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On Why The Wall Street Casino Has Already Saved A Special Place In The History Books For Its Creators

Tyler Durden's picture




 

In a starkly realistic report released by the United Nations Conference On Trade And Development (UNCTAD), the author minces no words, and while foregoing the opportunity of ever being invited on CNBC, presents the stark truth on an as is basis, something the American public has to increasingly look to non mainstream media sources and even foreign publications for.

Starting in the United States subprime mortgage market, the financial crisis spread quickly, infecting the entire United States financial system and, almost simultaneously, the financial markets of other developed countries. No market was spared, from the stock markets and real estate markets of a large number of developed and emerging-market economies, to currency markets and primary commodity markets. The credit crunch following the collapse or near collapse of major financial institutions affected activity in the real economy, which accelerated the fall in private demand, causing the greatest recession since the Great Depression. The crisis has affected most strongly companies, incomes and employment in the financial sector itself, but also in the construction, capital goods and durable consumer goods industries where demand depends largely on credit. In the first quarter of 2009 gross fixed capital formation and manufacturing output in most of the world’s major economies fell at double digit rates. Meanwhile problems with solvency in the  non-financial sector in many countries fed back into the financial system.

The likelihood of a recovery in the major developed countries that would be strong enough to bring the world economy back to its pre-crisis growth path in the coming years is quite low. This is because neither consumption nor investment growth can be expected to revive significantly due to very low capacity utilization and rising unemployment. In addition, banks need to be recapitalized and their balance sheets cleaned of toxic assets before they can be guided back to their traditional role as providers of credit to investors in fixed capital. Until this is achieved, and in order to halt the contraction of GDP, it will be necessary to maintain, or even further strengthen, the expansionary stance of monetary and fiscal policies. Against this background, global GDP growth may turn positive again in 2010, but it is unlikely to exceed 1.6 per cent.

Contrary to what the administration will have you believe, confidence does not come from ceaseless repetition on TV of what General Electric hopes the general public wants to hear, whether it is unfounded hope, unfounded optimism, or any other concept, with an "unfounded" adjective preceding it. Confidence comes from a sense that there is stability and order in a system, that currently is increasingly chaotic, and where even a regular Main Street resident is aware that the market and the economy have gotten fundamentally disjointed to a point where the latter is merely a speculative plaything operating in a vacuum, and run by an ever decreasing number of pathological gamblers.

Is optimism wrong then? No, but optimism without even trace amounts of reality is much more dangerous and insidious than pessimism, where while the latter will not make you rich, it will also not lead to a complete loss of all capital in the Wall Street-sponsored game of roulette, which incidentally has 35 instances of 00. 

The improvement of certain financial indicators from their lows reached in the first quarter of 2009 and falling interest rate spreads on emerging-market debt and corporate bonds, combined with the rebound of securities, commodity prices and the exchange rates of several emerging-market currencies by mid-2009, were quickly seen as “green shoots” of economic recovery. But the economic winter is far from over: tumbling profits in the real economy, previous overinvestment in real estate and rising unemployment will continue to constrain private consumption and investment for the foreseeable future. As the crisis is global, reliance on exports offers no easy way out, since trade is expected to decline by about 11 per cent in real terms and any new trade expansion requires a recovery of consumption and investment somewhere in the world.


Given the weakness in macroeconomic fundamentals, an upturn in financial indicators in the first half of 2009 is more likely to signal a temporary rebound from abnormally low levels of prices of financial assets and commodities following a downward overshooting that was as irrational as the previously bullish exuberance. They are not a reflection of strengthened macroeconomic  fundamentals but of a restored “risk appetite” among financial agents. Consequently, they could be reversed at short notice, depending on the pace of recovery and financial market sentiment.

The notice is even shorter, if one considers that the "market makers" controlling the natural bids can and will flip to offload their positions faster than the eye can blink when the conditions warrant it: unlike the evil market makers of old, these new guardians of "capital markets integrity" have, oddly enough, no requirement whatsoever to be present in moments of stress, and, more surprisingly, no risk parameters in which they operate: we have, as expected, learned nothing once again from the Lehman "lesson." But that is a topic for another thread. But back to speculation.

In the course of the crisis, financial distress spread directly across stock and bond markets and primary commodity markets, and put pressure on the exchange rates of some emerging-market currencies. The uniform behaviour of so many different markets that are not linked by economic fundamentals can be attributed to one common factor: the strong speculative forces operating in all these markets.

As participants in financial markets often seek speculative gains by moving before others do, these markets are always “ready for take-off”, and eventually interpret any “news” from this perspective. Indeed, they often tend to misread a situation as being driven by economic fundamentals when these are just mirages, such as perceived signs of economic recovery in certain economies or fears of forthcoming inflation. As long as prices are strongly influenced by speculative flows – with correlated positions moving in and out of risk – markets cannot function efficiently.

Recognizing the lack of economic logic of these markets is key to understanding the roots of the current crisis, and should be the basis for further policies and reforms aimed at stabilizing the financial system. However, so far an appropriate appraisal by policymakers has not been forthcoming. The policy approach to tackling the crisis is focused on better regulation of actors and markets at the national level, but does not address its impacts on currency and commodity markets and on the future of an open trading system.

It is, frankly, shocking that an organization so disconnected from finance and capital markets as the United Nations, can have such a solid grasp of the entire chain of events and risk players that have brought us to where we are now, and are perpetuating the same mistakes that the regulators and all other market participants hope are different this time, and will not result in the same outcome. Yet, the US market, being essentially self-regulated (the irony is amusing) by crony, manipulated, bribed and incompetent organizations such as FINRA, the CFTC and the SEC, is now facing just the same speculative challenges it did in the days before Lehman, in August of 2007 and at every other inflection point, where had there been some more insight of how to deal with asset bubbles, the current predicament may have been avoidable.

