Tag Archives: Paulson

America Is Going Down By The Head

While I agree with the majority sentiments of this author, what is more disturbing to me – is the complete clueless understanding by most Americans that these ‘bailouts’ are rescues that THEY are going to have to pay for!  There is little understanding or concern that what these “bailouts” really are – is the imposition of Mussolini-style government Fascism; where government runs, controls and otherwise manages industry in America.

What that means folks is that Capitalism is in all practicality DEAD IN AMERICA.

It means we are no longer a Representative Republic, but a Fascist Democracy – and having achieved this under a Republican Administration that has essentially greased the pan for the incoming Marxist Administration of total tyranny and dictatorship by the cooperation of the One and his Politburo in Congress.

The adoption of the policy that this industry or that institution is “too big to fail” ensures that the more important and bigger issue of liberty and freedom in America – must fail in order to nationalize the entire country.  A desperate people will surrender almost anything for the mere promise of bread.

Even if it means their liberty.

Americans should take a good look at Argentina’s collapse – because I believe this is our near-term future.

America Is Going Down

Don Swarthout – Christian Newswire

Today I believe America is about to go down financially.  Some reasons for this conclusion are the financial crisis, bailouts, increased government spending, belief in a global economy and both parties belief in a one world government.

When we were first discussing the credit crisis and the bailouts I contacted a financial expert who said, “I cannot understand why the President has insisted upon a $700 Billion dollar bailout to save the economy.  Call me back in a few days and I will have an answer for you.”  When I called back he said, “I still do not know what to make of this so-called credit crisis.  It just does not make any sense to me.”

When a financial expert had no idea why we were going through a credit crisis or a bailout, I began to dig for answers.  Then a friend pointed out while Henry Paulson was on CNN arguing for the bailout of Citigroup, one advertiser was asking people to apply for low-cost credit cards.  My banks had told me they would loan us money whenever we wanted it.  I wondered if the credit crisis was real.

According to Fox News the American people were overwhelmingly against the bailouts.  Calls to Congress ran 100-1 against the bailouts.  Still Congress approved a $700 Billion dollar bailout package.  An additional $1 Trillion dollar bailout is being considered by Congress, which means $1,700,000,000,000 of your tax dollars could be given away.

Why have we just given our government so much power over us?


In the last eight years government spending doubled our national debt from $5.7 Trillion to $11.4 Trillion dollars.  President Bush met with Mexico and Canada several times to discuss creating a North American Union and wiping out the U.S. Borders under the Security Prosperity Partnership of America.

The President’s meeting with Canada and Mexico, government bailouts and government spending during the last eight years made me wonder if our government was trying to spend the U.S. Dollar out of existence.

Articles about the Security Prosperity Partnership of America say President Bush is pushing us toward a North American Union, eventually leading to a one world government.  Why is our President discussing this?

Then my attention was called to the Council on Foreign Relations and their strong desire to see a one world government.   In doing my research, I found both Democrats and Republicans were nearly all members of the CRF, a group founded in 1921. Why do so many of our politicians, both Democrats and Republicans belong to this group?

Maybe Democrats and Republicans argue just so they can play the political game and to hide their true feelings.  This explains why they belong to a group whose focus is a one world government.

All of this leads to one conclusion, America as we know it, is going down. 

America is almost broke and will likely default on loans secured from foreign countries by Spring.  If we default on these loans nobody will lend America any money because our government bonds, our collateral, will be worthless.  The dollar would also become worthless and would then be replaced with the North American Union Amero.

Then our government will start over with a new currency called the Amero and a new government called the North American Union.  Our government’s reckless spending is making the dollar, our Constitution and the principles of America totally meaningless.  What will happen to the American public?

The blame for this mess rests with our Congress who mismanaged the national debt, spent way too much money, desires a one world government and enacted legislation which required banks to make undesirable loans.  Some of our Congressmen passed this legislation for their own personal gain and should be prosecuted.

This makes sense to me and with the huge bailouts, it will come to pass.  My advice to you is to change your assets from being based on the U.S. dollar to another government’s currency.  God help us.

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Primary Bailout: Marxist Centralized Planning & Abandoning What Made America Great

Primary Bailout

By John Galt


October 5, 2008

“Forward, the Light Brigade!”
Was there a man dismay’d?
Not tho’ the soldier knew
 Someone had blunder’d:
Their’s not to make reply,
Their’s not to reason why,
Their’s but to do and die:
Into the valley of Death
 Rode the six hundred.

