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Teetering On The Edge Of The Abyss
by moonwolf | October 7, 2008 at 10:00 am
438 views | 71 Recommendations | 39 comments
by moonwolf
The $800 billion dollar "bailout", or handout as some would call it, touted to be the one shot miracle to save the global financial system has failed. The black maw of banking debt is sucking up that pocket change as if it didn't exist. Too little, too late is an understatement. Those who have a real idea of how much bad paper is on the books, and scurrilously stashed off balance sheets knew it would require a minimum of 5 trillion dollars to begin to stem the hemorrhaging, let alone be the staggering amount required to cure the epidemic of crushing debt.
Traders in global stock markets are screaming their disdain and complete repudiation of the spurious logic of Secretary Paulson's short-sighted give away to con-artists and shysters, as indexes on markets from Mumbai to Hong Kong and New York tank.
Libor rates have gone through the roof and the credit taps, running so freely for so long, have been summarily turned off bringing economic activity and thus growth to a grinding halt. Bankers are so suspicious of what may be hiding on each others balance sheets that even inter-bank lending has virtually stopped, as paralyzed, the global economy free-falls into ever deepening recession. Many economists, at least in relation to the US economy, are quietly invoking the "D" word in their conversations about dire future consequences from what will doubtless go down in history as "The Great Unraveling", ending an era of unprecedented greed and feral excess spun out onto an unsuspecting global population by the Bush Administration, the duplicitous US Congress, the Federal Reserve, and a callous consumptive trans-national corporate kleptocracy.
Many here will have followed my posts of Mike Whitney's relentlessly steely-eyed analysis and accurate warnings, as the harbingers of the unfolding global economic crisis whipped by us unnoticed for over a year and a half like rusting sign posts on a one way road to ruin. Here is his latest installment and its doesn't look good! Not good at all.
Years from today, when the current financial crisis is over, historians are likely to agree that it would have been far better if the Bush administration had declared a state of emergency earlier in the process so that the necessary steps could have taken to avoid a complete financial meltdown. The media could have been used to bring the American people up to date on market-related developments and educated in the bizarre language of structured finance. Knowledge is power; and power can prevent panic.
Now we're in a terrible fix. People are scared and removing their money from the banks and money markets which is intensifying the freeze in the credit markets and driving stocks into the ground like a tent stake. Meanwhile, our leaders are "caught in the headlights", still believing they can "finesse" their way through the biggest economic cataclysm since the Great Depression. It's madness.
If something is not done to increase the flow of credit immediately, the stock market will tumble, unemployment will spike, and many businesses will grind to a standstill. We could be just days away from a severe shock to the system. Secretary of the Treasury Henry Paulson's $700 billion bailout does not focus on the fundamental problems and is likely to fail. At best, it puts off the day of reckoning for a few weeks or months. Contingency plans should be put in place so the country does not have to undergo post-Katrina bedlam.
Does Congress have any idea of the mess they've made by passing the Bailout bill? Do they even read the papers or are they so isolated in their Capital Hill bubble-world that they're entirely clueless? Did any Senator or congressman even notice, that while they were busy mortgaging off America's future, the stock market was plummeting to new lows? Between the time the ballots were cast on Paulson's bailout, and the announcement of the final tally (which was approved by a generous margin) the market went from a 310 point gain to a 157 point loss; a whopping 467 plunge in less than two hours.
Thus spake the Market: "Paulson's bill is a fraud!"
