Lively discussion out there and these open forums are filling up quickly - keep it up folks!
Feel free to post your links, comments, thoughts, discussion topics, etc here.
Discussion of Housing Bubble, US Dollar, Debt, Trade Deficit, Oil, Gold, Consumer Spending, Central Banks, Inflation, Outsourcing and the Bleak Future of the US economy
This Blog and/or the articles contained within have been referenced, linked or quoted in: Businessweek online, WSJ Online, Dollar Collapse, Safehaven, Silverbear Cafe, Financial Armageddon, Yahoo & Google Finance -- among many other blogs & web-pages... Thanks for stopping in for a read!
Lively discussion out there and these open forums are filling up quickly - keep it up folks!
Feel free to post your links, comments, thoughts, discussion topics, etc here.
CNN has pulled the link, but it looks like yesterday could have been much worse: Dow Jones: 'Specialists' Moves on Monday May Have Staved Off Bigger Mkt Fall'
Black Monday could have been even darker.
Proponents of open-outcry trading say that specialist market makers on the New York Stock Exchange, faced with a flood of selling orders late Monday, took the buy side or aggressively solicited for buyers on several large financial companies that were selling off. By assuming the role of buyers or soliciting them, these specialists may have helped limit losses at the bell. ...
... "If this was purely electronic, it could have been down 1200 or 1300 on the Dow," said Bernie McSherry, a senior vice president with Cuttone & Co., the largest independent floor operator at the NYSE. ...
"[Specialists] created trades that otherwise would not have occurred...when someone alerts a broker and says look at this, you create an interest. That facilitates trading that doesn't happen in other markets," said Dave Humphreville, president of the Specialist Association, which represents market makers on the floor of the NYSE.
I listen to Michael Savage on my drive home most evenings and find comfort in the fact that many of his viewpoints are similar to my own (maybe I'm really not crazy after all?).
Anyway, several times over the last couple of weeks I've heard him bash the bailout plan, Paulson, Bernanke and the rest of the gang and he even offered us a new "catchy" pledge of Allegiance:
From the Savage Nation:
"I pledge allegiance to the Stock of Goldman Sachs of Wall Street and to the Gang for which it stands One Gang indivisible with liberty and profits for them."
HYSTERICAL, but oh so true!
Protest rally September 25 2008 in the Wall Street area of New York City thousands angry about the government aiding Wall Street financial firms with billions of dollars - KEEP IT UP AMERICA!
"You Broke it, You BOUGHT IT, This Bailout is Bullshit!
DC Rally - No Bush Bailout
Protests across Los Angeles
I'm still stunned at the outcome of today's Bailout vote - THE PEOPLE WERE HEARD!
Maybe, just maybe, there is still a glimmer of hope for our elected representatives!
Here's a list of how your representatives voted: FINAL VOTE RESULTS FOR ROLL CALL 674
But it ain't over yet yet. Looks like this package will continue to get pushed until the Cabal gets their desired YES answer:
New bailout plans
Business groups, Wall Street, the Bush administration and congressional leaders want to revive the bailout after it was defeated Monday in the House of representatives. Thursday could be the earliest the bailout could be reconsidered, in part because of House members taking time off for Rosh Hashana.
That could make for some rough days for the credit and stock markets, which tumbled after the Monday defeat in the House, setting a record Dow Jones Industrial Average drop of 777.68 points.
On Monday afternoon CNBC reported that Democratic leaders have pledged to put together another financial rescue package.
U.S. Treasury Secretary Henry Paulson said he will “continue to work with Congressional leaders to find a way forward to pass a comprehensive plan to stabilize our financial system.”
DON'T LET THEM PASS IT THIS TIME EITHER! Contact your Representative (Link) and tell them:
NO MORE BAILOUTS!
Note: A separate "No Bailout Petition link" is located at bottom of this post - for those who haven't already signed it. Come on People! This is your chance as an American to make a difference and say "We've had enough of this corrupt banking Cabal and the system must Die! (Please take the time to read/digest each of the very important quotes in blue below)
"Give me control of a nation's money and I care not who makes it's laws."-- Mayer Amschel Bauer Rothschild, Godfather of Central Banking
"Whoever controls the volume of money in any country is absolute master of all industry and commerce." -- James A. Garfield, President of the United States
"I have never seen more Senators express discontent with their jobs....I think the major cause is that, deep down in our hearts, we have been accomplices in doing something terrible and unforgivable to our wonderful country. Deep down in our heart, we know that we have given our children a legacy of bankruptcy. We have defrauded our country to get ourselves elected." -- John Danforth (R-Mo)
"It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." -- Henry Ford
"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the government at defiance. The issuing power (of money) should be taken away from the banks and restored to the people to whom it properly belongs." -- Thomas Jefferson, U.S. President.
"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it's issuance." -- James Madison
"A great industrial nation is controlled by it's system of credit. Our system of credit is concentrated in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the world-- no longer a government of free opinion, no longer a government by conviction and vote of the majority, but a government by the opinion and duress of small groups of dominant men." -- President Woodrow Wilson
"Most Americans have no real understanding of the operation of the international money lenders. The accounts of the Federal Reserve System have never been audited. It operates outside the control of Congress and manipulates the credit of the United States." -- Sen. Barry Goldwater (Rep. AR)
"The financial system has been turned over to the Federal Reserve Board. That Board administers the finance system by authority of a purely profiteering group. The system is Private, conducted for the sole purpose of obtaining the greatest possible profits from the use of other people's money" -- Charles A. Lindbergh Sr.
