The G-20 group members will be swarming into Pittsburgh, Pennsylvania on September 24-25, 2009, to discuss the state of economic failure that originated right here in the great U.S.A. The global crisis was concocted by fraudulent make-believe mortgage-backed securities/derivatives, and credit default swap swindles that permeated the entire globe. Out of Reaganomics, Laissez-faire capitalism purported by Alan Greenspan-- the has-been Federal Reserve chairman, and Supply-Side economics soothsayers rallying the grandiose plan to trickle down wealth to the working class suckers through the great idea of modest-to-stagnant wages and inexpensive credit deals with escalating compounding interest etched into fine print contracts, as well as the masquerading of homes as ATM machines, the rich became richer beyond their wildest dreams.
Little Boy Bush took an infection upon the body of the economy and drove it deep to the bone allowing it to become systemic, while poisoning the very marrow that made this country great. Once Greenspan was sent out to pasture upon the cushion of his Lazy Boy recliner, Ben Bernanke took the helm of the pirate ship called the Federal Reserve Bank, a member bank of the world’s central banks centered within the International Bank of Settlement.
The Federal Reserve Bank was established in 1913 by Congress under a veil of darkness giving it the power to be the sole issuer of our U.S. dollar. The Treasury collects taxes, and revenues and issues Treasury bonds and bills, which are then bought by the Federal Reserve. Now, since the Fed has bought up Treasuries, they are entitled to receive interest due upon their expiration. In other words, the taxpayers pay interest to a bank that is allowed to print and issue the American dollar.
Without going into detail, the Fed takes, for example, a $100 bond, and banks $10 of the $100 and then loans out $90 at zero percent interest to their broker-dealers and investment banks, which then takes that $90, deposits $10 and then, loans out $80. From $100, $170 is created. $70 created out of thin air via the fractional reserve method. So, what have the investment banks been doing with their Federal Reserve bootie? They (Goldman Sachs, BoA, and the rest) have been gambling on Wall Street pushing the DOW into positive territory. This manipulation is being done by the “Insiders of Wall Street” for their own gain. These investment-banking institutions engage in “front running”, which means that because of their computerized trading capabilities, they can jump ahead of a trading stock that is being pushed up getting ahead of others who are also making the buy and get that stock for a “front-of-the-pack” price.
What we are now witnessing is how the Treasury and the Federal Reserve are part of what could be called a syndicate to serve the financial needs of the corporate financial oligarchs instead of working to repair the damage done to the economy by those members of this syndicate. The American people are left out.
The investment banks that have been provided trillions of dollars through the Federal Reserve through various programs have not been committed to investing in the real economy, but only in themselves. Credit remains locked up. Actually, there is plenty of liquidity but many cannot or will not borrow. Many banks are hoarding their available liquidity.
If we go back to February 2009, and revisit Timmy Geithner’s objectives just after he was appointed Secretary of the Treasury, we see that his total intention was to recapitalize the very banks—the syndicate---with over a trillion dollars of the government’s capital. Even back on day one, Geithner was planning to feed the zombie beasts taking them from undernourished zombies full of unexposed and hidden toxic mortgage debt poisoning their balance sheets and viability, to obese zombies with the same unaccounted for toxic debt. His intention was to allow them to borrow Fed funds at zero percent and gamble with it so as to accumulated big profits in order to cushion or pad their balance sheets against the day when they will have to write down their virtually worth-less toxic mortgage debt holdings. It was not about taking care of the economic health of the nation, but to feed the evil beasts.
Yet, Ben Bernanke proclaims that the recession is basically over! Hurray for this Psychotic Reaction!
Geithner said, “We have to both jump start job creation and private investment, and we must get credit flowing again to businesses and families.” This objective has been a failure. Unemployment continues. When counting people that are no longer being counted, August really had 800,000 unemployed Americans. Tent cities in Tennessee, California, Florida, and elsewhere continue to grow. The underemployed numbers are growing, as well. Consumer spending is in decline as Americans save their fragile incomes and work to pay down debt.
Yet the zombie followers of the 9-12 Washington, DC protest last week hate the idea of a public option or a government health plan. Please tell them to give up their Medicare, or Medicaid. How many of the kook-turds are one step away from a lay-off and NO health insurance, or a job change with a jacked up co-pay and a shrunken benefit plan? Oh well. They loved the free ride provided by one of the 41 sponsors funded by the health care insurance industry. They got all-they-could-drink Kook-Aid.
