Comment posted on another website

Posted this morning in comments at FabiusMaximus.com

Fab,

You amusingly take your contrarian tendencies to meta-levels of self-revolution that virtually are always entertaining! But you must be dizzy at times. Thanks for being so entertaining!

Two comments semi-germane to today's post:

1. As I've pointed out before, the rehearsal of catastrophe is always good entertainment (Aristotle), but that doesn't mean it's wrong! W.r.t current forecasts of collapse, my personal take is that the economy still exhibits the signature of pre-collapse seen before the Great Depression: excessive debt/GDP, mostly bad debt not being cleared by the banks; and very high income inequality. So I expect another financial collapse. This is a judgment call resulting from 30 years post economics PhD following the economy and learning to separate the mainstream propaganda from "the truth" as far as I can discern it.

2. John Robb is out with a proclamation that the problem with the world is that "the American dream" (that one should be able to get ahead by working hard) and that it needs to be reborn. I assert that it is excessive greed of the "managerial capitalist class" and their focus on profit (i.e., usually by screwing labor; record high profit/GDP etc.) that is the problem, and until all corporations face regulations similar to those in Germany and Scandinavia recognizing that employees are valid stakeholders in a corporation the problem won't be solved.

Back in the 'Seventies when regulation was in its heydey businesses used to say (re: environmental protections, for example) that they couldn't do it by themselves, that it needed to be required of all or they couldn't make a decent profit. Same thing applies today. Employee rights need to be enforced via law around the world in a reasonable way.

In my more optimistic moments I speculate that, as the most powerful form of social organization on the planet today, that corporations will naturally evolve to optimize their internal distributions a la Wilkinson (see his great TED talk on inequality) to maximize health and welfare benefits of all.

Interestingly, Putin has encouraged his oligarchs to register their businesses for tax purposes in Russia to support the nation. Radical concept.

The Ukraine: the dollar's Waterloo?

Very trenchant analysis from www.thegoldenjackass.com:

The desperation of the Anglo-American leadership, guided by the steady corrupt banker hands, has never been more acutely high, nor obvious in full view. The entire Ukraine situation is a travesty. It includes Langley agents killing police and street demonstrators from rooftops, the confirmation coming from the Estonian Embassy (translation of scripts). It includes thefts of official Ukrainian Govt funds, again sent to the Swiss hill sanctuary. It includes sanctions delivered by a US Paper Tiger, sure to cause horrific backlash. It involves the last gasp attempt to obstruct the Gazprom energy pipelines, which will inevitably corner the European market in monopoly. It involves subterfuge with the NATO card (aka Narcotics And Treachery Outlaws) with missiles placed on the Russian borders. Look for NATO members to find a back door to exit the spurious treaty. It involves playing with nitro-glycerine in the Petro-Dollar room. It involves putting tremendous risk for much more clear isolation of the United States. The more the USGovt pushes, the more the US will be isolated. Remember that Nazis steal from their enemy states, de-fraud from their allied states, and force themselves into an isolated state. In Ukraine, the United States has over-played its weak hand. Already, a secret document was leaked in London that the UKGovt would not support the US-led sanctions against Russia.

History repeats itself from the Kremlin phone calls made during the Syrian conflict just a few months ago, when the UKGovt withdrew its support and left the US isolated, looking very weak. Already, Putin has threatened to dump USTreasury Bonds. Putin aptly calls the Anglo-Americans as Mutants. Imagine the lunacy of trying to cut off the only Russian warm water military naval port in the Crimea. Just as stupid as the Trans Pacific Partnership faux pas, trying to cut off China from its Asian neighbors and partners in trade. The intelligence level of the USGovt has never been more stupid, destructive, and in full view. The lost ground for the United States is obvious and glaring in the Persian Gulf, the Mediterranean Sea, and the Caucasus region.

IMMEDIATE PETRO-DOLLAR RISK

If the Kremlin demands Gold bullion (or even Russian Rubles) for oil payments, then the interventions to subvert the Ruble currency by the London and Wall Street houses will backfire and blow up in the bankster faces. Expect any surplus Rubles would be converted quickly to Gold bullion. If the Chinese demand that they are permitted to pay for oil shipments in Yuan currency, then the entire Petro-Dollar platform will be subjected to sledge hammers and wrecking balls. The new Petro-Yuan defacto standard will have been launched from the Shanghai outpost. If the Saudis curry favor to the Russians and Chinese by accepting non-USDollar payments for oil shipments, then the Petro-Dollar is dead and buried. The rise of the Nat Gas Coop run by Gazprom is in progress, its gas pipelines to strangle the OPEC and its bastard Petro-Dollar child. The entire USDollar foundation with the USTreasury Bond bank reserve structure is at risk is collapsing, as consequence to the desperate adventure and criminal activity conducted in Ukraine. Just like with Syria, a hidden giant energy deposit is concealed under the table. Off the Lebanese and Syrian coast, a massive off-shore energy deposit was recently discovered. The US & UK & Israeli oligarchs wish to take it all. Confusion is their game. In the western plains of Ukraine, a massive gas deposit was recently discovered. The US & European oligarchs wish to take it all. Confusion is their game.

The danger level has never been higher. No resolution to the Global Monetary War can come, which we have been seeking, without a climax. It is hardly just a financial crisis amidst a stubborn economic recovery. The nature of the currencies and their underlying sovereign bond foundation is highly toxic, which requires a strong replacement as solution, using an alternative to the USDollar alongside its reserve ledger item the USTreasury Bond. A return to the Gold Standard is coming, but the birth will have loud pangs and possibly broad damage suffered. The Global Currency Reset is better named the Return to the Gold Standard. The United States and London will not give up their control of the Weimar Printing Press easily, used for elite self-dole of extreme wealth. It has served well as the Elite credit card. They will not go quietly, and assume their place in the backwater without taking the world to the brink. No climax can occur without enormous risk and loss. The Global Paradigm Shift is in full gear, with attendant risk huge here and now. My Jackass firm belief is that the US/UK fascist team face a Waterloo event in Ukraine, the victim to be the Imperial Dollar. This bulletin will not be a comprehensive note, as the situation is too vast. The information in the Hat Trick Letter is used to interweave a story of the impending removal of the USDollar from its corrupt throne.

UNITED STATES TRAPPED AND CORNERED

The Anglo Americans have fallen into a carefully designed trap by the Russians and Chinese in a clever designed sequence. More Sun Tzu tactics have been put into practice, which utilize the momentum from the enemy to be thrust back on them. Planning for final steps must have taken place during high level Putin meetings with Xi from the elite Sochi viewing box. The unfolding of events has been more carefully engineered and orchestrated than what appears. The US/UK team has been caught in a vise for months, as the rejection of the USDollar as global reserve currency is in high gear, the refusal of the USTBond a recognized trend in diversifications. The death process is slow and grueling. Much of the American Hemisphere is surrounded and controlled by Russia & China, whether the canal, the port facilities, the oil supply, the mineral deposits, even Yuan Swap facilities. Africa has largely gone under Chinese control, with Russia playing a hidden role as well.