Charge of the Light Brigade by Alfred Lord Tennyson

The particular charge for this article is the fiasco that was just completed by only five hundred and thirty four but the futility of their charge will soon be realized by anyone with one half of a clue about the reality of markets, monetary systems and the true reasons behind the largest assault on free market capitalism since the days of Franklin Delano Roosevelt. The real motivations behind what I call the Debt Nationalization Act of 2008 may never be known until Treasury Secretary Henry Paulson writes his memoirs, yet there is a nagging feeling that the days where capital innovation originating in the marketplace have been sunset, hopefully to arise when the dark pall of the new socialist America regresses in a fury of voter vengeance. It would appear that the American public needs to feel the pain of what so many people worldwide have lost their lives to run from and destroy: Marxist centralized planned economies.

Nous Sommes Francais

“We are French.”

While this might offend some people with the inference that it is a derogatory term, that is too bad. As for myself and our fellow frogs of Amerika, this is going to become a larger nightmare than anyone could ever conceive. The lack of hearings on this bill, the lack of study and discussion will come back to haunt our nation in spades. The pork that was loaded into the bill was indicative of the kind of games banana republics of the 1930’s in Latin America and the Caribbean used to play with their budgets which made them the mockery of the capitalist world of the time. Now we are the mocked, the joke, the sad fat bloated buffoon which gets featured on Jerry Springer as the wall to our house is cut out and the socialist forklift hauls our nation’s financial system into a dump truck because we are too large to fit into an ambulance.

The idea that we need centralized planning for our economy reminds me of the days in college where we studied under the Keynesian idealists and some of the professors actually praised a government planning committee to insure that resources and monetary needs were allocated based on a preconceived formula versus the capitalist utilization model where profit was the ultimate motive. Unfortunately the bailout does nothing more than create a GOSPLAN for the United States where not only the management of eighty plus percent of the housing industry now becomes the responsibility of the Department of the Treasury and an office building full of socialist bureaucrats, but the whims of political appointees in positions throughout the cabinet including HUD, the Fed and SEC. Scared yet? Better learn French just to get a taste of what is to come. Also buried in the bill is every wet dream fantasy of Al Gore and the Marxist environmentalist whacko movement laying the tax credit and planning for carbon sequestration, carbon credits along with IRS implications, and the penalties plus benefits for people who live in modern “green” homes and higher taxes for non-conformist homes, which means a tax increase on oh, most of us.

Unfortunately for the Bubblevision cheerleaders, the perception that this will instantly put the twenty percent down in the pockets of every man, woman, child, cat, dog, turtle, illegal, snake or hyena so everyone or anything can buy a home from the modern version of the National Recovery Administration is not only false, but a fantasy that is going to become even more impaired by the inflation this act will create. The only thing that will ultimately occur is that instead of 1,000 to 1,500 banks failing throughout the nation as such respected experts as Nouriel Roubini has speculated about, it is this writer’s opinion that in excess of 3,000 banks are probably doomed to failure. Before the debt nationalization and spurious comments about “urgency” and “disaster” sparked by vague and unsubstantiated comments from Paulson there was and always has been a prudent distrust by the American public of Wall Street, the banking system and most of all the government. Instead of calming these markets and the underlying institutions within our quasi-capitalist system, the actions of Bush, Paulson, the so-called Financial Mainstream Media, and our politicians has initiated a justifiable panic and loss of confidence in a system which was built upon data streams fraught with fraud and deliberate distortion. This is so much like the Euro-socialist model where the bad news was and always has been manipulated for political purposes instead of defining finite data points where capitalists can exploit the situation and expand economies using traditional investing methods.

Sadly, ever since John F. Kennedy, the concept of data distortion is now the unwritten policy of every administration and this is one of the reasons we have landed where we are today. The market’s distrust of inflation, unemployment, credit, real estate, and durable goods reports is one of the reasons the honest and practical investor is no longer wishing to participate in the system which appears “rigged” to the untrained eye. To the trained eye, with the manipulations and massive interventions in the system by central bankers worldwide and weekly edicts changing trading rules and roles, they know it has turned into a roulette wheel with a large magnet under the wheel designed to favor the few and punish the rest of the gambling public. Thus the real reason for this alleged rescue which does nothing but throw a lead laden life preserve and a Mai-Tai with a pretty umbrella to the man struggling in the ocean while sharks circle around him.

The Primary Bailout

Now the question everyone seems to have been asking:

Why the panic, why the sudden emergency, and why are foreign banks included?

I think the following list from the Federal Reserve Bank of New York will answer your question.


