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Guest Post: Bailouts + Downgrades = Austerity And Pain
Submitted by Nomi Prins
Bailouts + Downgrades = Austerity And Pain
The markets (read: traders with big books at mega financial firms and hedge funds) weren’t particularly shocked by last week’s wave of heavily pre-broadcast S&P sovereign debt downgrades. For months, the question wasn’t ‘if’, but ‘when.’ True to form, just as with the US downgrade, S&P’s reasons skated the surface of prevailing wisdom – governments have too much debt, and not enough income. That’s only a fraction of the story.
Nowadays, when any sovereign (including the US) gets downgraded by a rating agency, it's not just because its debt repayment ability is questionable (the publicized logic of rating agencies), but because it incurred more expensive debt to float its banking system. It chose to subsidize banks over people.
The S&P likes moving on Friday nights. It was on a Friday night that it downgraded US debt to AA+ from AAA. On Friday night, January 13, 2012, it downgraded France and Austria from AAA to AA+, and 7 other European countries, too; Cyprus, Italy, Portugal, and Spain by two notches; Malta, Slovakia, and Slovenia, by one notch. Portugal, Cyprus, Ireland and Greece are at junk status. Germany’s AAA rating is intact.
Nowhere in S&P’s statement about “global economic and financial crisis”, did it clarify that sovereigns were hit due to backing their largest national banks (and international, US ones) which engaged in half a decade of leveraged speculation. But here’s how it worked:
1) Big banks funneled speculative capital, and their own, into local areas, using real estate and other collateral as fodder for securitized deals with derivative touches. 2) They lost money on these bets, and on the borrowing incurred to leverage them. 3) The losses ate their capital. 4) The capital markets soured against them in mutual bank distrust so they couldn’t raise more money to cover their bets as before. 5) So, their borrowing costs rose which made it more difficult for them to back their bets or purchase their own government’s debt. 6) This decreased demand for government debt, which drove up the cost of that debt, which transformed into additional country expenses. 7) Countries had to turn to bailouts to keep banks happy and plush with enough capital. 8) In return for bailouts and cheap lending, governments sacrificed citizens. 9) As citizens lost jobs and countries lost assets to subsidize the international speculation wave, their economies weakened further. 10) S&P (and every political leader) downplayed this chain of events.
The United States
On Aug. 5, 2011, S&P downgraded US government debt to 'AA+'. This was four days after Congress voted to raise the US debt cap - to prevent a downgrade - proceeded by political squabbling and the US Treasury and Fed begging Congress to raise the debt cap. S&P, beacon of stamp-any-toxic-asset-AAA, accountability, claimed, “American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges.” In other words, too much debt, too little income.
According to the US Treasury, the main reason for the debt increase was a stalling economy – lack of enough incoming tax receipts to pay US expenses, (which include interest payments on growing debt.) That’s not true. Tax receipts dropped $400 billion to $2.1 trillion in 2009 vs. 2008. Expenditures jumped to $3.5 trillion in 2009 from $3 trillion in 2008. Treasury debt ballooned by nearly $4 trillion from 2008 through 2010.
Where’s the money? About $1.6 trillion lies on the Fed’s books as excess reserves which banks - dealers for sovereign debt - put there. Nearly a trillion dollars went to backing Fannie Mae, Freddie Mac - which enabled banks to artificially overvalue related securities, and extra interest payments. There was $700 billion in TARP, which though mostly repaid, never manifested into debt reduction, and hundreds of billions of dollars of asset guarantees underlying big bank mergers. So, 75% of the extra debt went to saving banks. S&P didn’t mention this. The policy repeated across the Atlantic.
Ireland
The Irish government’s pain started when it guaranteed the bonds of Anglo-Irish bank in September 2008. By May, 2010, Central Bank head, Patrick Honohan, assured the world that he’d have ‘two big banks, fixed by the end of the year.’ Upon that endorsement, the government backed bondholders on the banks’ behalf. The economy deteriorated.
Six months later, nobody would lend to Irish banks. Irish austerity promises didn’t change the fact that Irish banks weren’t big enough to contain their waste. By November, 2010, banks paid for $60 billion Euro of maturing bonds with emergency ECB loans, and the ECB became the backbone for the Irish bank guarantee scheme, whose participants included Ireland’s big financial firms: Irish Life & Permanent p.l.c., Bank of Ireland, Allied Irish Bank p.l.c., Anglo Irish Bank Corporation Limited, and Irish Nationwide Building Society. Irish Government Debt doubled from 65.3 billion Euro to 118 billion Euro since 2009.
The ECB deemed the bailout a success. Yet, by the summer of 2011, Ireland was downgraded to a notch above junk and households (and foreigners) accelerated extracting money from Irish banks, weakening the banks’ funding base further. The Irish government now owes 110 billion Euros to the banks, the National Asset Management Agency (NAMA, aka “bad bank”) the EU, ECB and IMF, with no way to repay it.