The Persian Gulf is in transition, with the critical protectorate role shifting to China. The Qatar royals have just ordered a dismissal of USGovt ambassadors from their nation. Note that Qatar is the site of a giant USNaval base. To be sure, the Sochi Olympic Games are over, a successful event. The gloves have thus come off. The risks have reached acute levels. The US leadership seems cavalier to the risks that over half the USGovt debt is in foreign hands, over 30% of it in Russian & Chinese hands. A severe backlash cometh. The most vulnerable player in the room is the most aggressive, arrogant, vile, and obnoxious. The instability of the situation is far beyond acute. The victim will be the USDollar and its sidekick the USTreasury Bond. The USTBonds will be kicked out of the global banking system. The Third World awaits the United States, for its domestic betrayals, its financial failures, its criminal deeds, and its war aggression.

THE RUSSIAN BACKLASH TO BE SUDDEN

Russian President Vladimir Putin will slam the West, and very soon. The initial salvo might be a natural gas cutoff by Gazprom, the Russian giant which has fast moved into the global monopoly position. Eventually, Putin might demand gold payment for the natgas in the captured pipelines, that being the plan according to The Voice. Russia supplies one quarter of Western European gas needs. It will be the opening salvo for Gold Trade Settlement, for which the Iran workarounds to the sanctions provided the critical prototype. Combined with a formal announcement of USTreasury Bond sales in volume by Russia & China, the impact would be tremendous, even devastating. The reverberation will be soon seen as the pending demise of the defacto Petro-Dollar Standard, dictated by crude oil sales in USD terms. It will also be soon seen as the end of the USTBond as the global reserve standard in banking systems. Notice for over two years, the primary buyer of USGovt debt (and its refunded rollover) has been the US Federal Reserve via bond monetization, an absolute heresy to central banking. Hyper monetary inflation cannot stand as fixed policy. The world has responded by constructing an alternative to trade settlement. The forum has been the BRICS conferences and the G-20 Meetings of finance ministers. The US & UK will gradually be excluded from both forums, a process well along. Even traditional allies like Japan are buying gold in high volume, with suppressed lowball data so far. This is game over for the USDollar, the direct victim of Ukraine backlash. The war against Russia has been veiled, but the Jackass has exposed it.

VEILED ATTACKS AGAINST RUSSIAN GAZPROM

First was the attack against Russian Gazprom in Cyprus. It was a hidden attack made to look like a bank confiscation event. Notice no bank account confiscations outside the small but important island nation. The entire Russian banking clearance system had been done through Cyprus. Also, Russia was making significant transactions to purchase Gold bullion using Cyprus as clearing house for the purchases. Second was the attack against Russian Gazprom in Syria, another complicated event. The US had used the Libyan Embassy as a weapons running facility (major diplomatic violation), after which the US lost Egypt as a transfer station on the weapons running. The false flag attack in Syria was made to look like a chemical weapons event. However, the Saudis were the guilty party. The motive by the US was to block the advance of Russian Gazprom pipelines, which are to connect to the vast Iran supply centers. Iran has far more oil & gas than Iraq. In fact, Iran is the linchpin nation, which will throw its support toward Russia. Iran will push the Nat Gas Coop certain to eclipse Saudi Arabia and the loud gaggle of OPEC members. With the Russian Gazprom, together Iran and the Nat Gas Coop will usher in the Petro-Yuan Standard and bury the Petro-Dollar, the price set by Russia, the contracts set in Shanghai. Thus the Saudis will be expendable, and their Gold in London to be totally stolen.

Move to the present. Third was the attack against Russia Gazprom in Ukraine, done by the CIA and its partner security agents from the small ally nation on the SouthEast Med corner. The old game of destabilization, popular uprising, bank thefts, and now data files stolen has been put into action. The theft of significant funds in Ukraine has only started, funds gone to Swiss banks. The full betrayal will be seen soon. The US & UK have a lunatic plan to corral the Ukraine pipelines and possibly the vast farmlands of Ukraine. The wrong-footed plan will backfire, when Putin cuts off the natgas supply to Europe, when Putin demands a new type of energy supply payment structure, and when Putin engineers certain other steps. They might execute a Nat Gas Coop double in price, much like the OPEC event in 1973. Witness the upcoming Birth of the Eurasian Trade Zone, the birth pangs heard in Ukraine. The United States and Great Britain will not be included. The Eurasian Trade Zone will span 14 time zones and will settle in gold.

IRAN WORKAROUND AS KEY PROTOTYPE SOLUTION

The Anglo Americans have disrupted a key nation with longstanding historical and religious ties to Russia. The land of Ukraine also contains Russia's only warm water naval port in the Crimea, the site of a recent suspicious earthquake. The response will be swift and firm. The Eastern nations (led by China & Russia) have been making detailed preparations in the last couple years to launch the alternative trade system founded in Gold Settlement. Its launch lacks a potential open door trigger, possibly offered by the Ukraine situation. The Gold Standard could return in a baptism by fire. The open door trigger appears to be the Western interventions into Ukraine, since the Western banking structures will not be permitted to collapse, the ugly reality. The abuse of the central bank monetary expansion and fraudulent bond redemption has gone totally out of control, forcing an endless cycle of alternative preparations and motivated reactions, including the Iran workaround with Turkey as intermediary in gold provision. Other attacks have taken place in the last few months against the Russian Ruble by Wall Street firms. The reaction will possibly be the launch of what could eventually be understood to be a gold-backed Ruble currency, combined with natgas cutoffs to Europe and USTBond dumps. At first it could be perceived as the oil-backed Ruble, but its quick hidden conversion to Gold bullion could be revealed later on. The USDollar will be discarded as obsolete, even toxic. The USDollar debt basis might be widely accepted to be the cause of the global financial crisis, and the USFed Quantitative Easing be widely understood to be the cause of the global financial collapse.

EUROPE AS KEY REGION TO TIP EASTWARD

Events inside Western Europe could unfold rapidly. Behind the scenes, much is happening. The important German-French Axis is breaking down, weakened by each passing month and bailout exercise. The motive for much of the German support of bailouts and rescue plans, as faulty as they have been, is the oversized German ownership of both French Govt debt and big French banks. They will fail, both the French sovereign debt and the big French banks. Germany must undergo a split, with a restructure from the devastating damage due to Southern European sovereign debt and related big bank losses. At the same time, Germany is on the verge of turning East to Russia. Already Russia is a large energy and mineral supplier to Germany, the heavy railway facilities in place. The core of Nordic Europe is firm. Austria and Finland are aligned with the pragmatic forces in Germany and the Netherlands. Italy is being transformed, but Spain might be lost to chaos. Turkey is also undergoing change during chaotic reform. The entire NATO Alliance has never been weaker. The military action in Ukraine is framed as a supposed NATO exercise to honor a treaty. Watch the loose end like Turkey fall off the NATO wagon, while Finland falls off the Euro currency wagon. The Jackass is eager to see the Snowden NSA files reveal key data on the illicit usage of NATO bases for narcotics distribution, the origin being Afghanistan. What a bombshell it would be if Turkey announced that their government would no longer permit heroin shipments from USMilitary aircraft on their Incirlik Airbase.