List of the Primary Government Securities Dealers Reporting to the Government Securities Dealers Statistics Unit of the Federal Reserve Bank of New York

BNP Paribas Securities Corp.
Banc of America Securities LLC
Barclays Capital Inc.
Cantor Fitzgerald & Co.
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Daiwa Securities America Inc.
Deutsche Bank Securities Inc.
Dresdner Kleinwort Securities LLC
Goldman, Sachs & Co.
Greenwich Capital Markets, Inc.
HSBC Securities (USA) Inc.
J. P. Morgan Securities Inc.
Merrill Lynch Government Securities Inc.
Mizuho Securities USA Inc.
Morgan Stanley & Co. Incorporated
UBS Securities LLC.

If you notice those banks that are highlighted in red and bolded, they are all American subsidiaries of foreign banks with operations inside the United States. Since July 15, 2008 Countrywide Financial, Lehman Brothers and of course Bear Stearns have been removed from the list of Primary Dealers for United States Treasury Securities, leaving only seven domestically based operations and none of the American banks remaining operating solely as investment banks. What a difference a year makes.

This now begs the question, why the sense of urgency. The answer is simple. If the United States Government, meaning the legislative and executive branches did not reach an accommodation to create valuations for the so-called toxic debt instruments and agree to buy a substantial portion of them back into the U.S. Treasury portfolio, they would refuse to buy United States Treasury debt instruments, in essence blackmailing the people of this country into creating a market which was created under false Level III pretenses.

Although this entire piece is just my opinion, it does not take a rocket scientist or Hockey Mom from Alaska to figure this out. Without the primary dealership network, the U.S. Treasury would have auctions which consist of some computerized bids and a very empty room with a few drunks from the closed Lehman bond desk who act as bidders but haven’t received the memo that their company has been wiped out by Goldman’s right hand man, Hanky Panky Paulson. The foreign bidders are critical to the survival of the United States because we have to raise over $2,000,000,000.00 per day to keep the lights on and justify the existence of thousands of stupid people enforcing thousands of needless and stupid regulations. It also keeps the stupid people populations down on our streets, which is a net positive but is financially inefficient. If the foreign bidders via the banks in the primary dealer network from Scotland, Japan, Hong Kong, Germany, Switzerland, France, and the United Kingdom is not enough of a concern, add in the threat from our own institutions refusing to use their Caribbean Island proxy hedge funds to buy also.

Ignored in this flurry of fluffernuttery and malfeasance was the streamlining of a thirty day application process by one Ben Bernanke to enable Goldman and Morgan to divest themselves of the “investment bank” tag and become commercial retail banks in five freaking days. Gee, do you think the bank examiners still dusting themselves off at the craters Indymac, Washington Mutual and Wachovia have had enough time to review the books at GS and MS to insure that they are viable commercial banks? Probably not but “Ben’s” word is good enough for me (snicker). So if they were not allowed to change their structure, begin the process of gifts from the FDIC of free deposits and the ability to leverage funds in an unlimited manner via the new zero reserve requirement, what incentive would they have to call their offices in the cubicles down the hall and tell them to buy half a billion in government paper for the Pirates of the Caribbean? None. So the game was rigged and allowed to proceed forward at all costs, including the middle class and integrity of our markets, and voila, instant bailout.

If the President and Legislature refused to move forward on a taxpayer funded boondoggle to destroy the monetary system by acquiring assets at prices way in excess of their underlying value, the banksters were going to blackmail the United States public by destroying their retirements and deflating everything in sight to insure that no politician was safe in their comfortable position and the American public would be in full outrage mode to restructure both political parties and quite possibly the political system currently in place. Since the deal of 1913 was the first institutionalized incident of M.A.D. (Mutually-Assured-Destruction) of record and the Federal Reserve reminded the politicians of this, it was completely evident after the so-called meltdown on September 29th, that action of some sort would have to be taken, taxpayer be damned.

Taxpayer Benefits or “There’s a Sucker born every minute”

Now the political talking heads, the lying elected officials and so-called financial press are all reporting the “aw gee, this is so wonderful the homeowners won’t have their homes foreclosed on and the reforms in this bill are so sweeping that we have planned for the future that the taxpayer could actually turn a profit on these turds.”

If you believe that one, please contact me immediately as I have a printer and I love selling promises to stupid people.