"The Federal Reserve banks are one of the most corrupt institutions the world has ever seen. There is not a man within the sound of my voice who does not know that this nation is run by the International bankers." -- Congressman Louis T. McFadden (Rep. Pa)
"Capital must protect itself in every way...Debts must be collected and loans and mortgages foreclosed as soon as possible. When through a process of law the common people have lost their homes, they will be more tractable and more easily governed by the strong arm of the law applied by the central power of leading financiers. People without homes will not quarrel with their leaders. This is well known among our principal men now engaged in forming an imperialism of capitalism to govern the world. By dividing the people we can get them to expend their energies in fighting over questions of no importance to us except as teachers of the common herd." -- Taken from the Civil Servants' Year Book, "The Organizer" January 1934.
Now that I've got your attention, it's time to wake up folks - send this link to everyone you know.
Well, if you haven't already figured it out, our government is under siege by Goldman Sachs and company (the money masters) who are trying to heist more power/control and stick a $700 Bailout on the US taxpayer - to save our corrupt banking/financial systems. ENOUGH!
If you feel the same way, please sign the Petition below - Say "No Deal" to the MASSIVE Bailout!
Click Link: Stop The Bailouts!
Citigroup Inc. to Acquire Banking Operations of Wachovia
Citigroup Inc. to Acquire Banking Operations of Wachovia
FDIC, Federal Reserve and Treasury Agree to Provide Open Bank Assistance to Protect Depositors
FOR IMMEDIATE RELEASE
September 29, 2008 Media Contact:
Andrew Gray (202) 898-7192
Citigroup Inc. will acquire the banking operations of Wachovia Corporation; Charlotte, North Carolina, in a transaction facilitated by the Federal Deposit Insurance Corporation and concurred with by the Board of Governors of the Federal Reserve and the Secretary of the Treasury in consultation with the President. All depositors are fully protected and there is expected to be no cost to the Deposit Insurance Fund. Wachovia did not fail; rather, it is to be acquired by Citigroup Inc. on an open bank basis with assistance from the FDIC.
"For Wachovia customers, today's action will ensure seamless continuity of service from their bank and full protection for all of their deposits." said FDIC Chairman Sheila C. Bair. "There will be no interruption in services and bank customers should expect business as usual."
Citigroup Inc. will acquire the bulk of Wachovia's assets and liabilities, including five depository institutions and assume senior and subordinated debt of Wachovia Corp. Wachovia Corporation will continue to own AG Edwards and Evergreen. The FDIC has entered into a loss sharing arrangement on a pre-identified pool of loans. Under the agreement, Citigroup Inc. will absorb up to $42 billion of losses on a $312 billion pool of loans. The FDIC will absorb losses beyond that. Citigroup has granted the FDIC $12 billion in preferred stock and warrants to compensate the FDIC for bearing this risk.
In consultation with the President, the Secretary of the Treasury on the recommendation of the Federal Reserve and FDIC determined that open bank assistance was necessary to avoid serious adverse effects on economic conditions and financial stability.
"On the whole, the commercial banking system in the United States remains well capitalized. This morning's decision was made under extraordinary circumstances with significant consultation among the regulators and Treasury," Bair said. "This action was necessary to maintain confidence in the banking industry given current financial market conditions."
Wachovia customers with questions should call their normal banking representative, service center, 1-800-922-4684 or visit www.wachovia.com. The FDIC's consumer hotline is 1-877-ASK-FDIC (1-877-275-3342) or visit www.fdic.gov.
Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's banking system. The FDIC insures deposits at the nation's 8,451 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed. The FDIC receives no federal tax dollars – insured financial institutions fund its operations.
FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically (go to www.fdic.gov/about/subscriptions/index.html) and may also be obtained through the FDIC's Public Information Center (877-275-3342 or 703-562-2200). PR-88-2008
Back in Jan 08, I pondered aloud several questions related to the potential Social Implications of (what was then) a looming economic crisis. Turns out, many readers were wondering the same and this was one of my highest traffic posts ever.
If you haven't already done so, read the info at the following link then come back to read the rest of this post.
SOCIAL IMPLICATIONS of a SIGNIFICANT ECONOMIC DOWNTURN
Well, nine months have passed since those words were written and there can now be no doubt (1) that this crisis is one of the most significant economic downturns in history and (2) the Massive bailout package being worked is just a bandaid to slow the controlled financial implosion. Even John McCain realizes this and recently stated in his debate with Obama: "This is not the beginning of the end, but the end of the beginning - if we come out with a package that will keep these institutions stable..
With that digested and the knowledge things are likely to get far worse, what can we anticipate for our future - just how bad could things get for the little guy living in the suburbs - trying to raise a family?
I'll refrain from trying to list all possible consequences, as there are far too many potential outcomes, but I would like to highlight several major consequences that could be initiated by a worst-case financial panic...
Note: I'm not trying to scare anyone here, but merely trying to create an awareness and food for thought - so that you can use the information to better prepare your family (in the event the worse-case scenario actually happens).
Let us hypothetically propose the economic crisis intensifies:
Hundreds more banks/financial institutions implode and the FDIC runs out of money - a nationwide run on the banks ensue; consumer credit has consistently gotten worse and available credit-card credit-lines have finally been turned off/reeled in - unemployment skyrockets due to the lack of new credit/spending; inflation rages as the dollar falls sharply; the economic crisis deepens and trillions in unpayable derivative contracts unwind quickly - stock markets collapse around the globe and the crushing pressure is exacerbated by foreign holders of US Debt who finally rush to the exit doors.
The Gvt panics and Stock Markets are closed indefinitely while ATM machines, banks and electronic commerce are shut down across the nation (as the government tries to figure out what to do). People grow anxious as their credit cards and debit cards don't work, and with no cash on hand, they can't buy food or gas... Those who do have cash rush to fill up their gas tanks and empty the shelves at their local grocery stores. The real economy comes to a screeching halt as deliveries of food, gas, etc can no longer make it to market.