A key player in the mix is Israel. They have a Tamar floating platform, whose natgas has been pledged under contract to Russian Gazprom. The tiny nation is possibly changing its alliances out of pragmatism, seeing its drained weakened host that has duly served its purpose. The next big step is for Western Ukraine to suffer the drain of remaining resources (financial and agricultural) to the West, using all the diplomatic tools the Euro Elite can muster. The people in the East will realize that they have been betrayed once more by the Western powers. This is the critical final step. Several swing nations will consequently align with Germany, if only to make being integrated by Russia less painful. During all the transitions, China will take care of Asia in this game. The remaining overriding question is whether the US & Britain will go quietly in the night of faded empires, or else to wreck the world with nukes and viruses. The main exports out of the United States and its royal handlers have been fraudulent bonds, military hardware, genetically modified food, fast food with diabetes, pharmaceuticals, surveillance software, computer viruses, and jamming software technology. Such is the nature of the fascist transformation.

RUSSIA CANNOT BE ISOLATED

The West is in for a gigantic surprise in the sequence of events to unfold. They have placed criminal oligarchs into top government positions in Ukraine. Doing so might suit the West but not the Ukrainian people. The political brain trust in Berlin shows extremely errant strategy, still kowtowing to the USGovt and London Elite in an incomprehensible manner. The West cannot isolate Russia, which is the latest absurd bone-headed strategy. They need Russia in vital ways that will become apparent when the West faces energy supply cutoff or forced Gold payments during an open global USDollar rejection. The US will quickly feel the lost Petro-Dollar gear mechanisms. China has already aligned itself beside Russia, which makes isolation impossible. Consider the Russian commodity supply and Chinese industrial power, the new axis to the Eurasian Trade Zone.

The West cannot continue to bully Russia & China. Poking a stick in the bear's face will not work for long. Disrespecting the Chinese creditor is deep folly. The risk that coincides is for the two Asian superpowers to threaten or actually execute a dumping initiative of USTreasury Bonds, and force the United States to use its last card in a grotesque display of hugely amplified monetary expansion. The US would collapse by falling on its own sword, the event occurring in the Weimar chamber. A super high volume bond monetization machine to cover globally dumped USTBonds is a strong likelihood as climax event, with a broken derivative mechanism that is revealed during its fracture. The London banker murders (another Jackass correct forecast, made in mid-2011) indicate a motive to keep covered up the extreme $100 billion JPMorgan derivative losses at the hands of the London Whale Bruno Iksil, first sighted in May 2012. The accelerated hyper monetary inflation in response to Russian & Chinese joint retaliation would finally kill the USDollar. The echo event, born from failure, would be for the USGovt to launch the new split Scheiss Dollar. Then the USGovt could have its domestic currency finally, and then wreck it with an assured painful sequence of devaluations. The fundamentals for the US domestic only currency are truly horrible, typical of a Third World nation. Ukraine is about the last gasp of the USDollar. It has no viable defense.

UKRAINE AS WATERLOO FOR THE USDOLLAR

Ukraine is the Waterloo event for Team Obama and the Wall Street handlers, the true controllers of the White House puppet. Ukraine will lead to wreckage to the USDollar and its USTBond partner in crime. Witness the death of the USDollar and the Birth of both the Gold Trade Standard, on the new Eurasian Trade Zone landscape. Neither Russia nor China will cooperate on the IMF super sovereign reformed currency basket at this point, not during extreme hostility and conflict. Hope and pray for cooler heads to prevail, since already many serious military attacks have occurred with advanced weapons off the Syrian coast. The Western Press prefers to frame the Ukraine situation as one more curious Orange Revolution event staged in Eastern Europe, akin to the other deceptive Arab Spring events. The old Soviet Union was trapped years ago, forced to use hyper monetary inflation in defense, as the nation imploded financially. The United States is now trapped in an ironic parallel manner, and will be exposed for its heretic inflationary response that ramps up to obscene volumes, followed by financial implosion. In fact, the events from here onward are the final hurrah for the USDollar regime and the criminal cabal.

Now has never been a better time to own a big stack of gold & silver coins & bars, stored in a secure place outside the United States, outside England, outside Switzerland, even outside Canada. The people must defend against a climax of systemic failure, led by arrogance, stupidity, desperation, and delusion, even armed aggression. It remains to be seen whether the Kremlin has some secret allies who might emerge in time, from other worlds. But that is an entire other story to be told someday maybe. We earthlings will all find out soon enough. Times are changing fast, and better to be alert than to get hurt. The Global Currency Reset lies directly ahead, complete with its doubled Gold price and doubled Silver price. The Russians & Chinese are motivated to respond to a military prod, poke, and nudge by delivering a financial response. The rejection of the USDollar is near. The rapid diversification away from the USTreasury Bond is near. The arrival of the new Global Gold Standard is imminent.

 

How monetary policy drives foreign policy

It should now be evident that America's foreign policy is to an extent being driven by our banking mess. Again and again, we see Washington, including Wall Street's handmaiden, the Fed, exporting monetary chaos implicitely in order to weaken the status of potentially competing reserve currencies:

• Wall Street sent a tsunami of bad AAA-rated mortgage debt to Europe, much to Germany, the locus of power for the Euro (and again, implicit admission of guilt is seen in the apparent fronting of billions of bailout dollars to the European banks by the Fed after the crisis);
• Washington has apparently fomented or supported a coup in the Ukraine that increases the likelihood of war in Europe dramatically therefore sending the gigantic pools of liquid financial assets in the world scurrying into the greenback and US Treasuries, which the Chinese have stopped gobbling up;
• the other factor is that the military-industrial complex needs war to get its funding, and when drone-bombing rag-heads can't provoke a serious attack, destabilizing a former Eastern bloc nation and provoking a somewhat justifiably paranoid Russian leader into military action guarantees at least a shot in the arm of crisis funding.

Russia has repeatedly stated over the past decades that an EU move on the Ukraine crosses a red line. The EU ignored the warning, and with the US's help and the ire of Ukrainians sick of a corrupt government crossed Putin's red line. What the Ukrainians want is democracy and relief from their corrupt plutocrats (see previous post's article by Paul Craig Roberts).

The US has no compelling strategic interest in the Ukraine, or in the Crimea remaining part of the Ukraine. Yes, the Ukraine has been looted by its oligarchs, just as Russia was, and just as the US is being looted by its oligarchs right now; incomes of a majority of American households are falling so the banks can collect on bad debts. It would be nice for people everywhere if they could break the grip of the plutocrats over their livelihoods. In the Ukraine, to substitute debt servitude to Western banks for the domination of the oligarchs would only accelerate the collapse of the EU. And it's not clear the EU, if it offers help, won't be ripped off by the oligarchs as well. The new government in the Ukraine has already increased the power of the oligarchs by giving them provinces to rule, so it's not clear the Western "rescuers" are even able to help solve the fundamental problem at all, and might end up losing their shirts again, as they have in Greece, Portugal, et al.

Until democratic governments around the world become strong enough to counteract the power of the plutocrats by taxing them, both their income and their wealth (as Sweden does) the revolving looting of sovereign governments and demolition of middle classes by the plutocrats and their corporations will continue.