It is, unfortunately, hopeless, that both the market and its regulators will keep repeating the same mistakes over and over, as everyone's interests are unfortunately aligned at this point, not with an investing paradigm, but one where, because a trip to Las Vegas is seen as too expensive, is usually replaced by one to the nearest E-Trade terminal. And so on, until the next bubble implosion, whether it be in China or in downtown Manhattan. The threat - each subsequent bubble eventually has increasingly more dire repercussions, as more capital is used to reflate it. If the last pop resulted in the near-decimation of Wall Street, the next one will likely spell certain doom for capitalism as we know it. So those who are in power have the choice of proactively approaching this issue, and as the UNCTAD report warns, take appropriate measures, or alternatively, we can all bask blissfully ignorant in the glow of CNBC's scrolling ticker and Amanda Drury's increasingly exposed cleavage, until such time as no further propaganda from the MSM will be sufficient to change the simple fact that the economy is in the eye of the hurricane, that markets no longer reflect even a trace of reality, and the speculators have once again hijacked capital markets. And it is these same speculators that none other than John Maynard Keynes warned against when he said "When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done."

Mr. President, Ms. Schapiro, Mr. Bernanke, with your actions, or more specifically, lack thereof, you have allowed the capital development of our country to become a by-product of the activities of a casino. You may be correct that by the time your respective terms end, the collapse will not be in full force yet, or you may be wrong, but rest assured that history will judge you appropriately and harshly, and will save a special Chapter for you in America's textbooks, so when future (massively indebted) generations look back upon the first decade of the 21st century and evaluate where it all went so horribly wrong, your names will be prominently featured.

Full UNCTAD report here:

 

 

 

 

 

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Tue, 09/08/2009 - 23:54 | 63168 John Self
John Self's picture

Yeah, but more importantly, I heard on CNBC that Bernie Madoff's house is for sale?

Wed, 09/09/2009 - 06:56 | 63285 Anonymous
Anonymous's picture

And now we are treated to Elmo on CNBC. Perhaps we would be better served by Triumph the Insult Dog. At least he would call 'em as he sees 'em.

Wed, 09/09/2009 - 07:08 | 63288 Anonymous
Anonymous's picture

And now we are treated to Elmo on CNBC. Perhaps we would be better served by Triumph the Insult Dog. At least he would call 'em as he sees 'em.

Wed, 09/09/2009 - 08:47 | 63303 Spartacus
Spartacus's picture

S&P 500 Moving Averages Show ‘Fierce’ Rally: Technical Analysis
http://www.bloomberg.com/apps/news?pid=20603037&sid=akblT1V_KXPg

Some more stuff.

Wealthy individuals’ Chapter 11 bankruptcy filings jumped 73 percent in the second quarter from a year earlier, according to the National Bankruptcy Research Center, a research firm in Burlingame, California.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aOYQzpAp2o9w

At the sametime this one is a surprise.

U.S. Stocks at Risk for 20 Percent Decline: Technical Analysis

 http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ak.1o0dVxWHo

 ANOTHER WONDERFUL one!

Goldman’s Blankfein Calls for Pay Rules to Stem Risk

http://www.bloomberg.com/apps/news?pid=20601087&sid=aeob.WGdm6_o

That is strange!

Wed, 09/09/2009 - 01:24 | 63174 CD
CD's picture

Wow. Just the chapter headings on the rest of the document look daunting. Maybe looking into other writings of Mr. Panitchpakdi are warranted.

http://en.wikipedia.org/wiki/Supachai_Panitchpakdi

Not that my hindsight in finding this is any virtue, but (from a Sept. 2008 interview, same guy):

"Already a year ago, UNCTAD highlighted – as is now widely accepted – that the sub-prime market crisis was due largely to a lack of transparency and insufficient regulatory oversight of financial institutions. The crisis then spread, creating an ongoing credit crunch in many other advanced economies. As such, it has become one of the factors precipitating a global slowdown, with significant consequences for development. [...] More broadly, however, for UNCTAD, the recurrence of financial crises every three or four years is a sign that there is something more fundamentally
wrong with the international financial system
, and that greater efforts are needed to devise institutional arrangements that ensure greater stability. A new financial system should also be built to avoid prolonged misalignments of exchange rates of the kind that have led to the build-up of the global imbalances now threatening the stability of the global economy. In our view, this will require a more multilateral approach to global finance. Just consider that while there is a comprehensive set of binding rules governing international trade relations, nothing of the kind exists in the area of finance, even though the adverse effects of financial crisis can wipe out gains from trade liberalization in almost an instant."

http://www.unctad.org/sections/about/docs/cso5_interview_en.pdf

If you click around on the site, you can come across a rather interesting (scary?) list in one of their reports, page 2: http://www.unctad.org/sections/dite_dir/docs/wir08_fs_us_en.pdf As far as I can tell, this shows the top owners of the 50 largest multi-national corporations (but please do correct me if I'm wrong). If so, this does put a whole new spin on TBTF... How many of these are TARP babies now...?

Presence in the Top 50 financial TNCs ranked by Spread Index, 2006

Citigroup Inc
General Electric Capital Corporation
American International Group Inc
Jp Morgan Chase & Company
Merrill Lynch & Company Inc
Morgan Stanley
Goldman Sachs Group Inc
Gmac Llc
Prudential Financial Inc

Wed, 09/09/2009 - 00:05 | 63177 Anonymous
Anonymous's picture

why is madoff's house important? madoff is just a front created by SEC to hide the crimes of GS, JPM, C, BSC, LEH, DB, CS et al...

Wed, 09/09/2009 - 03:56 | 63245 Anonymous
Anonymous's picture

madoff is a cia agent who was running cia intelligence
operations and important work for his wealthy clients.....

madoff's house is very important because it shows
us what lifestyles of the rich and famous is like
and would be an excellent reprise location for
robin leach's hard hitting investigative
journalism....

Wed, 09/09/2009 - 04:16 | 63249 Cognitive Dissonance
Cognitive Dissonance's picture

It's called sarcasam. Instead of real news, CNBC and other "corporate fawning media" talk about non-news stuff like the sale of Madoff's house.

