"End of Wall Street Boom" - Must-read history

[82_28]

Why the hell can't we just wipe it all clean? Perhaps it is socialism. But liquidate all humans who have a worth of over a million dollars US. Then yes, REDISTRIBUTE that shit back out. If that is what matters -- money -- then redistribute that shit. These scared motherfuckers who could probably pay someone a grand to come and get me, need to see what they have done. These people are technocrats. The worst of the worst of cults.

I can't tell you how many rich men keep me in their kindness, but still would never listen to a suggestion I ever had to say. Because they have the money, they know it all. In fact I have warned rich men to not take various business gambles. Some of these gambles came 5 or 6 years ago. All, every single one that I know of was shot to shit recently. And see I don't know shit. Perhaps if I had money I would know even more about being a fucking craven idiot. Thus, I would know more, wouldn't I? And that's all that counts. There truly is no captain of this ship and if there is, he doesn't give a fuck about the steerage passengers. Surprise Surprise.

[NeonLX]

Them what has, gets.

[JackRiddler]

Why the hell can't we just wipe it all clean? Perhaps it is socialism. But liquidate all humans who have a worth of over a million dollars US. Then yes, REDISTRIBUTE that shit back out. If that is what matters -- money -- then redistribute that shit. These scared motherfuckers who could probably pay someone a grand to come and get me, need to see what they have done. These people are technocrats. The worst of the worst of cults.

I can't tell you how many rich men keep me in their kindness, but still would never listen to a suggestion I ever had to say. Because they have the money, they know it all. In fact I have warned rich men to not take various business gambles. Some of these gambles came 5 or 6 years ago. All, every single one that I know of was shot to shit recently. And see I don't know shit. Perhaps if I had money I would know even more about being a fucking craven idiot. Thus, I would know more, wouldn't I? And that's all that counts. There truly is no captain of this ship and if there is, he doesn't give a fuck about the steerage passengers. Surprise Surprise.

Liquidate? Are you unaware that this word when applied to a human being has two distinct meanings, the one being to sell off the wealth of, the other being to kill summarily?

I'll assume you mean the former, and hope I don't need to belabor that I'm very much against the latter. In any case, the former is not a proposal that makes any sense to me, and it smacks of the nightmare version of "socialism," i.e. the relentless leveling and stripping away of creativity and freedom that the apologists of capital invoke.

Many people are "millionaires" merely by virtue of owning a modest house in an urban center that would sell for a tenth the price in an exurb. It's not like we're talking about Scrooge Mac Duck's money-bin, and all we have to do is break it open and equally dispense the loot in liquid form, one share for each person.

A lot of people whose personal wealth is valued in millions may actually do good for the world, as far as I'm concerned. We should be looking to establish minimum, decent standards of living and opportunity for all, and more rational, humane standards of what activities are to be encouraged (like those that clean up the eco-mess and advance community autonomy) and what activities shall be discouraged or even called crime (like most of what Goldman Sachs does).

I will agree with you that there should be some upper limit on what belongs to one person, but on the other hand society should recognize the importance of the power to accumulate capital and to use it to a creative purpose, something that usually only happens when attached to singular visions. Or, how to put this? I wouldn't want every town and building designed by a committee of enlightened professionals strictly with utilitarian cost-benefit and energy/resource accounts in mind. Though this should be the basic model for mass production, the world needs crazy.

A maximum earning potential can legitimately be a lot higher than what you're suggesting. Professions and business will always involve work, risk, often many years of education. Hell, even athletes, there'd be nothing wrong if baseball players were paid by a formula or some kind of scale that reflects seniority and performance, maxing at a million bucks plus a good pension, because millions of people actually do love watching them and they are putting their bodies and careers in anything else at some risk.

( Bonus is OPS*(R+RBI)*1000 + 1/(1000-FP)*8000 + (IP+5W+3App)/(ERA+WHIP)*12000 )

That being said, executive political power (as well as far-above average compensation) should be given exclusively to nurses, firemen, garbagemen and teachers.

It's ridiculous, as capital's apologists suggest, to say that people will only work hard and/or create great and beautiful things if there is absolutely no limit on what they can gain from it in dollars. (That would be Ayn Rand's philosophy.) Everything's relative, and if there was a maximum limit that allowed more individual freedom and power to do things than the low end, people would strive just as hard for that. And there would still be the great many who just find good work and/or creating beautiful things rewarding in themselves.

[JackRiddler]

!

http://www.telegraph.co.uk/finance/econ ... mulus.html
(Article reproduced here under fair-use provisions, with original link given, solely for non-commercial purposes of archiving, education and discussion.)

US money supply plunges at 1930s pace as Obama eyes fresh stimulus

The M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history.


By Ambrose Evans-Pritchard
Published: 9:40PM BST 26 May 2010

Comments 7 | Comment on this article
The stock of money in the US fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc Photo: AFP

The M3 figures - which include broad range of bank accounts and are tracked by British and European monetarists for warning signals about the direction of the US economy a year or so in advance - began shrinking last summer. The pace has since quickened.

The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of insitutional money market funds fell at a 37pc rate, the sharpest drop ever.

"It’s frightening," said Professor Tim Congdon from International Monetary Research. "The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly," he said.

The US authorities have an entirely different explanation for the failure of stimulus measures to gain full traction. They are opting instead for yet further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97pc of GDP next year and 110pc by 2015.

Larry Summers, President Barack Obama’s top economic adviser, has asked Congress to "grit its teeth" and approve a fresh fiscal boost of $200bn to keep growth on track. "We are nearly 8m jobs short of normal employment. For millions of Americans the economic emergency grinds on," he said.

David Rosenberg from Gluskin Sheff said the White House appears to have reversed course just weeks after Mr Obama vowed to rein in a budget deficit of $1.5 trillion (9.4pc of GDP) this year and set up a commission to target cuts. "You truly cannot make this stuff up. The US governnment is freaked out about the prospect of a double-dip," he said.

The White House request is a tacit admission that the economy is already losing thrust and may stall later this year as stimulus from the original $800bn package starts to fade.

Recent data have been mixed. Durable goods orders jumped 2.9pc in April but house prices have been falling for several months and mortgage applications have dropped to a 13-year low. The ECRI leading index of US economic activity has been sliding continuously since its peak in October, suffering the steepest one-week drop ever recorded in mid-May.

Mr Summers acknowledged in a speech this week that the eurozone crisis had shone a spotlight on the dangers of spiralling public debt. He said deficit spending delays the day of reckoning and leaves the US at the mercy of foreign creditors. Ultimately, "failure begets failure" in fiscal policy as the logic of compound interest does its worst.

However, Mr Summers said it would be "pennywise and pound foolish" to skimp just as the kindling wood of recovery starts to catch fire. He said fiscal policy comes into its own at at time when the economy "faces a liquidity trap" and the Fed is constrained by zero interest rates.

Mr Congdon said the Obama policy risks repeating the strategic errors of Japan, which pushed debt to dangerously high levels with one fiscal boost after another during its Lost Decade, instead of resorting to full-blown "Friedmanite" monetary stimulus.

"Fiscal policy does not work. The US has just tried the biggest fiscal experiment in history and it has failed. What matters is the quantity of money and in extremis that can be increased easily by quantititave easing. If the Fed doesn’t act, a double-dip recession is a virtual certainty," he said.

Mr Congdon said the dominant voices in US policy-making - Nobel laureates Paul Krugman and Joe Stiglitz, as well as Mr Summers and Fed chair Ben Bernanke - are all Keynesians of different stripes who "despise traditional monetary theory and have a religious aversion to any mention of the quantity of money". The great opus by Milton Friedman and Anna Schwartz - The Monetary History of the United States - has been left to gather dust.

Mr Bernanke no longer pays attention to the M3 data. The bank stopped publishing the data five years ago, deeming it too erratic to be of much use.

This may have been a serious error since double-digit growth of M3 during the US housing bubble gave clear warnings that the boom was out of control. The sudden slowdown in M3 in early to mid-2008 - just as the Fed raised rates - gave a second warning that the economy was about to go into a nosedive.

Mr Bernanke built his academic reputation on the study of the credit mechanism. This model offers a radically different theory for how the financial system works. While so-called "creditism" has become the new orthodoxy in US central banking, it has not yet been tested over time and may yet prove to be a misadventure.

Paul Ashworth at Capital Economics said the decline in M3 is worrying and points to a growing risk of deflation. "Core inflation is already the lowest since 1966, so we don’t have much margin for error here. Deflation becomes a threat if it goes on long enough to become entrenched," he said.

However, Mr Ashworth warned against a mechanical interpretation of money supply figures. "You could argue that M3 has been going down because people have been taking their money out of accounts to buy stocks, property and other assets," he said.

Events may soon tell us whether this is benign or malign. It is certainly remarkable.

Related Articles
Tim Geithner: 'Europe must react quickly and with force'
Recession: glimmers of hope?
Don't bid up the Swiss franc. Or else!
Dow Jones tumbles on fears about US stimulus package
Bad news: we're back to 1931. Good news: it's not 1933 yet
Gordon Brown's giveaway and tax cut plan will cost thousands of jobs and hold back growth

Refer to this post on money supply and total debt:

viewtopic.php?f=8&t=21495&start=420#p337629

Sorry, I couldn't find a graphic representation of the long term M3 that goes all the way to 2010:


Perhaps because it's no longer an official stat.

But imagine the extension as follows: similar levels continue until Sep 2008, then it shoots up to about 100 percent of GDP, and is now declining from that much higher level.

Nevertheless, my tendency is to think the policy is deflationary, and thus supportive of general debt slavery and continued recession. I find it funny the article calls these bozos Keynesians. They are following the Hooverian strategy, 'tis true. (Hoover also ran some major monetary injections -- all oriented to pumping money into the banks.)

Apropos, here’s a write-up from July 2009 concerning a Harper's article that is subscribers only…

http://www.harpers.org/archive/2009/06/hbc-90005235
(Article reproduced here under fair-use provisions, with original link given, solely for non-commercial purposes of archiving, education and discussion.)

