This week has been a horrible week for my pocket book (yours too.) Most of the American media is ignoring this fact and this is standard--the American taxpayer is never told the truth and never told the meaning of what is being reported.
So, in the finance area, I have taken on that responsiblity being an MBA.
Lets take a single story which I believe marks the beginning of the slide into depression for us in the west.
I could be wrong and I hope I am wrong but, alas, facts are facts and the critical fact of the week is that MF Global Holdings has filed for bankruptcy with the trustee annoucing over 2,000 layoffs.
See the links below for background on this story.
Now we want to know what does it mean to us sitting here at home on our couch?
Well lets list the disaster this represents:
1-First MF Global was heavily invested in what is called sovereign debt that is bonds they purchased from Greece, and additionally got loans from Germany's largest bank and JP Morgan Chase loans which will not be fully paid back and will take years to collect even if it is paid back- 50% on the dollar.
The latter two institutions used our money to make those loans. If they don't get paid our money is gone--our pension monies, our deposits, our tax money loaned to them, our bail-out money loaned to them. Details will not come out right away but you can be sure they are impacted.
That means that they are also placed in jeopardy of not being able to pay their debts to their other creditors, and the domino begins.
The amount of money involved in the Global situation is over 2 billion dollars not counting the money to be lost by American pension funds and American banks. How much?
MF Global has also loaned to Eurozone countries 6.3 billion Eurozone countries--Belgium, Italy, Spain, Portugal and Ireland". This is five times more than the money it has on hand and these countries do not have the funds to pay back those loans.
This in turn means that the American investors in MF lose their moneu-meaning our pension funds, our 401k monies, our tax subsidy money where these banks and corporations don't pay taxes.
That means also, we in the middle class, have to make up the difference.
Government in order to make up the taxes not paid by wall street, or under paid by these companies have to institute "austerity" programs and we end up taking all of this out of the hide of the middle class, the working poor and the desperately poor.
2-Now what we were not told in this story also is that MF "commingled" these American pension funds with their own money in putting 10 percent bets on derivatives, loans and re-insurance schemes. So our money is gone as well so that in the filing for the bankruputcy MF walks away from this collaspe in which it will take years for Americans to get their money back, at likely two or three cents on the dollar.
3-If the Eurozone people don't get paid then the situation now in Europe has just been made much worse. Money they thought they would have to bail out Greece, Italy and Spain just disappeared, or a least part of it.
That is what I mean by a disaterous week.
This all goes down and nobody goes to jail, no one is investigated, the president is mum, retirements are ruined and nobody even bothers to talk about it.
That is why I am saying don't give money these hedge funds, mutual funds people, these wall street banks. MF Global is a case study is what they do with our money and how the finance sector is out of control and has been and is bringing disaster the the entire western world.
They don't know what they are doing and are motivated by collossal greed, using our money.
This lastly means we will not be recovering from this "recession" any time soon.
In another blog I have suggested what average citizen can do.
To see how vaguely all off this is reported, such that the real impact is obscured see the article from BBC below. We get a soothing report that despite the MF collaspe everything will be ok.
Everything will not be ok.
Today the press reports that France and Germany are in bitter talks with the British over the issue of the hedge fund managers and the speculators.
The former two leaders have made the mild suggestion that speculative transactions (greed transactions) ought to be taxed.
The British prime minister is balking saying it would be devastating for the English banks and Cameron does not want the English banks taxed. He is clearly trying to protect the wealth of the wealthy which is housed in those banks.
(From Cameron's point of view things are bad for his class, so bad that the Royal family is now offering to rent out rooms at Windsor Castle, at 50,000 dollars per night. One must protect one's life style musn't one?)
But what then are the Germans and the French doing in proposing a tax.?
A tax would create more revenue for those countries and alievate perhaps the need for "austerity" programs. So why not do it?
Moreover, the French and the Germans have to raise money to pay off Greek and Italian debt and they fear taxing the middle class more than they already have. Besides an election now for both Merkel and Sarkozy might result in their being thrown out. They, too, want to avoid riots in the streets.
But this highlights the fact that the elites are fighting among themselves over who gets to fleece the middle class and how much.
It also means that the French and the Germans now understand that the speculators, using our money, can bring down their countries into financial ruin and bankrupt their banks. (See my ruminations on this above.)
So they want to curtail the American predatory banks by taxing them and their transactions and trading in their countries.
Obama and Geithner don't want any taxes on these American speculators and want the French and Engish to take the losses of the American speculators out of the English and German middle classes via so-called "austerity" programs. That is what was being said behind closed doors at the recent finance ministers meeting.