A couple of posts ago I said the scariest thing I've heard recently was Catherine Anne Fitts saying what the world needs now is a global debt for equity swap. I should say I generally like Ms. Fitts' analysis and suspect she may even have misspoken when she made this comment. Such a move would concentrate ownership of the world's assets sufficiently to create even more of a Plantation Earth than we have currently.

She identified the problem, but not the solution. What the world needs now is a global jubilee, debt forgiveness. The debt that the Fed is shoving under the carpet via QE is what is known in banking circles as "bad debt." It is loans that never should have been made because they will never be repaid. In honest not crony capitalism such debts come out of the profits (as losses) of the banks that made them. In crony capitalism, with a central bank controlled by the banks, such debts are "paid back" by being monetized and put on the backs of the taxpayers either directly or through inflation.

The austerity programs Europe has put in place so that Wall Street and European banks can be paid back bad debts have destroyed more than one economy and more are probably yet to fall. (The idea promoted ten plus years ago of "convergence" of interest rates in the EU between periphery and core caused me to gag at the time.) Debt slavery to Western banks is not the answer. (China is apparently making similar mistakes; it will be interesting to see what they do with the bad debt. I suspect their strong central government will tell the bankers to go stuff it.) Ms. Fitts suggests that sooner or later the plutocrats will destroy the banks in order to buy them cheap and collect the rents themselves, canny suggestion indeed.

Chaos in the world = a strong dollar. Until it doesn't. Chaos has a way of being unpredictable.

Capitalism has killed democracy. "Free" markets dominated by monopolies and oligopolies are not what Adam Smith had in mind. It's time for democracy to be reborn. There are degrees of economic inequality that are simply immoral and destructive and humankind has the right to reject them. When the top 85 families own as much as the bottom 3.5 billion people, as recently reported, we have reached such a point.

The scariest thing I've heard recently

In an interview with Greg Hunter on his YouTube channel Catherine Austin Fitts said, "What we need now is a global debt for equity swap."

In other words, let the sovereigns out of their unpayable debt by selling off public assets to the global plutocratic class.

This will seal the deal for generations of neo-feudalism to come.

More and more, I think the only way populations will throw off this yoke will be by national strikes that shut the corporatocracy down. I'm not advocating national strikes, but I don't see any way to combat entrenched neo-feudalism through democratic means, as the democracies have been eviscerated through the corrupting powers of money.

Talk continues to percolate through the Intertubes of the imminent "global reset"....

QE = Quantitative Erasing

How even the nostrums of decades of accepted mainstream academic economics are debased by propaganda in these latter days!

As John Hussman has pointed out, the euphoria of the current expansion (among the haves) is largely due to the legerdemain of FAS 157, the "pretend and extend" statement.

But FAS 157 was not enough.

Graduate students have been taught for decades that excess reserves are just that, in excess of required reserves, and therefore do not contribute to money multiplier money creation, or to movement of the real economy.

So "quantitative easing" (taking bank assets into the Fed and letting them serve as reserves) when it involves adding to already excessive levels of reserves should not expected to have an effect on the real economy. And it hasn't, by definition.

So why do it? The reason for QE is simply to sweep the mountains of bad debt on the banks' balance sheets into the unauditable fetid swamp that is the "Federal" Reserve System. It is "quantitative erasing" of these bad debts and magical transmutation of them into the gold (for the bankers) of high-powered reserves, so that the bonuses may increase!

The Fed has never to my knowledge reported on the losses on the assets it holds.

So I gag when I hear that Fed policy is going to remain "accommodative." It is a measure of the level of false consciousness even among supposedly professional economists that no one is calling out the Fed on this canard. ZIRP is so far from being repealed (see Hussman's beautiful chart relating reserves as a percent of GDP to short rates a couple of posts ago) that the dreaded "taper" can a priori have no effect on short rates; the only effect might be lower long-term inflation expectations, which would flatten the yield curve, which would be bearish for the economy, other things equal.

So I just think of QE as "quantitative erasing" and further plunging into the monetary chaos to come.

The banking system remains an anvil around the neck of the American economy. The Fed needs radical reform, or better, to be abolished.

And when the crisis comes, I pray that the haves in America will rediscover a collective conscience and realize that the countrymen and women they have expropriated are their closest relatives.

Taper -- not... Competitive bubble blowing at the Fed

What do you wanna bet Janet doesn't have the cojones to taper (much)?

Wall Street will undoubtedly exert its control over the West Coaster, to get her trained.

But more importantly as John Hussman points out it is the relationship between the stock of assets on the Fed's balance sheet and GDP that matters, and a mere slowing of asset purchases won't much change that.

 

 

 

 

 

 

 

 

 

 

This confirms my view that rates will stay low for years to come, that we are following in broad outline the Thirties, and that a return to "normal" rates will not occur until a resolution of the Crisis is within sight (ZIRP persisted in the Great Depression until about 1942).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial fascism leads to collapse

I posted this over at macrofuge.com:

In story form: when financial capital (ownership of “physical capital” aka the means of production) becomes too concentrated, a “failure of effective demand” occurs as the owners of the means of production lower wages to the point where consumption spending begins to fail; this depresses “animal spirits” quite rationally because most [true] investment demand is a derived demand (from consumer demand); hence the preference among those owning the means of production in the form of financial capital to prefer rents and speculation (with their cash) over investment in “physical” capital; through influence the rentiers lower capital requirements and create an inherently unstable monetary structure, within which they fight like pirhanas over speculative opportunities, which leads to a cycle of intermediary collapses, extreme monetary base creation, and bailouts using sovereign powers of taxation to pass the loss along to the people; once trust on the monetary unit vanishes, perhaps with an expropriation of deposit funds, the stage is set for (1) deflationary collapse, as bank runs overwhelm the deposit insurance system, and (2) hyperinflation, as the monetary authorities order banks to issue prepaid debit cards to anyone wanting to withdraw his or her money from the bank to “restore confidence.”  They then go and spend it as fast as they can.

The structural reforms needed: no more (or much higher reserve level) fractional reserve banking; steeply progressive income and, for a time, wealth taxation to restore a healthy circulation of income and product. See Emanuel Saez’s recent interview on this at http://www.bostonreview.net/BR38.1/emmanuel_saez_david_grusky_income_inequality_taxes_rent_seeking.php

Marx has the last laugh.

Personal note:  the bank has cut my position, and I am seeking new opportunities.  While I was happy to support small business lending, which is what I did, it was hard for me to reconcile working in such a manifestly corrupt industry as banking with my personal values.  The Fed and the big banks are sucking the life blood out of the economy.  As has recently become public knowledge, the big banks’ “profits” are manufactured out of their influence (being “too big to fail”).  Still, small businesses need loans (sometimes), and I felt good about supporting that, although I would encourage anyone thinking of starting a small business to avoid debt if at all possible. 

We are living through a period of history when the Devil has much of the world by the throat.  One can only hope and pray that it ends better this time than it did in 1940.  It will take a miracle of collective willpower.

