Saturday, April 03, 2010

The Financial Crisis is NOT Over!

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Economic Shock Therapy for Wall Street: Mortgage Lenders Could Soon be Falling like Dominos
JP Morgan suspends 56,000 foreclosures, GMAC and BOA
by Ellen Brown
Global Research, October 3, 2010
“Maybe this is like shock therapy. Maybe this will actually get the lenders to the table and encourage them to work out deals that are to the benefit of everybody.” --Economist Karl E. Case, quoted in the New York Times
The hits are coming fast and furiously. Major Wall Street mortgage lenders could soon be falling like dominos – and looking again for handouts.
On September 20th, Ally Financial Inc., which owns GMAC Mortgage, the nation’s 4th largest lender, halted evictions and resale of repossessed homes in 23 states. This was after a document processor for the company admitted that he had signed off on 10,000 pieces of foreclosure paperwork a month without reading them. The 23 states were all those where foreclosures must be approved by a court, including New York, New Jersey, Connecticut, Florida and Illinois.
On September 24, Representatives Alan Grayson (D-FL), Barney Frank (D- MA) and Corrine Brown (D-FL) directed a letter to Fannie Mae questioning its use of “foreclosure mills,” which were described as “law firms representing lenders that specialize in speeding up the foreclose process, often without regard to process, substance or legal propriety.” The letter followed a report by the Florida attorney general’s office in August that it was investigating three law firms that had allegedly fabricated documents in thousands of cases to obtain final judgments of foreclosure.
On September 24, California attorney general Jerry Brown asked GMAC to halt foreclosures in his state until the lender could prove it was complying with a law that prohibits lenders from taking steps to foreclose a home before making an effort to work with the borrower. California is a non-judicial foreclosure state, meaning foreclosures do not require the prior approval of a court.
On September 28, JPMorgan Chase said it was halting 56,000 foreclosures because some of its employees might have improperly prepared the necessary documents. All of the suspensions were in the 23 states where foreclosures require court approval.
On September 29, the Washington Post reported that a top federal bank regulator had directed seven of the nation’s largest lenders to review their foreclosure processes, after learning about widespread mishandling of homeowner evictions. Besides JPMorgan Chase, they included Bank of America, Citibank, HSBC, PNC Bank, U.S. Bank and Wells Fargo. The Washington Post reported:
The paperwork problems range from potentially forged documents to bank employees who never read borrowers' files before signing off on an eviction. . . .
"While we don't expect our review to find that consumers were harmed, we will take appropriate action if we find any impact," JP Morgan spokesman Tom Kelly said.
No harm perhaps except the illegal taking of thousands of homes without due process . . .
On September 30, Rep. Alan Grayson posted a devastating seven-minute video, in which he gave four real-world examples of such travesties of justice, including a man who was foreclosed on when he didn’t have a mortgage and paid cash for the home; a home that had two foreclosure suits against it because both servicers claimed ownership of the title; and a couple foreclosed on over a contested $75 late fee. Grayson blamed the massive foreclosure problems largely on the electronic shortcut called MERS. “The banks simply digitized mortgage titles into a privatized system, called the Mortgage Electronic Registry System (or MERS),” he said. “And it did the transfers by trading Excel spreadsheets among the banks and trusts, rather than endorsing the notes as required by their own contracts, by state real estate law and by IRS rules.” He stated that 60 million properties are recorded in the name of MERS -- 60% of the mortgages in the USA, and 97% of the loans made between 2005 and 2008.
On October 1, Bank of America announced that it was delaying foreclosures in 23 states.
The same day, Connecticut Attorney General Richard Blumenthal took the radical step of putting a halt to all foreclosures from all banks in his state.
A Box Even Houdini Couldn’t Escape?
All of this is a major headache for the banks, but according to the New York Times, “The companies say they are reviewing their procedures to take care of any violations.” They seem to think they can correct the problem by redoing some paperwork. But if the holdings in recent court decisions are upheld, it will not be just a question of hiring extra staff to clean up some files. For all those mortgages filed in the name of MERS, say these courts, the chain of title has been irretrievably broken. Humpty Dumpty has had a great fall and cannot be put together again.
MERS is simply an electronic data base. On its website and in assorted court pleadings, it declares that it owns nothing. It was set up that way intentionally so that it would be “bankruptcy-remote,” something required by the credit rating agencies in order to turn the mortgages passing through it into highly rated securities that could be sold to investors. MERS not only has no assets; it has no employees. The thousands of people enlisted to sign affidavits on its behalf are merely conduits. The arrangement satisfied the ratings agencies, but it has not satisfied the courts. Increasingly, judges are holding that if MERS owns nothing, it cannot foreclose, and it cannot convey title by assignment so that the trustee for the investors can foreclose. MERS breaks the chain of title so that no one has standing to foreclose. The homes are effectively owned free and clear.
