Rant or Revelation: My Money's on Revelation

Rant or Revelation: My Money's on Revelation

August 18, 2009


Correspondent Michael Goodfellow's rant reaches revelation.

Frequent contributor Michael Goodfellow and I correspond on a great number of issues. Having worked in technology and software his entire career, he brings an engineer's sensibility and rigor to many issues. Recently he wrote a commentary which he titled "A Charles Smith Moment" which leaves rant and enters revelation in my view.

He suggested I introduce it with the phrase "this is what I get when he's in a bad mood..." but I think you'll find a succinct indictment here:


A "Charles Smith" Moment

Unfair to you to call it that, but when reading this item about Iraq off Cato,

Time to Leave Iraq

(and these links on Social Security/Medicare and the Federal budget SSA Trustees Report and Tax Policy Center)

I had that feeling that the whole country is just a Ship of Fools headed into the rapids and there's nothing I can do about it.

It's not just that I disagree with the neocons -- their values, their goals, their plans and their politics. It's that they don't even seem to care. They don't clarify their goals or strategy, they don't learn from their mistakes and they don't even want to look at whether Iraq is a success or failure. It's as if they don't even believe what they say.

They just want to act out some WWII-inspired fantasy of turning countries into democracies and being the world's policeman. But now Iraq is just "so 2005", so ignore it, wrap it up, and off to Afghanistan! And both wars have so much momentum that even the President can't seem to slow them down or divert them, let alone call them off. He'd rather let both wars be huge failures than take any short-term political heat. Again, it's as if no one, even the other party, cares what we accomplish. Thousands of American soldiers die, tens of thousands of Iraqis die, trillions are spent, and for the politicians, pundits and public, it's just "whatever!"

And it isn't limited to the wars. On health care, the Republicans are patting themselves on the back for derailing ObamaCare, but neither side is facing reality. We can't afford existing Medicare. The baby boomers start hitting 65 in a couple of years. Time is up for dealing with that crisis. Even if the Republicans stop health care legislation, they still have that to deal with. And not in some "future generation", but during their term of office. What can they possibly be thinking?

But what can the Democrats be thinking? It's not as if there's any cost control in the ObamaCare plan. They seem surprised that CBO keeps scoring the plan as expensive. Can't any of them do arithmetic? 45 million uninsured times $2000 a year (a very cheap insurance policy) is $90 billion a year, or about a trillion dollars in ten years. CBO is only scoring the first five years of the plan, since it phases in. Still, any back-of-the-envelope calculation would have told them the tab was going to be in that ballpark. And this is on top of the Medicare problem, Social Security, Cap and Trade, and the financial crisis. How does anyone think we can afford all of that?

In fact, the one thing that does seem to unite both parties is a complete disinterest in what the legislation will actually do. They just want to let the usual special interest groups fight it out, write a thousand pages of incomprehensible regulatory gibberish, and call it done. Just don't ask us to read it!

The same was true during the financial crisis. The whole attitude of Congress was "Keep this away from me! I don't understand any of it! You, Federal Reserve, here's a blank check. Just solve this problem and don't even tell us what you are doing."

Again, this isn't a matter of values or priorities. It's beyond incompetence. It's a complete disinterest in the results of their actions. I would call it panic, but that requires a certain alertness. This is some kind of psychosis.

So I look at the entire political system and I think how unreal it all is, and how tired. Republicans are running on intellectual fumes -- neocons and old warhorses like McCain; anti-gay, anti-immigrant, anti-trade sentiment and populist know-nothings like Palin. No awareness of where the country is right now, and no willingness to stick to any principles at all.

I still like the libertarian arguments on Reason and Cato, but they have their problems as well. First, they are a tiny minority. Second, they mostly criticize the system without offering practical, politically possible steps in the right direction. And third, they are hopeless nerds. I watch those guys on video and I think "This guy couldn't sell me ice cream on a hot summer day! And I'm someone who agrees with him!"

I could never take the Democrats seriously either. From the various bailouts to all their plans for the economy, health care, environment, it has the same feel of unreality as the Republicans. As if they just don't want to know whether any of these plans can possibly succeed, or whether we can afford to even try. They just want to act out their fantasies, where they save the Earth, bring healing to the poor and end racism.

I wrote to one guy on global warming that the only thing that matters is what gets invented in a lab somewhere. If we can build better batteries or solar panels, do carbon capture or geoengineering, then we can make a difference. But the hair-shirt conservation measures have no real effect. And you can prove that with statistics about efficiency and the savings they could possibly get.

If you actually cared about global warming, you'd want to know what works. (and build nuke plants, which is apparently being shot down by the Obama administration.) But he doesn't even want to talk about that. It's just "if we don't pass cap and trade, the oceans will rise and the Earth is doomed." And if you don't agree with him, you are an evil "denier." It's not even a reasoned argument. Where am I supposed to go with that?


http://www.oftwominds.com/blog.html

Like you, I expect a train wreck at some point. Unlike you, I don't expect chaos. Instead, it will just be a hunker-down, "do something, anything!" government-orchestrated mess. More of the same, with increasing instability and poverty. I don't think that knowing how to grow veggies or collect rainwater will make any difference at all.

The thing to remember is that most of the third world has worse governance than we do, worse financial problems, fewer natural resources and a less educated population. Still, from Argentina to Poland to India, they just limp along. Anarchy does not break out. I see no reason for it to do so here either. It will just suck.

Thank you, Michael. Such clarity is a rarity these days.

Those of you who have slogged through my free eBook (shameless plug) Survival+: Structuring Prosperity for Yourself and the Nation will recall parallel descriptions of fantasy, disinterest and psychosis.

The entire structure of response and policy is what I term simulacrum, facsimiles of solutions, pseudo-solutions which as Michael points out, are being "sold" with the sort of half-heartedness of those who know full well they are props and facades and thus utterly illusory.

No nation can borrow 13% of its GDP without consequences, but rather than face our situation with what I term an adult understanding of triage and trade-offs--that you can't get everything you want right now, that priorities must be assessed and difficult trade-offs made--we as a nation have entered the delusion that we can just borrow the money to put off any hard choices.

Wars going badly? Borrow another trillion to "stay the course"--whatever that means. As Michael notes, the policy has always been incomprehensible, switching from finding WMDs to fostering democracy to stopping terrorism in Mosel before it gets to Miami to the ideological-flavor-of-the-month.

Sick-care unsustainable and broken? Borrow another trillion, write a 1,000 pages of gobblydigook to placate and pander to the special interests involved, solving nothing and doing nothing to actually cut costs, and then "declare victory": Mission accomplished!

It rings hollow because it is hollow: nothing of substance has been accomplished because as I put it, those with asymmetric stakes in the game are pouring every dime and every ounce of energy into the game to protect their share of the swag, while we citizens and "consumers" are expiring from death by a thousand cuts--none deep enough to spark concerted action.

While the government and corporate Elites protect their fiefdoms, the citizenry are distracted by trash-talk radio and TV, courtesy of a mass media owned lock, stock and barrel by six corporations.

Complacency and fatalism reign supreme, and the Elites are loving it because a confused, doped out, distracted, apathetic, complacent, fatalistic populace is easily duped and manipulated.

What Michael foresees as our future is what I term devolution. We differ on two points, which Michael already knows from our voluminous correspondence. So I want to be sure to note that I am not reading this into Michael's commentary--these are my thoughts.

I think we will devolve to "tipping points" or phase shifts where systems will break down. This won't necessarily lead to chaos but it will lead to something beyond complacency and fatalism. It could be negative or it could be positive; that choice is ours.

I believe that the loss of wealth, the extremes of income inequality and the credit/debt implosion are all phase shifts which have already occurred, but the status quo Power Elites and citizenry alike are in denial, hoping that some miracle of additional borrowing will re-set the clock back to the era of bogus "prosperity."

Those hopes will be proven futile because simulacrum is not reality and delusion is not a practical substitute for actual solutions.

I differ somewhat with Michael on solutions, as I think all solutions come from the margins. While I hope for technological solutions, I am skeptical because our consumerist mindset is fixated on the notion that "buying something new" will somehow solve all our problems.

Mo offense to Prius owners, but I suspect we've all been sold a bill of goods on its benefits. The entire cost of a vehicle, or any manufactured object, is called its lifecycle costs. This means calculating the cost in money, energy and resources of everything required to manufacture the vehicle--not just the steel, but the cost of pumping water to make the steel, mine the ore, etc.

Now a Prius has two components which simply do not exist in a stripped down ICE (internal combustion engine) vehicle: a large battery pack and extremely complex electronics for switching between electric and ICE drive.

