03.30.08
Posted in Old Posts at 7:59 pm by Administrator
BIRTH OF A NATION
By John Galt
March 31, 2008
I. Intent
The Founding Fathers had a vision where individuals were allowed to use their God given freedoms to use their own creativity, their own belief systems, and their own talents to work within a Capitalist system based on the principle of freedom. This freedom extended to all aspects to each and every citizen of American life as long as it did not impair or impede on other individuals or the greater good of this nation. These freedoms and the vision our Founding Fathers had for us are now coming to a close. The abdication of the ideal known as “personal responsibility” and the application of morality in everyone’s decision making process have been delivered a fatal blow first struck some ninety-five years ago. The creation of the Federal Reserve Banking system at the behest of political idealists who wished to manage the social fabric of society as opposed to their Constitutionally mandated responsibilities were just the beginning. The series of legislative initiatives undertaken from 1910 to 1940 to complete reshape our nation under the guise of “Progressivism” was slow to come about, but it was not until this decade and the final crisis of our foolish endeavors in societal management that we shall realize the implications of that generation’s actions. Their intent was to create a system of macro economic management by government which allowed the banking system to function outside of the legal parameters of the Constitution while profiting the few and penalizing the majority for any mistakes that were made. As decades of erroneous decisions have piled up and multiplied exponentially the proverbial bill is now past due. How appropriate that a nation founded in the idealism of personal responsibility and freedom shall now depart from that path and begin a final curtain call which entails the incorporation of a vile system of Marxist theory in combination with the perversion of religion to justify the revision of our society and the behavior of it’s citizens.
II. Taxation Without Representation
In the 1770’s part our nation’s foundation was laid with the purpose of eliminating tyrannical leaders who impose their will without the voice of the people. The taxation of citizens to serve a “crown” was considered a barbaric relic of medieval times as serfdom was no longer accepted by “modern” society. Alas, if only old Ben Franklin could see us now. The average schmuck has been quite content for decades to accept taxation without realizing they are being taxed as it has been given the false perception of the “cost of a free society” and other such rot. Although my personal principles are somewhat Libertarian in nature, this does not mean I am advocating naked women running up and down the streets as whores like Amsterdam promotes, nor the elimination of some of the Constitutionally mandated operations of government and it’s interaction with the private citizen. Obviously it costs money to maintain the national defense, a sound judicial system and to secure a safe, consistent and fair flow of commerce. Yet the responsibilities assumed have now spread to every aspect of our lives, including and up to the examination of the sexual behavior of flies as well as the willingness or ability of each citizen to educate their children in a manner (or religious principle) that they see fit. Alas, to become a “nanny state” costs considerably more than just the income tax structure we have in place now. So what is our poor government to do?
After the 1916 income tax solution opened the door, the U.S. government and it’s minions started looking for other taxation solutions to insure that the American people were married to their ideals through the concept of entitlements. That solution did not really take hold until the Great Depression created a nation of sheep willing to accept whatever solutions were provided to insure that the average citizen always had a roof over their head, a meal, a job, a car, a Playstation III, a vacation in Cancun, etc., etc. As the real levels of taxation on corporations (who just pass it on to the customer) and citizens skyrocketed via income taxes, fees, etc. the stress on government has become so great that running a debt on an annualized basis became commonplace and once the banksters and the government figured out that the U.S. was “too big to fail” and that the average citizen would rather be fat, dumb and happy rather than worry about the consequences of their actions, the game was on.
The spending on everything and anything was acceptable and by manipulating the accounting regulations the Congress and Senate could cut deals, make huge profits for themselves via the lobbying system, and create a dependency class that could be further expanded as long as the banksters played along by assuring the public that the integrity of our markets would never be unscathed and unending sources of profit and liquidity would be available as long as everyone played along and didn’t bother to look behind the curtain. Unfortunately for the elitists, people began to peek and worse, people began to worry as the liabilities of this nation were at a staggering $20,000,000,000,000 plus in 2000 and has more than doubled to a blow-one’s-brains-out-if-you-think-about-it-too-much $53,000,000,000,000 plus now. To maintain the ability to service this debt load, much less meet the underlying obligations, the impossible task of maintaining a seven to ten percent annual GDP (oh no, GNP wasn’t good enough, it didn’t track consumer spending enough) was thrust upon the markets and with the help of our friendly neighborhood central bankster, went to work to achieve it. Add in the smoke and mirror arrangement constructed by the Federal Reserve and you can see how this is not going to have a happy ending.
So who is taxing the American citizenry that does not have the authority to do so you may ask? That requires a quick and dirty analysis of our currency and the $53 trillion (it’s too much work to type all those zeroes more than once) in debt and liabilities we now are beholden to. Since the creation of the Federal Reserve in 1913, our dollar has experienced a depreciation of about 97% from its original value. We have changed the constitutionally mandated method of issuing currency in this nation without an amendment as intended by our founding fathers. Doubt that? Well here are the exact words from our Constitution:
Section 10. No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts; pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or grant any title of nobility.
We have witnessed the abdication of personal responsibility in favor or servitude to the state. In this writer’s opinion, it would be fair to the currency depreciation a somewhat inflationary tax levied upon our society as well as a moral hazard. But now look at the level of debt and obligations and start thinking about that from the big picture perspective. The only way to pay off or maintain the spending levels and debt we have incurred is to monetize the debt and at a rapid pace before the rest of the world does the job of peeking behind the curtain which the American citizens refuse to do for whatever reason. Bad news Sparky; the rest of the world has taken that peek and figured out a few things:
- The Federal Reserve has never been audited
- The Federal Reserve has no legal liability to the customers it serves, a.k.a. the American Public
- The Federal Reserve is a private corporation using policy to generate or promote monetary growth via it’s Treasury proxy. These policies often impact the consumer by destroying savings and increasing the inflation tax.