Spain
According to a recent Business Week article, Spanish banks hold 30 billion Euros ($41 billion) of “unsellable” real estate loans. Just like in the US where smaller banks got hit hardest, small and mid-sized Spanish banks did too. In addition, about 308 billion Euros worth of Spanish loans are ‘troubled.’ Home prices in Spain are off 28% from their April, 2007 peak, with land values in the outskirts of urban areas, down by as much as 75%.
In economic desperation, the public elected conservative party leader, Mariano Rajoy, as Prime Minister in the end of 2011 who promised to lead Spain to economic recovery, by invoking austerity measures in return for backing to help the biggest Spanish banks.
Meanwhile, the top six Spanish banks sit on $33 billion of foreclosed assets having set aside 105 billion Euros in write-downs against bad loans since 2008, with another 60 billion Euros to come. The backdrop is a 23% unemployment rate, triple its 7.9% May, 2009 level. Property transactions continue to decline. Foreclosures keep ramping up. The gap between what banks want to sell foreclosed or troubled property at, and what investors are wiling to pay continues to widen, forcing more small and mid-size banks to buckle under larger than anticipated losses, which in turn squeezes liquidity out of local usage.
Greece
According to an SEC report from the National Bank of Greece (NBR) for the year ending 2010 – loans to businesses and households were expected to “remain under considerable pressure…[due to] “downward pressure on household disposable incomes and firms’ profitability from the austerity measures… are likely to impair further demand for loans.” They weren’t kidding. In order for the NCB (or any bank) to reduce its dependency on ECB funding, it has to reduce loans to its own economy.
The ECB agreed to accept worse collateral (with junk ratings), including bank issued bonds with Greek government guarantees (under a May, 2010 rule change for all member countries). The ECB bought Greek (and other) government bonds in the secondary markets, to support their value and thus, their value as loan collateral. As with the Fed’s QE measures, Euro-style – this only perpetuates a fantasy of demand.
After four rounds of austerity measures, nationwide protests, 110 billion Euros in IMF and ECB bailouts to keep bondholders (and banks) happy, escalating interest rates driving borrowing costs higher, a downgrade to junk, and a Prime Minister swap; Greece remains in tatters with more pain to come.
Italy and Portugal
Last summer, S&P warned it would downgrade Portugal if it didn’t play ball with the IMF and EU over a 78 billion Euro bailout. So Portugal towed the austerity line. Its economy deteriorated. S&P downgraded it to junk status.
The IMF and EU declared that Italy too, needed ‘structural reform’, meaning public austerity and privatization. National assets went up for fire-sale, as they did in Spain and Portugal, to the highest international bidder. Now, the high borrowing costs the government faces as a result of bolstering the banking system, paying bondholders and selling infrastructure, has resulted in more downgrades and dim prospects.
According to the Italian Central Bank, 500 Italian cities are facing losses on derivatives contracts. JPM Chase and Banco IMI are accepting Italian government bonds as collateral, rather than less risky US Treasuries or cash, certain that the ECB will step in to buy, and thus prop up, Italian bonds if needed, as they did in August, 2011.
As Greece showed, using high-cost sovereign debt as collateral leads to more bailouts to ensure big lenders get their money back. JPM Chase, having weathered the US subprime crisis with support from the US Fed, isn’t about to lose on that bet. Meanwhile, several Italian towns, the City of Milan and the Tuscan region, are suing the big American, German, Swiss and French banks over derivative losses and misleading asset purchases, who will likely get bailout money anyway.
Bailout Economics Doesn’t Work
ECB bailout money didn’t (and won’t) go towards helping any European country’s local economy, any more than it went to aiding the mainstream US economy. The ECB and IMF, at the Fed, US Treasury and US administration’s urging, camouflaged the insolvency of European banks, perpetuating losses with bailouts, and forcing cowardly governments to support them, while turning a blind eye to boosting core economies.
Meanwhile, banks with access to the ECB’s ‘window’ are taking the money and immediately putting it back into the ECB as reserves. Overnight deposits at the ECB continue to break records, currently hovering around 500 billion Euro ($640 billion). As in the US, European banks aren’t using that liquidity to help fix local economies, but hoarding it to preserve themselves. The amount on reserve is 98% of the total made available in emergency 3-year loans in late December at 1% interest; banks get 0.25%, which means they are paying 0.75% interest for the loans, far less than the market would charge them.
The die has been cast. Central entities like the Fed, ECB, and IMF perpetuate strategies that further undermine economies, through emergency loan facilities and bailouts, with rating agency downgrades spurring them on. Governments attempt to raise money at harsher terms PLUS repay the bailouts that caused those terms to be higher. Banks hoard cheap money which doesn’t help populations, exacerbating the damaging economic effects. Unfortunately, this won't end any time soon.