Links worth clicking

A few from tyillc.com that hit the mark, from my POV:

• More on meaningless bank capital: Bragging banks ... – full disclosure, the basis for functional capital markets, is dead (mumbles in the notes don’t count)
• Models for financial risk are flawed – why Richard Bookstaber and most finance professors are idiots
• Virtue, Vice and Banks – got to love the Anglicans, the new Archbishop of Canterbury schools the banks

John Hussman’s remarks on QE are especially trenchant this morning. 

I suspect a deflationary shock is in the cards.

Moral Hazard R US

Forbes recently ran a story describing QEternity as basically a gigantic money laundering operation (here). The bad assets go into the Fed at pretend and extend prices in return for high-powered reserves money. The HSBC settlement proved that bankers are above the law, that too big to fail is too big to prosecute.

The financial sector of the US is poised for a fall.

 

The public players are all fools

How long will our MSM political discourse be limited to witless exchanges between cartoon ideologies? The libertarians are lazy, puerile pikers who want no one to take their toys away. The evangelicals follow like sheep their war-mongering false prophets, funded by greedy rich bastards who laugh at their stupidly. The screeching leftists like Krugman and Bernanke are too brainwashed in fiddle with the dials neoclassical macroeconomics to fully realize that the problem is the distribution, stupid. How long will progressives who sense a fundamental corruption in the military-industrial-financial-fascist complex resulting in the erosion of Constitutional protections, blatant suppression of significantly disruptive opposition (Wikileaks), the lack of a single prosecution of anyone responsible for the massively fraudulent activity that led to the financial crisis and the subsequent bailout of the perpetrators--how long will rationally skeptical progressives be labeled "conspiracy theorists"?

Most of the American people probably would fall into the latter category if they were honest about their views.

At this point They already know all of our political opinions through their surveillance of all our private communications, so what is there to lose in the American people tying up the phone lines to Congress more often with expressions of our disgust with our "representatives"? What other power do we have? Are we going to continue taking this lying down?

 

What a democratic solution to a banking crisis looks like

Via: bloomberg.com  Imagine what our response would have looked like if our political system weren’t totally corrupt, but actually responded in a reasonable way the will of the people.  The Millennials wouldn’t be debt serfs looking to rent their next apartment from a hedge fund, while Wall Street “bankers” snap up their second and third vacation properties.

BTW, I actually wrote the White House today (wow, political activism!) informing the President that I was one of his progressive supporters who has been disappointed many times by his policies, but urging him not to blink on raising taxes on the rich.  Until our selfish, corrupt ruling class is made to heel at least a little bit to the needs of the bottom 80 percent, we are on the express train to neo-feudalism.

Depending on how much backbone Obama actually has and on how secure the Devil’s grip on America’s throat is, we could see very dark days ahead.  On the other hand, Obama could cave, like he usually does.  Few people want to consciously become martyrs.  In this case the forecast is for continued collapse of effective demand.  America joins Brazil as a full-fledged banana republic.

Fighting Recession the Icelandic Way

By the Editors - Sep 26, 2012

Few countries blew up more spectacularly than Iceland in the 2008 financial crisis. The local stock market plunged 90 percent; unemployment rose ninefold; inflation shot to more than 18 percent; the country’s biggest banks all failed.

This was no post-Lehman Brothers recession: It was a depression.

Since then, Iceland has turned in a pretty impressive performance. It has repaid International Monetary Fund rescue loans ahead of schedule. Growth this year will be about 2.5 percent, better than most developed economies. Unemployment has fallen by half. In February, Fitch Ratingsrestored the country’s investment-grade status, approvingly citing its “unorthodox crisis policy response.”

You can say that again. Iceland’s approach was the polar opposite of the U.S. and Europe, which rescued their banks and did little to aid indebted homeowners. Although lessons drawn from Iceland, with just 320,000 people and an economy based on fishing, aluminum production and tourism, might not be readily transferable to bigger countries, its rebound suggests there’s more than one way to recover from a financial meltdown.

Nothing distinguishes Iceland as much as its aid to consumers. To homeowners with negative equity, the country offered write-offs that would wipe out debt above 110 percent of the property value. The government also provided means-tested subsidies to reduce mortgage-interest expenses: Those with lower earnings, less home equity and children were granted the most generous support.

Debt Relief

In June 2010, the nation’s Supreme Court gave debtors another break: Bank loans that were indexed to foreign currencies were declared illegal. Because the Icelandic krona plunged 80 percent during the crisis, the cost of repaying foreign debt more than doubled. The ruling let consumers repay the banks as if the loans were in krona.

These policies helped consumers erase debt equal to 13 percent of Iceland’s $14 billion economy. Now, consumers have money to spend on other things. It is no accident that the IMF, which granted Iceland loans without imposing its usual austerity strictures, says the recovery is driven by domestic demand.

In addition to easing consumer debt, Iceland reduced government spending and increased revenue by raising taxes and cutting deductions that mainly benefited the well-off, a path the U.S. might profitably emulate. In fact, relief for overburdened U.S. consumers is a cause promoted by former U.S. Federal Deposit Insurance Corp. Chairman Sheila Bair in a new book published this week. Bair would have done more to aid sinking homeowners and done less for banks, but she says her efforts were blocked by Treasury Secretary Timothy Geithner and others.

It worked in Iceland. A deficit that reached 13.5 percent of gross domestic product in 2009 fell to 2.3 percent last year. The IMF predicts Iceland will have a primary surplus (excluding interest on debt) of 1.5 percent this year.

As for the banking industry, Iceland never had an option to adopt the too-big-to-fail policy that led governments in the U.S. and Europe to prop up their banks. Assets held by Iceland’s three largest lenders had swelled to nine times the size of the economy. After they defaulted on $85 billion in debt, the government seized control of them.

Initial plans to repay foreign creditors, mostly U.K. and Dutch depositors, collapsed in 2009 as street protests led to the demise of the government. Repayment of obligations to overseas creditors was either postponed or written off, leaving the reconstituted banks with much smaller domestic operations. Twice, Icelanders rejected national referendums on repaying foreign depositors, who are pressing their claims in European courts.

Holding Accountable

A new government led by Johanna Sigurdardottir embarked on a campaign to hold accountable the so-called neo-Viking bankers at the center ofIceland’s crisis. Instead of picking a prosecutor from law firms in Reykjavik, which had depended on the banks for business, the government drafted an investigator from a remote village. Although a number of bankers fled the country to avoid prosecution, the former chiefs of two of the three biggest banks have been indicted and are standing trial.

Undoing the damage caused by the crisis is a work in progress; not every Icelandic innovation would be feasible in the U.S. or Europe. Iceland’s debt stands at almost 100 percent of GDP. Many of the country’s professionals have left for Norway and Denmark amid a dearth of jobs. Iceland still must figure out how to ease constraints that barred investors from withdrawing as much as $8 billion from the country and transferring it overseas. Inflation remains stubbornly high. To counter that, and to prevent capital flight, Iceland’s central bank has increased interest rates five times in the past year. But raising interest rates makes credit more expensive, checking growth.