- The Federal Reserve serves only the investors who own that bank, not the nation
Where as many nations have a central banking system directly accountable to legislative branch or powers restricted to the protection of the integrity of their currencies, the Federal Reserve has assumed the role of an un-elected oligarchy, which will ultimately destroy our freedoms and our nation. They are imposing an inflation tax and increasing the rate of destruction of our currency without the authority of the Constitution behind them and worse, at the expense of our citizenry to pay for decades of ignorant bliss as the party went on unimpeded. Now the bill is due and the tax rate is about to be increased dramatically as the casino on Wall Street has made so many bad bets, it requires the house to bail the players out or risk the destruction of the entire world’s financial system. This is not minor threat, but worse, it enables a far more devious threat to emerge.
III. 1914
So what do we have to look forward to? To get some idea, let’s take a look back into history. When Europe erupted into war in 1914, ironically enough due to an act of Islamic terrorism, the United States was caught in the middle as a neutral observer. The Federal Reserve was not a functioning entity, thanks to political delays, when the war started but the U.S. Treasury and its idealistic President were ready. Instead of allowing foreigners to sell off their holdings in the American markets, the solution was simple:
Close them.
That was a dangerous game but thanks to the currency provisions of the Alrdich-Vreeland Act the domestic banking system was able to avoid a repeat of 1907 and the currency crunch and uncertainty that would ensue from having our financial markets closed. This same approach could easily be employed again today. If there is a notable or sudden liquidation of our Treasury paper or equities by foreign powers along with a sudden flight of capital from our banks the easiest solution is not to just have the Federal Reserve purchase the paper, as that would require an unrealistic sudden increase in the money supply. The gradualist approach to monetization would have to be tossed out the window causing a larger problem at a sooner point in time. That alternative is unacceptable but still on the table but could appropriately be called the “nuclear option” as it would be the hyperinflationary trigger. The short term option is obvious and it is the 1914 option. That would enable the U.S. government to save face and still maintain some faith in the stability of our economy while stopping a deflationary outflow of capital that would cause an immediate collapse of our economy. Closing the markets in the name of free market capitalism (ironic isn’t it?) is the only logical solution and whatever excuse is offered as “cover” for such an action may sound drastic, but for a short term cessation of bleeding, the only reasonable course of action. How does such an action lead to a change in our nation and just what are the consequences? Read on my friends, as this is where a new nation is born.
IV. DEATH OF A NATION
To create a new ideal, the old one must die. The concept of America must die. There are and always have been tinkering old fools who have felt that they could “adjust” or redesign America better than the founding fathers. The aristocracy of old was greatly displeased with the balance struck in the United States Constitution but this balance served the purpose of allowing their class to excel in their goals while giving the average person a chance to succeed without the yoke of government being worn about their necks. As the participants of and investors in the modern Fiatocracy see their empire begin to flounder, the plans to revise and redesign this nation are right there in front of us, but thanks to the conspiracy theory principle, it is dismissed as unrealistic and absurd. Despite the fact that grown men dressing up in robes and burning humans in effigy in the mouth of a burning owl has been well documented and confirmed, that does not seem to strike the sheeple as critical to our future. Yet as this writer types this, these same individuals have ownership in the Federal Reserve, ownership of some of our largest financial and corporate institutions, or meet now behind closed doors to discuss the “rumored but documented” NAFTA superhighway as they are able to work in the open without scrutiny and without the authority allegedly given to the citizens of this nation in the Constitution. This is not a good sign and indicates that our nation is well on its way to passing into history as a memory.
The ability to create any new ideals or “modifications” as they shall be called, to our current system requires a breaking point, or death of the nation. There are two methods to achieve this goal and either might be acceptable but one is obviously much more practical. The first method is simply to involve a nation in an idealistic but costly war which slaughters millions of it’s citizens thus reducing the economic needs and re-balancing the supply demand curve in favor of the profiteers and political class where the numbers are much more manageable. This method is of course costly and if carried to extreme in this modern society, the physical damage to actual attacks on the homeland could put the power elite into the same risk strata as the citizens they wish to enslave. The second and most obvious solution is to bankrupt the people, not just the nation. Eliminate the financial capacity of a citizenry to survive and you own them. In the days of yore, the monarchy would simply offer an opportunity to survive by allowing the serfs to live on the land in exchange for the offerings a large percentage of the crops leaving the serfs just enough to survive. This virtual enslavement allowed one class to survive while another prospers. And this lesson in population and economic management has never been lost on the elites in society.
V. BIRTH OF A NATION
With the plan currently being enacted, the question becomes “What kind of nation will we look like in 20 years?” I fear we could become as drastic a head case as the 1970’s Soviet Union or worse a perpetual model of France combined with the ethnic problems of the Balkans. The withdrawal of the needle from the arm of America via the long-term extraction of capital infusion from foreign powers will leave our standard of living flailing at best and careening into levels unseen in this nation in over one hundred and fifty years if we are lucky. The inability of our society to pay its debt off at all levels and work towards self-sufficiency will create the grand political opportunity that only arrives in history maybe once every two or three centuries. This political opportunity or “third way” as it so often promoted will unfortunately allow the elitists to explode on to the scene denigrating the primitive nature and thought processes of our founding fathers and in the desperation of the moment, the citizenry will bleat right into an automatic acceptance of the changes as a “savior” of their society and the classes of people unable to cope with cyclical economic change. The new Socialism will neither call itself that nor ever openly use the terminology of the works of Marx or Lenin. The test case for this ideology is well under way in the form of Communist China attempting a mix of corporatism, communism and fascism while maintaining the illusion of free market capitalism. The theory that has been promoted over and over again by multinationals and our socialist infested State Department is that “free market capitalism promotes democracy” but in Communist China, it promotes enslavement. There are no free elections there nor truly free markets. There is no desire to allow open competition for the development of and expansion of goods and services without some degree of state control. The profits are guaranteed to insure a large percentage of funds to be allocated to increasing the ability of the military class to expand and dominate the region and the society as a whole. In the case of the United States, the military dominance is unquestioned, but the thumb of the political class does not have the reach of the Central Committee in Beijing yet. By allowing the crisis to worsen or better yet, accelerating the impacts of such a crash, much like what was accomplished in the 1930’s under FDR, the birth of a new nation can be completed under the demands of the very people who are to be enslaved. With so much of our population now dependent on government largesse, this process will be frighteningly easy to achieve.
