WordPress is having coding problems lately which is why the front page isn’t working. I hope this all gets cleared up soon. It is very annoying. And we get to talk some more about the attempts at bailing out a US economy that is very deep in debt. The government is mailing all of us retirees $250 so the last holdouts who want SS checks and not direct deposit, will join the direct deposit system. Also, the news that China stopped buying US debts is interesting. The US is generating record IOUs that have to be sold to someone. This is why the Federal Reserve is buying US government red ink. This is very bad, it causes hyperinflation in the future.
A pair of cardinals decided to nest near my house. For a week, the male fought his own mirror image, thinking it was another male cardinal. He would tear at the window, over and over again, until exhausted. He never figured out, this was his own reflection. I finally had to cover the window so he would not see himself and he finally went away.
MOVE WOULD SAVE MILLIONS AS AMERICAN RECOVERY AND REINVESTMENT ACT PAYMENTS ARE ISSUED TO MORE THAN 64 MILLION AMERICANS
WASHINGTON, D.C. – As America confronts the most severe financial crisis in generations, the Obama Administration remains committed to ensuring government action is administered as quickly and efficiently as possible. That is why the Treasury Department is calling on all Americans who are federal benefit recipients and still get checks in the mail to sign up for direct deposit, a small step that will help the government save millions, lessen the possibility for check fraud and benefit the environment.
Under the American Recovery and Reinvestment Act, the Treasury Department’s Financial Management Service (FMS) will issue more than 64 million one-time $250 payments to Social Security, Supplemental Security Income, Railroad Retirement and Veteran Affairs benefit recipients to make tough economic times a bit easier. An estimated 80% of these payments will be made electronically, leaving the remaining recipients until April 20 to switch from checks to direct deposit before the first disbursements are made in early May. Those individuals who switch to direct deposit will experience safer, more secure delivery of their economic recovery payment, as well as all future benefit payments, and will receive their payment sooner than those who wait for the mail delivery of a check.
This is an obvious lure to get all the hold-outs to stop demanding paper for SS checks. Instead, everyone will be electronic. So this bribe is being offered and I guess, will be quite effective. By the way, SS has not kept up with real inflation for a long, long time. For example, when fuel shot upwards, we got nearly nothing. Even with the prices down a bit, it is still double what it was 5 years ago.
The $250 checks barely make up for this inflation. I heat my home via firewood. For example, I spend the last three days, hauling logs out of the woods, chain sawing them up, splitting and stacking them. This is hard work. This is also, our future. Below is a foreclosure report from the Fed Reserve:
Default Probability by Year.
The top panel reports foreclosures on loans originated in that year. Loans may be purchase or reﬁnance. Data comes from Morton (1956). The bottom panel reports foreclosures on homes purchased with mortgages in that year. For these data, we count a loan as foreclosed if there was a foreclosure on that loan or any subsequent mortgage to that owner. Thus the probabilities in the lower panel are an upper bound on the probabilities in the top panel. See Gerardi, Shapiro, and Willen (2007) for details.
What is interesting to me is, Life Insurance companies were the biggest holders of mortgages before the Great Depression! Life Insurance isn’t inert, they collect monthly fees and then invest this in something. When the client dies, his heirs get the payoff. So, many people lost this future boon when the Great Depression wiped out the life insurance business.
Note how the bulk of loans that went bad from 1930-1940 were originated right before the Great Depression. The ones that were handed out in 1929 had a 25% chance of going under. We saw that this time around. The closer to the end of the housing bubble the loans were, the more likely they were immediately defaulted. Just like this time around the same loop, the default was often less than a year after getting the loans.
The second graph shows that the default rate prior to the 1990 Gulf War I recession which came on the heels of the Savings and Loan catastrophe. It is interesting that the default probability is lower this time around. The difference between the 1987-1991 housing bubble problems and today’s problems is the overall change in US fiscal health. Namely, all our systems are much more leveraged this time around.
The difference between the Great Depression and other recessions is the degree of international debt obligations. Up until the end of WWI, no one had spent so much money, so fruitlessly, in a war. The WWI debts were used as collateral for lending. So banks had a huge base of IOUs upon which, they could lend and they had to lend because all this money was pouring into the banking system via the Federal Reserve which had to move the WWI money flow to somewhere, fast.
This period is very similar to the present period because many of the payments flowing into the Federal Reserve and the Bank of London were actually loans from the US to Germany so Germany could funnel this money to England, France, Belgium, etc. This lending game was on top of the WWI loans so the WWI loans mushroomed tremendously.
This warped all banking systems and was the ultimate driving force for the global speculative games based on leveraging cheap loans from the major imperial central banks. There were several serious problems with the world’s biggest empire winning WWI. First of all, England already ran much of the planet earth. Germany had virtually no overseas holdings.