Wed, 09/09/2009 - 00:07 | 63178 Arm
Arm's picture

Laissez faire capitalism is NOT the problem.  The problem is CRONY CAPITALISM.  Essentially, when the rules of the market apply to most, except a chosen few who receive unfair subsidies.

That is what creates imbalances.  The problem is that it is very easy to introduce hidden subsidies. 

Wed, 09/09/2009 - 00:30 | 63188 Anonymous
Anonymous's picture

This is exactly the problem. We have sink or swim capitalism for the masses but for the folks who write campaign contributions the get to keep the profits and socialize the losses.

Wed, 09/09/2009 - 00:41 | 63193 Anonymous
Anonymous's picture

Except that laissez faire capitalism is damn difficult to implement. Who knew a vacuum would be so hard to build? How many markets are actually perfect...wheat? Is Hong Kong the only example of a laissez faire polity? Aiming for laissez faire and falling short will almost always devolve into crony capitalism. Laissez faire capitalism in practice means that those who capture strategic economic positions early on are able to parlay their windfall into political influence and use the government to restrict competition. US crony capitalists humorously and predictably use laissez faire jargon to justify their actions.

Best to hedge and use politics to empower economically weaker segments of the society so that they can act as a counterbalance to the crony capitalists. If the polity becomes unbalanced, then eventually the economy will become unbalanced, and vice-versa. This feeds on itself. The health of our democracy is dependent more on the Gini coefficient than on the highest marginal tax rates or GDP per capita.

Mixed economies must strike a balance between opportunity and equity. It's hard and requires debate and the banishment of doctrine, but that's pragmatism for you.

Wed, 09/09/2009 - 04:29 | 63250 Anonymous
Anonymous's picture

although i disagree with your antagonism toward
laissez-faire theories i do agree that providing
strong safeguards against corruption is very
difficult....

historically we have relied upon regulatory,
tax, and enfranchisement strategies to seek
balance which
has unraveled especially since 1980...but the
origins of that unraveling started decades
earlier....

i agree with michael hudson's critique that the
growth of the rentier/fire economy has been a
key catalyst for imbalance
favoring and creating a new class of plutocrat
never before seen in the country....

ultimately moral sensibilities are required to
govern fairly but i see no way of developing
a moral consensus in this highly fractured
and diverse nation....

to make war against the plutocrat or even to
counterweigh against him requires a knowledge
and resolve which is totally lacking....but
we battle on...

Wed, 09/09/2009 - 00:55 | 63201 JR
JR's picture

Absolutely. Capitalism is owning the means of production--not stealing it!  The alleged captains of finance who are forcing the appointments of treasury secretaries, presidential advisors and Fed chairmen on a revolving door basis are on the opposite political scale from capitalism. To control a nation's currency, its means of production and the reigns of its government is statism, soft tyranny--not capitalism. 

Wed, 09/09/2009 - 01:27 | 63209 Silver Bullet
Silver Bullet's picture

Laissez faire capitalism, my theory, will always end in crony capitalism.

 

Wed, 09/09/2009 - 10:57 | 63418 Anonymous
Anonymous's picture

The winners (sophisticated investors, see Goldman) are the capitalists that get to write - and re-write the rules.

Goldman has smart employees but the reason they outperform the way they do is that they own the government - the know the rule changes before they happen. Now that is sophisticated!!

The only difference between the past and now is that the average guy is more sophisticated about how the game works (the internet -sharing of information). Suddenly, the corruption seems so much more obvious to everyone.

Wed, 09/09/2009 - 02:07 | 63224 Marshal Ney
Marshal Ney's picture

Greenspan's a classic laissez faire capitalist. Gee, how did that work out? (He brought a wreath in the shape of a dollar sign to Ayn Rand's funeral!) The economy is too complex to expect a simple theory to govern it. Analogous:: Let's do away with traffic signs, speed limits, the police, the DMV, driver education, driver's licenses, road repair, safety requirements, medical/rescue services, stop lights and let every individual unencumbered driver make their own rules. Have a nice drive.

Wed, 09/09/2009 - 04:01 | 63247 Anonymous
Anonymous's picture

greenspan is not a classical laissez faire capitalist...
he is an opportunist and charlatan of the
grossest sort....

you have created a caricature of laissez faire
doctrine of which greenspan was an example....and
all quite by design at that...

Wed, 09/09/2009 - 08:55 | 63321 Marshal Ney
Marshal Ney's picture

Laissez faire: "a doctrine that opposes governmental regulation of or interference in commerce beyond minimum necessary for free- enterprise system to operate according to its own economic laws." Pure Greenspan.

Wed, 09/09/2009 - 08:07 | 63304 Anonymous
Anonymous's picture

Now, now, you're going to annoy all the Libertarians.

I dunno why some really smart people think that you can really run a country without plenty of laws, rules, regulations, etc. It assumes a sort of pervasive human goodness and wisdom that is not currently the case.

Wed, 09/09/2009 - 00:18 | 63182 Anonymous
Anonymous's picture

hey tyler d ((or whoever u think u are)) - forget not who writes America's ding-dang books... unfortunately, history does not judge appropriately or harshly as one would hope.

If it were that easy and if any such chapters were possible (non-nationalistic-patrio-anglo-saxon-bs), then the little global predicament we all loathe would have been easily avoidable. If history was documented accurately anywhere on the planet, there would be no demand for such fountainheads of unconventional wisdom as ZH in a vast blogosphere of willful ignorance.

Wed, 09/09/2009 - 08:12 | 63307 Anonymous
Anonymous's picture

Good point.

The history book that speaks most directly to what TD has touched upon here may well come from China, or Germany, or, perish the thought given the unfair beating they have taken in the bought-off US press, France.

Wed, 09/09/2009 - 00:22 | 63183 Anonymous
Anonymous's picture

This is the best overview of the current situation I have read. Thank you for providing it.