VI. OH AUGUSTUS, WHERE ART THOU
There is but one hope and believe it or not it is in the mirror. Go look at it. And pray hard for a miracle. In Roman times after the period of the Civil Wars, there was a desire that such a great empire, militarily over-extended and rooted in democratic principles would end their infighting and bring stability back to their people at home. The citizens hoped a return to a virtuous democratic society would win out over the old ways. When Emperor Augustus took power in 31 BC, it enabled a period of relative stability and economic growth to ensue. The Empire of Rome became unified, formidable and expansive once again without the drag of the Republic’s pesky democratic principles. Unfortunately it created a new fascistic monarchy, which demonstrated its brutality and ability to dominate its citizenry and neighbors on a regular basis. It is this writer’s fear that while history may not repeat; the duplication of human foolishness will allow this to occur again. We must, as a society, pray that as the Third Way takes hold over our society that someone will take a stand against the elimination of the U.S. Constitution and the ideals of Jefferson and Hamilton. That someone will have to be a person of considerable power on the inside and willing to wear the Judas label and betray the new elite when and if they make their move. Let us hope this is a man or woman of principle and does not have a sale price like much of our society. Let us pray this happens before the title “Imperator” becomes part of our lexicon, much like the phrase novus ordo has already been accepted, denied and ignored by the masses. The consequences of failing to stop this “new order” from taking hold, as seen in history, will be fatal.
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03.23.08
Posted in Old Posts at 1:58 am by Administrator
I remember when the US Dollar allowed me to buy candy for a nickel……
I remember when American cars were completely manufactured in America….
I remember when televisions were made in America….
I remember when Christian holidays were respected and “Spring” was just a season…or winter…or solstices….
I remember when Daylight Savings Time started and it sucked then just as much as it does now…..
I remember when “God” was not an obscene word or concept….
I remember when being an American first was not something you had to hide….
I remember watching television and not worrying about obscene words or behavior….
I remember when “Communism” was considered an evil and the Constitution a blessing….
I remember when politicians were caught in a lie they would actually feel shame….short-lived as it was…
I remember when your local bankster shook your hand and thanked you for your business instead of looking up your credit score to see if he or she wanted to talk to you…..
I remember when owning a home meant creating a neighborhood….
I also remember when “flipping” referred to coins or burgers and not homes…..
I remember when kids actually played outside instead of against each other via online interactive games or the internet….
I remember when getting that first job actually meant something to a sixteen year old….
I remember when credit cards were hard to get….
I remember when radio stations only broadcast in English as their primary language in the United States…
I remember when Civil Defense was a serious issue and homeland security meant preparing for war…..
I remember when illegals were ashamed of being caught….
I remember when being a “typical white person” wasn’t really an issue; we never really looked at color the way people do these days when I grew up….in the Deep South….
I remember when saving money was encouraged and spending foolishly as it is advised now, was frowned upon….
I remember when the price of gold last topped $800….and what happened to our economy….
I remember when lumberjacks were viewed with admiration by little boys as a profession instead of pushed out of business by Marxist environmentalist whackjobs….
I remember when most of our lumber came from the U.S.A. instead of Brazil or China also…..
I remember when a family farmer did not have to answer to faceless bureaucrats in Washington, D.C. about the water quality in their toilets….
I remember when people who got sick from eating foreign produce used to actually get upset and stop buying foreign produce…..
I remember when the Constitution was the word of law and “feelings” were something you worried about with your wife….
I remember when Castro was accurately portrayed as a murdering Communist thug….
I remember when 24 rolls of toilet paper was cheaper than a gallon of gas…..
I remember when a gallon of milk was cheaper than a gallon of gas…..
I remember when gasoline was rationed and inflation was actually feared….
I remember when it was viewed that the government’s business needed to stay out of mine to promote the greater good…
I remember when the idea of “chipping” a pet or livestock was viewed as radical and evil….
I remember when doctors were not scared to treat their patients due to lawsuits….
I remember when lawyers had some degree of honor……
I remember when Newt Gingrich taught a lesson to a class I was in and said that (paraphrasing) History was the most noble of studies…
I remember when the Federal Reserve actually cared about the value of the dollar…..as well as the Treasury….
I remember when our military was allowed to fight to win………..
I remember when “political correctness” was viewed as a joke….alas, no more…..
I remember when Jesus was celebrated in birth, death and rebirth….
Celebrate today.
America needs people to start believing in what founded this nation in it’s principles and moral guidance, not moral hazards.
Happy Easter to All and God Bless!
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03.21.08
Posted in Old Posts at 5:00 am by Administrator
Tonight and all week on the Q-Files I will be updating the world news and events to keep everyone clued in to the economic decline we are all witnessing. It’s no longer just a “Florida and California” only problem, it’s around the world and it’s moving into the fast lane as the instability of this past week demonstrates. No Bubblevision fantasies here, just the real news and views!
