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It Is Getting Ugly Quick In Fiat Land: S&P Now Down 8% YTD In Non-Dilutable Terms
First the fun stuff: gold hit an all time record today. To those who have had the foresight to realize that in the currency devaluation race to the bottom, the only winners will be non-dilutable precious metals (and not industrial gimmickry and bets on China's excess capacity like copper...well, maybe with the reverse alchemy exception of lead), we salute you. In fact, so does the market: the S&P is now down 8% year to date when expressed in ounces of gold. Because while central banks can monetize, sterilize (whatever that means), and dilutize that last remnant of the dying Keynesian religion, the FRN and its equivalents around the world, gold is untouchable, and increases in value with each desparate attempt to save a failed economic system.
Yet the bandwagon is once again getting heavy: the EUR is getting killed after hours, approaching $1.25 and is about to break the E-mini critical 117 yen support once again. Should central bank buyers not materialize, hello gravity. Which would also mean freefall for the ES. The bailout plan is now null and void, and in need of a bailout plan itself. The French banks won: we expect their FX traders to make a killing this year. We hope their contract demands bonus payment in gold.
At least today's market farce where volume was non-existant and allowed the same algos that killed the market to ramp everything up for no reason, will likely not be repeated again tomorrow. We have now entered the next regime.
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> Which would also mean freefall for the ES.
What is "ES"?
Sorry to be dense. What is the ES?
ES is the symbold for the eMini.
Thanks all!
Gotta love the ZH community!!
http://daytrading.about.com/od/marketprofiles/a/ProfileES.htm
All about the ES
http://www.bostonwealth.net/mortiesclassroom/es-e-mini-sp-500/
Remember there are two S&P futures contract..
The large S&P and the E-mini
Futures contract for the S&P. hey mitch--no Timmy posters?
http://www.cmegroup.com/trading/equity-index/us-index/e-mini-sandp500.html
Jim Rogers to appear for a full hour on Bloombergs "The Trade" soon.
The presenter stating they will talk about Gold and is emphasizing the flight to safety characteristics of the yellow metal !
I thought it was the $
Watching Bloomberg TV and waiting patiently for the Rodgers hour and guess what, they stick on some Poker Game - No Bullshit.
"The Trade" is still on the Internet but no business TV !
Unbelievable - racing cars last weekend and now the friggin Poker Lounge.
Dork...I thoroughly enjoy your avatar.
The poker thing is too apropos!
I know very few people at this point who are buying stocks. I probably know more robots who are instead.
More people I know now listen a little bit when I cheer gold on.
Gold is STILL a gift under $1500.
Much more important is how few people are selling their gold.
Ask one hundred people if they own gold.
Of the few that answer yes, ask if they are selling.
That is a great observation.
I know a few who own.
Zero sellers.
I will only sell if they hyperinflate my cash savings
Anybody want a 10000 Euro philharmonic ?
I'll sell when the Fed sells their stash, imaginary though it might be at this point.
I don't know. I've been in the basement at the NY Fed and seen the stash.
The cooler thing, though, is their huge, hyper-accurate scale to weigh the metal before they move it into some other nation's little storage space.
* I say we just confiscate it all, and say, "Yeah you and which army are going to take this off our hands."
Too cheap.
I had to sell some physical at $1,100 to pay some debts. Almost made me cry though. I think I regret it, but what is the alternative when AU is how I store my "wealth"?
I also sold some @1180 and kicking myself now but it was for my future home in expat land.
worth it. for the lifestyle, and the currency appreciation vs the USD long term-- good for you.
Do you have a larger image of your avatar?
I need to confirm something.
WADR
yeh
I bet you do
My four eye's say commando
Thats because people who own gold are crazy.
?
DoChen,
Your crew must be closer to the real world , news, or not living by a river in Egypt.
I have talked it to death, why,who,articles, links(ZH one of them), and still..
My friends, IF they are buying, dropping 401k's, are staying quiet.
I do not think they are doing ONE damned thing differently.
My spouse, hates to hear it, she does tell me to buy,sell, just do, whatever I want.......but she just doesn't want to know details.(Ostich Syndrome).
( I tell her, I am letting you know these things, so you will not be dumb when it hits, and whatever I purchase, can go down,as well as up).
I would hate hearing "I cannot believe you DID THAT!!!").........she can't because I give her the option to say No, Stop, Enough...............beforehand.
CYA Baby!
I look into my crsytal ball and see 400 point swings in the futures market, enough to push all of you out of your positions if your in synthetics.