Barack Hoover Obama

By Ken Silverstein

Kevin Baker has an excellent piece in the July issue of the magazine (available to subscribers) about the similarities between our current president and our thirty-first, Herbert Hoover:

The comparison is not meant to be flippant. It has nothing to do with the received image of Hoover, the dour, round-collared, gerbil-cheeked technocrat who looked on with indifference while the country went to pieces. To understand how dire our situation is now it is necessary to remember that when he was elected president in 1928, Herbert Hoover was widely considered the most capable public figure in the country. Hoover—like Obama—was almost certainly someone gifted with more intelligence, a better education, and a greater range of life experience than FDR. And Hoover, through the first three years of the Depression, was also the man who comprehended better than anyone else what was happening and what needed to be done. And yet he failed.

Mind you, Baker is not (like the majority of the GOP) rooting for Obama to fail:

It is impossible not to wish desperately for his success as he tries to grapple with all that confronts him: a worldwide depression, catastrophic climate change, an unjust and inadequate health-care system, wars in Afghanistan and Iraq, the ongoing disgrace of Guant·namo, a floundering education system. Obama’s failure would be unthinkable. And yet the best indications now are that he will fail, because he will be unable—indeed he will refuse—to seize the radical moment at hand.

Every instinct the president has honed, every voice he hears in Washington, every inclination of our political culture urges incrementalism, urges deliberation, if any significant change is to be brought about. The trouble is that we are at one of those rare moments in history when the radical becomes pragmatic, when deliberation and compromise foster disaster. The question is not what can be done but what must be done.

Along comes the New York Times today with a piece by Joe Nocera about Obama’s financial regulatory “reform” plan that’s particularly interesting in tandem with Baker’s piece:

Three quarters of a century ago, President Franklin Roosevelt earned the undying enmity of Wall Street when he used his enormous popularity to push through a series of radical regulatory reforms that completely changed the norms of the financial industry. Wall Street hated the reforms, of course, but Roosevelt didn’t care. Wall Street and the financial industry had engaged in practices they shouldn’t have, and had helped lead the country into the Great Depression. Those practices had to be stopped. To the president, that’s all that mattered.

On Wednesday, President Obama unveiled what he described as “a sweeping overhaul of the financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression.” In terms of the sheer number of proposals, outlined in an 88-page document the administration released on Tuesday, that is undoubtedly true. But in terms of the scope and breadth of the Obama plan — and more important, in terms of its overall effect on Wall Street’s modus operandi — it’s not even close to what Roosevelt accomplished during the Great Depression.

Rather, the Obama plan is little more than an attempt to stick some new regulatory fingers into a very leaky financial dike, and not rebuild the entire system. Without question, the latter would be more difficult, more contentious and probably more expensive. But it would also have more lasting value.

EDIT: Found another quote from the Hoover article.

President Obama, to be fair, seems to be even more alone than Hoover was in facing the emergency at hand. The most appalling aspect of the present crisis has been the utter fecklessness of the American elite in failing to confront it. From both the private and public sectors, across the entire political spectrum, the lack of both will and new ideas has been stunning. When it came to the opposition, Franklin Roosevelt reaped the creative support of any number of progressive Republicans throughout his twelve years in office, ranging from New York Mayor Fiorello La Guardia to Nebraska Senator George Norris to key cabinet members such as Henry A. Wallace, Harold Ickes, Henry Stimson, and Frank Knox. Obama, by contrast, has had to contend with a knee-jerk rejectionist Republican Party.

More frustrating has been the torpor among Obama’s fellow Democrats. One might have assumed that the adrenaline rush of regaining power after decades of conservative hegemony, not to mention relief at surviving the depredations of the Bush years, or losing the vestigial tail of the white Southern branch of the party, would have liberated congressional Democrats to loose a burst of pent-up, imaginative liberal initiatives.

Instead, we have seen a parade of aged satraps from vast, windy places stepping forward to tell us what is off the table. Every week, there is another Max Baucus of Montana, another Kent Conrad of North Dakota, another Ben Nelson of Nebraska, huffing and puffing and harrumphing that we had better forget about single-payer health care, a carbon tax, nationalizing the banks, funding for mass transit, closing tax loopholes for the rich. These are men with tiny constituencies who sat for decades in the Senate without doing or saying anything of note, who acquiesced shamelessly to the worst abuses of the Bush Administration and who come forward now to chide the president for not concentrating enough on reducing the budget deficit, or for "trying to do too much," as if he were as old and as indolent as they are.

Senate Majority Leader Harry Reid—yet another small gray man from a great big space where the tumbleweeds blow—seems unwilling to make even a symbolic effort at party discipline. Within days of President Obama’s announcing his legislative agenda, the perpetually callow Indiana Senator Evan Bayh came forward to announce the formation of a breakaway caucus of fifteen "moderate" Democrats from the Midwest who sought to help the country make "the changes we need" but "make sure that they’re done in a practical way that will actually work"—a statement that was almost Zen-like in its perfect vacuousness. Even most of the Senate’s more enlightened notables, such as Russ Feingold of Wisconsin or Claire McCaskill of Missouri or Sherrod Brown of Ohio, have had little to contribute beyond some hand-wringing whenever the idea of a carbon tax or any other restrictions on burning coal are proposed.

[JackRiddler]

Doing one more on Greece, again by Weisbrot, because I find he sums it up so well in a single column:

http://counterpunch.org/weisbrot05262010.html
(Article reproduced here under fair-use provisions, with original link given, solely for non-commercial purposes of archiving, education and discussion.)

From Greece to Spain
The Eurozone's Self-Inflicted Crisis

May 26, 2010


By MARK WEISBROT

The current turmoil in financial markets around the world is another illustration of the damage that can be done by a bloated and politically powerful financial sector, combined with finance ministers and central bankers who identify with this sector and have their own right-wing policy agenda.

Welcome to Europe, which has become the epicenter of the new global “financial crisis.”

On Tuesday, the focus of Europe’s troubles shifted somewhat from Greece to Spain.

At first glance it’s not obvious that there should be a crisis in Europe at all. Even if Greece were to default on its debt – and this would most likely be a rescheduling or a restructuring rather than a large-scale cancellation of the bulk of Greece’s debt – this would involve a relatively small amount of money compared to the resources that the EU has available to bail out any affected banks. And Spain’s debt is much smaller, relative to its economy, than that of Greece: it’s about 60 percent of GDP, well below the EU average of 80 percent.

But “the markets” have decided that Spain is next in line for attack, and so the price of Credit Default Swaps – a type of insurance -- on their debt shot up today. If this sentiment grows, Spain’s interest rates will continue to rise, and then their debt burden really could become unsustainable.

To make it worse, “the markets” can’t seem to decide what they want from these governments in order to love them again. Two weeks ago the Euro was plummeting because the financial markets wanted more blood: they wanted Greece, Spain, Portugal, and the other currently victimized countries of Europe (Italy and Ireland) to commit to more spending cuts and tax increases. Then they got what they wanted, and within a day or two, the Euro started crashing again because “the markets” discovered that these pro-cyclical policies would actually make things worse in the countries that adopted them, and reduce growth in the whole Eurozone.

Unfortunately the European authorities – especially the European Central Bank – are even worse than the markets. They are less ambivalent and more committed to punishing the weaker economies by having them cut spending even if it causes or deepens recession and mass unemployment (over 20 percent in Spain).

It will be recalled that the turmoil in financial markets took a big turn for the worse on May 6 when the European Central Bank announced that it was not going to engage in “quantitative easing” – creating money – in order to help ease the crisis. They reversed their decision, but only partially. And the agreement reached for the so-called “trillion dollar bailout” requires that any country borrowing the funds must agree to more austerity. This means that if a country like Spain does run into trouble due to increased borrowing costs, tapping the “bailout” funds will force them to accelerate a downward economic spiral. And where is the inflation that the ECB is worried about? The Eurozone is projected by the IMF to have 1 percent inflation for this year and 1.5 percent next year.

Imagine how much worse the United States economy would be today if, instead of responding to our recession with fiscal stimulus, near zero interest rates and a doubling of the Fed’s balance sheet – we had opted for budget cuts and tax increases. That is what the European authorities are advocating for the weaker Eurozone economies.

The Greek population refuses to accept these conditions, and understandably so. The upper classes in Greece don’t pay their taxes, and now the majority are being forced to pay the price for their cheating – a price greatly magnified by the irrational, pro-cyclical nature of the adjustment. Unrest is growing in Spain as well, with the largest unions talking about a general strike.

There is a class dimension to all of this, with the EU authorities and the bankers united in wanting to balance the books on the backs of the workers – and adopt “labor market reforms” that will weaken labor and redistribute income upward for generations to come. The EU authorities and financiers believe that real wages must fall quite sharply in these countries in order to make them internationally competitive – but the protestors are responding with a fiscal version of “No justice, no peace.”

They might add: “No justice, no euro.” From the beginning there have been serious economic questions about the viability and the desirability of the common currency – most importantly whether such a currency union was feasible among countries with greatly different productivity levels, no common fiscal policy, and a Central Bank committed only to maintaining very low inflation (without regard to employment).

The populations now suffering under EU-imposed austerity must have a real and credible threat to get out – or they will end up with indefinite sacrifice for the reward of lower living standards.

Mark Weisbrot is an economist and co-director of the Center for Economic and Policy Research. He is co-author, with Dean Baker, of Social Security: the Phony Crisis.

This article was originally published in The Guardian.

[JackRiddler]

Their cure will kill us! Michel Chossudovsky on State of Financial Emergency
May 26, 2010

[JackRiddler]

http://www.democraticunderground.com/di ... 89x8446148

.
Ratings Agency Launches Renewed Terror Attack, Now On Spain

A new phase in the bond markets' War on Europe opened Friday as Fitch dropped Spain from an AAA to an AA+ rating, prompting equity market declines and renewed pressure on Spanish bonds.

