Wednesday, January 12, 2011

Welcome to the financial circus of lies

I have read books like Manias Panics and Crashes. I never understood what the banks were doing back in the 1800's until I saw this. This is bigger than subprime. Bernanke will be hiding under his desk in a PTSD fit when this one hits. We just think Paulson looked like he was about to go to jail. 

Charles Smith at Oftwominds wrote a parody the other day. He was using Bush's quote, "This sucker is going down". We are about to see the biggest bust in history. It isn't only the banks, but the governments and the corporate buyout guys. I heard a bull on CNBS this morning say how you could get more for a company with borrowed money than it was selling on the market. That should always be true, but that is beside the point. It is true for 2 reasons. There is no broadbased dividend return in the market and the risk premium on stocks is higher than the risk premium on the bonds of the same corporations (unless they have adopted the GM bankruptcy model). The point here is the higher up crooks are using Ben Bernanke dollars to loot the best deals. Hot pressed money! Michael Hudson said this was what EBIDA meant, how much can you borrow and take out? To hell with the real losses!

I wonder how the banks are going to bank this next sub-prime crash, the junk bond insolvency? The Fed posted a 2010 profit to the government of nearly $80 billion. Think Congress is going to take their punchbowl away? Of course, they are hiding their own losses in Maiden Lane and the mortgage pool they bought. When we going to find out about that? It is clear to me that the Fed is moving out on the yield curve to produce income as much as to support the economy. You can't earn any money at zero and I would hate to believe these guys want to be left out of the party and would like some credit for sending the government a big check. But, this is $80 billion that now can't be paid by other parties and probably $80 billion for Wall Street in the end. 

The pretend and extend that is going on in Europe is going to eventually infect the core, Germany and France. This is nothing but another case of bank socialism. Japan joined in, isn't that funny? Black Swan at Mish said it was a move out of the dollar. Bullcrap. See these charts linked to default swaps on the JGB.

We have a series of back scratchers here. The Japanese are buying into the Euro rescue because when this stuff is going on, the world recognizes how far in debt Japan is. It is noted they have a little over $1 trillion in foreign reserves, but they have a $5 trillion haircut coming in their debt. If you look at the first portion of the chart on the JGB (the light colored line on the second chart), it is revealed that this isn't the first trip up the scale for Japan. You might recall the last trip was to even higher rates. Care to venture what effect systematic risk in the JGB would present, as we are looking at a 70BP swap on a security that yields around 1.5%? Does anyone actually believe China bought the JGB's in the spring and summer because they wanted to move out of the dollar? We all know how much the Chinese and Japanese love each other. Of course not. They judged it cheaper to take the haircut later than take the shock at the present with their overbuilt, over extended economy. 

All these governments are fucked. As much money as Ben bernanke is printing, it can't get to the right places and is instead laying there for financial thieves to convert to their own. The banks are banking uncollected income, which we all know is none at all. The leaders in Portugal are pretending they are solvent. The bankers are goading the other governments in Europe to bail these guys out in the name of the Euro. What the hell is the Euro? It is a bank note.

Now we enter the ultimate paradox. The broke have to pay higher interest rates. You might recall the TED spread and how the idiots on CNBC kept talking about it. Banks won't lend to other banks. Would you lend to Citi without a government guarantee? Chase, Goldman? Japan is 200% of GDP in debt on their government bonds and they are borrowing for next to nothing. What happens when the swaps go to 3%? Well, their entire tax income is dedicated to paying interest. Is this the goal of the financial crooks, to place the income of the world to paying interest to them? If this is the case, then we have only genocide to follow, as there will be nothing left for food or consumer goods and the entire scheme collapses.


Blurtman said...

"Is this the goal of the financial crooks, to place the income of the world to paying interest to them?" The goal is to make more and more and if that is what happens, so be it. Who will stop it? The peasants must work harder to pay off the debt.

mannfm11 said...

Blurtman, there will be nothing to sell and the system will choke on itself.