Posts Tagged ‘US National Debt’

The present world economic and political order – A madhouse where the Arsonists are Running the Fire Brigade‏

2 december, 2013

I have written a lot about the present economic and political disorder (including foreign policy), where the common people are the ones paying the price for the gigantic folly by the political class, old media, central and investment banks, hedge funds etc.; who are pushing risk, leverage and debt to ridiculous and dangerous extremes.

This absurd Alice in Wonderland economic and political farce has been going on now for some time. And the Rabbit Hole is getting deeper and deeper because of the actions, and inactions, of the people mentioned above.

When you start analyzing these figures you get utterly horrified of the totals of the open derivatives positions in the US and European markets.

Just as an example: the four big investment banks in USA (Goldman Sachs, JP Morgan Chase, Citibank and Bank Of America) ONLY “covers” 2,27 % of the Total Exposure with ALL their Assets!

To sum up – TOTAL EXPOSURE TO DERIVATES for ONLY these four banks:

207, 375, 086, 000, 000 TRILLION DOLLARS!!!!!!!!!!!

TOTAL ASSETS for these four banks:  4,720,464,000,000 TRILLION DOLLARS

And remember: these figures are now over one year old. Today’s figures are worse.

If you do the math for example for Goldman Sachs, it has a total exposure to derivatives contracts that is more than 364 times greater than their total assets!

To put these GIGANTIC sums into perspective let’s compare with the GDP from USA and all of EU from 2011.

There a lot of different way to calculate GDP and the figures for each year. Add to that exchange fluctuations, conversion rates etc. So the figures below come from the same source (IMF) to make the comparison easier.  And it is their conversion.

GDP USA 2011 – 15,094,025 billion US dollars

GDP EU 2011 –  17,610,826 billion US dollars

Total GDP for EU and USA 2011: 32,704,851 billion US dollars.

Let’s compare these 32,704,851 billion US dollars with TOTAL EXPOSURE TO DERIVATES for  these four above mentioned banks:

207, 375, 086, 000, 000 TRILLION DOLLARS!!!!!!!!!!!

                                        VS

32,704,851 billion US dollars in COMBINED GDP of EU and USA

Anyone see any problem???”

See among others my posts:

After Cyprus there can be NO Trust Anymore

The economic mess and structural problems in EU and US – Part 1

The economic mess and structural problems in EU and USA – Part 2

Why the Euro is doomed – the German households net wealth in not EVEN HALF of that compared to Italians

Citizens! Forgive us for not arresting those truly responsible for this crisis: bankers and politicians

This is why the Euro is doomed

EU a stupid empire on purpose

EU – an unaccountable mess created by an undemocratic treaty – Now also a crony Bankocracy

The scam that is called EU and the Euro is behind the present crisis

Below are some observations from people with very long experience in the investment and economical field. So rather than me writing again I give you these people’s views.

First from John Mauldin in his newsletter from November 30th (you have to be a subscriber). John Mauldin is a renowned long time financial expert who has written extensively and in depth about the world markets and economic situation. He has his own investment companies; he is an advisor to hedge funds, he an author of several books etc.

(Note: Most of the bold are mine and all underlining is mine. And the charts are mine)

Arsonists Running the Fire Brigade

”I led off by forming an analogy to my Thanksgiving Day experience:

I rather think the stock market is acting like we did at dinner. When the alarms go off, we note that we have heard them several times over the past few months, and there has never been a real fire. Sure, we had a credit crisis in August, but the Fed came to the rescue. Yes, the subprime market is nonexistent. And the housing market is in free-fall. But the economy is weathering the various crises quite well. Wasn’t GDP at an almost inexplicably high 4.9% last quarter, when we were in the middle of the credit crisis? And Abu Dhabi injects $7.5 billion in capital into Citigroup, setting the market’s mind at ease. All is well. So party on like it’s 1999.

However, I think when we look out the window from the lofty market heights, we see a few fire trucks starting to gather, and those sirens are telling us that more are on the way. There is smoke coming from the building. Attention must be paid.

I was wrong when I took the (decidedly contrarian) position that we were in for a mild recession. It turned out to be much worse than even I thought it would be, though I had the direction right. Sadly, it usually turns out that I have been overly optimistic.

This year we again brought my now-96-year-old mother to my new, not-quite-finished high-rise apartment to share Thanksgiving with 60 people; only this time we had to contract with a private ambulance, as she is, sadly, bedridden, although mentally still with us. And I couldn’t help pondering, do we now have an economy and a market that must be totally taken care of by an ever-watchful central bank, which can no longer move on its own?

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I am becoming increasingly exercised that the new direction of the US Federal Reserve, which is shaping up as ”extended forward rate guidance” of a zero-interest-rate policy (ZIRP) through 2017, is going to have significant unintended consequences. My London partner, Niels Jensen, reminded me in his November client letter that,

In his masterpiece The General Theory of Employment, Interest and Money, John Maynard Keynes referred to what he called the ”euthanasia of the rentier”. Keynes argued that interest rates should be lowered to the point where it secures full employment (through an increase in investments). At the same time he recognized that such a policy would probably destroy the livelihoods of those who lived off of their investment income, hence the expression. Published in 1936, little did he know that his book referred to the implications of a policy which, three quarters of a century later, would be on everybody’s lips. Welcome to QE.

It is this neo-Keynesian fetish that low interest rates can somehow spur consumer spending and increase employment and should thus be promoted even at the expense of savers and retirees that is at the heart of today’s central banking policies. The counterproductive fact that savers and retirees have less to spend and therefore less propensity to consume seems to be lost in the equation. It is financial repression of the most serious variety, done in the name of the greater good; and it is hurting those who played by the rules, working and saving all their lives, only to see the goal posts moved as the game nears its end.