Social unrest and general panic set in as our just-in-time economy breaks down. People are confused and scared while the government repetitively tries to reassure that they have everything under control. Hysteria eventually sets in as social chaos, looting, and roving gangs terrorize the masses (taking what they need from the unprepared). Similar situations take place across the nation as people who were on the fringes of society become hungry/desperate and/or take advantage of the lawless situation.
Martial law is ultimately declared and National Guard troops are deployed to major cities around the nation - to help restore order, distribute food, etc.
So many unknowns
Could this actually happen? I don't know - you be the judge; but it's probably better to be a prepared alarmist than an unprepared victim... Think about it.
If you've watched Paulson, Bernanke, Bush and the rest of our worried leaders over the last couple of week, you've probably been able to sense their state of alarm - Yes, they truly realize how big this crisis is...
What can you do to prepare?
I could list a thousand things here from generators, flashlights, etc, but the most important (I believe) are:
1) Have at LEAST a couple of weeks worth of non-perishable food/water on hand
2) Have enough cash on hand to make it through a possible electronic commerce shutdown
3) Maintain close relationships with friends/neighbors (help each other out)
4) If you have a gun, know how to use it - to protect your family, friends and valuable assets (cash/food).
Yes folks this could be bad, but we Americans are an industrious/resolute bunch and (though it will take some time) we will find a way to pull out of it.
However, be aware: regardless of the ultimate significance of this downturn, America is likely to forever change as the US Dollar loses it's reserve currency status in the not too distant future.
At a MINIMUM, this economic crisis will cause our standard of living to fall and our cost of living to increase significantly.
Our future is uncertain, and we're definitely in for some difficult times ahead, but the world will NOT end - and we will survive.
Again, this post was no meant to scare, but to inform by thinking outside the mainstream box. Use this information as you may, but it's probably not a bad idea to prepare for whatever the outcome.
Bubble Bigger than anything we've ever faced. You can NOT place value into assets that are worthless/illiquid: Ron Paul
Gas Shortage In the South Creates Panic, Long Lines
Gasoline shortages hit towns across the southeastern United States this week, sparking panic buying, long lines and high prices at stations from the small towns of northeast Alabama to Charlotte in the wake of Hurricanes Gustav and Ike.
I drove past nine or ten gasoline stations that were out of gas," Bragg said. "I had my GPS up looking for any gas in the area, from the mom-and-pop places to the corporate gas stations. Nothing. They were all taped off."
Public officials appealed for calm as it appeared that panic buying might exacerbate supply problems if motorists try to keep more fuel than usual in their tanks. The Environmental Protection Agency suspended regulations for antipollution additives to help ease the supply situation.
Georgia Gov. Sonny Perdue provoked some angry comments on the Atlanta Journal Constitution Web site, which quoted him as saying that "there is ample fuel in the city" and that some of the panic was "self-induced."
"Perdue says we got ample gas supplies," wrote one reader. "Then why is it that every gas station in my area is out of gas. Some have been out for over 4 days."
Expect Gas Shortage To Stick Around, Says Expert
ATLANTA -- The gas shortage in metro Atlanta will continue for several more weeks, leaving the majority of gas stations across the area dry and frustrated drivers searching for fuel, a petroleum company executive said Sunday."We're beyond panic; we're into desperation," said Tex Pitfield, chief executive of Saraguay Petroleum in Atlanta.
The shortage has hit hardest in Atlanta, Nashville, Tenn., and the Carolinas, including the Charlotte area and the mountain towns to the west. For days it has closed civic offices, cut short workdays and even canceled community college classes.
Last open forum getting full - starting a new one here. Please feel free to post up your thoughts, interesting/informative links, use for discussion topics, etc.
Many Americans are being brainwashed into believing that our economic woes can be resolved with the "saving grace" of a $700 Billion taxpayer bailout package - being crafted over the weekend.
Well folks, It just ain't going to happen that way...
This package (if approved) may slow the speed of our debt implosion, but the debt implosion train has already jumped the tracks and can not be stopped. A Massive Recession or Depression is well on its way.
If it's coming anyway (you ask), why not try to slow it down with the bailout?
Well, there are several very harmful side effects of passing this bailout - the most significant being: a falling US Dollar/inflation for every American household.
What do I mean?
Well, if passed, we will still experience the same (albeit slower) consequences of the debt implosion: unemployment figures will rise significantly and the value of our assets (homes, cars, boats, toys and other expensive gadgets) will tumble as people flood the market with these items to (1) get rid of the added household expense and (2)use the proceeds to help put gas in the car/food on the table.
The difference will be: If approved, we will experience a significant increase in the cost of living - simultaneously with debt implosion/falling asset values, etc...
Food, gas, clothing, imports, etc, will all skyrocket in price - significantly increasing the cost of maintaining a household.
Ultimately, this bailout will not be enough money and other bailouts will likely follow (due to this precedent) and the Massive Recession/Depression will turn Hyperinflationary in nature - Sticking it to the average Joe from both ends.
I just finished watching the Presidential debates. In a nutshell: I wasn't too impressed with either of them, but one key comment stuck and resonated within my head throughout.
When questioned on the pending bailout package and the economic crisis, John McCain stated" "This is not the beginning of the end, but the end of the beginning - if we come out with a package that will keep these institutions stable."
A keen realization that this package is just a bandaid - to slow the bloodletting, with the understanding that there will be much more bloodloss to come.
Hold on to your hats folks!
To most Americans, the Federal Reserve is just another name on their dollar bill. They don't know that this secretive private bank controls America's entire economic system. The Federal Reserve is no more federal than Federal Express. Created with no constitutional authority in 1913, the Fed prints money out of thin air and loans it to the U.S. treasury at interest. This can only lead to one outcome: debt. Currently, the Federal Reserve is printing billions of dollars to bail out Wall Street while destroying the middle class and the dollar. If our country wants a sound and transparent monetary system, we need to abolish the Federal Reserve and bring the power back to the American people.