Britain had to use up all their available credit, fighting the tenacious Germans. After the war, Britain couldn’t seize all of Germany’s holding and thus, offset the costs of WWI. There were virtually no holdings and the African ones were utterly unable to make up the differential in war losses. That is, when empires go to war, if there is no loot at the end of the war, they go bankrupt even if they win.
This is why they have to avoid major wars with other empires that don’t have distant holdings one can seize means the winner has to extract some sort of payment from the loser. This was done at the end of WWI and Britain and France did seize Turkish lands, claiming, Turkey was allied with Germany and thus, open game for chopping up [sounds familiar, eh?]. Germany was financially exhausted by WWI and had no money so money had to be created out of thin air, from the Federal Reserve in the US which is heavily owned by foreign powers such as the Rothschild clan.
These foreign entities were very interested in tapping US financial reserves for funneling loans to Germany and the, Germany giving this as payments for WWI and then Britain and France could, in turn, pass this same money that came from the US, back into the US. A vast, unprecedented finance stream that depended 100% on the US economy growing with no hitches.
We see this same government lending to itself or to others who then pay each other with loans which means, loans are being piled on top of loans and everyone ends up insolvent after trying to ‘make money’ via housing speculation and stock market games. When the inevitable contraction happens, it all falls apart most disastrously.
Other important loci of respectful opposition are the Congressional Oversight Panel, whose latest report is also a must-read. Other members of the opposition include Sen. Sherrod Brown, who recently became chair of a Senate Banking Subcommittee on economic affairs, and Paul Volcker, who heads a panel appointed by Obama (which has still not met) was keeping his own counsel for a time, but has begun to be more actively engaged again. This is all still a delicate balance act, less than ninety days into a new administration that progressives must wish well.
This story from Common Dreams illustrates how weak many liberal commentators are when it comes to real politics and real battles for influence. The fact that Volcker was relentlessly moved, during the election, from being a top advisor to Obama, to heading a sub-panel that would advise Obama to holding no meetings and giving no input, was in direct proportion to Obama raising money in the NYC finance community and the endorsements he got from top Democratic politicians who are in the back pocket of Goldman Sachs.
The fact is, Obama’s story about having conflicting advice and then choosing wisely, is fake. The anxiety of the top 5 investment houses who are totally exposed to destruction via the Derivatives Beast led them to surround Obama with their own people who then egged him on to save them all. And Bush, of course, had the exact same influences working on him, too. And they got everything they wanted. And are still getting what they want, today.
Before we talk more about GS and their dastardly deeds, we must go back to the issue of WWI debts and how they were paid. Today, the US is like Britain was in 1919: broke. And we are still fighting many wars we can’t afford. And our military is growing more expensive, not cheaper. And we are winning little financial recoupment for our wars. Iraq is a powder keg we can’t hold much longer and even though our oil corporations are happy, this isn’t fixing our economy at all.
True, the oil is now flowing so oil prices are down but the damage done by the war causing prices to shoot upwards in previous years, is still causing much more economic destruction than the gains from conquering Iraq. And Afghanistan is 100% a hole in our pockets. The only change at home thanks to this invasion is, heroin is cheaper than cigarettes.
Reversing its role as the world’s fastest-growing buyer of U.S. Treasuries and other foreign bonds, the Chinese government actually sold bonds heavily in January and February before resuming purchases in March, according to data released this weekend by China’s central bank.
Exports to the US fell so the Chinese didn’t recycle the deficit. Meanwhile, US government spending shot through the roof. It is now running record deficits, far worse than any previous period in history outside of WWII.
China’s foreign reserves grew in the first quarter of this year at the slowest pace in nearly eight years. For the quarter, the reserves edged up $7.7 billion, compared to a record increase of $153.9 billion in the same quarter last year.
There will be $2 trillion that has to be absorbed by someone in the coming year. The US can’t hold this debt on our own books because this will cause hyperinflation in necessities such as food, fuel and medicine. The US is very anxious to move this debt off our own books. And the deal always is the same: we must allow a flood of imports to invade our domestic markets.
The main effect of slower bond purchases may be to weaken Beijing’s influence in Washington, by lessening the reliance of the U.S. Treasury on Chinese central bank purchases at its government bond auctions. Chinese officials from Premier Wen Jiabao on down have expressed growing nervousness over the past two months about their country’s huge exposure to America’s financial well-being.
Thanks to the ASEAN riots, the Chinese are going turtle for a few months as they figure out, how to deal with all this. The Chinese don’t like massive riots. Japan doesn’t have this which is why the Japanese financial rulers get away with murder there. The Japanese workers are relentlessly being shoved into slavery and are not resisting. But this isn’t true in the rest of Asia! Not even slightly.
This will force the Chinese leadership to be even more creative. They can’t crush rebellions at home and defy other nations. They don’t want to do this at all. The US solution is not their own desire whereby, we bomb, bomb, bomb just about anyone who troubles us.