The reality of what this will cost will start to hit home in about forty-eight hours. The insipid and insane FDIC insurance increase from $100,000 to $250,000 decades after inflation has already made the U.S. Dollar worth about $0.146  (That’s in 1967 dollars per the BLS) is only adding insult to injury. The real purpose was to prevent a bank run by wealthier depositors at smaller institutions which are on the GS and MS Christmas shopping list submitted as part of the “we’ll keep buying Treasuries if…” bailout provisions. Add in the costs that will be passed on to the smaller depositors and you can say goodbye to free checking, free online bill paying, free ATM usage, etc., etc. But don’t worry, increasing fees, creating unlimited reserves and diluting the monetary base is not inflationary because Ben told me so; allegedly.

Next will be an array of fees and tax increases across the government spectrum to raise revenues for everything from boarding an airplane to breathing as they have to raise money in the face of declining economic activity and since government is ruled by generally the least intelligent life forms other than those that lay their eggs on cowpies, it is about a 99.9% assurance that taxes and fees will be increased even as GDP sinks lower, and lower, and lower.

The one benefit for those taxpayers “who qualify” has been highlighted under Section 110 of the debt nationalization act, but there will be consequences to that. The mortgage forbearance program has been established to help homeowners before foreclosure proceedings begin or bankruptcy filings have been made. That could prove to be a great political benefit for any political party in power that is suffering from the market based reality of declining real estate prices and the inability of their constituents to read a contract. The other pork in the bill guarantees that biodiesel will be manufactured against the will of the market place and energy efficiency will be imposed as opposed to allowing market forces to take effect and do the job that Americans won’t do. None of the solutions or pork proposals are based on free market capitalism so Ellsworth Monkton Toohey, aka Lawrence Kudlow will have to go back to haranguing about “Goldilocks” and the fictional drug induced booming economy he perceives to see in his world of purple dinosaurs and hand mirrors on his dressing room desk.

And now the Consequences of Abandoning What Made America Great

The lesson of this past week is as obvious as the truth of the blue stained dress:

Capitalism, risk and the rule of law matter no more.

America became a great nation because we believed that individuals had the right to succeed or fail based on their abilities or lack thereof. The lesson we began teaching our children started to deteriorate with the ‘no scoreboard’ mentality at Little League Baseball games and furthered with the rewarding of mediocrity in our eduction system. That lesson has carried through to our political elites, ruling economic class and the middle class of America:

Failure is an option, and not a bad one at that; as long as it is your political opponent and their supporters.

Because you can never really fail as long as you force the remainder of the population to fork up blood, sweat, tears and dollars at gun point to reward the losers of society and let the misdeeds of the ruling class go unpunished. If an investor recognizes the shortcomings of a particular company and wishes to perform the legal act of shorting their equity because of the mistakes, the solution is simple; ban the activity on that stock and tell the investor that he’s evil for exercising his plans within the rule of law. However the CFO who maliciously assists in the creation of questionable investment vehicles for that same company has no fear of prosecution, as long as they are inside the game, purchasing the securities of the other players and government and becoming “too large to fail.”

That lesson has been transferred across our society and is best illustrated by the latest data that the mainstream media reported from this same inept government that approximately fifty seven percent of our population is receiving some sort of check or benefit from the government. So why not increase it to a nice, fat round sixty-five percent and tell the other thirty-five to shut up and “do their patriotic duty” to prevent the “safety net” from failing.

Instead of the process where the weak, inept and mismanaged are allowed to die and stronger companies with more dynamic models to replace them allowed to flourish, the good old boy network established by FDR and expanded by every President ever since has allowed a diversified group of companies that should not exist in a normal, straightforward Adam Smith model to survive every downturn or inept strategic decision. The result has been to pass judgment on companies not based on their capitalist performance, but on their ability to promote the “public good” or the contribution to the society as a whole. This is neither capitalist nor desirable in any society and the Soviet model best illustrates why with the automotive industry which flourished under the USSR Communist Party hierarchy, but  in reality produced substandard products at prices totally out of line with the realities of the marketplace. Now one more time, someone please tell me the difference between the failed Soviet auto industry and the derivative models and quant hedge fund programs invented by our zit faced math whizzes just one more time?

