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The Dow and the S&P both had their worst January in history.
This month has been the worst January for the Dow since 1896, and for the S&P since 1928.
As both Bloomberg and Market Watch point out, the performance of the stock indices in January tends to forecast stock performance during the rest of the year.
So 2009 may be a very bumpy ride.
At the World Economic Forum in Davos, it was revealed that Forty Percent of the World's Wealth has been destroyed by the financial crisis so far.
As writers like Mish have repeatedly pointed out, even though the forces which could create hyperinflation (printing gzillions of dollars) are gigantic, the deflationary forces are - at present - even more enormous.
In other words, when you are Pumping Dollars Into an Airplane with a Hole in the Side, cabin pressure is not going to increase very fast.
Indeed, the whole plane might go down before cabin pressure is ever restored to normal.
If the pilot manages to avoid crashing into the ocean, then we might have to worry about excess cabin pressure (hyperinflation created by too many dollars).
But - as of today - the plane is still quickly losing altitude.
If the government is looting the treasury to the tune of of $700 billion plus, give the American people the money, not the con artists who got us into trouble in the first place.
We'll use the money to pay off our mortgages, credit card and other debt, and to stabilize the economy.
Instead of the peanuts the government gave us in the "stimulus package", this would have a real benefit, and would largely solve American's economic problems.
Say it Congress, phone it into talk shows, put it in emails and bumper stickers and freeway blogs:
"If You're Looting the Treasury, Give it To US"
The last official act of any government is to loot the treasury. If their looting the treasury, give it to the people.
As a reader named Ron puts it, distributing money to the taxpayers instead of the fat cats has many benefits:
"Pay off your mortgage - housing crisis solved.Bottom line: If the loot is given to the financial elite, it will probably be the last official act of the government. But if it is distributed to the American people, it could create a true and sustainable economic recovery.
Repay college loans - what a great boost to new grads
Put away money for college - it’ll be there
Save in a bank - create money to loan to entrepreneurs.
Buy a new car - create jobs
Invest in the market - capital drives growth"
The financial elite will propose a "new, improved" version of the bailout bill in the next couple of days. Here is some advanced ammunition to use against the proposal:
Unless the new bailout proposal will actually help Americans, use the above proven lies by the proponents of the original bailout monster to argue that the liars cannot be believed, and that the fruit of the poisonous tree is itself poisonous.
When the history of the financial crash is written, this is what will be said:
The worldwide financial crisis isn't about the subprime meltdown, although it might have first surfaced there for all to see.
It is not even ultimately about derivatives, although derivatives are by the largest risk numbers-wise (indeed, the nominal value of derivatives dwarfs the size of the world-wide economy).
It is - at core - a crisis of trust.
As long-time financial writer Will Hutton says:
"Such was the break down in trust and sense of panic that some of the most familiar names in British high street banking would not lend to each other at all or, at best, just overnight. Instead, the Bank of England had to supply tens of billions to banks who found the normal sources of funds blocked.
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Unless there is a radical and government-led change in ownership, structure, regulation and incentives so that the principles of fairness are put at the heart of the Anglo American financial system - proportionality of reward and fair distribution of risk - there is no chance of the return of trust and integrity upon which long-term recovery depends."
Princeton economist and former Secretary of Labor Robert Reich agrees that Wall Street's biggest problem right now is the collapse of trust:
The problem is, government bailouts, subsidies, and insurance aren't really helping Wall Street. The Street's fundamental problem isn't lack of capital. It's lack of trust. And without trust, Wall Street might as well fold up its fancy tents.
And as prominent economist Nouriel Roubini writes:
"It is obvious that the current financial crisis is becoming more severe in spite of the Treasury rescue plan (or maybe because of it as this [bailout] plan is totally flawed."
In other words, the financial crisis is worsening because the government is offering proposals based on obvious lies, which will not actually fix anything. Paulson and Bernanke and company are lying - just like the scam artists on Wall Street were lying . . . it's just more of the same.
The crisis will deepen unless real productive manufacturing and service jobs return as the foundation of our economy, honest and transparent accounting is used, and the government stops gaming the system for the benefit of the wealthiest 1%.
As John Carney writes:
"We're probably making things worse. Allowing insolvent institutions to fail and requiring worthless and worth less assets to be fully written down would provide transparency to the market. Instead, we're dedicated to the post-Lehman proposition of "Never Again." The various programs of our government continue to obscure asset pricing and conceal insolvency. This means that you can't trust the market to tell you which firms are failing.
Twisting the arms of bankers to lend to institutions that may be insolvent is a recipe for deepening the crisis. We've just been through a period of malinvestment--we spent too much borrowed money on junk. Borrowing more to spend on junk only digs us in deeper.