Geithner had his pipedream of creating a public-private partnership to buy illiquid assets from the zombie banks as the way to get them recapitalized and rid of their worth-less mortgage debt burden. FAILURE! This Obama confidante actually believed that from his pipedream plan he could magically create as much as $1T. He then dreamt up a concocted plan that the private part of this partnership would “determine the prices for current troubled and previously illiquid assets.” But it never worked. The holders of this worth-less debt did not want to sell at the assessed price of 23 cents on the dollar. They wanted the FDIC and Treasury and the private sector to suck up 78 or 80 cents on the dollar. There solution was to just hold on to it.
The FDIC (government/taxpayer) was to kick it the lion’s share of the determined price as a way to entice the private sector to take the bait. IT FAILED. Geithner said this: “This program will provide markets working again for the legacy [toxic] loans and assets [the candy coated way of saying debts] that are now burdening the entire financial system.”
In addition, Mr. Wizard Geithner had another scheme and that was called TALF-- (Term Asset-Backed Securities Loan Facility), whereby he would take a lump of $100B from the Treasury’s bake house and roll and stretch it out into a nice slab totaling up to $1T of new, freshly made capital in order to jump start new lending in hopes to sucker in consumers and business to borrow once more during a time of total insecurity and mistrust. OH YEAH!
Every morning Timmie Geithner, Treasurer Extraordinaire, must drink a gallon of the magic Kool-aid to believe what he is mixing up is the true elixir for the nation’s economic health.
Now, our Treasurer Extraordinaire was in London and spoke before the G-20, on September 4-5, 2009, defining his position. The UK Telegraph reported that Mr. Wizard Geithner said “You are seeing the first signs of positive growth now in this country and countries around the world.” TimmieBOY, a jobless recovery, with massive deflation, a declining US dollar, and tightened spending are not positive signs.
What he was coding was that Wall Street was showing positive growth. That is all that matters to Mr. Wizard Geithner. While TimmieG said it was too early to withdraw economic stimulus, meaning that he and Ben Bernanke must continue to funnel huge amounts of newly printed cash into the biggest financial institutions so they can continue to gamble on Wall Street and help the Fed chairman mop up Treasuries being unloaded by foreign central banks, Nicholas Sarkozy, the French president, will continue to push for tighter regulation of the financial services industry, as he did at the last G-20, and has promised to do it again when they all reconvene in Pittsburgh.
This means that he has had enough of Geithner allowing the US financial-banking giants to continue to go unregulated, and without transparency as they hide their debts off their balance sheets and manipulate markets as they have been doing.
What is a big laugh for all of us following the G-20 sham is that the world’s richest nations have pledged more than $1 trillion to help pull the global economy through the recession. That is like pocket change for the entire group of nations. Geithner and Bernanke printed up $1.5 trillion since February to hand over just to the top few investment banks right here at home.
The New York Times wrote on 9-11-09 that little has changed on Wall Street, but Mr. Wizard Geithner in tow with his gallon jug of Kool-aid continues to believe that stimulation of the biggest financial-banking institutions continue to be the order of the day so they can persist with their gambling on Wall Street by manipulating the process of trades. This is Mr. Wizard’s way to pave the road to recovery. Yet, he is not talking real reform of the financial sector. He is not talking about using the Anti-Trust laws to break up the too-big-to-fail financial institutions, or to keep them from growing even bigger so as to never again allow any company to hold the U.S. economy hostage.
Here is what Alex Berenson wrote in the NYT:
“Backstopped by huge federal guarantees, the biggest banks have restructured only around the edges. Employment in the industry has fallen just 8 percent since last September. Only a handful of big hedge funds have closed. Pay is already returning to precrash levels, topped by the 30,000 employees of Goldman Sachs, who are on track to earn an average of $700,000 this year. Nor are major pay cuts likely, according to a report last week from J.P. Morgan Securities. Executives at most big banks have kept their jobs. Financial stocks have soared since their winter lows.”
“For now, banks still sell and trade unregulated derivatives, despite their role in last fall’s chaos.” “In fact, though, regulators and lawmakers have spent most of the last year trying to save the financial industry, rather than transform it.”
“Simon Johnson, a professor at the Sloan School of Management at the Massachusetts Institute of Technology and former chief economist of the International Monetary Fund, said that the seeds of another collapse had already sprouted. If major banks are allowed to keep making bets that are ultimately backed by taxpayer guarantees, they will return to the practices that led them to underwrite trillions of dollars in bad loans, Professor Johnson said.”
“They will run up big risks, they will fail again, they will hit us for a big check,” he predicted.” “But even some senior Wall Street executives acknowledge the lack of change surprises them, given how poorly the industry performed last fall and the degree of government support necessary to keep it from collapsing.”
