The Federal Reserve is monitoring bloggers now, so I just thought I would say hello and KISS MY ASS. Bastards.
*This one is bad, bad, bad*
Robert Kahre, who owns numerous construction businesses in Las Vegas, is standing trial on 57 counts of income tax evasion, tax fraud and criminal conspiracy. If convicted on most counts, he could live out his life in prison.
But attorney William Cohan paints Kahre as an American “hero” who believes his payroll system helped keep the U.S. monetary system sound, and was also a form of legal tax avoidance.
A self-made entrepreneur, Kahre, 48, paid his workers in gold and silver coin, and said they could go by the coins’ face value — rather than the much higher market value of their precious metal content — for federal tax purposes. He did not withhold taxes from their wages, and he provided the same payroll system to 35 outside clients, which were other local businesses.
Judge David Ezra is presiding over the criminal trial, which began May 19 in U.S. District Court. Joining Kahre as defendants are his longtime girlfriend, a sister who works in his businesses, and a former business assistant.
Three of the four present defendants were among the nine people tried on similar charges two years ago, but no convictions resulted. In the 2007 trial, four others of the nine defendants, including Kahre’s mother, were entirely acquitted. Two individuals were only partially acquitted, but dropped from the indictment that forms the basis for the trial before Ezra.
This time around, the only new defendant is Danille Cline, Kahre’s girlfriend of 19 years, and the stay-at-home mother of his four children. The government claims she obstructed the Internal Revenue Service by allowing Kahre to place several homes in her name, thus attempting to conceal his assets.
Cline’s former brother-in-law, Thomas Browne, also was indicted this time, for his role as broker in some of the real estate transactions, but has since reached a plea bargain. He is expected to testify against the defendants.
“This is a case about money, greed and fraud.” The line appeared on screen in court during the government’s opening statement by Christopher Maietta, a trial lawyer from the Washington, D.C., office of the Department of Justice.
According to the government, Kahre and others concocted a fraudulent cash payroll “scheme” and then peddled it to other Las Vegas contractors. Defendants did not report to the IRS any payments made to workers, “either at the true amount or at the bogus amount, … being the face value of the coin or coins,” according to the indictment.
The now-suspended payroll service handled about $114 million over six years, according to court records. Between 17 and 25 percent of that went to Kahre or his workers; the rest went to the 35 client businesses to pay their workers, court records show.
The government did not indict most of the outside businesses or their personnel as co-conspirators with Kahre; although on May 6, Daniel McCartan of Action Concrete, which was one of Kahre’s payroll clients, was finally sentenced in connection with a plea agreement reached in December 2006. McCartan received five months in prison and five months of home detention for one count of tax evasion.
Kahre contends his workers had agreed to be independent contractors, so he did not have to withhold taxes for them. His six businesses are in the trades of painting, drywall, tiling, plumbing, heating-cooling and electrical work.
Further, the $50 gold coins and the silver dollars Kahre used for payroll are designated by Congress as legal tender, so people are entitled to value them at their stamped denominations, he also contends. Taken at face value, each defendant’s annual coin income placed him below the threshold for filing a federal tax return.
Earlier cases on the question of how to value gold or silver coins have focused on collectible coins that had been pulled from circulation but still have value as property, according to the defense. Kahre used coins minted after 1985, which are allowed to circulate.
“It’s not whether what Mr. Kahre did was legal under the law,” defense attorney Michael Kennedy told the jury in his opening statement. “It’s whether he believed what he did was legal,” in the absence of explicit instructions by the IRS — on its Web site, in its publications or in response to written correspondence from Kahre — on how to value post-1985 gold or silver coins.
“We’re not here to determine if moneys are owed,” said Kennedy on behalf of his client, Lori Kahre, who had relied on her brother’s tax theory. A tax mistake is different from a tax crime, so the IRS can still use administrative channels to force the defendants to pay back taxes, Kennedy has noted in the past.
A sincere, but mistaken understanding of the tax-filing process is different from adopting a “pretextual” belief system in order to dodge taxes, Ezra acknowledged in court Wednesday.
Cohan described Kahre’s payroll system as a “boycott of the Federal Reserve.” But when the lawyer attempted to elaborate on Kahre’s view that the nation has debased its paper currency by abandoning its former gold standard, Ezra added, “We’re not here to convince the jury that the … (U.S.) monetary system belongs to an international cabal.”
