State Of The Union:
New York Treats Journalist
As Would Russia
The End Game Approaches: Bankrupt The Banks
Even The Conscience Of Liberals Know
“The Plan Is Corrupt”
They that forsake the law praise the wicked:
but such as keep the law contend with them.
When the righteous are in authority, the people rejoice:
but when the wicked beareth rule, the people mourn.
(Pr 28:4 & Pr 29:2)
The End Game Approaches
March 25. 2009
The End Game Approaches
by Karl Denninger in Musings, The Market TickerWednesday
http://market-ticker.org/archives/898-The-End-Game-Approaches.html
We're about done here folks. By "done" I mean done with the government's ability to screw around with markets, game the outcome and hide the sausage, if you will, at least to any sort of positive effect. Today we heard from The Fed that their threatened program to start buying the long end of the Treasury curve will begin tomorrow: That was, without a doubt, prompted by a big drop of the 10 year Treasury rate, (which) was when Ben made his announcement. But over the last few days the rate has crept back upward, erasing about half of the drop. While this is expected behavior (higher rates) when the stock market is on a tear (like yesterday) as people sell Treasuries to buy stocks, both Friday and today the market was down - but the Treasury market was also being sold. That's not supposed to happen, but it did. It denotes selling - on a day when people should have been moving into Treasuries, not out of them. This compelled Ben to stomp on this trend lest he be seen as a toothless tiger, and that just won't do for Sir FedsALot.
Who's selling into Ben's "expectations" and producing this? Good question. I don't know, but Ben does - he has real-time Fedwire information that he doesn't release. I'm willing to bet it is NOT domestic holders, and is likely foreigners - including perhaps, central banks and their minions (Hello China!) This "acceleration" is a major problem, as it appears that Ben is losing control - rapidly. If foreigners are selling into the market we are literally nothing more than market recognition away from Armageddon in the bond market. If you recall it was not long ago that I wrote a couple of very "Apocalyptic" Tickers. Do not for a second believe that the fact that the stock market rallied has defused the underlying problem. It has not.
The underlying problem is not the stock market. It is the credit (bond) market - that is, the underlying reality that there is too much debt out there in relationship to GDP, it cannot all be serviced, and as the economy contracts it feeds a vicious spiral where a default produces unemployment which drops both spendable income (and thus income available debt service) AND tax revenues... This is "deflationary destruction" and it is inevitable when government pushes off the normal cyclical cleaning out that recessions do, as our government has. President Obama thinks he can spend $3.6 trillion this coming fiscal year (an increase of some $600 billion dollars!) while tax revenues are collapsing. Available reports are showing anywhere from 15-25% decreases in tax revenues, depending on exactly where and what you're looking at, and the available Federal data is deteriorating rapidly.
If the bond market sells into Ben's bid for the long end then rates will immediately start to climb once Ben finishes performing his "operations." This will force him to do it again, and again, and again, until he owns ALL of the long Treasuries. Don't think for a minute he will let that "printed" money out into the economy. He can't, because if the market detects that it will ramp Treasury yields (and all other yields) even harder, making his "buying" of Treasuries a self-defeating act. Instead he will force those "excess reserves" to go where the rest have gone - into The Fed vault.
The problem with this is that once he owns all the long-term Treasuries he can't sell them without collapsing the price, and now the solvency of our government rests with the ability to roll over short-end debt. See, that which The Fed buys and Treasury sells is a funding circle-jerk, effectively removed from the float and thus the government's funding base. Anyone care to take the bet on whether the selling pressure will move down the curve? If it happens, we're done - and neither Bernanke or Obama has the ability to prevent it. President Obama has apparently summoned the big bank Presidents to the White House this Friday, for what is certain to be a major arm-twisting. Attendees are expected to include Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Citigroup Inc.
There are fleeting signs of improvement in some credit markets ahead of this. Most notably the CMBX, which came in for the second day in a row in a significant way in the "AAA" tranche.... That improvement, of course, is based on the theory that the PPIP will buy up a good part of this and thus put a bid floor under these assets. Proof is found in the fact that the lower tranches, which would not be eligible, have barely moved. That is, the spread contraction you see there is predicated on the plan working. If it doesn't...?
What's worse is how the banks are marking this stuff at present. If this is real then these banks and other institutions are living in an absolute dream world. There is absolutely no chance that construction loans, for example, can reasonably be carried at 100 cents or even at 97, as is being done virtually everywhere. Bank of America is only discounting by a nickel. Wells Fargo thinks they're going to get 87 cents held to maturity and Key 98?
