Goldman Sachs Probed Over Crisis in Greece
February 26, 2010
Financial Times
By Alan Rappeport and Tom Braithwaite in Washington and David Oakley in London
The US central bank is looking into Goldman Sachs’s role in arranging contentious derivatives trades for Greece, which helped the country to massage its public finances, Ben Bernanke, chairman of the Federal Reserve, revealed on Thursday.
“We are looking into a number of questions relating to Goldman Sachs and other companies and their derivatives arrangements with Greece,” Mr Bernanke said, apparently referring to Greek currency transactions structured by Goldman.
Testifying before Congress, Mr Bernanke also responded to concerns that instability in markets for Greek debt and other securities has been heightened by trading in other derivatives, known as credit default swaps, which compensate investors in case of default.
Mr Bernanke said default swaps are “properly used as hedging instruments” and that “using these instruments in a way that intentionally destabilises a company or a country is counterproductive”.
The Securities and Exchange Commission is “examining potential abuses and destabilising effects related to the use of credit default swaps and other opaque financial products and practices”, said a spokesman.
Separately, Phil Angelides, chairman of the US Financial Crisis Inquiry Commission, told the Financial Times he was concerned about the practice of creating securities and “fully betting against them” – and about Goldman’s role in particular. Goldman declined to comment.
The US comments came as an official in German chancellor Angela Merkel’s ruling Christian Democratic Union party said the G20 nations were discussing whether a ban on the speculative use of CDS was workable.
Renewed uncertainty about Greece prompted a further sell-off of the country’s bonds and the euro amid rising fears that Athens faced a credit ratings downgrade that would complicate its goal of refinancing its debt in capital markets. The euro fell to a near nine-month low against the US dollar.
Goldman has come under fire from European regulators for structuring transactions that helped Greece trim its debt figures after it joined the European monetary union in 2001.
As Greece’s public debt grew to exceed its annual gross domestic product, the bank helped it organise a currency trade to delay its repayments while meeting European deficit limits.
Goldman has said that the currency swaps played a minimal role in Greece’s current financial crisis and that the transactions were in line with European regulations.
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We Are In A Depression, Not A Recovery
February3, 2010
The International Forecaster
Accept that we are now in a depression, Stock Markets still grossly overvalued, poverty rates increase across midwest, a lots opportunity to regulate the banks,Goldman Sachs reports record profits and still bonusing employees richly, mainstream America goes on a financial diet, suburbs now home to American poor.
Few professionals are yet willing to admit we have been in a depression for the last year. You have to understand the position that economists and analysts are in. They work for corporations, insurance, Wall Street, banking and government and if they thought we were in a depression and they publicly announced that all chances for advancement would be lost or they would be squeezed out of the firm or simply fired. Under such circumstances can you ever expect that you get the truth? We don’t think so. Furthermore the depression we are enveloped in is far from over. The recession encompassed a drop in real GDP in the midst of a credit crisis. The crisis was the result of over-extended credit, prohibitively low interest rates, massive speculation by banks, brokerage houses, insurance companies, and corporations worldwide. It just didn’t happen it was planned that way. We saw that recently in testimony before Congress when CEOs of these financial firms admitted they made a mistake in the process of enriching themselves. The worst sin was the criminal securitization of mortgages and the deliberately criminal mislabeling of their ratings. Then making matters worse those who sold this toxic garbage to their clients such as Goldman Sachs, JP Morgan Chase and Citigroup were shorting the product that they had just sold to their best clients. What kind of monsters are these people? Unethical doesn’t go far enough. It was criminal. These are the same characters, along with the Fed, and others, who gave us the dotcom boom and collapse and then foisted the real estate boom on our economy. The result has been deflating assets and contracting credit offset by massive lending, money and credit creation by the Fed and monetization, all temporary expedient measures, which in the context of history has led to failure. This has been in process for seven years. This second major abuse of our system in 14 years has presented a terrible dilemma and that is where we are today. Our monetary policy hasn’t worked and won’t work and there has been and presently is little fiscal control in Washington. This is no normal recession; it is a depression.
