During the Clinton Administration, four trillion dollars disappeared through the back door. Rather, than get it back, the Bush Administration has decided to simply hand out more through the same banks as a matter of government policy.
U.S. Treasury Said to Invest in Nine Major U.S. Banks
The stock market rising today is not surprising. With government willing to finance 100% of any and all losses, why not buy up everything you can? Perhaps that is the plan.
The terrifying thing about it is that people worried about evaporating value in their 401(k)s are persuaded that this is a good idea. A perfect example of “shock and awe” terrorism.
This brings me back to one of my favorite quotes that explains why you can not “solve” with more government funding and guarantees the very problem created by government funding and guarantees:
“As long as I can get government subsidies, what do I care if people have education or jobs?”
–Dick Ravitch, currently Lieutenant Governor of New York, to Catherine Austin Fitts over dinner at the Jockey Club in 1997
I’m not a financial advisor or anything, but if I measure my net worth in gallons of gas, I am up significantly since July. 🙂
I’d say gold is an inflation hedge. But what we are seeing is deflation, what with the massive Lehman bankruptcy. Furthermore us consumers will never see the $700B bailout money. It will be used to buy bad debt, and our future taxes will pay it off. Increased taxes that buy nothing real will furthermore allow less disposable income, further deepening the deflationary spiral.
I’d say raise cash, buy real assets (such as land), look into starting a small business or investing with family/friends/neighbors. Learn real skills, such as farming, or home/auto/computer repair. You can use these skills to save money, or get paid for them.
Disclaimer: The above is not meant to be financial advice.
so, what do we do? stay all cash? but that is going to smash too.
Buy gold? But they are supposedly driving the price down.
Hedge?
Q: Why are experimenters using Hedge Fund CEOs instead of rats?
A: There are some things rats just won’t do.
Bailout Recipe:
Fillet of a fenny snake, ? Â
In the caldron boil and bake;
Eye of newt, and toe of frog,
Wool of bat, and tongue of dog,
Adder’s fork, and blind-worm’s sting,
Lizard’s leg, and owlet’s wing —
For a charm of powerful trouble,
Like a hell-broth boil and bubble.
The Woman Who Could Have Prevented This Financial Mess Was Silenced by Greenspan, Rubin and Summers
By Katrina vanden Heuvel, TheNation.com
Posted on October 11, 2008, Printed on October 14, 2008
http://www.alternet.org/story/102559/
“Break the Glass” was the code-name high-level Treasury Department figures gave the $700 billion bailout; it was to be used only as a last-resort measure.
Now millions have been sprayed and damaged by broken glass.
But more than a decade ago, a woman you’re likely never to have heard of, Brooksley Born, head of the Commodity Futures Trading Commission — a federal agency that regulates options and futures trading — was the oracle whose warnings about the dangerous boom in derivatives trading just might have averted the calamitous bust now engulfing the US and global markets. Instead she was met with scorn, condescension and outright anger by former Federal Reserve Chair Alan Greenspan, former Treasury Secretary Robert Rubin and his deputy Lawrence Summers. In fact, Greenspan, the man some affectionately called “The Oracle,” spent his political capital cheerleading these disastrous financial instruments.
On Thursday, the New York Times ran a masterful and revealing front page article exposing the culpability of Greenspan, Rubin and Summers for the era of dangerous turbulence we live in.
What these “three marketeers” — as they were called in a 1999 Time magazine cover story — were adept at was peddling the timebombs at the heart of this complex crisis: exotic and opaque financial instruments known as derivatives — contracts intended to hedge against risk and whose values are derived from underlying assets. To cut to the quick, Greenspan, Rubin and Summers opposed regulating them. “Proposals to bring even minimalist regulation were basically rebuffed by Greenspan and various people in the Treasury,” recalls Alan Blinder, a former Federal Reserve board member and economist at Princeton University, in the Times article.
In 1997, Brooksley Born warned in congressional testimony that unregulated trading in derivatives could “threaten our regulated markets or, indeed, our economy without any federal agency knowing about it.” Born called for greater transparency — disclosure of trades and reserves as a buffer against losses.
Instead of heeding this oracle’s warnings, Greenspan, Rubin & Summers rushed to silence her. As the Times story reveals, Born’s wise warnings “incited fierce opposition” from Greenspan and Rubin who “concluded that merely discussing new rules threatened the derivatives market.” Greenspan deployed condescension and told Born she didn’t know what she doing and she’d cause a financial crisis. (A senior Commission director who worked with Born suggests that Greenspan and the guys didn’t like her independence. ” Brooksley was this woman who was not playing tennis with these guys and not having lunch with these guys. There was a little bit of the feeling that this woman was not of Wall Street.”)