Here's a dose of reality for you folks. We still have trillions of credit in the system that has to be defaulted or cleaned. The Fed can't print out of that without destroying the bond and currency markets and they know it, and even if they did, it's the same as defaulting the debt in that the valuation hit is identical. That is, even if they were willing to destroy the only thing they have to sell (and they're not) printing to that degree would do the same thing as defaulting the debt in terms of the actual purchasing power impact for the banks and government. This is a default by another name, and does the same thing to the people holding the debt who get paid in trashed dollars as does defaulting on them.
Meanwhile the banks appear to still think this trash is all "money good." No amount of "easy money" will fix the system when you get to this point. The law of exponents makes that impossible. You can hope to get organic growth in the economy going again, but that's not going to happen either, except in the very short term by "filling in the debt cracks" - a strategy that looks nice on paper but fails in the real world. I see a possibility of this scheme meeting with success, but it requires absolutely everything to go right, and the odds of that happening are low enough that I discount the scenario. I must therefore prepare for something truly ugly, whether I want to or not.
What I believe we will see instead is similar to what we got after 1929; there was a short-lived rebound in the economy and markets, and it looked like we were going to come out of it with "just" a recession. But the debt hadn't been cleaned from the system as they tried to prevent people from having to take the loss, and as a consequence able borrowers and able expansion of credit dried up, along with able providers. The "second leg down" was the real bone-crusher, and it will be this time as well. But by the summer into the fall, when employment hasn't materially turned around and both spending and tax receipts have continued to fall, reality will set in.
Congress is increasingly becoming aware that all of these "fixes" thus far since the summer of 2007 have been nothing more than a scam and a fraud - a rip-off of the Taxpayer and Treasury in a vain and vile attempt to keep those who committed willful blindness or even fraud from having to bear the pain of their sins. The American people are becoming increasingly aware as well. Come summer and fall there will be no political capital available to play games, either in the American public or the Congress. If Congress tries to appease the Wall Street pressure groups again, they will run the risk of having the Capitol put under siege by angry citizens demanding 535 immediate resignations - or worse.
The government is running a very real risk, as I have noted in the past, of being declared by the people as "the felon" instead of "the cop," and if that happens I don't want to be anywhere near the angry mob that makes that decision. So for now, enjoy the general upward to sideways trend in the market, but prepare. While the spring may bring hope and summer one of discontent, I believe there is a very high probability that come fall, the peak of Hurricane Season, a very ill wind will be blowing both in New York and Washington DC.
One Small Problem With Geithner's Plan:
It Will Bankrupt The Banks
March 25, 2009
One Small Problem With Geithner's Plan:
It Will Bankrupt The Banks
By Henry Blodget
http://www.businessinsider.com/henry-blodget-one-small-problem-with-geithners-plan-it-will-bankrupt-the-banks-2009-3
The big problem with Tim Geithner's plan to fix the banks is the same as it ever was: The gap between what banks say their assets are worth and what the market says they are worth. When a bank says an asset is worth 60 cents and the market says it's worth 30 cents, someone has to cover that spread. The genius of Geithner's plan is that it pawns most of the cost (and most of the risk) off on the taxpayer without the taxpayer noticing.
But unless the taxpayer gets stuck with the entire spread, which is probably what Geithner is hoping, banks that sell assets will have to take massive write downs. This will start the whole cycle of violence again. This risk to the banks is particularly acute when dealing with whole loans that the banks currently say they have no plans to sell. These loans are often carried at 100 cents on the dollar, because loans classified as held to maturity don't have to be marked to market. Even subsidized buyers won't likely be willing to pay anywhere near 100 cents on the dollar for these loans. So, here, the write downs could potentially be huge.
And then there's another problem: If the banks go through the exercise of putting assets up for sale only to have the bids come in at, say, 40 cents instead of the 60 cents on the books, the banks' accountants and/or federal regulators might notice. So even if the banks recoil in horror and refuse to sell at 40 cents, someone somewhere might insist that assets now carried at 60 cents be written down to 40 cents (after all, they won't have the "temporary illiquidity discount" excuse anymore, will they?). This will blow another huge hole in the banks' balance sheets. Given this, banks would probably be wise not to participate in Geithner's plan. Which is why the government is already talking about forcing them to....
Richard Bove, an analyst at Rochdale Research, wrote in a note to clients: “[The plan] will not happen because it would destroy bank capital. It might cause a bank to fail the new stress tests under way. Banks will not take this risk.” But while banks in theory have discretion over whether to sell loans, Sheila Bair, chairman of the Federal Deposit Insurance Corporation, said this decision would be made “in consultation with regulators” – a sign that the authorities might put pressure on banks to sell toxic assets. It's time to face the fact that we have already de facto nationalized the big banks--and that the way we've done it is worse than standard receivership and restructuring. The longer we remain in denial about this, the worse off we'll be. But that's another story....