As mentioned the French and Germans fear retaliation at the polls in coming elections and riots in the streets if they don't do something, riots which they have managed to avoid so far.
But note: most of banks in Europe are bankrupt already, bankrupted by the fact that our wall street banks sold them phony, worthless derivatives.
Most of the bail-out money was actually given to these European banks so that they would not go bankrupt right away. Our Federal Reserve Bank on top of that gave these European banks 9 trillion dollars (of our money-- and gave the American banks billions in "quantitative easings" ) The 9 trillion had to "loaned" to help the European banks because our American banks had ripped them off for trillions in bad derivative investments.
But that was only a temporary 2008 fix and now the wolf is at the door again for those European banks.
Only the Central Banks and the European Central Bank have money by virture of being able to print money, which they are loath to do since it would create inflation and this tact is violently opposed by the super-rich because it would make their billions of Euros worth a lot less.
So you see how convoluted and intertwined the problems are.
So you also see how all of this "Globalization" has proved to be dangerous in the end for everyone.
Grab your wallet and hide it somewhere.
Now some have asked what is likely to happen to Europe? What will happen is what has already started to happen. Greek debt has been written down 50% and investors have taken a "haircut."
But what does this mean? It means that investors like MF Global Holdings who invested our money into those Greek bonds will not get paid out fully. And that is why they declared bankruptcy--so we have come full circle.
Now notice this is just one banker-broker. Now multiply this by hundreds others around the globe and you see the problem. The finance crazies in seeking global financial control over everything using our money have brought us to this.
But they are crazy like foxes. MF Global will not lose money, the American middle class, its pension monies are the ones really taking this "haircut" We are never told this, but this is the fact. Corzine, the head of the company, cannot account for over 630 million of our money and will likely claim it was lost on Greek bonds. But more likely it is sitting in some Swiss Bank account.
Now what will happen and is happening is that Corzine or others like him can go to Greece and literally buy of the profitable assets there for pennies on the dollar and make money. This is so-called "privatization."
The govenment there is being forced to agree to this and that is what the uproar and riots are all about and as well the Greeks have to take sharply reduced wages, health and pensions.
Italy is next.
Now there is another shoe to drop in all this-one that will drop in Greece and Italy and also here in the United States as well.
The super-rich are not satisfied with taking our houses, our savings and our daily deposits in their banks, they have embarked upon privitizing our society as well.
Here is a partial list.
1-Our prison system is largely owned and run by private companies.
2-Much of our military effort is "contractors" war profiteers. We have five contractors for every solider in the field.
3-More and more of our schools have been sold off to private companies to run.
4-The debt students are complaining about, about 30 percent of it is owed to private, for-profit "schools and universities" like Phoenix, or on-line "universities" not public schools.
5-Our health care system, the lucrative part of it is being run for profit, in fact by insurance companies and giant health conglomerates.
6-Now under the cover of "austerity" the American middle class's last safety net will be under assualt--that of social security.
The demand behind closed doors, in the so-called super-committee which is supposed to report out on November 23rd, is to privatize social security-the last great sum of money wall street does not currently control.
They want our social security money and will tell us," take cuts in your social security or you can invest it in wall street and maybe get more that way, have that money grow."
A letter will come in the mail telling us about cuts in social security but offering on a "voluntary" basis that we can offset these cuts by investing part of our social security check in wall street. Just check the box of how much you would like to invest. If you don't check the box your future checks will go down.
Younger workers will not escape either. They will be told that a portion of the taxes they pay into social security should be put in a retirement plan. If they don't do it voluntarily there are ways to induce them to do so. So in the end wall street will get a big chunk of the social security money deducted from our paychecks every month.
This was done to Sweden, and in effect wall street is now really after the zillions in Europeon workers pension monies in these austerity programs.
This is greed and theft on a colossal scale.
Before the ink dried on the above writing Newt is out there proposing just what many of us feared: privatizing social security. What is revolting about his plan is that while wall street will get our social security money, if wall street loses our money the federal government has to pay the difference (that is us the taxpayers) Note too wall street has only paid one percent interest in the last twenty years and that scheme will surely make the deficit even greater than it already is.
Here once again is the pattern--wall street gambles with our money and if they lose we get the bill, if they win they get to keep the profits. Amazing.
Here is the link to the Newt proposal.
But wait there is more:
By December 31st the payroll tax reductions enacted for the middle class expire and if not renewed middle class folks lose about a thousand a year. The republicans will try to bargain this into keeping the Bush Tax cuts indefinitely.