What this means for our future is a bleak attempt at the “Lost Decade” model of Japan except the extreme risk of hyperinflation has been introduced not just into the U.S. Currency but into fiat currencies worldwide. The question is which central bank will shut it down first and try to establish a sound monetary base instead of an unlimited inflationary based economic model. My fear is that the entitlement society that America has become along with the aging work force and lack of an industrialized base will make any type of recovery a purely digital fantasy with short term hope being destroyed with long term reality. As American economic reporting is a mark to fantasy  model at best, outright blatant political lies at worst, the lack of consistent and viable data measurements will result in a floundering nation with little desire by foreign investors to plow trillions into the black hole located in the District of Columbia. In the end, we will not witness ’stagflation’ per se; the consequences will be a persistent, grinding inflation with negative economic growth, some quarters worse than others and vice versa, destroying the viability of the current American system of the Federal Reserve central banking model and the political class shall emerge being viewed as the savior as opposed to self-reliance and the Constitutional alternatives.
The end result of two weeks of hysteria and rhetoric is that our Primary Dealership network for the Fed will remain intact and the banking system is now subservient to the political parties in control. This two shall see a reversal of roles as the ecnomic decline accelerates. The new era of emerging superbanks, able to create a new fractional reserve system with the limits only being the ability of the display screen to show numbers and the IT departments at the banks learning how to calculate “quadrillions” into the formulas has begun. As the superbanks in the U.S. and Europe begin to absorb those institutions deemed worthy of saving, billions, perhaps hundreds of billions of depositor’s wealth will be wiped out in uninsured accounts, money market funds that collapse and equity liquidations.

Welcome to the brave new world boys and girls.

Mr. Toohey would be proud.

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The Damned Don’t Cry


The Damned Don’t Cry

by John Galt


Wow. What a month this has been. The start of a new stock bull market, now postponed by that pesky insolvency thing that I’ve been warning about for two years.

Then those dratted politicians daring to question the edicts of the Almighty General Zog, er, Hank Paulson (Zog sounds more intimidating than a nickname of Hanky-Panky) and daring to question a demand for $700 billion per Viagra moment to buy that pesky alleged sub-prime/Alt-A/Prime/Jumbo/Commercial/CDO/CDS/CLO/Auto-loan-securitization/Credit-Card-Securitization/Student-Loan-Securitization/the-Salmon-I-Loaned-To-My-Cat debt load America is carrying so they can create new debt loads to be purchased eight years later by another ignorant bunch of slobs.

Then gold rising almost $100 in a week. Then Oil rising $25 in a day only to fall back to a much more palatable and reasonable $16 plus gain.

Yes, well, I’m just happy the markets are stable and have not crashed and burned yet so I can find a nice safe money market fund to, er, never mind.
Despite popular belief, I am not focused on precious metals, equities or Senatorial song and dance routines. The smart money is and always has been in the corporate, municipal and Treasury bond markets. If anyone does just a wee bit of research, they will find what everyone at those formal dinner parties, you know, the ones schmucks like I do not get invited to, a total disintegration in market stability which indicates a real fear that the big jet liner that Glenn Beck refers to has fortunately not careened into a mountainside. Instead it has plowed into Mount Rushmore and the pilots, Ben and Hank, while free falling through the air are still barking out “please assume the crash position.”

Unfortunately for the United States while the games are afoot, the rest of the world, the smart money, is voting while Congress plays its election year games during this crisis.

The world is not sure if the United States is a ’sure bet’ and the investing community is trying to reconcile the instability in our banking system with a ration investing approach that will enable them to liquidate dollar holdings in a rapid fashion should the worst case scenario erupt. So what is the worst case scenario? Glad you asked. It is all related to the super duper MOAB (Mother of All Bailouts) also known as the biggest nationalization in capitalist history since Castro told the United States to assume the position.

The Final Vote

Despite popular rhetoric, the vote is a 50/50 proposition; yes or ‘yea’ = inflation and no or ‘nay’ = deflation. While this might sound like an over simplified version of events, I think it gets into the crux of reality. Politicians are not the best and brightest souls in the world because if they were they would be running hedge funds making $80 million per year or managing a corporation with enough naked pictures of other politicians with mules to insure they get bailouts and a $10 million per year salary for life. So assuming that the majority of our politicians are that stupid, corrupt or perverted (there’s a reach, eh Barney?) let’s get down to brass tacks. They will jawbone. They will demand concessions as if the Treasury did not anticipate that. They will threaten. Then the Fed and Treasury will grab them by the short hair, set it on fire, then reinsert it painfully to remind them that bankers control their primary arteries of Western Civilization and the votes will occur. Sadly, when this vote occurs, there is a consequence for all of North America. I will skip over the geopolitical implications and get down to some bottom line information as some idiot might make some money off of this, adopt me and prevent my wife and I from stealing a monkey from the Lowry Park Zoo to dance for pencils and pennies.

