There’s a Hole in the World

[Daveparts]

There’s a Hole in the World
By David Glenn Cox


Last Friday March 7, 2008 was an important day, a milestone, a memorable day like November 22nd or December 7th the stock market broke through the psychological barrier of 12,000 points and never looked back. Gone are the illusions now, gone are the excuses as one market annalist put it, "They’re finding new ways to lose money when the old ways worked just fine." We are leaving a land from which we won’t return for a very long time


The long suffering state of denial that has lived in this market since last summer has packed her bags, selling out to her sisters despair and resignation. The market lives on false hopes and rumors, that maybe the next bit of new will be better and then when it’s not they spin it so that it is. The mechanisms of self-correction are breaking down the tools put in place to guarantee trust and faith in the systems have been usurped by the bulls horns.


The games rigged, the referees are partisan and the checks are kited. All who would deny are silent, all who should proclaim it are silent leaving the multitudes clueless as to how to rectify the situation as all falls down. The Federal Reserve is a Gomer Pyle character, they care, they’re interested but all they know is how to do is to pump gas. They cut interest rates in August and it worked for six weeks. The market was saved then it started to slip again, so the Fed cut again. The rate cut buoyed the market but only for a day then began to slip again.


They cut again and stemmed the blood loss but the patient got no better, so they intervened between meetings. Praise and hallelujah the market soared, then slowly began to sink again. The concern became the rising mortgage defaults and foreclosures. The President announced, Project Hope that’s all the President did was announce it. A program where the bankers decide how they will work with the homeowners or if they will work with homeowners at all. Provided the homeowners fit the criteria and jump through the right hopes. You see the bankers concern is that homeowners might try to game the system.


But the numbers are piling up, the empty houses dragging down the value of the occupied. The banks in turn become even more wary of lending money for mortgages, asking themselves how low can the prices go? So despite Fed rate cuts mortgage rates are the same and in some cases even higher. Project Hopes criteria are so strict and its window so small that it’s numbers are inconsequential and the default numbers are growing even larger and fueling the cycle even further. They have built themselves a cage from which they can’t escape.


This drags down the bond market already mired in it’s own troubles, Ambac skates teeters and tap dances trying desperately to save their AAA rating. They tripled the amount of their stock on the market and raised 1.5 billion dollars in new capital. But that was yesterday and maybe that was enough, yesterday, but today know one is quite so sure. Ambac temporarily stopped trading on Friday due to a big announcement and the market held its breath. The announcement amounted to little more than a Boy Scout oath and the market began to slide again.


Sliding on bad economic news, bad currency news, bad energy news and platitudes and promises from Ambac when what they were looking for was candor. The dollar falling to record lows against the Euro and conversely pushing up the price of oil. The dollar may be the world’s reserve currency but oil is the world’s energy commodity, the dollar doesn’t control oil, oil controls the dollar. OPEC announces it will keep its production at the same levels when the President had wanted an increase in production. The President was in effect asking OPEC to give their oil away to prop up the dollar


But OPEC knows if the US economy tanks, oil prices will collapse. OPEC will be selling more oil for dollars lower in value. The President was asking OPEC for his own Project Hope to save the US economy but OPEC had to make the hard decision for their own interests. The treasury assets that they now own will be repaid in dollars worth less but their sovereign wealth funds can pick up some real blue chip bargains at fire sale prices. I guess you could say that they are willing to help us out only as long as they can profit from it.


A whirlwind, a vortex, a swirling universe making bank shots impossible in a land that thrives on bank shots. The money is pouring out of the stock market looking for a safe haven, gold, silver and commodities. The price of commodities is skyrocketing raising the specter of inflation sandwiched between energy prices, falling employment and a dollar that continues to decline. The rising oil prices will force the cost of petroleum based fertilizers to rise an equivalent amount, will the farmers be able to make up the increase in the cost of production?


Or will the farmers be caught in the pincers, higher production costs and then paid in weakening dollars. All against the back drop of a slowing, faltering, staggering economy. The US election season has brought back the talk of NAFTA Barack and Hillary both promise to fix it (wink, wink) and the Republicans are astounded that there are still those out there who debate its value. A recent poll found 4 out of 5 country club members agree NAFTA has been great for the economy. A boon to those who buy and sell a bust to those employed by building and manufacturing.


The stock market hovered Monday on a rumor that the Fed might intervene and cut rates again, why not? It’s worked so well so far, maybe if we keep pouring money in at the top it will fix it’s self. But that is the problem not the solution, the bankers were given cheap mortgage interest rates and passed it off to the marginal customers with teaser rates, now they wear these properties around their necks like flaming Colombian neck ties screaming, Look what they did to us!


The manufactures, the car companies suffer from falling sales because their customers can’t afford gas let alone a new car and blame the foreign competition. The electronics retailers blame the weak economy not a saturated market, saturated by customers who can no longer afford to buy. Working jobs that don’t pay enough to buy the big tickets items like the jobs offered at the electronics retailers.


The cure is unacceptable, not even fathomable to the Wall Street pundits an unspeakable heresy. Pass the wealth to those at the bottom, recreate the middle class. While it might be wonderful to have Chinese labor make for a dollar what used to cost three what’s the point if you can’t sell it? How far can we push the productivity game? Until one day, one employee comes in and works one hour and pushes one button and every thing is done. Then he clocks out and at the end of the week collects his paycheck for $20.00.


The trust is gone from the system because those in charge of it are untrustworthy.They in turn don’t trust their customers, they know they are taking advantage of their employees paying them starvation wages so they know better than to trust them either. The politicians of both parties are ignoring the issues or making promises that they have no intention of keeping and guess what? The public doesn’t trust them. The media tell you just what the media want to tell you and if you want the straight story look overseas, I don’t trust them. Come November, we are going to have another Presidential election and after the last two, should you trust them?


There’s a hole in the world and all the good things are pouring out, there is only one way to plug the hole. It can only be plugged from the bottom up not from the top down. You can’t build a pyramid from the top down only a pyramid scheme you can’t fix societies economic problems from the top down and by excluding those at the bottom. Trusting that by pouring ever more millions in borrowed money the hole it will fill itself, painlessly, effortlessly, carelessly, foolishly.

Today, the Fed announced a $200 billion dollar bank bail out, trading mortgage notes for treasury securities. Financed in part by the European central banks it is hailed on Wall Street but it’s the Alamo defenders fighting for the last rampart not the Marines on Iwo Jima raising of the flag. The market hovers around 12,000 but don’t unpack we’re not staying. The Fed fights for the integrity of the banks while telling the American people in trouble, you’re on your own, where’s your personal integrity? Like an alcoholic they must hit bottom before they can accept that they’ve got it all wrong as it all begins to circle the hole.

[phantom power]

1. There's a hole in the world, dear Liza, dear Liza.

There's a hole in the world, dear Liza, a hole.

[Adsos Letter]

2. So fix it, dear Henry...

[tom_paine]

3. Not a hole, a window into madness...

...into he fevered dreams of totalitarian monsters who now own was once once the nation which was the pinnacle of the Enlightenment, which now rushes headlong excitedly into The New Dark Ages.