We have zero funds rates and up until six months ago M3 expansion of more than 17%. The Fed has monetized trillions of dollars of Treasuries, Agencies and toxic waste and now we are told we are in recovery – the worst is over. We wish we could agree, but we can’t. We are reenacting the same mistakes of the past all over again. Unemployment is close to the depression levels of the “Great Depression” and is still expanding albeit more slowly. Money velocity has fallen even after the massive infusion of aggregates. Liquidity is not flowing into the economy it is pouring into Wall Street to aid and abet more speculation, which has sent the Dow from 6600 to 10,700. This game cannot be played indefinitely. Wall Street cannot continue to prosper as the economy remains stagnant, and unemployment climbs higher.
The market is grossly overpriced and the effect of favorable news will begin to wane. It should be noted that insiders are selling into the never-ending rally, and mutual funds have very little money flow coming into the funds. That, of course, is our government at work manipulating the market. Just last week insiders bought $18 million worth of shares and sold $419 million.
This to us is more proof that the stock market is the most overvalued since September 1987, which brought about the market collapse of 10/19/87 and resulted in August 1988 in the Executive Order, “The President’s Working Group on Financial Markets,” which has led to market manipulation and the end of free markets.
That and the bailout of banks, brokerage firms and insurance companies too big to fail, those same entities carrying two sets of books as authorized by the BIS, FASD and the SEC, government purchase of stock in selective Illuminist controlled companies, and government control of the mortgage and real estate markets. This give you corporate fascism at its finest. We see intervention everywhere and that is not free markets.
How can there be a recovery with 22.5% unemployment, and with the additional threat of further unemployment? Who will buy the new housing and the tremendous inventory overhand? What will happen to the commercial inventory building up? Who has money in America to buy cars and trucks? Credits to buy housing for subprime and ALT-A buyers will end up with a 50% failure rate. Cash for clunkers was a colossal failure. Such exercises in futility only buy time, just as stimulus packages, and monetization do the same thing. The elitists behind the scenes know this just as we know this. That means the colossal deficit increase of $1.4 trillion a year will add 10% yearly to the federal debt to GDP ratio that will be over 100% by 2011. The tax liability to service this debt will be overwhelming. Government debt is rising exponentially and if further stimulus is not added the credit crisis will be renewed. This is why the Fed cannot remove further liquidity from the financial system, especially after having taken M3 from 17 to 18% to 6%. Incidentally, England and the ECB have done the same thing, and they still see rising inflation. If further stimulation is not forthcoming, or war, or default comes, we will see inflation reverse and deflation take over and that could last for ten years or more. This deflation, if allowed to take its course, will cause losses of $12 to $15 trillion from the economy and cause unemployment to rise to 40% to 50%. That would also entail cutting extended benefits. That would give us the scenes we saw in the 1930s. The debt we are facing knows no precedent in modern times, and there is no possible way it can be paid.
Bad debt is piling up again in residential and commercial real estate as well as in personal and business debt. This in part is why lenders are not talking about it if they can help it, but they are not lending. Without further lending increases the economy cannot function efficiently because it is so dependent on credit. That means higher unemployment, fewer buyers and a slower economy. If you think foreclosed inventory is bad now wait until the second wave hits and it is going to hit. If you are under water on your mortgage you do not care anymore. You stop paying your mortgage and you live rent-free for a year or more. There is no longer any stigma to walking away or going bankrupt. All the Mickey Mouse games being played by government to keep people in their homes are not going to work. Subprime and ALT-A loans are not the answer. They start going into default in a big way next year as the taxpayer again foots the bill.
Where does the accumulation of debt end? For the two fiscal years ended 9/30/99, the public increased Treasury debt $5 trillion to $7.5 trillion or by 50%. The Fed has purchased 80% of Treasury debt yoy, increasing the monetary base from $850 billion to $2 trillion, which includes Agencies and MBS. Seeking cover on their announcement, they said on Christmas they would supply unlimited funds for three years to Fannie Mae and Freddie Mac. Government liabilities made in behalf of the American taxpayer since the third quarter of 2007 have jumped 61% to $3.62 trillion. It is our opinion that the inflation caused by funding and monetization over the next decade will be very disruptive and expensive to US dollar users as purchasing power falls. That translates into an additional loss in buying power of some 50%.
If liquidity stays at current levels the stock market will fall as it flourishes on increasing liquidity. In addition, higher inflation rates tend to push stocks lower. If we are correct and there is a second credit crisis ahead of us, M3 will rise again and monetization will be pushed into high gear again.
The banks make their money trading for their own accounts. They won’t have much in the way of earnings if legislation passes, the largest manipulations in history would come to an end.