Contact reporter Joan Whitely at firstname.lastname@example.org or 702-383-0268.
*It will NEVER end. Welcome to the new world.*
March 3 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke said policy makers may need to expand aid to the banking system beyond the $700 billion already approved and take other aggressive measures even at the cost of soaring fiscal deficits.
“Without a reasonable degree of financial stability, a sustainable recovery will not occur,” the Fed chairman said today in testimony prepared for the Senate Budget Committee. “Although progress has been made on the financial front since last fall, more needs to be done.”
Bernanke’s comments suggest he sees a role for bigger federal outlays as the Obama administration seeks congressional approval for a budget of $3.55 trillion for the fiscal year beginning in October. President Barack Obama has already signed into a law a $787 billion economic stimulus package of tax cuts and government spending.
Obama’s first budget seeks standby authority for as much as $750 billion in new aid to the financial industry. Whether those funds will be needed “depends on the results of the current supervisory assessment of banks” and the evolution of the economy, Bernanke said.
Bernanke said policy makers would have “preferred to avoid” what is likely to be the largest ratio of federal debt compared with gross domestic product since the end of World War II, and he urged lawmakers not to lose sight of fiscal discipline.
Cost to Budget
“But our economy and financial markets face extraordinary challenges,” and doing less now would eventually prove to be more costly, he said. “We are better off moving aggressively today to solve our economic problems; the alternative could be a prolonged episode of stagnation” that would cause budget deficits to swell further, increase unemployment and undermine incomes “for an extended period.”
The Fed has more than doubled its assets to $1.9 trillion during the past year by expanding loans to banks, launching programs to revive commercial paper and other markets and backing the merger of Bear Stearns Cos. with JPMorgan Chase & Co.
The 55-year-old Fed chairman told the Senate Banking Committee last week there’s a “reasonable prospect” the recession will end in 2009 “if the actions taken by the administration, the Congress and the Federal Reserve are successful in restoring some measures of financial stability.”
Fed policy makers face headwinds from equity markets, with the Standard and Poor’s 500 Index falling this year by 22.5 percent and the S&P Financials Index tumbling 44.2 percent.
The government is still trying to stabilize large financial institutions such as Citigroup Inc. and insurer American International Group Inc. Shares of Citigroup traded at $1.33 this morning at 9:33 a.m., and the government expanded its aid to AIG yesterday after the company reported a fourth-quarter loss of $61.7 billion, the worst loss by any U.S. corporation.
The spending blueprint delivered to Congress last month forecasts government spending this year of $3.94 trillion, up 32 percent from a year ago. That would yield a record deficit of $1.75 trillion in the year ending Sept. 30, equal to about 12 percent of the nation’s gross domestic product, the highest since World War II. Government spending of $3.55 trillion next year will include about $350 billion approved as part of the stimulus package.
“By supporting public and private spending, the fiscal package should provide a boost to demand and production over the next two years as well as mitigate the overall loss of employment and income that would otherwise occur,” Bernanke said.
Still, the size of the impact on the economy from government spending is “subject to considerable uncertainty,” Bernanke said. Consumers may decide to pay down debt or save their cash rather than spend it, he noted.
January forecasts by Fed officials suggest “a full recovery of the economy from the current recession is likely to take more than two or three years,” Bernanke told lawmakers last week.
The U.S. unemployment rate rose to 7.6 percent in January, the highest level since 1992. Job losses spanned almost all industries from trucking and construction to retailing and finance.
Fed officials expect unemployment in the fourth quarter to average 8.5 percent to 8.8 percent, which would be the highest since 1983, according to their January forecasts. Gross domestic product will contract 1.3 percent to 0.5 percent, and inflation will run at just 0.3 percent to 1 percent this year, their projections indicate.
Fed officials don’t see labor markets improving until 2011, when growth forecast at 3.8 percent to 5 percent reduces the unemployment rate to a range of 6.7 percent to 7.5 percent.
Economic models used by Macroeconomic Advisers LLC show the Obama stimulus package could keep the jobless rate at about 8.8 percent instead of the 9.5 percent rate that would result without the package.
The Fed is stepping up efforts to stem the worst credit crisis in seven decades by expanding a program aimed at supporting consumer and business loans to $1 trillion from $200 billion and adding commercial real estate. It is also buying $600 billion of debt sold by government-backed housing finance companies and mortgage-backed securities they guarantee.
