Posts Tagged ‘derivatives’

Barack Obama And His Fascist Crony Capitalist Connections To MF Global, Goldman Sachs, JP Morgan Chase, Citigroup – And A Coming $600 Trillion Collapse

January 5, 2012

The American people are routinely lied to by the Democrat machine and the mainstream media that serve as their propagandists. 

The message that we are fed is that the Republican Party is the party of big money and Wall Street.

It’s a lie.  It is literally a lie straight out of hell.

A look at a few incredibly pathetic and incredibly nasty recent events serve to document that it is a lie, and if you want to look at crony capitalist fascism, you need to look at Barack Hussein Obama.

First of all, we’ve heard about the catastrophe that has been caused by MF Global – a Wall Street big boy led by a former Democrat Governor with deep ties to Obama:

Is Jon Corzine having a Bernie Madoff moment?
 
Corzine told the many congressional panels he was hauled in front of this week that it was not his intention to violate any rules in regard to commingling customer’s funds, and yet six weeks after the Halloween bankruptcy filing, it’s scary to think that $1.2 billion in customer funds still have not been found.
 
Some three years ago this week, a Securities and Exchange Commission lawyer said this: “Our task is to find the records and follow the money,” while beginning a probe into Bernie Madoff’s $65 billion Ponzi scheme. “We do not dispute his number — we just have not calculated how he made it,” the lawyer said.

By definition in the Madoff Ponzi scheme, he used one client’s money to pay off another client. Madoff commingled or pooled assets to pay redemptions. He admitted to fraud, along with 10 other federal felonies.
 
While neither Corzine nor any other MF Global executive has been charged with any criminal wrongdoing at this point, Terry Duffy, head of CME Group, said during his congressional testimony: “The fact is that MF Global broke rules by moving customer-segregated funds out of an account over which it had control.”
 
Another parallel between MF Global and Madoff is that both firms — while dealing with very different products — self-cleared their trades.
 
That commonality is important because the books, records, settlement and capital flows are essentially being prepared by, and for the same beneficial interests as, the broker dealers, and are fraught with potential for corner-cutting and potentially nefarious actions.
 
Third-party clearing is just that. Another large clearing broker dealer oversees the books, records and flow of customer funds. If MF were cleared by a third party — say, JPMorgan or Goldman Sachs — it is highly unlikely that MF would be in the news today.
 
Both Madoff and Corzine used their positions to cozy up with the regulators in charge of oversight of their companies.

Here’s what Barack Obama and Joe Biden said about their utterly vile crony capitalist budy Jon Corzine:

• “You’ve had an honorable man, a decent man, an honest man, at the helm of this state. … He’s fought for what matters to ordinary folks.”

• “People…say, ‘You know, I was saving up all my life. …. Suddenly, because of this financial crisis, I may have to go back to work.’ “

• “Jon knows these are challenging times. This is why he got into public service. He didn’t do it for the paycheck.”

• “This crisis…came about because of the same theories, the same lax regulation, the same trickle-down economics that the other guy’s party has been peddling for years.”

• “Jon’s got the mop and he’s cleaning up after somebody else’s mess.”

• “One of the things you’ve got in Jon Corzine is somebody who tells it to you straight,” Mr Obama said.

• “Jon’s a leader who’s been called to govern in some extraordinary times,” Obama said while campaigning for Corzine in 2009. “Jon Corzine wasn’t just the first governor to pass an economic recovery plan for his state. He was an ally with the Obama administration in helping us develop a national recovery plan.”

• “I literally picked up the phone and called Jon Corzine and said Jon, what do you think we should do,” Biden said. “The reason we called Jon is that we knew that he knew about the economy, about world markets, how we had to respond, unlike almost anyone we knew. It was because he had been in the pit — because he had been in the furnace. And we trusted his judgment.”

• “Way back in the transition period, before we were sworn in, when Barack Obama and I were literally sitting at a desk in a high rise in Chicago, beginning the plan on how we would try to get this economy out of a ditch, literally, the first guy I called was Jon Corzine. It’s not a joke. It’s not a joke. First of all, he’s the smartest guy I know in terms of the economy and on finance, and I really mean that.”

Then there was this latest news that MF Global sold a whole bunch of assets to Goldman Sachs – a scumbag crony capitalist Wall Street big boy if there ever was one.  As you read this, I want you to consider the names of the people and institutions.  I will explain what an utterly godawful collection of demonic players we have in my paragraphs to follow:

MF Global Sold Assets to Goldman Before Collapse
Published: Wednesday, 4 Jan 2012 | 2:57 AM ET

MF Global unloaded hundreds of millions of dollars’ worth of securities to Goldman Sachs in the days leading up to its collapse, according to two former MF Global employees with direct knowledge of the transactions.

But it did not immediately receive payment from its clearing firm and lender, JPMorgan Chase & Co, one of the sources said.

The sale of securities to Goldman occurred on Oct.27, just days before MF Global filed for bankruptcy on Oct.31, the ex-employees said.

One of the employees said the transactions were cleared with JPMorgan Chase.

