Tuesday, September 30, 2008

Open Forum

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.


Anonymous said...

BOA Credit Cards Closed 1 Oct:

BOA Closes Credit Cards

I work in Credit Department at BoA (Senior Level Credit Analysist Boa Bldg 3rd fl, Char, NC)..We just received memo indicating that all BoA credit cards are being closed as of 10/1. Credit score and income do not nmatter,,all accounts are closed as of 10/1. I'm sure this will be on Drudge within 2 days


This is true, but not as bad as he/she says. We are closing accounts, but only ones with credit scores under 750. We will reopen cards within a year as long as crisis lessens.

J.mcmanus / VP Credit Dept BOA

FOFOA said...


There's still a vote tomorrow.

Justin_n_IL said...

Club Fed
Posted by Lew Rockwell at September 28, 2008 11:31 AM

I've been thinking recently of a "free-market" economist who left university teaching to join a regional Federal Reserve Bank, at its lowest professional rank. He was soon bragging about the great lifestyle even for a tyro: high pay, fancy benefits, easy work, chauffeured limos when he traveled, suites at four-star hotels, dinners at the most expensive restaurants in town, all courtesy of the printing press. I told him that his name would be on the list, come the Revolution.

FOFOA said...


'Un-American' Bailout, Paulson Should Have Quit, Gingrich Says...
"You have the former Chairman of Goldman Sachs asking for 700 billion dollars, and in his initial request, asking for it in such an un-American way that I think he should have resigned," said Gingrich. "I think Paulson has terminally misunderstood the nature of the American system. Not just no review, no judicial review, no congressional accountability. Give me 700 billion dollars, 700 BILLION dollars! 'I'll be glad to spend it for you.' That's a centralization of power that is totally un-American."

Follow the link to the video.

FOFOA said...

Interesting article if you haven't read it yet:

NEW YORK (Fortune) -- The proposed bailout of the world's financial system isn't really about money, folks. It's about psychology. In fact, you can think of it as the most expensive piece of psychotherapy in the history of the world.


Anonymous said...

"Euros Accepted" signs pop up in New York City


NEW YORK (Reuters) - In the latest example that the U.S. dollar just ain't what it used to be, some shops in New York City have begun accepting euros and other foreign currency as payment for merchandise

Anonymous said...

Time for a gold rouble?


There used to be a habit of framing old Tsarist bonds and putting them on the wall. Lenin's decision to renege on the Russian imperial debt meant that it became mere paper, interesting only as a historical relic.

In the light of the recent financial crisis in the USA, could the same thing happen now to the bonds issued by the American government, and could the country which has dominated the world for the last half century now enter history as a bankrupt state? And what can Russia do in the circumstances?

The decision by the US government to inject $700 billion into the financial system means that the already gigantic annual budget deficit of the American state (previously some $450 billion a year) will now rise by a factor of three. The total state debt of the USA will rise to well over $11 trillion. It is obvious that such a colossal debt can never be repaid. Instead, it will be serviced by more debt in the future. The contrast with Russia, which has painstakingly sanitised its state finances to the point that it now has more money to lend than the IMF, could hardly be greater.

The recent financial crisis itself grew out of this American culture of debt. To some extent, all countries share it: since 1914, all countries use paper currencies, i.e. debt instruments which are never redeemed. Whereas before the First World War, bank notes were essentially vouchers for specific amounts of gold cash, now the "promise to pay the bearer" (which remains inscribed on British bank notes) is in fact hollow.

In America, this basic culture of debt is aggravated by the fact that other countries use the dollar itself as a reserve. This means that the United States can export dollars in order to pay for its imports without the dollar losing value. Other states also need dollars to buy key commodities like oil. The USA can therefore export paper currency almost indefinitely - the famous "deficit without tears" analysed by the great French economist, Jacques Rueff. Naturally, if the state itself encourages such a culture of debt by issuing unredeemable paper currency to pay for imports, and by accumulating such mountains of debt, then it is no surprise if the American financial markets themselves operate on the same basis. But the collapse of those markets is only a symptom of a much deeper problem, the basic insolvency of the American state itself.