The United States economy has collapsed, and it’s getting worse each and every day. The media, shallowly and predictably, is blaming this on the so-called “free market” that the United States supposedly runs. However, the truth is quite the contrary. The United States is not a free market economy, and hasn’t been for many decades. The following three items are to blame for our current economic crisis, and they stem from neither Wall Street, nor greed, but rather from GOVERNMENT:
#1) The Federal reserve, by pumping massive credit in the economy – which encouraged reckless leveraging and massive mal-investment, ultimately causing the boom and the bust cycle we’re in presently.
#2) The Community Re-investment Act and other affirmative action legislation, by pushing banks to lower their lending standard in order to please politically influent groups.
#3) Freddie Mac and Fannie Mae, by subsidizing sub prime mortgages, which helped fuel the housing bubble.
If you want to see this country morph into an apocalyptic nightmare, with each citizen’s standard of living decreasing to horrors far beyond the Great Depression, then go ahead and support these actions. Support our cruel governmental empire, our inhumane banking cartel (the Federal Reserve), our welfare-ridden nanny state, and worst of all, the “stimulus” legislation which is sure to dramatically contribute to and increase the problems caused by item #1. Say goodbye to the country as you know it, because you will live in a shambled rubble that you caused by electing unfit morons, who are uknowledgeable of the Constitution, to federal office. As Tocqueville once said, “in a democracy, the people get the government they deserve.” 98% of the American people deserve the wretched hell they are about to encounter.
For the other 2%, please view the following links and attempt to educate the other 98% – for the sake of our own futures.
*Yup, it is a given. I just wish more would realize it.*
U.S. Representative and former presidential candidate Ron Paul tells Newsmax that bailouts of U.S. corporations are “bad morally” — and says current federal economic policies “will literally destroy the dollar.”
He also insists that the use of “counterfeit” paper money instead of a gold-backed currency is “insane,” and declares it is “foolhardy” for Barack Obama to propose national health care under the present economic conditions.
The Texas legislator ran for president as the Libertarian candidate in 1988, and sought the Republican presidential nomination beginning in March 2007. He withdrew this past June and did not endorse GOP candidate John McCain.
Asked by Newsmax’s Ashley Martella about the bailouts of Wall Street, the banking industry and apparently the Big Three automakers, Paul — a member of the House Financial Services Committee — said:
“I think we’re going in the wrong direction and I strongly oppose it.
“I find it to be bad economics. I find it bad morally to transfer wealth from one group of people to another no matter what kind of problems they have…
“Lo and behold, the Constitution doesn’t talk much about allowing Congress to go and bail out their friends. So I oppose it from practical and well as philosophic reasons.”
Martella noted that some of the big problems automakers face are union-related, such as commitments to life-long pensions and health care for retired workers.
Paul said the automakers are “sort of trapped because they’ve signed these contracts…
“These commitments, which had been signed onto by the pressure of the unions, which were backed up by law, [have] brought them to their knees.
“If we take the funds from those people who have been more efficient to prop this system up, we’ll never see the correction…
“Excessive labor costs are very very important but the business people, the people who run the car companies, won’t dare say so, or won’t say very much, because they can’t offend the liberals in Congress who are the ones who are going to bail them out.”
Paul said his fellow legislators are “working real hard, we’re working overtime, maybe this weekend we’re going to work real hard to prolong the agony and not allow the market to correct the imbalances.”
Paul has called for abandoning the Federal Reserve System and returning the nation to a gold and silver standard. He told Newsmax why.
“It’s not so much that gold is perfect, it’s that paper is insane. To give politicians and bureaucrats and secret bankers the license to counterfeit money and create money out of thin air is destined to fail, and it has. That’s why we’ve had this financial bubble develop since the linkage to gold has been severed in 1971…
“Now they’re trying desperately to print and spend, but the bubble was overwhelming and the bursting of this bubble is something they can’t contain. It would never happen under a gold standard because there would be no legal right for our central bank to spend money and create money out of thin air. The arrogance of it all is unbelievable.
“If we continue doing what we’re doing now, we will literally destroy the dollar.”
Paul, who is a physician, was critical of Obama’s stated aim of developing a national health care plan. He said: “He has no money. Where is he going to get the money?