That does not mean the homeowners don’t owe money to someone. They do. But the claim for relief is not in “law” (by virtue of an enforceable contract or rule) but in “equity” (a remedy provided just because it is fair), and MERS is not the proper plaintiff. Every MERS case involves a securitization, which means the real parties in interest are a group of investors somewhere; and before the homeowners can be made to pay, the investors have to come forward and prove not only that they are the parties owed the money, but the actual sums they are owed. In some cases they might already have been paid; for example, by insurers on credit default swaps held by the investment pool. The investors are entitled to recover in equity only so much as they are actually out of pocket, not the full amount of the original promissory notes, since they were not parties to those notes and there is no way to re-establish the chain of title.
What About the Non-judicial Foreclosure States?
Foreclosures have been suspended by JPMorgan, GMAC and BOA in 23 states, but what about the rest? The others are non-judicial foreclosure states, which means they allow foreclosure through a power of sale clause in a deed of trust without going to court. The presumption is that if the lender doesn’t have to prove his standing to sue before a judge, he can proceed. State laws in non-judicial states allow the sale of a property to satisfy a foreclosure as long as the trustee follows the regulations concerning notice. That would seem to violate Constitutional due process, but the United States Supreme Court has held that due process protections apply only when the government is involved in the taking of property. When a deed of trust and promissory note are executed between two private parties (homeowners and lenders), there is no automatic due process protection. The homeowners agreed to it in writing; case closed.
But here’s the catch: what if the lender signing the original documents is not the party foreclosing on the property? Then it becomes a question of fact whether the foreclosing party has authority to proceed, and that makes it a judicial issue – a question of fact for the courts. If the foreclosing party can show a clear chain of title – an assignment or progression of assignments from the original lender to himself – he is home free. But courts have increasingly been holding that MERS breaks the chain of title. Foreclosure expert Neil Garfield argues that even in non-judicial foreclosure states, that means the investors have to go to court to prove their case. And when they do, they will run up against the brick wall of MERS. He concludes:
There will be a head-slapping moment when title carriers, attorneys, judges and administrative agencies and clerks suddenly realize that the monster created on Wall Street has its equivalent in the public records of counties across the nation. I doubt if more than 6-7% of all the foreclosures in the past 10 years have resulted in clear title delivered to anyone. And the only corrective instrument can come from the original owner. That homeowner is sitting in the catbird seat and doesn’t know it. Millions of people who THINK they have lost their homes still own them and if anyone wants a signature from those people to clear title, they are going to be required to pay dearly, which is at it should be. Eventually the purse gets returned to the victim from whom it was snatched.
To Subsidize or Nationalize?
Where does that leave JPMorgan, GMAC, Bank of America, and the other major lenders? Investors have massive claims against these banks, and so do homeowners. A major title insurance company has already said it will not insure title to properties foreclosed upon by GMAC until further notice. Moody’s has placed the servicer ratings of GMAC and JPMorgan Chase on review for possible downgrade, and the Treasury is asking regulators for an investigation.
Investment adviser Christopher Whalen thinks we could soon be looking at more Wall Street bankruptcies. If so, hopefully we won’t fall into the trap this time of underwriting the losses while letting the banks keep the profits. If we the people are picking up the tab, we should insist on owning the banks.
Ellen Brown is an attorney and the author of eleven books. In Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free, she shows how the Federal Reserve and "the money trust" have usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are webofdebt.com, ellenbrown.com, and public-banking.com.
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Towards an Inflationary Depression in America
by Bob Chapman
Global Research, October 2, 2010
There is no question that those who control our government from behind the scenes are bound and determined to take over the $6 trillion in private pension plans. Whether they’ll be successful remains to be seen. The Department of Labor wants to force all IRA’s and 401k’s into the arms of a corporate fascist government, that knows better what is good for you, than you do. You would exchange your hard earned investments for a guaranteed, government annuity that is not worth the paper it is written on.
We have been writing about this for more than a year, but as usual few are listening. People say the government won’t and can’t do that. Government can do anything it wants.
Small amounts would go into R-bonds, government retirement bonds and larger amounts would be managed by the anointed few. They would be JPMorgan Chase, Goldman Sachs, Citigroup, etc. This would give them total control of the stock and bond markets. These investments would act as collateral for the government against which they’d issue R-bonds. Shades of the 1930’s German monopoly control of markets. That is what this is about as well as the control and subjugation of worldwide investments. A total hold on the control of all investments.
When this will happen and if it will happen, we do not know but this is what government bureaucrats are up too if they can get away with it. Very often Argentina is a testing ground for new fascist ideas. That is what their bankruptcy and default was in part about in the late 1990s and early 2000s. It was a trial run on default. For the past two years they have been in the process of discussing how to capture private pensions. We cannot accurately predict the future, but we do know the powers that be want your assets and to ignore that fact is stupidity. We have advised our subscribers to seriously consider removing their retirement from the clutches of the government. Do not forget you will have to pay taxes on your contributions and gains sooner or later. You have three months left this year to phase out, whether in part or in total. The choice is yours; we are out in total.