What can Russia do about this? At first sight, Russia's role in the international financial system does not seem very large. However, as a major exporter of hydrocarbons, her role in the world economy is actually very important. As the age of the dollar draws to a close, Russia will have to consider selling her oil and gas not in the devalued American currency, but instead in the euro used by most of her customers. It is surely unnatural for two geographical neighbours to do such large volumes of business using the currency of a distant and now ailing nation.

Second, the Russian leaders might also consider making their own currency, the rouble, convertible into gold. The idea of gold convertible currencies is extremely unpopular among most economists: they dismiss gold as a "barbarous relic" (to use the famous phrase of John Maynard Keynes) and suggest either the present regime of paper currencies or, at best, a link to a basket of commodities. (Gold for Russia - Image gallery)

Both these solutions are highly artificial and based on the same level of state control which has now just so spectacularly failed. Indeed, which is more "barbarous" - the reintroduction of gold as an instrument of payment, or the practice of amassing huge quantities of the precious metal to keep it locked underground in the vaults of central banks? The contempt of the Keynesians notwithstanding, it is an indisputable fact that gold does remain the ultimate store of value, which is precisely why states own so much of it.

Russia has less to fear than other countries from the introduction of a currency convertible into gold. Governments are typically hostile to gold because it reduces their discretionary power over the currency and the economy: they say that the money supply cannot be made dependent on the production of gold mines. In reality, this argument is bogus because the amount of mined gold already in existence vastly exceeds the yearly production, so mining does not in fact have an appreciable impact on supply. But, as it happens, Russia is a major producer of gold anyway and therefore to some extent controls production.

Secondly, Russia is vulnerable to her status as an exporter of primary materials - and as an exporter generally - especially in the age of inflation which is about to dawn. The more the Russian economy exports, the more her national paper currency will rise, making those exports more expensive. This is bad for an export-oriented economy. By contrast, the value of a gold rouble would depend not on the trade balance of the Russian economy at all, but instead simply on the price of gold itself which generally remains stable with relation to other commodities.

Russia has shown surprising success in putting an end to the unipolar world of which American strategists have dreamed now for over a decade. There are no permanent victories in diplomacy, however, but a shift in the structure of the world financial system would help to entrench recent gains.

John Laughland is a British historian and political analyst, and Director of Studies at the Institute of Democracy and Cooperation in Paris

Anonymous said...

You have proposed repeatedly that inflation is going to increase, but a lot of economists are saying that the more likely scenario is deflation as banks delever and contract their balance sheets, etc. What do you think about these arguments and have you reconsidered your inflation prediction with what's going on?
Thanks for your thoughts.

Randy said...

My stance has NOT changed. We are currently and will continue to experience DEFLATION (Credit collapse/deleverage/falling asset prices) concurrent with INFLATION (Falling dollar from monetary stimulus/foreign redemption and higher cost of living for J6P)

From 2007:
Not looking good for the USD

The Fed is scared shitless right now... If they are unable to fix/reinflate the credit markets, we could have a DEFLATIONARY event (which leads to a Depression). In a panicked attempt to stave off this potential deflationary crisis, they will continue to lower short-term rates, print more money and pump liquidity into the banking systems (the very same banking systems that control the credit markets, which are completely seized up--due to all the toxic waste Asset Backed Commercial Paper products they can't seem to offload to some other sucker).

Bottom Line: Inflation will soon be out of control and there is absolutely nothing the Fed can do about it without crashing the economy ( Note: they should be raising short term Fed rates now to prop up the dollar, but that would lead to a major recession {ultimately the cure to our ills} but Gvt officials are unwilling to do this while the housing markets are cratering and with an election year right around the corner). Regardless, they are now pushing on a string in their attempt to reinflate the credit markets and their efforts will probably induce a HYPERINFLATIONARY event that will be followed by or experienced simultaneously with a MAJOR Recession. In several years the dollar will probably be worth 50-60% its current value and its fate as the defacto "World Reserve Currency" could soon be brought to question.

