Culture of Life News Tue 2010-04-06 10:23 EDT

Ireland And US Will Be Devoured By Derivatives Beast

Elaine Supkis

The banking mess in the West continues. It has rather deep roots. That is, we decapitalized our own banking system long, long ago. The fix for this was to create a fake banking system with virtually no real capital reserves at all. This was possible thanks to the floating fiat currency created when Nixon suddenly cut the gold standard back in 1971. By 1987, the banking collapse was tremendous during a deflationary time that followed a hyperinflation era. This fix created conditions that caused the near-total collapse in Western banking...So far, governments in the West are being bailed out by Asia. And this is being done so Asia can continue to rapidly expand its own industrial base. This savage business gets worse and worse over time due to the self-feedback system of this debt expansion: you get more credit from export powers via letting them export even more to your own home base. So as capital vanishes, the need for debt shoots upwards and the system continues to get more and more unbalanced...Sure, we have little inflation except in important commodities but this is due to the Goddess of Zero slashing away at the mountain of debt, using the default tool to fix this mess in a very brutal way. Unfortunately, the bankers still control our `democracy' so they are moving all their losses onto our books and far from things going to zero, it is actually heading towards infinity: infinite debts owed by the taxpayers who want to continue stupidly cutting taxes while increasing credit based on virtually no capital at all! Sheesh.

Culture; Derivative Beast; devouring; Ireland; Life News.

Culture of Life News Tue 2010-03-30 16:01 EDT

Empires Must Regulate Trade And Finances

Elaine Supkis

I keep harping on the trade deficit issue since all of the other messes revolve around this misbalance...The `Me, Myself, and I' ethos is self-centered, childish and foolish. It comes out of living inside a major empire. The individual puffs up him or herself and decides, thanks to being fairly free inside of this empire, that the empire is stupid and doesn't need to be coaxed, nurtured or controlled. Instead, various individuals work day and night to evade taxes that support the imperial superstructure. They bribe politicians to allow looting of the purse via inflated war costs, corruption in buying services, tweaking laws so they channel all collective wealth into a few individual pockets, etc...The people are a collective. If they are individuals, they will be eaten by internationalist wolves or other empires that are not individuals. This is a harsh historical lesson: individuals eventually lose to organized groups...Mostly, throughout history, the freest people have been the CITIZENS of an empire (NOT the victims being oppressed by the empire). Free nations exist only in the shadows of an empire...This is why growing and preserving empires is more important than pretending to be an individual who has no ties to anything. Seriously, when major empires fall, the ability to roam the planet at will vanishes pretty fast...

Culture; Empire; finance; Life News; regulate trade.

naked capitalism Mon 2010-03-29 13:48 EDT

Thinking the Unthinkable: What if China Devalues the Renminbi?

Marshall Auerback

Conventional wisdom holds that the Chinese are due (as in overdue) for a revaluation of their currency, the renminbi...We question whether a revaluation is the right answer for them, and more important, whether the Chinese themselves see a revaluation as a plus. The government has engineered an enormous increase in money and credit in the past year. In fact, it seems to be as great as 5 years' growth in credit in the previous Chinese bubble. The increase in money and credit is so great and so abrupt that you tend to get a high inflation quite quickly even if there are under utilised resources. Add to this the fact that China simultaneously is providing massive fiscal stimulus...Inflation can take off and thereby begin to ERODE the competitiveness of Chinese exports. Nouriel Roubini pointed out this issue in 2007: if China didn't revalue, inflation would do the trick regardless. A continued high rate of inflation relative to its trade partners would push up the price of goods in home currency terms, which in turn translates into higher export prices. This might be the real reason why China is so reticent to revalue its currency. The Americans might go crazy if the Chinese devalued, but if the inflation is high enough, they might have to do it, as it will severely erode their terms of trade and cause their tradeables sector to collapse.

China Devalue; naked capitalism; renminbi; Think; unthinkable.

Mon 2010-03-22 14:10 EDT

American small businesses needn't go extinct

Barry C. Lynn

...One recent study, based on data compiled by the Organization for Economic Cooperation and Development, placed the United States second to last out of 22 rich nations in the percentage of workers who run their own businesses. Only Luxembourg ranked lower. The American small business is increasingly becoming an American myth: Self-employment in nonfarm businesses has fallen by nearly half over the past 50 years...specific political moves and decisions in Washington over the past several decades have made it much easier for the people who control large-scale corporations to displace small proprietors. One of the most important was a radical change in 1981 in the enforcement of U.S. antitrust laws...we have witnessed the greatest consolidation of economic power since the days of J.D. Rockefeller and J.P. Morgan.

American small businesses needn't go extinct.

Fri 2010-03-12 08:45 EST

AlterNet: The Richest 1% Have Captured America's Wealth -- What's It Going to Take to Get It Back?