Remember the Q-Files are on from 7 p.m. EDT (2300 UTC/GMT) on WHRI 11.765 Mhz plus 5.850 Mhz and streaming via the following:
Stream 1 (Free)
Stream 2 (Free)
Stream 3 (Free)
Stream 4 (Free)
Stream 5 (Free)
Stream 6 (Free)
Stream 7 (Subscription Required)
You can also go to www.stevequayle.com and click on the “Listen Live” link to obtain access to these links.
You can participate in the show by emailing your host at johngaltfla@yahoo.com
Thank you and I look forward to your participation!
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Posted in Old Posts at 2:05 am by Administrator
So everyone is proclaiming the “end of the financial crisis” and old Baldy who said Bear Stearns was a buy a few weeks ago is never wrong. Right?
Well, Whitney Tilson of T2 was on Bubblevision’s “Fast Money” (aka, follow their advice and your money disappears fast) and had a few words about the housing crisis that brought them down to earth. The look on their faces is worth the time to watch this on it’s own, but add in the horrified questions they asked which ruined their weekends and you would think old Whitney shot all of their dogs.
Enjoy the Video linked here!
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03.20.08
Posted in Old Posts at 3:06 am by Administrator
by John Galt
There is a time when everything in a moment of history coalesces or intersects as I have stated in the past. For purposes of discussion of the U.S. financial system and much of the markets, I think we have arrived or on the precipice of another such moment. The American financial system has been the subject of jolt after jolt, shock after shock and now a final retreat from another phony rally, thanks to more suspect data points which did nothing but confirm the suspicions of the investing public, and by public I mean the rest of the world (most American sheeple just “trust” their 401K plan adviser at work), finally say “the hell with it” and walk away. The data released this month might finally have convinced darned near everyone to just leave in disgust. Why and how is this moment upon us and quite possibly exploding on the scene today or over the next couple of weeks? Let’s take a tour of perception versus reality with a chart or two and the impact of the law of gravity on an airplane or a bird when the wings are removed.
“There’s a sucker born every minute”
If old P.T. were alive today he would not have to look far to find freaks, frauds and funny business. Thus I theorize he would return as a hedge fund manager or partner with one of the CEO’s who have elected to implode their corporations for personal gain. He knew how to round up everyone, get their attention, and keep the people focused on total nonsense and coax them into paying for it. Hey, that sounds a lot like CNBC doesn’t it! The current stock market conditions were a creation of one Mr. Alan Greenspan who might well be old P.T. re-incarnated if we did not know any better. The collapse of the dot-com bubble in the late 1990’s and early 2000’s created a need for a new bubble, one that the “common” man could feel and recognize as opposed to the vague and mysterious workings of Wall Street and those funky numbers streaming across the bottom of a screen. After all, let’s be friends and admit it; the first time any of us tried to figure out what all those symbols and numbers meant it was quite intimidating. But a house, ah yes, that’s something you can feel. You can touch. And the average schmuck can be convinced that it’s not a tool or implement but an “investment” and that the more house you buy, the richer you will feel. Good old P.T. Greenspan figured out that if he convinced the bankster community to create an entirely new wave of investing instruments and hedge funds then it’s no big deal for him to lower interest rates and encourage them to profit off the fees and the Treasury spread. If someone wanted to make some real money then all they had to do was to securitize those mortgages in large bundles and it was a safe bet in the minds of these power brokers that it would be no big deal to get AAA ratings because after all, it’s the banksters who paid the fees to the ratings agencies and made sure they explained just how these new securities would work so the ratings agencies could wink, nod, sleep and feel immune from any problems provided the models created by the firms on their superduper computers were programmed by the best and brightest in America.
Ok, so maybe the programmers were not Americans and this wasn’t the brightest idea in our history. But hey the models have been reliable since the Great Depression and so the updates with the new mortgage problems would be no big deal because after 9-11 we needed a boom and who cared if it meant fudging a line of code here or there. So to create a market for these new securities RMBS (Residential Mortgage Backed Securities) and CMBS (Commercial Mortgage Backed Securities) a pricing structure to create demand had to be created. This was a piece of cake as literally thousands of new hedge funds sprung up over night and with that pesky Glass-Steagall thing out of the way nothing could stop the banks or brokerages from saving America by plunging us deeply into debt by some $500,000,000,000,000.00 plus in derivatives. So just how did the banksters price this junk? Well you take a variety of mortgages, get them rated, come up with a really creative and “safe” sounding name like:
Bear Stearns Asset Backed Securities I Trust 2007-HE3
(yes, that’s a real name with AAA ratings from the MarkIt ABX-HE-AAA 07-2 Series)
Sounds safe to me. Heck sounds secure to me. In fact to create a demand for it a brokerage or investment bankster might place a phone call down to it’s Cayman Island hedge fund and the conversation might go something like this:
Investment Banker(IB): “Come on answer the phone, I just saw you at your cubicle a second ago”
Hedge Fund(HF): “Cayman Islands Super Duper Safety Hedge Fund, this is Mike, can I help you”
IB: “Hi Mike, I have a new securitized bond that needs a buyer. It has a AAA rating with insurance and we think it would suit your fund perfectly.”
HF: “Well, we’re the Fund for that. What’s the asking price?”
IB: “I’m offering it at $2.00″
HF: “Wow, that’s a steep price, I should get manager’s approval first. Never mind, I see you’re on the phone with me, ok, we’ll buy it.”
IB: “Thanks. And you have a buyer for it also I assume?”
HF: “Of course, I’m going to package it with five other bonds and create a new investment fund called the Grand Cayman U2Dumbtolive Fund and sell it in Shanghai at 8 pm tonight”
IB: “Good work! But that name concerns me”
HF: “Have no fear, in Chinese that translates to ‘dog is yummy fund’ and they love those names!”
