This is the oldest bank in America and the building in Manhattan was built just in time to see the entire system collapse in 1932.

The fiscal rescue team is concentrating on the wrong things. They want to save the bankers and then, after using IOUs from Asia which promise to pay eternal interest to China and Japan, this money will be used to recapitalize bankrupt banks who will, in turn, then lend this to us and we then get stuck with paying off this debt, somehow.  Only, the people who still  have enough income to pay for more lending don’t want to go into debt!  And those who want more lending are too deep in debt to take on even more debt.  This is the end of our bizarre ‘consumer economy.’ Worldwide

Obama’s Stimulus Not Enough to Avert Biggest GDP Drop Since 1946

President Barack Obama’s stimulus plan will be insufficient to avert the biggest U.S. economic declinesince 1946 as consumer spending posts its longest slide on record, according to a monthly Bloomberg News survey.

The world’s largest economy will contract 2 percent this year, half a percentage point more than last month’s forecast, according to the median of 50 projections in the survey taken Feb. 2 to Feb. 10. Even as Obama aims to create 3.5 million jobs with a stimulus plan, economists foresee an unemployment rate exceeding 8 percent through next year.

The forecasts underscore the urgency of a financial rescue that unthaws credit markets to spur business and consumer spending, analysts said. A prolonged economic slump means the Federal Reserve will keep its main interest rate below 1 percent for the next two years, the survey indicated.

“Without the stimulus, I think we would be negative for all four quarters of 2009,” causing an even worse decline, said Nigel Gault, chief U.S. economist at IHS Global Insight Inc. in Lexington, Massachusetts. Even with Obama’s plan, consumer spending and the labor market are “spiraling down together,” he said.

As layoffs soar and wages plummet, the government and the upper crust elites continue to imagine that the problem is lack of lending ability, not lack of capital flowing to the masses.  Wages are, after all, what money the workers wrestle from the hands of the owners of business and industry.  When workers are too weak to get a fair share of profits, their ability to buy begins a relentless decline.  The paradox of modern manufacturing is, it takes fewer people to produce massive amounts of things compared to each person doing things by hand, individually.


So it is easy to flood markets with manufactured goods.  This means, there has to be a system whereby these things can be sold.  In the old days, people living in villages built their own huts.  If they had some capital, they could build nicer houses.  If they were lords, they could force the villagers to work on building huge castles and other building projects.  There was no ‘housing market’.  In cities, even, people cobbled together buildings of various sorts using very simple, local materials.  There, they had some guilds which did various specialized works like carving wood decorations or painting pictures on wood, or stone masons who were fine artisans.


Before the industrial revolution, local weavers made the simple clothes of the masses and the guild of fine weavers made the dresses for the lords and ladies.  Each one, working on looms, produced only a few items a year.  One of the earliest forms of mass manufacture was the creation of power looms.  No longer requiring the labor of experts, these looms ran by themselves except for small adjustments.  Since this was not a labor skill, operation of looms was done by small children who were required only to be nimble and to be able to run back and forth, checking to see if the threads were unbroken or not entangled.


This made cloth cheap.  People could wear more and nicer clothes, for much cheaper.  But the weavers starved.  There were riots and then, they gave up and vanished from history.  To sell mass production, the industrialists and the bankers discovered, the working masses needed access to credit.  Since wages were being relentlessly suppressed due to industrialization spreading like wildfire, to sell mass goods, workers needed to be able to pay forwards in time.  


Even more importantly, to build and manage factories, manufacturers needed credit.  Hitherto, all credit extended by banks were for three things: building huge projects wanted by the aristocracy, paying for wars of adventure and trade exchanges.  The aristocracy had something valuable: the ability to collect taxes.  A banker could look forwards to x number of years of future tax revenues and set up lending conditions whereby a steady stream of future taxes could flow into the banks and capitalize further lending.  


The other area bankers allowed lending to accumulate was on land.  Again, the land had to have value and the value was very simple: how much profit there was from rents and labor attached to the properties.  An estate with serfs and steady revenues was much, much more valuable than a mere house.  A house might be sold but that is an uncertain thing.  But an estate that generates regular revenues was valuable.  Even unsold, the bank could profit from holding these and even farming them out after getting bids on who wanted to pay for the privilege of supervising these estates.