The further bad news is that if this middle class payroll tax cut is not renewed many middle class Americans will fall into the Alternative Minimum Tax category and more taxes will have to be paid and likely the home mortgage deduction will be watered down as well. This will be devastating to the middle clalss.
A final note of utter disaster: Much of the US bond debt will fall due in seven years: repeat seven years. Trillions of dollars will have to be paid out or re-negotiated or something. But folks are beginning to react now since it is clear that the US doesn't have the money to pay it out except by printing more money and that means 20% inflation rates--the latter is in fact a hidden tax on the middle class because as prices rise we see that wages will in fact be flat or declining.
Bankruptcies will skyrocket.
Well I am guessing that you have had enough bad news for now.
Tomorrow I will outline simple steps that can be taken to prevent all this and put in place sustainable solutions.
Really all of this can be solved.
But first read if you would the article below because the European situation is the same situation we have in this country; that is big investors take no real risks because the deal they have is that if a big bank loses money, the taxpayers of each European country will pay the bill. The same is true here in the United States as well. Yes, us taxpayers have to pay if Goldman Sachs makes bad business decisions.
Post script: The former chief executive of MF Global until 2008 gets hired by the city of New York to get a crack at the 120 billion in the pension funds of that city. He may be nice guy but should he be given another chance at our pension monies?
Corzine the disgraced former head of MF Global is to face three different congressional committees on what is now 1.2 billion in missing customer money.
There will be lawsuits but my prognistication is that the wall street investors will sue and get part of their money back but us tax payers will not get a dime and the 1.2 billion will not ever be fully located and recovered.
See what you think.
In order to get the big picture of world finances we have to understand who owes whom in terms of debt. The world operates on debt not liquidity or cash. Banks and governments create money through debt which is why the finance system is in dire straits.
See the link below to see what countries owe what to whom. Click on any given items and you can get a picture of its debt foreign and domestic.
Now the thing to notice is that these debts total hundreds if not thousands of times more that the actual cash in circulation in the US and Europe.
The world Gross Domestic Product is only about 70 trillion yet the debt between these countries is above 71 trillion. That literally means that there is not enough money in the world to pay off current debts. And to print the money to pay off those debts would create an inflation rates of over a thousand percent.
But the real underlyling problem is that there is outstanding over 700 trillion in derivative debt as well, making the situation dire. All this in a shinking economy situation where growth is practically nil for these countries and bound to get worse.
Such is the fix. See what you think.
Corzine has completed his first testimony before congress and states, he simply did not know where the 1.2 billion has gone and can't remember.
Now the laws were re-written by Congress such that Corzine and wall street types can legitimately claim they did nothing illegal.Where they did illegal actions, these are simply ignored.
Despite these facts Corzine will not spend a day in jail.
This is out of control.
For an analysis of banks see the link below.
Congress people can legallly indulge in insider trading. There is no law against it.
See link below.
See riveting testimony of Jon Corzine at the senate agriculture committee.
The riveting question is "where is the money" referring to the missing 1.2 billion in customer funds which have gone missing.
We learn that wall street deregulation allows firms can legal spend and gamble with customer money and keep the profits.
We see the autual people, mostly farmers and ranchers who lost their money.
They are coming after grandma's medicare. Stay tuned.
1/1/12 Happy New Year? I'll Get Back To You On That
January is forecast month and the forecast for the European Common Market is grim to grimmer.
See links below to get an idea and then I'll look at it from the standpoint of its impact upon the United States and the price of gold and silver.
Understand one thing: crisis and bad economic times always benefit elites and "investors" who have cash.
For example note that the interest rates being demanded by American investors using our money is 6-7 percent for the PIIGS (Portugal, Ireland, Greece, Italy, Spain, is high and assets in these countries are cheap. All this while paying Americans only 1-2 percent on their own money. Wow, how peculiar.
Meantime, you generally see gold and silver prices drop beause these "investors" are taking their cash out of gold and silver, temporarily, in order to purchase the cheap assets of their now near bankrupt countries. They win on high interest rates and get to purchase cheap assets using our money while paying us nothing interest on our own money, to boot get to keep any profits from all this and if these investments fail they can send the bill to us the taxpayers, the very ones who gave them the money in the first place.
Take a look at the rates being demanded by these "investors."
Rate at which markets are willing to lend to governments for 10 years:
- Germany: 2.05%
- France: 2.83%
- Spain: 4.95%
- Italy: 5.56%
- Irish Republic: 7.41%
- Portugal: 10.80%
- Greece: 22.14%
A 7 percent rate is generally considered to be unsustainable for a country. Italy and Spain while having lower rates have other issues which make those countries problemmatic. Germany and France hold a lot of the debt so they too are vunerable.