With that cheery little introduction, a brief explanation to the title of this editorial. The damned do not cry as they are cast into hell for they realize their sins and the pain they are to endure forever. The American economy is on a precipice, but sadly it seems that few beyond the smart money ‘get it’ and even they are shuddering in fear as to the consequences of action or inaction this week. World markets, be they capitalist, semi-capitalist, socialist hybrids or outright Marxist monopolies are voting on America and the actions of its politicians every waking moment of the day and have been for years. The voting was mild for years as the perception was that we could create a new deck of cards to build a new house of cards to support the elephant dancing on the top card year after year.

Until now.

The voting is much more intense and despite popular belief that we are ‘too big to fail’ that voting in our bond markets has major implications for our future. Thus why I present the final vote.


Unfortunately for the American public, your opinion is limited. Despite numerous website proclamations and the voices of the boisterous on mainstream commercial talk radio, this is a decision left to bankers and bankers hold 51.75 of the 52 cards in every deck. The protestations are heard by secretaries, volunteers and clerical staff in every hall of Congress but the reality an adult has to admit is that the control of our economic and political system is summed up by basic mathematical formulas:

Do you listen to the guy with $1,000,000,000.00 or the guy with $2,000.00 ?


So you think you have found 50,000 people with $2,000.00?

Ok, good luck with that one. That buys one politician if you have.
The reality is that our system has introduced a pathetic level of Roman Imperial corruption that would make Caligula, not Bill Clinton, but Caligula, blush.

Now that you have that basic understanding of math, $700 billion is more than you could ever conceive of, let us move forward to the consequences of an unfortunate and justified ‘yes’ vote.

The wording, no matter how you cut it, was for $700 billion “at any one time” to purchase securities. The definition was deliberately vague to infer that illiquid securities were the only ones to be purchased, yet the who defines “illiquid” was not. This could mean that Joe’s Sixpack Massage Parlor and Savings of Newark could submit his double lap dance coupons or Mary Joe Shclupper’s 13.7% subprime paper as an illiquid asset to be purchased by the government and added to the debt.

Of course, Joe’s is probably submitting better paper than Washington Mutual or Citigroup, but hey, who’s that picky?

The proposal is inherently inflationary as it gives discretionary powers to the Federal Reserve and US Treasury to issue new debt obligations, not only as needed, but as desired to “stabilize” economic conditions as they feel necessary. Since the positions in both branches in discussion are political yet tied to the banking substrata, there is no way in hell that paper will not be issued to bail out unfortunate (Ok, irresponsible) gambles by substantive banks in the system.

Considering our current situation where the various types of bonds created in the last five plus years have no assigned valuations other than that of the originating bank, why in God’s name would any bank devalue it’s own assets when selling the paper back to the taxpayer realizing that they can hedge that sale with commodities or a bond issuance from a more stable entity like the U.S. government? In the long run, the underlying assets be it a home or business with a declining market value could go to zero but our government will hold a security against that asset that could be worth thousands of times more than reality which means you and I own garbage. Monetizing assets that are near worthless is one of the most inflationary actions our central bank could take and at this time, considering the differing types of submissions they are wanting to accept, this could be the most inflationary action since the Central Bank in Weimar Germany attempted to monetize the war reparations debt.

Considering the alternative though a “Yea” vote could be the least painful for the American people when all is said and done.

‘Nay’ = Deflation

A no vote on any type of bail out package is the equivalent of throwing a grandmother on top of a live grenade to keep Senator Dodd’s suit from getting messed up. That possibility does exist. There is a level of vitriol, which is justified, as the regulatory authority that has been granted and expanded repeatedly by the House and Senate since 1913 to give the Federal Reserve and Treasury whatever authority it sought  to manage the economy could undermine any efforts to allocate trillions of dollars to stop the bleeding. There are several politicians who understand the inflationary implications of allowing an unlimited flow of monetary creation to begin unabated in an effort to preserve the current system and allow the fox to not only steal the chickens, but the hen house and the farmer’s wife also.

If the political elites vote no, the banksters have the excuse they need to preserve those institutions they wish to by allowing a seizure of all credit and monetary markets, thus crashing the economy almost immediately and bringing any dreams of economic expansion to an end for almost a decade. There will be a massive wave of bank failures as a result and the real estate market would probably experience across the board price declines of another fifty to sixty percent as the lack of credit prompts bankruptcy after bankruptcy. The idea of a deflationary reset should terrify any sane man or woman but if the political class chooses a non-reflationary course of action, it provides cover for the financial world to allow this to happen.