Listen up, Congress: This massive trillion dollar deleveraging process cannot be stopped. The system is purging credit excesses which are unsustainable. The levies you're building with this $700 billion bill may plug a few holes, but it won't stop the flood. Economist Ludwig von Mises put it like this:
October 7, 2008 at 10:00 am by moonwolf, 438 views, 39 comments
Most RecentMost Recommended Comments (39)
at 10:30 on October 7th, 2008
moonwolf, I like this story. It's good stuff. Well moonwolf, how do we get out of this mess. Do we need new banks for us, shut down the old ones, or what ? Nice to see you found time to write.
at 10:37 on October 7th, 2008
Thanks Solar,
We need to turn a jaundiced eye toward a complete and detailed review of the current laissez-faire neo-liberal capitalist economic system, the notion of globalization, the freedoms given to banks and corporations and move toward a total restructuring of the way we interact with money, each other, and business, from the ground up!
at 10:45 on October 7th, 2008
moonwolf, one question more, you talking $5trillion. Could it mean cash money disappears and they try to sell us the universal eurodollaryen debit card to cover in a mega merger the loss ?
at 10:59 on October 7th, 2008
Solar,
I can't say specifically, but I can say with certainty that all efforts to buy and shuffle around the debts does not eliminate the fact that the crushing debt exists! Moving it about is just slight of hand. There is not enough real liquidity in the system to keep it afloat. Printing money does not create new supplies of real money, only production does, contrary to the b**lsh*t you have been sold. Printing more money just dilutes the value of each dollar. Inflation baby!
at 11:07 on October 7th, 2008
..only production does, I got it
at 16:38 on October 7th, 2008
Moonwolf,
Really spectacular article you wrote..
I really liked it.
Main reason is you spoke the truth .
We can use more of that these days.
Much thanks
Peace,
Campanaro
at 10:56 on October 8th, 2008
Thanks for the acknowledgment campanaro! It is greatly appreciated. I keep working on it!
at 10:57 on October 7th, 2008
You have jumped to a bit of an early conclusion. Not a single penny of that money has het Wall Street yet. Expecting banks to change behavior based on the prospect of improved liquidity is almost as stupid as lending money to people hoping they will be able to pay it off when they finally get a better paying job!
at 12:01 on October 7th, 2008
eastvanray,
But that's exactly what Paulson and the Congress expected. Are they stupid? You bet. If you think that $800 billion will be enough even when they start to shuffle numbers around on computer screens, I'll put a side bet with you on the outcome. What say?
One of the estimates I read as to the real amount of unsupported debt in the US credit and CDS market alone was about $122 trillion dollars. Globally that number spirals to the unthinkable amount of $1,300 TRILLION dollars!!
I don't think a paltry $800 billion is going to help much! LOL!
at 16:39 on October 7th, 2008
I would argue they are not stupid... Blind and avaricious, yes. But not stupid.
at 10:57 on October 8th, 2008
Mikasi,
You're right! I stand corrected.
at 11:07 on October 7th, 2008
Most unsupported debt is perfectly safe. It wasn't all loaned to deadbeats. The deadbeats account for less than 10% of residential mortgages and 0% of commercial mortgages. Most real unsupported consumer debt is on credit cards.
at 11:24 on October 7th, 2008
Eastvaray,
"Most unsupported debt is completely safe." That is your opinion but I'll take the opinion of people that know more than you thanks.
I'm talking about the inter-institutional debt and major investors buying and selling debt, where debt was used to borrow more money and so on and so on, and so on with the value of real assets supporting the ever increasingly convoluted and murky transactions dropping to a level where the whole thing collapses. Many trillions of dollars were lifted, removed, stolen from the system in untraceable transactions due to the incomprehensible complexity. Ask economists and they'll tell you they can't understand all the strange tools and mechanisms that were just invented and spun up, nor could anyone ever trace all the shenanigans.
at 12:42 on October 7th, 2008
I will agree with you on one thing for sure Wolf.....that the system has been made WAY too complicated by politicians. The system needs to be torn down, deragulated and replaced with a system that even consumers can understand. But as long as we send lawyers to make our laws that isn't going to happen any time soon.
at 13:40 on October 7th, 2008
moonwolf, I like this story. It's good stuff.
at 14:08 on October 7th, 2008
moonwolf, I like this story. It's good stuff.
at 14:31 on October 7th, 2008
moonwolf, I like this story. It's good stuff. LOL I like the photo!