At the same time MF Global, which was run by former Goldman Sachs head Jon Corzine, was selling securities to Goldman to raise badly needed cash, the futures firm was also drawing down a $1.2 billion revolving line of credit it had with JPMorgan, according to one of the former MF Global employees.

JPMorgan spokeswoman Mary Sedarat said the bank did not withold money because of the line of credit. She declined further comment on details of the transactions.

JPMorgan has fought aggressively in bankruptcy court to protect its interests, and received a lien on some of MF Global’s assets in exchange for granting the firm $8 million to fund its bankruptcy costs.

The lien puts JPMorgan’s interests ahead of MF Global customers who have not yet received an estimated $900 million worth of money from their accounts, which remain frozen as regulators search for missing funds.

The hastily crafted transactions and the seeming inability of MF Global to recoup some of the money in the sale to Goldman may start to explain why so much money remains unaccounted for at the futures firm.

It is unclear what type of assets Goldman bought from MF Global, but the securities were worth hundreds of millions of dollars, the former employees said.

The sources spoke on the condition of anonymity.

The Wall Street Journal previously reported that George Soros’ fund was a buyer of securities sold by MF Global, scooping-up some of its European sovereign debt at a deep discount.

Panic among investors and clients about MF Global’s $6.3 billion bet on European sovereign bonds led to its demise.

Corzine, who was CEO of MF Global at the time of the collapse, headed Goldman Sachs from 1994 to 1999 before being ousted after a power struggle with co-CEO Henry Paulson.

Corzine and other top MF Global executives reached out in desperation to Goldman Sachs and JPMorgan, as well as Jefferies Group, Barclays, Citigroup, Deutsche Bank, Macquarie Group, State Street Corp and Wells Fargo, as potential buyers in its final days as the firm teetered toward collapse, Reuters earlier reported.

So let’s take a look at Obama’s connection to Goldman Sachs:

That’s right.  Goldman Sachs was Obama’s number two donor, to the tune of well over a million dollars.

I wrote something that hasn’t yet been published online about derivatives and how they have created the guaranteed implosion and collapse of the American and in fact global economic system:

What are derivatives? Some investors describe them as “dormant economic weapons of mass destruction”. They essentially are large leveraged bets on top of stocks, bonds and commodities. Money can be made within months or seconds by betting if a stock will go up, down or even remain the same. With no credit rating you can place a bet worth double your account balance. Big time investors get greater leverage with these instantaneous loans.

The New York Times, Oct 8th 2008 [the New York Times, as is so common with the left, purged this link, but the quote is also cited here]:

The derivatives market is $531 trillion, up from $106 trillion in 2002. This market is setup with odds similar to a racetrack. Trillions are won and lost (transferred) every second. But unlike a racetrack the big players have ultimate control. Their trillions can make stocks move. A 4% up swing in a stock can cause a derivative bet to rise more than 100% in value or vice versa. A low performing stock that rises only 6% a year could actually have many 3, 6 or 9 percent swings weekly or monthly (some stocks daily). There are billions to be made over and over again by the people that control billions and trillions thus the markets. A grand game approved by the top.”

There are over $600 trillion in derivatives floating around, most of it held by four banks whose failure would cause global economic catastrophe (JPMorgan Chase, Citigroup, Bank of America and Goldman Sachs).  The entire world’s GDP is $65 trillion; so there is literally not enough money on the entire planet to backstop the banks that are trading these things if they run into trouble.  And there is very good reason to believe that they’re running into trouble.  What kind of economic collapse would be triggered???

There was never ANYTHING like these “economic weapons of mass destruction” before.  How many of you have followed Jon Corzine and MF Global and the $1.7 billion (it just keeps going up – from $633 million to $1.2 billion to the latest $1.7 billion) in investor money that has simply vanished in the aftermath of bad bets on the European debt crisis???

Does that sound scary?  How about if I just talk about a mere $211 trillion in debt just for the USA instead?

Boston University economist Laurence Kotlikoff says “If you add up all the promises that have been made for spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That’s the fiscal gap,” he says. “That’s our true indebtedness.”

Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged. “The U.S. fiscal gap is huge,” the IMF asserted in a June report.

The above article describing our actual debt as $211 trillion written in August of 2011, and it’s ancient history now: our official debt isn’t $14 trillion anymore; now it’s over $15 trillionand about to soar to more than $16.394 trillion – just one half of one year later (see also here for more on that)!!!

The UK Telegraph has an article titled, “How the Fed triggered the Arab Spring uprisings in two easy graphs.”  It’s all starting to go completely out of control.  A collapse is coming that will make the Great Depression look like a child’s birthday party.  The present world system simply cannot continue much longer without a complete breakdown.  You can hear the approaching hoofbeats…

Here’s that graph which directly links the euphemistically titled “Arab Spring” (Spring is supposed to be a good thing) as food riots tied to Obama’s reckless fiscal policies:

It’s not an “Arab Spring” of democracy as oppressed people are inspired by Obama, as the demonic media have tried to argue.  Rather,the Arab countries that have collapsed or are collapsing are oil producers and therefore are backed by the U.S. dollar.  And Obama has imploded the value of those currencies by radically devaluing the dollar due to his reckless and immoral policies.