The illegal alien who says he is president of the US will be at a UN Summit in the coming week to push for global taxation, so that Americans can get closer to the poverty line. The catchwords are innovative financing mechanisms to achieve millennium development goals. Revenue is already being collected by some nations as a tax on airline tickets. Another proposed tax would be laid upon all international currency transactions. The collection goal is trillions of dollars a year in the form of the redistribution of wealth to bureaucrats and the poor. This is an extension of the Global Poverty Act sponsored by the president when he was in the Senate. The bill was defeated.
The latest monstrosity coming out of the Senate is the Livable Communities Act (SB1619), which is being fast tracked. All of these one-world cretins should be thrown out of office. It would move people into urban areas, so they can be better controlled. This is another beauty from Christopher Dodd, who is leaving the Senate. He has been more corrupt than his father was. He would force federal sustainable development zoning and control of local communities and of course create a whole new bureaucracy. The hook is the federal government will provide grants to force people into the zoo that passes for city living today - another nightmare for Americans.
For those who think federal borrowings have slowed down their second quarter borrowings rose at a 24.4% rate, up from 20.5% in the first quarter. Mortgages fell 2.3% from 4.3%, as household debt fell 2.3%, mostly due to the write off of bad debt. Corporate debt grew 3.8% from 5.8%. Local and state debt fell 1.3% from a plus 5.7%. Financial sector borrowings fell $1.07 trillion, or at a minus 7.1%. Bank assets fell and bank credit contracted at a 5.6% pace, and YOY fell 1.3%. Very importantly business loans fell 6.7% QTQ, and were off 14.4% YOY, in the purchase of government debt, mostly treasuries.
The above presents a picture of a systemic debt spiral, which if not addressed quickly will lead to deflationary depression. Lending is weak and that has become a problem now that stimulus and quantitative easy have ended. All the money available is being thrown at federal and state government debt. This in part is caused by the securitization of debt, which has continued to fall in value overall. National income is up but it has fallen for the most part into the pockets of transnational conglomerates that continue to fire workers to improve the bottom line and capture that 5.3% increase in profits. Last month real unemployment rose to 21-5/8%. As a result household net worth is at 2006 levels.
Ten-years ago US financial assets were $6.1 trillion and in the second quarter they were $16.255 trillion. Foreigners increased Treasury holdings by $709 billion in the second quarter and Agency purchases grew $147 billion. Overall foreign holdings of US financial assets grew $1.436 trillion YOY, or by 9.7%. Treasury holdings grew 12.1% YOY to $4.014 trillion and corporate bond holdings rose $375 billion YOY to $2.278 trillion.
Federal spending grew 5% YOY and were up 30% from three years ago. During the past nine quarters federal tax receipts have fallen from 19% of GDP to 16.3%. Total government spending during the quarter jumped to 40% of GDP.
The Ponzi scheme continues as markets accumulated $2 trillion in federal debt growth. In eight quarters it is up $3.610 trillion, or 54% to $10.308 trillion. In two years it jumped 46% to 71% of GDP, The madness continues.
Almost three months ago we predicted the Fed would continue to expand money and credit using quantitative easing and that the administration would try to get the House and Senate to approve various spending proposals for about $650 billion. The Fed said they might do this when necessary, but what they didn’t tell you is that they will have to buy Treasuries to the tune of about $2 trillion over the next six months. Such purchases will buoy the bond and stock markets, cause higher inflation and push commodity and gold and silver prices higher. This kind of move will make keeping zero interest rates considerably easier. There will probably be purchases of $1.8 to $2 trillion in Treasuries Agencies and MBS toxic waste. This is approximately what was done during QE1. We believe it will take more this time. Mortgage rates could fall to under 4% leading to more refinancing. Virtually everyone could refinance. We can see that the Fed has started the process of selling MBS and CDOs, by looking at their balance sheet. Only some $50 billion of $1.3 trillion dollars in bonds. They bought this paper at we would guess $0.80 on the dollar to assist bank solvency and now they are selling it back to the same banks at $0.20 on the dollar and the taxpayer gets to pay the difference. Any aggressive, or strong moves, or announcements, will come after the election for obvious reasons. That time lag from June to November is proving very costly for the economy in terms of GDP growth and additional unemployment. That means employment cannot improve until the first quarter of 2011. This also means the 10-year Treasury will fall to close to 2%. As a result of these moves the Fed could end up not purchasing $2 trillion in securities, but $2.5 trillion. We think in part their actions will be determined by how much stimulus money the administration can get from Congress. They are shooting for $650 billion. Foreign investors are not going to like this scenario at all, especially with a falling dollar, whose plunge can only be abated by economic, financial and currency problems in Europe. There is no question currencies wars have begun, as well as trade wars, which have been a long time in coming. Tariffs will stop free trade, globalization, offshoring and outsourcing. The affect will take a year or so to assert itself, but it will help employment as manufacturers and service industries return to the US, for lack of reason to remain in slave labor countries. The numbers we will see due to the Fed intervention will be staggering and they’ll get more coverage this time around as more professionals understand what Wall Street and banking are up too.