Bank lending won't get going again until trust in the markets can be restored. Fighting a Great Depression era problem probably won't help. More transparency, which means more write-downs and failures, is probably necessary if we're going to get through this. Unfortunately, we're still sailing in the opposite direction."
See also this.
The economic crash - as horrible as it is - has a silver lining.
It is a window of opportunity wake Americans up from their comfortable slumber and make them question their government.
Stalin said that dictatorships only last so long as the dictators keep their people well-fed. Americans have been strongly motivated not to question the government because they have been led to believe that if they just follow the party line, they'll get nice jobs, make a bundle of dough, buy into "the American dream". A crash has the possibility to awaken Americans from their long nap. It has the potential to get Americans to open their eyes and start questioning the lies they have been told by our government and their media lapdogs about virtually everything. Indeed, polls show that the economic crisis has increased Americans' distrust in government.
The old systems, institutions and habits are collapsing. This is a window of opportunity to reach people with truth.
In an important shift, top bond fund managers are selling some of their treasury bonds and buying corporate debt.
As Market Watch notes:
"Investment-grade credit is very attractive," said Gregory Davis, head of bond indexing at Vanguard and portfolio manager for its Long-Term Bond Index Fund....
For corporate bonds, "a lot of bad news is priced in, including defaults and downgrades," Davis said.Top-performing fund managers are selling or paring their holdings of U.S. Treasurys, one of last year's best-performing assets....Meanwhile, other government programs to bail out the credit markets, say by guaranteeing bank debt, will make Treasurys less attractive, managers say."As policy maneuvers are implemented and make the way through the system, prudent investment managers are going to be reducing their risk-free exposure and going more towards risk products," meaning anything besides Treasurys, said Steve Rodosky, manager of PIMCO Long Duration Total Return Fund....One strategy that successful managers say has some legs is to buy debt that the government is also buying.That strategy lends itself to holding mortgage-backed securities and debt sold by the big housing finance agencies including Fannie Mae, Ginnie Mae and the Federal Home Loan Banks....
Companies that are explicitly benefiting from policy actions are likely to have the best opportunities, said Rodosky ....Debt sold by banks that is guaranteed by the Federal Deposit Insurance Corp. should do well, he said.Also, debt sold by firms that have issued FDIC-backed notes but that trade on their own rating have good potential relative to the risk involved, he said.Still, "there are going to be some losers in this process, despite the government guarantees," he said. Several institutions are likely to be consolidated."Not every bond out there is money good," he said.
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Bond managers expressed the most distaste for Treasurys, which helped several avoid the market's pitfalls last year. They expect Treasury bond prices to fall, pushing yields up, by the same policies that help other assets. The government is incurring a lot of debt buying other securities and propping up financial markets, let alone the massive economic stimulus package expected to be approved in the next month or so.
Congressman Peterson is sponsoring a bill to address the Credit Default Swap problem. As Bloomberg writes:
House of Representatives Agriculture Committee Chairman Collin Peterson of Minnesota circulated an updated draft bill yesterday that would ban credit-default swap trading unless investors owned the underlying bonds. The document, distributed by e-mail by the committee staff in Washington, would also force U.S. trading in the $684 trillion over-the-counter derivatives market to be processed by a clearinghouse.
“This would basically kill the single-name CDS market,” said Tim Backshall, chief strategist at Credit Derivatives Research LLC in Walnut Creek, California. “Given the small size of many issuers’ bonds outstanding, this would make it practically impossible for the CDS market to exist.”
(See also this FT article).
Peterson's bill would ban "naked CDS trading" (that is, buying CDS when you don't own the underlying asset, which is the only valid business purpose for CDS's).
Because CDS are a large part of what caused the financial crisis, I urge everyone to contact Congress to support the bill.
As soon as the bill is assigned a number, I will post that information here.
America has won a major battle against the financial elite.
The house has rejected the bailout scam. The will of the people - as expressed through thousands and thousands of angry phone calls and faxes to Congress - prevailed.
But the financial elite will regroup and try another attack on the people and the free market . . .
Big Money and their Congress critters will try again, and use dirty tricks and try to pass it when no one is looking.
So we must redouble our efforts to make sure we win the war, as well as just one battle.
Call and thank those who voted no, and tell congress that anyone who voted yes or who votes yes in the future will be kicked out of office, tarred and feathered. And demand that they address the real financial issues, like Iraq (it is bankrupting America, we have to get out), derivatives (by far the largest financial crisis), etc.
Find congress members' contact info here.