Central banks around the world have engineered multiple bubbles over the last few decades, only to protest innocence and ask for further regulatory authority and more freedom to perform untested operations on our economic body without benefit of anesthesia. Their justifications are theoretical in nature, derived from limited-variable models that are supposed to somehow predict the behavior of a massively variable economy. The fact that their models have been stunningly wrong for decades seems to not diminish the vigor with which central bankers attempt to micromanage the economy.

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The destruction of future returns of pension funds is evident and will require massive restructuring by both beneficiaries and taxpayers. People who have made retirement plans based on past return assumptions will not be happy. Does anyone truly understand the implications of making the world’s reserve currency a carry-trade currency for an extended period of time? I can see how this is good for bankers and the financial industry, and any intelligent investor will try to take advantage of it; but dear gods, the distortions in the economic landscape are mind-boggling. We can only hope there will be a net benefit, but we have no true way of knowing, and the track records of those in the driver’s seats are decidedly discouraging.”

”but now let’s jump into Code Red. In this section, we deal with the topic of central banking and its failures and ponder the implications of continuing to give the same people ever more authority and responsibility. This is from Chapter 5, called:

Arsonists Running the Fire Brigade

In the old days, central banks raised or lowered interest rates if they wanted to tighten or loosen monetary policy. In a Code Red world everything is more difficult. Policies like ZIRP, QE, LSAPs, and currency wars are immensely more complicated. Knowing how much money to print and when to undo Code Red policies will require wisdom and foresight. Putting such policies into practice is easy, almost like squeezing toothpaste. But unwinding them will be like putting the toothpaste back in the tube.

20131122_buck

Promoting Failure

We’ll admit that we’re having too much fun criticizing central bankers, the Colonel Jessups of the Code Red world. But please don’t just take our word for it when we tell you that they’re clueless. Let’s look at what others have written.

In 2009 Congress created the Financial Crisis Inquiry Commission to uncover the causes and consequences of the financial catastrophe that almost brought down the world financial system. They roundly condemned the Federal Reserve:

We conclude this crisis was avoidable. The crisis was the result of human action and inaction…. The prime example is the Federal Reserve’s pivotal failure to stem the flow of toxic mortgages, which it could have done by setting prudent mortgage lending standards. The Federal Reserve was the one entity empowered to do so and it did not…. We conclude widespread failures in financial regulation and supervision proved devastating to the stability of the nation’s financial markets.

Not surprisingly, public confidence in the Fed has plummeted.

Italian Ind production

The Federal Reserve performed disastrously before the Great Financial Crisis, but almost all central banks were asleep at the wheel. The record of central banks around the world leading up to the Great Financial Crisis was an unmitigated disaster. All countries that had housing bubbles and large bank failures failed to spot them beforehand. In the case of England, where almost all major banks went bust (some rather spectacularly!) and required either nationalization or fire sales to foreign banks, the Bank of England never saw the crisis coming. Let’s look at what The Economist has to say about central bank failures:

In 1996 the Bank of England pioneered financial-stability reports (FSRs); over the next decade around 50 central banks and the IMF followed suit. But according to research cited by Howard Davies and David Green in ”Banking on the Future: The Fall and Rise of Central Banking,” published last year, in 2006 virtually all the reports, including Britain’s, assessed financial systems as healthy. In the basic function of identifying emerging threats, ”many central banks have been performing poorly,” they wrote.

According to published reports, the Bank of England only learned about the bankruptcy of one huge bank after another a few days before the actual public announcement. So much for staying on top of the situation. The regulators were captured by the very institutions they were supposed to regulate, with neither the banks of the regulators understanding the serious nature of the problems they were creating with their actions.

20131119_thisismadness

Housing bubbles swelled and burst everywhere: Spain, Ireland, Latvia, Cyprus, and the United Kingdom. Countries that had to recapitalize or nationalize their banks were broadsided by a disaster they did not anticipate, prepare for, or take action to prevent. In the case of Spain, even after the crisis unfolded, the Bank of Spain acted like a pimp for its own banks. It insisted nothing was wrong and proceeded to help its banks sell loads of crap to unsuspecting Spaniards in order to recapitalize the banks. (We apologize for our language, but there is no other word besides crap that properly characterizes selling worthless securities to poor pensioners – well, there are, but they are even less suitable for public consumption).

In fairness, central bankers did save the world after the Lehman Brothers bankruptcy. The money printing that the Federal Reserve oversaw after the failure of Lehman Brothers was entirely appropriate to avoid another Great Depression. But giving them credit for that is like praising an arsonist for putting out the fire he started.

The failure of central banks makes it all the more remarkable that they were given even more responsibility in the wake of crisis. Since 2007 central banks have expanded their remits, either at their own initiative or at governments’ behest. They have exceeded the limits of conventional monetary policy by buying massive amounts of long-dated government bonds, mortgage-backed securities, and other assets. They have also taken on more responsibility for the supervision of banks and the stability of financial systems.

Japan%20Charts%20Abenomics

The Banking Act of 1933, more popularly known as the Glass-Steagall Act, forced a separation of commercial and investment banks by preventing commercial banks from underwriting securities. Investment banks were prohibited from taking deposits. Until it was repealed in 1999, the Glass-Steagall Act worked brilliantly, helping to prevent a major financial crisis. It was replaced by the Graham-Leach-Bliley Act, which ended regulations that prevented the merger of banks, stock brokerage companies, and insurance companies. The American public’s interests were thrown to the wolves of Wall Street, and the Fed and the Clinton administration gave the middle finger to financial stability.

After the Great Financial Crisis, Congress could have simply reinstated Glass-Steagall. The act was only 37 pages long, but it had worked incredibly well. Instead, after an orgy of bank lobbying and Congressional kowtowing to the bankers who had brought the world to the brink of a global depression, Congress passed the Dodd-Frank Act. It is over 2,300 pages long; no one is sure what is in it or what it means; and it has added a dizzyingly complex tangle of regulations and bureaucracy to what should have been a simple, straightforward reform of the financial sector. (The act is so long and complicated that it was nicknamed the ”Lawyers’ and Consultants’ Full Employment Act of 2010.”) You will hardly be reassured to learn that the Federal Reserve’s powers were expanded through Dodd-Frank.

