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Geithner: The Truth Could Cause Significant Damage
By Wolf Richter www.testosteronepit.com
The charade: Treasury Secretary Timothy Geithner spoke before the House Financial Services Committee—chaired by Spencer Bachus, who'd declared in an interview last December that in "Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks."
Geithner was speaking on behalf of the Financial Stability Oversight Council, which he chairs. Established in July 2010, it was to come up with strategies that would ensure that the financial crisis wouldn't show up on our TV screens as reruns.
Now the reruns are here. Only the banks are bigger, the problems larger. The "solution" of the financial crisis—shifting trillions of dollars in risks and losses to taxpayers and central banks—is backfiring. What was largely a private-sector drama now engulfs entire countries. And while there are plenty of exciting financial subplots in the U.S., for the moment, the Eurozone is front and center.
"A severe crisis in Europe could cause significant damage by undermining confidence and weakening demand," Geithner said (Reuters).
Confidence! A series of bank "stress tests" were supposed to suffuse us with a cozy sense of confidence in the banking sector—despite all the very obvious issues that were piling up left and right. The last desperate stress test was held in July in Europe. Dexia, which had already been bailed-out in 2008, passed with flying colors. Three months later, it goes kaput (Euro Tidbit: The Lies of 'Stress Tests'). Other banks will follow.
If inspiring confidence isn't based on facts and transparency, it's a con game. And if the facts are awful, trying to pull a bag over our collective heads isn't going to help.
Geithner could have admitted, for example, that keeping Greece's economy afloat long enough to get us through the next election would only increase the magnitude of its problems. The Greek economy has been taken hostage by a political vote-buying machine funded by cheap euro debt. It needs to be restructured in ways that are not going to be pretty or necessarily predictable. It should be up to the Greeks to decide how to do that. And it should be bondholders that pay, not taxpayers.
"The critical imperative is to ensure that the governments and the financial systems under pressure have access to a more powerful financial backstop," Geithner said.
The ultimate "backstop" behind governments and financial systems? The printing press. Print trillions and bail out bondholders, Geithner pressured the ECB—though it has already printed enough to buy $211 billion in crappy Greek, Irish, Portuguese, Italian, and Spanish bonds. That wasn't sufficient for him. He wanted trillions. He failed to mention the damage these types of policies are doing to the real economy in the U.S. Inflation has whacked the purchasing power of the middle class and has created a hellish scenario for savers and fixed income investors. Credit markets are now controlled by the Fed and not by market participants. Housing has become a complex government program. Even stock markets are impacted by this flood of money. And the essential cleansing process that comes with failures has been stifled.
Apparently, it hasn't occurred to Geithner that governments and central banks need to stay out of the markets so that market participants can determine appropriate price levels via the chaos of trading. If Greek debt becomes worthless, it should be allowed to go that route. If U.S. housing has further to fall, let it find its bottom quickly so that things can move forward. If Italy needs to pay 8% to borrow money for ten years, discipline will descend on its government. If stocks go south, let CEOs figure out what to offer investors to entice them back. Concerted efforts by central banks and governments to set minimum price levels and depress yields hearken back to the good ol' days of the Soviet Union. It's not a fertile feeding ground for optimism, the lifeblood of a strong economy.
Capitalism, free enterprise, and even democracy require a belief in the future. Optimism may take a temporary hit when stocks or housing or bonds crash, but we all know that's part of the deal, and if they're allowed to bottom out quickly, optimism will return. But governments and central banks have conspired to reverse the slide by creating credit bubbles and other mechanisms that are already causing more damage and blowups. After enough of these kinds of setbacks, optimism might cede to an increasingly dour social mood—and not just in the US.
Winners and losers of the Fed's policies: Inflation As A Solution—Hosing The Middle Class.
Wolf Richter www.testosteronepit.com
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"The ultimate "backstop" behind governments and financial systems?"
The taxpayer.