This, Virginia, is the way of the world; it is also what causes rebellions if not revolutions.
Tomorrow, a look at the impact this is likely to have on this country.
Say it ain't so Fannie. Tell me it isn't true Freddie.
2/10/12 Update: Now we are being told that the total money taking from customers in the MF Global debacle is up to 1.6 billion.
Meantime Citi-Group admits defrauding taxpayers
In the NY Times article below we learn that the European Central Bank has offered cheap loans (647 billion dollars) to European banks at one percent for three years. This is a complete reversal of the banks position just a few months ago.
Now we want to know why has this decision been taken and will be the effects.
First the bank was reluctant to do this and normally would not do such a thing. The wealthy of Europe understand flooding the currency markets with cheap and plentiful Euro's will dilute the value of the billions of Euros many of the wealthy currently have.
Moreover, to do it in this fashion will surely cause inflation.
Inflation will make the crisis worse not better, especially for Europe's middle classes who have flat wages and/or sinking wages for the near term. It will be devastating for them.
So why is this being done.? (I hear you asking.)
This is the another shot across the bow of the speculators and hedge fund managers of the United States and another shot in the quiet currency war which is now being waged between the United States and Europe-Europe being the major trading partner of the United States.
The effect of flooding the Euro currency market with cheap Euros has the following outlines:
1. The banks will take the money and not loan it to consumers--they are broke like American consumers and have maxed out their credit cards.
No, the bank will take some of the money and use it to cover some of the bad bets they made on the phony American derivatives which are still sitting on their balance sheets. Still.
2. Some they will use to go shopping for those cheap and getting cheaper Greek assets. All that Greek art will be availble at lower and lower prices not to mention big chunks of the Parthenon itself. (Really, this happening along with fire sales of trendy Greek islands.) The rich know that conflagration will soon sweep all of Europe and the masses rebel and a nice fortified island is under that scenario is not a bad idea.
3. Cheap Euros make European goods cheaper vis-a-vis American goods and bankers are betting this might create some growth in some sectors of the European economies; if not they will simply hoard the cash and also start buying gold and silver. (The Germans are already doing this and so are the English)
4) The fourth aspect of this part of the speculation and currency war was set off when American speculators got trillions from out Federal Reserve (Central Bank) and used it to ruin Greece and the PIIGS. France and Germany have responded by moving to impose a transaction tax to keep the cheap and virtually free dollars the Americans got from their Central Bank by handing out virtually free dollars to their European banks.
This is currency war and will end badly. Astounding, the Amercan press does not cover this story at all-yet it can potentially have devastating effects upon the American dollar, American trade and our chances of getting out of this mis-named "recession."
Note that the Greece debacle really highlights how moridbund the banking system is: the Greeks get a bailout but only with the stipulation that it be paid for out of the hide of the middle classes and not to bolster the Greek economy. That would make things more expensive for those speculators betting against the recovery of the Greek economy.
The money they get will be turned right around and given back to these very same banks in loan payments. It is a simple transfer of funds so the banks loan the money and get higher and higher interest rates so that as well, the Greeks will have the money to pay them back. Does this system make sense?
Maxim: One cannot cure debt by piling on more debt.
The Greeks will smile, take the money and default one way or another down the road. That will impact us in ways I have described elsewhere..
There are other equally gloomy outcomes to be chronicled here but I think I have had enough of this for one day. You too?
Let's get back at it tomorrow after we recover a bit more from the bad news.
(What should be done is to increase interest rates and curtail the speculators who now push legitimate loan-makers out of the market and keep profits from depositors dollars and Euros while disinvesting in their domestic economies.)
But, I rant.
Meantime, glance, if you will, at the article below.
The reaction to austerity has begun to set in the European debt crisis. With England and France and Germany threatening to place "greed taxes" on the super rich and the hedge fund managers, political opposition to "austerity" is growing.
Below see where the Socialists in France are proposing a 75% tax rate on the rich, those earning over a million a year.
You can be sure this will become a theme all over Europe.
But notice in this article from the Financial Times that the often quoted claim that the United States corporations have one of the "highest" tax rates in the Western World is patently false.
Take a look at rates in Western European countries. The US rate is the lowest -35%-(the actual rate paid by corporations is only about 18%.) Also note the complaining tone of the article, understandably--the Financial Times represents the super rich so complaints from this newspaper about taxes is to be expected.