When you take an informed look at the facts, it is frankly stunning how horribly Obama has mismanaged the Middle East.  And it is only a matter of time before that world will blow up because of what Obama has done.

Now, here’s another thing: take a look at the four banks that are the worst of the very worst, and then look at Obama’s donor list: Goldman Sachs, JP Morgan Chase and Citigroup are ALL on Obama’s top ten list of donors.

The people who gave us financial hell in 2008 also gave us Obama.  That is a documented fact.  The too-big-to-fail big money corrupt crony capitalist Wall Street big boys who collapsed our economy – and I guarantee you that collapse aint nowhere NEAR over yet – are the same quivering piles of vile slime that we have to thank for Barry Hussein.

Let me tell you something, a global collapse unlike anything that has ever been seen by mankind is coming.  And Barack Obama is crawling all over the forces that are most behind that coming collapse.

Note that I haven’t even mentioned Fannie Mae and Freddie Mac yet.  These Government Sponsored Enterprises were at the heart of the mortgage market collapse in 2008.  And Barack Obama was their champion while he took more money in less time from them (Dodd took his money over twenty years) than any politician in American history:

I also notice how you utterly fail to mention the gigantic role of Fannie Mae and Freddie Mac in the 2008 collapse:

http://startthinkingright.wordpress.com/2010/01/23/aei-article-how-fannie-and-freddie-blew-up-the-economy/

http://startthinkingright.wordpress.com/2010/08/10/barney-frank-and-democrat-party-most-responsible-for-2008-economic-collapse/

http://startthinkingright.wordpress.com/2010/05/11/2009/08/03/who-really-exploded-your-economy-liberals-or-conservatives/

http://startthinkingright.wordpress.com/2011/08/15/democrats-set-up-america-for-2008-collapse-and-barack-obama-became-their-king/

http://startthinkingright.wordpress.com/2010/05/11/2009/12/31/with-eyes-finally-wide-open-reconsider-why-the-economy-collapsed-in-the-first-place/

http://startthinkingright.wordpress.com/2011/10/13/democrat-lies-about-their-key-role-in-2008-economic-collapse-reaches-laughable-proportions/

http://startthinkingright.wordpress.com/2010/05/11/2009/07/08/biden-we-misread-the-economy-and-its-all-the-republicans-fault/

Fannie Mae and Freddie Mac were created by Democrats. It was perennially staffed with Democrats. It had the sole power to bundle mortgages into the “mortgage backed securites” and then sell those securities to the private market under the guise that they were government and therefore AAA. It got massively into subprime loans to literally piss into those mortgage backed securities even as it made it impossible to tell a good security from a bad one. It forced banks to make utterly STUPID loans that went belly-up.

Watch these videos to see that Fannie Mae was responsible, and Democrats were responsible for preventing ANY regulation at ALL on Fannie Mae:

http://digitalartpress.wordpress.com/2009/03/22/video-proof-democrat-party-warned-responsible-for-fannie-mae-freddie-mac-economic-crisis-repost/

http://startthinkingright.wordpress.com/2010/05/11/barney-frank-video-proves-democrats-at-core-of-2008-economic-collapse/

George Bush tried SEVENTEEN TIMES to reform and regulate Fannie Mae and Freddie Mac. And Democrats stopped him at every single turn until it was too damned late. Look at the timeline: FANNIE and FREDDIE went bankrupt first before anybody else – and they had over sixty percent of the housing mortgage market and there was no stopping the crash that Demoncrats (demonic bureaucratic rodents) created.

Barack Obama is ALL OVER the past and future collapse of the United States of America.  That is a fact.

The disaster that is coming, the disaster that Barack Obama is behind, will be of biblical proportions.  So it is only fitting I end by quoting the Bible:

1 John 2:8-19 says:

“Children, it is the last hour; and just as you heard that antichrist is coming, even now many antichrists have arisen; from this we know that it is the last hour. They went out from us, but they were not really of us; for if they had been of us, they would have remained with us; but they went out, in order that it might be shown that they all are not of us.”

Jesus from Matthew 24:45:

Jesus told them, “Don’t let anyone mislead you, for many will come in my name, claiming, ‘I am the Messiah.’ They will deceive many.

Barack Obama is an antichrist.  He is most certainly not a Christian, though he claims to have come from a “Christian church” that is actually a racist, anti-American and Marxist cesspool.  Obama has championed over 54 million abortions that the Democrat Party is responsible for in America – including outright infanticide; he has either openly mocked the Bible or twisted and distorted its meaning so massively that it is frankly stunning.

The mainstream media propaganda REPEATEDLY crowned Obama with their messianic halo:

And, more than and unlike ANY American leader who has ever come before, Barack Obama has been hailed as “the messiah.”

Believe me, the guy qualifies for what Jesus Christ and St. John warned us about.  No one has EVER qualified more than Obama, save for maybe Adolf Hitler.

He’s not.  Period.  Rather, he is a false messiah, one of the antichrists we were warned about, who is going to bring hell to America and to the world before he hands over power to the TRUE antichrist whose coming will be hastened by the calamity that Obama has caused and still is causing.