Whats happen when the government outlaws the ownership of gold? Are you going to turn over your bars?
Then why pay your taxes?
I really don't see the government outlawing the possession of gold. It doesn't matter like it did in '33 - we are no longer on the gold standard. You can't waltz up to the treasury window and demand gold in return for your US$ denominated FRN's any more. To the government, your PM's are just another investment vehicle. If they wanted to take a swipe at the owners of PM's then they would treat the redemption of the PM's the same as selling your stocks and/or bonds - Capital Gains Baby!!! Tax you back to ground zero!
You can have a stack of gold coins that reaches the moon. It only serves to preserve your current wealth in an inflationary environment. If you took your Gold Maple Leaf or Gold American Eagle to the WalMart, you know they wouldn't have a clue as to how to value it. Unfortunately it has a face value stamped on it - and those dolts (not knowing anything about spot price plus premium) would probably offer you that.
Would you be willing to place a bet that the government will never again tax you in a dollar tied to the gold standard?
"Whats happen when the government outlaws the ownership of gold?"
Why would an entity outlaw something it values/covets itself???...seems like the behavior of an outlaw to me ;-)
hard to outlaw wedding bands
Long Gold/Short Oil was the best trade as a response to the greek crises, I kept getting poor entries and getting squeezed out of it, it sucks to be off your game when there finally is a game to play!
Nice. How sure were you that the Greek crisis was going to play out before the Israel/Iran crisis?
Any idea whether the China implosion will hit before the middle east?
Measuring the S&P in gold value is an extremely powerful tool in these times. It's good to be a permabear.
the S&P is now down 44% year to date when expressed in relation to the market value of beaver pelts....
That's why I insist on shaved beaver. Always up on shaved beaver.
Given the spread you should take physical delivery.
God I love this site. Thanks for pulling me out of lurker status!
you guys ow m a cup of coff and a nw kyboard if I can't gt th ky to work again.
You are not a permabear you are a Champion of Gold.
"The bailout now needs a bailout"
That is rich - you really do have a way to turn a phrase.
I wish someone could explain to me the fundamentals of an economy that works without ever-increasing debt/credit cycles, inflated asset prices and printing presses. Seems to me we have reached the end of that particular rope - except for the printing press part.
The only thing that can happen is deflation and that causes depressions and shifts in the power structure at the top. Nobody inside the "beltway" wants that to happen so we keep getting bailouts and then bailouts of bailouts.
How does it work without ever spiraling inflation and debt? Can it be done?
Do a search for any post by Mako. That should answer any questions you might have.
I wouldn't look to Mako. He fails to understand that the money that is used to pay interest on loans comes from that money which is spent on consumption, and that in an honest system, the market sets rates according to savings or consumption preference (which individual businessmen are able to see by predicting how much money they can make with a given amount of capital). He instead asserts that all systems that use compound interest are doomed, but this is clearly not the case.
For a better understanding, read this comic book: http://freedom-school.com/money/how-...nomy-grows.pdf
Compound interest isn't the problem. The problem starts with fractional reserve banking, and is exponentially worsened by the Federal Reserve and other Central Banks artificially controlling interest rates and other mechanisms which distort the money supply for their own benefit (i.e., to enslave the people).
Fractional reserve banking is fine as well, as, when done in a free market (with the full consent of the depositors), it allows for a fuller exploitation of savings. It is easily subverted with fraud, but fraud is already illegal. It is also easily subverted when you have a central bank committing fraud (by creating fictitious entries on the banks ledgers and printing new currency). However, those things are or should be crimes in and of themselves. One shouldn't throw the baby out with the bathwater.
As an example, the Scottish free banking system worked very well, despite its use of fractional reserve banking. There was no central bank, and the individual banks issued currency individually, and, as the banks attacked each other attempting to make each other go bankrupt (by accumulating large amounts of a competing banks notes and redeeming them all at once), they all participated in a trial by fire just like any other entity in a capitalistic, free market based society. They were the envy of the world. It was only when the Bank of England came in and forced them to submit (with force of law and thus arms) that the system fell apart.
Whenever you think of blaming some businessman for your troubles, you should look instead to the government. 99% of the time, you will find that they are the source of the problem. The other 1%, the businessman is exerting some sort of physical force (or threat thereof) that is distorting the market. This is very rare, as the government tends to crack down on such competition.
I agree that government is almost always the source of the distortion, although I don't consider financeers and investment bankers to be "businessmen", so much as extremely sophisticated and socially accepted con artists. Almost invariably fractional reserve banking has led to failure and loss of depositor funds, but I'll read up on this Scottish free banking system. Perhaps it would work, but the American free banking era, such as it was, was full of bank runs and full scale panics. Perhaps a lower fractional reserve ratio than the historic 9:1 would work better.