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"Governments have too much debt, and not enough income. That’s only a fraction of the story."
This thinking is economically backwards. The sentence should read "Governments are spending too much and running huge deficits."
In the USA for the past 65 years we have collected about 18% of the GDP in taxes. 90% top tax rate, 70% top tax rate, 28% top tax rate, it does not matter, we collect about 18% of the GDP in taxes, it goes up in good times, and goes down (today its 14.4%) in bad times. We economist know this, but this seems to be a mystery to the public.
So the proper way to express a government debt is the bastard politicians are fucking SPENDING TOO MUCH MONEY.
Will these dick head economic illiterates ever get it right?
http://www.whitehouse.gov/omb/budget/Historicals
Table 1-3
Top tax rates.
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?DocID=543&Topic2id=30&Topic3id=38
For the geeks the R2 is about fucking 0.08 correlation between top tax rate and taxes collected.
I agree, shut down THE ENTIRE GOVERNMENT (all branches and ALL departements) and let's find out out precisely what the value of everyone's labor really is. Fucking bring it. With no military, no police, and a well armed populace I promise you society will be considerably more honest and polite.
Wake the fuck up dude, eCONomics is not attached to any REALITY, the entire economic system depends on exponential growth WHICH IS NOW IMPOSSIBLE. This is a FACT and the underlying reason why governments around the world have been taking on massive debt or printing/monetizing. China has been doing it 100-fold, and people look to this SOCIALIST state as a GOOD example of what the future holds, what the fuck?
Fuck you all, bring on the collapse fucknuts, I know what the value of my labor and that of my employess, fucking bring it. FYI- sold another 4 tons of pecans to a Chinese company, made them pay up front again and my company will be exchanging some of this paper for physical and more land for planting soybeans. Hope those soybean prices hold. People are really fucking stupid, they what government services and protection, but they don't want to pay for it. Fuck 'em.
Canada is quiietly cutting back expenses of Government by a full real 10% over the next five years. They have a majority Government and the will to make it happen. Everything is being cut back by at least 10 points......Long the Loonie!
Federal, state, and local governments consume 45% of the GDP, in the 50s it was 26%. That is why we are drowning into the abyss. Government produces NOTHING. Government takes from others and redistributes the wealth. We would be better off without government in everything but the military, courts, cops, and jails.
"We would be better off without government in everything but the military, courts, cops, and jails."
Look around fucknut, a lot of the technology you see today is the direct result of government work and investment. Sorry idiot, you can't have your cake and eat it too, better learn to defend yourself fucknut.
Another typical hypocrite sheep. Stay healthy so you make good soylent green.
Dude, take a deep breath. You're mighty quick with the "fucknut" label. I understand we're all stressed (or at least, those of us paying attention), but not everyone who sees things slightly different than you is a "fucknut". Other than that, I agree.
People need to wake up with their "I want government to do this and that, but not this and that, and I only want to pay so much for it".
The "fucknut" label is more to wake these fucking hypocrites up. There are some serious costs associated with the current military and police intervention AROUND THE FUCKING WORLD. In addition, people have no idea how much THE GOVERNMENT subsidizes the FOOD THEY EAT. End these subsides and you will have a 100-400% increase in food costs (remember there is already 45 million on the SNAP program, so the COSTS for this program go up as well).
I have a big part of my family that farm corn and soybeans for a living (have for generations) and they say the subsidies are for big operations and they are a joke for real farming. They say they get no subsidies and feel it is another .gov winner picking outfit that rewards connected big farm operations. They say they see no need for the subsidies and wish they were not a part of the federal budget. What am I missing here, thx.
"What am I missing here,"
That depends on who the "they" is that you are refering too. Depending on your operation, you must know that even in good years this is an expensive and hard way to make a living, especially depending on what mother Nature does and the input costs of diesel fuel, fertilizers, taxes, pesticides, maintenance, and labor.
My family says the "subsidies" don't come their way, they farm for real and sell at market prices like any small business would. You claim all of our food is subsidized 100-400%. What am I missing here? I.E. is the subsidization you speak of simply a way to reward campaign donors for the mega operations or what? My family says the subsidies are bullshit and those that suckle from the .gov teat would be out of business should they have to be competitive like real farmers not privy to .gov funding. I fully realize it is a hard business, they work their asses off and are deep in hock to the bank for farm equipment, etc. Please explain your statement that these subsidies are somehow essential to americans food prices, cause they tell me it is bullshit winner picking by .gov and they do fine without it.