The Fed continues to accumulate Treasuries in numbers far greater than what the Treasury needs. We have sited this previously. Bigger numbers will start showing up in the first half of 2011. Purchases will exceed statutory limits and that means a repetition of excess Treasury creation in order to accommodate the economy’s need for liquidity and in addition the Fed might have to buy up almost the whole treasury float. If that happens the two-year T-note might not just drop to 2%, but to 1% to 1-1/2%. That means mortgages would fall to 3% to 3-3/8%. If this happens, then it probably would rule out QE3 and could set up a monetary collapse within two years accompanied by hyperinflation. Remember, inflation is different than hyperinflation. Hyperinflation is when dollar-holders, which in this case are all of us, lose faith in the currency as a medium of exchange. People will try to get out of the dollar, sometimes into other currencies, or into gold and silver, or into anything, but dollars. It is a classic flight to quality. This is the result of the Fed supporting asset prices and helping government maintain demand, which is supposed to assist recovery, but in fact does not. Even with these massive injections there will be little or no recovery. That will be followed by a decent into deflationary depression. If we have to guess it will take 2 to 3 years. These policies are the same old Keynesian fascist nostrums used in the 1930s, which never took us out of depression, a war did, and which worked at great price over the past 60 years. Like in the 1930s they won’t work. The Fed has been forced to undermine Treasuries in order to gain time and it won’t work, confidence has already been lost. Why do you think money is pouring into gold and silver, as they hit new highs? This is how Rube Goldberg would fix a monetary system with spit and bailing wire. When hyperinflation comes it will be like a thunderbolt from out of the blue. All of a sudden no one will be into gold and silver related assets and commodities. This is classic, as classic as the purge of maleinvestment that will follow. The Fed will most likely end up with all the Treasuries and be neutralized in efforts to assist the Treasury’s “Working Group on Financial Markets,” which in turn will cause a stock market collapse. There will be no one left to hold up the market. The public will be long gone into gold, silver and commodities. The Treasury bubble will have been broken. The legacy, money center banks, those to big to fail, will rush to buy Treasuries as well. Don’t forget they own the Fed and it is in their best interest to stop the run on Treasuries. Then you will see a reversal as these banks see the futility of saving the government and they will dump all their Treasuries. The result will be monetization and hyperinflation. You as subscribers know that in hyperinflation prices do not rise, they collapse.
We are in an inflationary depression and have been since February 2009. Bogus government statistics in GDP, CPI, and PPI and in employment are masking the ugly truth. It’s the 1930s all over again except this time it will be much worse. No recovery can sustain because all the Fed, Treasury and the administration are doing is throwing money at the problem and that is not the solution. We just saw a five quarter bounce borne by $2.5 trillion and now the Fed and the administration are planning two more such rescues for the next two years, which will cost a minimum of $5 trillion. They should end up in hyperinflation and a realignment of currencies, devaluation, revaluation and multilateral debt default. In the ‘30s the economy jumped 8% not 3-1/4%, with the same kind of stimulus and the market rose 50%. This time it rose from 6550 on the Dow to 11,700. A repetition of 1932-33. Along the way many individual investors have left the market after realizing the Fed and the government had it rigged for Wall Street. Front running, insider trading and naked shorting are tolerated on a massive scale. Everyone seems to forget that between 1930 and 1936 gold and silver shares, during a deflationary depression, appreciated 500%.
We were the front-runner in calling the residential real estate debacle and we now forecast a further 10% to 20% fall over the next two years into the next presidential election. Even with the stunning losses nothing has really changed in Washington and Wall Street. Little regulation, by the SEC and the CFTC. Two agencies that are merely extensions of a crime syndicate. Don’t forget we spent 28 years on Wall Street and owned our own firm. We forecast all you are seeing in 2000 and finally the mainstream is starting to catch up. As a result of this chaos since August 15, 1971 America and the dollar are headed back to a gold standard. This is one way these criminals can attempt to cover up what they have done. We wonder what the creators of this debacle are going to do once interest rates rise to 5% again, and the bond market collapses? This will be allowed to take place in order to smother inflation. The Fed will have no other choice. Then there is the question of major corporations having two sets of books, which feign solvency and add about 40% to earnings and assets. Will the BIS, FASB and the government allows this indefinitely? We can promise you they’ll allow this as long as possible, just like they’ll fight raising interest rates until real inflation reaches 14% again. As we will see the economy will not be able to tolerate such interest rates and will collapse into deflationary depression. Such rates will bring massive defaults and the longer higher rates are avoided the higher rates will go. We could see the 10-year T-notes trading at 7-3/4%. We ask what will happen to the stock market under those circumstances? It will collapse of course. Quite frankly, we see the situation already out of control and now it is only a matter of time until the situation worsens and debacle follows.
The number of mortgage applications in the U.S. declined last week for a fourth straight time, led by a drop in refinancing even as mortgage rates declined to the lowest on record.
The Mortgage Bankers Association’s index fell 0.8 percent in the week ended Sept. 24 to the lowest level in almost two months, the Washington-based group said today. Refinancing also dropped to a seven-week low, while purchases increased for the first time in three weeks.