The President has called for limiting the size and trading activities of financial institutions to prevent risk taking and another financial crisis. He also said there should be no proprietary trading. We are told Goldman Sachs will benefit from the President’s proposal to limit Wall Street risk by forcing deposit-taking banks to unwind trading operations.
Again the commercial paper market fell by $10 billion to $1.092 trillion. Asset-backed commercial paper rose by $3.5 billion to $430.0 billion.
Unsecured issuance fell by $9.9 billion versus rising $12.7 billion in the prior week.
Democrats have completely lost their moorings. They want to allow government to borrow an additional $1.9 trillion to put the national debt at $14.3 trillion. It would need 60 votes to pass.oqHo
Food prices are roaring upward again as the PPI rose 0.2%. That is a 4.4% gain month-on-month.
America Slides Deeper into Depression
January 11, 2010
Telegraph.co.uk
By Ambrose Evans-Pritchard
The labour force contracted by 661,000. This did not show up in the headline jobless rate because so many Americans dropped out of the system. The broad U6 category of unemployment rose to 17.3pc. That is the one that matters.
Wall Street rallied. Bulls hope that weak jobs data will postpone monetary tightening: a silver lining in every catastrophe, or perhaps a further exhibit of market infantilism.
The home foreclosure guillotine usually drops a year or so after people lose their job, and exhaust their savings. The local sheriff will escort them out of the door, often with some sympathy –– just like the police in 1932, mostly Irish Catholics who tithed 1pc of their pay for soup kitchens.
Realtytrac says defaults and repossessions have been running at over 300,000 a month since February. One million American families lost their homes in the fourth quarter. Moody’s Economy.com expects another 2.4m homes to go this year. Taken together, this looks awfully like Steinbeck’s Grapes of Wrath.
Judges are finding ways to block evictions. One magistrate in Minnesota halted a case calling the creditor “harsh, repugnant, shocking and repulsive”. We are not far from a de facto moratorium in some areas.
This is how it ended between 1932 and 1934, when half the US states declared moratoria or “Farm Holidays”. Such flexibility innoculated America’s democracy against the appeal of Red Unions and Coughlin Fascists. The home siezures are occurring despite frantic efforts by the Obama administration to delay the process.
This policy is entirely justified given the scale of the social crisis. But it also masks the continued rot in the housing market, allows lenders to hide losses, and stores up an ever larger overhang of unsold properties. It takes heroic naivety to think the US housing market has turned the corner (apologies to Goldman Sachs, as always). The fuse has yet to detonate on the next mortgage bomb, $134bn (£83bn) of “option ARM” contracts due to reset violently upwards this year and next.
US house prices have eked out five months of gains on the Case-Shiller index, but momentum stalled in October in half the cities even before the latest surge of 40 basis points in mortgage rates. Karl Case (of the index) says prices may sink another 15pc. “If the 2008 and 2009 loans go bad, then we’re back where we were before – in a nightmare.”
David Rosenberg from Gluskin Sheff said it is remarkable how little traction has been achieved by zero rates and the greatest fiscal blitz of all time. The US economy grew at a 2.2pc rate in the third quarter (entirely due to Obama stimulus). This compares to an average of 7.3pc in the first quarter of every recovery since the Second World War.
Fed hawks are playing with fire by talking up about exit strategies, not for the first time. This is what they did in June 2008. We know what happened three months later. For the record, manufacturing capacity use at 67.2pc, and “auto-buying intentions” are the lowest ever.
The Fed’s own Monetary Multiplier crashed to an all-time low of 0.809 in mid-December. Commercial paper has shrunk by $280bn ($175bn) in since October. Bank credit has been racing down a hair-raising black run since June. It has dropped from $10.844 trillion to $9.013 trillion since November 25. The MZM money supply is contracting at a 3pc annual rate. Broad M3 money is contracting at over 5pc.
Professor Tim Congdon from International Monetary Research said the Fed is baking deflation into the pie later this year, and perhaps a double-dip recession. Europe is even worse.
This has not stopped an army of commentators is trying to bounce the Fed into early rate rises. They accuse Ben Bernanke of repeating the error of 2004 when the Fed waited too long. Sometimes you just want to scream. In 2004 there was no housing collapse, unemployment was 5.5pc, banks were in rude good health, and the Fed Multiplier was 1.73.
How anybody can see imminent inflation in the dying embers of core PCE, just 0.1pc in November, is beyond me.
Mr Rosenberg is asked by clients why Wall Street does not seem to agree with his grim analysis.