Batteries require a stupendous amount of costly resources to manufacture. Until batteries are made of sand (silicon) or equivalent materials and do not require highly complex processes, they will remain costly. They are also toxic and therefore costly to recycle/ dismantle properly.

Thus I suspect that if you include the full lifecycle costs of manufacturing a Prius, the cost of maintenance and the fuel it burns (or the electricity used to recharge its batteries) and the disposal/recycling of its components, and weigh them against a high-mileage cheaper vehicle like a Honda Civic or subcompact Ford/GM, the Prius is probably less efficient and less environmentally sound than the cheap ICE vehicle.

"Buying something new" might not be the answer at all except at the margins--transformers that lose less energy, electronic power converters which are suddenly mandated to be efficient rather than energy hogs, etc. etc. Perhaps the Consumerist Gods will fail to be the "solution."

Just as technology changes at the margin, so too does behavior. I have to disagree with Michael about growing veggies, because as I have said before, "a garden and a homecooked meal are revolutionary acts." These simple acts are revolutionary because they upend the oppressive regime of agribusiness, packaged/fast food and the sick-care system--all parts in a seamless system of ill-health, derangement, torpor and chronic disease which can be treated with enormously expensive and mostly needless medications and procedures.

This is what I term an integrated understanding of the entire system of growing and consuming food and health. Agribusiness, fast food, high salt, high fat and high sugar processed "foods" (poisons is a more accurate term), chronic illness and various derangements, and an immensely profitable sick-care system are all one. There can be no "solutions" without an integrated understanding that simple behaviors are the heart of any and all real solutions. Buying something "new" is a simulacrum "solution" marketed to reap profits.

The solution to sick-care starts not with 1,000 pages of legislation, paid for with trillons of dollars of borrowed money but with an understanding of the causal connections between gardening, vegetables/food, cooking rather than consuming, self-reliance, goal-directed activity and responsibility for one's health.

The market will create the proper incentives to conservation and wise choices if it is given a chance. When gasoline is $10 a gallon (and it will be), then people will change their behaviors as common sense dictates. When peaches cost $10 a pound, then all the fruit that drops to the ground to rot now will be collected before it rots.

I read somewhere about a town in Alaska (I forget the source) which lost its electrical service and had to rely on costly generators for some time. The cost was passed onto consumers. As if by magic, electrical consumption dropped 40% overnight. No new devices were required; the Consumerist Gods were shedding tears and wailing mightily, for the "solution" was behavioral.

Yes, technology promises many innovations, but how we live offers much cheaper, easier and more environmentally sound solutions without waiting around for mechanical/electronic saviors promoted by the Consumerist Gods.

I would like to end with a mindful haiku from resident haiku poet Jed H.:

End of an Era
A Culture of Corruption
End of the Empire.

Here it is with Jed's notes:

END of an Era ( i.e., the Boom-times: 2000- 2007 a la 1920s )
A Culture of Corruption
END of the EMPIRE ! ( i.e., US of A is on its Downhill Slide, like Romans ! )

Thank you, Jed, for a poetic summation of "the end of an era."

Don't ditch that baby! In praise of western civilisation

The West in a Nutshell is a collection of essays that ranges widely from sport to geopolitics. Essayist Paul Monk applauds western literary and philosophical traditions and the encouragement of creativity and conceptual thinking they enabled.

Download audio


Jessica Stern is an expert on terrorism. In this conversation, first broadcast in 2003/4, Jessica talks about her book which is the result of 4 years research, interviewing a range of Jewish, Christian and Muslim terrorists.

Download

I've got to agree with Sheehan in the SMH on the weekend, here, while I think that US policy in the Middle East is flakey and counterproductive and the hardball of the last century left the Arab world with nothing but profound and chauvanistic extremisms to defend their sense of self, I really wonder how the enlightenment project can work in a nation indifferent to the classic social virtue of religious tolerance. In the middle ages Jews and Christian dissidents fled to the safety and tolerance of classic Islamic civilisation, without which the heritage of the Greeks would never have made it to Europe. The Mongols, colonialism, the triumph of the science and the technological revolution the mastery of nature spawned smashed that classic Muslim liberalism. The Americans enabled the rabid antiwestern fundamentalism of the Saudi's and funded a coalition of ratbags to defeat the USSR in Afghanistan.

The last gasp of an unreconstructed tribalism? A reaction to the suppression of political moderation in the arab world? Time will tell.

All five of those arrested on terrorism charges were treated with great generosity by Australia as they set up new lives here. But their behaviour in court has been an exemplar of the problem of reconciling sharia with civil law. One of the accused, Wissam Fattal, refused to stand as the magistrate read out the charges and followed this with a torrent of abuse as he was led out of the court. Another of those charged, Nayef El Sayed, informed the court he would stand for no man, only for his God.

In other words, they accept only sharia, the rest is a charade.

Even the family and supporters of the accused went out of their way to express contempt for the legal system and, by extension, the society it represents. Reporters were called ''faggots'' and ''dickheads'' amid a general attitude of animus recorded by the journalists covering the proceedings.

I have observed the same thing first-hand numerous times during criminal trials involving Muslim defendants, families and supporters.

In every case, the idea that Muslims are in trouble because they have been ''marginalised'' by society is reality turned on its head. They are the ones who have marginalised a society they are happy to exploit but not respect.

http://www.smh.com.au/opinion/ideological-passion-sells-us-short-20090809-ee65.html?page=-1

The Shadow Banking Pyramid

The current spate of fraud on Wall St., and specifically the front-running and market manipulation scams being committed by Wall St. banks on the floor of the NYSE and other market making venues, is finally getting some coverage This would be good news if it weren't meaningless.

Some background: I first started reporting on the rigged markets scandal in the U.S. and the U.K. five years ago in the pages of The Ecologist magazine in the U.K. I predicted that the unraveling of FannieMae and FreddieMac was all but certain due to explicit accounting fraud. I was one of many pointing out the blindingly obvious, but this information was kept out of view from the main stream America for fear it would frighten the sheep into cutting back on their leveraged speculation and consumption; using their homes like ATM machines. In an economy dictated to by the unholy triangle of GE, CNBC, and Wall St. selling their wares of weapons, propaganda and lottery tickets, delusions (and fiat currencies) must never be questioned.

Talking about crooks on Wall St. has been a staple while co-hosting my radio show in London with Stacy Herbert on ResonanceFM 104.4, "The Truth About Markets." Week after week we forensically describe the workings of Wall St. frauds -- drawing on my experience as a former Wall St. trader and inventor of patented financial engineering technologies used on Wall St. today -- to explain how the scams are done in full view of the SEC and CFTC. ResonanceFM is a musicians cooperative listened to primarily by bong smoking squatters in Shordditch who, by virtue of the fact that mainstream American and British media chose not to cover these crimes left open a niche for us to cover, have become preternaturally knowledgeable about fraudulent Collaterized Debt Obligations, Special Purpose Entity Accounts and High Frequency Trading Arbitrage. Many of these pot heads thank me today because many of them put their meager savings into gold bullion as we have been suggesting since 2002 -- which shot up 40% against the British Pound last year.

In 2006 I started making documentaries for Al Jazeera English. Death of the Dollar, Rigged Markets and Money Geyser explained, respectively, the structural weakness of the dollar, the structural weakness of the New York Stock Exchange, and the structural weakness of the global currency grid and in particular the currency and economy of Iceland. A year later, the Icelandic krona and the economy evaporated in a cloud of currency 'carry trade' ice and dust exactly as we predicted it would.

In 2007 the sup-prime scandal and the controlled demolition of Bear Stearns and Lehman Brothers got under way thanks to the Washington-Wall St. revolving door that gave us the Goldman Sachs-Oval Office axis of insider trading; the S&L crash, the 1987 crash, the Long Term Capital Management (LTCM) crash, the crash of Drexal Burnham, Enron, WorldCom and the dot-com crash. America has become the most corrupt empire in history and since the debts that caused each of these catastrophes was never paid off, but simply put off the balance sheet and traded in what Prime Minister Gordon Brown calls the 'Shadow Banking System' or to be more precise the Shadow Banking Pyramid, Americans can expect to live in the shadow of this debt pyramid in perpetuity.

America's debts are bigger than the entire GDP of the world, so unless the whole world decides to bail out America by gifting America 100 percent of their wages and profits for a year or more America can forget about ever digging out of its debt entombment.