Wed, 09/09/2009 - 00:25 | 63184 JR
JR's picture

There is nothing in place in America that will keep the Fed from finally taking all the wealth from the American people – no bar against it.

Here is a case in point from “Criminal Banks and Brokers Continue To Ply Their Trade… Stealing From You and Me As the Public Carries On Its Belief in Fantasies” by Richard J. Greene published by Financial Sense on February 27, 2009.

Section 19 of the Coinage Act of 1792 specifically states that any officer debasing the money shall suffer death. Alan Greenspan wrote the following back in 1967,

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value…"

Obviously, with this eloquent explanation on how gold protects the property of the common man it is certain that Greenspan clearly understood BEFORE he took his job at the Fed that there was no longer anything that kept the privately owned Fed from confiscating the wealth of the American people. So he knowingly took a job that he understood beforehand was confiscating the wealth of the American people and for 20 years this man moved rates for the privately owned Fed to the advantage of the many banks worldwide that own a stake in the Fed that subcontracts monetary policy for our country. It would not be hard to convict this man as he has provided his own evidence. The only thing lacking is enough intelligent individuals to cause a big enough ruckus to bring this man to justice, and of course, the bigger task of overcoming his grateful friends in high places. It is imperative if you are against many of the things this article mentions to let your representatives know. There is a constant shift of attitude more and more toward the Government feeling that it is in charge of us rather than them serving us…

The quickest way to get back on a recovery path is to end sending billions, and eventually trillions if this is not stopped, to failed organizations. Guess what, the world will not come to an end if Citigroup, Bank of America, and JP Morgan are allowed to fail. It will only end the gravy train for the top officers that feel they are in a privileged class. Hank Paulson diverted billions to his Goldman cronies before he stepped down and John Thain made sure $4 billion! in bonuses were paid early to Merrill henchman in a year when they not only blew themselves up but brought down the entire US economy in the process…

Are we going to allow the heavy hands of Government to move America toward the Communism that brought down Russia? Don’t be surprised if the same banks are left in charge when you wake up one morning and find out they are trying to stuff a new fiat currency down your throat and try to give you one of the new ones for three of your old ones that you have on deposit…

http://www.financialsense.com/fsu/editorials

Wed, 09/09/2009 - 01:43 | 63208 TumblingDice
TumblingDice's picture

Unfortunately JR, as much as I agree with everything else you said, I can't agree about the world not coming to an end if the big bans are allowed to fail. In a sane world that would be possible and all we would face is a healthy round of Great Depression style deflation. Unfortunately the Federal Reserve and Treasury have too many stakes riding on the wellbeing of our unsuccessful corporations. If they fail there is a high chance that the very entity protecting the rule of law (except for those with money) and property rights will fail. The fusion of corporate interests and government is pretty much cemented now.

In a sense this is a case of an economic MAD scenario. But we all know that I guess. The key is how return to the United States Constitution in the least harmful manner. How do we return to the rule of law and eliminate the moral hazard in such a way that the cost of this action/enforcement is the lowest possible, both present and future? That is a question that Ron Paul has to answer if he plans to win the Presidency in 2012. Keep in mind, that the present cost is the one that holds the most weight with voters and with his options, the cost is based more on the resent, while BO's cost for his actions is more weighted towards the future.

Wed, 09/09/2009 - 13:26 | 63699 JR
JR's picture

On the other hand TumblingDice, these bankers are desperate and, IMO, are taking desperate moves that may already be toppling their centrally-controlled money system. It is my belief that unless this insider control--that outlaws competition--is destroyed, time has run out on the United States and other Western democracies.  For the reality is, the party is over.  The sooner America admits her errors, accepts her punishment, and gets back to freedom, the sooner she will return to true prosperity.

The private cartel of bankers that the Fed represents are really only “capitalist” banks in that they specialize in grabbing other people’s capital. Goldman-Sachs’ free market capitalism is where we all get to play and when the night is over, Goldman goes home with all the chips.  Goldman-style capitalism is where Goldman makes the rules, picks the politicians, punishes the competitors, swamps and buys out other “capitalists,” and steals the tax money and the mites of the widows and orphans.

The American Dream was not about false prosperity, which is possible only through slavery.  As Robert Ringer said in 1979, “The heart of the American Dream is freedom; the lifeblood is free enterprise…  Wealth can be produced if men are free.  If men are not free, then slaves produce wealth for those in power.”

Either Goldman Sachs goes, or freedom goes.  I opt for freedom, whatever the cost.

Wed, 09/09/2009 - 13:59 | 63774 TumblingDice
TumblingDice's picture

The medicine has to be taken, or else the cancer latches on permanantly. We just have to convince enough people that it is better to have freedom now, even with the extrodinary present cost, than lose it forever and have the future cost be that much greater.

Wed, 09/09/2009 - 00:27 | 63186 Anonymous
Anonymous's picture

The author is blaming our financial problems on long only index traders while never stopping to ask.....Why? Why own an asset that has no dividend yield or income stream. Nobody in DC asks this question either. Because the answer to that question points in a direction folks like this don't want to go.

The the author writes this beauty:

"In the present situation with, with capacity utilization at historic lows and unemployment rising at a dramatic rate, there is little danger of either overheating or wage inflation for several years to come."

Har, har, har. He is so funny.

He doesn't know much history either so you can pretty much discount everything he wrote. Folks, inflation can happen with or without high unemployment. Yes, you can have high inflation with a large output gap.

Don't believe me? Read some economic history. Wiemar Germany is but one example of a country with huge inflation problems, high unemployment and a large "output gap" that the Keynes loons love to trumpet. Check out Zimbabwe recently. Check out any number of countries that have experienced high inflation.

Wed, 09/09/2009 - 04:46 | 63255 Anonymous
Anonymous's picture

very good...monetary inflation is a monetary
problem - not one of capacity utilization or
employment...the problem is currency debasement.

and don't forget 1970s usa as another more mild
example...

regarding a focus on long positions - the same
problem exists at cftc - no one looks at shorts
because reforms there would take away major
government-plutocrat power to control key markets...