Aside from the sell-offs, the predictable result will be higher interest rates for loans to Spain and thus the move, taken by people who have no stake in that country and whose friends may be selling it short on the side for a windfall, effectively robs the Spanish people of more of their wealth than they might have otherwise lost.

Somewhere down the chain, this puts people out of work, out on the street, and into earlier graves.

A common definition of terrorism is "the use of violence and intimidation in the pursuit of political aims." It applies here, and I use it advisedly, aware of how promiscuously the word has been thrown around. Have bombers demanded more victims than banksters?

The terrorists delivered their demand note through the press as follows:

Fitch downgraded Spain's credit rating to AA-plus, and said it expects the country's adjustment to a lower debt level will materially reduce its rate of economic growth over the medium-term.

Fitch cited an inflexible labor market and a restructuring of regional and local savings banks as hindrances to the pace of adjustment.

Source: "Stocks slide, euro falls after Spain downgrade," Reuters, Friday May 28, 2010.
http://www.reuters.com/article/sizedUST ... =ousivMolt

The wording is taken from Fitch's front page at http://www.fitchratings.com. The actual report, despite its impact on a whole nation, is subscriber-only.

Fitch is one of the instruments by which the global capitalist class finds a voice that can issue commands to the nations of the world. In this case, Spain is threatened that it had best ease restrictions on firing Spanish workers and cut their benefits, and is is being told how best to organize its banking sector.

Or else.

Adding insult to injury, Spain's adjustment to a lower debt level was itself a response to pressure from the bond markets, capitalist ideologists, and EU deficit hawks.

The weather report says next week will have a high probability of news stories about lazy Spanish civil servants claiming sick days caught drinking margaritas on the Costa del Sol and paying for it with bribe money as they cavort with socialist single-mother hookers who are drawing multiple welfare payments (For the American edition of this story let's offhandedly throw in Obama and ACORN-ED.) causing the bankruptcy of their country and a series of other economic crashes around the world. Add a bit of ethnic humor - Ay, caramba! - and amen.


How the Racket Works

Calls go out to reduce Spanish debt, the market pressures Spain, Spain complies with budget cuts. The analysts call the budget cuts deflationary. Again the markets pressure Spain. Debt service rises, further austerity measures follow. Everyone whose country is not yet bankrupt complains about any accompanying 'bailouts.'

That includes the banksters, whose many years of regulatory capture, fraud and recklessness set off capitalism's greatest crisis back in 2007-2008. Their many 'bailouts' around the world required only brief periods of extortion, for they were 'too big to fail.'

The bankster bailouts and the bankster-caused economic depression in turn forced many nations into higher sovereign debt. Now the ingrates turn around and decry the sovereign debt that they helped cause.

This creates a rich target environment for the hedge-fund bond vigilantes. They look around the globe for which currency, which country to short next. Right now, they are working over Europe.

They do so for no better reason than that fortunes can be made by using Europe's genuine troubles as the excuse to short the hell out of it. Never mind that this only makes everything worse for Europe. In the end, it may turn out Spain is not 'too big to fail.'

In short, money talks, bullshit walks, and that's the greatest problem that we the peoples have yet to confront.

The fiscal hardliners in France and Germany keep driving the process, ironically forcing their own major export markets in southern Europe to deflate their economies.

Even if the Germans and French were to wise up and decide to fight back before the wave of recession and danger of default finally hits home, Europe lacks many of the necessary means of defending itself in this war, as euroland policy cannot be coordinated across the board.

For a primer on the initial phase of the attack, in Greece, see "Essay: Let us reject the anti-Greek mythology..." http://www.democraticunderground.com/di ... 89x8416528

Now let's take a closer look at the special role of the ratings agencies.


Fitch and the Financial Terror Racket

There are those who will reply that my views of the events are hyperbolic and unfair to the capitalist classes. One of their arguments will be that Fitch is merely exercising its free speech rights in announcing publicly what it believes about Spain.

Spain after all is heavily indebted and potentially insolvent. Should Fitch say otherwise?

Some have even argued a ratings agency downgrade is like the routinely negative economic trash talk here on DU, just more influential.

Such statements disregard several important facts about Fitch and the other two major ratings agencies, Standard & Poors and Moody's, and their role in the global financial rackets.

In the following list, the first few items may seem like unpleasant but legal facts of life that we cannot change. But please read on and take note of the three conflicts of interest inherent in Fitch's business model:

1) The word of the ratings agencies moves markets. Friday's market turmoil was the latest of literally thousands of confirmations.

2) This isn't even necessarily because the ratings agencies are so smart and the markets take them seriously. It is a predictable crowd effect. All players understand that a ratings agency downgrade acts as an impulse around which bets inevitably will be made. The creditors of a downgraded entity's debt may use it as a reason (or pretext) to go break some knuckles, raise rates, call in debts.

3) Thus a ratings agency is among the entities that serve as maestros for the market chorus. That is a hell of a conflict of interest for an entity that earns the bulk of its living directly from the major market makers.

4) To repeat an important point, Fitch very likely has raised for a time the interest rates Spain must pay, although Fitch is not a lender, it is not an official authority. Furthermore, Fitch may not and need not be involved in Spain at all.

(Except for an office in Madrid which might get to see a big crowd outside its doors on Monday at Calle General Castanos 11, 1st Floor, Madrid, Managing Director Rui Pereira, phone +34 91 702 4612, fax +34 91 702 4620.)

5) Now the fun really begins. What is the business model? Fitch and the other two make money by serving private financial-sector clients who pay ratings agencies to rate the instruments they issue. Thus when Fitch announces a rating for one of its' clients instruments, it engages in commercial speech, at the request of the client who hired it. The second inherent conflict of interest is self-evident.

6) Spain and other countries are not paying Fitch to rate them and announce the results under its "free speech" rights. This makes for a third inherent conflict of interest, in that Fitch has no incentive to please Latvia, Botswana or Uruguay. It merely has a completely unnacountable form of power over these countries. At the same time, its business comes from private entities that may have interests antagonistic to these countries.

7) This is a great set up for insider trading. Anyone who could get Fitch to tweak its ratings, or who merely knows when a ratings downgrade will be announced and is in a good position to trade accordingly -- for example, all of Fitch's major clients, the banks that have their own desks for Fitch and deal with it every day -- could make amazing fortunes.

Of course, I make no accusations. I merely note the possibilities. In the absence of evidence of such trades, this is baseless speculation! Chastise me with whips and scorpions!

I mean, maybe it would be all right to speculate if Fitch and Co. had a past record as participants in fraud. But it's not like they should be viewed as criminal organizations per se. Moody's is not the Mafia!

Oh. Wait a minute.

Fitch and to an even greater extent Moody's and S&P took part as players in the greatest financial fraud in history by dollar amount: Wall Street's securitization, derivitization and relentless cloning of subprime debt instruments in 2002-2007.

Perpetrated mainly by a class of traders and executives at major New York-based and London investment banks, this fraud generated the financial meltdown that
- first manifested in August 2007,
- saw its preliminary climax in September 2008,
- was interrupted by the banking "bailouts" and the suckers' market of 2009-10,
- and now appears to have resumed with a vengeance.

And the ratings agencies were at the heart of the fraud.

There was one main reason why Wall Street banks were able to
- buy a seemingly endless stream of high-interest junk-mortgage loans from predatory lenders in the United States, at a time when housing prices would go up forever because this time is different,
- package these into impenetrably dense securities containing fragments from thousands of loans,
- and sell them as though they were good investments to pension funds, other banks, municipalities, insurance companies, and the suckers of the world.

The reason is that Moody's, S&P and Fitch, the respected ratings agencies hired by Wall Street banks to examine and rate these junk instruments, obediently gave AAA ratings to thousands of these, often mere months before they failed.

The AAA Equations: No Quants Required

No AAA rating on junk securities = far fewer suckers to buy junk = lower demand = less incentive for Wall Street to produce junk = lower demand from Wall Street for subprime mortgages from predatory lenders = less incentive to make predatory loans to house-buying suckers from the lower classes = fewer defaults when the housing market contracts = less economic misery on the ground in the US today.

No AAA rating on the junk = fewer sales of the junk = less market heat around subprime securities = fewer derivatives and clones = a much smaller financial house of cards = less severe crash when the housing market contracts = less severe misery for investors around the world = less economic misery in the world.

Moody's, S&P and Fitch get rich by helping to generate more economic misery in the world.

Backlash?

As we have been learning, slowly, from Congressional hearings, occasional exposes, whistleblowers and, of late, prosecutorial briefs, it was common knowledge at these institutions that they were engaging in fraud.

Ratings analysts were not examining the instruments they were rating. In fact those who did were discouraged, because there were more bonds than ever to rate, and business had never been so good, and giving an actual junk rating to junk might make Goldman and Bear and the Brothers go away.

When Wall Street brought the junk around to Moody's and Fitch, a higher rating than it deserved was a foregone conclusion.

If they were willing to take part in fraud on that scale, there is reason to investigate them for everything else they do. Such an organization is unlikely to be committing only one crime at a time.

So why are these fuckers all so likely to get away with it?

That's the beauty of dispersed responsibility and compartmentalization. The greatest crime in capitalist history (in dollar value) was perpetrated not by individuals, but by a class of individuals who each fulfilled merely one part in a chain of fraud production that arose semi-organically. All knew to take the money and cover their asses.

This is also how the mafia works, and was able to work to such great advantage for so many years: Thanks to the dispersal of responsibility among different fronts, limited liability entities and role players, most of whom didn't even want to know more than they needed to know. It was nearly impossible for prosecutors and the FBI to pin the crimes on the family chiefs and capos.

This is why the federal government finally devised the RICO acts, which allow proven members of criminal organizations to be convicted for crimes committed by other members. It would be a pleasure to see these applied to the banksters.