In 2008 I produced and presented a series for BBC World News, The Oracle. For ten weeks I hammered away reporting on the rot that was threatening to take down America; the duplicitous spewings of Hank Paulson, Ben Bernanke, and Tim Geithner, as well as the parasitical machinations of the Fed, so I wasn't surprised when Congress appeased financial terrorists on Wall St. and coughed up 700 billion dollars in ransom at the end of last year to ensure payment of Goldman Sachs' bonus pool for 2008 and 2009.

This is why I do not believe that the main stream media's belated reporting on Wall St. scandals is meaningful. It's too late. Like the New York Times sitting on the Bush wire tap story until after the election of 2004, the story of banking buccaneers and vipers in the New York Times reads more like a requiem than a news story.

The Egyptians had the great pyramids in the Valley of the Kings we have the great pyramids of debt created in the canyons of Wall St. These are now permanent features of the American and British financial landscape that have effectively turned Americans and Brits into debt slaves.



http://www.huffingtonpost.com/max-keiser/the-shadow-banking-pyrami_b_245988.html

The Coming Siege of Austerity ~

April 13, 2009


It's a curious symptom of the consensus trance zombifying the American public and its auditors in the media that something like a "recovery" is now deemed to be underway. And, as events compel me to repeat in this space, it begs the question: recovery to what? To Wall Street booking stupendous profits by laundering "risk" out of bad loans with new issues of tranche-o-matic securitized paper? This I doubt, since there isn't a pension fund left from San Jose to Bratislava that would touch this stuff with a stick, even if it could be turned out in collector's editions of boxed sets. Does it mean that American "consumers" (so-called) are awaited momentarily in the flat-screen TV sales parlors with their credit cards fanned-out like poker hands, ready for "action?" Not too likely with massive non-performance out in cardholder-land, and half the nation's electronics inventory wending its way onto Craig's List. Are we expecting more asteroid belts of new suburbs carved in the loamy outlands of Dallas and Minneapolis, complete with new highway strips of Big Box shopping and Chuck E. Cheeses? Go to banking's intensive care unit and inquire (if you can) among the flat-lining production home-builders and the real estate investment trusts on life support when they expect to rev up the heavy equipment.
The idea that we're about to resume the insane behavior that induced the current epochal malaise of economy is so absurd it will only be heard in the faculty dining halls of the Ivy League. And if America is not picking up where it left off eighteen months ago -- the orgy of spending future claims on wealth unlikely to accrue -- then what is our destiny? Based on what's out there in the organs of public thinking, it seems that we don't want to think about it.
So many forces are arrayed against a return to the previous "normal" that we will be lucky, in another eighteen months, to still find ourselves speaking English and celebrating Christmas. What's "out there" is a panorama of mutually reinforcing critical problems pertaining to how we live on this continent. Like the obesity, heart disease, and diabetes that plague the public, these problems are disorders of lifestyle habits and the only possible "cure" is a comprehensive revision of lifestyle. With the onset of spring weather and the cheez doodles and monster truck rallies and Nascar tailgate barbeques and the drive-in beer emporiums all beckoning, can the public shift its attention from these infantile preoccupations to saving its own ass?
So far, the most striking piece of the economic fiasco is the absence of any galvanizing spirit among the millions getting crushed in the tragic unwind of our relations with money. It will be interesting to see, for instance, if there is any uproar over the evolving story of Goldman Sachs's latest raid on the US Treasury, after booking billions in taxpayer-funded payouts funneled through AIG, based on double-hedged credit default swaps. Such magic tricks are understandably hard to follow, but a dozen-or-so federal attorneys with a middling background in differential calculus might suss out the trail that leads from Ben Bernanke's work station to Lloyd Blankfein's cappuccino machine.
Something similar may be said in regard to revelations last week of White House economic advisor Larry Summers' connection with a number of hedge funds shoveling millions into his deep pockets for showing up once a week to cheerlead their "innovations" -- not to mention his shadowy visits to the Goldman Sachs gravy train even after he signed onto the Obama campaign. As long as the stock markets seem to rally -- no matter what else is really going on in America -- nobody will pay much attention to these disgusting irregularities.
Since it is that time of year, and I am haunting the gardening shop, one can't fail to notice the many styles of pitchforks for sale. My guess is that the current mood of public paralysis will dissolve in a blur of blood and spittle sometime between Memorial Day and July Fourth, even with Nascar in full swing, and the mushrooming ranks of the unemployed lost in raptures of engine noise and fried cornmeal. It doesn't take too many determined, pissed-off people to create a lot of mischief in a complex society.
On the agenda in the second quarter of '09 are ominous rumblings in the oil and food sectors. Half a year of cratered oil prices have decimated the oil industry and we're driving at 100-miles-an-hour straight off a cliff into a new kind of supply crisis -- even if industrial production and global exports remain moribund. So many drilling rigs are being decommissioned that the oil industry itself looks like it's preparing for its own death, investment in exploration and discovery has withered with the credit markets, and the world may never recover from the year long hiccup in oil industry activity -- translation: peak oil is biting back now with a vengeance. Its peakness will look peakier and the yawning arc of depletion beyond will look steeper and pose a threat to every globalized and continental-scale enterprise in the known world.
So many dire elements are ranging around our food production system (i.e. farming), from widespread drought and water table depletion to "input" shortages (especially fertilizers) to sickness in credit availability, that we're all one bad harvest away from something that will make Pieter Bruegel-the-elder's "Triumph of Death" look like Vanity Fair's annual Oscar Party in comparison.
Barack Obama, charming as he is, had better drop his pretensions about kick-starting the old consumer economy, fire the Wall Street clowns and parasites who are running that futile exercise, and start preparing a US Lifeboat Economy aimed at reducing the scale and scope of our outlays so we can survive the coming siege of austerity. Meanwhile, I'm glad that he finally got a dog for the White House, because the President knows full-well where to turn in Washington if you want some genuine love and affection.

Labor's salvation would be the moral courage

And the political courage to turn on those who used a once in a lifetime credit bubble to enrich themselves by looting public companies. The complication is that the money captured the ALP as well and they would have to start with a good long look at Sussex Street.

Verrender in todays SMH is building a nice list:

"If David Coe was in the wrong place at the wrong time in 2008, the corollary is that his success during the previous two decades was all down to luck, an argument that was never put forward during the boom. On the contrary, a famous article in one business journal during that time proclaimed Coe and several others as "Masters of the universe."

Charming, disarming, hugely ambitious, intelligent and driven, Coe knows how to work an audience, either en masse or individually. He's a master in the art of massaging public opinion.

Until late 2007 he almost universally was regarded as a "good bloke", who had established himself as a benefactor and philanthropist. But it became clear that generosity began at home when he and his erstwhile business partner, Gordon Fell, crossed the line with their aptly named Rubicon Holdings.

This was a property management company with listed trusts operating in Europe, America and Japan. In a short space of time, Coe, Fell and another partner loaded the company up with debt, spent billions acquiring what turned out to be overvalued real estate and then bought dodgy debts from other real estate players which sweetened the blancmange. Then, shortly after the credit squeeze hit late last year, they sold the whole mess to Allco.

Between them, the Rubicon founders personally pulled about $64 million from the sale of their privately controlled company to Allco, a public company of which they were both directors. That doesn't take into account the $100 million or so in fees they raked from Rubicon before the sale."

Lets put David Coe on the short list, anyway.

No leadership anywhere

All through the Western world young technocrats are tweaking national economic models, factoring a temporary credit hicup that has knocked consumption expenditure and sending in reports asserting that as growth is far below the trend line only a catch up can be expected.
Meanwhile, politics has become so focused on managing relationships with those who fund election campaigns and those sectors that provide state revenues that the policy formulation process has been almost completely coopted by the need to offer political favours rather than the dispassionate scientific analysis of policy options and there promation.
Do you really think, for example, that the promise of carbon sequestration alone is responsible for the high profile this technology gets in the west.

As Machiavelli pointed out, real change is difficult; those who will benefit from change lack power while those who will lose by it are well established.

As cheap money and credit creation proliferated and asset prices exploded the property and finance sectors of the economy became more and more overweight they became important political players, capturing the local, state and national party apparatus and evolving into the senior patrons of our western institutions.

Thats why the bailout to date has been all about applying the shock paddles of bailouts and the amphetamines of even cheaper money to the sick and financially obese polity rather than accepting that only detox and rehab offer any future. The phantom wealth of the credit bubble and perverse patterns of activity engendered by the monetisation of illusionary gains completely captured politics.

That's why both the money needed for work relief and green jobs and the capacity for saving and capital formation that will be desperately needed for new sustainable and efficient production systems in agriculture and production is being squandered on futile efforts to prop consumption.