Falling home values are making it harder for Americans to refinance even as borrowing costs drop. At the same time, with the unemployment rate near a 26-year high and stricter lending standards, housing demand will be slow to improve.
“With lack of job growth, with lack of credit growth you’re simply not going to get housing and the economy growing well,” Michael Gregory, a senior economist at BMO Capital Markets in Toronto, said before the report.
Reports last week showed sales of existing homes in August were the second-lowest in more than a decade and those of new homes were the second-lowest in records going back to 1963. Home prices rose 3.2 percent in July from a year earlier, the smallest gain since March, according to a report from S&P/Case- Shiller released yesterday.
The mortgage banker’s group’s refinancing gauge fell 1.6 percent. The purchase measure increased 2.4 percent.
Record Low
The average rate on a 30-year fixed mortgage fell to 4.38 percent, the lowest in records going back to 1990. At that pace, monthly payments for each $100,000 of a loan would be about $499.58, or $34 less than a year ago when the rate was 4.94 percent.
The average rate on a 15-year fixed loan fell to 3.77 percent from 3.88 percent, also the lowest on record, and the rate on a one-year adjustable increased to 7.04 percent from 6.96 percent.
The share of applicants seeking to refinance a loan fell to 80.7 percent from 81.3 percent.
Sales plummeted after the deadline for signing contracts and becoming eligible for a government homebuyer tax credit worth as much as $8,000 expired on April 30.
The Obama administration said Aug. 30 it planned to announce a proposal for an emergency loan program to help the unemployed avoid default. The plan would also include a government mortgage refinancing effort to lower monthly mortgage payments for Americans facing foreclosure.
Orders at KB Home, a California builder focused on first- time buyers, fell 39 percent after the deadline for signing a contract to qualify for the federal tax credit expired. Unemployment and rising foreclosures make it difficult to forecast future sales, Jeffrey Mezger, the company’s chief executive officer, said Sept. 24.
“The housing market continues to face significant headwinds from high unemployment and foreclosures, which are impeding a broader recovery, and recent net order trends in the homebuilding industry have injected additional caution into our near-term outlook,” Mezger said in a statement.
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More Financial Bubbles Ahead in the US Housing Market
By Bob Chapman
URL of this article: www.globalresearch.ca/index.php?context=va&aid=18416
Global Research, April 1, 2010
International Forecaster
Bubbles have a hard time coming to an end, especially in residential real estate. Underlying forces such as government intervention to prolong the agony and the abject stupidity of builders extends the bubbles.
We are in a vast home inventory expansion and builders are going to build 535,000 new homes. The projected foreclosure rate could give us as much as a 3-year home inventory, up from present levels of about a year, if one includes the lenders shadow inventory. This past week the home building index rose 7.1% and it is up 25.1% year-to-date. The retail index rose 17% y-t-d, yet unemployment stubbornly clings to 22-1/8%. In fact, the retail index is up 87.4% y-o-y. We would say that index is grossly overpriced. As you can see bubbles have a way of not wanting to die quickly. This is caused by man’s disparately wanting to cling to the past attempting to take the easy way out rather than adapting to change. Government tries to keep sections of the economy alive rather than letting the cleansing process take its course.
The subsidization of the housing market is doomed to failure, because there simply isn’t enough money and credit available to keep it going indefinitely. All government is doing is re-flating a dying bubble. These Socialistic/Marxist policies just won’t work. Whether government likes it or not interest rates are headed higher, probably by 1% or more by the end of the year as government in its quest for more money to cover its debts crowds most others out of the market. This can be accommodated by the Fed, but not without higher inflation or perhaps hyperinflation, which in turn will drive interest rates even higher. We are seeing the reigniting of speculative mania in other markets as well – in the stock market and particularly in the low quality sector of the bond market worldwide. The mis-pricing of investments and finance is resulting in terrible distortions, mostly the result of Fed and government policy.
This mania has been aided and abetted by US dollar strength, especially over the past two months. We saw JPMorgan Chase, Goldman Sachs and Citigroup and others loading up on the long side of the dollar starting last October between USDX 74 and 78. They obviously knew the Greece episode was on the way. Irrespective, and in spite of no positive fundamentals, dollar strength was used to draw funds into dollar denominated assets. Supposedly the dollar has some sort of competitive advantage, which it doesn’t, and that a strong dollar will be re-flationary, which it has been. Gold and silver should have been flying to the upside, but our government detests free markets and it again temporarily suppressed prices. This is the result of the machinations of Larry Summers and Tim Geither. Dollar strength has the perceived benefit of the Fed’s ability to endlessly create money and credit.