Even The Conscience Of Liberals Know "The Plan Is Corrupt"
Paul Krugman, New York Times: The Conscience Of A Liberal
Despair Over Financial Policy
March 21, 2009
Even The Conscience Of Liberals Know The “Plan Is Corrupt”
Paul Krugman, New York Times: The Conscience Of A Liberal
Despair Over Financial Policy
By Paul Krugman, New York Times
http://krugman.blogs.nytimes.com/2009/03/21/despair-over-financial-policy/
The Conscience Of A Liberal: The Geithner plan has now been leaked in detail. It’s exactly the plan that was widely analyzed — and found wanting — a couple of weeks ago. The zombie ideas have won. The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system — that what we’re facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved.
To this end the plan proposes to create funds in which private investors put in a small amount of their own money, and in return get large, non-recourse loans from the taxpayer, with which to buy bad — I mean misunderstood — assets. This is supposed to lead to fair prices because the funds will engage in competitive bidding. But it’s immediately obvious, if you think about it, that these funds will have skewed incentives. In effect, Treasury will be creating — deliberately! — the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem.
Or to put it another way, Treasury has decided that what we have is nothing but a confidence problem, which it proposes to cure by creating massive moral hazard. This plan will produce big gains for banks that didn’t actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And I fear that when the plan fails, as it almost surely will, the administration will have shot its bolt: it won’t be able to come back to Congress for a plan that might actually work. What an awful mess.
Americans Largely Silent as Their Nation is Systematically Destroyed
March 24, 2009
Americans Largely Silent as Their Nation is Systematically Destroyed
By JB Williams
http://www.canadafreepress.com/index.php/article/9607
After trillions in taxpayer debt has been foolishly poured into the bottomless black hole of leftist wealth redistribution programs, under the guise of economic “stimulus” or “stabilization” legislation, the new “ONE World” government running Washington DC announces; Geithner, Bernanke Call for New Wind-Down Powers… and the people still sit silent as they watch Obamanation grow in unbridled power. Geithner Asks Congress for even Broader Power to Seize private Firms as the average American stumbles through their daily routine as if nothing is happening. Canada Free Press managing editor Judi McLeod writes: No cheerleader for propping up greenback at G20 summit asking, “Is the table being set for One World Government rather than speeding the recovery of the worldwide recession at next week’s G20 London summit?”
Obamanation has taken the nation from a trillion in debt to over $4 trillion in debt in the first sixty days, with even more federal spending promised, which could put the nation $10 trillion in debt before the 2010 mid-term election cycle. Amnesty for illegals and ACORN led redistricting will make 2010 and beyond a moot point. Still, beyond the movement to mail tea bags to members of congress or file another legal demand for proof of Obama’s constitutional eligibility for the office he holds, both of which are like whistling in the breeze, the people remain largely silent.
Threatened with a Soup Line Existence: The American people would never trade personal freedom for the false promise of federally redistributed free-stuff under some ill-fated socialist experiment, unless they were first threatened with a soup line existence. And so it shall be… 50% of their life savings and 30% of their home values have already evaporated into thin air. National unemployment is driving towards double digits as home foreclosures continue to mound. With their backs against the wall, confused by a daily diet of media manipulated headlines aimed at scaring the public into submission, convinced that our nation’s complex woes demand a solution far too complicated for the average peasant to comprehend, the people find themselves in a state of terminal paralysis.
Incompetent Evil in Charge: The same people responsible for the many disasters now surrounding every American household, were elected in 2006 and 2008 to fix what they broke. Instead of reversing course and placing their faith in the principles of freedom, they are installing more of the same failed entitlement policies that created the problem and they are doing so at a fever pace. The folks currently in charge of the nation don’t like anything at all about the nation that once was. They have a very different vision for America, one based on redistribution of free-stuff, not equal access to freedom.
At the foundation of personal freedom is the right to make your own decisions, invest and risk your own capital, own your own property and keep that which you are willing to work and sacrifice to earn. It’s called economic freedom, aka capitalism. But capitalism is public enemy #1 in America today, thanks to decades of class warfare and the art of division via social envy, all for purpose of political gain. Life, Liberty and the right to individually define and pursue Happiness has been replaced with the right of some to take from others against their will, in the name of a greater common good, better defined as the entitlement mentality.