Unlike the mafia, however, the banksters are protected by a powerful legitimating ideology that until now had widespread acceptance:

The unregulated free market is best, only traitors to America think otherwise, God prefers it. Greed serves higher interests, it's good to be rich, rich is sexy, everyone wants to work for Goldman, your value is your income, you only hate it if you're a loser. Wall Street funds America, it is indpendent of the government, it generates wealth for everyone else, it allocates capital more efficiently than the public sector or a bunch of hippies on the town council, and it is bringing development and wealth and jobs and lots of goodies to every poor country on earth. Taxation robs wealth from those who create it, government spending maintains the lower class as freeloaders. Europe is full of communists.

The banksters also are a lot more powerful than the mafia.

At the end of the 20th century, they used their influence to repeal the laws against the crimes they committed in the 21st.

Thus their collusions and corruptions could be committed in the open, or at least be visible to anyone who can afford a Bloomberg machine -- or a Fitch subscription plan!

Goldman's traders can claim they believed their own bullshit analysis, or merely did what their clients wanted. The executives of these large institutions, as we have seen in their Congressional testimonies, can claim they were too high up to know shit from shinola. They're very sorry, by the way.

Hedge fund managers who created the derivatives bomb can say they were only able to place their bets because suckers were willing to take the other side.

And so almost all of them keep their plunder and their positions and can continue their class war on the world.

If there is a weak link that can begin to unroll the bankster complex and start getting some of these furries into Supermax, it is at the ratings agencies.

The excuses end with the raters who announce themselves as independent, neutral, third-party auditors. The same entities that today are playing a spearhead role in the bond markets' offensive in Europe, and who not so long ago knocked down California and are no doubt planning a return visit to the Golden State.


Shut them Down

Every day you hear about how the government seizes properties from persons and companies suspected of crimes. Beyond the ACLU, there isn't much outcry in these cases of due process for drug dealers. The drug dealers are not 'too big to fail.' Apparently, they are more of a disaster than the Gulf oil spill, which isn't going to result in the seizure of BP. They are more of a national emergency than the banksters, who engaged in these frauds and continue to wage an international class war.




Iceland Jails Top Bankers, Why Can't New York AG Do the Same?
http://www.democraticunderground.com/di ... 89x8328133

[JackRiddler]

This is a poster seen in the Fitch Lobby.

“Never Forget - Why We Fight”


http://www.reuters.com/article/idUSTRE6 ... =ousivMolt
(Article reproduced here under fair-use provisions, with original link given, solely for non-commercial purposes of archiving, education and discussion.)

Stocks slide, euro falls after Spain downgrade

Stocks slide, euro falls after Spain downgrade
Albert H. Yoon
NEW YORK
Fri May 28, 2010 1:10pm EDT

(Reuters) - World equities slid and the euro fell on Friday after a downgrade of Spain's credit rating sent a new chill through markets already worried about the European debt crisis.

The downgrade by Fitch Ratings ignited a new round of selling in equities that were already lower after lackluster U.S. economic data injected a note of caution ahead of long holiday weekends in both the United States and the UK.

Fitch downgraded Spain's credit rating to AA-plus, and said it expects the country's adjustment to a lower debt level will materially reduce its rate of economic growth over the medium-term.

Fitch cited an inflexible labor market and a restructuring of regional and local savings banks as hindrances to the pace of adjustment.

"This should exacerbate the tremendous volatility we've seen in global stocks as the world wrestles with the idea of a debt-based collapse," said Chip Hanlon, president of Delta Global Advisors in Huntington Beach, California.

"Adding to this is the fact that no one wants to be long over a holiday weekend."

The euro fell as low as $1.2284, according to electronic trading platform EBS, near a session of $1.2281.

The euro also dropped versus the yen, and was last down 0.9 percent at 111.59 yen.

The major U.S. stock indexes shed more than 1 percent, and U.S. Treasuries slightly extended gains, hitting session highs after the Fitch downgrade. Benchmark 10-year notes were last up 18/32 in price, yielding 3.30 percent.

Investors had been shunning risk even before the Fitch downgrade on Spain.

A Commerce Department report that U.S. consumer spending failed to rise in April after six straight months of gains, cast a cloud over the outlook for the consumer-driven U.S. economy. Traders were particularly cautious ahead of long holiday weekends in London and New York, and ready to step back and take profits after a strong equities rally on Thursday.

The Dow Jones industrial average .DJI was down 119.94 points, or 1.17 percent, at 10,139.05. The Standard & Poor's 500 Index .SPX was down 15.13 points, or 1.37 percent, at 1,087.93. The Nasdaq Composite Index .IXIC was down 32.14 points, or 1.41 percent, at 2,245.54.

The S&P 500 and the Nasdaq had each fallen more than 1 percent earlier in the day, though had pared losses sharply before the news on Spain sparked a new wave of selling.

Technology bellwether Apple Inc (AAPL.O) managed to buck the downtrend, after Asian and European customers mobbed stores as the iPad tablet computer debuted outside the United States. Apple shares rose 1.5 percent. Bank of America Merrill Lynch raised its price target on Apple by $25 to $325 and kept its "buy" rating.

But still pressuring global shares and the euro was concern of contagion from the Greece debt crisis. Despite the lack of major shocks from Spain, Portugal or Ireland, which all have heavy debt loads, investors were still loathe to add risky assets due to questions of how shakier sovereign credit would affect the economic recovery.

http://www.ct.gov/ag/cwp/view.asp?A=2341&Q=456804
(Article reproduced here under fair-use provisions, with original link given, solely for non-commercial purposes of archiving, education and discussion.)

(Connecticut) Attorney General Sues Credit Agencies For Tainted Ratings That Enabled Financial Meltdown

March 10, 2010

Attorney General Richard Blumenthal today sued two of the nation’s largest credit rating agencies -- Moody’s and Standard & Poor’s -- for knowingly assigning tainted credit ratings to risky investments backed by sub-prime loans. Blumenthal said Moody’s and S&P’s alleged misconduct enabled the worst economic downturn in the nation since The Great Depression. The lawsuits, unique and unlike others filed on behalf of specific investors or pension funds, are sovereign enforcement actions brought under the Connecticut Unfair Trade Practices Act.


Despite repeated statements emphasizing their independence and objectivity when rating structured finance securities, Moody’s and S&P knowingly failed to live up to their representations. In particular, their ratings on structured finance securities were tainted by their desire to earn lucrative fees. Moody’s and S&P knowingly catered to the demands of investment banks and other large issuers of structured finance securities in order to increase their own revenues. As a result, many structured finance securities that contained a great deal of credit risk undeservedly received Moody’s and S&P’s highest ratings, Blumenthal alleges.

“These credit rating agencies gave the best ratings money could buy -- catering to their powerful investment bank clients, rather than objectively rating risky bonds,” Blumenthal said. “Countless investors and others -- including individuals, banks, mutual funds, insurance companies, hedge funds and pension funds -- were misled into believing that these credit ratings were independent and objective, and lost money on investments they might have avoided if told the truth.

“Moody’s and S&P violated public trust -- resulting in many investors purchasing securities that contained far more risk than anticipated and that have ultimately proven to be nearly worthless.

“The results have been catastrophic -- crippling the entire economy. Today’s lawsuit seeks an order stopping Moody’s and S&P from deceiving consumers, as well as civil penalties and disgorgement of ill-gotten profits.”

Structured finance securities have been the centerpiece of the national financial crisis. They are financial products whose value is derived from a stream of revenue flowing from a pool of underlying assets -- assets most commonly backed by residential mortgages, including subprime mortgages. They can also be backed by other assets such as student loans and credit card balances. Moody’s and S&P dominate the ratings market for structured finance securities -- and are responsible for rating virtually all structured finance securities issued into the global capital markets. Investors and other market participants rely on Moody’s and S&P to fulfill their stated promise of independence and objectivity.

In Moody’s own Best Practices Handbook, the company claims: “We serve investors by providing them with timely credit research and independent, thoughtful, and accurate rating opinions on which they can base their investment decisions.”



Both Moody’s and S&P have secretly defied their public promises and legal duty to provide independent and objective ratings, Blumenthal said.



This was not always the case. At one time, Moody’s and S&P refused payments from -- or even to meet with -- issuers of a security it rated. The companies’ business models have increasingly shifted, however, so that a vast majority of their fees are now paid by issuers.



As one of Moody’s former vice presidents publicly noted, “Starting in 2000 there was a systematic and aggressive strategy to replace a culture that was very conservative, an accuracy and quality oriented culture, a getting the rating right kind of culture, with a culture that was supposed to be business friendly but was consistently less likely to assign a rating that was tougher than our competitors.”



Blumenthal said Moody’s and S&P’s lack of independence and objectivity, violating the Connecticut Unfair Trade Practices Act, has manifested itself in several ways, including:


Moody’s and S&P modified rating methodologies to make more money: In short, in direct contrast to their public representations, and unbeknownst to investors and other market participants, Moody’s and S&P’s rating methodologies were directly influenced by a desire to please their clients and enhance their own revenue. Assessing actual credit risk was of secondary importance to revenue goals and winning new business.


Ratings shopping: Issuers unhappy with a credit rating agency’s initial analysis can attempt to influence the process by informing the rating agency of a more desirable rating that one of its competitors is willing to assign. As a result, the rating agency knows that it must meet its competitor’s rating or forgo the revenue altogether. Both Moody’s and S&P knuckled under to this pressure and allowed it to influence the ratings they assigned to structured finance securities.


Despite public representations of vigilant monitoring of conflicts of interest inherent to the Issuer Pays business model, Moody’s marginalized its own compliance departments and even punished employees who raised concerns about its lack of independence and objectivity. In some cases, compliance employees were given poor performance evaluations, less compensation and even demoted for interfering with Moody’s ability to please the large issuers of structured finance securities that paid the majority of Moody’s fees.

Today’s action is distinct from Blumenthal’s ongoing litigation against all three credit rating agencies -- Moody’s, S&P and Fitch -- that was filed in July 2008. The earlier lawsuits allege that the agencies knowingly gave state, municipal and other public entities lower credit ratings as compared to other forms of debt with similar or even worse rates of default. Those cases remain pending.