His answer is that this is the same Mr Market that bought stocks in October 1987 when they were 25pc overvalued on Shiller “10-year normalized earnings basis” – exactly as they are today – and bought them at even more overvalued prices in 2007, long after the property crash had begun, Bear Stearns funds had imploded, and credit had its August heart attack. The stock market has become a lagging indicator. Tear up the textbooks.
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How Goldman Sachs Made Tens of Billions of Dollars From Economic Collapse
January 4, 2010
TheEconomicCollapseBlog.com
Investment banking giant Goldman Sachs has become perhaps the most prominent symbol for everything that is wrong with the U.S. financial system, but most Americans cannot even begin to explain what they do or how they have made tens of billions of dollars from the economic collapse of America. The truth is that what Goldman Sachs did was fairly simple, and there may not have even been anything “illegal” about it (although they are now being investigated by the SEC among others).
The following is how Goldman Sachs made tens of billions of dollars from the economic collapse of America in four easy steps….
Step 1: Sell mortgage-related securities that are absolute junk to trusting clients at vastly overinflated prices.
Step 2: Bet against those same mortgage-related securities and make massive bets against the U.S. housing market so that your firm will make massive profits when the U.S. economy collapses.
Step 3: Have ex-Goldman executives in key positions of power in the U.S. government so that bailout money can be funneled to entities such as AIG that Goldman has made these bets with so that they can get paid after they win their bets.
Step 4: Collect the profits – Goldman Sachs is having their “most successful year” and will end up reporting approximately $50 billion in revenue for 2009.
So is it right for the biggest fish on Wall Street to make tens of billions of dollars by betting that the U.S. housing market will collapse?
You see, when you are talking about a financial giant the size of Goldman Sachs, the line between “betting that something will happen” and “making something happen” gets blurred very quickly.
Not that Goldman Sachs was the only one betting against the housing market.
According to the New York Times, firms like Deutsche Bank and Morgan Stanley also created mortgage-related securities and then bet that they would fail…..
Goldman was not the only firm that peddled these complex securities — known as synthetic collateralized debt obligations, or C.D.O.’s — and then made financial bets against them, called selling short in Wall Street parlance. Others that created similar securities and then bet they would fail, according to Wall Street traders, include Deutsche Bank and Morgan Stanley, as well as smaller firms like Tricadia Inc.
But certainly Goldman Sachs was the most prominent financial player involved in this type of activity.
In fact, without mentioning specifics, Goldman has even admitted publicly to wrongdoing. On November 17th, 2008 Goldman Sachs CEO Lloyd Blankfein even issued a public apology….
“We participated in things that were clearly wrong and have reason to regret.”
But complicated financial transactions are something that most Americans simply do not understand, so the public outrage towards Goldman Sachs and others has been somewhat limited. But that does not change the very serious nature of the activities that Goldman was involved in….
“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” Sylvain Raynes, an expert in structured finance at R & R Consulting in New York, recently told The New York Times. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”
But the sad thing is that many Americans do not even understand what Goldman Sachs is. Goldman Sachs was founded in 1869 and has forged a reputation as one of the elite financial institutions in the entire world. They only hire “the best and the brightest” and Ivy League graduates flock to the firm. Of the five major investment banks that dominated Wall Street before the crash, only Goldman Sachs and Morgan Stanley have survived. Merrill Lynch and Bear Stearns were severely damaged by the crash and ended up being purchased by retail banks and Lehman Brothers ended up folding.
There are persistent rumors that Goldman played a major role in the collapse of Bear Stearns and that ex-Goldman CEO Hank Paulson could have done much more to bail out Lehman Brothers, but perhaps nobody will ever know the full truth. All we do know is that at the end of the crash several of Goldman’s competitors were destroyed and Goldman found itself in a more dominant position than ever.
The truth is that Goldman is a financial shark and they do not apologize for it.
An article in Rolling Stone recently put it this way….
The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.
So how did Goldman Sachs prosper so greatly in an environment that destroyed their competitors?
The following is an extended breakdown of just how Goldman Sachs was able to reap tens of billions of dollars in profits from the collapse of the U.S. housing market….
Step 1: Sell mortgage-related securities that are absolute junk to trusting clients at vastly overinflated prices.