Rothbard has studied scottish free banking system and while he initially thought of it favourably (The Mystery of Banking, 1983) later he looked more deeply into it and found this experiment not at all well working. In fact second edition of that book contains an appendix: The Myth of Free Banking in Scotland. Just one quote from that appendix to make a point "The Scottish banks were (1) not free—indeed, they too pyramided upon the Bank of England—and (2) not surprisingly, they worked no better than the English banks."
Put 10 people on a desolate island.
Does it make sense for two of these people to handle the money for the other people? To be allowed to create money? And then lend out that money and collect interest? It's insane. Be it 10 people or 10 billion people. Any argument that makes this scheme sound good involves words and concepts that people don't understand.
+ 1000
you can't have fractional reserve banking and a free market. the two are ultimately mutially exclusive.
But its NOT an honest system and there is no price finding on a manipulated market which this certainly is.
The fact he "fails to understand" comes probably that he holds a wider view than the overly simple consumption vs saving.
After reading the comic book up to page 12, I already noticed a confusion brought by savings vs consumption perspective. The kid did not save anything, he has consumed two fishes.
The way he used them: eating them, saving them for another, letting them rot on the beach does not matter as they are consumed in all cases.
Any production process (and the case here is not even production but mere extraction) relies on consumption.
The problem is the idea that the "depression" must be avoided in the first place. "Depressions" are the "bad tasting medicine" that cures the malinvestment of the credit expansions.
A=A
There is no "easy way out" of economic reality.
Actually, you CAN avoid the hangover if you just drink enough. A few dozen aspirin are recommended as well.
"easy way out"..
this is what the system is supposed to be for. culture. civilization.
easy way out. but "we" the "people" are being fed on and
the message being fed to us is "you must pay for the indulgences
of the elite." feed my two headed child or it will starve!
there is nothing economic about debt based economics, and little
reality. the message is discipline for the "people" and endless power
for the connected. aka.. the "market". the "people" are the commodity in the market.
that is the us in usa.
otherwise i agree. but the reality is the money system is run by pirate priests who also control the collective mind but really are quite incompetent at all of it, and intentionally, as they stand to capture, in debt, everything,
the evolutionary step that the life form, slavery, aspires to manifest.
but there is/will be resistance and an inspired life form that will crush it.
it is in the stars. debt owed to whom? it is in the heart of man and will
not be captured by a synthetic swap or even a glistening rump. these
fed notes are souring and it is about time. and remember, they are
privately originated debts, turned bad, then made public. incest,
with child. two heads. long live the two headed, ass talking, debt monkey child.
Read Robinson Crusoe.
"How does it work without ever spiraling inflation and debt? Can it be done?"
No, there's a monetary cycle that goes like this:
1. Stability
2. Inflation, which encourages a build up of debt
3. Disinflation, which allows asset inflation and further encourages a build up of debt
4. Instability caused by a pop of the asset bubble
5. Monetary reform
Where do you recommend one keep one's assets before step 5?
Buy land all over the world sans debt financing.
You have something, regardless of fiat currency "value", and only commies can take it away from you.
"Buy land all over the world sans debt financing.
You have something, regardless of fiat currency "value", and only commies can take it away from you."
Or property taxes and escalating insurance payments can take it away from you.
There is no escape. We are captured.
yes, it can be done and will be done. inevitable maybe.
notice who is flush, and how, while compounding historic debt, privately
created at interest by fraud money making market makers,
has been transferred to the public sector, "spinning out of control"
(saturation as compounding will become out of control).
who is in control, and it is not the government( "we, the people" ).
it was they, the bought and paid for facilitators and their owners.
they socialize the loses and that which is painful and not profitable
and privatize the gains. some say moral hazard but it is really just treason and
treason does not hold the center. check the history of treason.
the next move is to foreclose on the public debt and purchase those
public resources, utilities and infrastructures that the public has
built up or preserved. ie water supply, plants, etc.. and purchase them
cheaply as the public sector has been saddled with the private debt/
money and interest previously profitably generated/created, now souring
and dumped on the sovereign/s. banker scam. nothing novel here other
than the reach and scale of the play. global, and maybe that isn't new either.
this is what happens when you give your money creation system to pirates and
agree to pay them compounding interest and cover all their insane bets.
we will see. it has been said that the tail is wagging the dog. strange, but it can
be corrected.