Barack Obama is going to cause a financial calamity that will devastate the world and lead to the coming of the four horsemen of the apocalypse as described by Revelation chapter 6.

I’ve given you at least eight hundred and eleven trillion reasons for that conclusion.

The beast is coming.

Update, 4/23/12: Just to point out how corrupt Obama is, Jon Corzine is STILL bundling campaign money for him.

Who REALLY Exploded Your Economy, Liberals Or Conservatives?

August 3, 2009

From Mark Levin’s Liberty and Tyranny, pages 67-71:

From where does the Statist acquire his clairvoyance in determining what is good for the public?  From his ideology.  The Statist is constantly manipulating public sentiment in a steady effort to disestablish the free market, as he pushes the nation down tyranny’s road.  He has built an enormous maze of government agencies and programs, which grow inexorably from year to year, and which intervene in and interfere with the free market.  And when the Statist’s central planners create economic perversions that are seriously detrimental to the public, he blames the free market and insists on seizing additional authority to correct the failures created at his own direction.

Consider the four basic events that led to the housing bust of 2008, which spread to the financial markets and beyond:

EVENT 1: In 1977, Congress passed the Community Reinvestment Act (CRA) to address alleged discrimination by banks in making loans to poor people and minorities in the inner cities (redlining).  The act provided that banks have “an affirmative obligation” to meet the credit needs of the communities in which they are chartered.1 In 1989, Congress amended the Home Mortgage Disclosure Act requiring banks to collect racial data on mortgage applications.2 University of Texas economics professor Stan Liebowitz has written that “minority mortgage applications were rejected more frequently than other applications, but the overwhelming reason wasn’t racial discrimination, but simply that minorities tend to have weaker finances.”3 Liebowitz also condemns a 1992 study conducted by the Boston Federal Reserve Bank that alleged systemic discrimination.  “That study was tremendously flawed.  A colleague and I … showed that the data it had used contained thousands of egregious typos, such as loans with negative interest rates.  Our study found no evidence of discrimination.”4 However, the study became the standard on which government policy was based.

In 1995, the Clinton administration’s Treasury Department issued regulations tracking loans by neighborhoods, income groups, and races to rate the performance of banks.  The ratings were used by regulators to determine whether the government would approve bank mergers, acquisitions, and new branches.5 The regulations also encouraged Statist-aligned groups, such as the Association of Community Organizations for Reform Now (ACORN) and the Neighborhood Assistance Corporation of America, to file petitions with regulators, or threaten to, to slow or even prevent banks from conducting their business by challenging the extent to which banks were issuing these loans.  With such powerful leverage over banks, some groups were able, in effect, to legally extort banks to make huge pools of money available to the groups, money they in turn used to make loans.  The banks and community groups issued loans to low-income individuals who often had bad credit or insufficient income.  And these loans, which became known as “subprime” loans, made available 100 percent financing, did not always require the use of credit scores, and were even made without documenting income.6 Therefore, the government insisted that banks, particularly those that wanted to expand, abandon traditional underwriting standards.  One estimate puts the figure of CRA-eligible loans at $4.5 trillion.7

EVENT 2: In 1992, the Department of Housing and Urban Development pressured two government-chartered corporations – known as Freddie Mac and Fannie Mae – to purchase (or “securitize”) large bundles of these loans for the conflicting purposes of diversifying the risks and making even more money available to banks to make further risky loans.  Congress also passed the Federal Housing Enterprises Financial Safety and Soundness Act, eventually mandating that these companies buy 45% of all loans from people of low and moderate incomes.8 Consequently, a SECONDARY MARKET was created for these loans.  And in 1995, the Treasury Department established the Community Development Financial Institutions Fund, which provided banks with tax dollars to encourage even more risky loans.

For the Statist, however, this was still not enough.  Top congressional Democrats, including Representative Barney Frank (Massachusetts), Senator Christopher Dodd (Connecticut), and Senator Charles Schumer (New York), among others, repeatedly ignored warnings of pending disaster, insisting that they were overstated, and opposed efforts to force Freddie Mac and Fannie Mae to comply with usual business and oversight practices.9 And the top executives of these corporations, most of whom had worked in or with Democratic administrations, resisted reform while they were actively cooking the books in order to award themselves tens of millions of dollars in bonuses.10

EVENT 3: A by-product of this government intervention and social engineering was a financial instrument called the “derivative,” which turned the subprime mortgage market into a ticking time bomb that could magnify the housing bust by orders of magnitude.  A derivative is a contract where one party sells the risk associated with the mortgage to another party in exchange for payments to that company based on the value of the mortgage.  In some cases, investors who did not even make the loans would bet on whether the loans would be subject to default.  Although imprecise, perhaps derivatives in this context can best be understood as a form of insurance.  Derivatives allowed commercial and investment banks, individual companies, and private investors to further spread – and ultimately multiply – the risk associated with their mortgages.  Certain financial and insurance institutions invested heavily in derivatives, such as American International Group (AIG).11