From July 08:
Fannie and Freddie: Walking Dead

This is huge folks! If Fannie and Freddy were allowed to fail (won't be allowed), we would quickly fall into an ECONOMIC DEPRESSION (i.e. lack of new home loan credit = lack of new money circulating, destruction of debt/bond/equity markets, a complete lack of home sales/swiftly building inventories, MANY times more home loan defaults than expected and an ABSOLUTE COLLAPSE IN HOME PRICES -- compounding several times over the current banking/financial system crisis and significant economic pains that we are now experiencing).

If the GVT indeed does bail them out (likely) expect a HYPERINFLATIONARY Spiral -- followed by a depression anyway. We're talking TRILLIONS of new dollars quickly added to a bloated fiat system that is already creating new money at a near 20% annual rate -- adding explosive fuel to a raging forest fire and increasing the velocity of US Dollar decline and ultimately Dollar hegemony collapse.

Once again, the Plunge Protection Team and Gvt are stuck between a rock and a hard-place, and the days of easy fixes have long since past... We should have taken our harsh medicine after the Dot.com crash, but the Maestro (Greenspan) wanted to leave his chair on a high note. Though honored, knighted and revered around the globe, Alan Greenspan (when history is written/analyzed) will likely go down as one of the WORST Fed Chairman EVER! I hope he can sleep well at night, knowing what he hath wrought.

This Week: Bailout or no bailout - what's the difference?

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.

Video - Hyperinflation mixed with Depression

Bloomberg video: Hyperinflationary Depression

Bottom Line: I would also have to concur 100% with Jim Willie's recent comments:


My greatest impatience is shown for those who attempt to argue whether inflation or deflation is winning, and where we stand. Such pursuits of chasing one’s tail serves to illuminate nothing and to waste time. We have both, will continue to have both, as both intensify. The key is for monetary inflation to enter the mainstream, which is underway finally. One can benefit little from putting the unique crisis into convenient cans for purposes of organization. This is not simple, and people should not attempt to simplify the ongoing collapse of the Great American Experiment in Counterfeit Monetary Systems. To be sure, we have gone past a tipping point. The move to flood the monetary pools of phony money beyond Wall Street is the big event. To be sure, the bankruptcies and deep insolvent events are accelerating. To be sure, the desperation for attempted mergers is palpable. To be sure, central bank activity with lending, swapping, and even accepting stock equity as collateral is a sign of total absence of any safeguard toward respect of moral hazard.

Looking for inflation vs deflation labels when the failure and default of USTBonds and receivership occur TOTALLY MISSES WHAT IS GOING ON. This is a death event for the US finances, US banking system, USEconomy structure, and USTreasurys, all rolled together like a gigantic vortex hurricane. Looking for (in) vs (de)flation in this environment is like observing color schemes on walking dead as they attempt to merge at a ceremony. They are of DEAD PARTIES ATTEMPTING TO SHARE COUNTER-PARTY RISK. Looking for (in) vs (de)flation when dead partners are marrying is like DECIDING WHETHER A HONEYMOON SHOULD TAKE PLACE IN THE CARIBBEAN OR FRENCH COAST. They both go to the recycling cemetery instead. The place to be now is in gold and silver, preferably silver since central banks own none and because silver has strong industrial demand. Besides, a silver default of sorts has been in effect for several months.

Hope this helps to clarify my thoughts/position



FOFOA said...

Just my two cents on Inflation/Deflation. If I buy a house on a street with 5 houses for $100,000, then later someone buys a house for $200,000, all of a sudden, all 5 houses are worth $200,000. My net worth went up $100,000. The street's net worth went up $400,000. But 400,000 dollars were not created. Asset inflation happened.

Asset deflation is happening now, which is the reverse effect. If I bought a house for $500,000, and now someone sells for $250,000, then all the houses on the street are now worth $250,000. So the net "loss" to the street is $1.25 Million. That is deflation.

This is happening with all types of assets, things that were assumed to be good investments. But as we bail them out, we take some of that phantom net worth, like the $400,000 in the first paragraph, and make it real, spendable cash.

That cash is no longer going to go into bad "assets" that were previously thought to be good investments, it is going to go into real things, like gas, oil, gold and milk. And because it is newly printed spendable cash, it is going to bid against the previously existing spendable cash. That bidding process will cause the cost of real things to go up. That is inflation.