Wed, 09/09/2009 - 00:36 | 63190 ghostfaceinvestah
ghostfaceinvestah's picture

I don't know all about this stuff, I just know the next crash is going to be a doozy, and the revolution that follows will be talked about for thousands of years.

Wed, 09/09/2009 - 00:50 | 63198 Anonymous
Anonymous's picture

"It is, frankly, shocking that an organization so disconnected from finance and capital markets as the United Nations, can have such a solid grasp of the entire chain of events and risk players that have brought us to where we are now, and are perpetuating the same mistakes that the regulators and all other market participants hope are different this time, and will not result in the same outcome."

Actually Tyler, it's not shocking. The entire blogosphere knows what's up, and frankly so does most of Main Street. The only people who don't are Wall Streeters and mainstream journalists who think this "crisis" is some sort of act-of-god, and don't understand that we're not all on the same team.

What's stunning is the complicity of the press. And the passivity of the American people while being fleeced and subjugated.

Wed, 09/09/2009 - 04:39 | 63254 Anonymous
Anonymous's picture

five entities control 90% of the press in america
....
to play my broken record i will remind folks
that the cia controls the press - the news
manufacturers hire
newsfakers and press whores to serve the interests
of the plutocrats....the cia answers to the
rockefellers, bundys, harrimans and other invisible
plutocrats...

the people are taught in school to be obedient
sheep....critical thinking is discouraged if not
punished....

many of the institutions which in the past have
served to homogenize and civilize this country
are now the very tools for subjugating it...

the press must be viewed as an enemy but let's
remember its newsfakers are trained in the
universities...taking on that institution is no
mean feat...

people at different times have had to take
radical action to tear down walls, statues of
adulation, and icons of arrogance....americans
are not yet there....it will be jungle warfare
requiring bold strikes against bastions of
plutocratic strength....

Wed, 09/09/2009 - 01:12 | 63200 TumblingDice
TumblingDice's picture

Financial Crisis: The Bubble Bursts

The causes of the economic downturn that gripped the world economy are widely disputed. Speculation, interest rate mismanagement by the Federal Reserve, excessive debt and loss of confidence are all cited as catalysts. However, further research indicates that the primary reason for the recession was the absence of liquidity in the system; the economy simply required more money to function. The determined actions of President Barack Obama and Federal Reserve Chairman Ben Bernanke provided the necessary fiscal and monetary stimulus to bring the economy back to prosperity. The recession officially ended in early 2010 as inflation and growth resumed their forward march.

Although pessimism persisted well into the late stages of the recession, mostly due to high unemployment, the naysayers were proven wrong by rising prices and the second boom of the service industry. Persintant trade deficit and increasing debt fueled the growth of next two decades of economic growth after saving it from the brink of the abyss in the 2008 to early 2010 period. The improvement of social efficiency by the government helped set the path...

...just kidding. Your version is better. Call me an idealist but I believe future history books will be based on the truth, with ZH quoted frequently.

Wed, 09/09/2009 - 17:55 | 64192 ZerOhead
ZerOhead's picture

Stop messing with my brain Dice...

Wed, 09/09/2009 - 01:13 | 63203 Ando
Ando's picture

Im starting to get sick of all the hating on speculators.  ALL INVESTORS ARE SPECULATORS!!!!!!   Just because you may hold stock for a couple years instead of a couple days, we are supposed to make laws that favor your type of trading.  Seems like gambling to me to speculate on the future growth of the US economy which is what long term investors are doing.  Some think its just easier to predict when all the retail investors will put more money into the market and trade around that.

Wed, 09/09/2009 - 01:43 | 63214 theadr
theadr's picture

When is Mozillo going to prison?

When are Moody's and S&P going to be closed down for fraud?

When is Buffett going to barred from the security industry?

When is Goldman Sachs going to undergo a CRA exam?

When are Dodd and Frank going to be impeached?

When are Phil and Wendy Gramm going to have their assets seized under RICO?

 

Wed, 09/09/2009 - 01:51 | 63220 Icarus
Icarus's picture

The difference is that one is speculation of fair value, and the other is speculation in what others are willing to pay.

The disconnect between the two is due to moral hazard.

No one has a problem with speculators using their own money.  The issue is with speculators using other peoples money with no reprocussions in failure.

 

Wed, 09/09/2009 - 03:14 | 63236 Anonymous
Anonymous's picture

Its not only using other people's money, but using other people's to leverage twenty to one and keeping the profit if successful or loosing the other people's money plus the leveraged loan which the other people get stuck paying off if it fails.

Let them piss away their own future.

Wed, 09/09/2009 - 04:52 | 63257 Anonymous
Anonymous's picture

no - all investors are not speculators...
speculators trade on technicals and money
created largely out of thin air....investors
buy based upon fundamental considerations....

i agree that the holding period of an asset
should not be limited...

however to remove the speculative nature
of trading, monetary inflation needs to end
and taxes on capital gains and rentier type
activity needs to go up while labor taxes go down....

i don't hate speculators - only the regulators
and lawmakers who make their activities
economically viable...

Wed, 09/09/2009 - 01:20 | 63207 michigan independant
michigan independant's picture

Thank you TD for the air of simple realism indeed lacking. We are not on the sidelines, but spectators as we await the new day.

Wed, 09/09/2009 - 01:35 | 63210 Anonymous
Anonymous's picture

...The good news in the article is that polls show that Americans are waking up the fact that the Federal Reserve is a disastrous failure and it has ruined the dollar and America, which I interpret from the news that “Americans think less of the Fed than of the Internal Revenue Service.”