Who do they buy their fertillizer from? Who do they buy their diesel fuel from? Who do they buy their seed stocks from? The international conglomerates (monopolies) that provide these items (Texaco, Dupont, Monsanto, Cargill, etc.) are ALL on the government tit via numerous tax-breaks and SBIR/STTR funding pools for the supposed R&D they do in MANY areas.
For example, unless your family is maintaining their own heirloom seed stocks (and this is a shitload of seeds and a tremendous effort in and of itself), then the seeds they are buying are government subsidized. This help?
Have them pay down as much of the debt as they can, those banks will come a calling when the SHTF.
Thanks for the enlightenment, tempered with your statement below:
There are many examples of "governments that fund ONLY military, courts, cops, and jails." They are called facist states typically ruled by dictators. Maybe that is what you want for America, but not me.
So then you acknowledge we are in fact fascist (subsidies), it is all a matter of which team (red or blue) that you want your fascism to support, correct?
Cognitive dissonace anyone?
You got it. When all the tax breaks, government research support, and other back door handouts to these huge agricultural monopolies ends, all of the cost will be passed on to the end users like your family.
Again, have them pay down debt now or switch the debt to local banks with no connections to wall street. Have them do this ASAP, this is what I did. A local bank is much less likely to come a calling when you are the ones feeding locals who would otherwise starve and hang those same bankers.
That is already the case, they are called "XXX Co. Equity" and they run the local grain elevators generally speaking. Thanks for the quick education, I am completely out of their loop but know it is all local finance wise in their part of the world. I mostly trade equities and to a lesser extent bonds. I know they have a disdain for "subsidies" because they feel it is another form of wealth distribution that they are not a part of benfitting from. I have a topic of conversation next time we talk about whether or not trickle down effects are to their benefit. Believe it or not, they say prices going sky high typically suck because they get pressured on the margins. Thanks LP!
Margins always matter to people who produce goods and services of real value. The world is about to experience a great reassessment of it's value system. My anger comes from doing the right thing, all the while watching irresponsible behavior be rewarded and my margins compress. I call bullshit on the whole thing. Fucking bring it all down, fine with me.
Your folks should read this book "More Food from Soil Science"
http://www.growersmineral.com/about/tiedjens
It's simply awesome.
Read it, lots of good ideas with absolutely no metrics for how many people you could really feed. In addition, Dr. Tiedjens work points out another crisis that is rarely addressed, the mineral shortage. Yeah, unfortunately plants need more than water, light, and dirt. It is a bit more complicated.
LoP,
That's right. For example, your food, particularly your meat, would become MUCH more expensive. So, as some of you contemplate the libertarian dream, perhaps you should also contemplate a near vegetarian diet.
Well, I butcher my own meat from the pigs and goats we have, so I am not sure exactly who your comment is directed towards. But you got it right.
Another believer of "the internet wouldn't exist without the government" urban myth... Yawn.
There are many examples of "governments that fund ONLY military, courts, cops, and jails." They are called facist states typically ruled by dictators. Maybe that is what you want for America, but not me.
Hummm ... sorry to be stinky here, but rather a lot of fascist states, or states ruled by dictators, fund a heck of a lot more than just military, courts, cops and jails ... in fact, you could say they are rather known for funding a whole heap more than that.
Take Libya under Ghaddafi for example (I think you could say he was a dictator), the state funded or subbed almost everything. There was free health care, free education (at home and abroad up to postgrad studies), interest-free housing loans, free land for farmers, subsidised electricity, and subsidised bread -- to the extent Libyans threw it away or feed it to cattle. They subsidised the cost of buying cars and tractors, and gave newlyweds an allowance for housing. They also profit-shared the oil revenues amongst the people.
Then in the more "traditional" fascist states, the state tends to fund trade unions, youth groups, "charities", big business, building projects, newspapers, the film industry, leisure resorts et al ... fascism is, traditionally, a merger of state and corporate power whlst co-opting labour blocs into the "system". It tends towards a total "capture" of social, economic and cultural life.
I mean, look at North Korea. It is a dictatorship, but the state even funds embroidery studios.
. . . yes: but then again canada is of course a totally separate enitity from u.s.
whose immunity's an autonomous bloodbank circulating now so far away from its uk Bank Of England
I love your attitude.
And I yours, now get back on the wheel and run.
A bit early for booze in the coffee, no?
(I agree with what you said).
Pecans did not do very well in some of our trees. I think about half is rotted this winter.
How did you do in regards to net crop?
I was fortunate to form a relationship with an asian several years ago who is well connected and helps me get over the hurdles associated with importing into a corrupt SOCIALIST society (amazing how many people forget what China really is about).
Regarding the pecan groves, we did okay and sold almost everything, BUT we did lose almost 30% of the older trees in one location in southern Georgia. Lack of rainfall (we don't irrigate pecan groves) resulted in these tree literally shutting down and becoming susceptable to many things due to the brittle timber (termites or a good strong gust of wind for example).