Famed future trend forecaster Gerald Calente was recently interviewed by libertarian economics writer Lew Rockwell. Calente said:
Some people have blamed those who oppose the bailout for the crash in the stock market. Are they right?
Well, first of all, the overwhelming majority of Americans rejected the bailout. So if you start trashing those who opposed the bailout, your dissing America.
Second, most experts who have looked at the bailout say it won't work, and will actually make the economic crisis worse.
Third, the bailout doesn't address the fundamental issues which need to be addressed to actually stabilize the U.S. economy, such as the trillions of dollars being spent in Iraq and the phony war on terror, the national debt, derivatives, lack of savings, the loss of our manufacturing base, the fact that the wealthiest people have collected all of the poker chips so that regular people can't keep playing, and gaming of the markets by the super-rich and the government.
And last but not least, investors who are dumping stocks because a quick "fix" wasn't approved don't understand what is going on. hey don't understand the real, fundamental problems with the economy. For example:
Are those who oppose the bailout responsible for the stock market crash?
No . . . those who got us into Iraq and the war on terror based on lies, who have run up the national debt into the stratosphere, those who hawked derivatives as a safe bet (including Alan Greenspan), those who have encouraged borrowing instead of saving, those who argued it was good for America to ship our manufacturing jobs overseas, those who have been so greedy that they've taken all the chips, and those who have been gaming the markets are responsible.
Democratic and Republican congress members are sounding the alarm: tyranny is here.
For example:
“I have been thrown out of more meetings in this capital in the last 24 hours than I ever thought possible, as a duly elected representative of 825,000 citizens of north Texas.”
Burgess asks the Speaker of the House to post the bailout bill on the internet for at least 24 hours instead of passing the largest piece of legislation in US financial history in the “dark of night.”
Rep. Burgess’ says, “Mr. Speaker I understand we are under martial law as declared by the speaker last night.” (Note: For an explanation of what he meant by martial law, see this)
Of course, there are many other indications that tyranny has already come to Amerca, including the permanent stationing of U.S. troops inside the country to quell "civil unrest" and the probable suspension of normal constitutional government for a state of emergency "continuity of government" operation.“My message to the American people don’t let Congress seal this deal. High financial crimes have been committed.
The normal legislative process has been shelved. Only a few insiders are doing the dealing, sounds like insider trading to me. These criminals have so much political power than can shut down the normal legislative process of the highest law making body of this land.”
We are Constitutionally sworn to protect and defend this Republic against all enemies foreign and domestic. And my friends there are enemies.”The people pushing this deal are the very ones who are responsible for the implosion on Wall Street. They were fraudulent then and they are fraudulent now.”
"House leadership invokes 'martial law,' forcing members to vote on key bills without full knowledge of what they are voting on: move represents erosion of the democratic process"Indeed, many people, including high-level politicians, have been warning of tyranny in the U.S. for some time. As three of many examples:
Bank stocks have fallen even faster than during the Great Depression.
CNBC has the story:
Update: Business Week has an article entitled "Stock Decline Hits Depression Levels - Money invested 10 years ago in stocks have lost half their real value, matching the worst ten years of the Great Depression".According to Jeff Rubin of Birinyi Associates, bank stocks have fallen further and faster than at any time in history, including the Great Depression.
Rubin said on Tuesday, the day of their big sell off, bank stocks were down 78.51 percent from their February, 2007 high. At a parallel point in the 1930s (two years from their high), bank stocks were down 78.09 percent.
Merrill Lynch's chief economist for North America, David Rosenberg, writes in an economic commentary entitled "Some Inconvenient Truths" that we are probably already in a depression:
We are likely enduring a depression today
As for depressions, there is no official definition, except to say that they have existed in the past. There were no fewer than four in the nineteenth century, one in the twentieth century, and we are very likely enduring another one today.
As I have previously written, just like it took many months for the officials and talking heads to admit that we were in a recession - and in fact had been for a long time - it will take a while before the government admits that we are already in a depression.
The Telegraph's lead economic writer, Ambrose Evans-Pritchard, has an interesting article arguing that we are in 1931-like conditions:
I have previously shown that the Government heard the 9/11 hijackers' plans from their own mouths.
PBS is about to confirm this.
Raw Story summarizes the PBS revelations:
Author James Bamford looked into the performance of the NSA in his 2008 book, The Shadow Factory, and found that it had been closely monitoring the 9/11 hijackers as they moved freely around the United States and communicated with Osama bin Laden's operations center in Yemen. The NSA had even tapped bin Laden's satellite phone, starting in 1996.