The Change Agents New World Dictionary: Old concepts have been redefined. Capitalism is now referred to as Fascism. Personal ambition is now called greed. Those who seek access to other people’s rightful earnings are called charitable, and those who demand a right to only that, which they earn, are called greedy. It isn’t just the words that have new definitions. The concepts have new meaning as a result. Words like socialism and communism no longer have a negative connotation attached to them. Most Americans have no idea what they are anymore, or why they don’t want to find out the hard way. The concept of liberal interpretations limits the meaning of words only to one’s individual imagination. The Constitution means only what someone imagines it to mean. If the shoe doesn’t quite fit, a new definition will solve the problem.
Is it a bankrupt dollar and a new international currency that will get their attention? - A North American Union? - An ACORN Army on their doorstep? What will be the final straw that breaks the proverbial camel’s back? I don’t have the answer… Frankly, I expected the people to revolt long before now. Clearly, I had underestimated the depth of apathy and tolerance for anti-American nonsense in the average modern American. But then, so did our nation’s founders, whom I’m certain are rolling over in their graves in disgust by now.
The Silent Consent Continues: Nobody knows for how long or at what expense, but so far, the people remain silent and Washington continues to profitably interpret that silence as broad-based consent. At this late date, I have no idea what will wake up the average American or how they might react once finally awake and ready to engage in self-governance. However, I am sure about two things… When they finally do awake, they are going to be really angry… And, the anti-American left won’t let up until then…
The clock isn’t just ticking. Time has already run out as of the 2008 election. Washington DC is currently dismantling America, individual right by individual right, in an unprecedented massive multi-faceted assault on all things American. If you are not familiar with the Democratic Socialists of America or their legislative branch, the Congressional Progressive Caucus, I strongly suggest that you take time to learn them well. They are in charge of your nation. This is who the average American is up against and they are a very well funded and organized enemy of the state.
You will not be able to take your country back without putting these two organizations out of business. The longer you wait, the tougher the battle, the higher the price. Clearly, the organizational skills of the average American are equal only to that of the stumbling bumbling Republican Party. Fragmented, distracted and disorganized, the people are no match for the leftist juggernaut running roughshod in DC. The people are lost, so they are losing… The most complex problems require the simplest of solutions. But the average American is so baffled by a daily diet of elitist B.S., that they cannot even see daylight… – When all else fails, return to the basics!
Police State: Luke Rudkowski Arrested For Attempting To
Question Mayor Bloomberg
March 29, 2009
Police State: Luke Rudkowski Arrested for Attempting to Question Mayor Bloomberg
By Source: Infowars
http://www.blacklistednews.com/news-3765-0-8-8--.html
WeAreChange founder and activist Luke Rudkowski was arrested at the Hilton Hotel on Manhattan today for attempting to question New York City Mayor Michael Bloomberg about his refusal to pay for the health care of 9/11 first responders. Rudkowski had Infowars press credentials and a video camera when he was singled out by Bloomberg’s security in the lobby of the hotel located at West 53rd Street and Avenue of the Americas (Sixth Avenue).
According to a post on the WeAreChange blog Rudkowski and other members of WeAreChange were confronted and asked questions by hotel security and Bloomberg’s security detail. Rudkowski was apparently singled out and forcibly detained at the hotel and subsequently handed over to the New York Police, who arrested him on a charge of trespassing. Rudkowski was also charged with impersonating a member of the press. Infowars is a bona fide press organization. Alex Jones operates numerous news websites in addition to hosting a nationally syndicated talk radio show that is currently rated as the most listened to talk show over the internet. Jones’ Infowars and Prison Planet have broken numerous stories, including one covering the MIAC controversy that was picked up by the Associated Press and mentioned by Fox News host Glenn Beck and radio talk show host Rush Limbaugh. Luke Rudkowski has worked as an Infowars journalist for several years and his journalism is featured in Alex Jones film Truth Rising: 9/11 Chronicles, released in 2008.
As of this writing, Rudkowski is being held at the 18th Precinct at 306 West 54th Street on Manhattan. An officer Fagan answered calls in regard to Rudowski’s arrest. Infowars staff report Fagan abruptly hung up the telephone when inquiries about Rudkowski were made. The 18th precinct phone number is: 212-760-8300. A NYC information page on the internet lists the following number for the precinct: 212-767-8400. Alex Jones and Infowars are requesting calls be made to the police asking about Luke Rudkowski’s whereabouts and the trumped up charges against him. The New York Police and Mayor Bloomberg need to be made aware of the fact there is a First Amendment in this country and it is an egregious violation of that amendment when members of the press are unduly arrested and charged. Please remember to be polite when contacting the police and other New York City officials.
They that forsake the law praise the wicked:
but such as keep the law contend with them.
When the righteous are in authority, the people rejoice:
but when the wicked beareth rule, the people mourn.
(Pr 28:4 & Pr 29:2)
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