DavidC
And not one mention of the CFR??????
the funny thing is that geithner himself undermines confidence. yes it's all theater, the washington people are the only people who listn to themselves, and by ow everyone else realizes they have nothing to say. it's theater fro thmselves in order to justify things to help their buddies. although it may be time to be buying corporate bonds?
All the vampires need to be hung.
When the only tool you have is a hammer, everything looks like a nail.
When the only tool you have is money, everyone's for sale.
Hard to believe that this eventually got out of hand. Welcome to eventually.
The "Truth" will cause significant damage TO THE HOLDERS OF ASSETS, and the more ASSETS you have, the greater the damage. Ergo, the wealthiest become less so.
If you, as AFSCME Pension Fund, for example, somehow come to know that the Assets you bought are not worth one third of the stated 'value', you will likely fire your pension fund manager (Provided you aren't getting kickbacks from him that make you wealthy) AND you will quietly sell off your holdings for what you can get. That those who DO KNOW what the assets are worth because they have been told the truth have been selling them to you--as a Pension Fund--keeps them in the top .01%.
The truth is known, all right, but it just can't or won't be allowed to be known by everyone.
All the world's a stage....but the actors on it know the script.
Giethner is setting up for a pass the blame game ;it's all Europe's fault should the SHTF.
Get ready folks, you're going to hear "Nobody saw it coming" real soon, over and over again.
LIES CAUSE MORE DAMAGE.
Sure the truth hurts .. but mostly it hurts the people with power. Lies cause even more damage .. but mostly they hurt the people who don't have power. Our kleptocracy naturally would pick the course of lies.
These people are trying to pull the wool over the people's eyes
We are not children for you to nanny!
Hey Timmay, here's something else that can cause significant damage - especially when applied, via a swift kick, to the nutz:
http://www.surplusandoutdoors.com/shop/outdoor-footwear/safety-boots-shoes/dr-martens-airwair-10-eyelet-637749.html
The point was made in the first paragraph. When a government does not uphold the rules on the books what is the point of more laws; regulations... Reform is code for greater concentration; control solidifying economic rents.
THE ROOT OF OUR SOCIAL, ECONOMIC, MILITARISTIC WOW'S IS AN EVIL MONETARY SYSTEM. EVERYTHING ELSE IS A SYMPTOM OR AN ACTION THAT SUPPORTS IT. AT THE HEART OF THIS SYSTEM ARE THE CENTRAL BANKS (THE FED), THEIR DISHONEST MONETARY POLICIES AND THOSE WHO CONTROL IT. SUCH POLICIES, LAWS AND THE CAPTURE OF REGULATORS ARE FOR THEIR BENEFIT. AN ACCOUNT OF THE PEOPLE HAS NO PLACE IN IT. INDEED, IF THE PEOPLE WERE ITS PRIMARY CONCERN, THE WORLD WOULD BE MORE FREE, LESS VIOLENT AND MORE PROSPEROUS; PROVIDING INDISPUTABLE PROOF OF MAN'S EVOLUTION, BEYOND THAT OF TECHNICAL INNOVATION AND EMPTY SOPHISTICATION .
"OccupyWallStreet's Young People are the tip of the spear... demonstrating what is our birth right. We The People must take up our Patriotic Duty and demand the restoration of The Rule of Law, Our Constitutional Democracy, Free Market Capitalism and FIRST a Sovereign, Honest Monetary System. It is the only path to true and lasting change!... Wall Streets crimes and Washington's complicity make them legitimate targets. Many of these sociopaths have to go. They are however, the minions for a larger more evil construct. That is a monetary system that demands constant growth of debt and war. And that criminal enterprise is controlled by the central banks (THE FED) and those behind them." - Inflection Point
[Please see our critique of OccupyWallStreet's First Public Statement below.]
See: OccupyWallStreet: The Kids Are Alright! - but Don't get fooled again
All Americans should consider the following
"The bane of humanity is we learn nothing from the horrors of past atrocities and history repeats itself. Our/Your passive acceptance of one transgression always makes way for another. This and the belief that injustice, visited on our neighbor, will not one day come knocking at our door is the banality of evil..." - Inflection Point
See: RAPE OF THE REPUBLIC
Here's something you might find interesting.