It is this perception added to Greece, European and euro problems that have fueled speculation in world markets. Perceptions are one thing, and fundamentals are another more powerful force, which in time will reassert themselves. Problems will first be evident in the bond markets, which have already begun. As soon as the 10-year T-note solidly crosses 4% the market, the dollar and bonds will falter. The current strength is perceived to be the weakness of other currencies and their economies, prospective re-flationary policies and the concept of too big to fail. This is why there is the concept that the current “recovery” will persist. They also recognize that individual euro zone countries cannot inflate their way out of problems. One currency prohibits that from happening. This means Greece and others cannot monetize their debt and that means any kind of recovery is years away. All 19 near bankrupt countries are in the same boat except the US. Markets believe in the Bernanke put or backstop. They also believe the Fed will reinflate again. They would rather have inflation or hyperinflation, which they can in part control, rather than deflation, which once it begins cannot be contained.
Then enters the question will the Fed deliberately choose deflation in a year or two to bring about world government? Is this what Greece was all about? We do not know for sure. All we can do is guess. Do not forget Europe’s problems are not as bad as those of the US even though they are led to believe they are.
The 10-year Treasury note may well be telling us something and that is that higher rates are on the way. It certainly doesn’t auger well for any recovery. If credit spreads widen watch out. Such a development would mean the dollar would begin to retrace its recent gains. Dollar gains are over at 82 on the USDX. We await its correction.
We have spent more than 70 years as Americans and we gasp at the criminal enterprise that America has become. Lawbreaking has become as casual as running a business, whether it is on Wall Street or within the beltway in Washington. Worse yet, almost all malefactors never see the inside of a jail, they just have their corporations pay fines and go back to doing what they were doing, which was breaking the law.
One of the ultimate insults comes from the FDIC requesting donations. 200 to 500 banks will fail this year because of incompetence and terrible investments. We believe, as the year progresses, bank failures will explode. One of the factors leading us to this conclusion is that more than 1,000 banks have professionals overseeing bank operations from the Comptroller of the Currency’s Office. Worse yet, we are seeing many banks and credit unions telling depositors they may have to wait seven days or more for their money. Can bank holidays be far behind? We believe it will happen over the next couple of years.
As we go forward we continue to see massive Treasury purchases by the Fed. The monetization is spellbinding at somewhere between 50 and 80 percent. The more we look at this cartoon the more we know quantitative easing cannot stop. If it does the system will collapse. The Fed and the FDIC even want pension funds to buy their toxic garbage, as does Fannie Mae and Freddie Mac. What a sordid turn of events, but not unexpected considering what we are dealing with.
Unemployment sticks at 22-1/8% as tax revenues continue to plunge as the budget deficit heads toward Mars. The next administration push will be to legalize illegal aliens. You ask where will this all end? Can you believe builders have been buying CDOs? Lennar has plunged in and Orleans fell into insolvency with 20% of their assets in toxic garbage.
There is no question zero interest rates, unbridled government deficits, stimulus plans and the Fed’s quantitative easing have been a failure. The result normally would be to pump more aggregates into the system. We will have to see what the Fed, Congress and the administration do, especially between now and the election. Is it any wonder we have called for a two-third’s official dollar devaluation and a debt default. Be patient we should see them happen within two years. Maybe we will get lucky and get tariffs on goods and services. That way we can bring most of our jobs back and get a healthy economy back with 5% unemployment. Many credit derivatives will be banned as well. We have been involved in markets for 50 years and we know sooner or later those who are leveraged – or on margin – lose sooner or later. As a broker we never had margin accounts. The halt in the downward fall of economics, finance and stock market prices are but an interlude. There are still no solutions, so the downside will begin anew. One thing that has come out of the foregoing and the recent troubles in Greece and with the euro is that gold has been recognized as money, as a currency. That view is going to grow as gold trades higher and higher. As an example, just look at the value of gold in euros and all other currencies. Gold has consolidated time after time at $1,050 to $1,100 no matter what the US government threw at the gold market. There have been a few exceptions to gold’s strength, but over time all currencies will fall against the only real money. On the short-term do not forget the government is very short gold and silver on the Comex, probably the LBMA and most certainly in the producer shares. This week’s numbers will give us an indication whether they have begun to cover. We are going to also see a resumption of inflation officially in the next CPI figures. Real inflation is again approaching 8% and this inflation will be reflected in gold and silver prices. Not all professionals are dumb enough to believe official figures. On the downside we do not believe $1,050 to $1,100 will ever be broken again. Your gains when they come will be quick and large.
Now that most of the evidence is in, it is apparent that Lehman Brothers management created a colossal fraud even bigger than that of Enron with its Repo 105 maneuvers and was assisted by its accounting firm of Ernst & Young, and by the NY fed under the direction of our current Treasury Secretary Timothy Geithner. Geithner and all the top management and directors of Lehman should be charged criminally, but all being Illuminati members no one has been charged. Do not expect much from the Department of Justice. Eric Holder was the official who wrote the pardon letter for March Rich, tax cheat and Mossad operative for the State of Israel. As you can see Holder is where he is today because of his enablement of criminal activity. It shows you again that Wall Street, banking and Washington are nothing more than a criminal cartel. The question now is who else on Wall Street is doing the same thing? We already know they keep two sets of books, which is sanctioned by the BIS, the FASB and your government. What is really going on at these Illuminist firms, besides that they tell us they are doing God’s work.