The resulting implosion by such a move would create an unemployment level well over twenty percent in short order, cause thousands of corporate bankruptcies, millions of more individual bankruptcies and put well over half of the construction industry out to pasture for a long time to come. It would also create a political upheaval that will change the face of America forever and the reflationary effort would originate with a wave of government sponsored projects and an expansion of socialism to prevent retirees from suffering more than they have already.

This is a damned if you do something, damned if you do not approach and sadly, either choice puts those on fixed incomes into a box as they will not have sufficient resources to maintain their current standard of living.

The immediate contraction of the money supply also creates a lack of liquidity for state and local governments finally eviscerating the municipal bond market and bringing spending at the local level under control. Unfortunately services, both non-essential and critical for localities would be impacted.

There you have it gang. The choice is there and only those who are prepared will be able to survive. For those of you with more debt than the ability to repay, life will be hell. For those who did not buy essentials for the long term or prepare for a paralysis in financial markets via either deflation or inflation I hope you enjoy your government masters. It is a sad statement that our society has reached this point.

Unfortunately, we, the American people get to witness this and endure history one more time and at our expense.

Welcome to Weimarica.

2008 style.

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America Goes Fascist As Government Bails Out The Banks and Nationalizes The Economy

It’s a new day, here in Amerika.  

For the last several weeks, as the mortgage, credit and financial crisis began to spiral out of control due to government meddling, mismanagement and greed – the government stooges who helped grease the playing field for this fiscal collapse in the first place, began to take over failed industries in a not-too-subtle nationalization of the banking, mortgage and credit industries.

With Lehman Bros going broke, in the wake of wreckage from Fannie Mae and Freddie Mac, the government takeover of AIG and the fact the FDIC is going broke faster than a wino in Vegas, it was apparently determined that the greed, sloth and criminality should be rewarded by making the you and I, the U.S. taxpayer and our children PAY for the HUNDREDS OF TRILLIONS OF DOLLARS in debt these institutions at behest of the government, have incurred.

It began with Morgan Stanley, and yesterday culminated in the government announcing it will MONETIZE ALL BAD BANK DEBT.  So in one fell swoop, the U.S. government with the Fed has trashed Free Market Capitalism, Socialized the Debt and are willfully ignoring the moral hazard they have created.

As my friend and fellow contributor John Galt said in response to this:

I said they would monetize and they are.

I said they would commit un-Constitutional acts, and they are.

I said that hyperinflation would occur before deflation, and it is.

I said that somewhere close to 40,000,000 retirees just became wards of the state because their retirements were wiped out and they did; they just don’t know it yet.

I said this disaster would alter our nation forever and it will.

Equities will be destroyed.     

Bonds will become worthless.

Money Market funds will be obliterated.

There is no incentive to save money.

The retirees who trusted the government to keep their money safe and earn a meager 4-5% annual return will be turned upside down by either destruction of their mutual funds or hyperinflation. A 5% return does nothing in the face of annualized inflation in excess of 20,30 or 50%.

Plus the entire tax structure of the U.S. will have to be redesigned.


John also warns that the action taken here signals the official end to the Right to Private Property in the United States.  Ultimately, he is correct, because the government will now own everything; your mortgage, your loan, your insurance, your bank.

In short order, America has gone pure fascist.  Not in the manner the Liberal Left had tried to redefine fascism in terms of Religious Conservatism, but TRUE Mussolini-style fascism – where the government runs industry, banking and commerce.

We shouldn’t be too surprised, we’ve been on this course for years, in fact during the 1930’s, the Collectivists at the NY Times and even FDR were enamored of Mussolini’s fascism – and sought to find a way to emulate it here.

Of course the media makes it sound like the greatest thing since Welfare was created by FDR.  Contrary to the headline, THIS IS NOT A RESCUE – it is a TAKEOVER that will be hung on your neck and mine and that of our children to cover:

Citing Grave Financial Threats, Officials Ready Massive Rescue

Lawmakers Work With Fed, Treasury To Try to Restore The Flow of Money

By Binyamin Appelbaum and Lori Montgomery
Washington Post Staff Writers
Friday, September 19, 2008; A01

The Bush administration is urgently preparing a massive intervention to revive the U.S. financial system, including a plan to sweep away the unpaid loans that are choking banks and blocking the flow of money to borrowers.

Congressional leaders gave bipartisan support to the administration’s efforts after a meeting last night with Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke.

Paulson and Bernanke presented a “chilling” picture of the state of the financial system, according to a participant in the meeting who spoke on condition of anonymity. Lawmakers were told that the consequences would be grave if they failed to pass legislation by the end of next week. Sen. Harry Reid (D-Nev.) and Rep. Nancy Pelosi (D-Calif.) committed to meeting that deadline.