But this trend, I predict, will grow-"austerity" will only be tolerated so long before countries and their populations begin to rebel against the money-lenders.
More Tomorrow on how Well Fargo has begun to goggle up those cheap assets and banks in Greece and other ailing countries.
There billions involved in Greek default. This 13 page article is the best I have seen explaining the situation. What we want to know also, is how that eventuality will affect the American banking system and our retirement monies.
So the Greeks have defaulted. It is an orderly default but it is a default. The American press has obscured this fact because it doesn't want us all worried about the impact this may have on our pocketbooks.
Default here means that 70% of the money the Greeks owed will not be paid.
I doubt much of the remaining 30% will get paid as well. It sets the precedent for the other PIIGS to default as well. Expect the snowball.
Would you pay if you didn't have to? Me neither.
So what are the down-stream implications of all this?
Well, get some tea, or whatever, and let's talk tommorow.
Meantime, the US press is awash with the proposition that US labor market is coming back slowly.
The same would be true for the US economy as well, and here is why.
Bouyant smiles over a jobs report of 225,000 new jobs is ok but at that rate it would take until 2025 just to keep up with population growth, a population that is hungry for jobs and cannot wait until 2025. 125,000 jobs is needed every month and an extra 100,000 jobs a month would take years to make up for the 11 million jobs lost in 2008--even counting the million or so jobs recovered since then. This is not good. Where are 9 million jobs going to come from? They may come but probably they will be created overseas, not in the United States.
Full employment as a solution would take a growth rate of 4% per year, so we can see therefore, that full employment will elude us for years, despite election year reassurances to the contrary.
It wouldn't happen no matter how the labor office manipulates the labor numbers.
23 million Americans want a job or a full time job today and can't get one. These are the facts.
Add to this bleak scenario the stagggering fact that the American savings rate is zero or underwater by 110 percent of income, and that, as well we have had flat wage levels in this country for 30 years;
and add the forecast of an aging more expensive population; add to this machine productivity is tossing more and more jobs to the robots and you have a picture in which not even Mother Theresa could see hope.
Banks blandly say no matter how much money they get from the Federal Reserve they would be guilty of bad business practice to loan it to debt- ridden Americans, and they would be right but only in some circles. In others not so much. Obviously the debt should be written down or as Richard Nixon suggested: What do Americans need? Answer: money.
So give them money-not the banks and wall street. That would solve the problems- but that is, I know, a dream. But Nixon did it before he was forced to resign, and the plan failed.
So no loans, and no mortgage write downs of any size as well for the population.
So what is to become of us?
Our corporations have abandoned us investing in Africa, China and India, Brazil--anywhere but here. They are chasing profits with these countries labor forces working under slave conditions, in many areas. But corporations rationlize as "this is where the profits are."
This is ironic that modern capitalism depends upon hand-made gadgets by workers living in a Dickens world of pernury.
Such is progress?
Well what to do. Can the bloom be put back of this rose?
A hard slog in the foothills of debt - FT.com - Columnists http://on.ft.com/AhFgqs
I will fix the above link at some later point. The financial times now does not allow links. Will have to figure something out.
Looks like the UK is in trouble.
Some more details on what is the likely impact of the now current Greek default.
So if 70 percent of the Greek debt holders are not not going to get paid, what does it mean world wide. See link below:
Meantime the Corzine "investigation" goes on. The outcome is predictible--the taxayers will get ripped off and the customers don't really get their money back. All we get is a better sense of who ran off with the funds.
Meantime the role of Bank of America in the financial crisis in 2008 and continuing is documented below.
JP Morgan is in the news announcing losses in the neighborhood of 3 billion dollars.The American press, in this case the NY Times, offers us the soothing response that this is not so bad and that everything will be ok.
Everything will not be ok for the following reasons, moreover, we want to know what this means, and who wins and who loses.
See the article below first and then we discuss it and its relationship to the European Debt crisis.
To quote from the article:
'The Federal Reserve is examining the scope of the growing losses and the original bet, along with whether JPMorgan's chief investment office took risks that were inappropriate for a federally insured depository institution, according to several people with knowledge of the examination. They spoke on the condition of anonymity because the investigation is still under way.
The overall health of the bank remains strong, even with the additional losses, and JPMorgan has been able to increase its stock dividend faster than its rivals because of stronger earnings and a more solid capital buffer.'
Now the huge loss in this is treated as minor and the health of the company is described 'remains strong.' (The NY Times reflects in its coverage the fact that the finance industry is so strong in NY that the Times slants the news when it covers the Jamie Dimon's of the world)
Now how, you ask, can a bank lose this much money and still remain strong?