In late 2006, Goldman Sachs made some fundamental changes in the way that they were approaching the U.S. housing market. According to a McClatchy report, Goldman spokesman Michael DuVally said that the firm decided at that time to reduce its mortgage risks by selling off subprime mortgage-related securities and by purchasing credit-default swaps to hedge against a serious downturn in the U.S. housing market.
The key moment came in December 2006. After “10 straight days of losses” in Goldman’s mortgage business, Chief Financial Officer David Viniar called a meeting of key Goldman personnel.
Vanity Fair described the results of that meeting this way…
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US Becoming Failed State
October 27, 2009 by JP
Filed under Government
October 27, 2009
Infowars
By Paul Craig Roberts
Evidence that the US is a failed state is piling up faster than I can record it.
One conclusive hallmark of a failed state is that the crooks are inside the government, using government to protect and to advance their private interests.
Another conclusive hallmark is rising income inequality as the insiders manipulate economic policy for their enrichment at the expense of everyone else.
The Banksters are still in charge.
Income inequality in the US is now the most extreme of all countries. The 2008 OECD report, “Income Distribution and Poverty in OECD Countries,” [PDF]concludes that the US is the country with the highest inequality and poverty rate across the OECD and that since 2000 nowhere has there been such a stark rise in income inequality as in the US.
The OECD finds that in the US the distribution of wealth is even more unequal than the distribution of income.
On October 21, 2009, Business Week reported that a new report from the United Nations Development Program concluded that the US ranked third among states with the worst income inequality. As number one and number two, Hong Kong and Singapore, are both essentially city states, not countries, the US actually has the shame of being the country with the most inequality in the distribution of income.
The stark increase in US income inequality in the 21st century coincides with the offshoring of US jobs, which enriched executives with “performance bonuses” while impoverishing the middle class, and with the rapid rise of unregulated OTC derivatives, which enriched Wall Street and the financial sector at the expense of everyone else.
Millions of Americans have lost their homes and half of their retirement savings while being loaded up with government debt to bail out the banksters who created the derivative crisis.
Frontline’s October 21 broadcast, “The Warning,” documents how Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert Rubin, Deputy Treasury Secretary Larry Summers, and Securities and Exchange Commission Chairman Arthur Levitt blocked Brooksley Born, head of the Commodity Futures Trading Commission, from performing her statutory duties and regulating OTC derivatives.
After the worst crisis in US financial history struck, just as Brooksley Born said it would, a disgraced Alan Greenspan was summoned out of retirement to explain to Congress his unequivocal assurances that no regulation of derivatives was necessary. Greenspan had even told Congress that regulation of derivatives would be harmful. A pathetic Greenspan had to admit that the free market ideology on which he had relied turned out to have a flaw.
Greenspan may have bet our country on his free market ideology, but does anyone believe that Rubin and Summers were doing anything other than protecting the enormous fraud-based profits that derivatives were bringing Wall Street? As Brooksley Born stressed, OTC derivatives are a “dark market.” There is no transparency. Regulators have no information on them and neither do purchasers.
Even after Long Term Capital Management blew up in 1998 and had to be bailed out, Greenspan, Rubin, and Summers stuck to their guns. Greenspan, Rubin and Summers, and a roped-in gullible Arthur Levitt who now regrets that he was the banksters’ dupe, succeeded in manipulating a totally ignorant Congress into blocking the CFTC from doing its mandated job. Brooksley Born, prevented by the public’s elected representatives from protecting the public, resigned. Wall Street money simply shoved facts and honest regulators aside, guaranteeing government inaction and the financial crisis that hit in 2008 and continues to plague our economy today.
The financial insiders running the Treasury, White House, and Federal Reserve shifted to taxpayers the cost of the catastrophe that they had created. When the crisis hit, Henry Paulson, appointed by President Bush as Rubin’s replacement as the Goldman Sachs representative running the US Treasury, hyped fear to obtain from “our” representatives in Congress with no questions asked hundreds of billions of taxpayers’ dollars (TARP money) to bail out Goldman Sachs and the other malefactors of unregulated derivatives.
When Goldman Sachs recently announced that it was paying massive six- and seven-figure bonuses to every employee, public outrage erupted. In defense of banksters, saved with the public’s money, paying themselves bonuses in excess of most people’s life-time earnings, Lord Griffiths, Vice Chairman of Goldman Sachs International, said that the public must learn to “tolerate the inequality as a way to achieve greater prosperity for all.”[Public must learn to 'tolerate the inequality' of bonuses, says Goldman Sachs vice-chairman]
In other words, “Let them eat cake.”