Please note that it was the same banks and investment firms that lobbied to repeal Glass-Steagall in 1999 that so aggressively and successfully lobbied for the Dodd-Frank Act. While there are some features contained in the plan that are good, the basic problems still remain. Industry insiders were able to assure that business as usual could continue. And to judge from their profits, it has done so remarkably well.

Figure 5.4 Major financial legislation: number of pages

Financial legislation

The Fed didn’t need more powers. In the years leading up to the Great Financial Crisis, the Fed already had almost all the tools it needed to prevent the subprime debacle. It simply failed to use them. You could call that lapse nonfeasance, dereliction of duty, going AWOL, or anything other than doing their duty. If you don’t believe you are capable of recognizing a bubble in advance, then all the additional regulations in the world won’t make any difference in preventing a bubble. Dodd-Frank merely gave them more regulations not to enforce. It is the mindset that needs changing, not simply the regulations.

According to the Financial Crisis Inquiry Commission, the Federal Reserve failed to use the tools at its disposal to regulate mortgages or bank holding companies or to prevent the abusive lending practices that contributed to the crisis. The central bank didn’t ”recognize the cataclysmic danger posed by the housing bubble to the financial system and refused to take timely action to constrain its growth,” the report said. It also ”failed to meet its statutory obligation to establish and maintain prudent mortgage lending standards and to protect against predatory lending.”

The most sordid part of the Great Financial Crisis was not the extreme failure by central banks to regulate. The most egregious violation of the public interest came in the form of the massive subsidies and aid the central banks gave to the banking system when the crisis was underway. The great journalist and essayist Walter Bagehot argued in the mid-19th century that during a financial crisis central banks should lend freely but at interest rates high enough to deter borrowers not genuinely in need, and only against good collateral. During the crisis, the Fed and other central banks lent trillions of dollars at zero cost against the shoddiest of collateral. And the Fed went out of its way to provide gifts to Wall Street banks via the back door. For example, when AIG went bust, Timothy Geithner decided that the US taxpayer should pay out credit default swaps to AIG’s counterparties at full price. Goldman Sachs was given a parting gift to $10 billion. Geithner did not even negotiate a haircut. The money went to dozens of banks, many which were not even American. It is no wonder Geithner became well-known as ”Wall Street’s lapdog.”

20131115_SpainGDP

Our good friend Dylan Grice wrote a fascinating piece on what happens when you have too many rules and too little common sense. In a Dutch town called Drachten, local government decided to take out all traffic lights and signs. They hoped people would pay more attention to the road rather than fixate on rules and regulations. They were right. In Drachten there used to be a road death every three years, but there have been none since traffic light removal started in 1999. There have been a few small collisions, but these are almost to be encouraged. A traffic planner explained, ”We want small accidents in order to prevent serious ones in which people get hurt.” Let’s see what Dylan has to say about the lessons for capital markets:

You might be thinking that traffic lights don’t have anything to do with the markets we all work in. But I think they do. Instead of traffic lights and road signs think rating agencies; think Basel risk weights for Core 1 and Core 2 bank capital; think Solvency 2; or think of the ultimate market regulators of our currencies – the central banks – and the Greenspan/Bernanke ”put” which was once imagined to exist. Haven’t these regulators provided the same illusion of safety to financial market participants as traffic safety tools do for drivers? And hasn’t this illusion of safety been even more lethal?

Wouldn’t it be nice if central bankers thought more like Drachten town planners? But central bankers and parliaments prefer extensive rules to a common-sense approach.

Central Banks and GDP growth

Unlike the planners of Drachten, the Federal Reserve and central banks around the world issue extensive sets of regulation, fail to enforce them, encourage everyone to speed, and then when crashes happen they protect as many banks as possible from the consequences of their own actions.

The Federal Reserve is in desperate need of reform. This doesn’t mean that politicians should be deciding interest rates or that banking supervision should be taken away from central banks. But central bankers should be answerable to the public for how they do their jobs. Accountability has been completely missing throughout the entire crisis. Almost all central banks failed to do even the basics of their job. The regulations they created, especially in Europe, made it possible for banks to take massive risk and make huge profits that ultimately had to be bailed out by taxpayers.

They believe the banks and other institutions they were regulating when they showed the models which they created which demonstrated conclusively there was no risk. Everyone, bankers and regulators, believed we were in a new era, for the old rules of common sense didn’t apply. Central bankers didn’t need more rules or regulations. They failed miserably at even carrying out the simple job they had. The regulatory functions of central banks should be treated like those of any other regulatory agency. It is critical that we hold central bankers accountable for their management of the banking system.

Participation%20Rate_0

No Apologies, Only Promotions

One of the most disastrous battles of World War I was the British Gallipoli campaign in Turkey in 1915. It was utterly devastating, leaving more than 50,000 British wounded and almost 100,000 dead. Winston Churchill, first lord of the Admiralty, was one of the architects of the campaign. In the wake of the outcome, he resigned his post to become a soldier in the war. Churchill was a humble man who felt he was at fault. He was honorable. But if Churchill had been a central banker, he would never have had to accept responsibility or resign. He would have kept his job and been given even more far-reaching powers and a big pay raise to boot.

For the past few years, central bankers have been living large. The same people who brought us the Great Financial Crisis are now bringing us a world of Code Red policies and financial repression. The arsonists are running the fire brigade.

Where is the central banker who has apologized for contributing to the crisis or for being asleep at the wheel? Given how disastrous their performance has been, it is extraordinary that the same cast of characters is still running the show. Central bankers are lucky that they still have jobs. As far as we are aware, no central banker was fired for incompetence or mismanagement. Many have retired and are now enjoying generous pensions and highly paid consulting careers advising investment funds as to what their former colleagues might do next.