Blumenthal thanked members of his office who worked on the investigation – Assistant Attorneys General Matthew Budzik, George O’Connell and Laura Martella, and Paralegal Holly MacDonald, under the direction of Assistant Attorney General Michael Cole, Chief of the Attorney General’s Antitrust Department.

A Gem From The Eve of the Meltdown:

http://www.reuters.com/article/idUSN1831999120070718
(Article reproduced here under fair-use provisions, with original link given, solely for non-commercial purposes of archiving, education and discussion.)

Fitch says confident in "AAA" subprime ratings

NEW YORK
Wed Jul 18, 2007 11:31am EDT

July 18 (Reuters) - Subprime mortgage bonds carrying the highest, "AAA," rating have not eroded in quality despite price declines in the securities in recent days, Fitch Ratings said on Wednesday.

Bonds

"We continue to be confident that "AAA" ratings reflect the high credit quality of those bonds," Glenn Costello, co-head of Fitch's residential mortgage group, said on a conference call. The top-rated bonds are designed to withstand a very high percentage of defaults, he said.

Fitch, Standard & Poor's and Moody's Investors Service last week roiled debt markets by announcing downgrades or potential cuts to bonds and collateralized debt obligations backed by subprime loans. Using new rating criteria that boosts default expectations, Fitch said it may take rating actions on at least $7.1 billion in low-investment grade debt, and about $803 million in CDOs.

A benchmark index of "AAA" rated subprime bonds dropped last week as investors speculated losses would not be isolated to the riskier, "BBB" rated bonds.

[JackRiddler]

.

I don’t know if this article from Der Spiegel, which says the same things about Fitch I just did, might not be part of a line shift in Germany.

In capital’s attack on Europe, the long yearned-for end game is to knock over the “German model.”

In the US, it will be to plunder Social Security.

(This notwithstanding the more apocalyptic scenarios we’re all familiar with.)


http://www.spiegel.de/international/bus ... 07,00.html
(Article reproduced here under fair-use provisions, with original link given, solely for non-commercial purposes of archiving, education and discussion.)

First Subprime, Now Europe
Revenge of the Rating Agencies

04/29/2010 03:54 PM


By Marc Pitzke in New York

Many observers assign a large part of the blame for the 2008 financial crisis to the "big three" credit rating agencies, which gave their AAA seal of approval to worthless investments. Now those same agencies are helping to bring the euro zone to its knees -- and no one is trying to stop them.

The scandal brewing over Goldman Sachs, Wall Street's biggest bank, has been sucking in more and more players. These include the bankers and traders who sold the infamously risky credit products that helped trigger the subprime crisis, the hedge fund billionaire John Paulson, who cashed in big at the expense of the victims, and the US politicians who condoned the farce for the longest time.

One group, however, has so far escaped the grip of the widening affair, although it's embroiled just as deeply. That group is the major credit rating agencies -- the same ones which are now causing Europe to shudder, having downgraded their ratings for Greece, Spain and Portugal.

It was Standard & Poor's (S&P) and Moody's, the same two agencies which are now rocking the European boat, which in 2007 had given their seal of approval to "Abacus 2007-AC1," Goldman's ill-fated credit product, by giving it the highest AAA rating -- only to cut it down to "junk" status nine months later. Goldman's investors lost more than $1 billion; the Securities and Exchange Commission (SEC) is suing Goldman for fraud, alleging that it misled investors.

Phantoms and Puppet Masters

Wherever things blow up in the financial world, the rating agencies' tracks can be found. The anonymous analysts of S&P, Moody's and Fitch (the smallest of the "big three") were center stage during the global crash. They also appear in the SEC fraud complaint against Goldman. And now they're causing financial havoc in Europe.

They're the éminences grises of Wall Street, phantoms and puppet masters. They wield enormous power over the fate of loans, deals, companies and even countries. Yet rarely has anyone ever really questioned their actions -- let alone held them accountable.

Their role, however, is far from unblemished. In the US, the rating agencies' behavior is now finally being called into question, albeit slowly. New York Times columnist and Nobel Prize-winning economist Paul Krugman accuses them of "a deeply corrupt system." US Senator Carl Levin, a Democrat, sees them as the main culprits in the credit crisis: "If any single event can be identified as the immediate trigger of the 2008 financial crisis, my vote would be for the mass downgrades starting in July 2007," he says. "Those mass downgrades hit the markets like a hammer."

From AAA to Junk

Levin chairs the Senate Subcommittee on Investigations, which on Tuesday also ripped through Goldman's top management. For 14 months, the committee has investigated the rating agencies. Last week, it published its preliminary findings -- a mountain of files, 581 pages thick. Levin's damning conclusion: "I don't think either of these companies have served their shareholders or the nation well."

The agencies "used inaccurate rating models in 2004-2007 that failed to predict how high-risk residential mortgages would perform; allowed competitive pressures to affect their ratings; and failed to reassess past ratings after improving their models in 2006," the inquiry found. "The companies failed to assign adequate staff to examine new and exotic investments, and neglected to take mortgage fraud, lax underwriting and 'unsustainable home price appreciation' into account in their models."

The result: Of all the subprime mortgage bundles which in 2006 were AAA-rated, 93 percent are "junk" today.

The Agencies Still Carry Carte Blanche

These are the same companies which are now messing with Europe's financial present and future. This is how it works: The agencies set the credit ratings for companies, even entire countries, and assess the risk of their investment products. These range from simple bonds to complex constructs like the derivatives and collateralized debt obligations (CDOs) which formed the house of cards that collapsed during the 2008 financial crisis and which are also at the center of the current lawsuit against Goldman Sachs.

Despite this dubious track record, the agencies still carry a carte blanche: If they award their highest seal of approval -- an AAA rating -- it means it's safe for investors. Unfortunately, such a rating can also be a trap. An AAA rating snared the Goldman clients -- among them the German bank IKB -- who invested in "Abacus 2007-AC1."

The agencies' quasi-monopoly goes back to 1909. That year, the financial analyst and investor John Moody began to categorize and score information about railroad companies, their stocks and their management. Later he added other industries and firms to the mix.

Today, Moody's analyzes more than 12,000 companies in 100 countries. S&P, which also maintains the famous S&P stock market indices, has been issuing ratings since 1916. It was bought by the financial and media conglomerate McGraw-Hill in 1966. Fitch, which was founded in 1916 and is now a subsidiary of the French holding company Fimalac, is the smallest member in this elite club.

Leading the Economy to Ruin

Ratings range from AAA all the way down to D. This traditional system proved to be worthless during the credit crisis. The dubious investment products at its heart defied serious and simple ratings. They were highly overrated by the agencies -- often at the request of the same companies who managed those products, which in return paid the rating agencies.

As early as 2006, Angelo Mozilo, then CEO of Countrywide, America's largest mortgage company, called Countrywide's subprime loans "toxic." Yet it took Moody's until the summer of 2007 to downgrade them. All this happened under the watchful eye of the US government.

That example was no exception. For years, the agencies gave their blessing to subprime loans which would later become the quicksand of the crisis, even when their risks were already known. This puts much of the responsibility for the collapse that followed onto the agencies' shoulders.

Their ratings helped lead the investment banks Lehman Brothers and Bear Stearns into ruin and helped destroy the insurance giant AIG. They also contributed to a trillion-dollar hole in the US budget. "The story of the credit rating agencies is a story of colossal failure," says Representative Henry Waxman, the Democratic chairman of the House Oversight Committee.

'We Sold Our Soul to the Devil for Revenue'

For a century, the rating agencies have acted as Wall Street's trusted referees. "But now, that trust has been broken," states Senator Levin's committee. "And they did it for the money."

From 2002 to 2007, the three top credit rating agencies doubled their revenues, from less than $3 billion ($2.2 billion) to over $6 billion per year. Most of this increase came from ratings. Their executives got paid "Wall Street-sized salaries," according to the Senate committee.

"It's like one of the parties in court paying the judge's salary, or one of the teams in a competition paying the salary of the referee," the report continues. The New York Times put it this way: "It is as if Hollywood studios paid movie critics to review their would-be blockbusters."

Not that they weren't aware of it themselves. Back in 2006, an S&P employee wrote in an internal email: "We rate every deal. It could be structured by cows and we would rate it." The next year, one of Moody's executives complained to his superiors that he felt "like we sold our soul to the devil for revenue."

The agencies and the banks are not just connected by money, but also by personnel. In 2005, Goldman hired Shin Yukawa, a ratings expert, away from Fitch. Yukawa immediately put his knowledge to good use -- in Goldman's mortgage department, which created "structured" credit products and made sure they got splendid ratings. One of these products was "Abacus 2007-AC1."

Little Chance of Reform

Yet a reform of the system is not in sight. The Democrats' current proposals to further regulate the US financial industry contain little about the rating agencies, apart from a tepid appeal to "strengthen" their regulation.

Some critics are now trying a different approach. A few institutional investors -- among them the state of Ohio -- are suing the agencies for their role in the financial crisis. On Monday, a Manhattan court denied Moody's and S&P's joint motion to dismiss one of those class-action lawsuits.

Two days later, S&P's hammer fell on Spain.

URL:
http://www.spiegel.de/international/bus ... 07,00.html
FORUM:
Revenge of the Rating Agencies
http://forum-international.spiegel.de/s ... to=newpost

RELATED SPIEGEL ONLINE LINKS:
The Debt Crisis: Europe Shudders Over Greece Disaster (04/29/2010)
http://www.spiegel.de/international/eur ... 19,00.html
A Greek Test: Euro Fears Force Merkel To Act (04/29/2010)
http://www.spiegel.de/international/ger ... 69,00.html
Opinion: The Euro Zone Needs New Rules (04/29/2010)
http://www.spiegel.de/international/eur ... 30,00.html
'We're on a Slippery Slope': Will the Greek Bailout Destroy the Euro Zone? (04/26/2010)
http://www.spiegel.de/international/eur ... 68,00.html
Wall Street vs. Washington: Goldman Sachs Goes on the Offensive (04/22/2010)
http://www.spiegel.de/international/bus ... 27,00.html
From the Archive: The Power of Rating Agencies (05/06/2009)
http://www.spiegel.de/international/bus ... 97,00.html
SPIEGEL 360: The Euro Crisis
http://www.spiegel.de/international/eur ... 12,00.html


© SPIEGEL ONLINE 2010

[JackRiddler]

My guess: Big US economy crash in December will coincide with release of "Kill Social Security" report

I'm assuming a worldwide crash doesn't start tomorrow. That can come at any time as a chain reaction proceeding from any market signal. Everything so far shows this is an extremely volatile, unpredictable, unprecedented situation in scale and quality, though the various crisis dynamics have their precedents.