"The French banks won: we expect their FX traders to make a killing this year. We hope their contract demands bonus payment in gold."
de Gaulle is dead and not remembered.
Thanks for the charts and commentary, you da mayne, mayne.
Like he once said, the graveyards are full of indispensable men.
Silver wings sillouette against the glow of the child sunrise.
TD you forgot sodomize.
I don't think he ever forgets that.....
See no major news on why ES is down 8 handles AH except for sinking Euro and (ha ha) political remarks from UK per "boiler plate" party transitions.
S&P futures starting to dive. This repreive has expired.
Wow; like TD said somewhere else, is this all we get for a $Trillion bucks?
The rate of intervention decay is simply stupendous.
Good to see you active GoldmanSux..
NO, that is all we get for a trillion Euros.
We get even less for a trillion bucks!
I just bought a trillion Zimbabwe bank note for $4. I don't feel like I got ripped off. Ahh the memories....
Thanks for responding and remaining the ONLY reliable financial and political newstream on the globe. In order to do my part in preventing the most valuable gathering place since the revolution from becoming captured by the plutocrats such s the Huffpo via Washington post attempts to purchase) I will be donating money this evening.
ZeroHedge = The Green Dragon Tavern 2010
TGDT must be a good place for a pint or two... just like ZH
Have you ever been there? It is a wonderful pub Miles however significantly overhauled since the olden days. If you are ever in Boston check it out you will not be disappointed. The history just envelopes you.
On my first trip it will now reside at the top of my list, right behind fenway. I used to work some good Irish bars in Seattle... namely FX McRory's and other more neighborly institutions of public rest on a friend of the bar-guest tender basis.
https://greendragontavern.com/CMS/Plone/whats-new
"Jefferson Survives" - John Adams
July 4th,1826 hours after the death of Thomas Jefferson who died the same day. John Adams was unaware of his death.
McCloy-
This is for you and anyone else interested in a clearly presented, easy to read book written by a genius who served on scotus.
OTHER PEOPLE'S MONEY, Louis Brandeis
http://www.law.louisville.edu/library/collections/brandeis/node/191
This is the shit, believe me. The same game never ends.
The Game? It's called the free market, Justice Brandeis.
I first learned about that watching the John Adams HBO mini-series. Very interesting show, I really enjoyed it. It's truly bizarre that the two died on the same day.
Great mini-series a tad inaccurate but still a masterpiece however isn't it bizarre that two titans of American foundings died on the same day and July 4th non the less? Incredible.
...i am a son of liberty...are you?
+100
Can I donate by sending silver?
The cattle will be getting more difficult to round up I think.
Maybe it's time to request funding for a new ZH-ish site. Give the cattle a new pasture to graze in.
Whatever people are interested in will sprout up on the web. At least for now. Fact remains that the cattle are learning to cross the stile causing serious mixing problems within the herds. Correlations keep popping up all over the place.
Fact remains that even the Chinese Pig Farmer index knows to hold physical as do its clients.
Thanks man......
The New York Stock Exchange has issued a notice to all floor traders announcing three new rules to be implemented immediately. These rules are designed to prevent the type of emotional response outcomes to the event that occurred on May 6th at approximately 2:45 PM EST.
First rule, all trading stations must install a hazardous waste collection can of no less than 5 gallons. The cans are to be lined with a red hazardous waste bag. Absolutely no trash of any kind is to be placed into this container. Trading stations failing to abide by this rule will be fined a substantial amount hourly until the station is in compliance with the rule.
Second rule, all floor traders shall wear Depends undergarments at all times during the session. At no time shall any trader be on the floor between the hours of 9:30 AM and 4:00 PM EST, without this undergarment.
Third rule, all floor traders needing to throw up are to throw up in the containers at their station. Absolutely no trader needing to throw up may use the restroom.
These three rules are implemented because, during the May 6th momentary crash of the market, the restrooms were filled with traders throwing up the last 2 meals they had eaten. These traders block the stalls needed by the other traders who were filling their drawers with what they had eaten the day before. This panic induced gridlock caused extreme embarrassment for the last described group of traders.
Can't quit laffin...That's the best...!!
Now I am workin on catchin my breath..
The 'Magic Show' just keeps goin on..
(This site has full-spectrum entertainment..)
ZH Rocks !!
EURUSD nearing 126 even.
ZH rocks...I was literally just now doing the math on real vs nominal valuations, so I could send it to some friends ...
I love this place!