Labor%20Force

Central bankers have had plenty of time to discuss the financial crisis since 2008, but they have provided only scholarly disquisitions as to what went wrong in the banking crisis, without accepting any responsibility at all. At no time have any central bankers admitted that they might have ignored the warning signs of excessive debt, kept interest rates too low for too long, ignored bubbles in housing markets, failed to regulate banks correctly, or proved themselves even mildly incompetent.

Not only were central bankers not fired, many were promoted instead and given pay raises. Timothy Geithner, who headed the Federal Reserve Bank of New York, not only failed to regulate a host of banks that needed massive government bailouts but was an active apologist for Wall Street banks. For his efforts he was promoted to Secretary of the Treasury under President Obama. In Europe, Spanish central bankers stand out as perhaps the most incompetent ever, having overseen dozens of banks that created the biggest housing bubble in European history and having failed to recognize problems not only before but after they happened. Bankers like Jose Viñals, Jose Caruana, and others were given plum jobs at the IMF and the ECB after being asleep at the wheel in Spain.

Japan debt

Granting extra powers to central banks without a change in the philosophy behind their management is like encouraging an irresponsible teenager. Imagine your teenage son borrowed the family car and crashed it, and instead of punishing him you bought him a new Ferrari to test drive. Conventional monetary policies are like a sturdy old family station wagon, but Code Red policies are like a modified Ferrari 288 GTO capable of hitting 275 miles per hour. Given how spectacularly central banks failed during the Great Financial Crisis, it blows the mind that they’ve been handed the keys to a faster set of wheels.

One last thought. You might get from reading this that we are against rules and regulations. Far from it. We just like very simple, workable rules. Reinstate Glass-Steagall. Limit the ability of banks to create leverage, and require even more capital as they get larger. Banks that are systemically too big to fail are too big, period. Take away the incentive to grow beyond what is prudent for the deposit insurance scheme of a nation to maintain. Allowing bankers to take the profits and then hand taxpayers the losses in a crisis is not good policy, even if it is bolstered by 1,000 pages of regulations written by lawyers and bank lobbyists who then proceed to ”massage” them in order to do what they want to anyway.

But, alas, such hopes may remain dreams deferred until there is yet another crisis and taxpayers are asked to absorb even greater losses (but we can always hope!). So, in the meantime, as prudent investors and managers, we must be aware of the realities we face. The saying in Africa is that it is not the lion you can see that is the danger, instead it is the one hidden in the grass that leaps out at you as you try to escape the one you see. Later we will talk about a few strategies that can help you handle the risks that crouch hidden in the grass.”

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Second this presentation from Grant Williams, investment and financial expert from Singapore, with 28 years of experience of world markets, to get another angle of the same problem. He is now a portfolio and strategy advisor for a hedge fund in Singapore.

“Grant Williams ”pulls no punches” in this all-encompassing presentation as the ”Things That Make You Go Hmmm” author reflects on what is behind us and looks ahead at the ugly reality that we will face when ”the impurities of QE are finally flushed from the system.” Central bankers of today have ”changed everything” he chides, ”in ways that will ultimately end in disaster.” Following extraordinarily easy monetary policies across all of the world’s central banks, Williams explains why ”we are now near the popping point of the 3rd major bubble of the last 15 years,” each bigger than the last. The only way Janet Yellen avoids being at the helm when this ship goes down is to blow an even bigger bubble than Bernanke’s government bond experiment, ”which is highly unlikely.” From how QE works, why many don’t ”feel” wealthy anymore, to the fact that ”the geniuses that gave this thing life, don’t have the guts to kill it,” Williams warns, ominously, ”the bills have come due on the blissful latest 30 years.”

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Returning to a world with which we are familiar is going to require either some real magic on the parts of Draghi, Kuroda, Carney, and soon to be Yellen; or some kind of tornado that sweeps away everything in its path and allows the world to build again from more solid foundations.

20131130_TTMYGH5

Wizened In Oz: ASFA 2013 Presentation. Perth, November 2013

Third, just to remind us that it is the normal, hardworking people that are following the rules that are getting screwed, just take a look at this graph from USA below:

This is why all these welfare systems are going to crash taking the societies with them.

And ALL these SYSTEMS were put in place by politicians KNOWING FULL WELL WHAT THEY VERE DOING and THAT THESE SYSTEM COULDN’T LAST IN THE LONG RUN.

US welfare cliff

http://www.zerohedge.com/news/2013-11-30/other-america-taxpayers-are-fools-working-stupid

“While what little remains of America’s middle class is happy and eager to put in its 9-to-5 each-and-every day, an increasing number of Americans – those record 91.5 million who are no longer part of the labor force – are perfectly happy to benefit from the ever more generous hand outs of the welfare state. Prepare yourself before listening to this… calling on her self-admitted Obamaphone, Texas welfare recipient Lucy, 32, explains why ”taxpayers are the fools”…

”…To all you workers out there preaching morality about those of us who live on welfare… can you really blame us? I get to sit around all day, visit my friends, smoke weed.. and we are still gonna get paid, on time every month…”

She intends to stay on welfare her entire life, if possible, just like her parents (and expects her kids to do the same). As we vociferously concluded previously, the tragedy of America’s welfare state is that work is punished.”

As quantitied, and explained by Alexander, ”the single mom is better off earnings gross income of $29,000 with $57,327 in net income & benefits than to earn gross income of $69,000 with net income and benefits of $57,045.

“We realize that this is a painful topic in a country in which the issue of welfare benefits, and cutting (or not) the spending side of the fiscal cliff, have become the two most sensitive social topics. Alas, none of that changes the matrix of incentives for most Americans who find themselves in a comparable situation: either being on the left side of minimum US wage, and relying on benefits, or move to the right side at far greater personal investment of work, and energy, and… have the same disposable income at the end of the day.”

