I was totally against the Paulson Banker Bail Bill from the first minute I saw the proposal. I was not alone. The majority of Americans were against it. As well as the majority of economists who commented on this attempt by Goldman Sachs to hijack our Treasury. Now, after conning Congress into passing the core of this bill along with a massive Xmas tree of financially ruinous goodies added by Congress, Paulson dumps the entire business! Now he and Congress want to save the US consumer. Who is drowning in debt and overwhelmed with goodies from the Asian Santa’s workshops.
Hedge funds are dying. Russia is seeing the ruble turn to rubble as commodity markets continue to collapse. And the hot British housing market is down 80%. The global asset/commodity collapse continues.
From Nov. 10, 2008: Fed Defies Transparency Aim in Refusal to Identify Taxpayer Loans to Banks
(Bloomberg) — The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.
Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn’t require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.
Bloomberg New did a wonderful thing when they filed a lawsuit with the Courts demanding Übergnome Herr Führer Paulson cough up some hard data about what this supposedly public official is doing with all our taxpayer-money-owed-to-Asia-and-offshore-pirates. These massive IOUs are being spent on all sorts of generalized objects that are 100% paper bets. Namely, stuff on paper that had a supposed value last year that now are not worth much of anything, this year.
As I keep saying, ‘Time is money’. And money changes over time. We see this clearly with inflation. A dollar in 1900 was worth 90% more compared to today. We see this clearly when we track necessities from back then, namely, the cost of a pound of bread. One can go back through time to see how this vital source of life was worth in various currencies from various times. A pound of bread today, costs around $3. Back in 1900, it cost $0.20.
Historical Gold Prices/Price 1800-2008 , Market, History, Bullion, Ingots, Bars,:
The price of gold in 1900 was tied to the dollar so it didn’t change much over the decades. It was at $20 an ounce back then. On New Year’s Eve, 1933, Roosevelt issued a fiat change in gold’s value and it shot up to $35 an ounce. So gold was suddenly worth more than before. This was inflation tucked away in the gold area. We were in a depression and the President’s advisors thought this little hidden shot of inflation via devaluing the currency, would restart banking and international trade.
It didn’t. Despite this, the dollar/gold duality was precariously balanced between $45 an ounce to $35 an ounce from that day until President Nixon cut the gold/dollar support system to ribbons. Like Roosevelt, he did this via fiat, without warning. This is the vast power of the President at work, unilateral and capricious. Both times Presidents toyed with gold, they gave speeches for several months, speeches echoed by whoever was Fed Chairman.
In the end, gold began to fly off in all directions. It shot up ton $850 an ounce in 1980 and again, in 2007. Then it went briefly to over $1,000 an once and now is falling back downwards. Bread also shoots up and down during these very same inflationary/commodity cycles. It used to be, bread and gold were pretty stable. Only if there was a total failure of the crops. This leads to revolutions, by the way.
Back to Paulson today: the bloated claims by the bankers and lenders who handed out loans like candy on Halloween, are now revealed to be worthless because the underlying value of assets has collapsed. Housing and stocks are not worth nearly what they were once worth during the hottest part of the lending mania. When we go to an auction and have, say, $1,000 to spend, we cease bidding when the bidding gets above $1,000. But if we have a promise from a bank to pay $1,000,000 for anything we bid up, we get totally reckless at an auction!
This is why my grandfather and my long-deceased father-in-law both told me to never, ever bid on anything using anything except money I have saved. Not to use lending to bid on things. Even when it came to housing, I used mostly my own cash when putting a bid on a house. This meant, I would not bid in hot markets that cost too much, for example.
In my youth, most people had to put down a large payment of around 20% of their bid if they wanted to buy a house. In Arizona, shysters who wanted many customers and didn’t care about consequences, would offer 0% down housing deals. And then either run off with the loot and not build the houses or would build the houses but not the roads, etc, needed for the houses. Or build roads but not provide water. Which, in Arizona, is fatal. So Arizona had regular boom/bust cycles featuring the cops looking for the housing developers so they could be arrested before they ran off to Brazil.
The mess Paulson is trying to clear out of his own Goldman Sachs operation as well as the other Big Banker’s bunkers, is mostly debts written up against housing and corporations. These IOUs are increasingly worthless as the global economy slides off a cliff. The rails are greased by epic amounts of debt which was mostly issued originally from the 0% crew at the Bank of Japan.