“There was a general feeling that an enormous amount of additional regulation should be put in place to prevent what happened that weekend from happening again,” said Byron Wien, vice chairman of Blackstone Advisory Services and the former chief investment strategist for Morgan Stanley and Pequot Capital. “So far, we haven’t seen a lot of action.”
Robert J. Shiller, the Yale University economics professor who predicted the dot-com crash and the housing bust, said the window for change may be closing. “People will accept change at a time of crisis, but we haven’t managed to do much, and maybe complacency is coming back,” Professor Shiller said. “We seem to be losing momentum.”
Kenneth C. Griffin, founder and chief executive of the Citadel Investment Group, a Chicago-based hedge fund that manages $13 billion, said that regulators and lawmakers needed to impose rules so failing banks could be shut, rather than allowed to operate indefinitely with taxpayer support.”
“Mr. [Nassim Nicholas] Taleb[, a statistician, trader, and author,] warns that the system has grown riskier since last fall. The extensive government support that began after Lehman collapsed will lead investors to assume that governments will always prevent major banks from collapsing, he said.”
“So investors will lend money to the financial industry on easy terms. In turn, financial institutions will use that cheap money to make risky loans and trades. The banks will keep the profits when their bets pay off, while taxpayers will swallow the losses when the bets go bad and threaten the system.” “But legislation that would allow regulators to close giant institutions in an orderly fashion has been stalled for months.”
“Another proposed change would require banks to list and trade derivatives through a central clearinghouse, just as stocks and options are traded through exchanges, but it has yet to go anywhere.”
“Moreover, some banks oppose opening derivatives trading, because it would cut their profits by making pricing more visible and as a consequence competitive. For now, legislation to force derivatives trading onto exchanges has stalled, and banks are still writing contracts with limited regulatory oversight.”
Everyone in the G-20 knows that the emperor’s wizard wears no clothes, when he believes that he wears the finest of robes. It is clear to many that little has changed, but Geithner is basically saying, “Don’t worry. Be happy. Mr. Wizard is here to fix it.”
So, what will Mr. Wizard Geithner try and sell to the G-20 members? Oh, the U.S. is in recovery!!! Let us all have a shot and a beer, along with French fries packed into our sandwiches! (A Pittsburgh tradition!)
Here is an excerpt from “Will U.S. Consumer Debt Reduction Cripple the Recovery?” gotten from Mike Whitney’s piece, “The Long Adjustment. How Bad Will It Get?”:
“Over the past decade US household spending has served as the main engine of US economic growth. From 2000 to 2007 US annual personal consumption grew by 44%, from $6.9 trillion to $9.9 trillion—faster than either GDP or household income. Consumption accounted for 77% of real US GDP growth during this period…The US has accounted for one-third of the total growth in global private consumption since 1990…” “The amount of US household debt amassed by 2007 was unprecedented whether measured in nominal terms, as a share of GDP (98%) or as a ratio of liabilities to personal disposable income (138%).”
So people, without consumer spending there is no recovery; therefore, to believe the recession is over is delusional.
Will Bada Bing Bernanke, or TimmieG proclaim to the G-20 that the scam they have perpetrated upon Americans and the world is over? Here is Dr. Dean Baker, in “Reverse Bank Robbery” stating that “Even that giant corpse Citigroup is showing signs of life. Its stock is now selling for more than five times the lows it hit earlier this year. Its market capitalization is up nearly $57bn, a bit more than the $45 billion that the government lent them through the Troubled Assets Relief Programme, or TARP.”
So, their profits are a result of the taxpayer’s generosity, and self-sacrifice. Right! It is all about just one of the financial banking crime syndicate programs, and this is called TARP.
Dr. Baker went on to write: “On the other side, banks can buy up US government bonds that are currently paying around 3.5%.” “This means that we lend the banks the money that they lend to us, albeit at a considerably higher interest rate. To take round numbers, lets say that the banks have borrowed $1 trillion from the Fed’s various lending facilities. (The Fed’s total loans are now over $2T.) Suppose they pay an average interest rate of 0.2% on this money. If the banks then buy up government bonds that pay a 3.5% interest rate, they can pocket the difference of 3.3 percentage points. On a trillion dollars of lending, this will give the banks $33bn a year in net interest or profit. This is the extra money that the government is paying the banks to borrow back the money that it lent them through the Fed.” “We…have shrewd traders like [the] Goldman Sachs crew…[that] take the money that they borrowed, either directly from the government or with the government’s guarantee, and use it to speculate in items like oil and other commodities.”