And since the smart play is to buy gold, silver and oil when the government is behaving so badly, the best news was not in the article at all, but for us greedy money-grubbers who want to make a lot of money without working and think that gold, silver and oil is the way to do that because that is what seems to be the lesson of the last 4,500 years, it is wonderful news that the majority of investors are not yet buying gold, silver and oil, which makes sense because it is mathematically impossible for the majority of investors in anything to make a profit, and only a minority betting against the crowd can, by mathematical imperative, make a profit!

http://dailyreckoning.com/clairvoyant-economists-still-pessimistic/

Wed, 09/09/2009 - 01:45 | 63218 Tao Jonesing
Tao Jonesing's picture

Wow.  Obama has been in office for only eight months, and his actions, or lack thereof, have "allowed the capital development of our country to become a by-product of the activities of a casino."

Uh, no.  He's certainly complicit in its continuation, but it was like that before Obama got into office.  What are you, Mr. Short-Term Memory?

http://video.yahoo.com/watch/5071946/13473681

 

 

 

Wed, 09/09/2009 - 08:08 | 63305 Ivanovich
Ivanovich's picture

Bush already guarenteed himself a spot as one of the worst Presidents.  He's over and done with.  What Tyler was saying was that it's Obama's chance to prove otherwise now.

 

Lets keep our eye on the ball, shall we?

Wed, 09/09/2009 - 01:48 | 63219 digalert
digalert's picture

I read the UNCTAD report which goes where? Global warming, bastards. So the USA plan is for the Oblame-all administration and bought / paid for hall of congress clowns to kill America as we know it with CAP & TAX green nonsense. Meanwhile uncle Ben plays test tube economics, balancing restoral of more wealth to swindle out the back door...sorry I need to go in to foul language now...

Wed, 09/09/2009 - 02:04 | 63223 Anonymous
Anonymous's picture

..The feds are in the print shop already. They’re printing up more dollars intentionally – to try to get inflation rates up…and to finance federal borrowing. It will be a miraculous thing if their new dollars don’t eventually cause inflation. But the macroeconomists who run the print shop tell us not to worry. They’ve got it all under control. They’re already talking about when and how to withdraw the dollars they so helpfully provided during the crisis period.

The simpletons – who had no idea that the crisis would come…and then thought it could be easily contained…and then mistook it for a monetary, banking crisis…and then judged it over before it had really started…

…these same simpletons still do not understand that the problem is not a lack of money, it’s a surplus of debt…

http://dailyreckoning.com/the-boomers-are-out-of-time-and-out-of-money/

Wed, 09/09/2009 - 02:33 | 63228 Gubbmint Cheese
Wed, 09/09/2009 - 02:36 | 63230 Anonymous
Anonymous's picture

HEY TD, I've been reading your posts almost since inception. You're definitely knowledeable and you've made a good case for deflation, destruction, asset devaluation etc. BUT......I feel like a fool having spent so much time analyzing what you have been writing and concluding its best to stay on the sidelines, as this market has gone up 50%. Pretcher called it better, and after all, what's the point of all this venting if you can't make money at it. SO CAPTAIN, where to from here? Make a call with a time frame for the audience.

Wed, 09/09/2009 - 18:28 | 64228 ZerOhead
ZerOhead's picture

It's a sock puppet market kid. My call would be for you to go with Pretcher since you feel confident in his abilites. Timeframe? NOW!

This site performs the function of a forum for the exchange of information and ideas... if you have been following for as long as you say you should know this already.

I honestly wish you luck... you may need it.

Wed, 09/09/2009 - 05:27 | 63269 George the baby...
George the baby crusher's picture

As long as history is "a set of lies agreed apon" crony capitalism will come up smelling roses even when all you see is shite.

Wed, 09/09/2009 - 07:45 | 63292 Anonymous
Anonymous's picture

Here are a couple of decent books for ZH readers on Money, Creation of Money, Credit, and Economic Cycles:

(1) Money, Bank Credit, and Economic Cycles (885 pages, very expansive & indepth reading) found at:
http://mises.org/store/Money-Bank-Credit-and-Economic-Cycles-P290C0.aspx

(2) The Ascent of Money: A Financial History of the World by Niall Ferguson (432 pages, much ligher reading), found at:
http://www.amazon.com/Ascent-Money-Financial-History-World/dp/1594201927

Good luck ZH ...

Wed, 09/09/2009 - 07:49 | 63293 Anonymous
Anonymous's picture

And now let's investigate how the mighty wielders of liquidity invest their spoils:

http://www.metro.co.uk/news/article.html?Goldman_Sachs_boss_offered_woma...

It appears a Goldman-chieftain offered a pensioneer 500k worth of HRS (horizontal refreshment swaps) if the old man agreed to hand over his wive to the Goldman-God without making any noise about it.

"I really like to work the underlying asset twice a day", millionaire banker Yann Samuelides would have told reporters if he had not denied all interview requests in the first place.

I would counsel the old man to stall the deal of until after bonus season.

Wed, 09/09/2009 - 07:50 | 63294 Anonymous
Anonymous's picture

Last I heard, no one has expected GDP to grow by more than 2%, even the administration.

Not sure why this article creates this 'new' reality, its just a piece designed to make the US metrics released by the administration to look blatently false, when they have acknowledged most of whats contained in this article

Wed, 09/09/2009 - 07:50 | 63295 Anonymous
Anonymous's picture

And now let's investigate how the mighty wielders of liquidity invest their spoils:

http://www.metro.co.uk/news/article.html?Goldman_Sachs_boss_offered_woma...

It appears a Goldman-chieftain offered a pensioneer 500k worth of HRS (horizontal refreshment swaps) if the old man agreed to hand over his wive to the Goldman-God without making any noise about it.

"I really like to work the underlying asset twice a day", millionaire banker Yann Samuelides would have told reporters if he had not denied all interview requests.

I would counsel the old man to stall the deal of until after bonus season.