Western leaders will be found who will bite the bullet and abandon, repudiate and punish those responsible for this long terrible sleepwalk into disaster: the property and real estate carny barkers, the directors of public companies unresponsive to the will of shareholders, the housing developers against local democracy, the auditors and accountants who certified an oligopoly of greed and tax fraud as prudent in return for a place on the gravy train. And generally, a whole media, business and professional elite that apropriated twenty years of productivity growth on the promise of prosperity for all when they delivered instead declining real incomes, insecurity of tenure and equal opportunity disaster.

The only question is if we will get these new paradigms and policies by way of the bold moves of a refreshed political class and active interested citizens or lose it all by way of complete collapse first.

I'm not the only one thinking along those lines.

Kevin McKern 10/12/08

"The Bank for International Settlements (BIS) issued a report on global lending and bond issuance that says both are down 70-80%, with bonds in Euros dropping 94%. This means companies can't borrow from banks, nor can they expect to raise capital in the bond markets. The result should be obvious: tons of companies, from small to large, will inevitably have to declare bankruptcy. This is true in the US, in Europe, in Japan, and the bankruptcy and job loss wave will spread from there to the rest of the planet, in a self-reinforcing manner, feeding off itself.

I would truly expect governments to prepare for this wave. However, I see no such action anywhere. Which I think will have very dire consequences, with millions of people on both sides of the Atlantic, and in markets worldwide, with no chance of finding work, and no hope of receiving government (financial) support: there'll be too many of them. All this will put enormous pressure on individual countries and their political systems.

Governments, meanwhile, use what money they can get to prop up an insolvent financial system, whereas their prime concern should be to feed and clothe their citizens, and make sure they have shelter and clean water. If you know of a government that is looking at these issues today, I'd like to know about it.

And before you knee-jerk that the central banks and Treasuries will simply print these amounts: (an) EU payment moratorium will come because the countries can't pay: the positions are beyond the ability of the EU governments to bail them out without a cessation of CDS payments.

They can't, it's end of the line, no hyper-inflation, a giant default wave, more morose attempts to save banks that should have been thrown out the window years go, and no money to take care of the millions of desperate citizens roaming the streets.

Banking and investing as we've known it won't be back for at least decades. The upcoming round of bank failures, which will leave very few, if any, standing, cannot be prevented.

A lot of the suffering among ordinary people can (be prevented), if only through using the current bail-out funds to make sure every American and European can get at least their basic needs fulfilled . But no politician anywhere is even looking at this reality, and the citizenry has been kept in the dark. It makes the implosion of entire societies an easily predictable fact."

Ras does the shops, empty as, apparently

1. Best Buy: Entered store at 11:00 am. Nearly empty. Stocked to the gills with XBox 360s and every version of "Guitar Hero" from Guns N' Roses to The Chipmunks. At least three-thousand different models of hi-def screens on display but no one even perusing them. Walked around the store several times trying to avoid the desperate sales people, but to no avail. When I finally let one clipboard-clutching clerk corner me, we immediately got into a discussion as to how sales were this season. "Don't ask", was the reply.

2. Next stop, Circuit City, approximately 12:00 noon: If Best Buy was poorly populated, then Circuity City was an absolute ghost town. Not only was the store almost completely empty, but the redshirted retail Rickey's appeared startled that someone (me) actually stumbled into the store. Practically tripping over one-another to offer me assistance, the poor things seemed like children starving for attention. Again, store jammed floor-to-ceiling with gimcracks and geegaws. Prices slashed on virtually item in the store. Free financing for life, practically.

3. Then, it was off to the mall, approximately 1:00pm.: With there being only two more weekends of mall shopping left before XMas, I was sure that the mall would be filled with sheeps ready to spend, spend, spend. Wrong, wrong, wrong. Again, I was shocked at the near-total lack of lambs and the mall personnel all loitering around as if this was to be expected. I even entered that Nirvana of Consumerism--The Apple Store, and for the first time ever in my recollection, there were more tatooed-and-spiky-haired Apple reps than there were customers in the store.

4. At that point, I scurried out of the mall and just for fun stopped in a gigantic pawn shop on the way home Well, imagine my surprise when I saw that the pawn shop was offering thirty friggin' percent off of everything in the joint! Furthermore, the only people in the place (besides me) were those lined up trying to pawn everything from paint-sprayers to iPods. Needless to say, the pawn shop was already over-run with these items and they were turning away the downtrodden in droves.

Podcast: Satyajit Das on Late Night Live

A final conversation for the year with LNL's financial crisis analyst. He talks about President-elect Obama's key economic advisers, the likely future of banking, and the effects that have been felt around the world.

Satyajit Das

Rant of the day ~ Collapse

Comes from Patrick Henry, Armchair economist


Hedge Fund Collapse - Major - (excerpts)

I predict and have been saying for some months now that we will experience a major hedge fund collapse soon. This will be larger than the collapse last year of the of $9 billion hedge fund Amaranth Advisors....



Also it is fascinating to see how desperately this entire process is failing...

Not even the idiots making decisions to bail out industries in Washington right now have the stomach to hand over the money to the likes of Cerebus. They would go to jail for something like that.

What if Chrysler / GMAC / Cerebus all go down the tubes? What a party that would be.

Don't be stupid. Shake all preconceived notions about the US stock market being a place to put your money for your future. The world is being reshaped as we speak and until the idiots running our government have the "balls" (for lack of a better word) to shut down the massive unregulated markets that trash the global financial system for a living and admit all of the norms that have defined the functioning of the capital markets have been completely destroyed by this massive unregulated market and their creation of "products" to place their highly leveraged bets, normal people must stay as far from this circus as possible.

If you are saving for your future, get out of the sucker's stock market before it becomes an empty dustbin.

How to become an epicurian hacker philosopher zen master.

Hat tip to Divided By Zer0. thx ace.

1. The world is full of fascinating problems waiting to be solved.

Being a hacker is lots of fun, but it's a kind of fun that takes lots of effort. The effort takes motivation. Successful athletes get their motivation from a kind of physical delight in making their bodies perform, in pushing themselves past their own physical limits. Similarly, to be a hacker you have to get a basic thrill from solving problems, sharpening your skills, and exercising your intelligence.

If you aren't the kind of person that feels this way naturally, you'll need to become one in order to make it as a hacker. Otherwise you'll find your hacking energy is sapped by distractions like sex, money, and social approval.

(You also have to develop a kind of faith in your own learning capacity — a belief that even though you may not know all of what you need to solve a problem, if you tackle just a piece of it and learn from that, you'll learn enough to solve the next piece — and so on, until you're done.)
2. No problem should ever have to be solved twice.

Creative brains are a valuable, limited resource. They shouldn't be wasted on re-inventing the wheel when there are so many fascinating new problems waiting out there.

To behave like a hacker, you have to believe that the thinking time of other hackers is precious — so much so that it's almost a moral duty for you to share information, solve problems and then give the solutions away just so other hackers can solve new problems instead of having to perpetually re-address old ones.

Note, however, that "No problem should ever have to be solved twice." does not imply that you have to consider all existing solutions sacred, or that there is only one right solution to any given problem. Often, we learn a lot about the problem that we didn't know before by studying the first cut at a solution. It's OK, and often necessary, to decide that we can do better. What's not OK is artificial technical, legal, or institutional barriers (like closed-source code) that prevent a good solution from being re-used and force people to re-invent wheels.

(You don't have to believe that you're obligated to give all your creative product away, though the hackers that do are the ones that get most respect from other hackers. It's consistent with hacker values to sell enough of it to keep you in food and rent and computers. It's fine to use your hacking skills to support a family or even get rich, as long as you don't forget your loyalty to your art and your fellow hackers while doing it.)
3. Boredom and drudgery are evil.

Hackers (and creative people in general) should never be bored or have to drudge at stupid repetitive work, because when this happens it means they aren't doing what only they can do — solve new problems. This wastefulness hurts everybody. Therefore boredom and drudgery are not just unpleasant but actually evil.

To behave like a hacker, you have to believe this enough to want to automate away the boring bits as much as possible, not just for yourself but for everybody else (especially other hackers).

(There is one apparent exception to this. Hackers will sometimes do things that may seem repetitive or boring to an observer as a mind-clearing exercise, or in order to acquire a skill or have some particular kind of experience you can't have otherwise. But this is by choice — nobody who can think should ever be forced into a situation that bores them.)
4. Freedom is good.

Hackers are naturally anti-authoritarian. Anyone who can give you orders can stop you from solving whatever problem you're being fascinated by — and, given the way authoritarian minds work, will generally find some appallingly stupid reason to do so. So the authoritarian attitude has to be fought wherever you find it, lest it smother you and other hackers.