Iraq has signed a multi-billion dollar deal with oil and gas giant Royal Dutch Shell, giving the company access to its natural gas reserves.
The deal is the second between the government and a foreign firm since the US-led invasion of Iraq in 2003
Ron Paul lectures Bernanke on the flaws of the bailout plan and the hazard of the attempt to fix prices versus letting them correct naturally in the free market at the Congressional Hearing today (9/24/08)
U.S. Mint suspends Buffalo gold coins after depletion
Thursday, September 25, 2008
NEW YORK - The U.S Mint said Thursday it was temporarily suspending sales of American Buffalo 24-karat gold one-ounce bullion coins because strong demand depleted its inventory.
"Demand has exceeded supply for American Buffalo 24-karat gold one-ounce bullion coins, and our inventories have been depleted. We are, therefore, temporarily suspending sales of these coins," the Mint said in a memorandum to authorized American Buffalo dealers.
The Mint also told dealers that it would work to build up its inventory to resume sales shortly.
In mid-August, a shortage of American Eagle one-ounce gold coins due to "unprecedented" demand had also forced the U.S. Mint to temporarily suspend sales of the popular coins.
The Mint said Thursday it would continue to supply the American Eagle 22-karat gold one-ounce and American Eagle silver bullion coins on an allocation basis to coin dealers.
Just heard through Bloomberg - WAMU Dead: seized by FDIC this evening; JP Morgan may try to aquire assets.
Hmm.. a Thursday evening? Possibly a signal for our illustrious gvt leaders who are trying to coordinate our MASSIVE Bailout plan?
Hat tip Jim-n-Max!
Since 2002, the national debt ceiling has been raised 6 times, as follows:
2002: Raised from $5950 billion to $6400 billion
2003: Increased again - from $6400 billion to $7384 billion
2005: Wasn't enough - increased to $8184 billion
2006: Raised from $8184 billion to $8965 billion
2007: Big one this time - from $8965 billion to $9815 billion
2008: July 08 housing Bailout package included provision for increase to $10,600 billion
Today (look at my debt clock) US debt stands at 9,794,281,325,636 dollars
The pending $700B bailout package will once again increase the ceiling - making it number 7 since 2002:
2008 Bailout Package Plan: Increase ceiling from $10,600 billion to ~ $11,300 billion
So, in other words, it took the US ~ 226 years for the US to reach the first $5,950 billion in debt, but it took only ~ 6 more years to double it. Again, we're talking about ELEVEN TRILLION, THREE HUNDRED BILLION DOLLARS - AN ENORMOUS FIGURE.
Note as food for thought, and an attempt to help you grasp the enormity of this figure: If we were to substitute seconds (a fleeting instant in time) for dollars, by the time 11.3 trillion seconds will have passed (from today) it would be the year 360,328 AD
So, where does it all end? Aside from a hyperinflationary event, this debt CAN NEVER BE PAID!
BTW: Rumor has it the Treasury is planning to install 3-phase 50HP motors this weekend - as the current printing press motors can no longer handle the strain of max print volume and 24/7 operations.
To take a qoute from Will Rogers: We are the first nation in the history of the world to go to the poor house in an automobile.
After watching the Bush's Emergency Economic "Scared Shitless" briefing on TV tonight, I decided it's probably a good time to get some more silver, food, toilet paper and load up another 1000 rds of 45 ACP.
Depiction of typical wall streetr's eating at the US Gvt finance trough - equal opportunity anyway.
Last forum was getting full - Please feel free to use this one for any discussion/topics of interest, links, etc. I will keep it towards the top until it too starts to get too full.
Great discussion out there folks. Keep it going!
More true now than when I initially posted it back in April
Mushroom Cloud over Wall Street - By Mike Whitney
"One bank to rule them all;
One bank to bind them..."
21/090/08 "ICH " -- - These are dark times. While you were sleeping the cockroaches were busy about their work, rummaging through the US Constitution, and putting the finishing touches on a scheme to assert absolute power over the nation's financial markets and the country's economic future. Industry representative Henry Paulson has submitted legislation to congress that will finally end the pretense that Bush controls anything more than reading the lines from a 4' by 6' teleprompter situated just inches from his lifeless pupils. Paulson is in charge now, and the coronation is set for sometime early next week. He rose to power in a stealthily-executed Bankster's Coup in which he, and his coterie of dodgy friends, declared martial law on the US economy while elevating himself to supreme leader.
"All Hail Caesar!" The days of the republic are over.
Section 8 of the proposed legislation says it all:
"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."
Right; "non-reviewable" supremacy.
Congress, of course, is more than eager to abdicate whatever little authority they have left. They're infinitely grateful for their purely ceremonial role, the equivalent of Caligula's horse, albeit, with considerably less dignity. Has even one senator spoken out against this madness, which--according to informal internet polls--is resoundingly rejected by the voters? Does it concern the members of congress at all, that the present financial crisis was brought on by the proliferation and sale of trillions of dollars of mortgage-banked garbage which were fraudulently represented as Triple A rated bonds by the very same people who now claim to need unprecedented and dictatorial powers to fix the problem? Or are they more worried that the steady torrent of contributions which flows from Wall Street to congressional campaign coffers will be inconveniently disrupted if they fail to ratify this latest assault on democratic governance? The House of Representatives is one big steaming dungheap that should be leveled and turned into an amusement park instead of a taxpayer-funded knocking shop. What a pathetic collection of cowards and scumbags.