So we can have both asset deflation and real world inflation at the same time. Necessities will cost more. Luxuries and Mortgage Backed Securities will cost less.

Randy said...

Well said FoFoa - thanks

goooooood girl said...

Feel good......

Justin_n_IL said...

Thus, the gambit of converting into bank while not being banks yet has not worked and the run against them has accelerated in the last week: Morgan’s CDS spread went through the roof on Friday to over 1200 and the firm has already lost over a third of its hedge funds clients together with their highly profitable prime brokering business (this is really a kiss of death for Morgan); and the coming roll-off of the interbank lines to Morgan would seal its collapse. Even Goldman Sachs is under severe stress losing business, losing money, experiencing a severe widening of its CDS spreads and at risk of losing most of its values most of its lines of business (including trading) are now losing money.

Both institutions are highly recommended to stop dithering and playing for time as delay will be destructive: they should merge now with a large foreign financial institution as no US institution is sound enough and large enough to be a sound merger partner.


FOFOA said...

Have you seen the protests on Wall Street? You haven't seen them on the news. jsmineset.com has a few videos of them. Scroll down a little to Wall Street Protests.

Justin_n_IL said...

Thanks for the link fofoa

FOFOA said...

Rep. Michael Burgess R-Texas

"Mr. Speaker, I have been thrown out of more meetings in this Capitol in the last 24 hours than I ever thought possible, as a duly elected representative of 820,000 citizens of North Texas... Let's let people see what we have done in the dark of night... We are under Martial Law as declared by the speaker last night!"


Matt said...

Look up your "Representative" and if they voted for the bailout (as did mine in NC), VOTE THEM OUT OF OFFICE!


Anonymous said...

Like pissing into the wind, the Fed and other countries are pumping huge amounts of paper money into our economies. It's time for all of us to review our what if plans.

Justin_n_IL said...

Ron Paul on the floor of the house this morning.


Justin_n_IL said...


I just read your illustration on inflation and deflation above. Nice way of making it easy to understand. It got me to thinking. If I blow up a balloon and tie it off it will over time naturally deflate. It's a slow process without any "shock". If I blow up a balloon and keep blowing and blowing and blowing....well you know what happens.....SHOCK

Justin_n_IL said...

I know he's preaching to the choir that hangs out here but it is worth reading.

Dr. Paul gave a quick speech on the House floor this morning concerning the bailout. Due to the nature of the debate today, he didn’t have time to read his full remarks, which were put into the congressional record and are featured below:

The process of this bailout reminds me of a panic-stricken swimmer thrashing in the water only making his situation worse. Even a “bipartisan deal”—whatever that is supposed to mean— will not stop the Congress from thrashing about.

The beneficiaries of the corrupt monetary system of the last three decades are now desperately looking for victims to stick with the bill after they have reaped decades of profit and privilege.

The difficulties in our economy will continue because the Legislative and the Executive branches have not yet begun to address the real problems. The housing bubble’s collapse, as was the Dot Com bubble’s collapse, was predictable and is merely a symptom of the monetary system that brought us to this point.

Indeed, we do face a major crisis but it is much bigger than the freezing up of Wall Street and dealing with worthless assets on the books of major banks. The true crisis is the pending collapse of the fiat dollar system that emerged after the breakdown of the Bretton Woods agreement in 1971.

For 37 years the world built a financial system based on the dollar as the reserve currency of the world in an attempt to make the dollar serve as the new standard of value. However since 1971, the dollar has had no intrinsic value, as it is not tied to gold. The dollar is simply a fiat currency, which has fluctuated in value on a daily, if not hourly, bias. This worked to some degree until the market realized that too much debt and malinvestment existed and a correction was required.

Because of our economic and military strength, compared to other countries, trust in America’s currency lasted longer than deserved. This resulted in the biggest worldwide economic distortion in all of history. The problem is much bigger than the fears of a temporary decline on Wall Street if the bailout is not agreed to.