According to the UN report cited above, Great Britain has the 7th most unequal income distribution in the world. After the Goldman Sachs bonuses, the British will move up in distinction, perhaps rivalling Israel for the fourth spot in the hierarchy.
Despite the total insanity of unregulated derivatives, the high level of public anger, and Greenspan’s confession to Congress, still nothing has been done to regulate derivatives.
One of Rubin’s Assistant Treasury Secretaries, Gary Gensler, has replaced Brooksley Born as head of the CFTC. Larry Summers is the head of President Obama’s National Economic Council. Former Federal Reserve official Timothy Geithner, a Paulson protege, runs the Obama Treasury. A Goldman Sachs vice president, Adam Storch, has been appointed the chief operating officer of the Securities and Exchange Commission.
The Banksters are still in charge.
Is there another country in which in full public view so few so blatantly use government for the enrichment of private interests, with a coterie of “free market” economists available to justify plunder on the grounds that “the market knows best”?
A narco-state is bad enough. The US surpasses this horror with its financo-state.
As Brooksley Born says, if nothing is done, “it’ll happen again.”
But nothing can be done. The crooks have the government.
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World Currencies to Join in Race to the Bottom
October 26, 2009
The International Forecaster
The G-20 finance ministers meet in Scotland on November 6th and 7th, and they will all be bleating about the fall in the dollar. France started this week, and the others will follow. Their currencies are rising in value and they do not like it.
We expect other nations to follow, Mexico and Brazil in imposing a 2% tax on incoming funds and others will print their currencies and buy dollars to reduce the value of their currencies and at the same time buy US Treasuries that are decreasing in value. That will neutralize any benefit from the exercise. In addition, they will all scream for a strong dollar policy. By the time the meeting begins the dollar should be between 71 and 72 on the USDX, the dollar index. The weaker dollar means dollar debt will be cheaper to pay back. The big question is how long will it take for the dollar to fall to 40 to 55?
We are often asked how does today compare with the 1930s in tax revenue and government spending? In 1930-31 tax revenue fell almost 53%. It increased 250% in 1932 and tripled in 1938. Yet, growth during the 30s went nowhere. In spite of an increase of 45% in government spending during those years by 1940 GDP had not returned to the levels of 1930. In 1939 unemployment was still 17.2% and in 1940, 16.4%. This is the same monetary policy being used today that was used during the 1930s. Keynesian monetization that does not work. The only reason the depression did not continue is that FDR arranged another war, otherwise the depression could have continued indefinitely. The debt bubble of the 1920s only lasted seven years. Our present debt bubble actually began in 1978, was purged in 1982-83 and began again in 1986. It was killed in 1989 and resurrected in 1994. The bubble of 2000-2001 was replaced by our current real estate bubble in 2003, which is now in the process of deflating. The privately owned Federal Reserve engineered all this.
The current fiasco was accompanied by a shortfall in tax collections to government spending from 2003 to 2007. 2008 held its own due to cooking the books and 2009 fell almost 18%. Unless further tax increases are implemented you can expect 2009 to fall short as well. Thus, if taxes are not increased the American economy will collapse. This is harsh and tax increases will come at just the wrong time. It can in part by temporarily covered by hyperinflation, but that would be a transitory solution. 62.8% of foreign reserves are in US dollars, so as the dollar depreciates foreign debt decreases. The flip side is that there is major imported inflation, particularly in the cost of goods and services.
Present government stimulation is not going to work. It didn’t work in the 1930s and Japan has found out to its dismay that since 1992 it didn’t work for them either. Why should it work in America? The debt that has been so wantonly created is still going to be there and if taxes are not raised or costs cut, it will be even larger.
Our government, Wall Street and many Americans are basing their future on stimulation and recovery and it isn’t going to happen. This supposedly is how government is going to generate its tax revenue. All we can say is good luck.
At the G-20 and G-7 we hear about an exit strategy. A strategy that doesn’t exist. Others may raise taxes but we can assure you the US and UK will be the last to do so. They are currencies in disparate trouble. The dollar will find its real value somewhere between 40 & 55 on the USDX. The dollar will become a third world currency and as a result gold will climb to $2,500 to $3,000.
The G-20 let us know that they would be replacing the G-7 and G-8. This desperation of power to developing countries would expedite the transfer of wealth from Western nations in the third world via carbon taxation in order to lower standards to meet those of the lower tier countries. This is being done to force the first world to accept world government.