Iceland’s central bank on Sept. 18 released a report suggesting the country go slow with plans to enter the European Union, a process started in 2010 when the euro seemed sounder than the krona. Becoming a member won’t be easy: If the issue were put to a referendum, Icelanders would probably reject admission. And why would Iceland want to join now? Euro-member nations such as Greece and Ireland offer testimony to the risks of being yoked to a currency along with stronger economies.

Devaluation of the kind Iceland suffered is never fun. Reneging on debts leaves a legacy of violated trust. But it still looks better than recession with no obvious way out.

If we were a democracy…

Via: Reuters

Fighting Recession the Icelandic Way

Few countries blew up more spectacularly than Iceland in the 2008 financial crisis. The local stock market plunged 90 percent; unemployment rose ninefold; inflation shot to more than 18 percent; the country’s biggest banks all failed.

This was no post-Lehman Brothers recession: It was a depression.

Since then, Iceland has turned in a pretty impressive performance. It has repaid International Monetary Fund rescue loans ahead of schedule. Growth this year will be about 2.5 percent, better than most developed economies. Unemployment has fallen by half. In February, Fitch Ratings restored the country’s investment-grade status, approvingly citing its “unorthodox crisis policy response.”

You can say that again. Iceland’s approach was the polar opposite of the U.S. and Europe, which rescued their banks and did little to aid indebted homeowners. Although lessons drawn from Iceland, with just 320,000 people and an economy based on fishing, aluminum production and tourism, might not be readily transferable to bigger countries, its rebound suggests there’s more than one way to recover from a financial meltdown.

Nothing distinguishes Iceland as much as its aid to consumers. To homeowners with negative equity, the country offered write-offs that would wipe out debt above 110 percent of the property value. The government also provided means-tested subsidies to reduce mortgage-interest expenses: Those with lower earnings, less home equity and children were granted the most generous support.

Debt Relief

In June 2010, the nation’s Supreme Court gave debtors another break: Bank loans that were indexed to foreign currencies were declared illegal. Because the Icelandic krona plunged 80 percent during the crisis, the cost of repaying foreign debt more than doubled. The ruling let consumers repay the banks as if the loans were in krona.

These policies helped consumers erase debt equal to 13 percent of Iceland’s $14 billion economy. Now, consumers have money to spend on other things. It is no accident that the IMF, which granted Iceland loans without imposing its usual austerity strictures, says the recovery is driven by domestic demand.

In addition to easing consumer debt, Iceland reduced government spending and increased revenue by raising taxes and cutting deductions that mainly benefited the well-off, a path the U.S. might profitably emulate. In fact, relief for overburdened U.S. consumers is a cause promoted by former U.S. Federal Deposit Insurance Corp. Chairman Sheila Bair in a new book published this week. Bair would have done more to aid sinking homeowners and done less for banks, but she says her efforts were blocked by Treasury Secretary Timothy Geithner and others.

It worked in Iceland. A deficit that reached 13.5 percent of gross domestic product in 2009 fell to 2.3 percent last year. The IMF predicts Iceland will have a primary surplus (excluding interest on debt) of 1.5 percent this year.

As for the banking industry, Iceland never had an option to adopt the too-big-to-fail policy that led governments in the U.S. and Europe to prop up their banks. Assets held by Iceland’s three largest lenders had swelled to nine times the size of the economy. After they defaulted on $85 billion in debt, the government seized control of them.

Initial plans to repay foreign creditors, mostly U.K. and Dutch depositors, collapsed in 2009 as street protests led to the demise of the government. Repayment of obligations to overseas creditors was either postponed or written off, leaving the reconstituted banks with much smaller domestic operations. Twice, Icelanders rejected national referendums on repaying foreign depositors, who are pressing their claims in European courts.

Holding Accountable

A new government led by Johanna Sigurdardottir embarked on a campaign to hold accountable the so-called neo-Viking bankers at the center of Iceland’s crisis. Instead of picking a prosecutor from law firms in Reykjavik, which had depended on the banks for business, the government drafted an investigator from a remote village. Although a number of bankers fled the country to avoid prosecution, the former chiefs of two of the three biggest banks have been indicted and are standing trial.

Undoing the damage caused by the crisis is a work in progress; not every Icelandic innovation would be feasible in the U.S. or Europe. Iceland’s debt stands at almost 100 percent of GDP. Many of the country’s professionals have left for Norway and Denmark amid a dearth of jobs. Iceland still must figure out how to ease constraints that barred investors from withdrawing as much as $8 billion from the country and transferring it overseas. Inflation remains stubbornly high. To counter that, and to prevent capital flight, Iceland’s central bank has increased interest rates five times in the past year. But raising interest rates makes credit more expensive, checking growth.

Iceland’s central bank on Sept. 18 released a report suggesting the country go slow with plans to enter the European Union, a process started in 2010 when the euro seemed sounder than the krona. Becoming a member won’t be easy: If the issue were put to a referendum, Icelanders would probably reject admission. And why would Iceland want to join now? Euro-member nations such as Greece and Ireland offer testimony to the risks of being yoked to a currency along with stronger economies.

Devaluation of the kind Iceland suffered is never fun. Reneging on debts leaves a legacy of violated trust. But it still looks better than recession with no obvious way out.

A scorcher of a commencement speech

A modern-day prophet Isaiah speaks to the graduates.

The obtuseness of Krugman and Bernanke

Via:  www.nytimes.com

Here’s Paul Krugman on the Spanish bailout:

Oh, wow — another bank bailout, this time in Spain. Who could have predicted that?

The answer, of course, is everybody. In fact, the whole story is starting to feel like a comedy routine: yet again the economy slides, unemployment soars, banks get into trouble, governments rush to the rescue — but somehow it’s only the banks that get rescued, not the unemployed.

Just to be clear, Spanish banks did indeed need a bailout. Spain was clearly on the edge of a “doom loop” — a well-understood process in which concern about banks’ solvency forces the banks to sell assets, which drives down the prices of those assets, which makes people even more worried about solvency. Governments can stop such doom loops with an infusion of cash; in this case, however, the Spanish government’s own solvency is in question, so the cash had to come from a broader European fund.

Bernanke, who studied the Great Depression, and Krugman, are both “mainstream economists,” meaning that they don’t acknowledge that the distribution in America is broken, making AgD-based macro policy a joke; and they both also seem not to realize that debts that will not be repaid do not belong on banks’ balance sheets, nor do they deserve taxpayer-funded bailouts.  Bernanke seems to have missed the fact that we have something called “deposit insurance” now, so that when banks fail depositors are not wiped out and AgD does not have to collapse (for that reason).

I’ve written before that Paul Krugman is too close to New York to think independently, and the column referenced above confirms that belief.

The sooner the bad debt is written off the sooner aggregate demand can recover.  Nationalize the banks, put them into receivership, do what it takes, protect the people’s deposits, but don’t bail them out.  Putting any more bad debt on taxpayers is criminal. 

The mainstream economists do not know the meaning of “bad debt,” and like the accounting profession, have deluded themselves into believing current balance sheets.  The time-honored traditions of honest banking require debts that have no realistic chance of being repaid to be written off the books.  None of these economists seem to know anything about honest banking.

From all reports the [largely unregulated] Spanish banking system is a house of cards.  The Spanish real estate bubble was worse than anybody’s.  And Krugman says we should bail them out?