First, it was not JP Morgan's money that was lost, it was yours and my money because JP Morgan-Chase has federally-insured deposit accounts which means your and my bank accounts which it used for these huge gambles.
We actually pay at least six times for the 3 billion JP Morgan loss.
We lose if our 401 savings are deposited with Chase by our employers and labor unions, states and city governments. They all lose and, therefore, our 401k goes south, our city taxes will likely go up or there will be layoffs because those institutions will not be receiving income for these 'investments' they thought was going to come in. Same on the state level and on and on.
Secondly, we lose since the federal government will be paying for those federally insured losses. We, as taxpayers thus pay again.
JP Morgan loses nothing.
If we have personally invested in JP Morgan CD's or the like or have checking accounts with Chase our fees will likely go up in the future.
Chase will likely take care of its shareholders first and depositors (you and me not, at all)
Federally insured means that our taxes will go up in the future to take care of this JP Morgan created loss, not to mention an increase in the national debt this will likely mean to cover the government loss.
JP Morgan will likely now simply go to the Federal Reserve and get more of that free money (1%) rate and get to gamble again with these new funds to replace the ones they lost. (We pay in increased inflation down the road and to boot will get blamed for spending to much because we can't pay the higher prices in a flat wage era. Ouch.)
JP can cover even this loss with other bets they have made that the American economy will go south. This called 'shorting' and they can do this even with their own stock. And they can make the stock go down by their own actions, and they can make even more money that the 3 billion loss. (This happened in 2008 and continues. Reinsurance schemes such as those with AIG are an example where the American taxpayer was forced to pay for most of the bank losses of year, over and above the bail out. How much? At least a trillion probably six trillion-counting the Federal Reserve layouts.
For example, if Jamie Dimon found out a week ago that his company had a 3 (now 5 billion) billion dollar loss, he could anonymously instruct a third party to sell JP Morgan stock and make billions that way.
This was done in the 2008 debacle and is still being done-even in this \JP Morgan situation. We wan to see who was shorting JP before the announcement and made money.
This is at the heart of the derivative scandal and the theft it represents of the assets of the American middle class.
Finally, in order to make up the loss JP Morgan will likely not pay or will slow pay some of their own creditors, including European banks or their subsidiaries or not make loans some of those banks were counting on.
Now Dimon will get away with this and is encouraged to do this because the banks years ago went to Congress and got laws which now make legal for banks to gamble with yours and my money.
That is why nobody goes to jail. See my blog on the Corzine case above.
Now the FBI, l the Federal Reserve have announced 'investigations' and the Congressional Finance and Banking Committee has hinted it might hold hearings.
I would venture to bet absolutely nothing will come of these hearings because the crookedness of what Dimon did has been made legal.
And to add insult to injury Dimon, as Chair of the Board, will launch an internal investigation of himself as CEO.
Now multiply this by the 50% of Wall Street banks that have this exact same configuration and have smaller losses which taken together is a huge number. What are the real losses each year piling up this way?
Trillions each year and on balance sheets around the world, the banks have over a quadrillion in worthless derivative debt.
This is ridiculous.
For a scathing analysis of this see the Keiser Report below.
More later as the details emerge.
But note first that, with the mounting student loan debt, and the quardrillion in derivative debt above, it is clear massive defaults are inevitable- or at least restructuring-and that would not necessarily be a bad thing. Argentina, Iceland, and Greece have shown the way to default and still survive. But in such a scenario, who losses and who wins? Losers, states, cities, 401k people, in short everyone but wall street.
On Greek situation:
My prediction: Greece will exit the Eurozone.
Meantime the markets apparently agree and have dropped world wide:
Last Updated at 17:19 ET 5/17/12
What does this mean and what will this year bring?
Meantime see this video statement by Dimon on the health of JP after getting 25 billion in tax money in 2009,promising to "overcome weaknesses" exposed in the 2008 financial meltdown. That promise apparently was not honored and things were not fixed. See the other CEO's the other giant banks as well, all promising to fix things.
Makes you laugh and then you cry because the money they are talking about is our money, both the bailout and the losses, were all our money.
Dimon comes on at 33.04 minutes into the meeting. But it is interesting to hear them all state how much of our money they got. This does not even count the sperate monies trillions they got from themselves sitting on the Boards of The Federal Reserve. (They all sit on the Board of the Federal Reserve. Self-dealing. You bet. See video.