“He has no intention of bringing our troops home. He’s talked a little about Iraq, but we’re maintaining a world empire to the tune of a trillion dollars a year. He wants more troops in Afghanistan … You have to save some money someplace.
“So if you want to help some people who are sick, we’ll have to change our foreign policy and bring our troops home.
“I believe that all goods and services in a free society should be by voluntary means and never through government coercion. The more the government’s involved, the more money they spend, and the more they pretend they’re helping, it does but one thing — it pushes prices up.
“When Obama says something like that, somebody in the media someday would have to say, ‘Where are you going to get the money?’ If he’s going to steal it from someone, who is he going to steal from? The producers are hurting. The corporations are bankrupt. There’s no funding.
“Instead of coming back to a balanced budget and living within our means, to propose national health care, and not attack our empire, is just foolhardy and will seal our fate.”
An opponent of the Patriot Act, Paul was asked if he would give any credit to the measure for keeping Americans safe since 9/11.
“No, not really,” he said. “All it’s done is regulate people. We’ve regulated the American people. The people are less free, but the fact that we haven’t had an attack is probably just a coincidence.”
Paul was especially popular on college campuses during his most recent presidential campaign. Martella asked: “Did you sort of feel like a rock star when you spoke to college students?”
Paul responded: “No, not really. I’m pleased that they’re interested in the issue of freedom and individual responsibility, so I’m delighted with that, but I guess the rock star status goes to Obama and others.”
*There will be HUGE ramifications for this, I am afraid. They are insane traitors.*
Nov. 24 (Bloomberg) — The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.
The unprecedented pledge of funds includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.
When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, some Congress members are calling for the Fed to be reined in.
“Whether it’s lending or spending, it’s tax dollars that are going out the window and we end up holding collateral we don’t know anything about,” said Congressman Scott Garrett, a New Jersey Republican who serves on the House Financial Services Committee. “The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones.”
Too Big to Fail
Bloomberg News tabulated data from the Fed, Treasury and Federal Deposit Insurance Corp. and interviewed regulatory officials, economists and academic researchers to gauge the full extent of the government’s rescue effort.
The bailout includes a Fed program to buy as much as $2.4 trillion in short-term notes, called commercial paper, that companies use to pay bills, begun Oct. 27, and $1.4 trillion from the FDIC to guarantee bank-to-bank loans, started Oct. 14.
William Poole, former president of the Federal Reserve Bank of St. Louis, said the two programs are unlikely to lose money. The bigger risk comes from rescuing companies perceived as “too big to fail,” he said.
The government committed $29 billion to help engineer the takeover in March of Bear Stearns Cos. by New York-based JPMorgan Chase & Co. and $122.8 billion in addition to TARP allocations to bail out New York-based American International Group Inc., once the world’s largest insurer.
Citigroup received $306 billion of government guarantees for troubled mortgages and toxic assets. The Treasury Department also will inject $20 billion into the bank after its stock fell 60 percent last week.
“No question there is some credit risk there,” Poole said.
Congressman Darrell Issa, a California Republican on the Oversight and Government Reform Committee, said risk is lurking in the programs that Poole thinks are safe.
“The thing that people don’t understand is it’s not how likely that the exposure becomes a reality, but what if it does?” Issa said. “There’s no transparency to it so who’s to say they’re right?”
The worst financial crisis in two generations has erased $23 trillion, or 38 percent, of the value of the world’s companies and brought down three of the biggest Wall Street firms.
The Dow Jones Industrial Average through Friday is down 38 percent since the beginning of the year and 43 percent from its peak on Oct. 9, 2007. The S&P 500 fell 45 percent from the beginning of the year through Friday and 49 percent from its peak on Oct. 9, 2007. The Nikkei 225 Index has fallen 46 percent from the beginning of the year through Friday and 57 percent from its most recent peak of 18,261.98 on July 9, 2007. Goldman Sachs Group Inc. is down 78 percent, to $53.31, on Friday from its peak of $247.92 on Oct. 31, 2007, and 75 percent this year.
Regulators hope the rescue will contain the damage and keep banks providing the credit that is the lifeblood of the U.S. economy.
Most of the spending programs are run out of the New York Fed, whose president, Timothy Geithner, is said to be President- elect Barack Obama’s choice to be Treasury Secretary.
‘They Got Snookered’
The money that’s been pledged is equivalent to $24,000 for every man, woman and child in the country. It’s nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures. It could pay off more than half the country’s mortgages.