The banks have cried wolf too much already.  Shut them up. 

And the same goes for Krugman, Bernanke, and the would-be rock star econo-whore from Columbia who shills for the Republicans. 

The propaganda of the kleptocracy has sunk in so deep it has become very, very difficult to avoid infection of one’s own thinking.  Beware.

Late add:  see John Hussman’s recent comment “The Heart of the Matter” for evidence that the authorities haven’t learned anything

The central bank shell game

Per David Rosenberg, h/t www.patrick.net

Banks pump and dump bad debt on to securitization markets (with the help of greedy fee-earning Wall Street banks and whoring ratings agencies)… bad debt spreads to banks across the face of the Earth, destabilizing financial markets… central banks buy up bad debt to hide it on their opaque balance sheets…  sovereign governments back the bad debt purchased by the central banks… commercial banks in the meanwhile load up on sovereign bonds to have some assets on their balance sheets while consumers and businesses are not doing a lot of borrowing… and, mirabile dictu, the sovereigns start to wobble and the commercial banks are back where they started from….

Thanks Richard Nixon, for putting the world on fiat money.  Thanks Alan Greenspan and Ben Bernanke for saying there’s no loan that can’t be made.

If the Republicans win the White House, we will have fiscal contraction that will precipitate a second financial crisis as the bad debt pigeons come home to roost (not to mention the trillions of dollars of derivative bets that were made by institutions collecting “free money” by selling un-backed “protecition” on sovereign debt and all manner of other hideous paper out there….

Out of options – David Rosenberg

Preparing for collapse

Practical advice.

The Automatic Earth is an eclectic site that features intuitive analysis in a style similar to my own (minus the obsession with “animal spirits”).  This video is from their site and recommends steps that mirror my own preparations (including asset allocation) pretty closely.  I haven’t sold my house and bought a farm, and I don’t think that’s a feasible move for most people.  If you’ve got a job, keep it, and maybe start a garden, would be my counsel.  But the monetary chaos that is likely to be upon us fairly soon is unimaginable.  So dollar cash reserves are probably as safe as one can get, maybe better in a Treasury money fund than in a bank, although I can only hope that the Feds have learned the lesson they botched in 2008, namely, that it would have been a whole lot better to guarantee all deposits and let anyone take their money out who wanted to, while nationalizing the banks, so that no one worried that their bank would fail.  And then they should have let the banks charge off their bad debts, which would have meant a lot of them would have failed.  And heads should have rolled like they did when FDR threw out the moneychangers, and that Obomba was too much of a chickenshit Establishment puppet to do.

I’m reprinting FDR’s 1933 inaugural address below.  I’ve been meaning to do this for a while.  As a challenge to the reader—as we may lurch Hard Right in the next presidential election—I challenge readers to write the inaugural address the nation may hear in 2013—or the one they’d like to hear.

Via: http://www.bartleby.com/124/pres49.html

Franklin D. Roosevelt

First Inaugural Address

Saturday, March 4, 1933

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  The former Governor of New York rode to the Capitol with President Hoover. Pressures of the economy faced the President-elect as he took his oath of office from Chief Justice Charles Evans Hughes on the East Portico of the Capitol. He addressed the nation by radio and announced his plans for a New Deal. Throughout that day the President met with his Cabinet designees at the White House.

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  I AM certain that my fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the present situation of our Nation impels. This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days.

  In such a spirit on my part and on yours we face our common difficulties. They concern, thank God, only material things. Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone.

  More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment.

  Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because the rulers of the exchange of mankind's goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

  True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.

  The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.

  Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.

  Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live.

  Restoration calls, however, not for changes in ethics alone. This Nation asks for action, and action now.

  Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously. It can be accomplished in part by direct recruiting by the Government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing greatly needed projects to stimulate and reorganize the use of our natural resources.

  Hand in hand with this we must frankly recognize the overbalance of population in our industrial centers and, by engaging on a national scale in a redistribution, endeavor to provide a better use of the land for those best fitted for the land. The task can be helped by definite efforts to raise the values of agricultural products and with this the power to purchase the output of our cities. It can be helped by preventing realistically the tragedy of the growing loss through foreclosure of our small homes and our farms. It can be helped by insistence that the Federal, State, and local governments act forthwith on the demand that their cost be drastically reduced. It can be helped by the unifying of relief activities which today are often scattered, uneconomical, and unequal. It can be helped by national planning for and supervision of all forms of transportation and of communications and other utilities which have a definitely public character. There are many ways in which it can be helped, but it can never be helped merely by talking about it. We must act and act quickly.

  Finally, in our progress toward a resumption of work we require two safeguards against a return of the evils of the old order; there must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people's money, and there must be provision for an adequate but sound currency.

  There are the lines of attack. I shall presently urge upon a new Congress in special session detailed measures for their fulfillment, and I shall seek the immediate assistance of the several States.

  Through this program of action we address ourselves to putting our own national house in order and making income balance outgo. Our international trade relations, though vastly important, are in point of time and necessity secondary to the establishment of a sound national economy. I favor as a practical policy the putting of first things first. I shall spare no effort to restore world trade by international economic readjustment, but the emergency at home cannot wait on that accomplishment.

  The basic thought that guides these specific means of national recovery is not narrowly nationalistic. It is the insistence, as a first consideration, upon the interdependence of the various elements in all parts of the United States—a recognition of the old and permanently important manifestation of the American spirit of the pioneer. It is the way to recovery. It is the immediate way. It is the strongest assurance that the recovery will endure.

  In the field of world policy I would dedicate this Nation to the policy of the good neighbor—the neighbor who resolutely respects himself and, because he does so, respects the rights of others—the neighbor who respects his obligations and respects the sanctity of his agreements in and with a world of neighbors.

  If I read the temper of our people correctly, we now realize as we have never realized before our interdependence on each other; that we can not merely take but we must give as well; that if we are to go forward, we must move as a trained and loyal army willing to sacrifice for the good of a common discipline, because without such discipline no progress is made, no leadership becomes effective. We are, I know, ready and willing to submit our lives and property to such discipline, because it makes possible a leadership which aims at a larger good. This I propose to offer, pledging that the larger purposes will bind upon us all as a sacred obligation with a unity of duty hitherto evoked only in time of armed strife.

  With this pledge taken, I assume unhesitatingly the leadership of this great army of our people dedicated to a disciplined attack upon our common problems.

  Action in this image and to this end is feasible under the form of government which we have inherited from our ancestors. Our Constitution is so simple and practical that it is possible always to meet extraordinary needs by changes in emphasis and arrangement without loss of essential form. That is why our constitutional system has proved itself the most superbly enduring political mechanism the modern world has produced. It has met every stress of vast expansion of territory, of foreign wars, of bitter internal strife, of world relations.

  It is to be hoped that the normal balance of executive and legislative authority may be wholly adequate to meet the unprecedented task before us. But it may be that an unprecedented demand and need for undelayed action may call for temporary departure from that normal balance of public procedure.

  I am prepared under my constitutional duty to recommend the measures that a stricken nation in the midst of a stricken world may require. These measures, or such other measures as the Congress may build out of its experience and wisdom, I shall seek, within my constitutional authority, to bring to speedy adoption.