EVENT 4:  The Federal Reserve Board’s role in the housing boom-and-bust cannot be overstated.  The Pacific Research Institute’s Robert P. Murphy explains that “[the Federal Reserve] slashed rates repeatedly starting in January 2001, from 6.5 percent until they reached a low in June 2003 of 1.0 percent.  (In nominal terms, this was the lowest the target rate had been in the entire data series maintained by the St. Louis Federal Reserve, going back to 1982)….  When the easy-money policy became too inflationary for comfort, the Fed (under [Alan] Greenspan and the then new Chairman Ben Bernanke at the end) began a steady process of raising interest rates back up, from 1.0 percent in June 2004 to 5.25 percent in June 2006….”12 Therefore, when the Federal Reserve abandoned its role as steward of the monetary system and used interest rates to artificially and inappropriately manipulate the housing market, it interfered with normal market conditions and contributed to destabilizing the economy.

————————————————————————————————

1 Howard Husock, “The Trillion-Dollar Shakedown that Bodes Ill for Cities,” City Journal, Winter 2000.

2 Stan Liebowitz, “The Real Scandal,” New York Post, Feb. 5, 2008.

3 Ibid.

4 Ibid.

5 Howard Husock, “The Financial Crisis and the CRA,” City Journal, Oct. 30, 2008.

6 Liebowitz, “The Real Scandal.”

7 Husock, “The Financial Crisis and the CRA.”

8 Ibid.

9 Editorial, “Fannie Mae’s Patron Saint,” Wall Street Journal, Sept. 10, 2008; Joseph Goldstein, “Pro-Deregulation Schumer Scores Bush For Lack of Regulation,” New York Sun, Sept. 22, 2008; Robert Novack, “Crony Image Dogs Paulson’s Rescue Effort,” Chicago-Sun Times, July 17, 2008.

10 Office of Federal Housing Enterprise Oversight, “Report of the Special Examination of Freddie Mac,” Dec. 2003; Office of Federal Housing Oversight, “Report of the Special Examination of Fannie Mae,” May 2006.

11 Lynnley Browning, “AIG’s House of Cards,” Portfolio.com, Sept. 28, 2008.

12 Robert P. Murphy, “The Fed’s Role in the Housing Bubble,” Pacific Research Institute blog.

The government links from footnote 10 have been purged (and I COUNT on left-leaning “news” sources to purge stories that reveal the left for what it is), but there is plenty of evidence that a) Fannie and Freddie were firmly in the hands of Democrats; b) that Democrats and Fannie/Freddie at least twice resisted reforms by President Bush and Republicans; and c) that Fannie and Freddie executives – who were deeply involved with Democrat activismactively cooked the books to obtain huge bonuses prior to the disastrous crash.  We can also demonstrate d) that Barack Obama and Chris Dodd were involved with corrupt Fannie and Freddie (and Obama and Dodd were also receiving large contributions from corrupt Lehman Bros. even as Obama was getting a sweetheart mortgage deal from corrupt Tony Rezko while Chris Dodd was getting sweetheart mortgage deasl from corrupt Countrywide) right up to the tops of their pointy little heads.

When one examines the actual factors that led to the housing mortgage meltdown (as Mark Levin documents), when one examines the Democrat’s patent refusal to even accept that there was even a problem with Fannie and Freddie – much less allow any regulation – prior to the ensuing disaster, and when one examines the record to see which politicians were receiving money from the parties most responsible for the disaster, there is clearly only one party to blame: the Democrat Party.

And they are right back to all their old tricks.  It was rampant and insane spending that got us into this financial black hole – and they want MORE on top of MORE spending.  Meanwhile, Democrats such as Barney Frank are hard at work trying to create the NEXT massively destructive housing bubble, ACORN is trying to seize houses from rightful owners in the name of the “poor,” liberals are making moral hazard that rewards recklessness and irresponsibility and punishes frugality and responsibility official government policy , even as the Obama administration is creating “solutions” to the foreclosure issue that have abjectly failed.

Why We Should Be Seriously Contemplating The Great Depression

December 3, 2008

Revelation 6:6 – “And I heard a voice in the midst of the four beasts say, A measure of wheat for a penny, and three measures of barley for a penny; and see thou hurt not the oil and the wine.”

There are plenty of financial experts out there assuring us that any comparison between our current economic situation and the Great Depression are utterly baseless.  The problem is that most of these experts are either demonstrated hypocrites who have themselves compared our economy to the Great Depression, or they are employing extremely flawed logic in their dismissals that may well even cross the line into outright deception.

Nathan Burchfiel takes CNBC‘s Jim Cramer to task for the sort of blatant hypocrisy that we’ve seen from all to many other media analysts:

CNBC “Mad Money” host Jim Cramer said on NBC’s “Today” show Dec. 2 that comparisons between the current economy and the Great Depression are “scare tactics.” Maybe he forgot about his own reliance on the juxtaposition….

But Cramer has been among the most vocal scaremongers when it comes to throwing around Great Depression warnings.


Criticizing economists who opposed the $700 billion taxpayer bailout of the financial industry on the “Today” show Oct. 1, Cramer warned the country was “on the precipice of Great Depression II.”