(This isn't the same as fighting all authority. Children need to be guided and criminals restrained. A hacker may agree to accept some kinds of authority in order to get something he wants more than the time he spends following orders. But that's a limited, conscious bargain; the kind of personal surrender authoritarians want is not on offer.)

Authoritarians thrive on censorship and secrecy. And they distrust voluntary cooperation and information-sharing — they only like ‘cooperation’ that they control. So to behave like a hacker, you have to develop an instinctive hostility to censorship, secrecy, and the use of force or deception to compel responsible adults. And you have to be willing to act on that belief.
5. Attitude is no substitute for competence.

To be a hacker, you have to develop some of these attitudes. But copping an attitude alone won't make you a hacker, any more than it will make you a champion athlete or a rock star. Becoming a hacker will take intelligence, practice, dedication, and hard work.

Therefore, you have to learn to distrust attitude and respect competence of every kind. Hackers won't let posers waste their time, but they worship competence — especially competence at hacking, but competence at anything is valued. Competence at demanding skills that few can master is especially good, and competence at demanding skills that involve mental acuteness, craft, and concentration is best.

If you revere competence, you'll enjoy developing it in yourself — the hard work and dedication will become a kind of intense play rather than drudgery. That attitude is vital to becoming a hacker.

more

Rasipedia #14: The final edition

Update #14 to Rasipedia: The final insult.

1. Well, they have finally done it. The world's governments and central bankers have pulled out all stops, taken off the gloves, put on the brass knuckles, pulled out the chockos and are now trying to pummel the epic, global, systemic financial collapse into submission with, literally:

Infinite Fiat

That's right. Infinite Fiat will now be employed by TPTB to attempt to revive the moribund credit system.

The Federal Reserve, acting in concert with virtually all other central banks worldwide, announced this morning that they will lend--without limit--to the failed financial gamblers, literally infinite fiat.

The world's governments have simultaneously announced that they will be nationalizing all banks and financial institutions.

Period.

So, after these two moves, there is literally nothing left to report.

There is NO option beyond Infinite Fiat and nationalization of the entire world's banks and financial systems.

Therefore, my work is done here.

You're on your own now.

(Final Ras Note: Firstly, we had it drilled into our little heads all our lives that "Free Market Capitalism is the Path to Prosperity". Now, we come to find out that in fact, ONLY a socialist/fascist model is what really works--as is being demonstrated now due to the ten-percent-across-the-board jump in equity indices all over the world upon the announcement of Infinite Fiat and mass nationalization of the entire planet's banks and financial system.

Therefore, I don't want to hear any politician, economist, pundit, stock shill, or MSM media type ever again state that Capitalism is anything but a dismal, abject, failure.

Secondly, perhaps one hundred years from now these Rasipedias will pop up in some musty archive, to be referenced by some student in some small college who is looking for precedents to THAT generation's bubble and bust.)

Now, onto the "Cliff Notes Version" of the Rasipedia, then on to the final Rasipedia itself:


"Cliff Notes Version" of Rasipedia.


1. The "Ponzi Pyramid of Debt Death/Bretton Woods II" that was the world's financial system collapsed five weeks ago today. Tens of trillions of electronic fiatscos were evaporated from the servers and spreadsheets housing them.

2. Literally every single large financial instution failed, simultaneously. Worldwide.

3. The world's governments and central banks have been performing ever-greater and more desperate maneuvers to revive the now-decaying corpse, pumping in seven trillion fiatscos.

4. So far, their efforts have shown little success as the spillover effects on the credit and equity markets can no longer be hidden.

A full blown, up-in-your-face credit collapse and stock market colllapse has ensued. Again, worldwide.

5. Coming next: "Great Depression II Meets Mad Max".

6. Therefore, we're scroomed.

(Ras): So, there you have it. The "short-and-sweet version" of Rasipedia.

Perhaps you might have better luck getting through to the sheeple if you send them this version, as opposed to the opressive, boring "Sunday Edition" of the Rasipedia. At least there is some hope that the sheeple will read it, even if they don't understand or believe it.

LOL.

Now, onto the "Sunday Edition" of the Rasipedia:


UPDATED RASIPEDIA (10-12-08):


Table of Contents:

Section 1: Layman's explanation of the systemic, worldwide financial collapse

Section 2: Timeline of "Fannie/Freddie Big Bang" leading to worldwide, systemic financial collapse

Section 3: What will happen even though the "Hanktator Act" was enacted.

Section 4: The four questions that were never asked during the Congressional hearings on the "Hanktator Act"

Section 5: Special section: The Fed's unprecedented move to backstop the entire $4 trillion money market fund sector

Section 6: All government and central bank efforts to date to combat the systemic global financial institution collapse

Section 7: Other Countries' Efforts to Fight the Financial Collapse:



Individual Sections of the Rasipedia:


Section 1: Layman's explanation of the systemic, worldwide financial system collapse

Layman's explanation of our situation:

1. The current "Ponzi Pyramid of Death" monetary system is crumbling. This system was constructed from the following "sections", each one of them more dangerous and fraudulent than the one below it. Here are the sections in top-to-bottom order:

Derivatives ($600trillion)
Securitization ($10-$15 trillion)
Central Banking
Fractional Reserve Lending
Fiat Currency


2. Right now, virtually every single large bank, medium-sized bank, hedge fund, pension fund, mutual fund, money market fund, stock broker and insurance company on the planet has failed or is failing. All the trillions of dollars phony paper they have been trading back and forth is virtually worthless.

3. Somewhere between $10-$20 TRILLION (estimates are hard to make due to the opaque nature of the derivatives markets) in debt and derivatives "value" has been wiped off the books of the above-mentioned players.

4. The players are failing left-and-tight. ALL of the biggest, oldest Wall Street banks, plus the largest insurance company plus the two largest mortgage companies (Fannie and Freddie), plus the entire money market, plus the largest U.S. S&L (WaMu) and the fouth-largest U.S. bank (Wachovia), the largest U.S. insurance company (AIG), all failed in the span of five weeks. The rest of the thousands of institutions worldwide were also mortally wounded and are now toppling over, en masse.

5. Governments and central banks worldwide have already pumped approximately $7 trillion collectively into the failed financial system to date to fight this systemic, sychronized, worldwide, complete, utter collapse. So far, their efforts have failed. Credit is not flowing between banks and stock markets are crashing worldwide. Many stock exchanges have been closed outright. Entire banking systems have been nationalized, or will be shortly.

6. At this point, the fight will continue to the death. During these next few weeks, months, and even years the "economic convulsions" between the "Ponzi Pyramid" debt collapse destruction-deflation and government and central bank reflation/monetization/nationalization efforts will rage, with the back-and-forth battles getting wilder and wilder, until:

7. The entire world will plunge into a final financial demise, with the people of all the nations suffering mightily. "Great Depression II" will ensue for the next five to ten years.

8. During this time, if the world doesn't blow itself up in all the wars that will surely follow, tens of millions of people in the U.S. are going to learn to fear debt and living beyond their means. This is a good thing.

9.Eventually, hopefully, the U.S. pulls through in one piece, the people's stock, bond, and housing assets are decimated, many have lost their jobs, but we all learn discipline, humility and sobriety and as a result, our national character grows.

10. We emerge as a chastened and humble nation, and so do the other nations who have contributed to this Ponzi Pyramid of Debt and Derivatives Death". Exactly what we need.



Section 2: Timeline of "Fannie/Freddie Big Bang" leading to worldwide, systemic financial collapse

In order to help put into context the rapidly-moving events surrounding this systemic worldwide financial collapse, below is a timeline of the "Fannie/Freddie Big Bang" that touched off the derivatives implosion, which is why so many instituions failed simultaneously, worldwide.

To wit:

Timeline of "Fannie/Freddie Big Bang" CDS implosion, leading to current total, systemic, global financial collapse:

1. September 7th, 2007: Treasury takes over the failed Fannie and Freddie and FHLBs.

2. September 7th, 2008: All counterparties to the multiple tens-of-trillions of fiatscos of CDS positions are instantly thrown into chaos since many of these OTC private contracts are poorly documented and the gamblers are poorly capitalized and unable to pay up on the bets. (Many players immediately start failing that very week).

3. September 8th, ISDA issues an emergency press release confirming that there are huge (but undisclosed) amounts of CDS trades outstanding on Fannie/Freddie debt. ISDA urges emergency conference call with Federal Reserve New York in attendance be undertaken immediately. The call takes place that very morning.

