11 Oct 2011
Why Aren't Markets Clearing?
Smith is trying to figure out what the real problem with the economy is:
Prices on the NASDAQ, for example, go up and they go down. That can be good or bad for you. But, the market clears. It doesn’t matter what happens in tech or to Pets.com or if we weren’t as wealthy as we thought we were or all kinds of other junk. The market clears.
Why aren’t markets clearing? This is the question. Why do I have houses piling up for sale? Why do I have workers filling out resume after resume? Why did I at the worst of the recession have inventories of real goods piling up at record rates? Why do I still have 2009 model year cars on my lots? Why do I have assembly lines that are not turning?
Why aren’t my markets clearing?
We lose a bunch of wealth fine. We got the balance sheets wrong fine. There is no new tech fine. There is not enough oil fine. All fine, whatever.
Why aren’t my markets clearing? One reason, perhaps, is that markets aren't clearing by design. I'm stealing this idea from somewhere that escapes me at the moment, but if a bank is holding, say, equities in its portfolio, it marks those equities to market when the market goes down. Everyone does this. The price of a stock is whatever the stock market says it is on any given day.
Not so for housing. Banks will insist that we're just going through a "rough patch," and eventually housing prices will rebound. So they resist marking their real estate holdings to their true value and accepting the consequences. This is understandable, since in some cases the consequences are insolvency and complete failure. Still, with this toxic waste clogging their balance sheets, credit doesn't flow and markets don't clear.
This, of course, is something that was a hot topic of converstation back in 2008 and 2009, but if I had to guess, I'd say there's still a lot of delusional thinking like this in corner offices all over the financial world. Credit channels are blocked up because we still haven't faced up to the extent of the housing bust. Markets in general aren't clearing because one market in particular isn't being allowed to clear. I don't think that "fixing" the housing mess is the holy grail of getting our economy moving again, but it's probably a big part of it. Mark down the toxic waste, renegotiate underwater mortgages, and recapitalize the banks if necessary. It would be a good start. Source
The Wicked Game, Piñata Greece!
How Greece is being beaten into a pulp to force Europe’s banks to accept capital while keeping Italy et al in awe.
Reliable sources tell me that the troika has drawn a surprising line on the sand: Either the Greek government agrees to force upon the private sector trades unions an immediate reduction in minimum wages with immediate effect (plus the dismantling of all awards regarding dismissal compensation and limitations), or the next instalment (or tranche) of EU-IMF-ECB loans to Greece will be withheld. Noting that even Mrs Thatcher took years before she could impose her iron will on the trades unions, it is clear that the troika is asking the Greek government to commit to a change that it may be both unwilling and unable to effect. If this is true, two questions arise: Click here for the full story by Yanis Varoufakis.It is a must read and concludes: In short, the plan seems to be to let Greece default in a big way, so as to scare the bankers into accepting new capital, while, at once, grinding the Greek social economy into a pulp to keep Italy and the rest of the NFY member-states in awe and keen to do as they are told. Our collective tragedy is that this plan, like all the others before it, will not work. Why? Because, like all the previous plans, it does not address the eurozone’s systemic Crisis systematically. Because, once again, the powers that be choose to ignore the interconnections between: (a) the banking sector’s insolvencies, (b) the lack of fiscal shock absorbers in case there is a run on the bonds of one or more member-states, and (c) the absence of a decent surplus recycling mechanism that directs surplus into deficit regions in the form of productive investments. As long as this form of European denial remains, Greece’s reduction to a pile of ashes will only lead Mrs Merkel to a Pyrrhic victory over the banks.
U.K. Banks Ran ‘Ponzi Schemes’ Before 2008 Financial Crash, Osborne Says
U.K. Chancellor of the Exchequer George Osborne said British bank practices before 2008 resembled “Ponzi schemes,” contributing to the market crash.
The crisis was caused “by the mistakes of human beings,” Osborne told delegates at the Conservative Party’s annual conference today in Manchester, northwest England. He blamed excessive borrowing by the previous Labour government, the creation of the euro and bankers’ risk-taking for the economic problems the U.K. faces.
“The banks and those regulating them believed that the bubble would never stop growing, that markets were always self- correcting, that greed was always good, that their Ponzi schemes would never collapse, and that none of the debts would ever turn bad,” Osborne said. “They let down their customers, they let down their shareholders, and they let down their country.”