In early 1998, according to the Times story, one of the guys, Larry Summers, called Born to “chastise her for taking steps he said would lead to a financial crisis. But Born kept at it, unwilling to let arrogant men undermine her good judgment. But it got tougher out there. In June 1998, Greenspan, Rubin and the then head of the SEC, Arthur Levitt, Jr., called on Congress “to prevent Ms. Born from acting until more senior regulators developed their own recommendations.” (Levitt now says he regrets that decision.) Months later, the huge hedge fund Long Term Capital Management nearly collapsed — confirming some of Born’s warnings. (Bets on derivatives were a key reason.)
“Despite that event,” the Times reports, ” Congress (apparently as a result of Greenspan & Summer’s urging, influence-peddling and pressure) “froze” Born’s Commissions’ regulatory authority. The next year, Born left as head of the Commission. Born did not talk to the Times for their article.
What emerges is a story of reckless, willful and arrogant action and behavior designed to undermine a wise woman’s good judgment. The three marketeers’ disdain for modest regulation of new and risky financial instruments reveals a faith-based fundamentalist approach to the management of markets and risk. If there is any accountability left in our system, Greenspan, Rubin and Summers should not be telling anyone how to run anything. Instead, Barack Obama might do well to bring back Brooksley Born and promote to his team economists who haven’t contributed to the ugly mess we’re in.
Katrina vanden Heuvel is editor of The Nation.
© 2008 TheNation.com All rights reserved.
View this story online at: http://www.alternet.org/story/102559/
In a recent article by Ron Kirby, he seems to suggest that the Federal deficit may be buried within the derivatives market.
http://www.financialsense.com/fsu/editorials/kirby/2008/1003.html
Perhaps this is what Cheney meant when he said, ‘Deficits don’t matter.’ This now explains why the speculative derivatives (interest rate swaps) are so important. Also it brings to new light about being ‘too big’ or ‘too important to fail.’ If these major investment banks fail, there is not only a liquidity crisis, but there would be Federal fiscal meltdown. Such creative financing. If certain triggers are not met, then the premiums paid by the buyer are forfeit to the writer of the contract. I think some of the mutual funds that invest in these instruments, however, have a 1 to 3% yield.
Why should the gov’t borrow money when it can sell lottery tickets — and even better, write the winning number? Clever.
Jarno
dear Catherine: Have been hearing you regularly on http://www.rense.com and look forward to wearing match sticks to hold up my eyelids on Thurs.. As I see this debacle: it has taken a mere 15-20 trillion dollars of worldwide central bank unfusion of constant liquidity over the past year or so to enable the globalmarket to regain the appearance that all is well…the curtain hiding the wizard nearly flew open and exposed the fools hiding in the casino economy buying and selling $1000 trillion worth of naked shorts , derivatives of all types, credit default swaps to guarantee the losses and of course dry derivatives where the participant does not have an interest in the stock/company in question ( this nuance will most assuredly target particular companies and/or sectors of the economy that the insiders wish to bankrupt ). All the players have retained their seats of power ( all the hidden offshore accounts are well maintained ) and except for very few, they are positioned to continue the plan to replace the dollar as the reserve currency and most other currencies as well. Remember Angela Merchal has stated that she is placing a “cornerstone” and Gordon Brown ( who in years past sold off half the BOE gold bullion @ $275..per ounce ) states that “a new foundation has been laid”. Quite possibly we are witnessing in real time the coup de’tat that you have previously broadcast. Today radio host Thom Hartman announced that according to the Oct. 1st Federal Register the head of Homeland Security has announced an “emergency”; and has initiated his martial law power to repel a “biological, chemical or nuclear” attack on our land ( particularly he mentions anthrax!!!! ). As you already are aware the 3rd Army has been ressigned under NorthCom command as a deterant to possible street insurrection.
In addition Naomi Wolfe also sounds the alarm on a youtube video that corresponds to the above. She is very alarmed!! She also mentions the reassignment in the video.
Get some rest and I will have my ears pierced on Thursday night. as always, Richard
Maybe having an aerospace engineer dolling out the billions is a good idea. On second thought, i’m not so sure.
Parsing the education or jobs quote, a college marketing professor told me last week that “…at least 40%, maybe 50%, of her students have no business being in college. About 1 in 10 understands the concept of retail pricing versus wholesale. And, 70% fail the simple math test I (the prof) gives on the first day of class each semester.” And she teaches at a decent academic college.
Her take was that we are getting what we deserve with the bailout with idiots like this graduating from college.