IB: “Great. I’ll wire the money to your account to buy this and complete the transaction. Are you free for tennis tonight?”
HF: “Sure, I just have to grab some dinner, meet you at the club at 8.”
While that story sounds far-fetched, that’s essentially how this has been worked out for some, oh, five plus years now. There is no giant strip of shiny office buildings in the Cayman’s with thousands of investment banksters or hedge fund managers working there. Just like there isn’t thousands of “banks” buying the Treasury Paper each month and saving it in vaults in these islands. This was the safest scheme ever concocted because every aspect of the creation, securitization, rating and pricing mechanism was controlled by the orignator. Of course it could never fail as long as there was another sucker born every minute or two in China, the Middle East, or India(Japan told us to pound Saki after the dot-com bust). Once the Chinese or whoever purchased these instruments the promises of steady income with the same perceived level of safety as a U.S. Treasury were no longer traded but stored as a reserve with the valuations given to them by the hedge fund or investment banksters who resold them. This nonsense permeated not just into foreign holdings but into the domestic U.S. markets as P.T. Greenspan continued to encourage “diversification” and pension funds, 401K’s, IRA’s and mutual funds bought these instruments under the assumption that they could not fail. After all, an illegal alien would never walk away from a half million dollar home they purchased with a no-doc loan would they?
Oops.
Models of Monumental Stupidity
In this writer’s opinion, there is nothing more dangerous in this world than a drunk driver, an infant playing with garbage bags, George W. Bush in charge of the military, or a bankster feeling they can act with impunity. In 2005, while doing what I enjoyed doing, reading articles from newspapers from around the internet, I came across this article (plus others) titled Banking on illegal immigrants from CNN.com and of course another one about an illegal getting a $750,000 home in Denver. The banksters were all giddy about this “untapped” resource (their words, not mine) for expanding the “American dream” in the hopes this boom would continue. I knew this boom was over in 2004 when I saw a condo conversion down in my area flip seven contracts in one day for a two bedroom one bath, but these articles just confirmed my worst fear:
We’ve lost our ever lovin’ freaking minds.
The banksters didn’t care because the concept of “responsible lending practices” went out the window when they were not going to get stuck with the paper and Wang Ho Dung would buy shares of it when he took a second mortgage out on his home in Beijing between working five jobs and fathering three hundred boys for the People’s Liberation Army. The coming crash in China has already been commented on by this writer but let me warn you now, it will cause headaches for the U.S. banksters who have lost their ever lovin’ freaking minds. So the variety of insane plans: no doc, Alt-A, subprime, no-doc jumbo, no-doc Alt-A, no-doc doc doc doc and my favorite the “psst, hey buddy, wanna buy a home” loans were created and anyone and everyone who could fog a mirror tried to get a home. To make matters worse the mortgage brokerage industry expanded so they could make a buck and that overwhelmed not just the banksters who had to order more “APPROVED” rubber stamps but the entire system of permitting, appraisal, inspection, etc. became somewhat suspect as everyone just wanted to “move” the home and get bodies in and out of contracts, be they legal citizens or not.
The issues that these excesses to the other extreme in the lending and securities industry of course created a problem that nobody wanted to acknowledge. Like that pesky little geek at Chernobyl who said “I wouldn’t push that button if I were you” the models were ignored and from what I understand the variances created by the overwhelming input did nothing to indicate that there would be a series of cascading failures due to the large number of mortgages written nor who they were issued to. Of course the problem with models, as in all computer programs is the old theory “garbage in, garbage out” and thus why there was no accurate mathematical model that could include “common sense” as part of the equation. The common sense aspect was just brushed over as for over sixty years the commercial banks served that role by insuring they got to know their customers and actually validate the information gathered before approving five hundred thousand dollar loans for people with forty thousand dollar per year incomes and no money down. Thus the theory of the infallibility of the models is now obvious and we need to fire those Indian programmers and blame our education system for the shortfalls of not producing enough engineers. The entire problem could have been avoided thus, if we had just given the NEA twenty trillion bucks to educate our youngun. Or better yet, actually regulate the industries that we are supposed to be regulating instead of “trusting” their word as good enough and rubber stamping paper work, year after year.
Needless to say, that brings us to today, March 20, 2008.
Wile E. Coyote meet Gravity
The collapse of Bear Stearns last week was not hard to predict, foresee or wonder about. If you look at the one year chart of the stock price and can’t figure that out, then you could have a problem with vertigo or need to quit binge drinking with American Idol contestants.
Needless to say the collapse of a Prime Dealer was viewed with great alarm by the Federal Reserve which is why they plunged head first into the problem and did what they had to to “stabilize” the market. But the Federal Reserve does have a limit to it’s budget; they have expended about sixty percent of their balance sheet bailing out Wall Street under the Benron Bernanke “Inflate or Die” banner. This illustrates the problem. The school marm who is in charge of the largest central bank in the world has no real world experience to how the banking system functions nor the real business world. Those of us who saw this problem coming in 2003 prayed Greenspan would live until he was 150 and would create another fantastic yet disastrous solution to all our problems in 2005. Instead old PT thought it was more important to travel the world with his reporterette wife and left us with, ugh, Bernanke. He’s a nice guy I’m sure but in way over his head. He was supposed to be the Fed Chariman best equipped intellectually to cope with the threat of an economic depression. That would be wonderful if it were 1929 and we needed a replacement for Roy A. Young, but it’s not 1929, there is no internet boom and P.T. Greenspan just handed the keys to him and said “I’ll stab you in the back later, when it really matters” to which Benron thought “I wonder what he meant by that comment?”