“It’s unprecedented,” said Bob Eisenbeis, chief monetary economist at Vineland, New Jersey-based Cumberland Advisors Inc. and an economist for the Atlanta Fed for 10 years until January. “The backlash has begun already. Congress is taking a lot of hits from their constituents because they got snookered on the TARP big time. There’s a lot of supposedly smart people who look to be totally incompetent and it’s all going to fall on the taxpayer.”
President Franklin D. Roosevelt’s New Deal of the 1930s, when almost 10,000 banks failed and there was no mechanism to bolster them with cash, is the only rival to the government’s current response. The savings and loan bailout of the 1990s cost $209.5 billion in inflation-adjusted numbers, of which $173 billion came from taxpayers, according to a July 1996 report by the U.S. General Accounting Office, now called the Government Accountability Office.
The 1979 U.S. government bailout of Chrysler consisted of bond guarantees, adjusted for inflation, of $4.2 billion, according to a Heritage Foundation report.
The commitment of public money is appropriate to the peril, said Ethan Harris, co-head of U.S. economic research at Barclays Capital Inc. and a former economist at the New York Fed. U.S. financial firms have taken writedowns and losses of $666.1 billion since the beginning of 2007, according to Bloomberg data.
“This is the worst capital markets crisis in modern history,” Harris said. “So you have the biggest intervention in modern history.”
Bloomberg has requested details of Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit against the central bank Nov. 7 seeking to force disclosure of borrower banks and their collateral.
Collateral is an asset pledged to a lender in the event a loan payment isn’t made.
“Some have asked us to reveal the names of the banks that are borrowing, how much they are borrowing, what collateral they are posting,” Bernanke said Nov. 18 to the House Financial Services Committee. “We think that’s counterproductive.”
The Fed should account for the collateral it takes in exchange for loans to banks, said Paul Kasriel, chief economist at Chicago-based Northern Trust Corp. and a former research economist at the Federal Reserve Bank of Chicago.
“There is a lack of transparency here and, given that the Fed is taking on a huge amount of credit risk now, it would seem to me as a taxpayer there should be more transparency,” Kasriel said.
Bernanke’s Fed is responsible for $4.74 trillion of pledges, or 61 percent of the total commitment of $7.76 trillion, based on data compiled by Bloomberg concerning U.S. bailout steps started a year ago.
“Too often the public is focused on the wrong piece of that number, the $700 billion that Congress approved,” said J.D. Foster, a former staff member of the Council of Economic Advisers who is now a senior fellow at the Heritage Foundation in Washington. “The other areas are quite a bit larger.”
Fed Rescue Efforts
The Fed’s rescue attempts began last December with the creation of the Term Auction Facility to allow lending to dealers for collateral. After Bear Stearns’s collapse in March, the central bank started making direct loans to securities firms at the same discount rate it charges commercial banks, which take customer deposits.
In the three years before the crisis, such average weekly borrowing by banks was $48 million, according to the central bank. Last week it was $91.5 billion.
The failure of a second securities firm, Lehman Brothers Holdings Inc., in September, led to the creation of the Commercial Paper Funding Facility and the Money Market Investor Funding Facility, or MMIFF. The two programs, which have pledged $2.3 trillion, are designed to restore calm in the money markets, which deal in certificates of deposit, commercial paper and Treasury bills.
“Money markets seized up after Lehman failed,” said Neal Soss, chief economist at Credit Suisse Group in New York and a former aide to Fed chief Paul Volcker. “Lehman failing made a lot of subsequent actions necessary.”
The FDIC, chaired by Sheila Bair, is contributing 20 percent of total rescue commitments. The FDIC’s $1.4 trillion in guarantees will amount to a bank subsidy of as much as $54 billion over three years, or $18 billion a year, because borrowers will pay a lower interest rate than they would on the open market, according to Raghu Sundurum and Viral Acharya of New York University and the London Business School.
Congress and the Treasury have ponied up $892 billion in TARP and other funding, or 11.5 percent.
The Federal Housing Administration, overseen by Department of Housing and Urban Development Secretary Steven Preston, was given the authority to guarantee $300 billion of mortgages, or about 4 percent of the total commitment, with its Hope for Homeowners program, designed to keep distressed borrowers from foreclosure.