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PBS also found that "the 9/11 Commission never looked closely into NSA's role in the broad intelligence breakdown behind the World Trade Center and Pentagon attacks. If they had, they would have understood the full extent to which the agency had major pieces of the puzzle but never put them together or disclosed their entire body of knowledge to the CIA and the FBI."
In a review of Bamford's book, former senator and 9/11 Commission member Bob Kerrey wrote, "As the 9/11 Commission later established, U.S. intelligence officials knew that al-Qaeda had held a planning meeting in Malaysia, found out the names of two recruits who had been present -- Khalid al-Mihdhar and Nawaf al-Hazmi -- and suspected that one and maybe both of them had flown to Los Angeles. Bamford reveals that the NSA had been eavesdropping for months on their calls to Yemen, yet the agency 'never made the effort' to trace where the calls originated. 'At any time, had the FBI been notified, they could have found Hazmi in a matter of seconds.'"
Former CIA analyst Michael Scheuer told PBS, "None of this information that we're speaking about this evening's in the 9/11 Commission report. They simply ignored all of it."
Not only was then-Director Michael Hayden never held accountable for the NSA's alleged failure, but he went on to oversee the Bush administration's vast expansion of domestic surveillance. In 2006, he was appointed as director of the CIA.
And since the NSA reports directly to the White House, the whole allegation that "turf wars" between the different intelligence agencies caused 9/11 holds no water. In reality, the NSA and other intelligence services conveyed sufficient information to the White House to stop 9/11, but the White House ignored it and shut down further investigation.
Preface: To those who believe that all 9/11 conspiracy claims are crazy, please listen to what intelligence officers, military leaders, legal experts, and others in the know have to say. On the other hand, to those who believe that 9/11 was an inside job - so that talk of mere "negligence" is a cop-out, please read to the end before making up your mind about strategy. As David Ray Griffin has pointed out, nearly everyone who looks at the evidence regarding 9/11 with an open mind ends up being convinced that it was an inside job. Any prosecution related to 9/11 will force people to look at the evidence.
Gangsters have been jailed for life based on convictions for tax fraud.
Investigations into small misdeeds often turn up evidence of major crimes.
And covering up the crime is itself a crime. Even if the prosecutor isn't sure how you did it, if he can prove you covered up the crime, destroyed evidence, committed perjury, etc., you'll end up in the big house.
So if government agencies are too spineless to prosecute for anything else, prosecuting those complicit in 9/11 for criminal negligence and/or cover-up is worthwhile.
Is there strong evidence of criminal negligence with regard to the 9/11 attacks?
Is there strong evidence for a cover-up and destruction of evidence?
Without doubt. See this and this.
Now is the perfect time to prosecute criminal behavior.
9/11 is no exception.
If the only politically feasible way to do it is to start with a prosecution solely for criminal negligence or cover-up, then start there.
An article in CNBC states, "The U.S. Congress and the Bush administration were under intense pressure on Saturday to negotiate a $700 billion rescue".
Who is putting intense pressure on both the White House and Congress to pass the bailout?
Not the American people, who overwhelmingly oppose the bailout.
Not American economists, former treasury secretaries, chairmen of the FDIC, or the Congressional Budget Office, who all say that the bailout won't work, and will actually harm the economy.
So who is putting the intense pressure on our government?
Maybe its just America's financial elite.
But consider that many financial analysts say that the real reason that the government bailed out Freddie and Fannie is because China demanded it. And there were rumors last week that China instructed its banks to stop lending to U.S. banks. The U.S. owes trillions of dollars to China which, along with Japan, Saudi Arabia, and other creditor nations, is keeping America afloat. If they pulled the plug, the U.S. would instantly default on its obligations. See this.
They say that economics and finance are now global. Perhaps corruption, blackmail and tyranny are also.
I previously pointed out that when the Japanese government threw cash at their big banks in the 90's, the banks just horded the money instead of using it to restore "liquidity".
Well, a professor of economics and an expert in liquidity now hints that the entire liquidity "crisis" might be a hoax.
Bloomberg quotes the good professor:
"I suspect that part of what we're seeing in the freezing up of lending markets is strategic behavior on the part of big financial players who stand to benefit from the bailout,'' said David K. Levine, an economist at Washington University in St. Louis, who studies liquidity constraints and game theory.
Are the big banks faking a liquidity crisis because they know that if they act like the financial system is drying up, they'll get a big bailout?
Like a kid who pretends he's sick so he can play hookie from school, are the big players pretending they are financially "sick" so that they can play hookie from the free market?
Forget Republican versus Democratic. That's a false dichotomy. Its the Democrats in Congress who are now trying to pass the fat cat welfare, taxpayer-funded bailout. Forget labels. Forget politics. Forget who should get credit for good ideas. Let's look at substance and do what's best for the country.