Continued - Mushroom Cloud over Wall Street - By Mike Whitney
Hat tip FOFOA
NY Post: ALMOST ARMAGEDDON - MARKETS WERE 500 TRADES FROM A MELTDOWN
The market was 500 trades away from Armageddon on Thursday, traders inside two large custodial banks tell The Post.
Had the Treasury and Fed not quickly stepped into the fray that morning with a quick $105 billion injection of liquidity, the Dow could have collapsed to the 8,300-level - a 22 percent decline! - while the clang of the opening bell was still echoing around the cavernous exchange floor.
According to traders, who spoke on the condition of anonymity, money market funds were inundated with $500 billion in sell orders prior to the opening. The total money-market capitalization was roughly $4 trillion that morning.
The panicked selling was directly linked to the seizing up of the credit markets - including a $52 billion constriction in commercial paper - and the rumors of additional money market funds "breaking the buck," or dropping below $1 net asset value.
The Fed's dramatic $105 billion liquidity injection on Thursday (pre-market) was just enough to keep key institutional accounts from following through on the sell orders and starting a stampede of cash that could have brought large tracts of the US economy to a halt.
While many depositors treat money market accounts as fancy savings accounts, they are different. Banks buy a variety of short-term debt, including commercial paper, with the assets. It is an important distinction because banks use the $1.7 trillion commercial-paper market to fund their credit card operations and car finance companies use it to move autos.
Without commercial paper, "factories would have to shut down, people would lose their jobs and there would be an effect on the real economy," Paul Schott Stevens, of the Investment Company Institute, told the Wall Street Journal.
Cracks started to show in money market accounts late Tuesday when shares in one fund, the Reserve Primary Fund - which touted itself as super safe - fell below the golden $1 a share level. It had purchased what it thought was safe Lehman bonds, never dreaming they could default - which they did 24 hours earlier when the 158-year-old investment bank filed Chapter 11.
By Wednesday, banks sensed a run on their accounts. They started stockpiling cash in anticipation of withdrawals.
Banks, which usually keep an average of $2 billion in excess reserves earmarked for withdrawals, pumped that up to an astounding $90 billion by Wednesday, Lou Crandall, chief economist at Wrighton ICAP, told The Journal.
And for good reason. By the close of business on Wednesday, $144.5 billion - a record - had been withdrawn. How much money was taken out of money market funds the prior week? Roughly $7.1 billion, according to AMG Data Services.
By Thursday, that level, fed by the incredible volume of sell orders pouring in from institutional investors like pension funds and sovereign funds, had grown to $100 billion. It was still not enough to stem the tidal wave.
The banks knew something drastic had to be done. So did Paulson.
The injection of capital into the market was followed up by calls from Treasury Secretary Hank Paulson to major money market players like Bank of New York Mellon and State Street in Boston informing them that federal money was in the market and they should tell their clients the Feds would be back with a plan to stem the constriction in the credit market.
Paulson knew the $105 billion injection was not a real solution. A broader, more radical answer was needed.
Hours after Paulson made his round of calls to calm the industry, word leaked out that an added $1 trillion bailout of banks was being readied. Investors cheered. At about 3 p.m., news of the plans was filtering up and down Wall Street, fueling a 700-point advance in the Dow Jones industrial average through 4 p.m. Friday.
By that time, Paulson had announced the plan. It included insurance on money market accounts, a move that started in quiet Thursday morning, when the former Goldman Sachs executive saved the country from a paralyzing meltdown.
Articulate Jerry from over at Eyeonwashington.blogspot.com has been kind enough to forward/share some of his thoughts regarding our dire political/economic predicament. Though you may not share all of his specific viewpoints, I'm quite certain you will enjoy the read nonetheless. Thanks Jerry!
The political system is once again, creating a new quandary for our nation due to its failure to build a transparent government. Without appropriate supervision of its operations, and a necessary level of regulation to make sure the system responds to its own best interests and practices, and not for a select few, our democracy cannot work effectively.
This is how the derailment occurred under the direction of Alan Greenspan, the former chairman of the Federal Reserve, our nation’s central bank dating back to 1913:
Along with a capitulating series of presidents, who followed the prescribed philosophy of unbridled and secretive capitalism under a trickle-down theory through a pyramid-style economic methodology, Alan Greenspan, Ben Bernanke, Hank Paulson, Phil Gramm, and many within the Republican and Democratic Parties have presented us with the unbelievable meltdown we are all witnessing.
The late John Kenneth Galbreith, claimed that the trickle down theory was responsible for the Panic of 1896. It was called by the elites of the time “The Horse and Sparrow Theory”, meaning that if you fed the horse enough oats, the horse would pass on its good fortune to the sparrows hanging out along the road. No Sh*t! There is absolutely no example of trickle-down theory working anywhere in the world, as far as I have found, that would justify continuing it, beyond this point in time. It is only an idealistic, pie-in-the-sky theory.
I am no economist, but only a lay person intrigued by the crime story that has surrounded the privileged elite controlling the credit markets starting with the most powerful on top and moving on down to those who wanted to buy a piece of the wealth-accumulating dessert.
This 30-year run has led us to where we are today. 30 years ago this crime story began establishing its foothold, building its operations and soldiers creating a cyber-wealth empire, which has amounted to somewhere between $450-500 trillion in worldwide toxic derivatives now woven throughout the fabric of foreign central banks, financial institutions, private equity funds, hedge funds, pension funds and sovereign wealth funds. Now this cyber-wealth is on the verge of melting down exposing deceptive, secretive, greedy, and extremely under-capitalized practices.