Since we are on the subject of ES, does anyone care to see what based on how ES is behaving after hours, what the market action might be like tomorrow based on Elliott Waves? If I see an interest here, I will post a chart for trading the ES for tomorrow...
Pleeez do.
Does anyone know how to attach a chart to a comment.. I do not want to just link to my site, as I don't want it to be considered spam!
You can only do it if you are a contributor so just post the link.
Thanks Howard_Beale.. that's what I thought.. I have asked Tyler to become a contributor, but it has fallen on deaf ears....
What should I do.. provide a link or give my email address if anyone wants the info or just forget about it!
Trust me my Eliott Wave stuff is a cut above anything any of the other contributors publish here.. I guess you have to really know someone here to become a contributor!!
Is there anyone here that can lobby for me.. if my information and analysis is crap..then by all means vote me off the Island.. but give me a chance!!
Here see our track record just from last week.. and several of our other track record is available on the main site as well!!
http://www.bostonwealth.net/2010/05/10/morties-track-record-week-of-3may2010/
Just email them and explain what your focus is and try to make some frikkin sense.
Here you go!
ES market prediction for tomorrow!
http://www.bostonwealth.net/2009/05/11/10712/
Folks.. nothing to get excited with the ES futures.. from years of experience.. the time to get excited is if they are +/- 8 .. right now hovering around -5.5...
The other day when it was lock limit up at +55 that was something to be excited about..soemthing that I predicted would happen on Saturday evening before the bailout news!... last time we had a lock limit up before that was in 2008!!!!
Otherwise it can change in a heartbeat before market open!
Boston, the Smiley Face HAS to go. Sorry.
Im always up and would love to see it. I learn more each and everyday..Thanks very much that would be supurb!
E-mini took a dump AH
I really think TD & Co should get a Nobel Prize in economics. Why is the f*** did that windbag Krugman get one. He says NOTHING in his columns.
I'm surprised Hayek doesn't crawl out of his grave (or urn or whatever) to hand his back.
Because he is a LIB-ER-AL.
It's not about the quality of your work, it is about which side you are on.
Example A:
Obama (he did nothing, got the peace prize, then sent more troops to Afghanistan, and then ACCEPTED the peace prize)
* Don't get me wrong, I am all about peace through superior firepower.
What's a good way to buy gold? Too many ads on the internet not sure what's the best route. Is there an ETF I can use aka GLD?
I like the Internet for many reasons, but real buying and selling of market traded commodities, instruments, stocks and derivatives is done with your broker over the phone [that is if you dont have a 500 million dollar supercomputer filled with fast trading algos]
I thought "fast trading algos" were a built in feature when I bought my MacBook Pro.
Boy was I disappointed.
You need MacBook Pro Plus. The HFT subscription is not included.
i got the iphone application that does all that shit.
Cheeky, I think this guy just snorted an entire 8-ball of blow before making this video, fucking awesome !!
http://www.youtube.com/watch?v=imZqCgM94DE&feature=player_embedded#!
I'm pretty sure that's ZH's own Gordon_Gekko.
Nah, it's MB's older brother.
Haha ha. Ok fess up, which one of you guys is this?
i cant help but smile every time i see this guy. He is an accountant and very enthusiastic. No , he is not on drugs. he just lives close to his heart.
Instant Classic +100
He's certainly animated. Sometimes his brain is moving faster than his mouth. Actually, I didn't notice the big spike in silver, so that was a plesant surprise to me, as I have some. Yes, physical. No real intention to sell, yet.
This guy is fucking ripped.
it's a casino gulag economy with even like these guys like Warren Buffet are these big pump and dumpers.
Hilarious- did you see him drool after he said "plinkink" instead of "picking".
Goof-
-
He's an O'bot assigned to monitor private sector activities. His next step will be to draft legislation.
I'm waiting for Gordon to blow his top on this question! The GLD is the most screwed up paper piece of trash out there. Sprotts PHYS is trading way over spot since he actually has the physical gold to back it all up.
So find a local dealer. Buy the real thing. No paper gold. Real physical gold. Do not buy from a place that holds it in a depository for you. You need it in your hands.
If I'm buying real gold, might as well get an AK-47 to protect it w/ as well!
Highly recommended that you do just that.
Get one before they are banned...
Don't forget LOTS of ammo and magazines.
Yes. And the most valuable metal...LEAD!
If you think so. I don't have a gun.How are your drywall skills? Got a shovel?
I bought tools and musical instruments as well as a lot of toiletpaper.