With the arrival of capitalist mass manufacturing, the banks opened a new door. More money was to be made off of the future earnings of the rising middle class who wanted the trappings of the aristocracy but had no serfs attached to holdings or had any tax revenues to be tapped.  So the banks lent for house-buying and the people who got loans then had to spend half of their adult lives, paying this off.  Mass manufacturing improved relentlessly during the following 200 years and eventually, the only way to make it run was to extend credit first for things like cars which can be repossessed.  Then, by 1960, money was extended for buying anything at all, including things of totally useless purpose.  Things which were consumed on the spot like vacations or dinners began to become an increasingly large part of debt.


It is this debt system which is collapsing.  It is not collapsing because banks can lend.  It is collapsing because the masses can’t borrow much, anymore.  As one country after another moved from ‘capitalized’ to ‘indebted’ the masses of these nations also moved relentlessly into the ‘indebted’ category, too.  When the rich decided to leverage their wealth to infinity, they, too, went deep into debt.  This is why, as they get increasingly frantic to find ‘money’ they are showing up in the news, as bankrupts, not rich people.  People who did save money are now losing it to the bankrupters.  But an astonishing number of people who gave money to con men like Madoff actually were not handing over profits and wealth to be invested but were handing over loaned money to make it grow faster than the interest on the principal.


Everyone was playing this game!  And as always, it crashed due to too much debt chasing too few capitalists.  In the end, during the last 5 years, this money moved towards Asia where manufacturing is the greatest.  So the capital was saved there and in turn, Asian powers funded lending over here.  This system has now broken down.  Until the US and Europe crawl out from under this mountain of debts from Asia, will normal lending resume.  But this won’t happen so long as wages continue to drop. Exclusive

MidSouth Loses Would-Be Borrowers as TARP Fails With Louisianans 

C.R. “Rusty” Cloutier of MidSouth Bank wants to heed PresidentBarack Obama’s call to lend money. It’s his customers who aren’t paying attention.

Cloutier, chief executive officer of MidSouth Bancorp Inc. in Lafayette, Louisiana, received a $20 million cash infusion from the U.S. government on Jan. 9 and instructed loan officers to line up borrowers. Then he went on the road to make personal appeals at 14 town hall meetings.

“What we want to do is make people aware we have $250 million to lend,” Cloutier said Jan. 28 at the branch in downtown Lafayette. The 20 or so in the audience were outnumbered by bank employees handing out cookies and bottled water. Nobody asked for an application.

Even if lending was at nearly zero percent, if one is a saver and prices of goods and property are dropping, why go into debt to buy things one can buy with cash?  Houses and cars are things we use to live in and do business in.  If business is bad, why invest in more houses and more cars?  It makes more sense to sit and wait.  There are many people who would dearly love to have bigger and nicer houses and fancy cars.  But they are spendthrifts and already spent their wad and defaulted on their previous loans.  


This is one of the paradoxes of lending: spendthrifts always want more loans.  But they crash the system.  The sober, the careful, are leery of going into debt in good times and are even more leery of going into debt in bad times.  They worry about the future and the bottom line.  They are the ‘ants’ while the happy-go-lucky consumers who don’t plan ahead or worry about the bottom line, are the ‘grasshoppers’.  Ants worry all the time about winter, the grasshoppers don’t give a hoot about winters.  Depressions are when ants run things after the grasshoppers eat all the crops and devastate the landscape.  The money the Treasury and Federal Reserve are giving bankers is totally wasted.


Worse, it makes things even more out of kilter.  These funds are debts in the first place!  The government is not drawing on sovereign wealth funds to kick-start things.  No, this is ripping off the ant’s savings. These are debts and the ants must pay the interest on these loans to the banks! Why would the ants want to go deep into debt a second time?  


The tax cuts aren’t going back to the ants, either.  These are really loans on the ant’s future labor: taxes.  To pay the interest on the loans which we hope to get from the Bank of the Chinese Ants, the US ants have to work even harder and the debt burden on the future is growing, not shrinking.  If the government wants to spend money, it makes more sense to simply use this to prop up the states and local governments so they keep things running until the debt overload passes into bankruptcy elsewhere in the system. We do NOT want governments to go bankrupt. Worldwide

Home Prices Tumble in 88% of U.S. Cities

Home prices fell in almost nine out of every 10 U.S. cities in the fourth quarter as foreclosure sales drove down prices.

