid to commit capital amid enormous
uncertainty.
“The economic fallout from this national credit crisis continues to
drain state tax coffers, making it even more difficult to weather the
continuation of frozen credit markets for any length of time. I will
continue to do all I can to encourage the passage of the emergency
rescue plan,” Schwarzenegger wrote.
(Reporting by Ajay Kamalakaran in Bangalore; editing by Patrick Graham
and Mohammad Zargham)
—Commentary— by DaveM
So let me get this straight… not only did it take California’s governor a life time
to get the budget situation underhand, effecting thousands of
California employees and programs… NOW he wants a loan from the
federal government, MORE of our tax dollars going to “bailout” the
system. What is THIS money going for? Not only have government officials spent $7 billion
dollars on a very unpopular bailout for Wall Street, but now around 15 States will be asking for
money… when will it end? I find it kind of fishy that the governor would ask for these funds only AFTER not being able to pull together the budget crisis in his own state. Could this be a way of fixing his own mistakes by using the Federal Government and your hard earned dollars? Time will tell.
Jim Willie
The Market Oracle
October 2, 2008
Pardon the brief and jumpy style, laced with more emotion than usual. The events of the last few days have been remarkable, alarming, chaotic, and surreal. Gonna attend the Toronto gold show hosted by the Cambridge House this weekend. If you are there, grab my arm and say hello. Let me know your perspective on the brewing crisis.
The banking system breakdown is very far along, but still early. Remember USFed Chairman Bernanke stated over a year ago that the mortgage problem was contained. Try not to laugh. The bond crisis is absolute, broad, deep, and all-inclusive, enough to kill the USTreasurys after it kills the US banking system. The heart attack signals are with the LIBOR spreads over USTreasurys, the money market, the TED spread (Treasury versus EuroDollar), and short-term USTreasurys. Charts resemble heart attacks and EKG electro-cardiogram monitors. Many details appear in the October Hat Trick Letter report just posted. The bank runs have begun in earnest. Nevermind the big banks for a moment. The smaller ones are entering seizures. The small and medium sized cities are also entering seizures. Here are two stories, one about a city and another about the bank holiday coming.
This from a friend in Seattle: “I was talking to my neighbor last night. He is in finance in the county government, King County (Seattle). He said there are some very secretive budget talks being held, very hush, hush. Apparently, the county has lost around $200 million of taxpayer money in toxic paper investments , with huge implications on the budget. He says he is not privy to the details, but he is taking a 10-day vacation starting today, because he has nothing to do since everything is in flux.”
This from a friend in Atlanta with strong banking connections: “ Reliable word that Bank of America branch managers just received a letter or memo from the USFed instructing them to perhaps be ready for a one-week universal shut-down of the banking system , including access to checking accounts, savings accounts and credit cards. Reliable word has it that BofA bank branches received a shipment of signs last week, reading “WE’RE SORRY, BUT DUE TO CIRCUMSTANCES BEYOND OUR CONTROL, WE CANNOT BE OPEN AT THIS TIME.”
So the banks are in need of a respite, a break, a holiday. They need to shore up their positions. Economists and bankers avoid revealing the consequences of extended absence of short-term credit supply. Imagine all the supply chain DELIVERY routes being interrupted for lack of short-term credit, certain to interrupt the supply of food, gasoline, building materials, basic household wares, simple hardware, and more. The short-term credit would certainly also disrupt payroll streams for companies, inventory supply for retail chains, durable goods purchases by consumers (like washing machines & refrigerators), the maintenance of basic machinery (like cars, trucks, computer, communications), even cash dispensed at ATMachines.
The Senate passed the Wall Street bailout bill, by a 3:1 majority. Some sweeteners like tax cuts and raising the limit to $250k on individual accounts for bank depositors helped. Some people might think that finally the banking system can at last receive some meaningful fixes. Call me a killjoy, but this will accomplish next to nothing as a banking system remedy. It is more a paper seal to Wall Street corruption than to ANY solution. If passed by the House, as is likely, it puts an epitaph on the American badge of legitimacy. A decade of fraud has been underwritten, sanctioned, and sealed. Even foreigners might smile at the new & improved bill. Their impaired bonds can participate in the redemption process. The only trouble is they might have to accept hot shiny USTreasury Bonds in return, of certain questionable value.