I will try to summarize the general concensus I get around here:
Most ETFs are a bad idea because they don't own physical gold. The feeling around here seems to be that there is far less physical gold in existence than people supposedly have claim to on paper, so when push comes to shove, these ETFs may have nothing but a paper claim to an amount of gold that doesn't actually exist, or they don't have control over.
Therefore, it is best is to buy physical gold (coins, bars, etc.) and store in a safe place you control. Silver is good too if it's more in your price range.
Second best is to buy stock of miners who own physical deposits of gold and silver.
There is a fund called (PHYS) in which shares are supposedly connected to real physical gold. The fund actually allows you to redeem your shares in physical gold, but the process is cumbersome.
ETFs/ETNs are yet another invention of financial engineers to scam people out of their hard earned money. Check out UNG...biggest POS ever and a good short from the day it launched.
Only buy mining shares after you have some physical, and with money you could bear to be parted from. It is still paper, after all.
Mines could be nationalized if needs be, and then the mining co is left only making a small margin for the privilege of bringing the Govts gold out of the ground. The share price would then no longer be leveraged against their metal, because it is no longer theirs.
Also note that CB's hold reserves of gold, but not silver.
Paper is for the fire.
Mines can also reach depletion/impossible to mine points before delivering physical gold.
Must not be good to be a gold miner right now as the extraction rate can not meet the demand rate. Human lifes in gold mines must be somehow quite expendable.
Chet, its more than a feeling.
PHYS is the only ETF that I would even think about touching....Tyler's article yesterday showed that it is trading at 30% over NAV. I buy my coins at http://www.tulving.com/ They have always been prompt and reliable.
Physical Gold? Try www.tulving.com or www.golddealer.ca
Tulving.com + 1232.60 Go Hannes
APMEX.com is reliable, competitive, and always well stocked. Have run over 100K of metals through them over the past few years without one single hitch. That's just my 2 cents.
I agree, I like APMEX. They are a little more expensive than Tulving but excellent to deal with. I am placing another order right now.
Yep, only good experiences with them.
Physical.............
If impossible,Perth Mint( Owned by the Western Gv't of Aus),CEF(Canada, BullionVault (James Turk),all of these do both Gld/Slvr.
And all are OFFSHORE.
Do NOT buy Unallocated,ask for Serial #'s, Mfg'r, Weight, or just buy Bullion......for smaller quanities.( for that, Lear Capital, APMEX,GoldLine ) are three I would trust for physical purchases.( TAKE Possession)
Expect to pay, at least a 5%-6% Premium over spot(Gld), and $.79/$3.00 for Slvr), depending on what coins you buy.Plus freight.
Some guy's claim 3% over, I do not / have not found anyone who sells individuals that cheaply.
Maple effing Leafs baby! And I dunnae mean them puck chasing pillocks from Tarrana! Hoo Hooo! On a not entirely unrelated side note: SWHC did quite nicely today for a kicker. Another superb perk of owning gold is that if you run out of lead, well... just be sure your charge is sub-sonic though, you want to recover those slugs!
Regards
Maybe the EURO will have a orderly descent after the bailout announcement?
This Big Lie has come from such propaganda sources as the Limbaugh Institute of Retarded Reactionary Ranting. But the $1.5 trillion in subprime mortgages were dwarfed by the $15 trillion US residential real estate market, to say nothing of the $1.5 thousand trillion world derivatives bubble. But, starting with Bush-Goldman Sachs Treasury Secretary Henry Paulson, the talk has been of a “housing correction,” not a derivatives panic. It must be pointed out that derivatives are nothing but wagers, bets placed from a distance on securities which themselves are often not mortgages, but rather other derivatives. The bettor buying a synthetic CDO or CDO² does not own the underlying mortgages or mortgage-backed securities, any more than someone who bets on a racehorse owns part of the horse. Blankfein and others tried to portray derivatives as a service to hedgers and end-users, but it’s clear that the vast majority of derivatives involve neither hedgers nor users, but only bettors on both side of the transaction. It is in any case this mass of kited derivatives which blew up in 2008, bringing on the present world economic depression.
Goldman Sachs executives are babbling cretinsThe mystique of Goldman Sachs is based in large part on their reputation as the smartest financiers on Wall Street. After today’s hearings, this mystique has permanently dissipated. The Goldman executives babbled. They sounded dumb. They stalled and stammered and went into contortions to avoid giving straight answers to simple questions. They were mendacious and evasive when they did speak. Financial powers around the world will note carefully the refusal of three out of four Goldman executives on one panel to state that they had a duty to defend the interests of their clients. Who will want to do business with such a gang? Goldman Sachs got $10 billion of taxpayer money in low-interest loans under the Bush-Paulson TARP. Part of that money went to pay for obscene bonuses for Goldman executives like the ones on display today. The argument for bonuses is that they must be paid to retain the highly talented personnel, virtual geniuses, who are indispensable for Wall Street speculative success. But these are no geniuses, they are imbeciles. No more bonuses should be paid by banks saved through public money.