The average sheep is simply unaware of the upcoming stress mother Nature is going to put on food production. Specifically fresh water and liquid fuels (which the government has been subsidizing for quite some time) will be a big problem for many moving forward. There are look of good ideas out there regarding farming that does not involve pesticides or commerical fertilizers but NO solid data on how many people these approaches can really feed. Guess we will find out the hard way eventually.
Seriously considering planting some peanuts strictly for the oil to run in diesel engines. I am getting more requests from local customers lately. Ultimately I think local economies is where we are all headed as central planning and the one world industrial military complex (U.S. Military U.N. and NATO) runs out of other people's money and labor.
Wow, everything you're doing has great foresight - quite jealous. Thought about olives or sunflowers for oil to run diesel motorcycles... Anyway, a tiny bit hypocritical to send pecans to China through a 'fortunate' relationship? Shipping nuts around the globe - while talking about food production stress? Fuck that, sell them local. Nothing against making some coin before the SHTF - but we all should try to become less of the problem in the meantime.
It comes down to your final statement - "Guess we will find out the hard way eventually."
"Wow, everything you're doing has great foresight"
I wish, my margins are shit.
"People are really fucking stupid, they what government services and protection, but they don't want to pay for it."
Spot on. When most people were children, they were constantly told by parents that they couldn't afford this or that. Or, the kid would have to wait and save up for something they wanted. In other words, as children, most were taught to live within present means, to delay gratification and to work for it first.
Then, we become adults and suddenly think we can have this infinite piggy bank called the government...and get something for nothing. And politicians, who presumably have household budgets, could care less about sticking to a budget at the country level. Maybe as individuals they do (or some do), but collectively they are an abysmal failure. The people's failure.
It's a very sad situation, indeed. And Tyler's right, people get the government they deserve. Until the people wake up and realize that they are cutting their own throats by demanding something for nothing, this whole project is doomed, as those that do produce will eventually pull an 'Atlas Shrugged' and get the hell out.
LOP
"Hope those soybean prices hold."
Dude, my opinion and strong gut feeling is we are heading for a major food crisis among all the rest of the chaos.
My advice, take it or leave it, "Store up on storable foods". The prices are going to soar. Just an incident with Iran is going to shot oil prices through the roof.
The domino effect of this incident alone, is staggering.
And the handlers need a good war now....
Not fear mongering, just a word of advice; extreme strong gut advice.
Sorry but this article is bullshit. The financial services industry forms a large part of our economy and our top tier investment banks make markets in securities around the world. A bankruptcy of one of these institutions would be a complete disaster and would cause havoc throughout the global economy. Sorry, but the truth is that these institutions are simply TOO BIG TO FAIL.
That was awesome! You got talent.
I agree and have always suspected this guys writes for John Stewart. pretty good stuff.
LOL "financial services". What is the real value of the sector again, I mean aside from bankrupting the country and continuing the SOCIALIZE PRIVATE LOSSES on the backs of the productive taxpayers while those who took the risk kept the "profits". Fuck the paper-pushing fucknuts, bring on the collapse.
Million Dollar Bonus,
That is some of the best sarchasm I've read in a while. Good one!
I submit JPM, Goldman, Morgan Stanley, Citi, and any other failed banks should have been let go and declared bankrupt. The deposits should have been insured and then moved to other profitable banks. If we would have taken this course of action we would be far better off and the whole systemic crisis would be over by now. Sovereigns now are at risk, AAA ratings have been lost, and everyone is now gaming the capitalist system for who can make the best out of a corrupt outcome.
Either the King of SARC, or the King of Stupid.
I cannot decide...........
MDB,
Thanks so much for being "sorry." /sarc
Thank the Princeton Keynesians for this (athough they have moved to Columbia and other schools): Krugman, Stiglitz, DeLong (out at Berkeley) and many other MIT/Harvard/Yale/Princeton economists and students.
The belief is that 1) government spending should always increase in times of economic slowdown and 2) you can keep borrowing and printing.
Their evidence? The Great Depression. And some isolated events from smaller economies.
It is really a faith based system.
The evidence from Rothbard’s classic “Americas Great Depression” shows the opposite. Government spending increased at all levels from 1929 to 1933, federal, state, and local, and the economy still collapsed.
The Federal Reserve increased FOMC buys from banks, increasing the monetary base, and the economy collapsed.
If you look at the evidence it is clear government made the economy much worse, 24.9% unemployment in 1933, that it would have been with no government involvement.
The whole Keynesian school of thought is just a justification for governments to spend and the Federal Reserve to steal from people.
There is no justification for government spending in bad economic times, but there is a lot of justification that governments should spend LESS in bad economic times.
When you get laid off from a job do you spend more or less? Why is the government immune from the economics that govern us all?