Most of the federal guarantees reduce interest rates on loans to banks and securities firms, which would create a subsidy of at least $6.6 billion annually for the financial industry, according to data compiled by Bloomberg comparing rates charged by the Fed against market interest currently paid by banks.
Not included in the calculation of pledged funds is an FDIC proposal to prevent foreclosures by guaranteeing modifications on $444 billion in mortgages at an expected cost of $24.4 billion to be paid from the TARP, according to FDIC spokesman David Barr. The Treasury Department hasn’t approved the program.
Bernanke and Paulson, former chief executive officer of Goldman Sachs, have also promised as much as $200 billion to shore up nationalized mortgage finance companies Fannie Mae and Freddie Mac, a pledge that hasn’t been allocated to any agency. The FDIC arranged for $139 billion in loan guarantees for General Electric Co.’s finance unit.
The tally doesn’t include money to General Motors Corp., Ford Motor Co. and Chrysler LLC. Obama has said he favors financial assistance to keep them from collapse.
Paulson told the House Financial Services Committee Nov. 18 that the $250 billion already allocated to banks through the TARP is an investment, not an expenditure.
“I think it would be extraordinarily unusual if the government did not get that money back and more,” Paulson said.
In his Nov. 18 testimony, Bernanke told the House Financial Services Committee that the central bank wouldn’t lose money.
“We take collateral, we haircut it, it is a short-term loan, it is very safe, we have never lost a penny in these various lending programs,” he said.
A haircut refers to the practice of lending less money than the collateral’s current market value.
Requiring the Fed to disclose loan recipients might set off panic, said David Tobin, principal of New York-based loan-sale consultants and investment bank Mission Capital Advisors LLC.
‘Mark to Market’
“If you mark to market today, the banking system is bankrupt,” Tobin said. “So what do you do? You try to keep it going as best you can.”
“Mark to market” means adjusting the value of an asset, such as a mortgage-backed security, to reflect current prices.
Some of the bailout assistance could come from tax breaks in the future. The Treasury Department changed the tax code on Sept. 30 to allow banks to expand the deductions on the losses banks they were buying, according to Robert Willens, a former Lehman Brothers tax and accounting analyst who teaches at Columbia University Business School in New York.
Wells Fargo & Co., which is buying Charlotte, North Carolina-based Wachovia Corp., will be able to deduct $22 billion, Willens said. Adding in other banks, the code change will cost $29 billion, he said.
“The rule is now popularly known among tax lawyers as the ‘Wells Fargo Notice,’” Willens said.
The regulation was changed to make it easier for healthy banks to buy troubled ones, said Treasury Department spokesman Andrew DeSouza.
House Financial Services Committee Chairman Barney Frank said he was angry that banks used the money for acquisitions.
“The only purpose for this money is to lend,” said Frank, a Massachusetts Democrat. “It’s not for dividends, it’s not for purchases of new banks, it’s not for bonuses. There better be a showing of increased lending roughly in the amount of the capital infusions” or Congress may not approve the second half of the TARP money.
*Well isn’t this lovely!!!!!!!!*
Oct. 8 (Bloomberg) — The U.S. Federal Reserve has approached Canadian banks and insurers to consider acquiring U.S. assets to improve short-term liquidity and help bolster financial institutions coping with more than $500 billion in losses, the Financial Post reported
The talks included phone calls from Fed officials and at least one intensive discussion about a possible rescue, the newspaper reported, citing people familiar with the contacts.
*This comes from George Ure’s site, urbansurvival.com. Events are pretty much following this script, aren’t they? VERY interesting, indeed.*
The Start of the Beginning (of the End)
No, yesterday’s mini-melt of the stock market was NOT ‘the big events’ that the predictive linguistics oif http://www.halfpasthuman.com have been pointing toward around October 7th. Not even.
What we are witnessing now, being semi-aware observers thanks to Cliff’s work, is linguistically only the initial tumblers falling in the lock that will finally open around October 7th. If you’re one of the millions of American’s who lost between 6 and 8 percent of your investment values Monday, it wasn’t because we hadn’t been saying unequivocally “flee paper assets – buy real things with utility value” and only then if there’s anything left, play with paper”.
Water under the bridge today, and although there’s talk that the White House and CONgress will try to rework the bailout, the tumblers are already falling that unlock whatever next week has in store.