  But in the event that the Congress shall fail to take one of these two courses, and in the event that the national emergency is still critical, I shall not evade the clear course of duty that will then confront me. I shall ask the Congress for the one remaining instrument to meet the crisis—broad Executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe.

  For the trust reposed in me I will return the courage and the devotion that befit the time. I can do no less.

  We face the arduous days that lie before us in the warm courage of the national unity; with the clear consciousness of seeking old and precious moral values; with the clean satisfaction that comes from the stern performance of duty by old and young alike. We aim at the assurance of a rounded and permanent national life.

  We do not distrust the future of essential democracy. The people of the United States have not failed. In their need they have registered a mandate that they want direct, vigorous action. They have asked for discipline and direction under leadership. They have made me the present instrument of their wishes. In the spirit of the gift I take it.

  In this dedication of a Nation we humbly ask the blessing of God. May He protect each and every one of us. May He guide me in the days to come.
26

Obomba is Wall Street’s Sugar Daddy

Wow, this is the MSM now!  Can revolution be far behind?  Or will Congressional whores be true to their Johns?

“Sell? To whom?”

Via:  The Fed's Anti-Inflation Exit Strategy Will Fail – Allan Meltzer in the WSJ

Prof. Meltzer demeans himself by even addressing the Fed’s ridiculous proposition that by paying interest on reserves the Fed can control excess reserves.  Where is the reserves interest going to come from?  This is just another underhanded way to try to recapitalize the bad banks (not all banks are insolvent).

Meltzer instead suggests the Fed use the traditional method of selling securities to suck in high-powered money.  But what are they going to sell, and to whom (the “Wall Street question”)?  The Fed has taken in untold and literally unknown amounts of garbage as if it were worth being reserves—they won’t even tell us what it is or how much of it has already charged off!

If and when inflation becomes a problem (when the next Big War gets going) the Fed won’t have the balls to reign in anything, would be my guess.  And we know the Whole Sick Crew of neoclassical economic advisors to the President are on record as welcoming an inflation to “lower the debt load.”

In the meantime the only thing that will restore a healthy middle class to America is an explicitly redistributionist rebalancing of aggregate demand.  Let the ruling class that has engineered the economy and the tax system to its own benefit for the past generation start to pay its own bills—especially the gigantic Wall Street bailouts, the largest transfer of wealth from ordinary Americans to the wealthy in history. 

[I hate to admit it, but a rebalancing of aggregate demand that put more money in the hands of the middle class would also increase the odds of a “benign” mild wage-price inflation getting going.  Combine this with a concerted effort to get big American corporations to knock their preening executives off their pedestals—who strut through the halls wearing expressions that say, “We are gods, oh ye puny cube-dwellers!  Do not think that you are even the same species as we!  You will never join our club!”—and get pay ratios in America back toward something that doesn’t cause gagging, and the economy might just pick up steam….]

Raise marginal tax rates on the super-rich to where they were in the 1950s (see this), the last time the federal debt load was this high.

I called my Senators today and told them to dump Bernanke.

P.S.  The Fed always has reserve requirements to reign in excess reserves.

P.P.S.  If the Fed had not bailed out the banks, and instead had provided unlimited deposit protection, what would have happened?  There would be a large amount of high-powered money in the hands of the public rather than in the banks.  The public could have made runs on as many banks as they liked, and the banks that lost their deposit base failed, and there would have been no massive wealth transfer to the investors in the failed banks—but the executives of the banks that levered up irresponsibly would be out of work, instead of cracking jokes to Congress about financial crises being something that come around every seven years, and paying themselves record bonuses.  Would this have been inflationary?  No.  People are reducing their marginal propensity to consumer, and increasing precautionary demand for money.  When things calmed down, they just would have put the money back in a bank.

Dennis Kucinich: a truth teller in Congress

Via:  RawStory.com

Kucinich: ‘Class war is over, working people lost’

By Sahil Kapur
Thursday, December 17th, 2009 -- 3:05 pm

WASHINGTON -- Reflecting on the growing divide between Wall Street and Main Street, Rep. Dennis Kucinich (D-OH) on Wednesday offered a powerful critique on the state of the economy in an open committee hearing.

"The class warfare is over -- we lost," Kucinich said before the Committee on Oversight and Government Reform. "I want to make that announcement today. Working people lost.  The middle class lost."

The harrowing comments from Kucinich, who is Chairman of the Domestic Policy Subcommittee, come amidst a national unemployment rate of 10 percent, one year and several months after the economic collapse of 2008 has marred the livelihoods of many.

"Don't tell me about class warfare," he continued. "Come to my neighborhoods in Cleveland.  I will show you class warfare.  I’ll show you hollowed out areas. I’ll show you businesses that went down because they don’t have access to capital.  And on Wall Street it is fat city.  Don’t tell me about class warfare."

Kucinich, a former presidential candidate who is viewed across the nation as a progressive champion on many issues, said that despite the recent uptick in economic figures, many regular Americans continue to struggle.

"All across this country people are starved for capital," Kucinich said. "Small businesses are failing, you have shopping centers that are becoming vacant because people can’t afford the rents anymore because the people who own the malls the developers are getting cash calls and credit is tightening."

"The separation between the finance economy and the real economy is real. This is not some fake idea. You can’t call that class warfare. That’s a fact."

Kucinich, who voted against the Emergency Economic Stabilization Act of 2008 (also known as the Wall Street bailout), lamented it as a catalyzing force for the rising inequality of income in the United States.

"The wealth of this nation is being accelerated upward," Kucinich said. "That’s one of the problems that I had with the bailout."

"You could say that it helped stabilize the American economy, but what I see is the separation between the real economy and Wall Street. Wall Street is stabilizing, markets are a lot better, banks are doing well -- they parked their money at the Fed for a while so they could get higher interest rates."

With income and wealth inequality at levels greater than in 1929, Kucinich’s statement is not an exaggeration.  Presidents George W. Bush and Barack W. Obama, along with Hank Paulson, Ben Bernanke, Timothy Geithner, Larry Summers and the rest of the Whole Sick Economic Policy Crew, will go down in history as the puppets of the plutocracy who drove the nail into the coffin of the American middle class for a generation or more.  Just wait until they start raising taxes to pay for the bank bailouts!  You never hear these shysters ever talk about raising taxes on the rich (see previous post).  They are good lackeys of the plutocracy, all.

Combined with his sickening Nobel Prize acceptance speech, which displays a stunning ignorance of the realities of terrorism, social justice and proportionality (see Global Guerillas for up-to-speed discussion of asymmetric conflict) President Obama, with his soaring yesteryear rhetoric and good-little-boy conformism to his masters’ wishes, may go down as our most fey, quixotic president ever.

Reading assignment for President Obama

In the Financial Times (click through on title; FT has asked us not to repost):

This time will never be different

Review by Martin Wolf

Published: September 28 2009 03:18 | Last updated: September 28 2009 03:18

This Time Is Different: Eight Centuries of Financial Folly
By Carmen Reinhart and Kenneth Rogoff