Yes, I'm aware that the 2007-8 crash has resumed after the bailout delays but it's far from climax yet. And now instead of a subprime bond crisis it's a "sovereign bond crisis," because the stupid governments accepted let the toxic shit on their own books.

You may be aware of the bipartisan "National Commission on Fiscal Responsibility" appointed by Obama to report on what to do about the US deficit in December. Watched one of their sessions on C-SPAN and I'll be reporting later on that. This commission is crammed with known anti-Social Security activists like Alan "The Brute" Simpson and Peterson Foundation is tracking its every move with events in its "anti-entitlements" campaign.

The Set-Up

Although Treasuries are still seen as a haven, (in contradiction to how gold also is, so one or the other is due for a big fall), their supply is without precedent. Leaving aside comparative debt-to-GDP, the absolute total debt paper the US must roll over and sell for the new deficit dwarfs the demands in debt from the European states being called insolvent. This is the point I’m adopting from Frank Biancherri, though I don’t share (or necessarily disagree with) some of his other conclusions.

As other factors to consider, there's another huge chunk of debt paper to be sold from Britain, and China's currently running its first-ever trade deficits (combination of accounting tricks as it shifts away from foreign debt holdings and a worldwide resource shopping spree). This means they also are not adding sovereign debt to their accounts.

Everyone's trying to sell debt paper. I wouldn't be surprised if some at the US Treasury were therefore happy about the EU's troubles -- except that a weakened EU also can't absorb as much US debt!

Thus even if T-bills are supposed to be a better deal than other debt, the demand has to come from somewhere. Otherwise the Fed will be buying T-bills, which it already does, effectively a print (when bailout banks buy t-bills, it's the same, by the way - borrow zero percent from Fed, buy bills from Treasury at zero-plus).

This needn't be the disaster in itself but as an impulse it will cause pressure against T-bills and US equities. There will be announcements that the dollar is finished (my first dates back to 2004, by the way, so I've learned to be more circumspect) and howls like you've never heard that the US must get the deficit under control and that the "only" thing “left” to cut is entitlements. (Will the curious inability to see the largest discretionary spending item and largest cause of the deficit on the spending side?)

Timing

Every country with a deficit and any form of social state (despite its inadequacy, the US still has a big one) is on the chopping block. The irony is that even those who respond to pressure by following the austerity demands are shorted again the next day, this time because they're deflating. Right now the capital markets see no game for growth, so it's all casino around sovereign debt.

(There's no out beyond currency and capital controls and an expropriation of banks on the basis of fraud and emergency, i.e. the guillotine plan, but that happens only if tens of millions shut down EU capitals demanding it, since most Americans cannot even understand this sentence.)

The attack on Europe will continue, the attack on Britain will start as the new Conservative government presents a budget, and after the election it will be the turn for the US.

No matter who wins, it will be a reason to short the market. If the Republicans gain big, the markets will say governance is paralyzed and austerity will end the recovrey. If the Democrats maintain position, the markets will howl that the deficit will never get under control.

The Prestige

Just then the Kill Social Security Commission will present its national salvation report. Either way, the election being over will allow the politicians to dispense with whatever bullshit they were selling for votes and announce what they really support, given a worse crisis than expected, etc. This being a "bipartisan" commission the politicians and with elections behind them the politicians will be able to pose with their hands tied by necessity.

[JackRiddler]

.

Allowing the occasional optimist in. This guy hopes instead for an uprising this very month around Peterson's Kill Social Security Foundation. Recall this is the Peterson who ran Treasury for Nixon, headed the Blackstone Group (defense-involved fund that among other things owned the WTC 7 mortgage).

http://www.counterpunch.org/halle05212010.html
(Article reproduced here under fair-use provisions, with original link given, solely for non-commercial purposes of archiving, education and discussion.)

Pete Peterson's Pathological Obsession
May 21 - 23, 2010
Punking the People, Punking the Left

By JOHN HALLE

Pete Peterson has stepped up his mischief making.

The last week of April found the most odious of Wall Street billionaires having assembled a parade of A-list Washington power brokers-up to and including former President Clinton- all willing to serve as enablers for Peterson's pathological idee fixe: deficit reduction.

There was, as to be expected, much talk of "personal responsibility", "sustainability", and "fiscal discipline" though it should be understood that these and other self- help bromides were the sugar coating on a pill laced with arsenic.

For Peterson has slyly removed from the table the obvious targets for reducing deficits-significantly increased taxes on billionaire wealth and millionaire income and a cutting off of funding for useless wars and weapons systems. What deficit reduction means is "entitlement reform" a code word for cut backs in Social Security benefits.bill

And that means numerous senior citizens standing in long lines at food pantries, others dumpster-diving for food, many living out their "golden years" in homeless shelters, and others literally freezing to death in unheated apartments.

It also means high unemployment, particularly among younger workers who would otherwise have available to them entry level positions vacated by seniors who will be now be dropping dead on the job if Peterson gets his way.

For all these reasons, any street corner peddler would recognize the product as a tough sell and that's why Peterson has committed, by his own accounting, a full one billion dollars of his personal fortune to try to an attempt to apply a metallic shine on the turd he is hawking.

What the fuck is wrong with these people? He can do anything! Go build a pyramid, you dumb fuck!

Peterson's marketing blitz will reach a crescendo with his sponsorship of America Speaks!, "a national town hall meeting", taking place in 20 cities on June 26, according to its tastefully designed website. These astro-turf fora will encourage us "to weigh-in on the difficult choices involved with putting our federal budget on a sustainable path." Those who don't regard the choices required to address the deficit as "difficult" at all-rather a simple matter of reducing spending on the military and increasing taxes on billionaires, have no place at America Speaks, evidently. Nor do those who, quite reasonably, do not regard deficits as at all "unsustainable."

America Speaks coincides with the deliberations of Obama's deficit reduction commission, most members of which have already, in whole or in part, signed off on Peterson's austerity program.

Peterson thinks now is the time for the coup de grace to be delivered to the last remnants of the New Deal safety net, the pea under the mattress troubling the sleep of economic royalists since FDR.

But he's wrong. For unlike banking reform, climate change, the war in Afghanistan, and EFCA, where the corporate, oligarchic right steamrolled all opposition, it's not just the fringe left who will be on the streets when Peterson institutes his final solution. Even the most addled tea partier wants to "keep the government's hands off of our Social Security." It is not for nothing that Social Security is called the third rail of american politics.

America Speaks should be mobbed: with high school and college students facing a comatose job market, families trying to survive on a single income following the death or injury of their spouses, and current retirees whose current benefits have reduced them to near destitution and who are seeing their children's future in the pages of Dickens novels. And it should even include relatively privileged middle aged men whose retirement crucially depends on at least one of the stools of the retirement triad (now more than ever with our 401 Ks in the toilet.

After a series of humiliating defeats, the left should relish the chance to take ownership of June 26th.

Rather than the bullet putting the left out of its misery, as Peterson intends it, June 26th should be the first step in turning the tide.

John Halle is Director of Studies in Music Theory and Practice at Bard College. He can be reached at: halle@bard.edu

[JackRiddler]

Assimilating the following from a new thread by seemslikeadream, started at

viewtopic.php?f=8&t=28456

Banking System Collapse: Wake Up America Your Banks Are Dying

U.S. banks are being shut down by federal regulators at a staggering pace this year, and yet most Americans seem completely oblivious to it. In fact, federal officials have already shut down 81 U.S. banks this year, which is about double the number that were shut down at this time last year. So why aren't more people upset about this? Well, part of the reason is because the FDIC is doing it very, very quietly. The bank closings for each week are announced every Friday, which means that they pass through the news cycle over the weekend almost unnoticed. For example, banks in Nebraska, Mississippi and Illinois with total deposits of almost $2.3 billion were shut down by federal regulators on Friday. So did you hear about it before now? If not, why not? Shouldn't the fact that we are experiencing a banking system collapse be headline news? But most Americans are more than happy to remain blissfully ignorant of what is going on. In fact, most Americans seem far more interested in what is happening on American Idol or Dancing With The Stars. But when the American Dream starts dying for tens of millions of Americans as the economy collapses perhaps more people will start to care.

So just how bad is the banking system crisis?

Well, FDIC Chairman Sheila Bair says that 775 banks (approximately ten percent of all banks in the United States) are now on the Federal Deposit Insurance Corporation's list of "problem" banks.

So should we be alarmed by that?

Well, there were only 252 U.S. banks on the FDIC's problem list at the end of 2008.

There were 702 U.S. banks on the FDIC's problem list at the end of 2009.

Now there are 775.

Do you know if your bank is on the verge of failing?

You might want to check.

But even if all of our banks fail the FDIC has plenty of money to cover our federally-insured banking accounts, don't they?

Unfortunately, they do not.

The FDIC is backing nearly 8,000 U.S. banks that have a total of $13 trillion in assets with a deposit insurance fund that is pretty close to flat broke.

It was recently reported that the FDIC's deposit insurance fund now has negative 20.7 billion dollars in it, which actually represents a slight improvement from the end of 2009.

But the bank failures on Friday drained another $313.6 million from the FDIC’s deposit-insurance fund.

And the way things are trending, the banking crisis could get a whole lot worse?

Why?

Well, Americans are simply not doing a very good job of paying their bills.

During the first quarter of 2010, the total number of loans at U.S. banks that were at least three months past due increased for the 16th consecutive quarter.

16 quarters in a row.

Just let that sink in.

If that is not a trend, then what is?