One of the most pressing questions of the day is “Was yesterday IT?” Heck no. The latest HalfPastHuman (HPH) advisory explains why: What we’re hearing is not emotional release language, it’s still emotionally building language:
we are hearing all kinds of language out and about in the MSM at this time. Note that they are speaking of the ‘failed rescue’ as being ‘worse than 9/11′ and other such phrases.
Further listen for the words (especially adjectives/adverbs and verbs (tense is important)) around ‘worries about the future of….’ retirement, student loans, real estate….et cetera. Also please note how many times you hear ‘feel’ and ‘despair’, ‘worries’, and other emotive descriptors coming out of the usually hyper-rational talking heads in MSM.
As of this point…all is still within the building tension language. So we continue to see that the 7th is the slip point where we go into release language.
We still have a few weeks as things degrade, and it is likely that calm (if that is what we have now) will prevail through this week and into next, however please note that the shift into release language will (seemingly) catch us all unaware, and it likely will be coincident with a very rapid degradation of conditions. So if you can get it over this next week, then perhaps efforts should be made to do so.
But basically, we are in it now, steady for another 7/seven days, then into release language. If you think the teevee words are shrill and intense now….just wait for it..
vale, clif and igor (day off?ha! still working).”
All of which is not to say things are tense enough already; witness the overwhelming of the House computer system after the vote. I plan to call the members of my Congressional Delegation today and see if they voted for the will of the people, or if they were on the bankster’s side in the bailout. A thank you and congratulations will be offered for those who did, and a campaign check for whoever opposes them if they did not. The follow-up being as important as the voiced sentiments beforehand. And, unlike Congress, my position hasn’t waffled and is not easily swayed.
The financial meltdown the economists of the Austrian School predicted has arrived.
We are in this crisis because of an excess of artificially created credit at the hands of the Federal Reserve System. The solution being proposed? More artificial credit by the Federal Reserve. No liquidation of bad debt and malinvestment is to be allowed. By doing more of the same, we will only continue and intensify the distortions in our economy – all the capital misallocation, all the malinvestment – and prevent the market’s attempt to re-establish rational pricing of houses and other assets.
Last night the president addressed the nation about the financial crisis. There is no point in going through his remarks line by line, since I’d only be repeating what I’ve been saying over and over – not just for the past several days, but for years and even decades.
Still, at least a few observations are necessary.
The president assures us that his administration “is working with Congress to address the root cause behind much of the instability in our markets.” Care to take a guess at whether the Federal Reserve and its money creation spree were even mentioned?
We are told that “low interest rates” led to excessive borrowing, but we are not told how these low interest rates came about. They were a deliberate policy of the Federal Reserve. As always, artificially low interest rates distort the market. Entrepreneurs engage in malinvestments – investments that do not make sense in light of current resource availability, that occur in more temporally remote stages of the capital structure than the pattern of consumer demand can support, and that would not have been made at all if the interest rate had been permitted to tell the truth instead of being toyed with by the Fed.
Not a word about any of that, of course, because Americans might then discover how the great wise men in Washington caused this great debacle. Better to keep scapegoating the mortgage industry or “wildcat capitalism” (as if we actually have a pure free market!).
Speaking about Fannie Mae and Freddie Mac, the president said: “Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk.”
Doesn’t that prove the foolishness of chartering Fannie and Freddie in the first place? Doesn’t that suggest that maybe, just maybe, government may have contributed to this mess? And of course, by bailing out Fannie and Freddie, hasn’t the federal government shown that the “many” who “believed they were guaranteed by the federal government” were in fact correct?
Then come the scare tactics. If we don’t give dictatorial powers to the Treasury Secretary “the stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet.” Left unsaid, naturally, is that with the bailout and all the money and credit that must be produced out of thin air to fund it, the value of your retirement account will drop anyway, because the value of the dollar will suffer a precipitous decline. As for home prices, they are obviously much too high, and supply and demand cannot equilibrate if government insists on propping them up.
It’s the same destructive strategy that government tried during the Great Depression: prop up prices at all costs. The Depression went on for over a decade. On the other hand, when liquidation was allowed to occur in the equally devastating downturn of 1921, the economy recovered within less than a year.
The president also tells us that Senators McCain and Obama will join him at the White House today in order to figure out how to get the bipartisan bailout passed. The two senators would do their country much more good if they stayed on the campaign trail debating who the bigger celebrity is, or whatever it is that occupies their attention these days.