Graphic: Financial World Dominated By A Few Deep Pockets
- Inflection Point
UHH, Im no constitutional prof, like O bummer, but OW has 1 thing wrong. ITS A CONSTITUTIONAL REPUBLIC NOT DEMOCRACY.
Democracy is mob rule regardless of individual rights.
Republic is individual rights
some times you eat the bear
sometimes the bear eats you
truth with teeth...
Yeah, lets all print $$ out of thin air and pretend its real. Meanwhile people flock to US Treasuries for safety at close to 0% yield because their scared $hitless of everything else. Treasuries are the new bubble. Timmy luvs it because it gives the Government cheap money, lets Ben run his printing presses and lets Obama spend with abandon.
gold is the bubble. in the end basically we the people just run out of money. and that's been "the plan" since day one. that's what is meant by "wringing the excesses out of the system." the irony that The Bernank can actually give money away (to the government of course) and still accomplish this should be lost on no one....and yet it seems to have been lost on pretty much everyone. (There's not a government in existence right now truly interested in the prosperity of their people...is there.) In a world where the American market is literally the only non-mercantilist economy on the face of the earth where will all these goods go? Emerging markets? hahahahaha. yeah, right. we're now moving away from Greenspans truly horrific "forced savings" model and towards what i see as The Bernank's "terms of trade" agenda. at its epicenter are the global debt markets.
Here's the bottom line: In a world of monopoly money, gold (and silver) is(are) the only thing(s) in which people have confidence. It will retain it's value (on a relative basis) in a deflationary period, and it's a proven hedge against inflation. Whatever minor bubble might have existed just popped when the price dropped $250 (give or take). Watch what happens to the price of gold when "The New Feudal Europe" melts down and waves of new monopoly money need to be printed.
There's a lot of talk about paper money vs. hard money, and that gold, silver, platinum etc will replace paper money.
"Sadly" we do not live back in 1930 anymore. Paper money, or any money that is unnatural (i.e. created, printed and forced by governments to the people) is and will always be a LIE. Yet, people adhered to it. Today, fiat money in the form of PAPER MONEY represents perhaps 2 or 3% of the total fiat that exists. The rest is eletronic. If you pay your bills electronically (writting checks, credit cards, debit cards, internet banking, etc) and by that a good part of us, do not DRAW (paper) MONEY IN OUR HANDS before paying our bills.
This is a serious problem for us. We are getting increasingly dependent on a system that is purely electronic. Everything is runing inside mainframes while nobody is auditing the existence of those digits. There is not even tangible-fiat money."
Money do not need even to be cast into paper, and that's big shit IMO. The problem is not only due to leveraged financial system syntetic produts, but there is not money even in what should be called real economy.
I think having some gold and silver is a must. But I wonder HOW things will work. How the economy would work? How gold and silver and platinum fits in an electronic system during hyperinflation? Would that mean that in such scenario we will not have eletronic payments anymore? Or would mean that we will STILL need to convert precious metals into fiat "e-money" and be DEPENDENT on banking and government electronic systems?
The thing about paper money is, well, you can burn it. Conjure up those old images of people burning bundles of money. Now, substitute a gold bar for bundles of paper money and see if this imagery works. I do the same kind of mind exercise with Ron Paul vs every other politician. Imagine Ron Paul using a teleprompter in a short talk to kindergarteners. Imagine Mrs. Paul vacationing in Spain or on an African Safari with a bunch of poor relations. Imagine Ron Paul renting luxurious homes in Hawaii. Imagine Ron Paul referring to us as consumers. Imagine Ron Paul telling us we just need more optimism. Imagine Ron Paul declaring his unconditional support of Eric Holder or Ben Bernanke or Tim Geithner or Nancy Pelosi or Harry Reid or Barney Frank or or or or....