Tax evasions by Americans will increase this years. Millionaire tax evasion scams have been put under pressure by new Americans laws which severely punish banks abroad for sheltering such fund transfers. Some Americans have sought to evade these new laws by denoucing their American citizenships. See article below:
Other interesting articles:
How will gold and silver be affected by all this?
What about runs on European banks?
See four PBS videos on how Wall Street ripped off small town America , pensioners, and small towns in America. JP Morgan is covered here as well.
Shareholders vs. Clients? What is wrong with that analysis?
But what if Greece left the Euro?
Click on the boxes in this article to get the copy to become visible.
What kind of shape are European banks in?
5/23/12 Is the US economy ready if Greece leaves the Euro Zone?
A quote from the article:
I think in anticipation of that basic problem, you’d see an escalation of what’s already occurring, which is a major withdrawal from Greek banks that could turn into a run … and the banks in the rest of Europe who have lent to Greece would be even further hit than they were in the Greek restructuring. You’d see significant problems developing in Spain and Portugal and Italy as the market looked to whether those countries would decide to pull out of the euro as well. In those three countries, you might even see a collapse of their financial systems. They could go into a serious recession or depression in Europe, and that would be of enormous negative consequence to the growth of the U.S.
What is going to be the response of the Central Banks?. Can you say QE4--or more bail outs for the banks-indirectly by buying American debt. See articles below. Then we discuss.
George Soros speaks on the European Debt Crisis
Think that the European Debt Crisis has not much to do with you sitting on the couch at home. Think again. Remember depositors means you and my paycheck in Chase, Wells Bof A and the like.
And more: How what Congress does or does not do in six months will directly affect your pocket book.
Quotes from the article above
"Personal tax rates
- Everybody’s, let me repeat, everybody’s personal taxes will go up in 2013 by thousands of dollars. The lowest 10% individual income tax bracket will expire, reverting to 15%. The highest 35% individual income tax rate will rise higher to 39.6%. People in between will see a 3% hike in their tax rate, on average. The overall heightening of taxes – income, payroll, health care taxes, etc. -- will suck $399 billion from the economy and into the government coffers."
"Capital gains and dividends rates
- The 0% and 15% tax rates on long-term capital gains will expire, rising to 10% for lower tax brackets and to 20% for higher tax brackets. The current qualified dividend tax rates of 0% for lower tax brackets and 15% for higher tax brackets will rise to ordinary income tax rates for all individuals. Higher capital gains taxes means less investment, which means fewer jobs."
Of course the conclusion of this article is biased. Congressional inaction on jobs will create more job loss is the fact. More government income is needed to produce the dollars needed to put people to work, is my view and that is also the view of most economists, and this is exactly what was done in the last great depression to bring us out of it.
People with money spend it and thus companies hire more people because there is profit to be made and the economy grows. There is no growth if people are out of work and austerity puts people out of work.
Notice that the tax rate for wealthy individuals is 0% and a low 15% for capital gains including those speculating with our money.
The average millionaire in this country pays only 15% in taxes and that doesn't count the money on taxes that would be collected if the goverment forced corporations to repatriate their profits from overseas tax shelters. It doesn't count tax evasion savings accured in this fashion.
Dividends are not taxed at all in some cases. Who gets dividends? The rich mostly.
So the tax schedules are skewed in favor of the wealthy while the average American pays 21 to 30 percent of their income in taxes with no way to reduce that bill by hiding income overseas.
The rationale used is that these folks will investment their tax breaks and create jobs.
Well we see how that has worked out.
What they did in fact was to take our money( our money because we have to make up for the taxes they don't pay by higher taxes upon ourselves and having the government borrow money to cover these tax losses) and gamble with it and lost it almost bringing the world finance system to ruin. And they are set to do this again.
Clearly austerity and budget cutting doesn't work as can be seen in the European example.
My remedy is simple. Stop giving these folks our money and let us keep our own money to invest locally in our own communities.
We have concentrated in this blog on finances in the Euro Zone and in the United States. Here is more on these and an additional factor looming--demographics.
See videos below and then we shall discuss.
A new deal on the European Debt Crisis? See what you think?
7/31/12 Third World Debt Going the Way of Greece?
The Euro Situation in interactive charts and graphs
Back to Self-Reliance? The wave of the future for European populations?
Is this the future of America? --Video
Also: Right now your money in the bank is insured up to 250k but that law is set to expire at the end of 2012. What to do.?
What about the American Deficit? What are the facts?
World Debt-Who Caused it-Who Got the Money-and Who has to pay it back.
The world we live in is a construction of the banks using phony debt as a means of control.
So let's have a lookt \at the debt leader the United States. How did this happen?