Still the bill must be viewed as a giant paper net to catch a giant locomotive train, one that derailed and then went over the mountainside cliff 500 meters above and is hurtling downward with acceleration. Gravity is a *****, and so is momentum! One should not doubt for a second that it will do much to halt the downward trajectory. One should remember that debt solutions accomplish nothing in providing remedy for debt abuse and damage inflicted by broken debt contraptions. Nothing is fixed, only accounts have been shifted and names have been changed. THE BANKING SYSTEM PROCEEDS ALONG ITS OWN CLEARLY DEFINED PATHOGENESIS, with great momentum and power, which no human devices can interrupt. The next shock will be why the bill has not fixed the banking system as Mini-Fuhrer Paulson claimed it would. The other next shock is why Wall Street will need another $700 billion within a year. The other other next shock is how much the AIG and Fannie Mae “INVESTMENTS” a la nationalization will each cost the USGovt conglomerate an unexpected extra $trillion. The bailout yesterday enables Wall Street executives to retire more comfortably, even as some seek asylum or face exile.
The irony of the lifted depositor insurance is that big financial conglomerates can now raid the private accounts worth over $100k now, with government coverage in the bankruptcy courts. The October Hat Trick Letter contains some multi-sided evidence of USFed open license to use subsidiary accounts toward the aid of liquidity strains. What constantly leaves me shaking my head is how intelligent people continue to attribute fair spirited motives to the system, when it resembles a crime syndicate more each year. The reason why it resembles one is that it IS a crime syndicate operating under the USGovt roof. There are three crime syndicates operating under the USGovt roof, the others identified in the report this month. Each has had a profound financial effect on the nation, as in killing its host .
One can make a fine balanced and credible argument that the Fannie Mae bailout package represented an aggregate parallel of the simple Trenton New Jersey home loan fraud. The parallels are argued, with conclusion being the USGovt bailout was tantamount to abandonment by the mafia gangsters, who walked away from the $250k loan on the $50 crack house dilapidated property. Parallels are disturbing, as Wall Street and USGovt players fill out the example carried to the aggregate. The other Fannie Mae fraud is the simple bond certificate counterfeit, just plain paper printing without bother of Wall Street involvement. That fraud helped to run up the total Fannie Mae fraud past the $1 trillion mark. Given the sleazy guys who ran Fannie Mae, and all the protection run for it by politicians averse to reform, the fraud was quite easy. Who would want to question a shiny Fannie bond, a device which powered the great housing boom?
A new role seems to have come to the Federal Deposit Insurance Corp. They are the newest brokers on Wall Street, the new investment bankers, raiders true to the name. They do not protect depositors any more than Christopher Cox at the SEC protects stock investors. The FDIC has minimal funds, most likely co-mingled with the USTreasury anyway, just like the Social Security Trust Fund. The measly $45 billion lying around in the FDIC fund would not cover more than one or two decent sized banks, or one Washington Mutual or one Wachovia. So what does Sheila Bair do in response? She defends Wall Street, avoids liquidation by dead banks, and steers them to the JPMorgan chop shop and slaughterhouse. A great arbitrage results, as JPMorgan obtains bond assets for nothing, and can sell them to a stupid captive customer, us taxpayers.
In doing so, several things happen:
• JPMorgan obtains the entire corporate asset kit & kaboodle for next to nothing
• deposits are used to help the JPM asset ratios
• bond assets can be sold to the USGovt bailout fund
• senior bond holders for the dead banks are screwed, receiving a pittance
• dangerous credit derivatives are placed in the JPM Garbage Can
• the Wall Street Consolidation Plan continues.
The Big 3 Banks are JPMorgan, Citigroup, and Bank of America. Just how on earth can Citigroup even consider acquiring Wachovia? Buy it with what? Citigroup is insolvent. That does not stop the Wall Street firms from spreading their cancer. Besides, King Cox has a plan, to remove ‘Mark to Market’ asset accounting rules. Poof! The US banks are solvent again. Only trouble is they become Walking Zombies. Couple this desperate policy change with short stock restrictions, and the Third World Finances label fits even better, from lack of credibility. The new Wall Street I-Bank is on the scene. The modern FDIC might make Michael Milken proud, the junk bond king from Drexel Burnham. By the way, he only served two of his ten years in prison. Wall Street does have its privilege. The Wall Street investment bank model is dead & buried, with the door slamming shut by Goldman Sachs changing its coat to read bank holding company. 