The Federal reserve is NOT the Federal government fucknut, it is a PRIVATE banking cartel.
FUCKNUT, FUCKNUT, FUCKNUT, FUCKNUT, FUCKNUT,
FUCKNUT, FUCKNUT, FUCKNUT, FUCKNUT, FUCKNUT,
FUCKNUT, FUCKNUT, FUCKNUT, FUCKNUT, FUCKNUT,
FUCKNUT, FUCKNUT, FUCKNUT, FUCKNUT, FUCKNUT,
And now back to our regularly scheduled show.
Friedman on the Great Depression Myth:
http://www.youtube.com/watch?v=dgyQsIGLt_w
Is Rothbard's book, Great American Depression in pdf for free on the web? I'd like to read it.
His excellent read, History of Money is free at:
http://mises.org/books/historyofmoney.pdf
Well worth the time to read. You can also listen to the entire book on You Tube.
You know, it always makes me think this.
I am sure, back in the day, I remember reading that Keynes thought the upper limit of government spend during a moment of crisis should be about 23 percent of GDP and no more.
I wish I had kept a reference of where I read that. I keep meaning to go back through my books on Keynes and try and find it.
Thanks for contributing SE, academics who actually get it lend credibility to the joint. We need more visible players willing to stand up and say enough. Having one prestigious enough to testify the truth to our congressional critters is a good thing. Thanks for continuing to show up.
BTW, you only get shit from commenters because you link to your blog on damn near every post. We know where it is, and I for one think it is a great reference for RE.
"Unfortunately, this won't end any time soon."
BINGO we have a winner.
nomi prince... well said. Or princess.
You got to question an organization that rates shit mortgage paper (designed by GS et. al. to fail) AAA but now the United States government ranks below that level. Hmmm, this seems like an awfully convenient tool for the elite. The crap mortgage paper was great till it wasn't. Now that .gov has moved all the bad debt created by these entities to their balance sheet they are dropped below AAA. Oh, and the convenient fact that S&P is McGraw Hill also, so these same people write our textbooks that our children learn from. It is amazing how all the pieces fall into place and all the levers of power lead right back to the same group. Curious no doubt.
US citizens at the root of it all.
Hey fucknut, there have not been any U.S. citizens since the Federal Reserve Act of 1913. Wake the fuck up, at that point ALL citizens became "tenants" of the corporation of the United States of America whose board of directors became the PRIVATE banking CARTEL known as the Federal Reserve. This includes landowners who were initially given a special status as "stewards" but the Federal government was also given the power of eminent domain, so it really didn't matter. The private banking cartel, via their (bought and paid for) government puppets can still take whatever the fuck they wanted to. Troll harder next time.
AnAn_octopus
. . . all 8ways ffrom honest
and ffor whom the only haiku
is just ffinally f u
This may be the most important thing written today on this site. And it's not just our children's textbooks, but all the way up through the highest levels of learning. It's up to the individual to decide if things are done by design or not, but there is no more important piece of of learning or dialogue that could ever happen, with respect to business and economics, than the fundamental meaning or definition of money. There may not have been a more hotly debated topic for much of our history... there were election campaigns, even political parties, that were consumed by the definition of money and the government's role in the creation or management of it. Today... Nothing (outside of one candidate who is purposefully marginallized at ever turn). We are a nation of serfs living under an illusion of freedom. How does this happen? See the above quote... quite systematically.
for some reason it's not letteing me give you an up-arrow. so, here's a virtual one. +1
Tends to happen when starting a comment with italics...
Reading the first two sentences, and I guessed Nomi. This is getting just too damn easy:)
Yep, that first one, submitted by Nomi Prins, was a dead giveaway.
Where is the money?!
The new "Where's the Beef?" (A cookie for you if you know where this came from)
Quite simply, the United States made a few dollars in Tax Revenue and overcharged a credit card for trillions beyond our means.
(DUH!)
I wonder what it would take to choker chain this Nation, close the credit card and simply write out the budget according to availible money, right this month.
Pain baby Pain.
'Unfortunately, this won't end any time soon.'
True, but with so many sovereigns near the ledge, the chances of a Leeroy seem higher than ever.
I get the feel the rating agencies will now be under pressure as the US debt ceiling (part deux) is in play...
I think you will see a US upgrade from S&P before you see a downgrade from Moody's or Fitch. It won't happen.
Debt is the key word here.....where is it written that says a government has to have debt ......spend what you make...and only what you make....period....Governments are a cash flow entity....use the cash flow only....but a politician can´t stand living within their means....it does not buy as much votes...