A Ponzi scheme is a fraudulent financial arrangement under which investors are paid high returns from the deposits of subsequent investors. Bernard Madoff was jailed for 150 years in June 2009 for masterminding the largest ever U.S. Ponzi scheme.
No U.K. banks have been prosecuted for running a similar operation. Source
UK Poverty To Rise By Over 40%
The coalition's spending cuts will contribute towards a 40 per cent rise in the number of adults living in poverty by 2020 and the biggest drop in incomes for 35 years, the Institute for Fiscal Studies (IFS) has warned.
In a report commissioned for the Joseph Rowntree Foundation (JRF), the IFS said that unless drastic action is taken the number of people living below of the poverty line will rise to 4.9 million over the next eight years.
The IFS report also forecasts a fall in living standards due to high inflation and weak earnings growth that is unprecedented in recent history.
It expects real media household income to be seven per cent lower in 2012/13 than in 2009/10 and to remain below its 2009/10 level until at least 2015/16.
Julia Unwin, chief executive of the JRF, said that people and places in poverty are "bearing the brunt" of government's austerity measures. Source
Angelo: We do not agree with the above statement. The coalition is culpable, but for a different oversight. Not spending money you do not have is not a bad idea, the issue of allowing the people to bear the dept of private bankers and not reviewing the whole fractional reserve fiat money issue is a dereliction of duty given the time that has passed since the story of Northern Rock broke, years. We are willing to accept the direction of the findings of the IFS report. From our own analysis, we predict the financial crisis may possibly result in far worse than their findings. Then again, they (govt.) have also had good cover to avoid progress behind our press-titute media. When is it our fault, today, the 15th October (world revolution day)?
Angelo: We do not agree with the above statement. The coalition is culpable, but for a different oversight. Not spending money you do not have is not a bad idea, the issue of allowing the people to bear the dept of private bankers and not reviewing the whole fractional reserve fiat money issue is a dereliction of duty given the time that has passed since the story of Northern Rock broke, years. We are willing to accept the direction of the findings of the IFS report. From our own analysis, we predict the financial crisis may possibly result in far worse than their findings. Then again, they (govt.) have also had good cover to avoid progress behind our press-titute media. When is it our fault, today, the 15th October (world revolution day)?
Babylon's Banksters and Capitalism Collapse?
'Cash grab system cannot survive storm'
There is barely a corner of the globe that has not been touched by the current financial meltdown. But a senior sociology scholar at Yale University thinks the crisis is far wider than the economic crash - it is capitalism itself which is collapsing. Immanuel Wallerstein explained his theory to RT.
Angelo: Does the penny drop? Born around 1970? Your whole confused life in hindsight, generation X are born into the chaos of a new era. The cusp of 500 years. Heightened personal insecurity is hardly surprising in the circumstances. The grey matter has been working overtime, just for you. Then imagine the shift for their parents, the baby-boomers. Could a biblical analogy be that the boomers are like ancient Egypt, X are Moses (they will never see the promised land) and the next group, let us call them the "chosen ones" are the ones who may see the promised land. It is appropriate that we do not conclude today.
Angelo: Does the penny drop? Born around 1970? Your whole confused life in hindsight, generation X are born into the chaos of a new era. The cusp of 500 years. Heightened personal insecurity is hardly surprising in the circumstances. The grey matter has been working overtime, just for you. Then imagine the shift for their parents, the baby-boomers. Could a biblical analogy be that the boomers are like ancient Egypt, X are Moses (they will never see the promised land) and the next group, let us call them the "chosen ones" are the ones who may see the promised land. It is appropriate that we do not conclude today.
Dr Farrel highlights the historical nature of Bankers destroying economies, he refers to his book called Babylon's Banksters.
Kanye West Shows, Occupy Wall Street Goes Nuclear
Business Insider Reports: Kanye West was just spotted with Russell Simmons at the Occupy Wall Street protests down in Zucotti Park.
Cue Wall Street protesters wishing for a Kanye re-mix of one of their catchy chants, which you can learn here >
UPDATE: He left. Everyone started freaking out about him showing up.
When asked about the protests Simmons told us: "I'm here everyday. We need to take the money out of politics. It's as simple as that."
When we asked Kanye what he thought of the Occupy Wall Street movement, he didn't respond.
He's definitely the biggest celebrity to appear so far. (Russell Simmons, Susan Sarandon, and a few others have shown up.)