at 15:04 on October 7th, 2008
Christina,
I'm sure that's the way many people feel right now!
at 14:45 on October 7th, 2008
Thanks all!
at 14:56 on October 7th, 2008
Moonwolf, I like this story. It's good stuff.
at 15:03 on October 7th, 2008
moonwolf, I like this story. It's good stuff.
at 15:21 on October 7th, 2008
moonwolf, I like this story. It's good stuff.
at 15:21 on October 7th, 2008
Thanks you two!
at 15:38 on October 7th, 2008
The Bush administration is going to be long remembered for this rediculous mess. Let's just hope McCain doesn't get into the Oval Office, and that we can pull ourselves out of this sooner than later.
One thing that has my attention on this issue is some of the video I have seen coming in from other countries around the world. I have seen people cheering and laughing at the current economic woes the U.S. is facing, but before laughing to hard, they should realize that this mess has already found it's way into the global economy and will most likely be affecting their lives in the not to distant future.
at 15:33 on October 7th, 2008
Thanks Jared.
at 15:40 on October 7th, 2008
Read this?
Aaaand THIS?
at 07:24 on October 9th, 2008
Thanks Daniel,
The Amero? I thought we weren't aloud to use profanity here?!
Why would Canadians ever OK tying our economy that closely to a country that scuttles it's own ship, impoverishes it's own people and eats its own kids' futures? Ain't gonna happen! The first PM who tries will find himself, along with all the other fools that supported the notion, dropped off in the wilderness, North of the Arctic circle in January in shorts and a bad Hawaiian shirts. Nice 'n' bright so they make great targets for Polar bears!
at 15:53 on October 7th, 2008
moonwolf, I like this story. It's good stuff.
at 16:25 on October 7th, 2008
moonwolf, As you may remember that I was totally against this Bailout, I however think that 5 trillion would be to much to solve the problem? but maybe not. Looking at the global picture I feel that the original 800 Billion was only the american government offer. The US government thought that most of the worlds nations would apply the same measures to help solve the problem, UK instantly took up US policy infact implementing their plan prior to the US.
The problem is that most other nations are not following USA lead and of course this bailout will not work and was pretty pointless though as you say will plug some holes.
Meanwhile whilst the wheeling and dealing of the administration to get the bill through rumor hype and panic caused a mini stock market crash. The stock market seems to be settling down now I expect we will see a rise once investors feel a bit more secure and the markets will rise and show the true damage to stocks and shares.
The answer is destroy your credit cards, lol, save up and then buy and only buy what you can afford. Companies need to learn not to live on credit they can not really afford. Speculators that use other peoples money need to be policed or limited to the amount of investment.
Yes there will be unemployment but not as bad as the media is predicting, one thing for sure the hype needs to stop once it does the damage will not be that bad. Countries such as Germany have thought more about joe public than the stock exchange, it was a good move to insure citizens money in the bank and savings however president Bush must of been shocked at the no bailout policy.
I fill sorry for those that will have their houses possessed but most of these will be far over their head in debt and most probaly been living on credit most of their life. I like many people have fell into that trap and now that burdens gone and I have thown away the credit cards and have no debts what so ever, life is sweet.
I fill sorry for those that will end up unemployed I certainly know what thats like having been a suffer of ageism. I retired early and move to a cheaper economy. But many will not have that choice and be lucky to have a pension to do so.
We can never trust our governments as they have puppet masters and some of those puppet masters help cause such problems and are conning the public, bailouts should never be an option but good laws to stop the elite con men from using such scams are really needed.
at 11:07 on October 8th, 2008
Babel-Fish,
Thanks so much for the thoughtful and compassionate comment. Bang on the money. No pun intended! (:D)
For the last 3 years my wife and I have engaged in an interesting self-imposed fiscal exercise. When we go out and we see an object we would like to buy we put the potential purchase to one simple test. We ask ourselves one question, "Do we NEED this?" If the answer is no, then we don't buy it.