Now that moment, that potential implosion is upon us. On Tuesday a faux rally was engineered one more time on the idea this Fed Funds rate cut would be the one to finally bail us out. In reality, the market internals said otherwise. They called “nonsense” on this rally and the earnings reports on Goldman Sachs and Lehman Brothers were celebrated by Bubblevision (CNBC) and proclaimed to be the savior of our economy, again, for the 318th time, and that the sun would come up tomorrow.
Well, the sun came up on Wednesday, March 19, 2008. It was hot down here in Florida. But it was hotter in the financial centers around the world. The story (Bloomberg: Goldman, Morgan Stanley Use Fed’s Wall Street Window) of Goldman Sachs and Lehman going to the discount window the minute after they reported on Tuesday to get $2 BILLION each (that’s “B” as in BILLION) have persisted for twenty four hours now and begs the question: If earnings are so great, then why beg for a loan??? Add in the damning evidence of a massive capital flight to quality and safety as illustrated below in the charts of the 1 Month Treasury, 3 month Treasury and 2 year Treasury and you start to get the idea…..
Yields do not CRASH like this unless there is a massive flight to quality. Add in the events of tonight as I finish penning this and the crash in China I’ve warned about appears to be under way. For those that do not understand what I mean, well, here:
The first chart is a weekly chart through the end of last week, the second chart as of approximately 2230 EDT on 3/19 (3/20 Shanghai time). It’s down 5% plus. It’s cratering. They are scared and have never been exposed to the gyrations of food shortages, energy shortages and a financial crisis under a capitalist system. The problem is it’s not a pure capitalist system so panic will rule the day if the Communists can not use their 50% plus control of all the stocks to stop the slide. The problem? There are margin calls impacting U.S. companies which started earlier in the day and appear to be accelerating again, just like last week. Thus why we could be at that moment where Wile. E. Coyote looks down and realizes he’s not a bird and that gravity still works. The lack of any ability to raise cash, to cover margin calls, could crater this market later today. There’s nothing much left to sell. They sold gold. They sold oil futures. They sold grains, metals, speculative paper, you name it, if it could be sold, it was today. The last strong sector, the commodities and materials sector was sold off hard today. This means the bear market is now almost in full swing. The activities and games played by the big boys to kill the shorts took that money out of the markets. The fallacy of a “real estate bailout” has everyone from the Century 21 office down the street from me (she looks more and more like the Maytag repair guy from the old commercials) to the average schmuck laughing out loud at the concept that the government will buy up all the bad paper in this country to save the day. Congress, as usual, will address the problem after their in depth investigative committee returns from seeing the real estate crisis first hand in Monaco and do something to make matters worse. In the history of bear markets when there are no buyers, that leaves sellers and going into a long weekend that could be a most dangerous formula for those that wish to be the tall blade of grass and do something foolish. When everything is being sold except for the safest of Treasuries, then you have to be concerned that we are heading into a major move. Yields do not drop to 0.30% on a 3 month T-Bill unless there is a whiff of panic in the air.
I smell panic. The rumors are flying like smoke from a forest fire. Where there is smoke, there is fire. I would advise against trying to play the role of smoke jumper now unless you have a clue as to what you are doing or a professional investment adviser who is not just another CNBC salesman type.
Today could just be another day.
Or it could be historic.
Either way, after so many people have been warning about this for so many years now, you can not say you have not been warned.
Happy Easter!
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03.17.08
Posted in Old Posts at 2:31 am by Administrator
Gang, I had heard A LOT of bad news on a Sunday. Today was the single worst day for market news and emails and phone calls that I have gotten in quite a while. Being outside the game does have some advantages but all I can say is “just wow” and leave it at that.
If you have not gotten your preps in order, you’re in trouble. Period.
Tune in to Steve Quayle Monday night at 7 PM EDT for updates, frequencies and streams listed below. I shall post my latest op-eds when news and time permit. This is the end gang. Period. We are witnessing history. Enjoy it.
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03.13.08
Posted in Old Posts at 8:50 am by Administrator
A long time ago, in a galaxy far, far away…..
I warned that once the United States crossed the Rubicon, there would be major economic consequences. While those consequences may not happen in one moment of singularity, the consequences are there. There have been a number of technical analysts who project the next stop and support for the USD Index is at the 62 level followed by 56 then the low 40’s. It does not matter. There are larger geopolitical consequences once we close below the 72 level and set up a new base for the decline and none of them are good.
Don’t Cry for Me Argentina
That’s right. We are entering into the realistic probability of what I call destruction economics where the United States economy tears the heart and soul right out of it’s citizenship and almost every move by the Fed only makes matters worse. The fact that so many people have ignored the fact that the Federal Reserve Chairman has stated openly that he will inflate to avoid a deflationary depression has escaped the attention of many when discussing the dollar crisis. All you have to do to realize he’s not bluffing is to look at this chart:
I wish to thank John Williams and others who have continued the calculation of M3 and advise everyone to pay attention to www.shadowstats.com as the data series there no becomes crucial to where this economy is heading. The problem with the US Dollar being destroyed is much more important to other nations than our own at this moment. If you are a Chinese Communist Party leader who directed their central banks and investment houses to invest in American Treasuries and companies there is a realization that your returns are now quite negative versus domestic (Chinese) inflation and being deliberately diluted in the U.S. to monetize the massive Federal debt. There is now a real risk that the Arab and Chinese bloc elect to liquidate their holdings and convert them further into Euro denominated investments and double down on commodities to continue expanding their strategic investment base. This will trigger a massive inflationary spike at the grocery store for the American consumer and decide the election in a rapid manner. The Republicans will assume the role of Jimmy Carter and receive all the blame for the banking collapse, municipal bond market collapse and inflationary death spiral and their party will be obliterated at the polls. In that same token, the Argentine model is the only recent modern version of the inflationary death spiral being imposed by a central bank on its people that we have at the moment.