How did this debt happen?
First let's today settle the question of who or what caused the deficit in the United States in the first place such that the government had to borrow all that money and who got rich of the debt we currently have.
First a little history of debt in this country and then we go to the specifics.
Turns out the greatest contributor to the greatest debt in in US history was George Bush.
See below: Debt increased from 133 billion to 1 trillion during his administration. This was the Republican "starve the beast" strategy--create a debt ridden goverment and then under the cover of austerity take back middle class assets, ignoring the fact that two wars made Republican defense contractors, the banks, , the pentagon, the so-called secuity industry and wall street--the rich. There is no justice here.
On top of all this is the claim that the middle class overspent and now has to tighen it's belt because the monied classes simultaneously reduced wages forcing the mddile class to put their wives, children and grannies to work and use their high interest rate credit cards to survive.
Why can't the American public see this scam is beyond me.
But a chart is worth a thousand words.
It is clear that the Republicans ran up the debt with bailouts for banks, two wars, and tax breaks for the rich.
I am suggesting this was and is no accident.
And they are poised to do it again because there are billions in profits in it for their constituents-the banks, the pentagon, the so-called security industry, the prison industrial industry, and the war profiteers.
Tomorrow lets go back for more detail and a prognosis on the above which is clearly not sustainable. It will be a re-run of 1929. See the PBS vido special on the 1929 debacle to get a look at how it all worked then.
US companies preparing for Greece to leave the Eurozone. Yes, they are.
"In a survey this summer, the firm found that 80 percent of clients polled expected Greece to leave the euro zone, and a fifth of those expected more countries to follow.
“Fifteen months ago when we started looking at this, we said it was unthinkable,” said Heiner Leisten, a partner with the Boston Consulting Group in Cologne, Germany, who heads up its global insurance practice. “It’s not impossible or unthinkable now.”
Mr. Leisten’s firm, as well as PricewaterhouseCoopers, has already considered the timing of a Greek withdrawal — for example, the news might hit on a Friday night, when global markets are closed.
A bank holiday could quickly follow, with the stock market and most local financial institutions shutting down, while new capital controls make it hard to move money in and out of the country."
Should we be buying gold, go on the gold standard as Ron Paul suggests, allow currency collaspe and start over again, or impeach congress; end fractional banking and wall street gambling on margin, end buying stock on margin on margin-end the Federal Reserve?
These are some of the ideas being tossed around in the video below. Then come back and I will give my suggested solutions.
Meantime on the unlimited bond purchases promised by Draghi.
"Draghi said policy makers agreed to an unlimited bond- purchase program as they try to regain control of interest rates in the euro area. He said the ECB will have a “fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability.”
What does it all mean--especially since we see that Russia and China are now moving toward one another in order to protect their currencies and themselves for the possible debacle in the West. Meantime, what is the US doing--the US is looking left out.
I will be making my own prognistications in the next few days but first here are some additional variables which will have to be taken into account.
Here are fuel prices and food prices.
What are some of the triggers to look for?
Five more triggers set to fizzle or ignite in the next six days on wall street, the banks and JP Morgan--one pundits view.
We will throw these into the mix and get back our analysis tomorrow.
Well where are we in the never-ending European Debt Crisis and what is likely to happen?
First, there is a clear anti-Merkel trend. Socialists have won elections or gained strength in France, possibilty Holland, in Italy, now it looks Spain is rebelling against austerity as well.
Second, the European Central banks while offering unlimited funds may find that nobody wants those funds with the condtions now attached and the fact of the matter is that more debt cannot cure existing debt.
If that happens what will happen? The possiblilities and outcomes
1. Rolling default. Country after country may opt out of the zone or threaten to do so-getting concessions on the austerity plans-- which it is clear stiffle growth.
The Germans would lose. Yes the Germans would lose because they sell many if not most of their products to the PIIGs. Inflation would occur
and the creditor nations would lose and take the haircut, even if the zone fell apart. After all the Greeks reason, austerity and default start to look alike except default regains Greek soververgnity and that looks good to Greeks and the other nations right now.
2. Expect a planned default- with reverberations in the United States as well. That is why President Obama is promising an increase in exports. He plans to let the US currency float thereby increasing exports. He has to to put some American's back to work. A cheap dollar helps.
3. Meantime the Chinese and the Russians see this coming as well and are talking now about creating trade and currency aggreements between themselves which would insulate them from the dollar and its collaspe.
They are even talking commodity trades not based on currency but a form of barter. And that could work and if it does other nations could start to immulate it--trouble for the west.