4. September 8th to present: The failed gamblers scramble to construct a list of the failed trades.

5. September 16th: The Fed, feds, and ISDA step in and try one last ditch attempt to make a market in all the destroyed derivatives positions during the emergency "ISDA Sunday Swap Meet", which is a complete, abject, utter failure

6. Immediately after this failed "Sunday Swap Meet", the following players instantly are ruined (but not all topple over immediately) :

a. Lehman Brothers
b. Merrill Lynch
c. AIG
d. Morgan Stanley
e. Goldman Sachs
f. (Update): WaMu topples less than three weeks later
g. (Update): Wachovia bit the dust exactly three weeks later

And the Grand Total of just the top financial institution failures so far:

1. Fannie Mae failed ($2.5 tril.)

2. Freddie Mac failed ($2.5 tril.)

3. FHLB system failed ($1.3 tril)

5. Merril failed ($800 bil.)

4. Lehman failed ($700 bil)

5. AIG failed ($500 bil. in CDS)

6. Goldman Sachs effectively failed ($2 tril)

7. Morgan Stanley effectively failed ($1.5 tril)

8. WaMu failed ($300 billion)

9 Wachovia failed ($800 billion)

Sub Total: Approximately $13.1 trillion

(And now the simultaneous collapse of virtually ALL of Europe's biggest banks, followed by the unprecedented move to nationalize all the fallen financial freaks by the European governments. Please see:Grand Total ALL Reflation/Nationalization/Monetization Costs to Date,worldwide )

Time-frame for this epic collapse of virtually every major financial institution in the U.S. AND now Europe:

Less than five weeks

...which clearly is a record.

(Ras Update: On October 2nd, ISDA held an "auction" to attempt to settle failed CDS positions on Fannie/Freddie underlying debt. Actual notional amounts were NEVER released, so we don't know how high the losses actually were to the parties who wrote the CDS "insurance". However, given the ratios of CDS-to-underlying debt of 10-to-1 and the supposed 90% percent recovery rate, I estimate that hundreds of billions of fiatscos are owed by the losers. A similar auction was held on October 10th on Lehman CDS positions. Again, my estimate is at least $400 billion is owed by the losers. Grand total all losses currently owed but not yet paid: $1 trillion.)



However, that's not all: also vaporized were virtually every:

1. Hedge fund
2. Pension fund
3. Insurance company
4. Mutual fund
5. Money Market funds, both in the U.S. and in all other major countries, worldwide.

Sub Total: Who knows? Probably trillions more


ALSO crushed, and even more dangerously so:

1. Some percentage of the $62 trillion credit default swaps market (Ras Note: Immediately after the "Fannie/Freddie Big Bang", ISDA began reporting that the swaps market was $54 trillion instead of the former $62 trillion--$8 trillion in positions evaporated--and offered NO explanation for this stunning drop.)

2. Some percentage of the $650 trillion overall derivatives markets

Sub Total: Who knows? I don't even want to guess anymore.



Section 3: What will happen even though the "Hanktator Act" was enacted

Now that the Hanktator Act has been officially passed, I am modifying my predictions for what will happen going forward--even though at this point it's anybody's guess as to what the heck will take place next in this insane economic environment.

To wit:


1. As of October 12th, I am no longer sure that bank runs won't be coming soon to a neighborhood near you. Especially since the U.K., Germany and France are this weekend set to announce the effective nationalization of their banking systems and the U.S. expressed similar intentions this weekend. These governments would not be making these unprecdented moves in unison if they were not concerned that the banks were about to experience a panic run on them, in my opinion.

2. I am also no longer sure that the Federal Reserve will be the first one lined up at Treasury's window to start trading in the now-almost-one trillion or so fiatscos worth of totally dead assets it took on its balance sheet from failed financial institutions around the world. This is because the entire U.S. banking system is on the brink of failure and Hank Paulson is now stating that he will use the TRILLIONS of fiatscos authorized by Congress to try to stave off collapse and a run on the banks. So, the Fed may have to wait--perhaps forever--to ever deal off these dead "assets".


3. One thing is for certain: The U.S. government has made it a top priority that house prices will not fall any further. Instituting everything from outright foreclosure forebearance to the authorizing of Fannie and Freddie to start purchasing dead, toxic MBS, the feds are desperately trying to keep the housing collapse from continuing unabated. Whether or not they will be successful remains to be seen. However, if these latest actions fail, you be absolutely assured they WILL resort to even more radical measures--even including the federal government literally buying empty houses outright and moving sheeple into them at no cost.

4. Clearly the U.S. automobile industry has failed and will be nationalized in one form or another. Whether GM absorbs Ford and Chryslyer first and then is absorbed by the federal government or whether they are all nationalized individually (with perhaps one of them allowed to be dissolved), it is absolutely guaranteed that there will be a government bailout of the U.S. auto industry.

5. Sorry to have to report this, but I still see tens of millions of people thrown out of work and/or losing their business. Especially in the bloated, useless "F.I.R.E" (Financial, Insurance and Real Estate) sector.

6. I am now fairly confident that that the sheeple's 401(k)/IRA mutual funds are going to be destroyed one way or another. Either through the continued stock collapse (as of this writing the DJIA, S&P and NASDAQ have all crashed apprroximately 40%) or through confiscation/taxation of their funds/gains. There are already discussions going on in Washinton D.C. as to how the feds might start tapping into the trillions of fiatscos currently trapped in the 401(k)/IRA system.

7. I still can't decide whether the U.S. bond market crashes or skies. If our Asian and OPEC debt-enablers keep buying up the multiple-trillions-more fiatscos of Treasury debt we will be issuing to fund all the bailouts, then perhaps interest rates stay low.

However, if our debt-enablers demand higher interest rates to compenasate them for the risk, or the Federal Reserve have to step up and fling some fresh fiatscos to buy the debt, then all bets are off and we could see a full-blown bond crash.

8. While the U.S. fiatsco has been on an upward rocket shot these last few weeks as other currencies collapse, I cannot make a confident prediction that this trend will continue. I just don't know how the debt funding will play out and this will be a large determinate as to the relative value of the U.S. fiatsco going forward.



Section 4: The four questions that were never asked during the Congressional hearings on the "Hanktator Act"

The four questions that were never asked during the Congressional hearings on the "Hankzooka Act" were:

1. Of WHAT exactly do all these instruments consist? (Categorically: MBS, CDOs/Squareds/Cubeds, CDS, other derivativtes)

2. Exactly WHO is holding them?:

3. WHAT are the actual, verifiable, CASH FLOWS on the instruments that the destroyed financial sector are trying to foist on the American taxpayer?

3.(a) WHAT is a reasonable estimate of the "worth" of these assets, based upon number 3 above?

4. WHAT "assets" has the Federal Reserve accepted in exchange for the fiat/Treasuries flung under the various "TAF-like" programs? From WHOM has the Fed accepted these "assets?" WHAT is the cashflow from these "assets?" At WHAT price did the Fed value these "assets"? Will the Fed be swapping these "assets" back out to the players with whom they did these deals? (And then will the players be dumping these assets onto the Treasury under the "Hanktator Act"?)

(Ras): Four simple questions. The truthful answers to which would instantly collapse our entire economy and financial system even more so than it already has, because the truth is just too ugly to reveal.

Which is why we haven't heard them asked, nor will we hear them answered.



Section 5: Special section: The Fed's unprecedented move to backstop the entire $4 trillion money market fund sector

The Fed's unprecedented move to backstop all Money Market funds:

First, a link to the Fed's "Interim Final Rule" on their loaning to the failed financial institutions enough fiatscos to try to revive the moribund ABCP scheme:

But we''re not desperate or anything. We just thought we''d do this outta the blue, on a Friday morning, because we weren''t very busy

Now, the KEY phrase from this document is this (with my emphasis added):

"To reduce liquidity and other strains being experienced by money market mutual funds, the Federal Reserve System adopted on September 19, 2008, a special lending facility that enables depository institutions and bank holding companies to borrow from the Federal Reserve Bank of Boston on a NON-RECOURSE basis if they use the proceeds of the loan to purchase certain types of asset-backed commercial paper (ABCP) from money market mutual funds (ABCP Lending Facility)."


Did you catch that part about "non-recourse"?

Do you know what that means?

Well, it means that when--not if--the ABCP the institutions hand the Fed in return for freshly-flung fiatscos goes bad, then THE FED WILL JUST EAT THE LOSS AND NOT, I REPEAT NOT, TRY TO RECOVER THE FIATSCOS FROM THE INSITUTIONS!!!


Section 6: All government and central bank efforts to date to combat the systemic, global financial system collapse

Government and Central Bank efforts from March, 2008 to present to fight the financial Collapse:

The sum, fiatsco-wise and in terms of actual actions, of the efforts of the various TPTB branches to fight the debt destruction convulsions and the related costs incurred to do so (so far) is presented below.