WELFARE ABUSE: 32 years old Austin, TX welfare recipient says (October 30)

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The economic mess and structural problems in EU and USA – Part 2

23 januari, 2013

This is the second part about USA. Again, It ain’t pretty to say the least!

Where the same absurd Alice in Wonderland economic and political farce is playing out in the USA. And as in Europe it is, as usual, the common people who are paying the price.

And as in Europe, the US crisis is anything but over regardless of what the political elites are trying to tell the people in USA. In USA the role of ECB is played by the FED (the Federal Reserve), which creates money out of “thin air” to support the gigantic and increasing debt. And to keep the stock market going and lower the price of the dollar.

So that the federal US government can spend your tax money like a drunken sailor.

(See my posts:                                      

The US election – Yes we have NO bananas

How Obama loves the poor SOOO MUCH, especially the black, that they have had the largest single drop in income ever

In three graphs – Obama Economics)

All graphs get bigger when you click on them

USA_jobs2

                                                 USA

In USA, Goldman Sachs and the other investment banks, plus the big Hedge Funds, are pushing leverage to ridiculous and dangerous extremes.

If you read the Comptroller of the Currency, Administrator of National Banks, report for the second quarter 2012 “Quarterly Report on Bank Trading and Derivatives Activities”, you get utterly horrified of the totals of the open derivatives positions in the US market.

Four of the largest U.S. banks are walking an extreme tightrope of risk, leverage and debt when it comes to derivatives.  Below you are going to find just how utterly exposed they are.

But first what is leverage?

Most people do not understand “leverage” and what it actually means. If they did, they would not sleep at night knowing what’s going on right now.

To put it simple: leverage means that these banks etc use a leverage of say 1:50 or 1:100 in their speculations. Which means that they only put up 1 of their own dollars for an investment worth 50 or 100 dollar. Their dollars are “worth” 50 or 100 times more than they actually are.

It ALSO means that IF “things” goes wrong way they LOSE 50 or 100 dollars for every dollar they invested in that trade or position. Or much, much more.

And usually when things goes wrong, it goes very fast when it comes to trading with these kind of leverages. So very quickly, these sums get astronomical. In a couple of days they can literally lose ALL their capital and more.

Nov deficit

 This has happened time and time again. Just to mention a few:

–         Lehman Brothers (was the 4th largest inv. bank in the US).

–          Bear Stearns

–          American International Group

–          Northern Rock (a medium-sized British bank)

–          Washington Mutual

–          American Savings and Loan

–          Landsbanki and Glitnir

–          Barings Bank

–          Société Générale

–          JP Morgan Chase & Co

–          Morgan Stanley

–          Long-Term Capital Management L.P. (LTCM)

As I said before, this is JUST A VERY SHORT LIST

Avalanche

This would not per se be a problem if this were a truly free and capitalist market. Because then these banks would go bankrupt and the owners and investors would lose their money. As they are supposed to do if the do bad business or trades.

But as we all know, this is NOT a free and capitalist market.  Our “dear” politicians have “decided” that these banks with all their wild speculations are too important or to big, to be allowed to fail.

 So instead, they have used taxpayer’s money and put whole countries at risk and in extreme debt just to bail out these banks.

And the banks knows that whatever speculations they do, REGARDLESS of how much or bad they speculate, and as you can see below their speculations are horrific, the politicians are going to bail them out with our tax money.

JP Morgan Chase

Total Assets: $1,812,837,000,000 (just over 1.8 trillion dollars)

Total Exposure To Derivatives: $69,238,349,000,000 (more than 69 trillion dollars)

 Citibank

Total Assets: $1,347,841,000,000 (a bit more than 1.3 trillion dollars)

Total Exposure To Derivatives: $52,150,970,000,000 (more than 52 trillion dollars)

Bank Of America

Total Assets: $1,445,093,000,000 (a bit more than 1.4 trillion dollars)

Total Exposure To Derivatives: $44,405,372,000,000 (more than 44 trillion dollars)

Goldman Sachs

Total Assets: $114,693,000,000 (a bit more than 114 billion dollars)

Total Exposure To Derivatives: $41,580,395,000,000 (more than 41 trillion dollars)

To sum up – TOTAL EXPOSURE TO DERIVATES for ONLY these four banks:

 207, 375, 086, 000, 000 TRILLION DOLLARS!!!!!!!!!!!

TOTAL ASSETS for these four banks:  4,720,464,000,000 TRILLION DOLLARS

So they can “cover” 2,27 % of the Total Exposure with ALL their Assets!

So who is going to pay for the “rest”:  202, 654, 622, 000, 000  TRILLION DOLLARS!!!!!!!!!!! if anything goes wrong?

EmployRecNov2012

Well, we know the answer to that doesn’t we. So far, it’s the common people, i.e. the taxpayers, who had to cover for all the banks bad speculations thanks to our dear politicians.

Take another look at those figures for Goldman Sachs.  If you do the math, Goldman Sachs has total exposure to derivatives contracts that is more than 364 times greater than their total assets!

That is utter insanity, but everyone just keeps pretending that the emperor actually has clothes on.

And why are “our” politicians SO EAGER to protect these speculators?

To put these GIGANTIC sums into perspective lets compare with the GDP from USA and all of EU from 2011

There a lot of different way to calculate GDP and the figures for each year. Add to that exchange fluctuations, conversion rates etc. So the figures below comes from the same source (IMF) to make the comparison easier.  And it is their conversion.

GDP USA 2011 – 15,094,025 billion US dollars

GDP EU 2011 –  17,610,826 billion US dollars

Total GDP for EU and USA 2011: 32,704,851 billion US dollars.

Lets compare these 32,704,851 billion US dollars with TOTAL EXPOSURE TO DERIVATES for  these four above mentioned banks:

207, 375, 086, 000, 000 TRILLION DOLLARS!!!!!!!!!!!

VS

32,704,851 billion US dollars in COMBINED GDP of EU and USA

Anyone see any problem???

Problem solved all right. So just move on, nothing to notice here or worry about.