What has been uncovered is that President Reagan’s free market, trickle-down economic express-train policy, driven by his senior engineer Alan Greenspan, has finally hit the inevitable wall. Its theory was to let those at the top of the pyramid acquire all the wealth they could and, through its basic fundamentals trickle down as a stimulus to those “sparrows” hanging along the roads of Main and Side Street. We just saw that it failed. Those 10% at the top have acquired massive amounts of wealth, while the economy has failed - leaving the middle class to suffer with foreclosures and real wage shrinkage. What we also witnessed was the top of the pyramid collapse, and the top-tier wealth accumulators seeing their lending financial institutions fall into conservatorship, insolvency or bankruptcy because of their trickle-down principles. These institutions have ended up holding toxic debt that was virtually worth-less - requiring them to activate their distress calls to congress and the White House. “Help, help. Save our wealth.”
Now the Treasury, Fed, and President have decided to create a new Pyramid Scheme but not molded out of private free market theory, but out of a socialistic model.
By infusing the largest failing financial institutions with the previous recipients of the Fed’s 2% open window, we will witness over one trillion dollars of taxpayer-treasury funds being given out to the Bush “Haves and Have-Mores”. In addition, the Fed has provided foreign sovereign wealth funds, and foreign central banks with taxpayer-treasury funds because they’re angry over their losses resulting from the Pyramid Scheme, since they ended up buying leveraged-out, AIG insured (through credit default swaps that are worth-less), and collateralized debt obligations made mostly out of mortgage debt. YIKES! Those countries took a major wealth-loss hit and now want the U.S. government to bail them out, too. They seem to have forgotten that such investments are NOT safe, nor guaranteed by the U.S. government, but risky. This has been the Great Unwinding for those at the top, or close to the top of the Pyramid Scheme. If you were not such a big player, you ended up drowning. As with the Titanic, only the elite and privileged got to the lifeboats in time leaving those in steerage to meet their fate. Remember, they all were told that the Titanic was unsinkable. That was what Greenspan and the financial institutions told their tickle-down investors, as well. SOL, as they say.
The new trickle-down fundamental is to privatize the earnings and socialize the losses. This is what McCain means when he says the fundamentals are good. They are good for the wealthiest 10% of Americans, not the many who have seen a $300 per year loss in real wages.
So how will it all unwrap over the next month, three months, 12 months? If I knew, I would be a rich guy, too. I’d be on Letterman, Oprah, Leno and Larry King. O’Reilly would be begging me to go on his show, but I would refuse and call him a jerk on the phone. I’d be on a big-time world tour, with Bono, and Krugman and Roubini, giving out advice and selling my book and Internet newsletter. I’d have a cottage by the lake, and a loft in the city. I’d be sitting pretty during the Great Unwinding. There would be groupies wanting me to analyze their investment portfolios. You know the shtick.
But based upon my gut intuition, the Bush Bailout Plan is unsustainable. The Bush Crime Family Conspiratorial Headquarters has one goal in mind, and that is to retain power for their constituents at the top of the Pyramid. The only way to do this is to get McCon elected. If and once elected, the Bush/Cheney crime bosses will hop off the White House grand cruise ship and onto their exiting water craft for safer ground. McCon and McPalin will be left to drift in the dangerous economic waters for 4 years as they so desperately campaigned for.
What the McCons don’t realize is that the U.S. does not have any money of its own left to spend, therefore, they must print more for the Great Infusion. They rely on foreigners to supply us with funds to shore up and patch up a leaking dyke. Will there be a time when they curtail their generosity toward a nation who has squandered it for “more wars, my friends”, or the Halliburton/Blackwater/ etc war machine, or the huge spying enterprise, or the aggression and hostility directed toward others? There is a strong possibility of it ending up backfiring into their faces - affecting their own self-interests. Can the dollar improve under this new socialized economy? Or will we see that these emperors, in fact, have no clothes, as the credit market fails to loosen up out of fear, as cash-strapped consumers put up the duct tape and plastic around their lives waiting for the economic fallout to pass further freezing up the economy. Does this sound like 1931?
Deflation is not to be disregarded. Nor is inflation, for that matter, as it impacts upon many life-sustaining essentials. A value-less dollar is a possibility. Can banks go under while holding on to their government/taxpayer- paid-for and issued treasury life preservers? Yes! How can the U.S. repair and rebuild Iraq and Afghanistan while we, too, crumble under the tribulations of war right here at home? I don’t see much time left.
The top-tier banksta gangstas wanted a guarantee that no “economic insurgents” would fire upon their financial institution’s value, which remains weak, rotten and vulnerable. Plus, these CEO administrators want to make a ton more money by wagering on themselves without the threat of the big, bad “economic insurgents” betting against them. This is how neo-fascism works. The government protects its own and, in this case, it’s the big political party supporters and holders of the oligarchy’s wealth. It all comes at a price! The Republicon Party and those making up the Demo-Con sub-party capitulators, such as Lieberman, will see bigger and fatter contributions fill their purses unless congress stands up to the Paulson/Bernanke/Bush/Banksta criminals.
The Bush administration responded to those he refers to as “my base” who wanted to protect themselves from “economic insurgents”, who are also known as “short sellers”. These are investor/traders who bet that the stock price would fall because the company’s fundamentals are not strong. Short selling has now been removed for 800 chosen stocks, including G.E., allowing the “haves” to bet on themselves without fear of the “insurgents” coming after their unbridled speculation.
Bush once said, “we fight them there, so we don’t have to fight them here.” But the war is right here in America and most people don’t realize it, although it has been very clear to many more of us this week. The war in Iraq and Afghanistan was partly created as a distraction from the economic war right here in America brought to us by the Wall-Street Gangstas, and their crime bosses. There is a war between Wall Street, and those living on Main and Side Street. Protect Wall Street first. They get the U.S. backed Protection Service. March forward and manipulate the heck out of the markets. Give protection money to the foreign central banks and sovereign wealth funds to keep them from dumping their U.S. Treasury bills and bonds, or dollars on the open market. By showering them with bailout funds, Hank “the Paulie” Paulson, and “Bada Bing” Bernanke, along with the White House crime bosses, have encouraged those international bankers to continue to fund our debt, USING OUR GOVERNMENT ISSUED BAILOUT MONEY. WOW! What a deal!