To wit:

Federal Reserve efforts undertaken to fight the credit collapse:

1. Dropped Fed Funds rates a total of 375 basis points, some of these moves being surprise rate cuts.

2. Also pounded down discount rates by similar amounts and means.

3. Created unprecedented, even borderline Constitution-contravening, now-trillion fiatsco TAF, TSLF, PDCF,"Fed,LLC", "Fed, AIG", "Fed Euro-swap" programs Then, extended time-frames, amounts and frequency of many of those programs.

4. Instituted the stunning "Fed-FDIC" program on Friday, September 19th, whereby the Fed backstops ALL money market funds (total fiatsco exposure amount: over $4 trillion by itself), accepting worthless ABCP paper with NO-RECOURSEto try to stop a run on the funds by panicked bagholders.

5. Accepted hundreds and hundreds of billions (and now perhaps trillions) of fiatscos of totally dead "assets" from failed Wall Street firms and will not disclose what those "assets" are, nor from whom they were accepted.

6. Offered JPM "sweatheart $75 billion loan" as part of Lehman liquidation (probably to square up some failed CDS positions)

7. Suspended "Rule 23(a)", allowing commercial banks to fling fiatscos to their failed investment banking arms

8. Began outright purchases of Agency debt on Friday, September 19th

9. Allowed Goldman Sachs and Morgan Stanley to--with no waiting period--change from investment banks into commercial banks. Changed "rules" so that Morgan Stanley can continue to perform investment banking functions. Changed the "rules" regarding minority ownership of these giants

10. Did a special $25 billion "TAF" to Goldman and Morgan

11. Raised "SOMA" account credit limits by 25% from $3 billion to $4 billion

12. In an unprecedented move, on September 29th, the Fed committed to injecting $630 BILLION in "liquidity" into the world's financial system. This injection took the form of increased "TAF-like" injections (also extended in duration) as well as MASSIVE "Fed Euro Swap" injections--probably to help fight the collapse of all the European institutions that are stuffed to the gills with bad paper sold to them by Wall Street.

13. Announced, on October 7th, that the Fed will be acting in concert with foreign central banks to extend the size and duration of the previous "TAF-Like" program. Also announced an unprecedented coordinated overnight funds rate cut in conjunction with the ECB, BofE, Canadian central bank, Sweden and Swiss national banks.

14. In a move that can only be decribed as "Crossing the Rubicon" the Fed, for the first time ever, announced on October 7th that it will create an "SIV" and directly loan fiatscos to corporations that participate in the commercial paper market. NO "collateral" is even necessary for the players to borrow from the "Fed SIV". Furthermore, NO limit to the amount of fiatscos provided by the Fed was announced. However, not even this ground-breaking, breath-taking step taken by the increasingly-panicked Fed lowered LIBOR rates. In fact, LIBOR rates actually ROSE on the day of the announcement.

15. On October 8th, The Fed pumped an additional $38 billion into AIG, raising the total to an astounding $123 billion so far. This latest, massive, injection coincidentally was made just twenty-four hours before the ISDA's scheduled auction to settle perhaps as much as hundreds of billions of fiatscos of failed CDS positions. AIG is reported to be sitting on $500 billion-plus in CDS "insurance" they sold to counterparties.


(Total liquidity/reflation/monetization effort costs on the part of the Fed):

Now multiple trillions of fiatscos, and no sign of let up, since they have proven they are willing to fling fiatscos in all directions to prop the money market funds and other failures. So don't for a minute believe that the Fed (or other central banks) are anywhere near throwing in the towel.

(Ras): That is one impressive list of accomplishments by the Fed in their battle against the debt destruction convulsions. Breaking all previous rules, precedents and protocols, the Fed is well on its way to playing out Bernanke''s promised "Roadmap to Weimar" as laid out in his famous 2002 speech:

"Deflation: Making Sure it Doesn't Happen Here".

However, these massive stunning, creative, and even nefarious moves on the part of the Federal Reserve don''t represent the total effort by TPTB to stave off economic collapse.

Far from it.

Next we will focus on the Treasury/Administration/SEC/FDIC gang's efforts and see just what rabbits they have pulled out of their collective hats. Trust me, they have produced an entire litter of "reflation bunnies" in their attempts to keep this collapsing system intact.

And here they are:


Treasury/Administration/Congress/SEC/FDIC efforts:

1. Congress proffered "Economic Stimulus Checks for Sheeple" program of $150 billion

2. Treasury floated various failed "Super SIV" programs before turning to the "big gun" efforts described below

3. Treasury (Hank Paulson) demanded, and received, from Congress an $800 billion (so far) "Bazooka" to nationalize Fannie, Freddie, FHLBs

4. Within six-weeks, Hank used that bazooka to take over the GSEs, injecting an initial $200 billion into these fallen frauds and also instituted a Federal Reserve-like function of monetizing GSE MBS. Also, offering "liquidity" for MBS

5. Treasury pulled off two emergency funding Treasury auctions totalling $200 billion to give Federal Reserve more ammo to fire at collapsing financial institutions worldwide

6. Treasury demanded "Hanktator" emergency legislation from Congress, giving Treasury literally dictatorial powers over the entire financial system. Further demanded authority to keep shuffling dead assets from Wall Street banks into government (and taxpayer's) lap

7. Treasury/FDIC/SEC arranged "shotgun weddings" between failed Wall Street banks, commercial banks and major mortgage originators

8. On Friday,September 19th., Treasury announced they were turning the GSEs loose to once again start snapping up dead MBS from the failed financial system

9.The FDIC quietly allowed banks and S&Ls to practice "foreclosure forebearance" which gives these failed institutions the authority to pretend that all their deadbeat real estate loans are "performing". Also, have quietly shut down or married off failed banks (And are just beginning this last effort, with perhaps thousands more to go.)

10.The SEC ruled that "Short-Selling Seditionists" are a financial threat and released a 799-member "untouchable" list of failed financial institutions which cannot be shorted. This action came after a smaller version of same was instituted in July. Have continually added to this list, including many non-financial stocks

11. The FDIC arranged an unusual THURSDAY NIGHT takeover of WaMu, dealing off its deposits to JPM. Additionally, and no surprise at all, WaMu's derivatives positions were also transferred to JPM

12. FDIC decided that the collapse of WaMu did NOT constitute a "Credit Default" therefore no CDS payments need be triggered. This is a HUGE event because the FDIC just basically negated ALL CDS contracts, in my opinion.

13. On September 29, the FDIC authorized that Citi take over the failed Wachovia. And, in what is becoming par for the course, Citi was allowed to "cherry pick" Wachovia's deposits and some of the debt, and the rest of the rotting carcass will be strewn across the backs of the taxpayers to be carried like so much rotting meat, similar to the recently-failed WaMu.

And who knows what further CDS bombs were set off by this latest failure of one of Wachovia, which is the world's largest financial institutions? My sense is that Wachovia's collapse was "not helpful" to the already devastated credit default swaps market in particular and the whole derivatives space in general.

14. ON September 30th, in yet another stunning move by the increasingly-desperate TPTB, the SEC and FASB decided to make it even easier for the failed gamblers holding dead, toxic "assets" to completely abandon any and all pretense of "mark-to-market" and just allow the mortally-wounded institutions to literally make up any "value" for these "assets" they deem necessary to shore up the ol' balance sheet.

The SEC and FASB offered a press release, found here:

But Rules are for little taxpaying sheeple, NOT big, failed, Wall Street gamblers.

...whereby they explain that it is perfectly okay for the destroyed financial institutions to simply make up whatever valuation they desire for the trillions of fiatscos worth of dead, rotting "assets" currently stuffed in the dungeons of their balance sheets.

This latest desperation move is obviously intended to obscure the massive, multi-trillion fiatsco losses which have crushed the gambler's corrupt enterprises until the Hanktator Act can be passed and these rotting corpses can be laundered through the new entity.

15. The SEC has extended the "Anti Short Selling Seditionist" emergency rule has been so successful in fixing all stock, bond, currency, debt-derivatives problems that they are extending it for another few weeks or so. Sheesh, and to think TPTB could have saved themselves all this heartache and stress of having to take the OTHER thirty or so unprecedented, emergency actions if they just would have implemented this one simple rule up front. Whod'a thunk it?

Oh well, better late than never I say.