Money’s most important function is to serve as a means of exchange—a measurement of value. If this crucial yardstick is not stable, it becomes impossible for investors, entrepreneurs, savers, and consumers to make correct decisions; these mistakes create the bubble that must eventually be corrected.

Just imagine the results if a construction company was forced to use a yardstick whose measures changed daily to construct a skyscraper. The result would be a very unstable and dangerous building. No doubt the construction company would try to cover up their fundamental problem with patchwork repairs, but no amount of patchwork can fix a building with an unstable inner structure. Eventually, the skyscraper will collapse, forcing the construction company to rebuild—hopefully this time with a stable yardstick. This 700 billion package is more patchwork repair and will prove to be money down a rat hole and will only make the dollar crisis that much worse.

But what politicians are willing to say that the financial “skyscraper”—the global financial and monetary system-is a house of cards. It is not going to happen at this juncture. They’re not even talking about this. They talk only of bailouts, more monetary inflation, more special interest spending, more debt, and more regulations. There is almost no talk of the relationship of the Community Reinvestment Act, HUD, and government assisted loans to the housing bubble. And there is no talk of the oversight that is desperately needed for the Federal Reserve, the Exchange Stabilization Fund, and all the activities of the President’s Working Group on financial markets. When these actions are taken we will at last know that Congress is serious about the reforms that are really needed.

In conclusion, there are three good reasons why Congress should reject this legislation:

a. It is immoral—Dumping bad debt on the innocent taxpayers is an act of theft and is wrong.

b. It is unconstitutional—There is no constitutional authority to use government power to serve special interests.

c. It is bad economic policy—By refusing to address the monetary system while continuing to place the burdens of the bailout on the dollar, we can be certain that in time, we will be faced with another, more severe crisis when the market figures out that there is no magic government bailout or regulation that can make a fraudulent monetary system work.

Monetary reform will eventually come, but, unfortunately, Congress’ actions this week make it more likely the reform will come under dire circumstances, such as the midst of a worldwide collapse of the dollar. The question then will be how much of our liberties will be sacrificed in the process. Just remember what we lost in the aftermath of 9-11.

The best result we can hope for is that the economic necessity of getting our fiscal house in order will, at last, force us to give up our world empire. Without the empire we can then concentrate on rebuilding the Republic.

Anonymous said...

Thank you all, who called, faxed, wrote or emailed your representatives and congresspeople. It is far better to take pain now, and rework a better solution than to take the path to the cliff on a short sighted solution that we had in front of us. Thank you all. Let's hope that the next time around we have a proposal that addresses the core problems. PLEASE send thank yous to those that defeated this bill!! -rip

FOFOA said...

LOL <--Click for funny

Anonymous said...

The bribe-out bail-out is not over. Look for Wednesday for another round. Funny how Pelosi talked the bribe-out down, but voted for it. We all need another round of phone calls demanding a NO vote again.

About credit default swaps, there is $1000 trillion in worthless swaps hanging along the bankruptcy food chain worldwide.

Michael Hudson, a rebellious Chicago School economist, says that the bribe-out monies are coming from the Social Security Administration. The Fed will drop worthless junk bonds in their lock box and use our social security withholdings for the rich crooks.

Bernanke and Paulson had told Fannie and Freddie to make available $2 trillion in loan money to create another real estate bubble in order to inflate housing prices.

These bankstas just cannot stop themselves. What we need is indictments under the RICCO Statute. Take these thieves to court.

There is only one way for consumable item prices to go and that is up. It is inevitable that more job losses are around the corner, business closures, and problem for many this winter.

Justin_n_IL said...
This comment has been removed by the author.
Randy said...

Appreciate the great links and information folks - as many of you regulars know, I sometimes use your info for main page.

Jerry, I certainly hope the Info regarding use of Social Security withholdings to fund the purchase worthless junk bonds turns out to be false.

Justin_n_IL said...

Scarlett got married!!!
Heather Locklear got a dui!!!
Paul Newman kicked the bucket!!!
Healthy snacks? OH BOY!!!
The Rams finally got rid of their coach!!!
WOW, I made pistachio pudding tonight...my daughter hates it bye the way!!!
Yo Dennis!!!
Wow gas sure is high these days!!!
I'm sick and tired of poor coverage. Would the government please save me?!!!