David DeGraw, Amped Status

...while US workers are now working more hours and have become dramatically more productive and profitable, our pay is actually declining and all the dramatic increases in wealth are going straight into the pockets of the Economic Elite...the average US citizen is forced to give up approximately 30% of our income in taxes. This tax system is now strategically designed to flow straight into the hands of the Economic Elite. A huge percentage of our tax dollars ultimately end up in their pockets. The past decade proves that -- whether it's the Republicans or the Democrats running the government -- our tax money is not going into our community, it is going into the pockets of the billionaires who have bought off both parties...most every serious economist knows that due to so much theft and debt created in the tax system, the only way to fix things, other than stopping the theft and seizing the trillions that have been stolen, will be for the government to cut important social funding and drastically raise our taxes...Trillions more in our spending on food and fuel has been stolen due to fraudulent stock transactions and overcharging...we have the most expensive health care system in the world and we are forced to pay twice as much as other countries, and the overall care we get in return ranks 37th in the world...The American worker is screwed over every step of the way, and it all starts with the explosion in the cost of a college education. This is one of the Economic Elite's most devastating weapons...The American dream has turned into a nightmare. The economic system is a sophisticated prison cell; the indentured servant is now an indebted wage slave; whips and chains have evolved into debts...

AlterNet; Captured America's Wealth; Go; richest 1; s; take.

Culture of Life News Fri 2010-03-12 07:51 EST

Toyota Tears Of Regret

Elaine Supkis

Toyota decided long ago during the push to force Japan to open the doors to imports from the US to balance Toyota exports to the US, that they would colonize the US by opening factories here. This allowed them to pocket all the profits while keeping the door open to selling 2-4 million cars every year in the US. This clever move paid off quite handsomely and now many Americans think Toyota is benign and not a major, major cause of the capital drain as well as job drain in the US.

Culture; Life News; regrets; Toyota Tears.

China Financial Markets Thu 2010-03-04 08:47 EST

Stuck in neutral -- what Japan's rebalancing can teach us

Michael Pettis

...A few days ago I read a good article (``Stuck on Neutral'') about Japan [from] the Economist...about Japan's post-1989 rebalancing, ...discusses why, in spite of every attempt, Japan has not been able supposedly to rebalance the economy and achieve any real growth during the two lost decades after 1990. Private consumption never took off to drive economic growth...After many years of excess investment driving growth, Japan's rebalancing process, which occurred after corporate, bank and government debt levels prevented the investment party from continuing, locked the country into many years of slow growth because it had to grind through years of debt-fueled overinvestment...it doesn't matter what individual policies we take to boost consumption if these polices don't in the aggregate represent a real transfer of income to the household sector, as they did not in Japan...Japan's experience suggests one of the risks China faces...Chinese household consumption will undoubtedly rise as a share of Chinese GDP over the next decade or two, but the process nonetheless can be disappointing for growth. It depends on lots of other moving parts, most importantly perhaps the change in investment and the speed with which income is transferred to households. And the change in investment might depend on debt capacity constraints and the extent of earlier overinvestment.

China Financial Markets; Japan's rebalancing; neutral; stuck; teach.

Wed 2010-02-24 08:49 EST

What the PBoC cannot do with its reserves

Michael Pettis

...Revaluing the RMB, in other words, is important and significant because it represents a shift of wealth largely from the PBoC, exporters, and Chinese residents who have stashed away a lot of wealth in a foreign bank, in favor of the rest of the country. Since much of this shift of wealth benefits households at the expense of the state and manufacturers, one of the automatic consequence of a revaluation will be an increase in household wealth and, with it, household consumption. This is why revaluation is part of the rebalancing strategy -- it shifts income to households and so increases household consumption. So a revaluation has important balance sheet impacts on entities within China, and to a much lesser extent, on some entities outside China. But since it merely represents a distribution of wealth within China should we care about the PBoC losses or can we ignore them? Unfortunately we cannot ignore them and might have to worry about the PBoC losses because, once again, of balance sheet impacts. The PBoC runs a mismatched balance sheet, and as a consequence every 10% revaluation in the RMB will cause the PBoC's net indebtedness to rise by about 7-8% of GDP. This ultimately becomes an increase in total government debt, and of course the more dollars the PBoC accumulates, the greater this loss. (Some readers will note that if government debt levels are already too high, an increase in government debt will sharply increase future government claims on household income, thus reducing the future rebalancing impact of a revaluation, and they are right, which indicates how complex and difficult rebalancing might be). In that sense it is not whether or not China as a whole loses or gains from a revaluation that can be measured by looking at the reserves, and I would argue that it gains, but how the losses are distributed and what further balance sheet impacts that might have.

PBoC cannot; reserves.

naked capitalism Fri 2010-01-08 19:33 EST

Geithner's dubious AIG cover up

Edward Harrison

...This was looting and a cover-up plain and simple...Damaging e-mails have revealed that Treasury Secretary Timothy Geithner urged AIG to withhold crucial information about the deterioration of its financial condition in the lead up to its demise...He was on the job when these firms levered up and took reckless risks that endangered our financial system. For him to absolve himself of responsibility is a disgrace. And to add insult to injury, we now learn that he urged a systemically important company to withhold evidence of his looting of taxpayers. Tim Geithner must go.