In his address to the conclave US Treasury Secretary Tim Geithner told attendees that the US was going to legislate sweeping changes to the financial system under the guise of creating greater protection for consumers and investors and to promote a more stable financial system that would relieve taxpayers of the burden of the financial crisis.
The members still want to complete the Doha trade talks that have been bogged down for four years. What the WTO is really trying to accomplish is extreme financial deregulation under the cover of trade agreements, which would undermine genuine regulation and would make the entire world a free trade zone to be further looted by transnational conglomerates. The force behind WTO deregulation is the EU and they are pushing the worst aspects of the plan.
The WTO has an agreement called the FSA, the Financial Services Agreement that explicitly applies to more than 100 countries and mandates major deregulation. Mr. Geithner worked on this plan during the Clinton administration, so his regulation statements are meant for public consumption only. Incidentally, the WTO-EU rules are virtually unknown to the US Congress.
Geithner was the one who closed the deregulation deal for the Clinton entourage as lead negotiator. He knows all about the existing agreements. He was directly instrumental in the destruction of Glass-Steagall. The whole new crowd in the Obama administration was responsible for setting up what has become the destruction of our financial system.
The present US course is to re-regulate and that is in direct opposition to what the WTO and the EU want. There will be quite a fight over this change of direction by the US, especially over the WTO, Understanding on Commitments in Financial Services, which is severe deregulation. The bottom line is Doha, the FSA, WTO and the EU have to be stopped. More deregulation is now politically unaccepted by Americans who have lost so many jobs. There obviously are two factions within the Illuminist structure fighting this out. In fact, the FSA was largely written by American Express and AIG. These are some of the inner workings behind the scenes that you never hear about. Things are never what they seem to be.
The Treasury will have major issuances next week. On Monday alone they will issue $116 billion in new notes and bills, 2, 5 & 7-year paper; plus another $30 billion in bills and $7 billion in TIFS. Tuesday will see $44 billion in 2-year notes. On the 28th, $41 billion in 5-year notes and on the 29th, $31 billion in 7-year notes. That totals $182 billion and that is disastrous.
Domestic investors are selling the rally in domestic stocks at an accelerating rate while continuing to invest overseas, and in the emerging bond bubble.
Don’t’ be deceived by Wall Street and Washington, the worst remains ahead for the economic and systemic-solvency crisis. There are no meaningful signs of business recovery, with the current depression likely to evolve into a great depression, in conjunction with the collapse of the value in the US dollar and a hyperinflation. Risks are high for these crisis’s to explode in the year ahead. The general outlook is not changed says economist John Williams.
Mortgage application fell for a second straight week with refinance loans decreasing 13.7%, the lowest since 9/11/09.
Barclays Capital hosted a private meeting yesterday with Goldman Sachs president Gary Cohn, CFO David Viniar and Global Sales and Treading co-heads David Heller and Harvey Schwartz.
How concerned are they about any new regulations on the financial industry? Not much. In a copy of the notes Barclay is putting out on the meeting, and obtained by EconomicPolicyJournal.com, Goldman told Barclay that it is educating the regulators.
Barclay advised that senior Goldman management are spending an, “exorbitant amount of time thinking about potential regulatory and policy outcomes and educating regulators and policymakers on the intricacies of financial markets.”
The only picture I can conjure up is Blankfein and company educating,
Gene Sperling (“Counselor” to Geithner) who last year took in $887,727 from Goldman
Lee Sachs (Geithner’s “right hand man”) who reported more than $3 million in salary and partnership income from the hedge fund Mariner Investment Group (started by Brace Young former Goldman partner) and Gary Gensler (Head of CFTC) former Goldman partner.
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Who Wants to be a Billionaire?
October 14, 2009
Forbes.com
By Duncan Greenberg
Are billionaires born or made? What are the common attributes among the uber-wealthy? Are there any true secrets of the self-made?
We get these questions a lot, and decided it was time to go beyond the broad answers of smarts, ambition and luck by sorting through our database of wealthy individuals in search of bona fide trends. We analyzed everything from the billionaires’ parents’ professions to where they went to school, their track records in the early stages of their careers and other experiences that may have put them on the path to extreme wealth.
Our admittedly unscientific study of the 657 self-made billionaires we counted in February for our list of the World’s Billionaires yielded some interesting results.