As this criminal activity unfolds the Chairman of the Federal Reserve Ben Bernanke wants more regulatory authority for the Fed so the Fed can better cover up criminal activities. He says the Fed is unequally suited to supervise large, complex financial organizations and to address both safety and soundness risks and risks in the stability of the financial system as a whole. This is the ringleader talking. This is the nexus, the core, the leader of criminal activity in America grasping for even more power. This is the same group under Greenspan and then Bernanke that created the stock market bubble of the late 1990s, the housing, mortgage, commercial real estate bubble, the bubble that took the Dow to 14,100 and then from 6,500 to 10,900, the toxic garbage bubble and the bubble on Wall Street and in banking.
These are the people who lost Americans trillions of dollars so they could implement world government. All this just didn’t happen; it was planned that way. Yes, they are unequally suited to the creation and transmission of criminal activity. This is the same Fed that spent two years in Lehman’s offices and found nothing, because they aided and abetted their criminal activity. They knew everything that was going on. They were trying to bail Lehman out and it did not work. The SEC was there with them, shoulder to shoulder, covering up the crime scene. They are all liars and thieves, not incompetents. We then wonder how deep and serious the fraud is at other firms. From what we have seen so far we haven’t even scratched the surface. We want to see all these facilitators in jail. We do not want to see the Fed with more power. We want to see the Fed out of business as well as the end of the SEC and CFTC. As you can see our government and Wall Street are totally corrupt and unless we do something about it they will destroy our country.
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The Financial System in America is on the Edge of Default
by Bob Chapman
Global Research, March 14, 2010
The dramatic and costly undertow of deflation continues unabated, as government via fiscal policy and the Federal Reserve, by creating money and credit out of thin air, proceed to overpower this deflation with massive inflation.
Unbeknownst to most the Fed and the Treasury have been maintaining this program for the past several years, accompanied by most major countries, all of which have taken the path of least resistance rather than address the underlying problems.
The current stage of problems had to be addressed 2-1/2 years ago in what has become known as a credit crisis. This continuing crisis has been accompanied by 22-1/8% current unemployment that has resulted in a perpetual fall in tax revenues and a resultant enlargement of government deficits. We might add that this condition is being experienced by many countries worldwide, which followed America’s leadership into this terrible financial and economic morass. These policies have led to massive sovereign debt policies, a hangover of the policies of 1933 and 1971.
The financial system in America is on the edge of default. A recent poll found that 92% of those surveyed wanted to unseat their current representative or Senator in Washington and only 21% believed that government enjoyed the consent of the governed. It’s very obvious people are not happy with the political, economic and financial situation presently. Eighty percent believe that government is enmeshed in partisan infighting. Not only between parties, but within parties as well. Politicians are very aware of these numbers and are frantic to get reelected. The public has recoiled in disgust. People are demanding that the power of government be curbed. People are sick and tired of paid off corrupt politicians, more than half of whom have been in office for more than ten years.
It is not healthy for a nation to have $3.3 trillion in Treasury bonds held by foreigners. China holds about $900 billion and Japan about $800 billion. We also understand that hedge funds and others also are fronting both countries, so the figures are not really reflective in their total positions. These nations for the most part are rolling their positions, but have not injected new capital into US Treasuries. That is why the Fed had to fund 80% of new Treasury debt last year.
Presently the Fed is fighting and pulling out all stops to halt legislation to audit the Federal Reserve, a private corporation, which has managed our monetary policy since 1913, under the Federal Reserve Act. On Monday the Treasury held a media conference for financial reporters and bloggers in which the Fed was discussed. The meeting had some very strange conditions. Mr. Geithner, Mr. Krueger and Mr. Sperling could be paraphrased but not quoted and what was paraphrased could not be connected to a specific official. Again, the element of secrecy to protect the guilty. One blogger said, “Did they get the ground rules from Al Qaeda?” The meeting was a travesty. How can government officials demand secrecy in public briefings? It is no wonder that 90% of the public and 317 members of Congress want more Treasury transparency and an audit and investigation of the Fed. This is the same gang run by Geithner and Bernanke that are currently running the gold suppression scheme. When you have a criminal cabal involved you have no transparency. That is why the audit of the Fed is so important. Such an exercise would expose exactly what both have been doing in the markets. The Fed and Treasury have lied for years about what they have been up too in behalf of their Illuminist friends. It is not only about the actions of the President’s Working Group on Financial Markets, but the funding of Watergate, Saddam Hussein, who they supposedly conveniently hung, the countries that secretly received loans, how much, who got them and what was the collateral? Were currency swaps with foreign control banks used to strengthen the dollar by the Fed and for those foreign control banks to purchase Treasury and Agency paper? How about all the inside information funneled to Wall Street and banking for almost a century from both the Fed and Treasury? Their lies are legion. They both are manipulating every market in the world 24/7 and the American people want it stopped. We also want an audit of America’s gold and the testing of the gold bars held. There is much we want to know, so we can save our country and our freedom.