Why are you laughing at the idea of EMs becoming consumers? You sound like a cnbc anchor laughing at peter schiff in 2006/2007 as he predicted a collapse in housing.
Have you never heard of TATA motors? Or chinas own auto market? South Americas trade deals w China? And you top this with the assertion that gold is a bubble . You're way off base on this even if EU crash deflated gold in the short term, it seems gold will be dispensed from ATMs in China
Just lets get this fucking strait right here right now. This makes me scream at the top of my goddamn lungs.
"CONFIDENCE" IS A FUCKING SUBJECTIVE MINDSET. IT HAS TO DO WITH THAT FUCKING POWER OF POSITIVE THINKING BULLSHIT.
It has nothing to do with fundamentals and objective reality, the way it has been used in the past two decades.
Real "CONFIDENCE", based on reality will only be restored when HFT, derivatives, and all the other Harvard business school whiz kid innovation bullshit is outlawed.
you can have all the confidence and positive thinking you want, but market will take you out if you are on the wrong side.
Nothing like Harvard MBA banksters fortunes get wiped out when truth surfaced at Lehman bros. Many banks are about to go down again...
I agree. I think an appropriate comparison is like deciding upon chemotherapy. I think the longer the pain is delayed, the greater the chance the patient dies.
Gold anyone? After the Central Banks stop trashing it to stop the Chinese selling all their green, and if more folks ever realise they are being screwed, Gold will look even better.
As long as my Banker sleeps well at night on his/her Billions in Bonuses we should all feel nice and cozy..right?
Geithner is not a believable con man, and he was rightly ridiculed in the European press. But if the EU prints, then they can't just say "Geithner told us to do it."
my hedge-spread in the (low 7 figures) is that precious metals will become much more expensive in terms of euros than in terms of dollars. the eu is inflating its way out of trouble like the U.S.. The significant difference and the opportunity to make money lies in the velocity of money.The bankrupt companies in the U.S. were recapitalized and made to understand that this bailout was conditional on not making loans. "borrow the money, buy U.S. paper and we will give away the spread." The only leakage is into the call market, and into bonuses to financial executives.
The Europeans are bailing out financial institutions and governments. The European "financial moneys" can be sterilized in a similar fashion as in the U.S.. The government bailouts will be immediately spent with a high velocity. Inflation between the two entities should increase at different velocities. There in my opinion lies a low risk high return investment. Any one else making the same bet. marc
Yes. But I had to get burned long TBT from 39 to 33 first. Luckily with no more leverage than implied in TBT itself. Short gold from 1900 to 1600, long again. Short a whole bunch of stuff from QPSA to NFLX. GMCR hasn't paid me yet, but it is early. Close to net flat since Tuesday; will go net short again today (US stockwise), by closing longs, more than by adding shorts.
But the juggling chainsaw artists that are europe already has more chains in the air than hands to catch them. PS China next.
"Apparently, it hasn't occurred to Geithner that governments and central banks need to stay out of the markets"
No, intervention and manipulation are their treasured "policy" weapons and they use them in every segment of the market in an attempt to assure their continued control.
Apparently, a lot of people are just coming to the realization that central banks and government ARE THE MARKET (and always were).
Yes it has, but you have to remember that his virtual bonus pool being accrued for when he moves fulltime to GS is his main concern?
Greece is better off than the US. At least they have oil to collateralize their debts with. The US can't drill domestically. Our debt is collateralized by the recreation of the Nixon Era corruption by both Neocons and Clinton admin appointees, overstated real estate value and the future earnings of our grandchildren should the US still be a country.
The currency isn't valued by gold, it's valued by people. As costs are determined by organic law and demand. The rawest form of democracy on the planet.
We don't have our freedoms anymore, we no longer have upward mobility. As a matter of fact, the only value left is CIT-and we only have that because their performance is collateralized by theri asian student body. We are worse off than Greece, and we have our nationalized banks to thank for that.