16. IRS rules were changed to make the deal more palatable tax-wise for Wells. Here is the actual ruling:

"For purposes of Code Sec. 382(h), any deduction properly allowed after an ownership change of a corporation that is a bank with respect to losses on loans or bad debts, including any deduction for a reasonable addition to a reserve for bad debts, shall not be treated as a built-in loss or a deduction attributable to periods before the change date. This guidance does not affect the application of any provision of the IRC except Code Sec. 382. Banks may rely on this guidance until further guidance is issued."

...which, according to calculatedrisk blog, allows Wells to accelerate the tax write-offs associated with absorbing the failed Wachovia's "assets".

17. The Treasury is allowing Fannie and Freddie to buy FHLB MBS. I'm not sure why they are doing this since all the GSEs have been effectively nationalized, but there must be some nefarious method to this madness.

18. October 8th:The Treasury Department announced a "technical correction" that would allow them to backstop additional money market funds under Treasury's "Temporary Money Market Fund Guarantee Program". According to Treasury, MMFs that have a "policy of maintaining a stable net asset value or share price that is greater than $1.00 and had such policy on September 19, 2008" are now eligible to participate, provided the fund meets all of the other original requirements, which basically translates to: they haven't folded up shop yet.

19. October 10th: The G7 goons are at it again. After a reportedly contentious meeting on Friday, they released a statement, which can be found here:

A little fuzzy on details, but still scary nonethless.

And here is the "Money Quote Paragraph" from the statement:

"We are developing strategies to use the authority to purchase and insure mortgage assets and to purchase equity in financial institutions, as deemed necessary to promote financial market stability.


As we develop plans to purchase equity, as in the approach we are taking to broad mortgage asset purchases, we are working to develop a standardized program that is open to a broad array of financial institutions.

Such a program would be designed to encourage the raising of new private capital to complement public capital.

Consistent with the legislation, any equity the government purchases through a broadly available equity program would be on a non-voting basis, except with respect to the market standard terms to protect our rights as investors."


(Ras): If I am interpreting this paragraph correctly, the Treasury is going to purchase "equity" in a "BROAD ARRAY OF FINANCIAL INSTITUIONS" which to my little conspiratorial Rasputin mind says they will be buying into more than just the failed banks. It looks to me like they will buy into anything even remotely resembling a "financial institution".

Regarding the "private capital" thingy, it is my understanding that they are working on some kinda "Matching Funds" program whereby the Pigmen and the Treasury will do joint bailouts (and looting) of distressed institutions and perhaps entire sectors.

Once again I remind the reader to please not make the fatal mistake that these guys are anywhere NEAR finished in this epic battle. They have only begun to fight. And I can hardly bear to contemplate what they will do next, but you can bet your last fiatsco they WILL be doing something. In fact, they will be doing a whole lot of "somethings". And soon. And most of them probably bad.

20. Since Fannie and Freddie did such a bang up job of destroying the world's economy, the U.S. Treasury decided to reward these two Frankenstein monsters by allowing them to snap up $40 billion A MONTH in dead dog mortgages from failed financial institutions and then hold the toxic trash in their own portfolios, according to Bloomberg.

Of course, one has to ponder as to why this sopping up of these worthless loans owed by deadbeat homedebtors, most of whom will NEVER pay their mortgages is being done, but at this point why even bother trying to figure out what makes sense and what doesn't? I will state this for the record, however: It's clear that your federal government wants to keep house prices artificially inflated. Therefore, you will be paying more of your net income to have a roof over your head, as well as pay more property taxes, insurance/maintenance/upkeep costs, and HOAs as well. And somehow this is supposed to be a GOOD thing?

Hmmmm, okaaaaay.


(Total nationalization/stimulus/reflation effort costs on the part of Treasury):

Estimated $2.3-plus trillion so far, with open-ended commitment going forward.

(Ras):Once again I have to confess pure,unbridled shock and awe at the impressive array of weapons that this particular branch of TPTB has amassed--and used--in their battle against the evil forces of deflationary debt collapse convulsions.

Yet, despite outlining the above massive and unprecedented steps taken, we''ve not yet completed our quest to document all TPTB''s powers and programs undertaken to date.

Let us do so now:

Congressional efforts:

1. Passed the proposed $150 billion "economic stimulus" program suggested by Treasury/Administration

2. Passed the "Save the Homedebting Sheeple Act" with an estimated cost of $300 billion (but will surely be much more)

3. Then tacked on the "Bazooka" provision to allow Treasury to nationalize Fannie/Freddie for another $800 billion (so far)

4. passed the afore-mentioned "Hanktator" act, giving Treasury unprecedented dictatorial powers over the failed financial system and perhaps multiple-trillions of fiatscos to do so.

so that we can buy ourselves a few more weeks or months worth of reprieve before "Great Depression II" continues unabated.

5. Just passed $25 billion aid to auto manufacturers

(Total stimulus/reflation effort costs on the part of Congress, avoiding double-counting costs already attributed to Fed/Treasury above):

$300 billion to $1 trillion.

(Grand Total ALL Reflation/Nationalization/Monetization Costs to Date, U.S. only):

Approximately $ 7 trillion. So far.


Section 7: European Efforts to Fight the Financial Collapse:


In addition to the nationalization of Northern Rock in 2007, Europe has been in a mad scramble to try to revive their equally-as-collapsed-as-the-United states'. financial system. Virtually every single big bank throughout Europe in the last week.

And the governments have responded with unprecedented moves to nationalize the broken banks.

To wit:

1. Monday. September 29th Germany's biggest bank bail-out, putting together a €35 billion loan package to save Hypo Real Estate.

2.Belgium, changing their stance from a mere "liquidity injection" decided that nationalized Fortis, a 300-year odl institution that survived everything except the "Great Real Estate Bubble" of 2002-2008, was a better idea.

3. And a day later, a bail-out for Dexia took place.

4. The Irish government issued a blanket guarantee of the deposits and debts of its six largest lenders in the most radical bank bail-out since the Scandinavian rescues in the early 1990s.

5. The government of Greece folllowed Ireland and announced that it was guaranteeing all deposits in all banks.

6. On October 7th,Iceland's entire banking system failed. Russia stepped in and provided a five billion fiatsco injection to try to revive the Iceland banking system. Alas, but this emergency measure was to no avail. The Icelandic government had to step in and shut down all the banks and has announced they will nationalize the entire banking system.

7. Again, on October 7th, the Russians stated that they were pumping in thirty-six billion fiatscos into their failing banking system.

8. Spain revealed their version of the American "TARP", a fifty billion Euratsco fund to soak up dead "assets" from failed financial institutions.

9. Australia's central bank, in a surprise move, dropped their overnight funds rate by 100 basis points. Hong Kong followed shortly with a rate cut of their own.

10.On October 8th, the U.K. pumped the equivalent of 87 billion U.S. fiatscos into their failed banking system in a desperate attempt to revive their failed financial institutions. At least the U.K. was kind enough to their taxpayers to demand preferred stock which MIGHT one day pay some paltry dividend back to their Treasury--unlike the U.S. TARP plan, which will basically offer nothing to U.S. bagholding taxpayers.

11. Various halts to trading on indices around the world have taken place in the first week of October as stock indices crash upwards of ten-percent per day.

12.On October 8th, The People's Bank of China dropped their overnight lending rates twenty-seven basis points--sneaking in under the cover of the excitement generated by the massive, unprecedented, coordinated move by the Fed and other European (and the Canadian) to drop overnight lending rates fifty basis points. Not to be outdone in creating more fire to burn their currencies to the ground along with everyone else, On October 9th, the central banks of Hong Kong, South Korea and Taiwan also dropped their overnight rates twenty-five basis points.

13.On Oct. 9th, The European Central Bank is offering banks "unlimited cash" and pumped an unprecedented (there's that word, "unprecedented" again!) 100 billion fiatscos in overnight funds into the financial system. This latest panic move came the one day after an interest-rate cut failed to soothe tensions in money markets.

The ECB said it will lend banks as many fiatscos for which the failed gamblers can provide "collateral", which one can only imagine what the "collateral" consists of these days: Beanie Babies? Pet Rocks?

14. October 9th: Iceland's government froze (sorry for the bad pun, but I can't resist) trading on its stock exchange for two days and took control of the country's largest bank (the third one in a row). Whoda thunk that tiny little Iceland would be knee-deep in the derivatives hoopla and now has a banking system that is totally in tatters? I guess when one lives in a country that is freezing cold 9 months a year, what else is there to do than gamble?

(Grand Total ALL Reflation/Nationalization/Monetization Costs to Date, worldwide):

Best estimate: Tens of trillions of fiatscos pumped into or committed to being pumped into the system?

And even more as Europe's collective governments continue nationalization of their biggest banks.

Why even bother to hazard a guess anymore?