Depending on the events of the day, I will add to this thread tonight. But there is a whole world of hurt about to fall upon us….
Well that took less than an hour to update…watch the Swiss Franc today; it could easily trade at par which triggers another series of carry trade problems for the U.S.
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03.12.08
Posted in Old Posts at 9:32 am by Administrator
Several months ago, I wrote the following post titled “The Nightmare Crash Nobody Wants to Talk About” which referred to the Chinese stock market and the huge speculative bubble building there. Here it is reposted with a chart to illustrate what I am referring to. It’s crashing boys and girls and once it breaks the psychological support level of 4000 the inexperience of these so-called “capitalists” being managed by a COMMUNIST authoritarian oligarchy will unravel in such a violent manner that it will destroy the faith of the morons who believe that Goldilocks is alive and well. Remember that this will IMPACT the United States much harder than the Fantasyland promoters on Bubblevision would ever dare state publicly…..
Note: I have added the Bollinger Bands, the 50 DMA, and 200 DMA on to this Yahoo Finance chart to illustrate the rollover. Once it’s below 4000 the talking heads might actually start to pay attention….
“The Nightmare Crash No One Wants to Talk About”
August 16, 2007
By John Galt
Twas the night before football
And all through the house,
Most Americans were stirring,
Even the mouse.
As we screamed Go Bucs
While others “go Colts”
The stock markets were crashing
Because of the dolts.
As we chanted and sang,
A terror hit a guy named Chang,
As the something in Shangai
Went Boing and then Bang!
The markets were churning,
But we did not care,
Kudlow was crowing,
”Don’t worry Ben’s there!”
Then all of the sudden,
With a violent thrash,
The speculative bubble
In China did crash.
This horrible poetry sounds like a far fetched story out of a Tim Burton movie, yet tonight it is not. There is an 800 lb. gorilla blocking the America citizen’s view of the television, yet most just figure it’s “summer programming” or Cramer forgot to shave. No, the Shanghai markets have not crashed. And no, the Yuan has not been revalued to par on the dollar either. That gorilla in the room is about to eat millions of people alive and beat the snot out of them, yet few dare to notice it on either Main Street or Wall Street. The thrashing of our markets continues to dominate the media worldwide, as the fears of the credit lockup will spread into a full fledged banking crash. The reality of this lockup should terrify everyone even more, because despite the fraud and Ponzi scheme perpetuated on the general public and most investors by the derivatives and housing fiasco, there is a larger problem ten thousand miles away that is being denied like a Bill Clinton midnight adventure when he was the original Governator.
A little background on this story is in order, first and foremost. For over five years now, we’ve been preached to about the “China miracle” which is neither Chinese in origin, nor much of a miracle economically speaking. It does not take a lot of effort to change an agrarian regressively authoritative economic structure into a semi-capitalist turn of the twentieth century robber baron fiefdom. The United States was determined at all costs, including it’s future, to keep labor cost structures down and exploit the larger more populated nation’s prospective future growth. If this meant sacrificing industrial production in our nation to stave off labor inflation and increase profitability, be it in any currency that was on a more solid basing than the dollar, then so be it. Article after article was being produced proclaiming proudly “see, they’ve changed” and of course my favorite line in almost every article “the introduction of capitalism will eventually lead to a democratic society” or words to that effect. The key phrase that pays, as usual, was ignored by the American public because it’s a dirty word which has been translated into meaning you’re a racist or redneck if you use it: Communist.
You see, the “Communist” Chinese Party has never had any intention of reducing it’s power, it’s reach, or it’s desire to have regional if not hemispheric domination at any cost. They attempted to use older methods based on the Soviet model for decades, but when the USSR faded into oblivion, it became painfully obvious that their methodology was flawed. Upon further review, they determined it was more logical to use our own greed as a weapon against us, and of course our banksters and robber barons said “dude, that rocks” and proceeded to outsource millions of jobs to benefit the Rust Belt so that plastic widgets at Chinamart would only cost 89 cents instead of costing 92 cents like they did when Americans made them. This logic of course was so flawed that our banksters could not just stop with widgets and weapon systems being outsourced to a nation which has nuclear missiles pointed at our cities, oh no, we could not stop there. Instead, we thought “let’s teach those good old boys in the Communist Party how to manage a stock market and make a big bubble there so we can all speculate and make a fortune.”
Needless to say, there is a huge Communist Chinese stock market bubble and the banksters made a fortune.
The consequences of their foolishness was not limited to the smog ridden shores of China or India, oh no, the Pirates had to set up hedge funds around the world to move unregulated monies about and pray that nothing went wrong. Well, guess what sparky? It’s gone wrong. The concept of creating a Communist Chinese economic machine at the expense of the American worker finally came home to roost when it was discovered that the former American factory worker now working two jobs, one at an Indian owned franchisee of a 7-11 store and the other stocking Communist Chinese goods at the local Chinamart overnight did not cover the “A” in the A.R.M. Suddenly it was discovered by the banksters that manipulating the government data to say there was not much inflation when there was and people choosing to eat and buy medicine for their children was more important than paying for their homes because in their minds the logic was that there was no way the government would ever let the banksters put them out on the streets. Theory A meet Result B. Whoops, they went on the streets, the cash flow stopped to the banks, and an asset appraised and estimated incorrectly plus all the derivatives on the original paper came crashing down. And now, as if this was not unforeseen, we have a major credit and liquidity crisis in the good old US of A, much like the late 1920’s. The difference this time is that we are the largest debtor nation in the history of capitalism and our currency is based on Ben Bernanke’s and the bankster’s whims as opposed to gold as our Constitution originally mandated.