House Republicans are pushing a meaningful alternative to the Paulson bailout plan.
CNBC has the story:
This is a chance to stop the taxpayer bailout and to make the scam artists who created the economic mess clean it up.In a letter to House Speaker Nancy Pelosi, House Minority Leader John Boehner urged that the proposals be "given the consideration they deserve."
The proposals include:
Click Here to Read Boehner's Letter and Republican Proposal
- Wall Street – Not Taxpayers – Should Fund the Recovery
- Private Capital – Not Tax Dollars – Should Be Injected Into Financial Markets
- Immediate Transparency, Oversight, and Market Reform
(1) Wall Street - not taxpayer - funding of the recovery(Find contact info at Congress.org).
(2) Private - not public - capital injected into the markets
(3) Immediate transparency, oversight and market reform, and
(4) Insist that they clean up the derivatives mess, also.
The following experts have slammed the bailout:
The following group of prominent economists, including numerous Nobel Prize winners, has written a letter slamming the bailout proposal:
In 1930, there were 123 million Americans.
You know the $700 billion price tag of the proposed bailout? Treasury pulled that number out of thin air.
As Forbes writes:
In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.
"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."
McCain is making the following threat: "Vote for the bailout or I'll pull out of the election".
Sen. Lindsey Graham, McCain's representative in debate negotiations, said McCain will not attend the debate "unless there is an agreement that would provide a solution" to the financial crisis. Graham, R-S.C., told The Associated Press that the agreement would have to be publicly endorsed by Obama, McCain, the White House and congressional leaders, but not necessarily given final passage by the House and Senate.McCain is trying to blackmail America: Pass the bailout, or the elections won't happen.
CNN is reporting that McCain has "suspended his campaign" and is asking Obama to do the same, due to the economic crisis:
Republican presidential candidate Sen. John McCain announced Wednesday that he is suspending his campaign to return to Washington and focus on the "historic" crisis facing the U.S. economy.
Is this the first step in canceling the elections due to "national emergency"?
Is that part of the reason that the U.S. military is permanently being deployed within the U.S. to deal with "civil unrest" and "crowd control"?
Many of us have been warning about this possibility for years.
Hopefully, McCain's suspension of his campaign is just political posturing, and he will return to the campaign next week. Hopefully, this is not the first step in canceling the election.
I am opposed to the bailout plan because it is socialism. It would deal a mortal blow to the free market and to the rule of law, as Paulson's actions are unreviewable by courts. And Paulson's plan is immoral, because its the fat cats hosing the taxpayer again.
Moreover, it simply won't work.
Why not?
Because the real crisis is the unwinding $62 trillion dollar market in credit default swaps. (See this, this, this, this and this).
A hundred billion here or a hundred billion there - while huge sums - are dwarfed by the potential of a crashing credit default swap market, which could very well take out not only the U.S. economy, but the economies of most of the world's developed countries.
I think there is a powerful argument that we should let the markets sort it out for themselves.
However, if governments are going to do anything, they should cancel all credit default swap contracts. The governments of the world should all declare that default swaps are null and void. See this.
The basis for canceling them? Fraud, for one.
People selling credit default swaps got fat and made billions of dollars selling something that no one understood, that no one was overseeing, and that is threatening to bring down the world economy. Indeed, a young, brand new graduate who knew nothing about the real world invented credit default swaps and talked her bosses at JP Morgan into selling them.
And yet they were sold as a relatively safe investment, even though the companies which sold them didn't have the assets to pay out on them. That's fraud.
Warren Buffet calls derivatives "weapons of mass destruction", and they should be treated as such.
Remember that banks and financial houses have hidden their derivatives exposure off the balance sheets. And almost no one understands derivatives:
"Not only [world's richest man] Warren Buffett, but Bond King Bill Gross, our Fed Chairman Ben Bernanke, the Treasury Secretary Henry Paulson and the rest of America's leaders can't 'figure out'" the derivatives market.Indeed, the government actively helped to hide the derivatives mess since at least 2006. For example, according to Business Week:
"President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations."Again, I am for the free market and for the rule of law. But if the U.S. government is going to stick its enormous nose into the free market, the Paulson bailout plan is not what will help. The one thing the government could do is cancel credit default swaps and persuade allied governments to do the same.
Quite a few people think that - now that they are out of office - it is too late to try Bush, Cheney, Rumsfeld, Gonzales and the rest of the boys for their crimes.
Even those who support prosecutions think it probably won't happen. For example, Dave Lindorff wrote today:
The likelihood of their being indicted and brought to trial now that they have left office is exceedingly slim.