The median price of a U.S. home declined 12 percent from a year earlier and sales of properties with mortgages in default accounted for 45 percent of all transactions, the Chicago-based National Association of Realtors said today. Prices fell in 134 U.S. metropolitan areas, rose in 18 and were unchanged in one, the biggest share of declines in data going back to 1979.

The worst U.S. housing slump since the Great Depression is deepening asforeclosures drain value from neighboring homes and the economic recession worsens. The number of Americans collecting unemployment benefits rose to a record 4.81 million in the last week of January as companies such as Caterpillar Inc. and Home Depot Inc. slashed jobs. The U.S. lost 2.6 million jobs last year in the biggest workforce reduction since 1945.

The swift growth of the debt burden in housing was extremely bad and should have been squelched before it took off.  Housing isn’t a positive money flow, it is a loss. We don’t make money on our houses unless we sell them and move away to a cheaper location.  I.e., only when we downsize, do we see any profit.  I have done this in the past and it works.  But only then, does it work.  Or when you die and your children get the estate and it isn’t burdened with debts, do they, not you, profit.


So when prices are too high compared to income, housing becomes a cruel burden if you have to take on debts in order to have a home.  Virtually no houses in America come with money-making estate purposes. I.e.: a farm.  No, housing is alway a loss on the income.  To fix this, taxes are not levied on the interest due.  So, as housing prices rise, the income taxes to the government decline due to taking off the charges of this extra burden of debt!  On top of this, when paying off the debt, borrowers have to pay virtually all the interest, first.  After over ten years, only then, is the interest payments less than principal.


When housing rose in value, millions of Americans who already paid off much of the interest on their mortgages went much, much deeper into debt so they could have more money to buy manufactured goods and worse, to buy consumable things that cease to exist nearly immediately!  This is the true bonfire of the vanities.  Housing MUST fall in price so it is in balance with future earnings, which are declining due to the forces of capitalism seeking cheaper labor and more efficient mass production.


Below is a story from today’s NYT about one of the many old, old bonds that have huge timelines collecting interest:


That’s What You Call Investing for the Long Term –

Next month, one of the bonds, issued in 1868 and thought to be one of the oldest active municipal bonds in the country, will come due. And the city stands ready to retire the debt incurred when Winston Churchill’s grandfather came up with the idea of building a road to one of the nation’s first racetracks, which he had opened in what is now the Bronx.

For 135 years, New York City has been dutifully paying 7 percent annual interest on the bonds, which financed construction of the road. On March 1, the owner of one of them is entitled to come forward and collect its face value: $1,000.

The other 38 bondholders have notes that will mature sometime between now and 2147, a mere 138 years away.

“It’s not the best example of municipal debt management,” said Jim Lebenthal, a bond specialist. “But 135 years of payment without missing a beat does underscore the safety record of municipal bonds.”

The ideal system for making money is to buy a bond that pays and pays and pays and one can pass this on as a legacy to heirs and it never pays the principal off.  How delightful that is!  The modern form of this kind of debt is credit card debts.  Right now, laws forbid forcing heirs to pay off these endless debts.  But the creditors get first dibs on any estate left behind.  


No debt should last 135 years.  This is ridiculous.  I know that NY state will call in bonds with high interest rates and 7% is high.  But it seems the city and the state both overlooked this absurd bonds and mindlessly allowed someone to collect many dollars in interest payments.  What is interesting to me is, who was really cashing in the money from these ‘lost bonds’ and why did they say nothing? This takes us to the usual suspect when it comes to bleeding taxpayers to death, penny by penny: The Bank of New York.


That’s What You Call Investing for the Long Term –

As generation has begat generation, the 100 or so outstanding notes with a combined face value of $66,000 have all but been forgotten, aside from an occasional newspaper account. But the Bank of New York Mellon, which administers the bonds for the city, has a record of the 39 bondholders who own them and has been mailing them interest checks twice a year….

What is known about the bonds is that they were the handiwork of a wily 19th-century financier and a couple of cash-strapped towns that schemed to implement a public work at the expense of their wealthy, gleaming neighbor….

The city comptroller is not certain how much debt was originally issued through the bonds, but a previous estimate put the figure at $278,000, reflecting the fact that hundreds of bonds were probably sold originally, some of them with shorter maturities. Today, nearly 100 of the bonds, with a face value of $66,000, have yet to mature. By the time they do, the city will have paid out nearly $1 million in interest….