Wed, 09/09/2009 - 08:06 | 63302 Anonymous
Anonymous's picture

More shocking news:

Thousands Of Abandoned, Foreclosed Homes Threatened By Florida Hurricane

September 8, 2009 12.17.08

FORT MYERS, FL—In what forecasters are predicting will be the largest, most devastating disaster to hit Florida since the national economy collapsed, a Category 5 hurricane neared the Gulf coast this week, threatening thousands of repossessed and long deserted homes.
According to meteorologists, the incoming tropical storm could leave as many as 3 million residents every bit as homeless as they've been for the past year or so.
"Those who haven't already lost everything to the housing-market crash are urged to evacuate their homes immediately," said Robert Menken, head meteorologist at the National Weather Bureau. "That should be about 10 or 12 of you. Everyone else, please stay where you are, probably on the couch of some in-law who lives near Atlanta."
In preparation for the hurricane's landfall, the Emergency Broadcast System issued a number of safety warnings early Sunday. Due to expected high winds and torrential rain, citizens are advised to keep their windows and doors boarded up, as they pretty much have been through most of 2009.
In addition, any cars that have not been repossessed by local banks, or sold in a frantic daze by debt-ridden residents, are to be kept off the streets to prevent any further damage.
Enlarge Image
Many local residents fear for the structural integrity of the self-storage units where their families' belongings have been kept for months.
Floridians currently living out of their cars are likewise being ordered to pray for the best.
"I can't believe I would have had to leave my house behind had I not been evicted nine months ago," said Dale West, one of countless citizens who grabbed family members and rushed to the safety of a nearby church basement last April. "Just think of all the things I could have potentially lost had I still had them!"
"Dear God," West added. "How could something like this have already happened to me?"
The massive mile-wide storm system is expected to cause more than $120 million in damage to recently seized property, destroy hundreds of acres of highly leveraged land, and knock out power to thousands of homes that have been totally dark for weeks now.
Massive floods are also expected in the next few days, threatening to cut off dozens of unused roads and destroy prized possessions long ago abandoned and forgotten about.
"It's a ghost town around here," said Fort Myers native Carol Hodge, who saw some of the neighborhood's last few squatters flee on Monday. "Or, rather, more of a ghost town. People haven't really lived in this county since 2008."
At press time, emergency crews from seven Florida counties and representatives from FEMA had already been dispatched to the default-ravaged state, though many said they believed the damage would be insurmountable.
"We rushed here as fast as we could, but it looks like we're too late," Bradenton EMT John Sarvis said as he looked over countless For Sale sign–riddled lawns and vacant model homes. "All the way from Vero Beach to Fort Lauderdale, it's an absolute wasteland. I doubt anyone will ever be able to live here again."

Wed, 09/09/2009 - 11:26 | 63442 MinnesotaNice
MinnesotaNice's picture

Loved it...

Wed, 09/09/2009 - 14:20 | 63828 Hephasteus
Hephasteus's picture

Banks ease stress on emergency management by making america more mobile since they are living out of their car?

Wed, 09/09/2009 - 18:44 | 64263 MinnesotaNice
MinnesotaNice's picture

lol... I can picture the headlines and the awards ceremony on CNBC for the altruism displayed by the banks in this weather emergency... "Banks Allow Foreclosed Americans More Mobility While Living In Their Car, Which Greatly Assisted Emergency Management Efforts"

Wed, 09/09/2009 - 18:34 | 64253 ZerOhead
ZerOhead's picture

Yes... very nice!

Wed, 09/09/2009 - 08:18 | 63308 Anonymous
Anonymous's picture

it seems to me the only thing that is protecting us, such as that protection is right now, is the judicial branch, and at that, only a few stalwart souls. i think about that a lot these days.

Wed, 09/09/2009 - 08:28 | 63311 FischerBlack
FischerBlack's picture

What a strange world we live in. I never thought I'd say it, but the UN gets it. And this might be the very first time they've ever 'got' anything.

Wed, 09/09/2009 - 08:38 | 63313 Sqworl
Sqworl's picture

The UN is the most corrupt organization!!!  Nothing good comes from it, except unpaid parking tickets.

Wed, 09/09/2009 - 08:53 | 63319 Hephasteus
Hephasteus's picture

All governments get it. They just don't give it.

Wed, 09/09/2009 - 09:19 | 63333 Anonymous
Anonymous's picture

So, ZeroHedge unleashes another Keynesian and Marxist attack on speculation and speculators, using a UN report as some kind of authority on free markets and their operation.

Just as all it takes is a single contrary fact to falsify any theory, it takes only a single unsupported assumption to invalidate any argument.

The false assumption that is made in the report is:

"The uniform behaviour of so many different markets that are not linked by economic fundamentals can be attributed to
one common factor: the strong speculative forces operating in all these markets."

and concludes:

"Recognizing the lack of economic logic of these markets is key to understanding the roots of the current
crisis, and should be the basis for further policies and reforms aimed at stabilizing the financial system."

With these two sentences, the authors of the report clearly show their bias and complete lack of knowledge about how markets work and the role of speculation in all markets.

In the concluding sentence (above), they are simply stating that since markets don't seem to work as they expect, that it must be the markets that are broken ("lack of economic logic").

This report and it's conclusions are complete nonsense.

Wed, 09/09/2009 - 09:36 | 63343 Anonymous
Anonymous's picture

Without the socialization of risk there would have been no rewards....your an arse and your comment is nonsense

Wed, 09/09/2009 - 18:28 | 64243 Anonymous
Anonymous's picture

You really do not get it at all. Zero hedge is not against the market. they are against crony capitalism. Nobody would consider Ron Paul to be anti market, yet he makes many of the same points as zero hedge.

The FEd which dctates monetary supply is in fact a private banking consortium. So banks in effect regulate themselves and choose the interest rates and policies they want. they determine their own bailouts. that aint the free marke t chum. That is much more like a communist party working for the benefit of insiders in the party.

Thu, 09/10/2009 - 06:15 | 64745 Anonymous
Anonymous's picture

Please read the post again.
I do not accuse ZeroHedge of being "against the market". I say that this particular ZeroHedge author and the authors of the UN report, like so many in other media, do not seem to understand that speculation is an essential aspect of free markets.
Anyone who tells you that the market isn't working correctly because it isn't following some kind of "economic logic" just doesn't understand this.
And anyone who says (as the report authors do) that different markets should not have "uniform behaviour" because they are "not linked by economic fundamentals", is a worse fool.