The truth, however, is that it is a much better time to prosecute the criminals then when they were in office.
Why?
Because, as an attorney has previously pointed out:
It is unlikely that a court would allow high-level officials such as a sitting president or vice president to be tried until they leave office after the end of their designated term or through impeachment and removal. This is because the constitutional "separation of powers" doctrine provides that one branch of government, such as the judiciary, cannot unduly interfere with the workings of another branch, such as the executive branch. It is clear that, pursuant to federal statutes, a sitting president cannot be tried criminally, although it has not been decided whether the president can be indicted (the first step in the criminal process) while in office or whether the vice president has the same protections as the president. Thus, even if a court did not dismiss a lawsuit outright on sovereign immunity grounds, it would almost certainly stay (i.e. pause) any lawsuit against the president and vice president.
Now that the boys are out of office, prosecutions can move forward. It is the perfect time to prosecute.
In the 1974 comedy Blazing Saddles, Cleavon Little plays the new sheriff in an old Western town. The sheriff is African-American, and when he rides into town for the first time, the townspeople pull out their guns and are about to shoot him.
But he quickly puts a gun to his own head, pretends he's scared of his own gun, and says "BACK OFF OR THE AFRICAN-AMERICAN GUY GETS IT!!!" The townspeople are dumb and fall for it, suddenly terrified that he'll kill himself. Here's the scene.
That's what Wall Street is doing with the bailout.
The fat cats on Wall Street are saying "give us a lot of money, and buy all of our bad debt for a lot more than its worth, or Wall Street will get it and we'll go into a depression!"
Are Americans stupid enough to fall for it?
Note: While the scene contains racism, this analogy really has nothing to do with race. If it was a white sheriff, I still would have written about it, because its the principal of threatening one's self to manipulate other people which I'm referring to, not any racial issues. In any event, it was the sheriff - not the townspeople - who was the smart one.
New research shows that people may be a lot smarter than they realize.
Specifically, normal people who suffer brain injuries may develop increased mental abilities.
How could damage to the brain increase brain function?
Because damage to portions of the brain which inhibit our brain-processing power allow us to become aware of such faculties.
Scientists at the University of Australia who have studied this issue conclude that we all probably have the ability to activate heightened brain functions without comprising normal brain functions (and we don't need to get hit in the head to do it):
So, if all of us have latent super-abilities, is it possible to activate them permanently, or at least periodically, without compromising normal brain functioning? Probably, say the Australian scientists who used transcranial magnetic stimulation to temporarily switch off the frontal temporal lobe of volunteers. Afterwards the subjects showed an immediate improvement in calendar calculating, naming the day of the week of any recent history event, and in their artistic abilities. Of course these were just the abilities tested. Scientists do not know all of the latent abilities that humans may possess.
An article in the Army Times reveals that the 3rd Infantry Division’s 1st Brigade Combat Team will be redeployed from Iraq to domestic operations within the United States.
The unit will soon be under the day-to-day control of US Army North, the Army service component of Northern Command. The Army Times reports this new mission marks the first time an active unit has been given a dedicated assignment to Northern Command. The paper says the Army unit may be called upon to help with "civil unrest" and "crowd control".
The soldiers are learning to use so-called "nonlethal weapons" designed to subdue unruly or dangerous individuals and crowds.
This violates posse comitatus and the Constitution. But, hey, we're in a "national emergency", so who cares, right?
Apologists for the bailout plan say that it will have a trickle-down benefit for taxpayers.
But in his testimony to the Senate today, Bernanke pretty much admitted that the bailout isn't aimed at helping taxpayers.
Specifically, as the Wall Street Journal summarizes it:
So Bernanke is arguing against the government purchasing Wall Street's toxic assets at their real price (which would benefit taxpayers) and for the Wall Street firms themselves to set whatever arbitrary price they like, since they "have a view of what they think it's worth" and "it's hard for outsiders to know".Bernanke used his time to argue for not buying assets at fire-sale prices in the Treasury's $700 billion bailout proposal.
***Mr. Bernanke said the Treasury plan should have taxpayers buy the assets and hold them at close to their maturity value. Removing the assets, he said, would bring liquidity back to markets, unfreeze credit markets, reduce uncertainty and allow banks to attract private capital. (Reuters has a partial transcript)
Forcing assets down to even lower fire-sale prices would protect taxpayers the most, since the government would own the assets below the value if held to maturity. As long as those securities didn’t flat-out default, the government’s purchase would have a substantial upside. However, Mr. Bernanke essentially argued that doing so would hurt markets even further and wouldn’t solve the problem facing the economy. In pushing back against congressional efforts to change the Treasury proposal, Mr. Bernanke said: “We cannot impose punitive measures on institutions that choose to sell assets.” The beneficiaries would be not just the companies selling, but markets and the overall economy, he said.