Geithner's dubious AIG cover; naked capitalism.

Thu 2010-01-07 20:04 EST

Hard times at the Washington Post

Dean Baker

The Washington Post is a newspaper with a proud legacy. It has done much important reporting over the years, most famously its coverage of the Watergate scandal that resulted in the resignation of Richard Nixon. Unfortunately, it seems to have abandoned its journalistic standards. In its last issue of the decade, it published as a news piece an article by the Peter Peterson Foundation-funded Fiscal Times. This compromised the Post's journalistic integrity to the extent that readers can no longer take it seriously.

hard times; Washington Post.

Credit Writedowns Tue 2010-01-05 19:08 EST

Volcker: `I wasn't persuasive enough' for Obama to heed my economic advice

I don't know quite what to make of the Paul Volcker interview published late last week in Business Week. In case you missed it, Business week published a frank interview of former Federal Reserve Board chairman Paul Volcker with media giant Charlie Rose the day before Christmas Eve...``The American political process is about as broken as the financial system. Therefore, one has to be a bit skeptical. Just to give you one little example, one unrelated to the financial crisis. Here we are on Dec. 29, almost a year after the Inauguration, and there is no Under Secretary of the Treasury. That should be an important position. How can we run a government in the middle of a financial crisis without doing the ordinary, garden-variety administrative work of filling the relevant agencies? The Treasury is an outstanding example of a broken system, but it's not the only one.''

credit writedowns; economically advice; heeded; Obama; persuasion; Volcker.

Culture of Life News Mon 2010-01-04 16:52 EST

The Horrors Of The Carbon Trade Derivatives Beast

Elaine Supkis

There are many ways of fixing things. Using the right tools is important. The international bankers have chosen a very nasty tool for fixing both global warming and dealing with the Hubbert Oil Peak: wild derivative futures markets modeled on the goofy OTC --CDS market! The thing that just destroyed international banking. We mustn't forget that the reason we had a banking meltdown was due to the sudden climb in energy prices beginning with the invasion of Iraq.

Carbon Trade Derivatives Beast; Culture; horror; Life News.

zero hedge Tue 2009-12-22 12:35 EST

Guest Post: Fed-Covert Money Printing Alert

This note contains an update on where Fed printing stands, how much is left, what the pace of purchases is, and when the program will stop. It also updates the Fed's balance sheet, and its inflationary impact. This update houses some very important developments, due to actions at the US Treasury in coordination with the Fed.

Fed-Covert Money Printing Alert; Guest Post; Zero Hedge.

Mon 2009-12-21 18:24 EST

Credit Booms Gone Bust: Monetary Policy, Leverage Cycles and Financial Crises, 1870-2008

Moritz Schularick, Alan M. Taylor

The crisis of 2008-09 has focused attention on money and credit fluctuations, financial crises, and policy responses. In this paper we study the behavior of money, credit, and macroeconomic indicators over the long run based on a newly constructed historical dataset for 12 developed countries over the years 1870-2008, utilizing the data to study rare events associated with financial crisis episodes. We present new evidence that leverage in the financial sector has increased strongly in the second half of the twentieth century as shown by a decoupling of money and credit aggregates, and we also find a decline in safe assets on banks' balance sheets. We also show for the first time how monetary policy responses to financial crises have been more aggressive post-1945, but how despite these policies the output costs of crises have remained large. Importantly, we can also show that credit growth is a powerful predictor of financial crises...

1870-2008; Credit Booms Gone Bust; financial crises; leverage cycle; monetary policy.

naked capitalism Thu 2009-11-19 10:43 EST

Roubini Predicts ``Mother of All Carry Trade Unwinds''

Nouriel Roubini has officially left the ``hedging your bets on the economy'' camp. He has declared the markets to be frothy because super low dollar borrowing rates have turned the greenback into the funding currency for the carry trade. Far more important than the peppy rally in the stock market is the resumption of early 2007 style risk taking in the credit markets.

carry trade unwind; mother; naked capitalism; Roubini predicted.

naked capitalism Thu 2009-11-19 10:33 EST

Guest Post: Herding the Sheep

George Washington of Washington's Blog

Financial insider and commentator Yves Smith wrote an essay last week entitled ``MSM Reporting as Propaganda'' arguing that the government has been using propaganda to make people think that things are getting better, no one is angry, and -- therefore -- no one should get upset...Is Smith right? And even if she is, isn't ``propaganda'' too strong a word?...Even if true, propaganda is too strong a word for attempts to convince people that important issues are boring, that no one else is angry about them, and that everything is normal. Perhaps ``herding the wayward sheep'' would be better . . .

Guest Post; Herd; naked capitalism; sheep.