Was there something big going in D.C........The White Sox are headed to the playoffs!!! What was I saying...oh well nevermind!!!

1. Scarlett Johansson
2. Heather Locklear
3. Paul Newman
4. Healthy Snacks
5. Scott Linehan

6. Forgetting Sarah...
7. Pistachios
8. Dennis Quaid
9. Train Travel
10. Health Insurance

Anonymous said...

$1 Quadrillion Problem?

Anonymous said...

Sign this petition against a bailout and pass it on to any other blogs you know of or mailing list!


Justin_n_IL said...

I'd love to play this video for the guy opposite Peter. This was back in August of 06.


Hard Money Lenders Direct in California said...

this market is unreal, what can we do about it.

Anonymous said...


I haven't seen much about Las Vegas recently. Are you still monitoring its economy? I really enjoy reading your unique perspectives on that city.


Justin_n_IL said...

Here is a relevant quote from a few years ago.

If a nation expects to be ignorant and free, in a civilization, it expects what never was and what never will be.

- Thomas Jefferson

FOFOA said...

Here is a quote from CNBC yesterday:

"There are two positions - cash and fetal."

Matt said...

A great article by Lew Rockwell!


Matt said...

Did anybody see Dark Knight? Here is a funny video merging a scene with Bush's speech about the bailout.


Anonymous said...

anyone interested in a little futuristic optimism and thoughts on how to get out from the control thumb of the bankers, check this vid out


Justin_n_IL said...

Rockwell's article is good until he gets all delusional. Economic recovery my foot. I side with Ron Paul's opinion. You have to get at the root of the problem. That problem being a corrupt monetary system. NO fiat currency is going to work in the long run.

Justin_n_IL said...

Let the finger pointing begin in earnest. All the world is drunk with the wine of America's fornication. America's absolute recklessness.


Anonymous said...


What we have are the large banksters stealing from the rich and sorta rich, and hugely rich, to make themselves richer. So let's rename it as Enrich-to- Durance, or something like that. Duran is headed to durance.

there is no time to send a letter folks. YOU MUST CALL.
These are PA representatives:
murphy--202-2252301-------voted no on the first vote call
murtha--814-5352642--------voted yes
pelosi--202-2255126----------voted yes, even after talking the bill down.
altmire-202-2252565----------voted no

specter-senator-202-2281229 bill not ready for senate vote, yet tell him your wishes.
reed 202--2243542
casey 202-2246324
biden 202-224 5042
obama 202-224 2854
clinton 202 224 4451

time is running out.

Anonymous said...

The Duran link was in reference to Next Dimension's youtube link. Sorry for the spelling/sentence structure errors.

Justin_n_IL said...

Another relevant quote.

"A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional way along with his fellows, so that no one can really blame him."

John Maynard Keynes, 1931

Justin_n_IL said...

Here's a good video from Max Keiser titled "Focus on the Locust"


Justin_n_IL said...

Check this out.

"it seems that buried deep in the Bailout Bill was a clause that would have enabled banks to operate without any reserves"


FOFOA said...

As stock prices plunge, you will hear lots of talk about "bargains". And in a down market, there will be big upswings meant to tempt you back in. But if you understand P/E ratios, and how businesses are valued, you will understand that stocks now called "bargains" can actually drop to HALF their current price and still be overpriced.

I bought a small business once and paid 9 times earnings. That meant that if I worked the business for 9 years, I would get all my purchase price back and the rest is gravy. But when you buy companies on the S&P 500, you are paying about 24 times earnings, which means if you were really rich and bought up all the stock, it would take you 24 years of current earnings just to break even.

When stock markets crash, it is this value we place on future money that fails. And if the overall trend heads back to the historic P/E ratios of between 7 and 15, then look out below. Because a company that Jim Cramer says is a "bargain" today, may actually be OVERPRICED even at HALF that price.

Here are some little known facts about the crash of 1929.

Justin_n_IL said...

Isn't it amazing how when it gets harder and harder to deny the truth the news outlets start to give in.