First, a significant percentage of billionaires had parents with a high aptitude for math. The ability to crunch numbers is crucial to becoming a billionaire, and mathematical prowess is hereditary. Some of the most common professions among the parents of American billionaires (for whom we could find the information) were engineer, accountant and small-business owner.
Consistent with the rest of the population, more American billionaires were born in the fall than in any other season. However, relatively few billionaires were born in December, traditionally the month with the eighth highest birth rate. This anomaly holds true among billionaires in the U.S. and abroad.
More than 20% of the 292 of the self-made American billionaires on the most recent list of the World’s Billionaires have either never started or never completed college. This is especially true of those destined for careers as technology entrepreneurs: Bill Gates (Microsoft), Steve Jobs (Apple), Michael Dell (Dell, Larry Ellison (Oracle), and Theodore Waitt (Gateway).
Billionaires who derive their fortunes from finance make up one of the most highly educated sub-groups: More than 55% of them have graduate degrees. Nearly 90% of those with M.B.A.s obtained their master’s degree from one of three Ivy League schools: Harvard, Columbia or U. Penn’s Wharton School of Business.
Goldman Sachs has attracted a large share of hungry minds that went on to garner 10-figure fortunes. At least 11 current and recent billionaire financiers worked at Goldman early in their careers, including Edward Lampert, Daniel Och, Tom Steyer and Richard Perry.
Several billionaires suffered a bitter professional setback early in their careers that heightened their fear of failure. Pharmaceutical tycoon R.J. Kirk’s first venture was a flop–an experience he regrets but appreciates. “Failure early on is a necessary condition for success, though not a sufficient one,” he told Forbes in 2007.(See “Flying Solo.”)
According to a statement read by Phil Falcone during a congressional hearing in November, his botched buyout of a company in Newark in the early 1990s taught him “several valuable lessons that have had a profound impact upon my success as a hedge fund manager.”
Several current and former billionaires rounded out their Yale careers as members of Skull and Bones, the secret society portrayed with enigmatic relish by Hollywood in movies like The Skulls and W. Among those who were inducted: investor Edward Lampert, Blackstone co-founder Steven Schwarzman, and FedEx founder Frederick Smith.
Click here for the full report.
U.S. Turns Profit on Bank Bailouts
August 31, 2009 by Andrew
Filed under Government
August 31, 2009
Dallas Business Journal
The U.S. government has made a profit of about $4 billion on the bank bailout program so far as some of the largest banks have already repaid their loans, according to a report by the New York Times.
In the Dallas-Fort Worth area, locally-based Plains Capital Corp. was listed late last year as the recipient of $87.6 million in Troubled Asset Relief Program funds.
To date, the Treasury says it has allocated $250 billion in TARP funds.
The Associated Press is now reporting that lawmakers, including Sen. Dianne Feinstein, D-Calif.; and Olympia Snowe, R-Maine, are going to draft legislation that will force companies benefiting from the funds to report how the money is spent.
The lawmakers’ decision follows an Associated Press report in which the news agency said it had asked 21 banks how they’re spending the money — only to receive no answers or vague answers at best.
The article said the profit so far amounts to about a 15 percent return annually, and that the news comes as a pleasant surprise given a lot of controversy around the Troubled Asset Relief Program when it was approved.
The profit so far has included $1.4 billion from Goldman Sachs, $1.3 billion from Morgan Stanley (NYSE: MS) and $414 million on American Express(NYSE: AXP), as well as between $100 million and $334 million in profit from the five other banks that have repaid the government, according to the Times report. It does not include $35 million from 14 smaller banks.
The banks operating in the Dayton area that have paid back their TARP funds include U.S. Bancorp (NYSE: USB) and JPMorgan & Chase Co.(NYSE: JPM).
The article cautions that the government has yet to be paid back by insurance giant American International Group (NYSE: AIG) or the automakers, General Motors and Chrysler.
Click here for the full report from the Dallas Business Journal
Matt Taibbi of Rolling Stone Magazine
Click the picture or link below to hear Kevin’s interview with the political columnist for Rolling Stone Magazine, Matt Taibbi and click here to read his article, “The American Bubble Machine.”
The Great American Bubble Machine
July 2, 2009
Rolling Stone Magazine
by Matt Taibbi
The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.
Any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.
They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They’ve been pulling this same stunt over and over since the 1920s — and now they’re preparing to do it again, creating what may be the biggest and most audacious bubble yet.
