Saturday, November 26, 2011

Black Friday, and not the good kind

The stock market had its worst Thanksgiving week since 1932.

Interest on Italian bonds topped 8% at a time when the US and Germany are paying less than 2%. Italy is the 8th largest economy in the world and was operating with a budget surplus.

Germany's bond auction Wednesday failed to sell even 2/3 of its offering at any price, and Germany is one of the strongest economies in world. Italy has no problem selling bonds even if the prices are outrageous. Why would this happen? The big banks who purchase the bonds wanted to let the dog know that the tail is in charge. Germany has been insisting that the banks take a haircut on the Greek debt. The banks don't like that arrangement, no matter that they are entirely to blame for this mess and continue to profit from it. They don't pay for their mistakes, that's the job of the taxpayer. When I say "mistakes", I really mean their deliberate fraud and corruption.

By Friday the Rottweiler had gotten the message and the German Fiance Minster was saying that Germany may reconsider its position on Greek debt. Greece and Italy both have un-elected bankers as Prime Minister and Germany doesn't want to be next.

It's often said that he who has the gold, rules. In this case rule is by they who control the mountain of interlocked derivative contracts.   $1,200,000,000,000,000 give or take a few hundred trillion.

Thursday, November 24, 2011

Euro collapse edges closer

The rate on sovereign bonds in Europe continues to climb, even in Germany which has the strongest non-communist economy in the world. Things are so bad that the British Pound is starting to look good.

US 3rd quarter GDP was revised down to only 2% growth this week. Given years of stagnation while the population continued to grow, this could be viewed as negative growth since wages for the 99% continue to fall. Last week's initial unemployment claims were up slightly, still close to 400,000/week, so there is no good news there.

The declining standard of living is reflected in the higher cost of the traditional Thanksgiving dinner that rose 13% over last year. Wall Street speculators controlling the price of commodities such as grain and fuel are driving up production costs. With the food supply firmly under the control of large transnational corporations you can bet the increased costs are passed along. Throw in the cost of new packaging to make the prices look the same, you have an added increase in the real cost that consumers don't "see" but must pay.  Well at least we aren't turkeys, even if the billionaires don't see us any different.

Wednesday, November 23, 2011

B of A swirls toward the drain

The cost to insure Bank of America debt through credit default swaps has set a new high as it appears that BoA won't be allowed by banking regulators to transfer additional derivatives from its Merrill Lynch division to its banking arm. After a credit downgrade in September they have been effectively using  FDIC insured deposits as collateral to keep the counter parties on their $75 trillion in derivatives from demanding bankruptcy. The Federal Reserve that regulates the big zombie banks was okay with this, the FDIC who would need to cover all the insured deposits was not.

Even BoA says that they are in much worse shape than they thought. Another significant downgrade by the rating agencies require another 8 billion in collateral and will likely mean the end of BoA. This will be a crisis for the FDIC. With BoA holding 17% of all US deposits the cost could run several trillion. The tea baggers in Congress will need to decide if they are willing to pay for it or crash the banking system.

Germany was only able to sell 2/3 of the bonds that it tried to auction today and this does not bode well for the survival of the Euro. A collapse of the Euro could cascade into total economic collapse. News from China hasn't been all that good lately and given their Communist government, it's hard to gauge how well they would weather such a collapse either.

The need for help from food pantries has tripled as millions of former middle class workers burn through the last of their resources and have no choice but to start living the life of the extreme poor. Take those canned goods you've been hoarding down to donate before they expire and buy new ones.

Monday, November 21, 2011

There was bad news today but it wasn't from Congress

The markets tanked today, but not by more than the high-frequency traders drive it up or down in a given day. Nobody on Wall Street expected Congress to do anything but kick the can down the road. The next Congress will be making the decisions. Either President Newt and Speaker Cantor will plunge us into the age of Charles Dickens, or Obama and Nancy Pelosi will do it instead (okay, I mean fix 30 years of Reaganomics, no really they might).

I'm not sure the Republicans want to be in power during the next four years. Things are likely to get ugly even with a Progressive government. We can get through this mess if enough people catch on to what is really going on.

Today's bad news is that the predator banks are going after France with their corrupt credit ratings agencies trying to work up a panic. France was supposed to be the only country besides Germany that could hold the line on the Euro. Given that the European Central Bank is either run by insane people or that they are in on the "big steal", the collapse of the Euro and probably Europe seems inevitable.

The other bad news is that a senior Chinese official came right out and said we are all screwed, the world economy is in for a long term "recession". He really means Depression, or perhaps the end of civilization, that's anybody's guess. China is looking to save itself and he basically said so out loud. Nobody is really trying to save us, in fact the real power around here wants to do us in. Knowledge is the only effective weapon we have, pick it up and use it.   

Sunday, November 20, 2011

The Super Committee, killed by Kryptonite

Actually they were killed by a dose of reality when Democrats called the Republican's bluff. Democrats put everything on the table (far more than they should have) but Republicans refused to agree to any real cuts let alone to tax the rich even at Clinton era levels.

The Republicans refuse to cut spending in any serious way. Remember, they were in complete control for 14 years. The current budget is still entirely a Republican construct, they've blocked every reform possible since Democrats regained tacit control of Congress in 2006, as Republicans have maintained control by filibuster in the Senate.  If Republicans were to agree to any cuts, they would have to answer to either the voters (tea bag protest sign: "keep your Government hands off my Medicare") and on anything else they answer to the lobbyists who own the Congress. Sure they're happy to screw with poor people and school kids, neither constituency votes or gives bribes, but make real budget cuts? No way.

The Republicans are still chanting that we are borrowing from China and sticking our grandchildren with the bill. The fact is that China has not increased its US Treasury Bond holdings in years. Even when they did, they paid for them in USD. Have you gotten a Government check payable in Yuan? All those dollars they have to throw around are not from their own profits, China spends those buying up African copper mines and Texas oil fields. This is really extra money US companies are keeping offshore in Chinese banks to avoid US taxes. Those same companies pay far more corporate taxes in China than they do in the US.

The bulk of US Treasury bonds are in fact held by rich Americans who are wallowing in cash after three decades of being grossly under taxed. The rich see these bonds as the only safe investment since all the extra cash has created bubbles in everything else. The rich are really banking on a deflationary spiral like the one their grandfathers created in the early 30s. This will allow them to grab off the last of the middle class wealth.

As a point of history, it's not true that Hitler was brought to power by the runaway inflation of the Weirmar Republic in the early 20s, but from the real suffering brought on by the deflationary spiral of the late 20s. Despite Prescott Bush and his Wall Street banker friends' best efforts to repeat their successes in Italy and Germany, the Progressives in the US elected FDR instead. That didn't keep them from an immediate coup attempt. Things have been worse, but we continue to rush headlong toward a repeat of the events engineered by the descendants of the same people the New Deal tried to defeat. It is class warfare, and we're losing.

The latest bid has come in for domestic terrorism

Is anyone really surprised that bankers would go after anybody that opposes their looting and pillaging of the country?

U.S. banks should "undermine" Occupy protesters: memo

More news you won't see on the "Lame Stream Media" (it's not like 2 dozen teabaggers got together). 
The crowd estimate comes from the State and is probably understated.