The group likely to initiate lawsuits is the senior bond holders to the broken banks. They should have entered an orderly procedure led by the FDIC. They face ruin when they should salvage something. The FDIC sets up banks to be raped. The label of pimp is too generous and connotes too much respect. To think that Sheila Bair at the FDIC is being praised for her leadership lately is enough to make a bond holder vomit. These mergers are nothing but disguised ‘Chop Shop’ rapes. At least the FDIC receives fees. JPMorgan donated $1.9 billion to the FDIC cause. By the time the dust clears after the locomotive crashes, three giant hollow monoliths were be standing, a tribute to Manhattan, in the Big 3 Banks. Their glass and aluminum fittings might be in much better shape than the World Trade Center though. It is doubtful that they possess any gold bullion in basement vaults. Let’s hope the third of these buildings does not suffer a structural sympathy, only to collapse.
Clearly they are AIG with its raft of Credit Default Swaps, and Fannie Mae with its raft of mortgages and their bonds. Fannie also has a scad of Interest Rate Swaps. As explained in past Hat Trick Letter reports, the quarterly bills payable to JMPorgan and Goldman Sachs might be considerable on these swaps. The USGovt swallowed two really big ugly hairy hungry tapeworms, that will possibly each cost an extra $1 trillion in unplanned expenses. Actually, my guess is the figure might be conservative. A year ago, when clowns like Bernanke and harlots on Wall Street were estimating the entire mortgage fiasco would result in $100 to $200 billion losses, my figure was $1.5 to $2.0 trillion. As the time bombs go off, they will do so in dribs & drabs, actually giant dribs & giant drabs. The costs will take esteemed senators in the august body of the USCongress off guard.
An interesting thought came to me tonight as the Senate Bailout Bill was written. Actually, more sinister than interesting. The Fannie bill, the AIG bill, and the Wall Street omnibus bill might have been greased by private bribes. Imagine the hefty $138 billion paid to JPMorgan by the USFed, ostensibly from counterfeit Dept of Treasury hotmoney, during the Lehman Brothers failure and confusion, approved by Bankruptcy Court judge James Peck in Manhattan, all executed in pre-dawn during the weekend. Sorry, wanted to paint the background accurately but succinctly. If the 74 senators were each given $2 million in a basic traditional bribe, located safely in a Cayman Island account, then the total cost to JPMorgan would only be $148 million, in the neighborhood of 1 part in 1000 on that disgusting under-the-table handout of $138 billion. It makes good business sense in a day and age when rules mean nothing, when preserving the system is paramount, especially when BS bylines can be spouted about helping the common man.
Those talking perpetual campaign managers known as USCongressional members, they like to talk about “the fact of the matter” a lot, as thought they have some innate ability to recognize facts. Here are some facts. A broad and deep run is occurring on US banks, small, medium, large. Banks rely upon deposits and bank equity (stocks and bonds) to supply themselves with capital. The bank runs strip banks from their ability to continue operations, at a time when their stocks have cratered. Stock price declines of over 70% and 80% are common, the norm, not the exception. Insolvency plus illiquidity means bankruptcy, without benefit of time extensions. As Meredith Whitney (the intrepid bank analyst from Oppenheimer) said in a recent interview, “There are a ton of regional banks that also face a similar predicament.” She correctly forecasted much bank distress, and expects a flood of FDIC activity to deal with failing banks.
Europeans have also lost respect for the US financial leadership, public statements having been made by the German Finance Minister Peer Steinbrueck to the effect that the United States has lost its geopolitical leadership mantle. A powerful reversal in investment flow endangers the US bond markets. Private flow of money resulted in the movement of $92.9 billion out of the US in July, after $46.8 billion entered the nation in June. A profound new trend is in place, whereby the three major continents of North America, Europe, and Asia are bringing home money. With a US budget deficit easily eclipsing the $1 trillion mark this coming year, demands for USTreasury sales will be left wanting, as USTBonds will be left on the table. The money printing machines will be the main recourse, as US$ monetary inflation will enter at least one and maybe two new gears in higher usage.