Because according to out “dear” politicians, bankers and political elites from EU and USA there is NO SERIOUS PROBLEM HERE. The problems in USA and EU are more or less solved etc.

So the ones that put as in the mess in the first place, very “reassuringly” tells us: “We take care of it”.

Yeah sure!

mrzSpendaholic2

Let’s move on to another “bright spot” –the federal budget and debt. The figures are based on the 2012/2013 data:

2012 US Tax Revenue: $2,469,000,000,000

2012 Federal budget: $3,796,000,000,000

2012 Budget deficit: $1,327,000,000,000

US Federal Debt as of January 22, 2013: $16,471,084,067,491

Total interest paid on the debt in 2012: $359,796,008,919

Budget INCREASE between 2012 and 2013: $38,500,000,000

mrzWhat is the

To make these gigantic sums understandable here is how these figures would look like for a “normal” family:

Annual family income: $24,690

Annual family expenses: $37,960.  154% of the annual family income.

Annual family shortfall borrowed from friends/neighbors etc: $13,270.  54% of the annual family income.

Total interest the family paid last year: $3,598 (at near 0% interest).  Nearly 15% of the annual family income

Total family debt (mortgage, auto, credit card): $164,471.This is   666% of the annual family income.

Change in family spending this year: an increase of $385

This looks like a very responsible family wouldn’t you say?

And do you think this family would get any loans from the banks?

When you look at it this way, it really seems absurd. Yet it’s true… a slow motion train wreck. That any person with more than one functioning brain cell can see coming miles away.  Except our “dear” politicians. They are in ACTUAL FACT increasing the spending AND the debt.

Foodstamps%20Oct

Here’s another way to look at the debt ceiling I found in a paper. It’s very symptomatic:

Let’s say you come home from work and find there has been a sewer backup in your neighborhood… and your home has sewage all the way up to your ceilings.

What do you think you should do?

Raise the ceilings, or remove the crap?

Well, or “dear” politicians are franticly at an increasing speed trying to raise the ceiling at the same time as the “sewage” is increasing EVEN MORE.

Yeap, there you have politicians in a nutshell.

Why fix the problem that they themselves caused, when the politicians can pretend that they are the giver of all gods and bearer of all gifts to all the people all the time.

And it doesn’t cost anything for anybody. It’s ALL free forever. And they all lived happily ever after.

Sounds like a wonderful fairytale doesn’t it?

On that “cheerful” note, I stop here.

mrzOur children

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The US election – Yes we have NO bananas

8 november, 2012

I could talk at length of the different aspects of this election and the result. But I will not. That would require a long essay. And that is for another time. So it’s just going to be a quick comment (well sort of), and follow up to my post The betrayal of journalism and the first amendment by the mainstream media in USA

It is a very sad day indeed to see a people voluntarily decide to throw themselves and their country over the cliff.

Let’s look at the economy (the figures are from the Congressional Budget Office):

In the Fiscal Year 2011, the federal government collected $2.303 trillion in tax revenue. Interest on the debt that year totaled $454.4 billion, and mandatory spending totaled $2,025 billion. In sum, mandatory spending plus debt interest totaled $2.479 trillion –. exceeding total revenue by $176.4 billion.

(Mandatory spending includes entitlements like Medicare, Social Security etc. which are REQUIRED by law to be paid. Congress in practical terms do not see this money, it is automatically deducted.)

For the Fiscal Year 2012, which just ended 37 days ago, that deficit increased 43% to $251.8 billion.

In other words, they could cut the entire Federal Government’s discretionary budget – No military, SEC, FBI, EPA, DHS, IRS, etc.- and they would still be in deficit by a quarter of a trillion dollars.

(Discretionary spending includes nearly everything we think of related to government- the US military, the Department of  Homeland Security, IRS, EPA etc.)

The only thing showing any growth in the US, besides the debilitating regulatory burdens, is the national debt. It took over 200 years for the US government to accumulate its first trillion dollars in debt. It took just 286 days to accumulate the most recent trillion (to $16 trillion).

Last month alone, the first month of Fiscal Year 2013, the US government accumulated nearly $200 billion in new debt in just 31 days.

And the numbers will only continue to get worse. 10,000 people each day begin receiving mandatory entitlements. Fewer people remain behind to pay into the system. The debt keeps rising, and interest payments will continue to rise even more. In addition, the dollar is going to decline.

The result, the US government is legally bound to spend more money on mandatory entitlements and interest than it can raise in tax revenue. It will not make any difference how high the federal, state or local government raise taxes, or even if they cut everything.

Another effect of Obama economics is that the poor are getting poorer, especially the black.  Under Obama the poorest Americans has suffered the single largest drop in income ever.

And the Black Americans in the same lowest income quintile have suffered almost double as the average American in the same quintile under Obama:

The drop is – 11.58% in one year (2010) and is at the lowest level ever.

That’s what I call “change”! But I would not call it “hope”.

And the number of people classified as poor are getting larger and larger.

See also my posts

How Obama loves the poor SOOO MUCH, especially the black, that they have had the largest single drop in income ever

In three graphs – Obama Economics

America, You are at a tipping point and you have your last change to stop it – Part 10

America, You are at a tipping point and you have your last change to stop it – Part 9

America, You are at a tipping point and you have your last change to stop it – Part 8

America, You are at a tipping point and you have your last change to stop it – Part 7

America, You are at a tipping point and you have your last change to stop it – Part 6

America, You are at a tipping point and you have your last change to stop it – Part 5

America, You are at a tipping point and you have your last change to stop it – Part 4

America, You are at a tipping point and you have your last change to stop it – Part 3

America, You are at a tipping point and you have your last change to stop it – Part 2

America, You are at a tipping point and you have your last change to stop it – Part 1

Why, Mr President, are you deliberately destroying the American way and committing economic harakiri?

And then of course we have the very disastrous Obama Care.  I wrote 34 posts about it. You can read them here:

Obama Care 34 – Which system do YOU thinks works best?