Still, he acknowledged that the precise approach to doing so hadn’t been determined, arguing for flexibility. “We do not know exactly what the best design is,” and that would come from consultation with experts, Mr. Bernanke said.
“We believe that strong and timely action is urgently needed to stabilize our markets and our economy,” he said.
In subsequent questioning, Mr. Bernanke distinguished between, on the one hand, “fire sale prices,” the ones that prevail “when you sell into an illiquid market” and, on the other, the prices that holders think the assets are really worth, sometimes described as “fundamental” values or “hold-to-maturity” value.
“The holders have a view of what they think it’s worth. It’s hard for outsiders to know,” Mr. Bernanke said. The point of an auction is to reveal those prices.
No one could have seen this coming, right?
Well, actually, the White House has admitted that they drew up the bail out plan months ago:
[White House Deputy Press Secretary Tony] Fratto insisted that the plan was not slapped together and had been drawn up as a contingency over previous months and weeks by administration officials. He acknowledged lawmakers were getting only days to peruse it, but he said this should be enough.But the government did nothing real to prevent the financial meltdown. Instead, it let the meltdown happen, and now is trying to ram through terrible and counter-productive legislation drafted previously by using fear tactics.
As we all know, the powers-that-be have used the "Shock Doctrine" to pass anti-American, fascist legislation while the public was in a state of shock.
This applies to economic shocks, as well as physical attacks like 9/11.
Indeed, right now, Paulson and Bernanke are using the shock doctrine to try to ram through legislation that would help out the fat cats at the expense of taxpayers, and give the government control over the free market.
But there is some resistance. For example, Senator Leahy and the New York Times are questioning Paulson's use of shock and awe:
"The rescue is being sold as a must-have emergency measure by an administration with a controversial record when it comes to asking Congress for special authority in time of duress."***
Mr. Paulson has argued that the powers he seeks are necessary to chase away the wolf howling at the door: a potentially swift shredding of the American financial system. That would be catastrophic for everyone, he argues, not only banks, but also ordinary Americans who depend on their finances to buy homes and cars, and to pay for college.
Some are suspicious of Mr. Paulson’s characterizations, finding in his warnings and demands for extraordinary powers a parallel with the way the Bush administration gained authority for the war in Iraq. Then, the White House suggested that mushroom clouds could accompany Congress’s failure to act. This time, it is financial Armageddon supposedly on the doorstep.
“This is scare tactics to try to do something that’s in the private but not the public interest,” said Allan Meltzer, a former economic adviser to President Reagan, and an expert on monetary policy at the Carnegie Mellon Tepper School of Business. “It’s terrible.”
The only hope of preventing another dose of shock politics is loud, organized grassroots pressure on all political parties: they have to know right now that after seven years of Bush, Americans are becoming shock resistant.
The people don't want it (see this poll showing that only 28% support the bailout; and see this).
Most economists don't want it (see this, this, this, this and this).
Many congress people don't want it (see here and here).
So who wants the bailout?
The only people who want it are the big money boys, the ultra elite, including the Wall Street fat cats and Fed who got us into this mess, and their counterparts abroad who would also be bailed out (see this and this).
It is literally America versus the financial elite.
The Fact Sheet from the U.S. Treasury states:
The purchases are intended to be residential and commercial mortgage-related assets, which may include mortgage-backed securities and whole loans. The Secretary will have the discretion, in consultation with the Chairman of the Federal Reserve, to purchase other assets, as deemed necessary to effectively stabilize financial markets.
Most people think that the proposed bailout will cost $700 billion. In fact, it is not limited to $700 big ones, and will probably go much higher.
Specifically, Paulson's draft bailout plans says:
"The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time."
That means that Paulson could buy a couple hundred billion worth of assets one day, sell them, and then the next day buy another couple hundred billion, and so on.
The maximum price tag?
There is no maximum. Paulson could literally spend unlimited taxpayer monies. And remember that Paulson has already broadened the proposal to include the purchase of non mortgage-related assets (and see this).
As Chris Martenson writes:
This means that $700 billion is NOT the cost of this dangerous legislation, it is only the amount that can be outstanding at any one time. After, say, $100 billion of bad mortgages are disposed of, another $100 billion can be bought. In short, these four little words assure that there is NO LIMIT to the potential size of this bailout. This means that $700 billion is a rolling amount, not a ceiling.Indeed, as written, the feds are only limited to $700 billion at a time in mortgage-related assets. But since they can also buy non-mortgage related assets, the $700 billion language may not even apply to other assets.