So what does this have to do with the price of egg rolls in Nanking you may ask? Let’s take a look at the mitigating factors in the Communist Chinese economy which will cause much more pain than a Goldman Sachs hedge fund defaulting someday. The Communist Chinese have had it pointed out in numerous financial publications that they manipulate their stock market and have no clue about proper accounting practices or how to deal with every aspects of banking operations. They are sitting on about $1.3 trillion in their foreign currency reserves which is wonderful if you’re opening up a money laundering operation in the Cayman’s for government treasuries (whoops, did I say that?) but not so hot for the average Chinese citizen to open up dry cleaners on every street corner. The mania that everyone forgot about that is my nightmare scenario is setting up perfectly and Wall Street has less control over that than it does the housing fiasco they helped create here. The average Communist Chinese citizen was forced since birth to accept all edicts and teachings from the government as the gospel thanks to a rigid “this is it or you get shot” education system. Since the average Communist Chinaman has about as much experience running a capitalist economy as my cats do running a Bear Stearns hedge fund, they imported “help” to manage their economy. And it does not take much of a reach to figure out that the banksters were more than eager to create a speculative bubble there in exchange for selling out our industrial heart and soul.
“So get to the nightmare John” you scream futilely at your computer screen. Time, grasshopper, in good time. The problem is the same problem America experienced and in short order we can all discuss if this is a dangerous or correct assumption on my part. The banksters were so successful modeling the Chinese economy after the American 1920’s economic miracle that the nation has experienced huge growth if you can believe the figures published by a Communist Chinese government who learned how to calculate and publish government data from the same nation which has been publishing faulty and in some cases fraudulent government data for the last fifteen years (gulp!). The figures were so good, so beyond belief, that the average Chinese citizen decided that stocks were the only casino really worth playing because the Communist Party would never lie to it’s citizens and if you caught them in the lie, so what because if you talked about it, you would get a fair, speedy trial and hung like the Director of Quality Control for the Communist Chinese food exporting companies. The average citizen in Communist China discovered that what we did in the 1920’s was brilliant so they started taking out second and third mortgages on their homes, pawn loans on their vehicles and selling family members if they could get that burden off their backs and buy some more shares in companies who like to paint Barbie with lead based paints to poison those evil capitalist Americans. The perception created thanks to such brilliant souls that have brought you the Dot Com bubble and the Housing Bubble was the same one sold to Americans in 1928, 1986 and 1998; that markets can never go down as long as there is a “report” of economic growth coming from the government. Since our government is laden with the same rocket scientists who created the hedge fund Ponzi scheme, why should we doubt any reports coming from them, right? The Communist Chinese happily allowed their economy to be bubbled up and now are humming right along posting figures to make everyone happy, keep our banksters smiling, and our industrialists fleeing here for there without thought of the consequences here in America to their actions. So what could go wrong, right?
As with all Ponzi schemes, they eventually unwind. The greatest danger facing our markets right now, our economy, is not just the current credit crunch, that’s small potatoes compared to what could be on the horizon. The Communist Chinese speculative bubble is showing signs of bursting, but nobody wants to mention the thought. The shuddering in fear you here is in the back rooms of Wall Street where already they are trying to figure out how their Quant funds could possibly be in trouble when they hired the best video gamers in the world to insure that they would never lose money in their programs. The proverbial “whoops” is right around the corner. Assuming the Communist Chinese experience a correction in their markets of twenty-five percent, that would rattle our markets even further to the down side for several reasons, the least of which is that our hedge fund morons invested in a Communist country thinking they can manipulate people who have nuclear warheads pointed at their own offices. This correction could easily snowball into a full blown crash which would be a logical leap since the only way the Communists know how to control bad events is to shoot people or run them over with tanks. This would create a liquidity crisis at home as the average citizen in China would want their money immediately and almost all of them would try to sell all of their holdings at the same time. The safeguards that worked so well here in 1929 and 1987 will fail there as usual, and create a liquidity crisis in Communist China that will crash the U.S. Treasury market almost instantly. How? Simple. The Communists will not care what our banksters say and will insist that the Communist Chinese re-inflate their economy even though inflation is pretty rampant now. As opposed to that, they will dump their U.S. assets on to the world markets to raise cash and bring their Yuans home as they have seen what a wonderful job the hedge fund managers have done here and after watching our markets have figured out that our banksters are absolutely clueless. Once our Treasury market collapses, the nightmare crash there, will result in our markets tanking completely. And the stock market aspect is the small potatoes; my concerns are more with the debt markets imploding totally, bringing our entire economy to a grinding halt and into a full blown depression within twelve months.
The motto of this story? For the intelligent soul, I would have several months of salary set aside outside of the banking system. I would have several months more of salary in precious metals like gold or silver just in case it is finally revealed just how worthless our U.S. Dollar really is. This nightmare before kickoff does not have to happen, but every indication that the education we gave the Communist Chinese was too good. Unfortunately, we failed to educate them on how to manage the downside risks, as apparently everyone here has forgotten the consequences of speculative credit and equity bubbles that we have created throughout history also.
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03.06.08
Posted in Old Posts at 1:53 am by Administrator
Yes, that’s right. Above are 5 day charts for Integrity Bankshares, Fremont General, Thornburg and additional a 2 year chart for Citigroup which sure seems to love being in the news lately. IF all of these banks are in trouble, which any rocket scientist who can look at the pretty pictures above to figure out, then where the hell is the FDIC to do what it’s supposed to do?
We have a problem Houston and it’s accelerating daily.
Pay attention folks, that’s all I’ll say for now…..
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