Oh, but the U.S. government will never let the entire banking system fail, right?

Well, they won't let the "too big to fail" banks go under, we have seen that.

But the small and mid size banks?

They fall into the "not big enough to bail out" category.

And where in the world is the U.S. government going to get more money to bail anyone out?

The reality is that the U.S. government is now over 13 trillion dollars in debt.

To give you an idea of just how horrific that is, if you started spending a million dollars a day on the day that Christ was born, you still would not have spent a trillion dollars by now.

That is how big a trillion is.

But for this year alone it is being projected that the U.S. government will have a budget deficit of approximately 1.6 trillion dollars.

So, yes, pretty much wherever you turn we are facing a financial nightmare.

What should we do about all this? Feel free to leave a comment with your thoughts....

The "spending since Christ was born" analogy is highly misleading. "13 trillion dollars in debt" came about because of spending by a nation of 300 million people, and cannot be compared to a nominal "you" who is now 2000 years old.

Let's look at the problem in context because it's all much more complex than the propaganda that emphasizes public debt as the greatest evil would have us believe:

Prior to 2008 most public debt was accumulated starting in the 1980s due to the shift of the tax burden away from the rich and to the working class (tax cuts for high incomes, rise in Social Security and Medicare charges) and the massive rises in military spending.

This accelerated with the advent of the Bush regime and its further massive cuts in taxes on the rich and rise in spending for wars and "national security." The regime created most of the US sovereign debt burden prior to 2008.

Almost one-third of the total has been accumulated since 2008 as a result of the bankster fraud, the bailouts, and the resulting depression necessitating stimulus spending. That is private debt passing into public debt due to the actions of private actors and the government's obedient service to their support. It's ironic that the same class of private actors now show their gratitude by attacking the government for the private debt for which they are actually partly responsible.

"13 trillion" is gross public debt, which means it includes intergovernmental debt. Intergovernmental debt is what the discretionary budget (Pentagon and other military-related items including wars, debt service, and assorted actual social programs) has borrowed from the mandatory budget (Social Security fund and Medicare, which have always been in surplus until now).

Actual government debt to the private sector and foreign creditors is about 7 trillion dollars.

Public debt is a fraction of total debt - household, corporate, and financial sector debt far exceed it.

Please refer back to my earlier discussion of the numbers for all US debt (private consumer, private mortgage, public, state, corporate, small-business and domestic financial sector) in proper context, on this very thread, around the middle of the following page ("money supply and debt"). Here:

viewtopic.php?f=8&t=21495&start=420

[JackRiddler]

Gotta love this - what have I been telling you?


http://counterpunch.org/brown06072010.html
(Article reproduced here under fair-use provisions, with original link given, solely for non-commercial purposes of archiving, education and discussion.)

Why State's Should Own Their Own Banks
How Banks Make Money on Low-Interest Loans

June 7, 2010

By ELLEN BROWN

Keeping interest rates low is considered the first line of defense for central banks bent on easing the credit crisis and getting banks to lend again. The Federal Reserve’s target for the federal funds rate -- the overnight interest rate that banks charge each other – has been kept at a rock-bottom 0% to 0.25% ever since December 2008. A growing number of economists now think it could stay there well into 2011 or even 2012, prompted by fears that a spreading debt crisis in Europe could hurt a budding U.S. recovery.

Dirk van Dijk, writing for the investor website Zacks.com, explains what a good deal this is for the banks:

“Keeping short-term rates low . . . is particularly helpful to the big banks like Bank of America (BAC) and JPMorgan (JPM). Their raw material is short-term money, which is effectively free right now. They can borrow at 0.25% or less, and then turn around and invest those funds in, say, a 5-year T-note at 2.50%, locking in an almost risk-free profit of 2.25%. On big enough sums of money, this can be very profitable, and will help to recapitalize the banking system (provided they don’t drain capital by paying it out in dividends or frittering it away in outrageous bonuses to their top executives).”

This can be very profitable indeed for the big Wall Street banks, but the purpose of the near-zero interest rates was supposed to be to get the banks to lend again. Instead, they are investing this virtually interest-free money in risk-free government bonds, on which we the taxpayers are paying 2.5% interest; or are using the money to engage in the same sort of unregulated speculation that nearly brought down the economy in 2008, or to buy up smaller local banks, or to pay “outrageous bonuses to their top executives.” Even when banks do deign to use their nearly-interest-free funds to support loans, they do not pass these very low rates on to borrowers. The fed funds rate was lowered by 5% between August 2007 and December 2008; yet the 30 year fixed mortgage rate dropped less than 1%, from 6.75% to only about 6%.

Why Do Banks Need to Borrow? Because They Don’t Really Have the Money They Lend

Dirk van Dijk writes that “short-term money” -- meaning money borrowed short-term from other banks -- is the “raw material” of the big banks. Why, you may ask, do banks need to borrow from each other? Don’t they just take in money from their depositors and relend it?

The answer is no. Banks do not lend their depositors’ money or their own money. As the Federal Reserve Bank of Dallas explains on its website:

“Banks actually create money when they lend it. Here’s how it works: Most of a bank’s loans are made to its own customers and are deposited in their checking accounts. Because the loan becomes a new deposit, just like a paycheck does, the bank . . . holds a small percentage of that new amount in reserve and again lends the remainder to someone else, repeating the money-creation process many times.”

A bank simply advances bank credit created on its books. This credit becomes a deposit in the account of the borrower, who can write checks on it. The checks then get deposited in other banks and trade in the economy as what we all know as “money.”

A bank can create as much money on its books as it can find creditworthy borrowers for, up to the limit of its capital requirement. The hitch comes when the checks drawn on these loans-turned-deposits are cleared, usually through the Federal Reserve. A bank with a 10% reserve requirement must keep 10% of its deposits either as “vault cash” or in a reserve account at the Fed, and when checks are cleared by the Fed, it is through this account. The effect is to make the bank short of reserves, which it can try to replenish by attracting back the customers of the bank where the credit was deposited. But as was explained by the Winterspeak blogging team:

“If bank A [the lending bank] fails to [attract new depositors], then it simply borrows the reserves it needs overnight from . . . bank B [the bank where the reserves wound up]. The overnight lending market is designed to do exactly this. Bank B, in this case, happens to have exactly the quantity of reserves bank A needs, and since reserves earn no interest, is happy to lend to bank A at the federal funds rate, which is the overnight interbank lending rate.”

In effect, a bank can create money on its books, lend the money at interest (today about 4.7% on a fixed rate mortgage), then clear the outgoing check by borrowing back the money it just created, at a cost to the bank of only the very low fed funds rate (now .2%). The bank creates bank credit, lends it at 4.7%, then borrows it back at .2% to clear the outgoing checks, collecting 4.5% interest as its profit. The credit the bank has lent is not an asset it has labored to earn but is simply “the full faith and credit of the United States” – the credit of the people collectively. Yet the bank is allowed to pocket a hefty interest spread on this credit-generating scheme; and that is assuming it lends at all, something that is happening less and less these days, since bankers find it safer and more lucrative to use their nearly interest-free credit lines to invest in risk-free government bonds at taxpayers’ expense, engage in speculation, or pay themselves sizeable bonuses.

Avoiding Another Lehman-style Credit Collapse

The reason banks are highly dependent on loans from each other, then, is that they need these low-cost loans to keep the credit shell game going. This is particularly true for large Wall Street banks. Small banks get their funds mainly from customer deposits, and usually have more deposits than they can find creditworthy borrowers for. Large banks, on the other hand, generally lack sufficient deposits to fund their main business -- dealing with large companies, governments, other financial institutions, and wealthy people. Most borrow the funds they need from other major lenders in the form of short term liabilities that must be continually rolled over.

That helps shed light on what really caused the credit crisis following the collapse of Lehman Brothers in September 2008. The Lehman bankruptcy triggered a run on the money markets, causing interbank lending rates to soar. The London interbank lending rate (LIBOR) normally adheres closely to official interest rate expectations (meaning, in the U.S., the targeted fed funds rate); but after Lehman went bankrupt, the LIBOR rate for short-term loans shot up to around 5%. Since the cost of borrowing the money to cover their loans was too high for banks to turn a profit, lending abruptly came to a halt.

Interest rates on variable rate mortgages and big corporate deals tend to be based on LIBOR rates, which are moving up again now, although the fed funds rate has not changed. LIBOR rates are moving up due to tensions arising from the possibility that Europe’s sovereign debt crisis could turn into another global banking crisis.

This is just one of many reasons that states should consider following the model of North Dakota, the only state that currently owns its own bank. The state-owned Bank of North Dakota (BND) helped North Dakota escape the credit crisis. The BND has a very large and captive deposit base, since all of the revenues of the state are deposited in the bank by law, keeping the bank solvent regardless of what is happening in the interbank lending market. North Dakota is currently the only state not struggling with a budget deficit.

Nations could follow this model as well. A recent article in The Economist noted that the strong and stable publicly-owned banks of India, China and Brazil helped those countries weather the banking crisis afflicting most of the world in the last two years.

If You Can’t Beat Them, Join Them

While the banks responsible for today’s economic crisis are enjoying unprecedented benefits, state and local governments are forced to maintain very large and wasteful rainy day funds, even as they are slashing services to balance their budgets. They have to do this because they do not have the secure, nearly-interest-free credit lines available to private banks. Owning their own banks can allow local governments to avail themselves of the very low interest rates accessible to private banks, by giving them the same authority to create “bank credit” on their books that private banks have. North Dakota, which has had its own government-owned bank for over 90 years, not only is the only state to sport a budget surplus but has the lowest unemployment rate in the U.S. It evidently has no funding problems at all. Five other states currently have bills on their books to consider forming their own banks, and several others have discussed that option in their legislatures.