I believe if the government wants to socialize these financial institutions, then take them over. Cut the investors out. Let them take their hits. Replace the greedy CEOs. Remove their golden parachutes, bonuses, salaries, stock options and send them home. Raise taxes on the top-tier wage earners. Carve up these mega-financial institutions into smaller, more controllable, transparent and regulated entities. These corporate thieves, foot soldiers and “benefactors” must feel the financial pain and not the middle class who were victimized by their rise and fall.
In addition, we need to realize our hegemonic failure in the Middle East and shut the wars down. Leave the bases and
stop the human and economic losses. Orchestrate a massive industrial rebuilding movement that would focus on alternative energy and re-engineer an alternative energy grid. And finally, provide single-payer health care allowing workers to move between employers or start their own businesses without the fear of losing coverage and, remove the heavy health care burden experienced by businesses, which drains valuable capital needed for expansion.
You have just read my views - only one set of eyes and one mind.
Max Keiser on Aljazeera English news on 18 September 2008 as the world's central banks inject $260 billion into the markets.
Slight delay upon video loading -- Give it a few seconds
Our Global economy is currently teetering on the edge of a cliff - caused by a complete collapse of the American Debt bubble and unwinding of the global derivatives complex.
Had American financial policymakers allowed us to take our medicine earlier, we probably could have gotten through this mess, but Alan Greenspan and the Boyz instead decided to follow a consistent policy of delaying our day of reckoning. By lowering rates/increasing liquidity at any inkling of global economic stress (see some of the examples below), they merely covered up the economic problem of the day with more easy credit/debt - which successfully delayed, but significantly increased the size of the problem...
- US Stock Market Crash of 1987
- Japan's Economic Crash of 1990's
- LTCM Hedge Fund Collapse 1994
- Asian Currency Crisis 1997
- Russian Bond Default 1998
- NASDAQ Bubble/Bust
The latest example was the Housing Bubble
Most uninformed Americans actually think the housing bubble created all of our current economic ills, but what they don't realize is: the housing bubble was merely the delayed symptom of easy monetary policies and laxed lending standards - created in large part by Alan Greenspan and his cronies by not wanting to take the harsh economic medicine after the dot-com implosion and 9/11 crisis. Therefore, they delayed the much needed/necessary hardship by lowering/holding rates at 1% (40 year low) - providing the volatile fuel mixture used to inflate the housing bubble.
So, here we are today, sitting on the MASSIVE cumulative effect of all these corrective delays and the problems are GARGANTUAN.
Thus far, in an attempt to save our crumbling foundation of debt, Gvt financial experts (AKA: Plunge Protection Team) have tried three different mortgage work-out plans, pushed through a massive economic stimulus package and simultaneously resorted to a myriad of unprecedented Fed Reserve lending facilities. That wasn't enough, so Bear Stearns was bailed out with your taxpayer dollars, followed by Fannie Mae/Freddie Mac and most recently AIG. Each of these attempt to stop the systemic debt implosion has been more drastic than the previous and each attempt has failed.
It's now being said the proposed $700 Billion Bailout package (a new taxpayer funded Government structure used to buy up the bad debts of sinking US and International banks) will save the day.
So, will it work?
Before answering this question, ask yourself: How many times during this developing economic crisis have our appointed financial wizards told you the crisis is contained - and have they been right even once?
Much to Greenspan's despair (because his legacy will now forever change) our inevitable day of reckoning has finally arrived! The problems we now have are far too big for any repair effort - Deleveraging of debt must happen and there is nothing, aside from delaying the inevitable, that Paulson, Bernanke, Cox, Lukken and the rest of this lying band of taxpayer pirates can do about it.
Our system is Hemorrhaging badly and the band aids will slow, but will not stop the massive bloodletting to come.
If you'd like to know more about how we got here and what our future is likely to hold - see link: US Economic Outlook 2008-11+
Lastly, we should never discount the negative implications these bailouts create for the US Dollar - as the World's Reserve: Dollar: Faltering Foundation of US Economic Strength
The collapse of government backed mortgage giants Fannie Mae and Freddie Mac caused the financial crisis now gripping the American economy.
Who is to Blame?
How did it happen?
Follow the money.
Senator Chris Dodd (D-CT), Chairman of the Senate Committee overseeing Fannie and Freddie received $165,400 in contributions from individuals and PACS for both mortgage giants since 1989.
That's over $8,000 per year.
But Obamas cash card is much better:
Since January 2005 he's amassed over $126,000. Thats roughly $32,000 PER YEAR!
Also along for the ride:
Kerry, John $111,000
Reid, Harry $77,000
Clinton, Hillary $76,050
Pelosi, Nancy $56,250
Frank, Barney $42,350
Durbin, Dick $23,750
Schumer, Charles D $24,250
Bill Moyers speaks to two well-versed voices — NEW YORK TIMES business and financial columnists Gretchen Morgenson and Floyd Norris. Their conversation ranges from the mortgages to derivative, the SEC to the Glass-Steagall Act.
Very good basic overview of some of the issues that have metastasized into our current financial crisis.
The most significant financial issue in 100 years, but I know we can't say the "D" word.
Paulson is floundering - "We don't fix the roof during the hurricane, we just try to deal with the winds."
Grasping at straws - Won't solve anything!