Why is it that the two responders to the post both bring up the Fed, bailouts, "socialization of risk", etc.., when none of those topics is what the discussion is about?

Wed, 09/09/2009 - 09:27 | 63336 Bizzle
Bizzle's picture

This post is magnificent... one of the best things I've read in the past six months.  At this point I'm past hoping the Powers That Be do the right thing and have resigned myself to preparing for the worst.  Nevertheless, the fact that I'm not alone in this realization heartens me.  Thanks.

Wed, 09/09/2009 - 12:36 | 63549 JR
JR's picture

Yes, this is cold-water-in-the-face-talk.   But I’m anxious to hear even more financial confession.  First the problem didn’t begin with the U.S. sub-prime crisis.  As Greenspan took his bows and flannel-shirted Bernanke gave us a smile, the Fed continued to hold its foot on the public’s interest rate neck…lying about the actual rate of inflation and feeding the big banks as much advance gambling dough as possible for the next bubble following their cleanup from the dot com patsies.  Further, I resent the recommendations that gambling money be restored to the super crooks again, just like it has been after every bubble crisis and I quote:

[B]anks need to be re-capitalized and their balance sheets cleaned of toxic assets before they can be guided back to their traditional role as providers of credit to investors in fixed capital.

Yes, but these big babies themselves need to be tossed out with the dirty water so “good banks” can be restored to their traditional role. 

Wed, 09/09/2009 - 11:36 | 63451 JR
JR's picture

Liberal Keynesian economists such as James K. Galbraith and Paul Krugman, in their self-serving quest for economic “equality,”  misuse and abuse truth to denounce  the “free market” system that built the American Dream.

Something destroyed us. That’s for sure. But I contend it was not free markets. JESSE JAMES WAS NOT A CAPITALIST.  And, of course, neither are tenured-to-the grave economists such as Professor Galbraith who used the 25th Annual Milton Friedman Distinguished Lecture last year to launch a sweeping attack on the free market consensus, especially the monetarist version, arguing strongly that Keynesian economics offered a solution to the "Financials crisis of 2007-2008" whereas monetarist polices would deepen the recession. Baloney! 

We aren’t going to solve our arguments as people of goodwill until we can agree on the meanings of the terms we use. Fed Chairman Bernanke’s actions can’t be called capitalism and Juan Peron’s policies can’t be called socialism. 

Can we all not agree that a very desirable economic system was responsible for the explosive growth in America’s gross national product? Or that free market enterprise provided for that growth with government policies that both protected and allowed that freedom.

When John Jacob Astor became Eighteenth Century America’s richest man with techniques such as buying the Indians’ beaver furs with trinkets and rum, and selling the furs to European hat makers at a thousand percent profit, he primarily built Astor GNP not U.S. GNP.  America grew, not from market exploitation by the likes of the Astors’ New York tenement enterprises or J.P. Morgan’s U.S. steel monopoly or Goldman Sachs’ central bank control, but from the millions of honest workers and entrepreneurs whose efforts at building their own estates helped their neighbors’ estates grow as well.

Capitalism is where the means of production are owned by private persons and operated for profit.  Yes, Astor and Morgan were capitalists, but they exploited the opportunities capitalism offers by paying politicians to help them deny these opportunities to other men.  In other words, they were government-sanctioned monopolists.

John D. Rockefeller shut out competitors so he could force the public to pay any price he selected, rather than a price the market would set.  Bill Gates pressures Congress so he can “lawfully” keep higher paid Americans off his payroll and give America’s jobs to foreigners.

Goldman Sachs, now, with paid politicians on board, literally picks the winners and losers in our economic society for its personal benefit.  Perhaps that’s the greatest abuse ever of our system.

Our economic system, capitalism, has produced our growth in spite of these incredible abuses.  Private bankers use their property and power to make obscene profits, but only after they have had laws changed and greased palms to shut out competitors and transfer the public’s money to their accounts.

Was Jesse James a capitalist?  No, whether you put on a mask, stop the train and ride away with the mail or you regulate a country’s currency to put inflation bucks in your pocket, the process is the same.

Grand larceny is not capitalism!  Government sanctioned financial anarchy, both by the monopolists and their mobs and their tenured apologists, has decimated the roots of capitalism.

We must stop people such as James Galbraith and Paul Krugman from identifying these abuses with free market capitalism, the process that produced the American miracle that anti-capitalists are now gaming.  What a tragedy if the Goldman Sachses and the Br’er Galbraiths further close out the opportunities for millions of Americans, and millions as yet unborn.

Wed, 09/09/2009 - 15:35 | 63984 Silver Bullet
Silver Bullet's picture

Unfettered, unregulated capitalism will INVARIABLY lead to greed, corruption and bailouts.

Is this a fault of capitalism? No.

Its a fault of the guys who were to supposed to be regulating it. Period.

Wed, 09/09/2009 - 12:47 | 63584 Anonymous
Anonymous's picture

"The trend is your friend"

Nowhere in Jesse Livermores book "Confessions of a Stock Market Operator" does it say 'the government is your friend.'

Wed, 09/09/2009 - 15:59 | 64018 Careless Whisper
Careless Whisper's picture

You got the trading bible Anon. But don't forget this:

"... manipulation is the art of advertising through the tape. The tape should tell the story the manipulator wishes its readers to see. A manipulator, today, for instance, has not only to make a stock look strong but also to make it be strong."

 

Wed, 09/09/2009 - 18:26 | 64239 Anonymous
Anonymous's picture

I don't know if I can sign this as a Canadian but I have referred it to my American Cousin in California.

I suggest, if that isn't so obvious as to be ludicrous, to pass this petition along to all and especially sundry, as sundry is what we all seem considered to be.

Ignatz

Do NOT follow this link or you will be banned from the site!