“People who bought the bonds might say: ‘This is really cool; generations of my family will benefit from this,’ ” said Richard Sylla, a financial historian and a trustee for the Museum of American Finance. “For the issuer, if you don’t have to pay back the principal for 100 or 200 years, that’s an advantage, too.”

The Bank of New York Mellon is part of…the Federal Reserve system via its incarnation as the  Bank of New York –

  • Late 2005: The Bank of New York settled with federal regulators for US$38 million regarding a money laundering scandal that began in 1996. The illegal operation involved two Russian emigres—one who was a Vice President of the bank—moving over US$7 billion via hundreds of wires, and ended in the prosecution of at least nine individuals.
  • April 7, 2006: J.P. Morgan Chase & Co. announced they would swap their corporate trust unit for Bank of New York Co.’s retail and small business banking network. The swap values the Bank of New York business at US$3.1 billion, and JPMorgan’s trust unit at US$2.8 billion and gives Chase access to 338 additional branches and 700,000 new customers in the New York, New Jersey, and Connecticut Tri-State area.
  • December 4, 2006: The Bank of New York and Mellon Corporation announced a merger, in which the name would be changed to Bank of New York Mellon Corporation, and almost all key leadership positions would be assumed by Mellon Corporation personnel.
  • May 2007: Russia filed a US$22.5 billion lawsuit against the bank for money laundering.[6]
  • Talks of a merger began when Tom Renyi approached Robert Kelly about a possible amalgamation between the Bank of New York and Mellon Financial Corporation.[8] The $16.5 billion deal was finalized on the 1 July 2007, with Kelly as the Chief Executive Officer (CEO) of the new company, and Renyi as Executive Chairman.[8][9] Per the deal, the new Board of Directors is composed of ten directors appointed by the Bank of New York, and eight by Mellon.[10]. The Bank of New York Mellon launched its new brand identity on 1 October 2007.

The Bank of New York is the oldest bank in America.  So it is no surprise, Mellon holds these old, old bonds.  The directors of this bank are very connected, very powerful people.  They have many civic duties.  Fleecing us is not listed in these duties.  One of the social duties of the bankers is to alert the state that there are these old bonds in the system, stealing money.  Yes, this is theft!  And the Bank should have assisted in closing these funds, not keeping them running for hundreds of years!


 As for advantages for not paying back any principal at all for hundreds of years: this is ridiculous.  Over time, these things build up. Bonds issued in 1850 and all the later ones are piled, one on the other, until they form a pyramid.  Each one is bigger and each one lasts longer and eventually, there are too many and the bleeding is hemorrhaging present revenues until the entity dies.  This is why shutting down debts is so important.  It also prevents inflation. Exclusive

U.S. Mortgage Market’s $3 Trillion Problem

U.S. home loans exceeded the total cash available in the country by $3 trillion at their peak, showing the size of the mortgage problem to be fixed, said Michael Shaoul, chief executive officer of Oscar Gruss & Son Inc.

The CHART OF THE DAY shows the growth of the nation’s mortgage market compared with the Federal Reserve’s M2 gauge of money supply. The lines crossed in the first quarter of 2002, reversing a 42-year relationship….

The gap peaked at the end of 2007 at $3.123 trillion and now stands at $2.387 trillion. Part of the spread reflects mortgages at face value that are already being carried by banks at 50 cents on the dollar, Shaoul said.



It was just plain irresponsible for the bankers to hand out $3 trillion in loans.  At the very beginning of the big mortgage debt bubble, it was obvious that the bankers were increasing the money supply far and beyond the official money supply.  This is what also caused that sudden cloud-burst of hyperinflation.  


The old, old bonds laid at the door of the taxpayers pay and pay and pay for long-gone projects that are not making any profits at all while we see mortgages granted in just the last 3 years vanishing into thin air, due to bankruptcies all over the place.  This is a bad combination: growing, never paid-off government obligations bleeding money in the form of interest payments all over the place while at the same time, people living in buildings that still exist, drop the entire thing, causing immense losses.  And the bankers want a steady stream of interest payments flowing into the bank! This is how they get richer.


The faux tax cuts so far have not freed the taxpayers so they can use their capital elsewhere.  It has, instead, become an insidious builder of future debts that will squeeze out absolutely everything in the next 50 years until all we have is taxes to pay for interest on lending which is how we paid for services from 1945-the indeterminate future.





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  1. Pingback: RESCUE TAX PAYERS NOT BANKERS « Culture of Life News

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