F.A. Hayek won the Nobel Prize for showing how central banks’ manipulation of interest rates creates the boom-bust cycle with which we are sadly familiar. In 1932, in the depths of the Great Depression, he described the foolish policies being pursued in his day – and which are being proposed, just as destructively, in our own:
Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion.
To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection – a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end… It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression.
The only thing we learn from history, I am afraid, is that we do not learn from history.
The very people who have spent the past several years assuring us that the economy is fundamentally sound, and who themselves foolishly cheered the extension of all these novel kinds of mortgages, are the ones who now claim to be the experts who will restore prosperity! Just how spectacularly wrong, how utterly without a clue, does someone have to be before his expert status is called into question?
Oh, and did you notice that the bailout is now being called a “rescue plan”? I guess “bailout” wasn’t sitting too well with the American people.
The very people who with somber faces tell us of their deep concern for the spread of democracy around the world are the ones most insistent on forcing a bill through Congress that the American people overwhelmingly oppose. The very fact that some of you seem to think you’re supposed to have a voice in all this actually seems to annoy them.
I continue to urge you to contact your representatives and give them a piece of your mind. I myself am doing everything I can to promote the correct point of view on the crisis. Be sure also to educate yourselves on these subjects – the Campaign for Liberty blog is an excellent place to start. Read the posts, ask questions in the comment section, and learn.
H.G. Wells once said that civilization was in a race between education and catastrophe. Let us learn the truth and spread it as far and wide as our circumstances allow. For the truth is the greatest weapon we have.
NAPLES, Fla. — Several months ago, economist David Hale had a private meeting with Federal Reserve Chairman Ben Bernanke, who was trying to ward off a recession by lowering interest rates and increasing the money supply in the economy.
The problem with that approach is that the value of the dollar plunged against foreign currencies, causing crude oil prices to skyrocket because oil is pegged to the dollar. It affected food prices, gasoline and family budgets.
“Ben, you are playing a very unique role in world economic history,” Hale recalled telling Bernanke, an expert in the Great Depression. “You are the first central bank governor of the United States to preside over a recession with no decline in commodity prices.”
Bernanke could hypothetically limit inflation in commodities by raising interest rates, a policy that would restrict the flow of money but potentially lead to an avalanche of bank failures. At a financial conference in Florida on Tuesday, Hale, a Chicago-based economist for investment managers, hedge funds and multinational companies, paraphrased the Fed chairman’s response.
“We have lost control,” said Hale, quoting Bernanke. “We cannot stabilize the dollar. We cannot control commodity prices.”
If efforts to stop a recession sent commodities to record levels through July, then the realization that a recession could be imminent has sunk oil prices by almost 40 percent during the past two months. For all the debate about foreign demand and financial speculators, one overlooked aspect of commodity prices is the health of the American economy.
With investment banks collapsing under the weight of subprime mortgages and the recent government bailout of Fannie Mae and Freddie Mac, commodity prices have retreated as the market predicts demand for oil will fall. October futures closed down $4.56 Tuesday, at $91.15 a barrel. And in response to inflationary concerns, the Federal Reserve responded Tuesday by holding the overnight federal funds rate steady at 2 percent as it has since April.
Hale believes the recessionary turns could keep oil below $100 a barrel, a consensus shared by many analysts who see oil staying in the $80 to $100 range.
But a problem for America is that much of the power it wields over oil prices is based on the strength of the dollar and economic demand. Russia, Venezuela, Ecuador and others have nationalized their reserves, stripping ownership rights away from private firms and complicating the global market for oil.
“While every other country is practicing natural resource nationalism, this country still pretends there is a free market in energy when, in fact, there is not,” said John Hofmeister, the head of Citizens for Affordable Energy and the former president of Shell Oil Co.
If there is any relief for American consumers to come from global markets, it might emerge from China, a country that has successfully wrestled down inflation. China insulates its population from the market price of oil, a policy shared by Malaysia, Thailand and India.
As inflation in China dropped to 5 percent from 8 percent, the government has begun to pass actual commodity costs onto the public, said James McGregor, a consultant and author of the book “One Billion Customers: Lessons From the Front Lines of Doing Business in China.”
“I think you’re going to see them squeeze down subsidies,” McGregor said. “They don’t like them either because they distort the economy.”