So what happens when you have vague language and an unlimited budget? Fraud and self-dealing. Mark my words, this is the largest looting operation ever in the history of the US, and it’s all spelled out right in this delightfully brief document that is about to be rammed through a scared Congress and made into law.
Not only are the fed bailouts giving billions to foreign central banks, but the new $700 billion bailout proposal could bail out private foreign banks as well.
Specifically, a Fact Sheet from the U.S. Treasury says:
Participating financial institutions must have significant operations in the U.S., unless the Secretary makes a determination, in consultation with the Chairman of the Federal Reserve, that broader eligibility is necessary to effectively stabilize financial markets.
An article from today in Politico explains
"In a change from the original proposal sent to Capitol Hill, foreign-based banks with big U.S. operations could qualify for the Treasury Department’s mortgage bailout, according to the fine print of an administration statement Saturday night."
An interview in Bloomberg shows why the bailouts won't work:
As details of Treasury Secretary Henry Paulson's plan to revive the U.S. financial system by pumping as much as $700 billion into the markets emerged Sept. 19, bond investor Michael Cheah was reminded of Japan.We already know that Wall Street firms have used fed cash to speculate or to buy failing competitors. As the economic crash gets worse, they may just park it in treasuries to try to save their own hides.
When that country's real estate bubble burst, leaving a trail of bad real estate loans, officials flooded the economy with cash only to see banks hoard the money instead of lending it out. The result has been a series of recessions and persistent deflation for more than a decade.
"Although the government tried to debase the yen by printing a lot of government bonds, the economy went into a standstill,'' said Cheah, an official at the Monetary Authority of Singapore from 1991 to 1999 who manages $2 billion at AIG SunAmerica Asset Management in Jersey City, New Jersey. "The banks used the money to buy safety. I see a repeat happening here. The banks will use it to buy Treasuries.''
Many commentators have called the Paulson bailout socialism for the wealthy. For example, former senior advisor to the U.S. Treasury and highly-regarded economics professor, Nouriel Roubini, says that Washington’s bail outs are “socialism for the rich, the well connected and Wall Street; it is . . . a corrupt system where profits are privatized and losses are socialized.”
But as leading journalist Robert Scheer notes, this is more like fascism than socialism:
What is proposed is not the nationalization of private corporations but rather a corporate takeover of government. The marriage of highly concentrated corporate power with an authoritarian state that services the politico-economic elite at the expense of the people is more accurately referred to as "financial fascism" [than socialism]. After all, even Hitler never nationalized the Mercedes-Benz company but rather entered into a very profitable partnership with the current car company's corporate ancestor, which made out quite well until Hitler's bubble burst.Indeed, historian Gaetano Salvemini argued in 1936 that fascism makes taxpayers responsible to private enterprise, because "the State pays for the blunders of private enterprise... Profit is private and individual. Loss is public and social" (page 416). This perfectly mirrors Roubini's statement about the current bailout plan.
As an article on Wikipedia states:
In general, apart from the nationalizations of some industries, fascist economies were based on private property and private initiative, but these were contingent upon service to the state.Sound familiar?
***
Fascist governments encouraged the pursuit of private profit and offered many benefits to large businesses, but they demanded in return that all economic activity should serve the "national interest".
Government propagandists, their hired private contractors and useful idiots are creating "downvote bots" or scripts to bury stories which question the government.
Anyone who has posted news items questioning the government's version of 9/11, the government's unquestioning support for Israel, or a host of other topics has probably noticed that all of their recent stories get downvoted virtually simultaneously, which defies the laws of probability.
One free, simple scripting program to create automatic downvotes of certain topics or news posters is called "Greasemonkey", which is commonly used on large social news sites such as Reddit.
For example, there are some 2,480 hits for the google search site:reddit.com greasemonkey downvote. This is some 2,480 times that Reddit users are publicly admitting to using greasemonkey (see also this).
Propaganda agents obviously aren't going to publicly brag about what they are doing, and you can bet that their use of downvote bots is much greater. Moreover, they probably have more sophisticated software than Greasemonkey.
As one example of a publicly-available downvote bot, this script automatically downvotes any stories on 9/11, Gaza, torture, Guantanamo and a host of other topics, downvotes certain posters, and engages in other forms of cyber warfare.
I call on programmers to figure out a way to fight this cyberwarfare propaganda.
Note: Greasemonkey has valid uses as well, such as blocking pop-up ads.
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Economics reading © 2011 - September 2011