The Federal Reserve and the U.S. government have gone to extraordinary lengths to keep a corrupt banking system afloat, including buying toxic assets off their books and making credit available nearly interest-free, all in the name of turning the credit spigots back on on Main Street; but the banks have not kept their end of the bargain. In fact, they are just doing what their business models require of them – making the highest possible return for their shareholders. Publicly-owned banks operate on a different model: they must serve the community. Like China, India and Brazil, U.S. states would be well served to set up publicly-owned banks that could provide credit to the local economy when the private banking scheme fails.

Ellen Brown is the author of Web of Debt: the Shocking Truth About Our Money System and How We Can Break Free. She can be reached through her website.

[seemslikeadream]

FBI Uses Terror-Probe Tactics on Fraud

By DEVLIN BARRETT

Federal Bureau of Investigation officials in New York are increasingly employing tools and techniques used to hunt terrorists to take aim at a different kind of criminal: white-collar con artists and inside traders.

At a time when the public has grown suspicious of Wall Street and lost confidence in the government's ability to police it, investigators say they are expanding a number of methods, including the use of human sources, so-called tripwire programs, and internal intelligence reports, to try to get a better handle on crimes in the marketplace.

"We're trying to apply the principles of the national-security side so we can prevent something from becoming a $50 billion fraud by catching it early on," FBI Special Agent-in-Charge James Trainor said in an interview with The Wall Street Journal.

Mr. Trainor, who is head of the New York field office's intelligence division, said he is trying to change what he says is the culture of silence on Wall Street along with the culture of investigative work in his office.

"Say there's somebody at a hedge fund who is considering investing. The folks who do this kind of research are very bright, and presumably many people did not invest in Bernard Madoff or somebody like Madoff. Instead of just not investing, I'd like them to also give me a call," he said.

Both the FBI and the Securities and Exchange Commission have faced criticism for not catching Mr. Madoff earlier in his decades of defrauding investors. As part of its own overhaul, the SEC launched an effort earlier this year to cultivate more informants and sources.

That sort of increased human intelligence-gathering is also at the root of the FBI's efforts.

Mr. Trainor, who oversees hundreds of intelligence analysts and agents, said he believed there was a "keep it quiet" culture among financial-sector workers who are afraid of being blackballed in the industry if they report their suspicions to authorities. He said that reluctance to talk must be worn down over time.

To get a better sense of Ponzi schemes and other crimes, the FBI has created a system of internal intelligence reports on ongoing investigations into financial crimes. The contents of the reports, called domain intelligence notes, can give early warning to agents not involved in the investigation about new frauds that have been uncovered.

Mr. Trainor said the bureau is also using tripwire programs aimed at encouraging citizens who might get the first signs of something nefarious to contact an investigator.

In terror cases, tripwires have been set up for large purchases of household chemicals that can be used to make explosives.

In the financial sector, tripwire programs focus on a range of areas where workers might see the first glimmers of a criminal conspiracy. For example, employees of trading firms would be encouraged to report questionable buying or selling or stock; those working at rating agencies would be asked to report suspcious lobbying to improve ratings.

Toby Vick, a lawyer who handles white-collar cases in Washington and around the country, said the FBI's new approach may help catch con artists, but he voiced doubts it would ensnare those involved in securities fraud. He said that finding a crooked investment banker within a corporation can often be a needle-in-a-haystack search, so using methods designed to map out terror networks may not work.

"It sends a chilling message to Wall Street, and I think practically speaking, it's a hard thing to do," said Mr. Vick. "All drug dealers are drug dealers, all terrorists are terrorists, but very few bond dealers are crooks."

Marvin Pickholz, a former SEC enforcement official now in private practice in New York, said investigators should maintain a healthy skepticism of the people supplying the FBI information, because they may be acting more out of self-interest than civic virtue.

"If the idea is to get more boots on the ground and more eyeball contact, that's wonderful, because that's where the system kind of went off the tracks in the sense that the SEC didn't understand what it was looking at," said Mr. Pickholz.

The veteran lawyer said he always offered up a particular strategy to investigators trying to catch more white-collar crooks: "Go down on the Street and go hang out in a bar, because people say things in a bar they would never admit elsewhere."

[American Dream]

Moving this article to a better home here on this thread:

CONTAINS GRAPHIC DEPICTIONS OF SUICIDAL/HOMICIDAL VIOLENCE

http://www.counterpunch.org/young06102010.html

June 10, 2010

Does the Ruling Class Really Want to Commit Suicide?

A Hell of Their Own Creation

By CHARLES M. YOUNG

Last March I went to the Left Forum in New York, which is a yearly gathering of liberals, progressives, anarchists, socialists, communists, hippies, punks, mystics, conspiracy theorists and anti-conspiracy theorists who are all trying to figure out how to get to a decent future from the indecent present. Nobody, of course, knows how to do that. There may not even be a path to a decent future from the indecent present, but I always find the Left Forum hopeful because a few thousand people in one place are at least putting their minds to the problem.

The panel discussion I most wanted to see (out of 300 or so) was called “The Crisis That Gives the Capitalist Class Nightmares,” because Michael Hudson was speaking. Whenever Hudson writes something, I read it, because he’s one of a tiny number of economists with academic credentials who predicted the present debt crisis. (Apparently not predicting crises is necessary for tenure in most economic departments these days.) At the panel, he explained that when labor is squeezed to the point that it can’t purchase anything, the capitalist is left with nothing to invest in, except more debt, and so we end up with Wall Street creating ever more complicated, ever more leveraged, ever more worthless junk for its gambling habit. When this collapses, as it must, half the hospitals in Latvia (which Hudson advises) have to shut down for lack of funds.

The next guy to speak was Hillel Ticktin, an emeritus professor of Marxist Studies at the University of Glasgow. Whip smart, grumpy and funny, Ticktin expanded on the theme of “fictitious capital,” as Marx called money made from money with no value added. Ticktin said we had reached the last stage of empire with this humongous array of empty numbers in computers that is our economy and recommended we all read Volume 3 of Capital. Then he closed with a question: “Does the ruling class really want to commit suicide?”

Every time I have watched the news since March, I think back to that question and have an anxiety attack.

Because, yes, the ruling class is trying to commit suicide. In and of itself, this would be a great boon to mankind. Imagine if the ruling class admitted their abject failure to get anything right, and did the honorable thing. Top management at Wall Street, the elite of both major parties, their lobbyists, the big pr firms, the worst hacks of the corporate press, most CEOs and COOs--what if they all just got in a big bathtub, conceded defeat and opened up a vein like Frank Pentangeli in The Godfather II? Who would miss them?

So suicide isn’t the problem, exactly. The problem is that they don’t know they’re trying to kill themselves, and it doesn’t occur to them to behave honorably. The ruling class is not Frank Pentangeli. The ruling class is the husband who is failing at work, having his home foreclosed, his car repossessed, his children are getting humiliated at school because they aren’t wearing the right clothes, the self-help books have failed, the church offers no solace, television won’t acknowledge his existence--so he shoots his wife and four kids and then puts the gun in his mouth.

Thus the problem is murder suicide. The husband wants to kill the only people in his life more powerless than himself, because they are living reminders of his own shame.

Let me spell that out. The ruling class is the husband. Everyone who works in the productive economy is the wife and four kids. The ruling class wants to commit suicide because it has so completely failed and because everything it believes is so obviously wrong. One part of the ruling class brain knows it doesn’t do anything worth doing, and another part of the ruling class brain doesn’t want to be reminded and lives in terror of being exposed. This is called denial. To keep the denial in place, evidence of failure must be destroyed. If you, oh reader, are the living evidence of ruling class failure, it is a dangerous situation.

The ruling class wrecked the economy. That was a stupendous failure, but at least they were wrecking a social construct that deserved wrecking.

Organizing labor on the principle that the guy with the most money gets to tell everyone else what to do--how did that come to be considered a good idea? How did that get equated with freedom? Every major religion warns against greed, and somehow most of the United States has come to believe that letting the greedheads run everything is efficient.

That’s so 20th century.

The bigger problem is that the ruling class, in its murder suicide frenzy, is killing nature. Nature is not a social construct. It’s really there. It’s alive. As such, it is too painful for the ruling class to look at, so they are killing it. Anything that reminds them of life, anything that isn’t money, has to go.

It’s a mistake to fetishize all this evil and project it onto BP. BP is one sociopath in a culture of sociopathy. If you read its “plan” for dealing with oil spills in the Gulf, as some enterprising reporters did for the Associated Press, it is a contemptuous joke from beginning to end. It is full of bizarre lies and mistakes. The corporate flunkies who accepted it at the Minerals Management Service should be in prison. The company that wrote it, the company that had no plan whatsoever for dealing with a deep blowout in the Gulf of Mexico, cares about brown pelicans like Joran van der Sloot cares about young women.

The chorus of energy companies denying global warming wasn’t killing nature fast enough for BP, so it invited nature into a hotel room and strangled her.

A prophecy: At some point this summer, a hurricane is going to blow through the Gulf of Mexico. It’s going to drown New Orleans in carcinogenic sludge, again, and a day later it’s going to be raining tar balls on Nashville. People all over the South will go to church and demand that Jesus save them. Jesus will choose this moment to make his return to earth: “Hey, I told you 2000 years ago that it’s easier for a camel to pass through the eye of a needle than for a rich man to get into heaven. I told you that the poor are blessed. I told you that as you treat the least of these, you have treated me. That means if you oppress the poor, you oppress me. That means if you drown pelicans in oil, you’re drowning me. But you didn’t read that part of the New Testament. You only read that weird symbolism in the Book of Revelations and argued about nothing while the ruling class destroyed everything. You came to believe that my teachings were somehow consistent with capitalism. I mean, where did you get that from? I’m the guy who threw the money changers out of the temple. You think the money changers of Wall Street are going to save you when the ocean dies? You think I’m going to save you with some kind of rapture and vacuum the believers into heaven? Not a chance. But you do have a choice. You can deal with the ruling class now, or you can burn in a hell of your own creation.”



CHARLES M. YOUNG is a founding member of the collectively-owned, journalist-run online newspaper ThisCantBeHappening.net. His work, along with that of colleagues John Grant, Dave Lindorff and Linn Washington, can be found at http://www.thiscantbehappening.net