Chinese reserves fell a record $32.6 billion in January and another $1.4 billion in February before rising $41.7 billion in March, according to figures that were released by the People’s Bank for the first time over the weekend. Resumed growth in China’s reserves during March suggests that confidence in the country may be reviving, and capital flight could be slowing.
China has essentially lent vast sums to the United States — roughly two-thirds of the central bank’s $1.95 trillion in foreign reserves are believed to be in American securities. But the Chinese government now finances a dwindling percentage of new American mortgages and government borrowing.
Mortgages are now resuming in the US at record cheap rates compared to the past but nearly all of this is being funded via the Treasury sucking up all these new debts and then selling Treasury bonds to the Federal Reserve. Britain and Germany tried this sort of trick after WWI. It didn’t work in the long run. It simply made the collapse much worse, when it finally caught up with reality.
Generally speaking, people like a steady status quo. So when an element suddenly changes, it throws into chaos, all systems connected with this status quo. The Japanese carry trade is a prime example: when it ended, all systems depending on it existing also crashed. Since the Japanese carry trade was the keystone for the entire global lending cycle, its failure caused all other systems to fail, simultaneously.
In general, too much lending always leads to these problems. We can’t lend too much, forever. There always is an upper limit. Nothing can go to infinity except one thing: zeroes added to numbers. This is why inflation can take off, very suddenly. It usually is less than a year, going from say, 12% inflation to 360,000% inflation. Since the take-off is so sudden, bankers must fear this process. But they don’t. They toy with it, trying to have a mythological 3% inflation rate.
Of course, Japan opted out of the 3% inflation game back in 1994 when they gave up on inflating their bubble back to life. They have instituted a grim depression system so the export markets could surge and thus, refinance Japan. Now, Japan has the world’s #2 FOREX holdings and their industries have driven rivals to the wall.
TOKYO (Nikkei)–Itochu Corp. (8001) said Monday it has taken a stake of 85% in SolarNet LLC of the U.S., as well as a stake of 67% in Ecosystem Japan Co., Ltd.
Like China who also is capitalized heavily, Japan is on a major buying spree. Like China, Japan is buying up commodity systems and energy production systems. Both are looking to the far future when these things will be increasingly valuable due to the Hubbert Oil Peak.
Americans are increasingly resisting the entire concept of the Hubbert Oil Peak because we want the old status quo to continue forever. Obama is encouraging alternative systems but this will be a total failure unless he raises gas taxes so US drivers will be forced to downsize their SUV fleet of gas guzzlers. There is zero political will for this.
In the rest of the world, only the upper classes owned cars after WWII so governments found it easy to raise gasoline taxes very high to cover government expenses. So there was little resistance to high prices. Now, people are accustomed to it. But the US has always had high auto ownership. This was because gas was cheap and easy to get. And we were the top producer of high octane gas for a long time. Until 1970, when we hit our own Hubbert Oil Peak. Since then, we import more and more oil. But consumption continues to climb and when prices go up, people agitate to cut the taxes, not raise them. All, so we can over consume oil we no longer produce, domestically.
This makes our trade imbalance worse and worse. China imports oil. So does Japan. Both are capitalized and can afford to do this. The US is not capitalized and can’t afford to do this. We do this by issuing IOUs to China, Japan and OPEC.
Foreign investors in Chinese banks will in future be forced to accept a lock-up period of at least five years, China’s top banking regulator said, after a series of share sales by US and European financial institutions.
In recent months, companies such as Bank of America, UBS and Royal Bank of Scotland have sold down all or part of their stakes in China’s largest state-owned banks immediately after lock-up periods of three years expired.
China, like Japan, will slowly bend all foreigners to their own rule. UBS, the RBS and the Bank of America are all going bankrupt! And are not capitalized at all. They are empty shells, pretending to be banks. RBS is actually totally bankrupt and has been taken over by a desperate, and increasingly bankrupt UK government. All these banks are withdrawing from China not because they hate it there. They are being forcibly withdrawn as their losses mount and they must get capital from somewhere.
This is disrupting China’s financial markets so China is moving quickly to change the game. And this is what matters: how swiftly a government reacts to danger. Those that fiddle around and pretend, there is no danger, will die. Those that move quickly to take over important future markets while arranging things so foreigners can’t raid the treasury or wreck domestic industries, will win.
The losses in Asia are bad. But if the Asian powers keep a lid on the populace and we have a recovery, they will emerge from all this, much stronger. And the US will be even deeper in debt. The only shining ray of hope here is, Japan will strangle to death due to population losses or public debt. And Japan is rightfully worried about this possibility which is why Aso is frantically talking about helping the one third of the working class who have zero unemployment insurance.
The US is handing me $250 of money it doesn’t have. And this will be another IOU on top of all the others. And I want a stable system, not one deep in debt. And so this $250 boon I will get will not make my future more secure. It makes it more precarious which is why I oppose these temporary bail outs. And I definitely oppose the Goldman Sachs bail out. More about that, later. It is a massive scandal.
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