Really? We have been drilling for decades. We are on a path to surpass Saudi Arabia. Read below.
http://www.npr.org/2011/09/25/140784004/new-boom-reshapes-oil-world-rocks-north-dakota
Where have you been?
That appears to be story about North Dakota? Last I heard, North Dakota was not in Greece?
Greece has oil? I think you might find that it is salt water not oil. Maybe you were thinking of "Greese" ;-)
He means olive oil.
Grease. The movie and the lubricant.
Or perhaps the country of "Geese"? Somewhere in Northern Canada i believe.
Excellent piece. Isn't this what "Occupy Wall Street" should be addressing as it gets hijacked by leftwing loons?
"in the U.S. Inflation has whacked the purchasing power of the middle class". Let's see the data to support this assertion. The charts I'm looking at showed a minor blip in commodity prices this summer and that blip is fading.
...and look at the tips!
Thanks for challenging me to show the numbers. I love numbers. I'm a born numbers guy. So here they are:
August CPI: up 3.8% from a year ago and up 0.4% from July. For the last three months, it's running over 5% on an annualized basis. But wait: That's inflation in goods and services. Stuff we spend money on. Not wages!
Wages dropped 1.8% from a year ago and 0.6% for the month on an inflation-adjusted basis, continuing their inexorable 12-year trajectory, having peaked in 1999. Since then, they have dropped 8% or so, depending on who's doing the counting (the Census Bureau yesterday announced a drop of 7.1% from 1999 to 2010, not including the decline since).
For more data and sources:
http://www.testosteronepit.com/home/2011/9/15/snapshot-of-our-calamity-e...
And look at the Yield Curve rates! The market is predicting deflation...... Bitchez.
http://www.treasury.gov/resource-center/data-chart-center/interest-rates...
P.S. Attention Gold Bugs: I Do NOT interpret this argument as one for lower gold prices.
You're implying that the yield curve is somehow market-driven? Heard of Op. Twist? Blind Trusts in Caymans? etc? etc?
Dumb troll is dumb.
Check this Bitchez... where's all this inflation? As far as wages go, you are describing DEFLATION, not inflation!!!!!
http://www.bloomberg.com/apps/quote?ticker=USGGBE10:IND
how about the fact that the US no longer imports 2/3 of its oil but half and falling then? Indeed what the hell will we be importing once the yuan is revalued? As much manufacturing as we outsourced i would think.
And of course, anyone with an ounce of honesty and two brain cells to rub together knows that the REAL rate of inflation is ALWAYS significantly higher than the manipulated and under-reported CPI.
Coinage Act of 1792 - SEC. 19. And be it further enacted, That if any of the gold or silver coins which shall be struck or coined at the said mint shall be debased or made worse as to the proportion of fine gold or fine silver therein contained, or shall be of less weight or value than the same ought to be pursuant to the directions of this act, through the default or with the connivance of any of the officers or persons who shall be employed at the said mint, for the purpose of profit or gain, or otherwise with a fraudulent intent, and if any of the said officers or persons shall embezzle any of the metals which shall at any time be committed to their charge for the purpose of being coined, or any of the coins which shall be struck or coined at the said mint, every such officer or person who shall commit any or either of the said offences, shall be deemed guilty of felony, and shall suffer death.
This problem would self-correct if this were to be applied.
wait a minute...wait a minute...it does not "specify a time" in the term "shall suffer death." When exactly? And are we talking natural causes here or just "a whacking"? I think a "shall be killed immediately" would have been better...i agree. But it was the 1790's. We were more civilized back then...
We have a government stuffed with animals who routinly commit treason. The sad part is, a good number of them honestly think that what they are doing is in the public's best interest. We are ruled by fools.
we are the fools. no one in the business community even mentions the word "corruption" in relation to tax policy. And not a single of these quivering quails called journalists have it in them to even ask the President "with the Solyndra scandal how can you possibly ask the American people for more money?" We should ask AFTER the investigation is completed, yes? And shouldn't the President be demanding answers...and resignations?