Paulson wanted to re-capitalize his own business and his friend’s businesses by using US taxpayer debts issued to Asia and the Caribbean Island pirate coves. Instead of declaring bankruptcy, the plan was for our bankrupt bankers to shovel all this mess into our laps and then they would be free of bad debts and thus, able to issue more bad debts. Isn’t that a cute plan?
Paulson’s Credibility Takes Another Hit as He Abandons Asset-Purchase Plan
Nov. 13 (Bloomberg) — Henry Paulsonbecame Treasury secretary 28 months ago, when he was at the top of the financial world: Wall Street’s best-paid chief executive officer, capping his career with a high-profile sojourn in public service.
Today, two months before he leaves office, Paulson is a reduced figure, damaged by the financial-market meltdown that happened on his watch and by the government’s struggles to respond to it.*snip*
“This is a flip-flop, but on the other hand, when they first proposed the thing, they didn’t really know what they were doing,” said Bill Fleckenstein, president of Fleckenstein Capital Inc. in Seattle and author of the book “Greenspan’s Bubbles.” Paulson has pushed some “cockamamie schemes,” he said. “So one has to ask, does he have any clue?”*snip*
The Treasury chief yesterday said he had no regrets over reversing his plans for the bailout program.
“I will never apologize for changing a strategy or an approach if the facts change,” Paulson said at a press briefing in Washington.
HAHAHA. Abandon ship! Paulson rushed off to work at the Treasury 28 months ago because he knew what was cooking. He, like myself back then, knew perfectly well that he had to be at the helm when the inevitable mess hit the rocks. In 2006, it was painfully obvious that the housing bubble was going bust. The flood of Japanese carry trade money was still elemental and tremendous. But it could no longer flow into global housing markets.
From Australia to Argentina, from the United Kingdom to the United States, in every nation or principality on earth like Dubai, housing was built. And inflated in size and price. Hugely inflated. Across the planet, unsustainable housing was built. This was the era of the McMansion. Even the lowliest of workers could buy a remote location and live in a huge house there!
Corporations were bid up in price by tens of billions of dollars. Towards the end, as the major corporations desperately fought off this flood of Bank of Japan funny money, the hell hounds restlessly roved the planet, searching for any organization to put deep in debt. Some of the last deals were really stupid like the Boots deal in England. The monetary inflation cycle hit commodities and they shot up and ate up all discretionary incomes of both households as well as businesses.
This tsunami of commodity price hikes pretty much ate up the Japanese carry trade lending. And Japan, hit by serious inflation, clung to the 0% interest game but the yen began to rise last year. And this is what caught Paulson and his buddies off guard. They were so accustomed to the Japanese carry trade being an obvious way of funding deals, they couldn’t deal with the disappearance of this lending source.
This is why the poor gnome has floundered about, helplessly. He can’t fix things by simply ringing up Tokyo and getting a cheap loan. And even more importantly: the loans have outstripped our ability to pay them. Housing, in the last two years of the global housing bidding war, no longer were bigger and bigger. Instead, people were moving down, not up, the scale. They could afford less and less housing size and the price of very small houses shot up but this was a sign of reaching a limit.
Eventually, people gave up and ceased bidding on any houses. This did work in that it caused overpriced housing to finally drop. But this drop caused the debt cycle to freeze up. Banks that were still solvent couldn’t lend on bids for housing values since values were dropping. If they did lend, they lost money as the houses went ‘underwater’ instantly. The only protection is to force buyers to lay down at least 20% in savings with the bank before bidding on a house! We are, in other words, going back to the older, safer system.
This system can’t create huge bubbles which bring huge profits to Goldman Sachs and others. The gnomes running the systems are so accustomed to getting huge, huge bonuses based on tapping into the Japanese carry trade banking cycle, they cannot adjust downwards. This psychological problem is gumming up the works and preventing a cure for this mess! They should be removed. We need new blood here. Thank god, Paulson is departing pretty soon. I hope he isn’t replaced with another gnome.
Continued>>>
http://emsnews.wordpress.com/2008/11/13/paulson-drops-bank-bail-bill-down-toilet/#more-194
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