Meltdown

Nuclear Cores and Spent Fuel Pools Have Both Lost Containment

All Capitalist Systems Have Some Inequality.  We Don’t Want To Prevent All Inequality … Just Economy-Wrecking Levels

Read on as the MSM pick up on what I've been ranting about for 2 years. Virtually every penny of the big banks' profits consists of taxpayer bailout money. This doesn't include the ~60% of revenue paid out as bonuses, of course!

Day after day, whenever anyone challenges the TBTF banks' scale, they are slammed down with a mutually assured destruction message that limitations would impair profitability and weaken the country's position in global finance. So what if you were to discover, based on Bloomberg's calculations, that the largest banks aren't really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers? The stunning truth is that the top-five banks account for $64 billion of an implicit subsidy based on the ludicrous (but entirely real) logic that: The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail. Once shareholders fully recognized how poorly the biggest banks perform without government support, they would be motivated to demand better. The market discipline might not please executives, but it would certainly be an improvement over paying banks to put us in danger.

Eater Beware ...

According to dictionary.com, Deflation is “a fall in the general price level or a contraction of credit and available money.” Falling prices. That sounds good, especially if you have set some cash set aside and are thinking about a major purchase. But as some additional research with Google would seem to demonstrate, that would be a naïve and simple-minded conclusion. According to received wisdom, deflation is a serious economic disease - St.Louis Fed: "...discourages spending and investment because consumers, expecting prices to fall further, delay purchases, preferring instead to save and wait for even lower price..." The problem with deflation, then - we are told, is that it feeds on itself, destroying the economy along the way. Deflation is far worse than its counterpart, inflation, because the Fed can fight inflation by raising interest rates. Deflation is nearly impossible to stop once it has started because interest rates can only be cut to zero, no lower. In case you’re not already scared straight, the deflationary doomsday has already happened in America when (according to the New York Times) it caused the Great Depression. I hope that everyone is clear on this. Now that you understand the basics, I have some questions for the people who came up with this stuff.

Back in 2007, at the peak of the credit and housing bubble, Wall Street knew very well the securitization (and every other) party was ending, which is why the internal names used for most of the Collateralized Debt Obligations - securitized products designed to provide a last dash trace of yield in a market in which all the upside had already been taken out - sold to less sophisticated, primarily European, investors were as follows: "Subprime Meltdown," "Hitman," "Nuclear Holocaust," "Mike Tyson's Punchout," and, naturally, "Shitbag." Yet even in the last days of the bubble, Wall Street had a certain integrity - it sold securitized products collateralized by houses, which as S&P, and certainly Moody's, will attest were expected to never drop in price again. But one thing that was hardly ever sold even in the peak days of the 2007 credit bubble were securitizations based on personal-loans, the reason being even back then everyone's memory was still fresh with the recollection that it was precisely personal-loan securitization that was at the core of the previous, and in some ways worse, credit bubble - that of the late 1990s, which resulted with the bankruptcy of Conseco Finance. Well, in a few short days, those stalwarts of suicidal financial innovation Fortress and AIG, are about to unleash on the market (or at least those who invest other people's money in the absolutely worst possible trash to preserve their Wall Street careers while chasing a few basis points of yield) the second coming of the very worst of the last two credit bubbles.

The mainstream media is overflowing with stories proclaiming the global economy is on the mend.  Really? Based on what engine of growth? If we cut through the Keynesian jargon of aggregate demand and other Cargo-Cult mumbo-jumbo, what we find is the Status Quo is hoping to boost its precious aggregate demand with the same bag of tricks that imploded so spectacularly in 2008: the wealth effect based on phantom collateral created by Centrally Planned asset bubbles. Though you will not find a Keynesian pundit or economist with the courage required to admit it, the same problem of phantom collateral applies to Federal and state debt: the consumption all that debt funded is soon forgotten, but the debt remains to be paid, essentially forever.

Egan-Jones may have been barred from rating sovereigns for 18 months due to missing a comma here or there in its NRSRO application (when everyone knows this was merely retribution for downgrading the US ahead of all the other rating agencies), but now the time has come for that other rating agency which dared to follow in EJ's footsteps and downgrade the US of AmericaAA+ in August 2011 to be punished: Standard & Poors. Moments ago we learned that federal and state prosecutors will five civil charges against S&P for its mortgage bond ratings during the housing crisis.

Things don’t look so good for China.

On January 22, 2012, candidate François Hollande called banks the “enemy.” Now you’d think he is being tutored by Jamie Dimon.

“I think there was a level of greed, a level of excessive risk taking in this situation that I find abominable and very upsetting,” says Breuer. “But that is not what makes a criminal case.”

Over the past few months, the perception has been that the risk of a meltdown in Europe (characterized by the loss of market access for Spain and Italy) has grown increasingly remote. The relative calm comes courtesy of the ECB which conventional wisdom has it, began acting "like a real central bank" in September when it announced it was willing to throw eurozone taxpayers' wallets behind theoretically unlimited purchases of Spanish and/or Italian bonds. This promise of course, was meant to discourage so-called "bond vigilantes" (otherwise known as investors who know a bad deal when they see it) from "speculating" on rising periphery bond yields. As it turns out, the effect of the as yet untested Draghi put has been dramatic. Spanish and Italian 10s have tightened by a ridiculous 240 basis points since late July. 

Yesterday we broke the news of what is prima facie evidence, sourced by none other than the Federal Reserve's official August 16, 2007 conference call transcript, that then-NY Fed president and FOMC Vice Chairman Tim Geithner leaked material, non-public, and very much market moving information (the "Geithner Leak") to at least one banker, in this case then Bank of America CEO Ken Leiws, in advance of a formal Fed announcement - an act explicitly prohibited by virtually every capital markets law (and reading thereof). It was refreshing to see that at least several other mainstream outlets, including Reuters, The Hill and the NYT, carried this story which is far more significant than Season 1 of Lance Armstrong's produced theatrical confession and rating bonanza. What, however, the mainstream media has not touched upon, yet, is just how profound the market response to the Geithner Leak was, and by implication, how much money those who were aware of what the Fed was about to do, made. Perhaps, it should because as we show below, the implications were staggering. But perhaps what is even more relevant, is why the Fed's previously disclosed details of Mr. Geithner's daily actions at the time, have exactly no mention of any of this.