Obama Care 33 – President Obama is a willful and certified liar

Obama Care 32

Obama Care 31

Obama Care 30

Obama Care 29

Obama Care 28

Obama Care 27

Etc…

Obama Care

Then on top of that, we have the equally disastrous foreign policy. Where the Obama administration systematically have thrown their former allies (Eastern Europe, Britain, Israel, Egypt, Saudi Arabia  etc) under the bus, and helped parties like the Muslim Brotherhood that hate everything that USA and the western world stands for, to power.

See my 19 posts on Syria etc as some examples of that disastrous foreign policy:

How the Assad regime with the help of Russia, Iran, China and Hezbollah transformed peaceful protester to fighters

Here is links to all my posts

Russia’s solution for Syria – More Carpet bombing and Total Destruction

I could go on with many more examples but I think I will stop here.

But as the old saying goes (Joseph de Maistre in a letter from St Petersburg August 1811): a country has the politicians/government that they deserve.  So enjoy!

In addition,  this quote from a reader’s commentary in The Prager Zeitung in March 2010 (translated from Czech) sums it up quite well really:

Multitude of Fools

The danger to America is not Barack Obama but a citizenry capable of entrusting a man like him with the Presidency. It will be far easier to limit and undo the follies of an Obama presidency than to restore the necessary common sense and good judgment to a depraved electorate willing to have such a man for their president.

The problem is much deeper and far more serious than Mr. Obama, who is a mere symptom of what ails America. Blaming the prince of the fools should not blind anyone to the vast confederacy of  fools that made him their prince. The Republic can survive a Barack Obama, who is, after all, merely a fool.

It is less likely to survive a multitude of fools such as those who made him their president.“

P.S. If you are wondering about the title, see this video with music by Spike Jones. There is another long story behind the lyrics but that you have to find out yourself. D.S.

Spike Jone – yes we have no bananas

http://www.youtube.com/watch?v=jT6JkceQ9FU

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How Obama loves the poor SOOO MUCH, especially the black, that they have had the largest single drop in income ever

15 september, 2011

The Census Bureau has just published it latest Income and poverty data for U.S.(2010). The data goes back to 1967.

The report here:

Income, Poverty, and Health Insurance Coverage in the United States: 2010

http://www.census.gov/prod/2011pubs/p60-239.pdf

                         Another hole in one!

It is really a terrifying reading – Under Obama the poorest Americans has suffered the single largest drop in income ever.

Take a look at this chart (done by Justin Hart, http://ihartpolitics.com/?p=308) –

It shows the % change in the lowest quintile median incomes, the poorest Americans, from 1968 (in 2010 dollars)

And the drop is – 6.04% in one year (2010)

And then let’s have a lock at Black Americans in the same lowest income quintile.

They have suffered almost double as the average American in the same quintile under Obama:

The drop is – 11.58% in one year (2010) and is at the lowest level ever.

That’s what I call “change”! But I wouldn’t call it “hope”.

Some other highlights in the name of hope and change:

– Median household money income for the nation was $49,400 in 2010, a decline of 2.3 percent from 2009, in real terms.

– The 2010 official poverty rate for the nation was 15.1 percent, up from 14.3 percent in 2009, with 46.2 million people in poverty, an increase of 2.6 million since 2009. The highest percentage since 1993 (15.1%) and 1982 (15.2%), and the largest number in the 52 years for which poverty estimates have been published.

The 2010 official poverty rate for blacks was 27.4 percent, up from 25.8 percent in 2009, with 10.7 million people in poverty, an increase of 731 000 since 2009. The highest percentage since 1996 (28.4%), and the largest number in 17 years.

– The decline of Real Median Household Income among the15 to 24 years was – 9.3%.

                               Are you extremists?

Obama had three pillars that swept him to power – huge turnout among young (under 30), Hispanics and Blacks. Now the young and Hispanics are gone, down to 43-44% as the rest of the population. So he is toast.

But the blacks are still overwhelmingly behind Obama (around 81%).

The obvious question is why? Since under Obamas “eminent leadership” they have had the biggest drop in income and living standard ever. Not to mention skyrocketing unemployment.

With so much “hope” and “change”, I guess that’s why he is so “popular”.

____________________________________________

A quick update on September 27 to my post:

I wrote:

“Obama had three pillars that swept him to power – huge turnout among young (under 30), Hispanics and Blacks. Now the young and Hispanics are gone, down to 43-44% as the rest of the population. So he is toast.

But the blacks are still overwhelmingly behind Obama (around 81%).

The obvious question is why? Since under Obamas “eminent leadership” they have had the biggest drop in income and living standard ever. Not to mention skyrocketing unemployment.

With so much “hope” and “change”, I guess that’s why he is so “popular”.

Well, it seems that the blacks have started catching on because now Obama is losing the blacks too in a BIG Way

According to a Washington Post/ABC News survey, his favorability rating among blacks has dropped off a cliff, plunging from 83 percent five months ago to a mere 58 percent today a drop of 25 points!

In the election of 2008, he was able to increase black’s participation from 11 percent of the total vote in 2004 to 14 percent. And he carried 98 percent of them.

Way to go Obama!

                Click on the graphs for a larger image

                        Jobb aproval economy

                              State of the country

Some more revealing graphs of Obama economics

This graph shows the job losses from the start of the employment recession, in percentage terms – this time from the start of the recession. This is by far the worst post WWII employment recession.

This graph shows the number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers). A very high level.

This graph shows the number of workers unemployed for 27 weeks or more. The level is extremely high.

 

                                          It was Bush’s fault!              

            

See also some of my previous posts:

Hey Obama – You don’t pay your bills so why should I?

In three graphs – Obama Economics

Why, Mr President, are you deliberately destroying the American way and committing economic harakiri?