Investors continue to chase yields, which is a dumb practice. Interest rates are at 80-year lows and can only stay the same or rise. People are grabbing junk bond yields that will come back to haunt them.
At least for now Greece and euro problems are being shuffled into the background. You can imagine this is not the last of the eurozone problems. The PIIGS will be back one by one to cause never-ending problems until they are forced to leave the eurozone. That will cause a eurozone breakup, probably by the end of next year.
This is the first real threat to the eurozone since its beginning ten years ago, and we think they will find that their rules are so restrictive that weak members will be forced to leave. The monetary policy and interest rates may be singular, but fiscal policy is not. Exchange rates for the euro must fit all members, but rates and methods of growth vary widely. With one currency sovereignty has effectively been lost. Public debt to GDP has to be under 3%, while most are over 3%: Greece is at 10.7%. There is also a public debt limit of 60% of GDP, which all nations in the zone have broken. All precepts have not and cannot be met. There is no effective policy because there is no way to enforce the rules. In addition most have current account deficits and the zone effectively has been carried by Germany from this aspect. The bottom line is a few have growth, the rest do not. As a result there is pressure, due to poor growth in some of the nations, for austerity measures to reduce fiscal deficits at the worst possible time. Greece comes first along with Ireland and the rest will follow.
Just as an example, Spain has a fiscal deficit of 10% of GDP that has to fall to 3% within three years, which is virtually impossible just as it is in Greece. Their current account deficit is 4.5% of GDP. In a recessionary/depressionary world getting into the plus column is a tall order. This dilemma is the result in part of the housing collapse caused by Spanish banks and inattention by the Bank for International Settlements. We see consumption continuing to fall in the face of 20% unemployment, which worsens by the day. The PIIGS and a present total of 19 nations are effectively bankrupt. We do not believe they can survive without devaluation and debt default. That is why we expect that to happen next year.
Historically banks have kept loan loss allowance ratios at $1.33 for every dollar of debt. Today it is 0.58%.
The commercial paper market rose $11.2 billion last week to $1.145 trillion.
The Treasury sold $21 billion in 10-year T-notes. The bid-to-cover was 3.45 to 1, which is average vs. 2.85 to 1. This was the highest since 1995. Indirect bidders, which include foreign central banks, bought 35.1%, compared to an average of 41.7% at the last four re-openings.
Almost 39 million Americans received food stamps in December, the most ever, as the jobless rate hovered near a 26- year high, the government said.
Recipients of the subsidies for food purchases climbed 23 percent from a year earlier and rose 2.1 percent from November, the U. S. Department of Agriculture said Thursday in a statement on its Web site. The number receiving the benefit has set records for 13 straight months.
Food aid climbed as the national unemployment rate reached 10.1 percent in October, the highest since June 1983, and remained at 10 percent through December before easing to 9.7 percent in January.
An average of 40.5 million people will get food stamps each month in the federal fiscal year that began Oct. 1, Agriculture Secretary Tom Vilsack said last week. The figure is projected to rise to 43.3 million in 2011.
Nevada had the biggest increase in the percentage of the population receiving the coupons, up 49 percent from December, USDA figures show. Texas had the most recipients, at 3.31 million, topping California’s 3.11 million.
The U.S. government recorded a budget deficit of $221 billion in February, the Treasury Department reported Wednesday, even as its income posted a big increase for the month.
Income totaled $107.5 billion in February, a 23% increase over last February's total, and marking the first monthly year-over-year increase since April 2008.
Spending was $328 billion in February, up 17% year over year. That was the largest February total on record, a Treasury official said.
February was the 17th consecutive month that the government recorded a deficit. It was a little less than expected: last week the Congressional Budget Office predicted that the deficit would be $223 billion in February.
Year to date, the deficit is $652 billion, according to the Treasury data.
The Senate approved a $140 billion package of tax breaks and aid to the unemployed Wednesday, the most substantial effort by the chamber to boost the nation's economy since passing the stimulus bill last year.
Six Republicans joined 56 Democrats to pass the "tax extenders" measure, 62 to 36. The package faces an uncertain future in the House, where Democrats have taken a markedly different approach to the "jobs agenda" than have their Senate colleagues.
Small defense companies, energy firms, and other technology start-ups throughout New England could lose tens of millions of dollars a year because of a decision by House Democrats yesterday to abruptly halt budget earmarks for companies.
The decision follows a House ethics probe into an alleged pay-to-play system in which investigators followed a trail of campaign contributions and linked them to earmarks — a provision added to a bill that directs money to a specific project, in this case, a private company. Although the House Ethics Committee cleared members of specific wrongdoing, House leaders remained sensitive to the appearance of a rampant quid-pro-quo system that has stoked outrage around the country.
The decision, which exempts earmarks for nonprofit groups, could significantly affect Massachusetts because the House delegation has proved adept at the political horse-trading required to obtain funding for private companies.
Can Nancy Pelosi Get the Votes?
The Senate bill's abortion language is not the House Speaker's only problem.
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