Don’t buy any used cars from Lloyd BlankfeinSleaziest of all was Goldman’s risk-monger in chief, Lloyd Blankfein, who pretended not to know that derivatives are often kept hidden off balance sheet. The morally insane Blankfein testified that his role was to provide the firm’s clients with “the risk they wanted.” Other GS witnesses represented the firm’s role as “distributing risk.” But it turned out that they were manufacturing risk through the very existence and activities of Goldman Sachs, which had the result of pyramiding the total risk of the US financial system into intergalactic space. It is time to regulate much of that unbearable risk out of existence with appropriate regulatory legislation. In the meantime, no sane person would buy a used car from Blankfein. Nor should they believe his assurance that the “recession” has ended.
But when at the end of the day Blankfein finally suggested to Sen. Tester that synthetic CDOs might be outlawed, we should accept his proposal immediately.
Today’s hearings reveal the Goldman Sachs gunslingers and whiz kids as ignorant gangsters and con artists, notable only for their ability to practice massive fraud with impudence. These sleazy mediocrities do not deserve bonuses paid for by taxpayers. Rather, it is time to shut them down and put them in the dock.
If Goldman Sachs had cared about is clients, it would have urgently warned them to unload their subprime risk by late 2006 or thereabouts. Instead, Goldman was busily increasing its clients’ risk by selling them more toxic CDOs out of its own inventory warehouse.
Goldman Sachs: bookies who stack the deck and fix the gamesAs the philandering Sen. Ensign pointed out, comparing Wall Street to Las Vegas is a slander on the croupiers of Las Vegas, where everyone knows or should know that the game is rigged so that the house always wins. To use the comparison introduced by Sen. McCaskill, Goldman Sachs was operating as the gambling house, or the bookie. At the same time, Goldman was betting for their own account. But much worse was the fact that Goldman was stacking the decks, loading the dice, fixing the games on which the bets were placed, and bribing the umpires.
As Ensign put it in a rare moment of lucidity, the subprime mortgage was bad. But the collapse of subprime would not have had anything like its actual destructive effect on the US economy if it had not been compounded by the mass of synthetic derivatives that were piled on top of subprime.
No national or social purpose served by Goldman Sachs and toxic derivatives betsThe broader issue raised by today’s hearing is: what human purpose is served by the existence of Goldman Sachs, which concocts toxic synthetic CDOs for the purpose of allowing speculators, who are often lied to and duped, to bet for or against them. Goldman Sachs can only be described as a speculative parasite which promotes the activities of other speculative parasites, such as the John Paulson hedge fund at the expense of the public and of its other clients. It was a crime to inject $10 billion of Treasury money into Goldman Sachs. It was another crime for the Fed to lend Goldman untold billions (just how many billions Bernanke still refuses to disclose) to keep them afloat and enable more predatory profits. These crimes must stop, and the public money must be clawed back. Most important, it is time to shut down the derivatives rackets.
Goldman got $12.5 billion from taxpayers for AIG credit default swapsUseful questions from GOP Sen. Coburn pointed to another kind of derivative: the infamous credit default swap (CDS). These CDS are what brought down AIG, whose London hedge fund had issues $3 trillion in derivatives. When the government bailed out AIG, part of that $180 billion of taxpayer money was used for payouts to the CDS counterparties of AIG, biggest among them Goldman, which got $12.5 billion from the US taxpayer. That was 100 cents on the dollar on a mass of toxic CDS. Coburn wanted to know why Goldman got all their money back, while GM bondholders took a bath as GM went bankrupt. That was, of course, a matter of Goldman’s political clout through GS alum Henry Paulson and Obama Car Czar Steve “The Rat” Rattner, backed up by the historic preponderance of finance capital over industrial capital in this country since Andrew Carnegie sold out to JP Morgan over a century ago.