America, You are at a tipping point and you have your last change to stop it – Part 1

America, You are at a tipping point and you have your last change to stop it – Part 5

America, You are at a tipping point and you have your last change to stop it – Part 6

America, You are at a tipping point and you have your last change to stop it – Part 8

America, You are at a tipping point and you have your last change to stop it – Part 9

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America, You are at a tipping point and you have your last change to stop it – Part 5

1 november, 2010

                 Some points on the economic situation

Since 2007 the debt has increased by $5 Trillion Dollars It’s the crime of the century!

                                As of today 13:15 EDT

                                        And California

19 Facts About The Deindustrialization Of America That Will Make You Weep

http://www.businessinsider.com/deindustrialization-factory-closing-2010-9

– The United States has lost approximately 42,400 factories since 2001

– The United States has lost a total of about 5.5 million manufacturing jobs since October 2000.

– The United States has lost a whopping 32 percent of its manufacturing jobs since the year 2000.

– As of the end of 2009, less than 12 million Americans worked in manufacturing. The last time less than 12 million Americans were employed in manufacturing was in 1941.

– Manufacturing employment in the U.S. computer industry is actually lower in 2010 than it was in 1975.

– In 2008, 1.2 billion cellphones were sold worldwide. So how many of them were manufactured inside the United States? Zero.

– Dell Inc. has announced plans to dramatically expand its operations in China with an investment of over $100 billion over the next decade.

– Dell has announced that it will be closing its last large U.S. manufacturing facility in Winston-Salem, North Carolina. Approximately 900 jobs will be lost.

– If our trade deficit with China increases at its current rate, the U.S. economy will lose over half a million jobs this year alone.

– As of the end of July, the trade deficit with China had risen 18 percent compared to the same time period a year ago.

– The Census Bureau says 43.6 million Americans are now living in poverty, which is the highest number of poor Americans in the 51 years that records have been kept.

So how many tens of thousands more factories do we need to lose before we do something about it?

How many millions more Americans are going to become unemployed before we all admit that we have a very, very serious problem on our hands?

How many more trillions of dollars are going to leave the country before we realize that we are losing wealth at a pace that is killing our economy?

How many once great manufacturing cities are going to become rotting war zones like Detroit before we understand that we are committing national economic suicide?

The deindustrialization of America is a national crisis.  It needs to be treated like one.

If you disagree with this article, I have a direct challenge for you.  If anyone can explain how a deindustrialized America has any kind of viable economic future, please do so below in the comments section.

America is in deep, deep trouble folks.  It is time to It is time to wake up.”

18 Iconic Products That America Doesn’t Make Anymore

http://www.businessinsider.com/basic-products-america-doesnt-make-2010-10#

Rawlings baseballs, Etch-a-sketch, Chuck Taylors shoes, Stainless steel rebar, Mattel toys, Minivans, Vending machines, Levi jeans, Radio Flyer’s Red Wagon, Televisions, Cell phones, Railroad parts, Dell computers, Canned sardines, Incandescent light bulb, Forks, spoons, and knives.

”Buying American” used to be a popular political gesture. But these days it’s becoming impossible. “

Is this the end result if present political and economic trend continues? “Why do great nations fail?…. They all make the same mistakes. .. He He Now they work for us.”

Chinese Professor

79% of Private Sector Job Growth Over Last 5 Years Has Been in Texas 

http://www.willisms.com/archives/2010/09/trivia_tidbit_o_870.html

Stimulus Failure: 48 Out of 50 States Lost Jobs Since Democrats Trillion Dollar Stimulus

http://biggovernment.com/publius/2010/10/22/stimulus-failure-48-out-of-50-states-lost-jobs-since-democrats-trillion-dollar-stimulus-plansince/

“In total, over 2 million jobs have been eliminated, in contrast to the over 3 million more jobs Americans were promised if Democrats’ 2009 stimulus plan passed. The only place in America that has exceeded its projected job growth following Democrats’ stimulus is Washington, D.C.”

The Adult Recession

http://www.cepr.net/index.php/publications/reports/the-adult-recession

“The study, ”The Adult Recession: Age-Adjusted Unemployment at Post-War Highs,” adjusts the current unemployment rate to account for demographic differences and finds that the unemployment rate has not fallen below 10.8 percent in the last 12 months. During the worst episode of the recession of the 1980s — the second half of 1982 and the first half of 1983 — unemployment passed 10 percent for 7 months.

The analysis notes that the population is older today than it was in the 1980s, which has the effect of lowering today’s unemployment rate relative to the past. Since they change jobs more frequently and are more likely to move in and out of the labor market, Young people have a higher unemployment rate than older workers. Adjusting for this older workforce shows that the United States is experiencing the weakest labor market since the Great Depression.”

60 Minutes Shock Report: National Unemployed and Underemployed 17.5%; California 22%

The video here: http://www.cbsnews.com/video/watch/?id=6987699n

”When you take into account the underemployed as well as the unemployed, the national rate hits 17% and California a staggering 22%.

To put a face on the realities of the underemployed in America under Obamanomincs, reporter Scott Pelley spoke with a fiber-optics engineering manager who has been looking for work for over a year.  He just took a job working at a Target.   20% of the unemployed in America have college degrees.

According to the report, 1/3 of the unemployed have been out of work for over a year.  This hasn’t happened since the Great Depression.

Licensing to Kill

A new study shows how city regulations harm small business.

http://online.wsj.com/article/SB10001424052702304741404575564171912051184.html?mod=WSJ_Opinion_AboveLEFTTop

“When most people think of occupations requiring fingerprints and police reports, corner bookshop owners don’t spring to mind. Try telling that to Los Angeles, where many used booksellers are required by law to get a police permit and take a thumbprint from every 40-something trying to offload his collection of French poetry.

That’s one scene from a study to be released this week by the Institute for Justice, which has collected dozens of examples of regulations choking economic growth by taxing and over-licensing small businesses. In a survey of eight major cities, the study found that entrepreneurs routinely face obstacles …”

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