Debt is the key word, but I don't think it's for the reasons you mention. In our monetary system, money is debt, period. Virtually all money in existence is loaned into existence... The debt plus the interest that begins to accumulate upon the creation of the money can't be paid without the creation of more money (i.e. the issuance of more debt). So the system that has been created for us REQUIRES that the aggregate debt level continues to grow, or the monetary system will itself, collapse. Government debt is simply a single component of this debt pyramid scheme. The other players in our debt serfdom system are us consumers (which is all we really are... and when we are good consumers, we are leveraged consumers).... and corporations (who when they are good corporations, understand the value of borrowing cheap money to grow their business, as they grow their debt, as long as they can stay solvent). The game is always the same... how to foist as much debt as possible into the system that will allow the serf to maintain some minimum monthly payment.
In this system you get wonderful concepts like "austerity" championed by people who think they are being rational. Austerity is just the bankers way to milk the system a little bit longer until the whole thing collapses.
This is math... there is no solution... there is only timing.
Is MMT good or bad? Right or wrong? I tried to read and comprehend it, but it is too much for me to swallow from just reading the document itself.
http://pragcap.com/resources/understanding-modern-monetary-system - Is this what you are talking about? I had to google MMT and go down quite a ways before finding the link. I've not read this before now... and only skimmed it, but it looks to be spot on (at least on my spot). Looks like good reading for the weekend.
Also check out Debt, the first 5,000 years. You can find a PDF version of it online... I bought the book. A great read (so far, not quite finished).
gosh - it seems like the collapse is purposeful - maybe to keep a ceiling on oil ?
Banker’s running nations threw debt processing plant producing worldwide economic destruction.
I'd like some debt with a side of debt, along with my Frosty. Thanks.
Bailouts + Downgrades = printing and momo ramping.
Silver.
For spain the trouble of the real estate is even a lot worse.
A lot of it sits on the books of other european banks because most of the Spanish houses are vacation residential houses which are also foreclosing on a high rate.
Soon as we finish Greece, we can move onto Ireland. They have no way out.
Seriously. After a 95% run in the SPY during the worst economy in 75 years.
And ultra-low interest rates and a strong dollar during the biggest deficits ever recorded in history.
Do you think there is anything bad that TBTB can't fix?
The Plutocrats at the Fed and ECB are euphoric, they pulled off the impossible and basically set new benchmarks that will be discussed for the next 100 years in Economic classrooms.
Ask the record amount of people on food stamps what was fixed. They did not fix anything you retard. They papered over the stock market by hitting "print" was that such a genius idea?
I don't doubt they're partying like the Parisian elites of 1796.
1797 was a pretty shitty year for them, though. Just saying.
"After a 95% run in the SPY during the worst economy in 75 years.
And ultra-low interest rates and a strong dollar during the biggest deficits ever recorded in history." - Robo-
With that logic, if I shove the larger, nicer looking and more expensive carbon fiber probe up your ass with great force and frequency, it will surely cure your prostate cancer since the smaller, cheaper plastic probe you previously had shoved gently up your ass wasn't working.
according to martin armstrong, there is no plan. the central planners are just improvising at this point - with increasing desperation.
http://www.martinarmstrong.org/files/US%20Dollar%20Evolution/index.htm
I'm shocked!!!!!!
. . . there is no plan . . .
?
OCCIDENT
v
ORIENT
being played out: WEST v EAST__ uk/us/is nato/euro----> mena. IranIraq. afpak<----russia __CHINDIA
DIALECTIC
think again: as again, long since pre-empted. . .having already indeed been played-out <====> ffalse dialectic, yet again, given the one and only SOLIPSISM of. . .ROTHSCHILD, the more-than-200-year-old family-controlled banking dynasty, is making a big move in China, and Yu is leading the charge. It plans to add 15 merger advisers there by March, giving it 55 in all, more than any foreign investment bank, says Olivier Pecoux, co-chief executive officer of Rothschild. Today, the merger business in China is still relatively small. So far this year [aug 2010], China has accounted for about 9 percent of the $1.1 trillion in deals around the globe, according to data compiled by Bloomberg. The potential, though, is enormous. China has $2.5 trillion in untapped foreign currency reserves and is mandating that state-owned companies expand abroad to secure natural resources such as oil and metals.
"The economic balance of power has already changed, and it is moving to the East," says Yu, whose title is head of greater China. "There will be an increasing number of Western companies selling assets to China."
The bankers made a decision to move the balance of power to the East, led by China. In exchange, China has made some concessions to the bankers pet country?
http://twelfthbough.blogspot.com/2012/01/parasites-on-move.html
Oceania has always been at war with Eastasia.
This should surprise no one who produces a real product of real value and who is still in business.
If you guys get a chance, read Dylan Ratigan's "Greedy Bastards". It really does point out how all this came to be in a layman's point of view.