The plan involves using hundreds of billions of dollars in government funding to buy bad loans, leaving banks with more money and fewer problems, according to two sources familiar with what was said at the meeting.

After the meeting, Paulson told reporters the proposal was “an expeditious solution that is aimed right at the heart of this problem.”

Also last night, the Fed was considering offering backing for money-market mutual funds, which have had massive withdrawals in recent days, said a source familiar with the discussions.

And the Securities and Exchange Commission is considering further limits on short-selling, a practice that allows investors to bet on a decline in a company’s stock price, according to a person familiar with the matter. Critics of the practice say short sellers are driving down the share prices of financial companies, thereby contributing to their destruction.

The government has already tried three times this month to keep money flowing through the financial system. It took over the two largest providers of funding for mortgage loans, Fannie Mae and Freddie Mac. It created a new source of funding for investment banks. And it took over the insurance giant American International Group.

Now the government is contemplating its broadest — and perhaps most expensive — intervention to date.

The urgency has only grown with each successive intervention because the first three tries have not worked. People are withdrawing money from money-market mutual funds. Banks are refusing to lend to one another. Several large financial companies need money to stay in business, including the bank Washington Mutual, which is seeking a buyer.

Regulators and the banking industry are increasingly concerned about customer withdrawals from money-market funds. Crane Data, which tracks the industry, said total deposits in money-market funds fell Wednesday by at least $79 billion, or about 2.6 percent. Financial executives have told government officials in recent conversations that the rising pace of withdrawals is the equivalent of a bank run and that if it continues, it will drain a massive and critical source of funding.

Money-market funds are particularly important because they buy short-term debt, which is used by financial companies and other corporations to finance day-to-day activities.

According to legislative aides, yesterday’s meeting was arranged after Pelosi called Paulson’s office mid-afternoon to discuss the state of the markets. During that call, Paulson asked to meet with Pelosi, Reid and key lawmakers from the banking committees. That meeting took place at 7 p.m. in Pelosi’s office on the second floor of the Capitol.

Paulson and Bernanke did not present lawmakers with a written proposal but are expected to do so by tonight, congressional aides said.

During the meeting, one lawmaker worried aloud that Paulson was asking for “a blank check,” according to a participant. There was also a “healthy debate” about whether this action would finally stabilize the markets.

“They couldn’t answer yes to that question,” the participant said.

Paulson and Bernanke generally have kept Congress at arm’s length as they have sought to deal with the financial crisis. Yesterday, however, after meeting with congressional leaders, they exchanged awkward compliments with the lawmakers at a news conference. Lawmakers had been increasingly critical of the Fed and Treasury leaders for failing to consult with Capitol Hill. The administration will need congressional approval to commit taxpayer money to its new plan.

“We’ll do this as quickly as we can. We’re not talking about a month,” said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, which would probably review the plan before it went to the House floor.

A hearing on the topic that Frank had scheduled for next Wednesday could now become a legislative drafting session, he said.

Also yesterday, Sen. Charles E. Schumer (D-N.Y.), chairman of the Joint Economic Committee, suggested that the government create an entity that would operate much like the Depression-era Reconstruction Finance Corp. — it would buy “equity and possibly secured debt,” providing desperately needed cash to companies while permitting the government to share in any profit.

“The government would get repaid before the others in the financial chain,” Schumer said.

If a plan does move forward, Democrats may try to demand concessions from the suddenly humbled industry, Schumer said, including support for a proposal to permit bankruptcy judges to modify mortgages for distressed borrowers. Currently, judges may set new terms for mortgages on second homes but not on primary residences.

That idea is contentious and has been fiercely opposed by the banking industry. Frank said he would instead demand that banks reduce the number of foreclosures.

Still, it’s not clear that Democrats would insist on such concessions at the expense of passing the plan quickly.

“The costs of doing nothing are enormous,” Frank said. He added that with the recent deterioration in the financial markets, “I think the timetable for something has been greatly sped up.”

Is it not amazing and utterly infuriating that one of the MAIN CULPRITS that caused Fannie Mae and Freddie Mac to collapse by making laws that they give risky loans to their political constituents is the point man on bailing out and nationalizing the economy???

Hugo Chavez could learn a thing or two on how to Nationalize an entire economy from observing our idiots at the Fed and the criminals in Congress.


More on this story:

Capitalism Dying by the Hour

The Skylab Economy

The Rescue Mission


Filed under Economy, News