He made a similar claim about the financial bailout in September, arguing that if Treasury Secretary Henry Paulson didn’t find a way to get a rescue package passed, “we are going to have The Great Depression II on our hands.”


On Nov. 11, Cramer supported another proposed bailout – this time for the U.S. auto industry by saying it would prevent another depression. “It’s like look – we got to bail them out,” Cramer told CNBC “Street Signs” host Erin Burnett. “We have to. We have to keep the Great Depression off the table.”

In other words, the “Great Depression” basically becomes a shell game, where you see the shell when the shysters want you to look at it, and then you don’t see the shell when they want to keep it out of sight.  It’s a bogeyman that some journalist, or some academic, or some government official can trot out to frighten us into doing what s/he wants to advance an agenda, and then put it away until they want to frighten us again.

Now, there was a time when a story like this one would have completely discredited a media personality such as Jim Cramer.  But in these Bizarro World days, being discredited seems to be to a journalist’s career what having a tawdry sexual affair does to a movie star’s career.

Then we’ve got the philosophical dismissal of any comparison to the Great Depression, as exemplified by government academics such as Ben Bernanke:

WASHINGTON (AFP) — Federal Reserve chairman Ben Bernanke said Monday the current economic situation bears “no comparison” to the much deeper crisis of the 1930s Great Depression.

“Well, you hear a lot of loose talk, but let me just … say, as a scholar of the Great Depression — and I’ve written books about the Depression and been very interested in this since I was in graduate school, there’s no comparison,” Bernanke said in a question period after an address in Austin, Texas.

Bernanke cited “an order-of-magnitude difference” in the current situation compared to the 1930s.

“During the 1930s, there was a worldwide depression that lasted for about 12 years and was only ended by a world war,” he said.

“During that time, the unemployment rate went to 25 percent, at least, based on the data that we have. The real GDP (gross domestic product) fell by one-third. About a third of all of the banks failed. The stock market fell 90 percent.”

Bernanke said the situation at that time represented “very difficult circumstances,” because “we didn’t have the social safety net that we have today. So let’s put that out of our minds; there’s no — there’s comparison in terms of severity.”

Well, first of all the fact is that Bernanke – just like Cramer – has himself made the comparison between our economy and the Great Depression, as the bottom of the same article clearly demonstrates:

In a related matter, President George W. Bush said in an interview released Monday that Bernanke and Treasury Secretary Henry Paulson warned him weeks ago that bold action was needed to avert a new Great Depression.

“I can remember sitting in the Roosevelt Room with Hank Paulson and Ben Bernanke and others, and they said to me that if we don’t act boldly, Mr. President, we could be in a depression greater than the Great Depression,” Bush told ABC News.

Which clearly means that comparisons to the Great Depression clearly aren’t so silly after all – as evidenced by the very people who are most loudly telling us that such a comparison is silly.

Bernanke and others also imply that our social support structures and our financial expertise would prevent the worst effects of any so-called “Great Depression.”  But is that really so?

When the $852 billion Troubled Asset Relief Program (TARP) suddenly morphed into what one writer mocked as Capital Redistributed As Pork (CRAP), shouldn’t it bother you that an abandonment of such an enormous program’s expressed goal midstream amounts to a de facto declaration that our experts clearly don’t know for sure what they’re doing?

The notion that a Great Depression could never happen because we know so much more doesn’t hold much water for me in the light of our “Keystone Cops-approach” to all of our various bailouts and attempts at political legislation.  The fact is, after seeing our “experts” at work the last couple months, I have less confidence in them than I’ve ever had before.

But there’s another giant problem with Bernanke’s analysis, and it is difficult to imagine that he doesn’t himself recognize it.  The problem is that he’s comparing apples to oranges; he’s comparing an economy that may well be on the throes of a future Great Depression to a 1930s economy that was already well into the worst stages of a depression.  And he’s pointing out the obvious – but in fact completely irrelevant and actually completely absurd – fact that they don’t look alike.  Of course they don’t look alike – yet.

But what would have happened had Bernanke compared the economy as it was in 1929 with our economy today, rather than the worst period of the 1930s?  What would have happened had he looked at the economy just before the Black Tuesday crash of October 29, 1929, or even shortly after that crash?  The numbers would have hardly appeared anywhere near so dire, which means Bernanks’ comparison would have failed.

Let me quote Wikipedia to show you what I mean:

The Great Depression was not triggered by a sudden, total collapse in the stock market. The stock market turned upward in early 1930, returning to early 1929 levels by April, though still almost 30 percent below the peak of September 1929.[7] Together, government and business actually spent more in the first half of 1930 than in the corresponding period of the previous year. But consumers, many of whom had suffered severe losses in the stock market the previous year, cut back their expenditures by ten percent, and a severe drought ravaged the agricultural heartland of the USA beginning in the summer of 1930.