THE RISK LIES WITH HIGHER USTBOND YIELDS OFFERED, OR LOWER USDOLLAR EXCHANGE RATES FORCED. Either way, foreign US$-based bondholders face big losses. The nationalization demands will quickly force the issue of USTreasury Bond default. Bear in mind that now 52.7% of USTreasury debt is held by foreigners, and that proportion is fast rising. At yearend 2007, a hefty $9.4 trillion in US$-based securities were in foreign hands, as in liquid assets, easily divested. Risk to foreigner reserve accounts grows. They recognize their risk of becoming bagholders of greatly damaged debt paper. Amidst this pressure and isolation, the US Federal Reserve might simply resign its contractor position with the USCongress. After all, their balance sheet is decimated. It is not unlimited. It does have creditors.
The gold price will respond, as the USDollar faces a trashing. On the other side of this storm, characterized paradoxically as a USDollar rally at a time of truly devastated fundamentals, the USDollar will get trashed. To this end, a shocking admission came from New York City mayor Michael Bloomberg. He is a bit of a maverick, speaking his mind. He actually stated, “The next cause for concern in the battered US economy is whether there will be buyers abroad for the nation’s billions in debt.”
USDOLLAR AT RISK, USFED RATE CUTS SOON
The USDollar is at extreme high risk. Since its bounce in July, behavior is erratic, volatile, and fully dependent upon central banks and market rule changes. The US$ money supply had been steadily growing at a 15% growth rate, give or take. Expect it to surpass 20% soon, and the US$ to reflect the debased currency from a flood of supply. The United States will be the first nation to cut interest rates, from desperation financially and economically. Other nations will eventually follow, but not right away. The effect few talk about regarding the mammoth nationalization and bailouts underway is the powerful jump in price inflation, along with currency debasement. Both are inevitable, sure to lift the gold price in powerful steps. The isolation of the US in geopolitical circles, the utter shock at failed leadership witnessed the world over, the widely perceived national bankruptcy will translate into shunned USTreasury auctions and outright divestment of US$-based assets. The only buyers will be central banks. The USDollar is at very very very high risk of serious declines, exactly like the US stock markets.
A trump factor has entered the room. THE USDOLLAR & GOLD WILL SOON RESPOND TO THE FAILURE OF THE US FINANCIAL SYSTEM, WHICH COULD QUICKLY RESULT IN NATIONAL EMERGENCY, BANK HOLIDAY CLOSURES, AND TOTAL FRUSTRATION BY BANK LEADERS, AS NOTHING SUCCEEDS. The Wall Street bailout bill fixes nothing in bank system structure and integrity and function, as problems remain intact tragically. The United States controls the world reserve currency in the USDollar. In Hat Trick This late summer, my analysis stated that gold must make a difficult transition from an anti-US$ trade to a hedge against monetary inflation, a hedge against realized price inflation, and a hedge against geopolitical risk, even a national US banking collapse. Some movement has been made on the transition from the tunnel vision anti-US$ trade. One should keep focus on how the US official lending rate at 2.0% is more than 3% below the current suppressed Consumer Price Inflation rate. So money is actually free for those who can access that rate.
The USDollar increasingly is being defended by market interference mechanisms of the worst and most egregiously shameful order, such as
a) restrictions to short financial stocks, even though they are insolvent and more illiquid by the week,
b) calls to eliminate ‘Mark to Market’ accounting of bank assets , and
c) the trusty Plunge Protection Team devices used to prop up stocks, bonds, and the US$ itself.
The major currencies are all at risk actually. One contact with international connections recently wrote me, “The US$ will drop to 2.00 against the EUR not before long. And then the EUR will crash shortly thereafter.” Many fine analysts expect the USDollar to suffer a severe markdown as the recent US nationalizations and bailouts are fully digested. Their forecasts would coincide with the notion that the USTreasury Bond suffers a severe market interruption like a suspension or possible default, but then later the euro is victimized by new global gold-backed currencies. This is a very possible scenario.
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