I mean, when you have the Dallas Head of the Federal Reserve JOKING IN SECRET MEETINGS with bankers that American companies aren't INVESTING ENOUGH in China and that American workers, especially those in unions, need to their rights stripped because the only way we'll create more growth is 52 hour work weeks with lower pay with minimal benefits......while we are growing DEEPER in debt......I mean, it's just unbelieveable.
This war's going to end someday...
and look like one of my favorite paiting,'Europe after the Rain' by Max ernst.No,I'm not an art history major.
Pay attention! Who found the money? Step two is a wealth transfer.
TD:
I am relatively certain that ZH has backup plans for when the site is potentially blocked, but I think the process for myself and others is unclear. Can we get a document, say a .pdf file to download that has instructions including your alternate IP addresses and some basic instructions for what to do if we find the site dark one morning? Maybe add a download tab on the home page and let everyone get a copy on their local machine? Things seem to be moving along at a faster clip now and thinking ahead to these potential challenges seems like a no brainer.
Thanks!
Stax
Austerity? (snort!)
Pain? Oh yeah.
Alea iacta est!
Is this why KY Lube is sold out at stores in my neighborhood?
Q: Does Romney pay taxes on the $150 Million he has stashed away in the Cayman's?
Yes, when it is income we pay income tax. When it is capital gains we pay capital gains tax. The chief asset we pay annual tax on is property tax, but that is not federal.
Just like Ron Paul paid income tax on the income he used to buy gold. If he stores that gold offshore, should he pay tax on? No, not until he sells it, and even then only some of the time.
Ron Paul can beat Romney in a straight up fight over legitimate issues. Ignore these distractions.
HH,
i enjoy your posts.I love RP.always give what ever little $ i can.I dont know what you're smoking if you think this is gonna be a staright up fight.Go ahead,junk me.
"Home prices in Spain are off 28% from their April, 2007 peak" "The backdrop is a 23% unemployment rate, triple its 7.9% May, 2009 level"
Homes are unsellable at any price. At least 50% down.
Spain's unemployment was upwards of 14% by 2008. The quote might be accurate if May 2007.
sounds like the us if the governemnt did falsify the numbers
Let's see if I've got this straight -----
The stupid, greedy TBTF's used other people's money to make stupid investments, mortgages, CDO's, other off balance sheet bets, etc that went bad. They in fact became insolvent. So the brilliant Bernanke started printing electronic trillions to buy the TBTF's loosing bets & lend them more trillions at 0% to cover their stupid losses. Now the TBTF's have lent the electronic trillions back to the Fed to collect interest & increase their assets. And the fed is buying the debt issued by the treasury to cover 40% of us guvmunt expenditures.
Tell me again how this helps the real economy & not just the TBTF's.
this synopsis has been a fine precis of the economic wasteland which was bequeathed to us by the financial terrorists of wall street doing the lord's work - ie. that of the rockefeller-mic-yale-cia axis of evil....
Bailouts + Downgrades = Austerity And Pain
this article is a flowering masterpiece!
i've been reading it for over an hour and as a breakfast it has blossoming complexities of flavor and nourishing Real thought
slewie wonders if nomi may have written this m/l specifically for the #0WS rank&file?
the corporate TBTF banks v. The People
we have:
there is more here, too! these dynamics are international and hopefully will become the basis of the global struggle against fiat fascism
lQQks like nomi got jumped at the top of the string over "economics" but i can understand...
L0L!!! slewie knows a flowering masterpiece when he sees one, too!
Bailouts ='s Money for the Banks (and money for Wall Street)
Downgrades ='s Money for the Banks (and money for Wall Street thru the SIV's / Trusts and / or other Equity positions taken, the web of debt)
Austerity ='s "We the People" back stopping / paying for the Bailouts for the Banks and Wall Street.. as well as the all to often over looked! CONTNUED Sub Par Federal Tax Collected from the Banks and Wall Street.. NOT! only the Corporations (that are people) but as well the People who Control the Corporations (C Level Executives) on down who benefit from Off - Shore Bonus Monies / On - Shore Monies that are Taxed at a 5% - 15% Rate, or less. The Taxes NOT! collected from the Banks and Wall Street + the Bailouts + the Tax Credits that are monetized (think General Electric made $8 Billion, didnt pay any Taxes and still got $3 Billion in Cash Back from the IRS.. those Tax Credits that are monetized) ='s the Working Class Paying the Lions share of the taxes even though the Working Class only earns 5% of the Capital Gains in America.
and lastly Pain! The Pain of suffering the ignorance of the majority.. that allows this bullshit above to go on.. and to continue unabated! year after fucking year!
Wall Street should Thank God for the Fluoride in the Water! and Public Schools! otherwise they would not be able to screw over the majority of America!
Tax Breaks is Code for tax Breaks for the Rich..
Less Regulation is Code for Less Civil Liabilities for Wall Street and more Criminal Laws for Main Street!