In early 1930, credit was ample and available at low rates, but people were reluctant to add new debt by borrowing. By May 1930, auto sales had declined to below the levels of 1928. Prices in general began to decline, but wages held steady in 1930, then began to drop in 1931. Conditions were worst in farming areas, where commodity prices plunged, and in mining and logging areas, where unemployment was high and there were few other jobs. The decline in the American economy was the factor that pulled down most other countries at first, then internal weaknesses or strengths in each country made conditions worse or better. Frantic attempts to shore up the economies of individual nations through protectionist policies, such as the 1930 U.S. Smoot-Hawley Tariff Act and retaliatory tariffs in other countries, exacerbated the collapse in global trade. By late in 1930, a steady decline set in which reached bottom by March 1933.

Keep in mind that OUR stock market began to tank only a little over two months ago.  And if the exact same thing were to happen now that it did to the United States in the 1930s, we actually would expect our market to pick up significantly in the coming months – and our economy to even appear to be rebounding – shortly before a downward slope into collapse that would occur one to three years later.  It wasn’t until March 1933 – 3 years and 4 months after the Black Tuesday stock market crash – that the bottom really fell out of our economy.

And while “Great Depression” comparisons may be silly in terms of the actual economic numbers RIGHT NOW (the number of banks going under, the jobless rate, etc.), we actually face potential economic nuclear bombs that would very likely have made 1930s American financial experts faint with dread.

We are looking at $700 TRILLION in derivatives.  Compare this stupefying fact to the associated fact that global GDP is only about a lousy $50 trillion! Assets have been leveraged as much as a hundred and even two-hundredfold.  The Institute for Economic Democracy have an article titled, “Hedging and Derivative Risks Become Infinite Risks.”  The result is MASSIVE exposure such as the world has never seen lurking like some incredibly deadly plague in the form of financial vehicles that few even begin to understand and only advanced computers can calculate.  As these highly leveraged financial obligations result in losses – as has already begun to happen – the result is cataclysmic failure in financial markets beyond the power of any government to prevent.  And anyone but a fool should be able to recognize by now that such disasters can send the entire global economy crashing down very quickly, seemingly from out of nowhere.

None of the bailouts have done ANYTHING to fix the systemic structural problems with our financial system (the worst probably being the massive flow of capital out of production and into speculative markets due to the shift from being a manufacturing-based economy to a service-based economy).  And the fact that the $852 billion bailout package went from being used to buy bad mortgages to a completely different solution should kind of serve to tell you that no one really knows WHAT to do.

So our financial experts are throwing out our money the way out-of-control craps players throw dice.

ABC News had this:

The government’s financial bailout will be the most expensive single expenditure in American history, potentially costing around $7.5 trillion — or half the value of all the goods and services produced in the United States last year.

In comparison, the total U.S. cost of World War II adjusted for inflation was $3.6 trillion. The bailout will cost more than the total combined costs in today’s dollars of the Marshall Plan, the Louisiana Purchase, the Korean War, the Vietnam War and the entire historical budget of NASA, including the moon landing, according to data compiled by Bianco Research.

It remains to be seen whether the government’s multipronged approach to bail out banks, stimulate spending and buy up mortgages will revive the economy, but as the tab continues to grow so does concern over where the government will find the money.

One critical thing to understand is that the aforementioned historic massive expenditures – which combined still only amount to half of the expenditure we are talking about today – took place over many decades, such that the various costs to the economy were absorbed over many years.  What happens when we spend trillions of dollars in only a few months?  Who knows?  No one has ever tried it before! And unlike the what had been the greatest – now the second greatest – expenditure in history, the costs associated with World War II were spent producing, building, and developing, whereas frankly most of the costs associated with our current bailouts essentially amount to paying off Wall Street’s gambling debts.

Meanwhile – as we contemplate forking over still more billions to bail out our automakers – we need to realize that we’re entering a potentially insane realm where there’s simply no end to the companies and now even the states who are “too big to fail” and need bailouts of their own.  And what of the moral hazard incurred by giving money to people, corporations, and states simply because they were the biggest fools and failures?  What impact will this have not only on the economy, but on the hearts and minds of honest people who played by the rules and ended up with nothing to show for it while the failures and the gamblers walk away with money in their pockets?  How many previously stable people will begin to angrily demand, “Where’s my bailout?”

What’s going to happen as our financial system attempts to absorb absolutely mind boggling government debts that dwarf anything ever before seen in human history?

A lot of financial experts aren’t so much anxious about what happens in the next few months.  We might well be able to throw so much money at the economy that we can stimulate it again; rather, they are worried about 3-5 years down the road as our dollar devalues dramatically due to interest payments that can only be repaid by printing more and more money.  You don’t just double an already insanely-out-of-control national debt without severe consequences.

And given the very real probability that massive spending is going to be the cause of our undoing, the social safety net that Bernanke refers to as being a preventative would actually merely be one more causative factor in a pending economic collapse.  We won’t be able to hand out food stamps and welfare checks if our government itself goes bankrupt.

So while it’s obviously not accurate to describe our present situation as a “Great Depression,” the simple reality is that we might well – and in the very near future – experience an economic meltdown that would likely make the Great Depression look tame in comparison.