Derivatives and zombie banks: the tollThanks to Goldman Sachs, the other Wall Street zombie banks, and their derivatives, the financial panic of 2008 has turned into a world economic depression of unimaginable proportions. The unemployed and underemployed in the US alone are surely in excess of 20 million. Five to six million home foreclosures are already done or in the pipeline, throwing tens of millions of Americans out of their homes. World trade has been seriously impacted. The budgets of California, New York, Illinois, and many other states are in crisis, with massive layoffs of teachers and other state employees. An entire generation is being destroyed. Now, Greek bonds are trading at junk levels under the attack of speculative predators including Soros, Greenlight Capital, SAC, and the protagonists of today’s hearings – Paulson and Co and Goldman Sachs itself. The attack on Greece and the euro represents the leading edge of the second wave of the depression, which is now arriving in much the same way that the second wave of the 1930s depression was unleashed by the Vienna Kreditanstalt bankruptcy in May of 1931, about 79 years ago and just a year and a half into that depression.
The goal of the Republicans is to portray themselves as stern judges of Wall Street, even as they line up in a unanimous phalanx to protect the finance jackals from any meaningful regulation whatsoever — as seen in yesterday’s vote to block cloture on derivatives re-regulation and reform. The goal of the Democrats is to expose the sociopathic evil of Goldman Sachs and the rest of Wall Street while preening themselves as defenders of the public interest, without however banning credit default swaps, banning synthetic CDOs, and imposing a Wall Street sales tax on all remaining derivatives and asset transactions.
To this degree, today’s hearings are being conducted in bad faith by both major parties. However, the dynamic of the resulting spectacle has the result of educating and mobilizing public opinion against the predatory practices which are the essence of Wall Street, even a year and a half after the banking panic of September 2008 and the monster bailout of zombie banks which soon followed. What is required is a new edition of the anti-banker sentiment set off by the Senate Banking Committee hearings conducted from January 1933 to May 1934 by committee counsel Ferdinand Pecora, which unmasked the corruption of Wall Street. Persons of good will need to get active now to push this process as far as possible while these social dynamics are working. It is time to hit the zombie banks, the hedge funds, and their derivatives as hard as possible, before the second wave of the depression hits. The program necessary to fight the depression and break the strangle-hold of Wall Street on the US economy and political system.
Mitch McConnell on the bailout: “Harry, I think we need to do this, we should try to do this, and we can do this.”During a break the senators filed out, and the GOP reactionary lockstep once again blocked cloture for a final debate on the Wall Street reform bill, weak as it is. Many activists of the Tea Party naively believe that they have been fighting for a year and a half that they have been fighting to take back the Republican Party. If that is what they believe, today’s second cloture vote proves that they have gotten nowhere in their efforts. Despite their charades, the GOP are the bodyguards of the Wall Street predators. Tea baggers who think they can break the Wall Street grip on the Republicans are pathetic dupes, and they need to wake up, pronto.
When Paulson went to the leaders of Congress to demand a $700 billion bailout for Goldman and his Wall Street cronies, GOP Senate majority leader Mitch McConnell was “deeply frightened” by the apocalyptic briefing delivered by Paulson and Bernanke. When Democratic Majority Leader Harry Reid started talking about how difficult it would be to get so much money in a hurry, McConnell urged an immediate bailout, saying: “Harry, I think we need to do this, we should try to do this, and we can do this.” (Andrew Ross Sorkin, Too Big to Fail [New York: Viking, 2009], p. 442) The GOP was the original party of the bailout, and they have not repented, as best seen through the continuance of McConnell, one of the key midwives of the bailout, as Republican Senate Majority Leader. This is the same McConnell who went to Wall Street recently to meet with zombie bankers and hedge fund hyenas, pledging to block derivatives reforms in exchange for big bucks contributed to the GOP’s campaign coffers. Tea baggers who think the GOP has changed or is moving to their side are sadly deluded. This is a matter of national survival. Now that Goldman Sachs is masquerading as a bank holding company, it is subject to FDIC rules. If Goldman’s derivative hoard is marked to market, it is bankrupt. The FDIC should therefore seize Goldman and liquidate it under chapter 7 of the US Code. Sheila Bair should not wait for the typical Friday mascaraed.
Thank God you are back. I missed you insights during all this madness the past week. Im just watching the interview from today BTW.
Tea baggers who think they can break the Wall Street grip on the Republicans are pathetic dupes, and they need to wake up, pronto.
People who think they can win hearts and minds by insulting others with sexual-reference pejoratives are immaculately stupid, and need to enlighten themselves, pronto.
This is the same McConnell who went to Wall Street recently to meet with zombie bankers and hedge fund hyenas, pledging to block derivatives reforms in exchange for big bucks contributed to the GOP’s campaign coffers. Tea baggers who think the GOP has changed or is moving to their side are sadly deluded.
You didn't read a single word I wrote, did you?
Write my response...I need help!!!