This has been the “shared sacrifice” President Obama has asked us all to endure. We have been asked to allow the financial oligarchs the right to take our money and use it to make themselves filthy rich at the expense of the real economy. We have been asked because these oligarchs own the government and need to see bigger salaries and bonuses. The “shared sacrifice” has been seen in a 33% drop in housing prices since 2007. The deleveraging of the rest of America’s debt continues. They are in the process of reducing their debt as a group by $2.5 trillion and lower their debt-to-equity ratios to a much lower expectation. The $14 trillion in accrued household debt over the last 7 years had doubled and can no longer be sustained. Americans are foreclosing on their homes, asking for revaluations of their mortgages, and abandoning payments accumulated on their credit cards.
I don’t think the recession is over, but just getting started! Will Mr. Wizard Geithner begin talking about Change We Can Believe In? Doubtful.
Mike Whitney excerpted from McKinsey Global Institute’s “Will US Consumer Debt Reduction Cripple the Recovery?”, in his Counterpunch piece titled Chairman Milquetoast’s Solutions-Band-Aids for the Recession, 8-28-09:
“Homeowners withdrew “$2.3 trillion in home equity loans and cash-out refinancings between 2003-2008”. Most of the money was spent on personal consumption. Where will the money come from now that home equity has gone negative?”
How much clearer can it be spelled out even to the one-dimensional toy soldiers brought to D.C., wound up and told to march against a public option health care plan? It is much more about the largest financial multi-national banking institutions, the top 500 largest multi-national corporations, and the top 10% of the wealth holders. A public option may just protect the toy soldiers from bankruptcy. It should be more about protesting the take-over of our economy by the corporate thieves on Wall Street than about a public option to protect working Americans from further economic losses.
Mike Whitney excerpted Don Monkerud, “Wealth Inequality Destroys US Ideals” in the above piece, “In 1955, IRS records indicated the 400 richest people in the country were worth an average $12.6 million adjusted for inflation. In 2006, the 400 richest increased their average to $263 million, representing an epochal shift of wealth upward in the U.S.”
Mr. Whitney, in his piece, wrote: “Over 40% of GNP comes from Fortune 500 companies. According to the World Institute for Development Economics Research, the 500 largest conglomerates in the U.S. “control over two-thirds of the business resources, employ two-thirds of the industrial workers, account for 60 percent of sales, and collect over 70 percent of the profits.” He also wrote “The top 1 percent incomes captured half of the overall economic growth over the period 1993-2007. The top 14,988 households received 6.04% of income, the highest figure for any year since the data became available. The top 1% of households received 23.5% of income, while the top 10% received 49.7% of income (highest on record).”
So TimmieG, will you and the others discuss with the G-20 members, in Pittsburgh, Pennsylvania, the too-big-to-fail corporate oligarchy in this world and how they need to be broken up into not-too-big-to-fail companies for the purpose of a more realistic free market? Doubtful.
To further drive home the fact that what we have is an economic crime syndicate, Dr. Dean Baker wrote in “Bailouts Without Accountability-Bernanke’s Bad Money” that Ben Bernanke was pushing Congress to believe that his main concern was “economic and financial stability” and unless the Fed was to receive $700bn in TARP funds, we would see the opposite in our financial markets and a collapse within the overall economy. “Last September, when he [Bernanke] was telling Congress that the economy would collapse if it did not approve the $700 billion TARP bailout, he warned that the commercial paper market would shut down.” But the truth-be-known that “What Mr. Bernanke apparently forgot to tell Congress back then, [was] that the Fed [had] the authority to directly buy commercial paper from financial and non-financial companies. In other words, the Fed [had] the power to prevent the sort of economic collapse that Bernanke warned would happen if Congress did not quickly approve the TARP. In fact, Bernanke announced that the Fed would create a special lending facility to buy commercial paper the weekend after Congress voted to approve the TARP.”
This was, and continues to be, the Royal Scam, brought to all of us by President Obama, Ben Bernanke, Larry Summers, and Tim Geithner. They all work for the financial crime syndicate, which had Bernanke cry wolf before Congress, in September of 2008, to scare Congress into giving Treasury funds in order to bail out the banks when the Fed had the power to create these special lending facilities independent of Congress and without the TARP funds. But instead, he stole an additional $700 billion to pass out to his bank CEO crime bosses. All the instability has been created by Bernanke and is continuing today.
So, will there be any real significant change that we could believe in when the G-20 comes to Pittsburgh, Pennsylvania? The history has shown nothing will change. The recession will continue and a recovery will only occur in dreams.
thanks for reading, jerry