Obama’s “New New Deal” Will Redistribute Wealth Of Shrinking Economy

November 14, 2008

The last couple weeks may well be a harbinger of things to come, as the people Obama promised to tax heavily continue to pull out of the market.  On November 4, the Dow closed at 9,625; today, it was at 8,497.  That means that the market has lost nearly 12% of its value since Obama became President-elect.  Hardly a measure of confidence.

The market spoke rather clearly on November 5:

NEW YORK, Nov 5 (Reuters) - Wall Street hardly delivered a
rousing welcome to President-elect Barack Obama on Wednesday,
dropping by the largest margin on record for a day following a U.S.
presidential contest.
 The slide more than wiped out the previous day's advance, the
largest Election Day rally ever for U.S. stocks.

Now, this wasn’t at all unexpected.  On October 24, I wrote an article titled, “Investors Ready For Dramatic Sell-Off If Democrats Win.”  A few days before that, I wrote an article pointing out that “Actual Job Creators Favor McCain 4-1 Over Obama,” which – among other things – points out that “74 percent of the executives say they fear that an Obama presidency would be disastrous for the country.”

The people who invest, and create job opportunities, and build the economy, don’t want to have their wealth redistributed.  Would you want your wealth redistributed?

Democratic apologists point out that Obama promises on a meager jump in the top federal tax rates from 36% to 39%.  But that “insignificant” 3% comes right out of peoples’ profits.  It sounds a lot worse when the reality is understood: when businesses that had been making an 11% profit are now reduced to an 8% profit.  Or an 8% profit reduced to a 5% profit.  And Obama promises to increase capital gains taxes and several other taxes that will impact upon businesses and the investment climate that supports business.  How hard are job creators willing to work to experience a diminishing return on their time, labor, and risk?

Time Magazine – a publication that has gushed over Obama for months – has a new gushing cover:

It should frighten you.  FDR was no “moderate.”  He presided over a terrible time for the country, and – while he was a popular figure because of what he tried to do – his actual economic administration has been widely recognized by economists to have been a failure.  Studies have demonstrated that the average depression lasted only four years; but for some reason the Great Depression dragged on and on and on under FDR’s governance.  By 1938, after more than four years of FDR, the effects of the Depression were actually much worse than they had been when he first took office.

As an example of the new realizations regarding the 1930s, UCLA economists argue:

Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt.

After scrutinizing Roosevelt’s record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.

Even the common man’s sense has largely been that World War II had more to do with getting us out of the Depression than FDR’s New Deal.  It certainly did get men who had been standing in bread lines put to “work.”  And as the nation coalesced together and began to pour resources into building weapons, factories that had been idled came back on line, and innovation increased to match the technological development of our enemies.  And certainly, the fact that, when hostilities ended, the United States alone was not reduced to rubble had a great deal to do with helping our economy surge forward.

But by that thinking, anyone who criticized President Bush’s wars in Afghanistan and Iraq is correct only insofar as we need an even BIGGER war.  For Obama to truly be like FDR, we need to have a devastating Depression that drags on for 12 years while incompetent liberals continue to tinker, and then we need slug it out in World War III against Russia and China.

So pardon me for looking at the “New New Deal” FDR-lookalike Barack Obama and shuddering down to the marrow of my bones.

We’re watching the market beginning to go down the slide.  It’s going to go down a lot more.  And fear over Barack Obama’s policies is going to have a lot to do with the lack of confidence that keeps investment from pouring back into the economy.

The picture is far more frightening than the story the media is telling: there are more than $700 trillion in derivatives in the global economy.  That’s far more than the total currencies of all the governments in the entire world.  As one writer puts it, “In other words, every dollar of insurance on bonds issued by some deadbeat governments and corporations is leveraged 200 times!”  We’ve got a time bomb waiting to explode.  And we put a lot of the people who created that time bomb in the first place in charge of fixing the mess they themselves created.  People like Obama’s National Finance Chair, Penny Pritzker, who was at the epicenter of the subprime loan scandal and once paid $460 million to stay out of jail.  People like Jim Johnson, Franklin Raines, and Jamie Gorelick, who pocketed over $300 million from Fannie and Freddie while juggling the books so they could get their bonuses.  People like Barney Frank, who claimed that nothing was wrong with Fannie and Freddie and the housing market they supervised, and repeatedly fought off President Bush’s efforts to regulate them at time when the crisis we are currently experiencing could have been averted.  People like Charles Schumer, who exemplified the sheer hypocrisy of the Democratic Party with his blaming others for what he himself did.  People like Joe Biden, whom two major studies said shared direct blame for the foreclosure disaster because of legislation he championed as the Senator from banking-capital Delaware.  And people like Barack Obama, who embraced more contributions from Fannie and Freddie – and from scandal-plagued finance institutions such as Lehman Brothers than anyone during his short time in the Senate.  Now all these people have been entrusted with fixing a mess of literally global proportions; a mess that they in large part created in the first place.

And Barack Obama wearing the “New New Deal” mantle of FDR’s Panama hat, glasses, and fancy cigarette is not going to make that time bomb go away.  In fact, it may be the very thing that brings the whole house of cards come crashing down.


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