Scanned the news this AM - A few links of interest on the MASSIVE Bailout Plan:
Financial Crisis: Washington Pulls Out the Stops
The federal government is embarking on a sweeping approach to fixing the country's rapidly unraveling financial system, offering few details but warning that failing to act could further endanger the economy. At the same time, regulators unveiled several narrower measures on Sept. 19 that are intended to reassure investors and protect financial stocks from being driven down by short-selling, coordinating their actions with governments overseas.
Paulson said: "We must now take further, decisive action to fundamentally and comprehensively address the root cause of our financial system's stresses." He acknowledged the plan would likely prove costly. "We're talking hundreds of billions of dollars—this needs to be big enough to make a real difference," Paulson said. "Until we get stability in the housing market, we're not going to get stability in the financial markets."
In the meantime, to keep the financial markets fluid, Fannie Mae and Freddie Mac would begin buying more mortgage-backed securities, the investments underlying much of the current turmoil. The Treasury would do the same. When the government assumed control of the two mortgage giants, it said both would continue increasing their portfolios for a time, and it announced a program by the Treasury to buy up securities directly from the market.
The Treasury also said it would insure money-market mutual funds—low-risk funds that many consumers and businesses view as equivalent to cash—making available up to $50 billion to prevent losses in the funds in return for fees from the funds. Investors in one prominent fund saw their investments decline this week after Lehman Brothers failed, and at least one other fund's investment manager said it would provide cash to prevent similar losses.
Atop those developments, the Securities & Exchange Commission said it would completely ban short sales—or bets that share prices will fall—of 799 financial companies, following a similar move by British financial regulators on Thursday. The move goes well beyond restrictions adopted Thursday to limit a kind of abusive short-selling called "naked shorting," and some securities experts had warned that such a move could actually harm the market.
In recent days, policymakers have increasingly debated the need for a government-run entity—perhaps modeled on the Resolution Trust Corp. established amid the savings-and-loan crisis of the 1980s—that would take problem securities out of the market to improve liquidity, restore confidence, and prevent a wave of corporate collapses that could have far-reaching effects on the U.S. and world economy. "Lesson No. 1 from that era is: move quickly," says Richard Breeden, the RTC's architect and a former SEC chairman. "Troubled assets don't become more valuable over time; they become less valuable."
Paulson sends mortgage plan to Capitol Hill, Bush calls crisis 'pivotal moment' for America's economy
WASHINGTON (MarketWatch) -- Treasury Secretary Henry Paulson has presented his historic mortgage rescue plan to Congress and the two sides will meet throughout the day on Saturday on the details.
Treasury presented the plan to Congress late Friday, a Treasury spokesman said.
In an unprecedented action, Paulson said Friday that he wants to spend "hundreds of billions" of dollars take unsellable mortgage assets off the balance sheets of financial firms. The hope is that this will unclog the financial system and allow banks to lend funds to each other and clients.
The failure of banks to lend is considered a big risk to the economic outlook. Without access to funds, businesses and consumers will cut back spending. On Saturday, President Bush called the crisis "a pivotal moment for America's economy," in his weekly radio address.
The measures being taken by the administration, the Treasury and the Securities Exchange Commission "require us to put a significant amount of taxpayer dollars on the line," Bush said. "But I'm convinced that this bold approach will cost American families far less than the alternative. Further stress on our financial markets would cause massive job losses, devastate retirement accounts, further erode housing values, and dry up new loans for homes, cars, and college tuitions," he said.
The New York Times reported that Federal Reserve chairman Ben Bernanke warned members of Congress of the risk of a deep and extended recession unless action was taken to clear the toxic mortgage assets from bank balance sheets.
Few details of Paulson's plan have emerged.
Treasury Sends to Congress Proposal to Buy Assets
Sept. 20 (Bloomberg) -- The Bush administration has sent to Congress a $700 billion proposal that gives broad power to the U.S. Treasury Department to acquire troubled assets now on the balance sheets of U.S.-based financial companies.
The legislation gives Treasury Secretary Henry Paulson authority to own as much as $700 billion in mortgage-related assets at one time. The bill would raise the nation's debt ceiling to $11.315 trillion from its current $10.615 limit.
The legislation was forwarded to congressional leaders in both political parties early this morning. The move comes as Paulson and Federal Reserve Chairman Ben S. Bernanke are pressing for action from Congress to help stop a contagion of credit risk that has toppled four financial giants and forced two into mergers as capital flight squeezes Wall Street.
``This is going to be a big package because it's a big problem,'' President George W. Bush said following a meeting with Colombian president Alvaro Uribe at the White House. ``We need to get this done quickly, and the cleaner the better.''
The proposal requires the Treasury secretary to report back to Congress three months after the government first uses its new powers, and then semiannually after that.
Bush said he called leaders in both chambers of Congress and ``found a common understanding of how severe the problem is and how necessary it is to get something done quickly.''
Under the proposal, the Treasury secretary is given wide berth to take action ``as the Secretary deems necessary'' to hire people, enter into contracts, and issue regulations. The proposal requires the Treasury to simultaneously consider market stability and protecting the taxpayer.
The Treasury plans to hire asset managers to purchase the assets through so-called reverse auctions, seeking the lowest prices, a person briefed on the proposal said yesterday. The proposal specifies that only assets from U.S.-based financial institutions issued or originated on or before Sept. 17 can be purchased.
The authority expires two years after it is enacted.
Bush today said he's unconcerned that the price tag on the package may seem high.
``I'm sure there are some of my friends out there that are saying, I thought this guy was a market guy, what happened to him,'' the president said. ``My first instinct was to let the market work, until I realized, while being briefed by the experts, how significant this problem became.''
Bush said the financial crisis is putting ``hundreds of billions of dollars at risk,'' but ``over time, we're going to get a lot of the money back.''
Crisis On Wall Street; Paulson: Plan Aimed At Solving 'Heart Of Financial Crisis'