Tuesday, March 12, 2013

Weekly Fear-Mongoring: Death of an Empire Part III

Exciting times coming up as we elect a new/(final?) Pope this week (my money continues to be on Ghana Cardinal Peter Turkson, who will take the name Pope Pius XIII). We also waved goodbye to the cuddly and affable Hugo Chavez (Sean Penn must be drinking again). Finally, North Korean leader Kim Jong Un continues to vie for attention by screaming like a petulant little child about how he's going to pre-emptively attack the West Coast (whatever, less red ink. Earthquake's gonna get them anyway. I'm over it). And Obama is FINALLY off to Israel to discuss how to creatively pussy out of attacking his fellow Jew-haters in Iran. And the Dow is at 14k!!!! Celebration in the streets!!!

But first onto part III on the Death of an Empire. This week's guilty party? WALL STREET!!!!!

Part I of the 'common sense expose' fingered the Federal Reserve (more like the Federal Reserve fingered the printing press and she squirted out a worthless fiat currency to soon be worth as much as toilet paper). Disgusting play on words. But not as disgusting as hyperinflation by 2014. Part II blamed our awesome government (both sides). It's time to attack the third part of the triumvirate by implicating the globalist crooks that took TARP money from the tax payer and oh by the way still got a nice bonus out of the deal.

Due to the unmitigated ineptitude of the SEC and US government, megabanks and investment companies were able to reap outsized profits in the lead-up to the 2008 economic crisis from our previous bear market of 2000-2002. We slugged through the Enron, Arthur Andersen, and Healthsouth (among others) scandals, drew up legislation that mandates CEO sign-off on financial records - and we STILL have a near economic collapse five years later!!!! Wasn't this supposed to prevent financial fraud? The aforementioned housing bubble prompted the opportunity for banks to collateralize mortgages and market mortgage-backed securities consisting of no-money-down sub-prime loans. They also dabbled in credit default swaps, interest rate swaps, and other derivatives. The top nine banks have over $225 trillion of derivatives exposure. Estimates for ALL global derivatives are over $1 QUADRILLION!!!!! I can't even count that high. How the hell were these banks allowed to enter into these sketchy transactions? Who was minding the store? Who is regulating derivatives that five people on earth truly understand? In fact, I'm now GLAD I got a non-reimbursable grade in a grad school derivatives class - it validates the fact that NO ONE knows how the hell derivatives work!!!!!

Everybody hears the phrase 'TARP' bandied about ('Troubled Asset Relief Program') that banks were FORCED to adhere to and accept money by the US Treasury. In total, $418b was issued to troubled banks, and $405b has been paid back, with interest. But that interest doesn't go to paying down the debt, that would make too much sense. Then-Treasury secretary Hank Paulson threatened martial law if Congress didn't pass TARP since the system would undoubtedly crash (as we will find out for realz in the next 18-24 months). Basically, banks can do whatever the hell they want with their money and get bailed out for bad decisions. Remember when I mentioned in Part II about the lack of foresight of the Clinton administration? What? You didn't read it? Well put the Ben & Jerry's down and go read it. I'll wait.

Ok thanks for reading that. The reversal of the Glass-Steagall Act meant banks could take on 'moral hazard' risks and blend their commercial and investment operations. So risks that they didn't have to be accountable for since they knew they had a lifeline to the government. Kinda like the trust fund baby who has a drug habit and daddy always bails him out when his lifestyle gets a little wayward. The 2008 crisis claimed the lives of Merrill Lynch, Bear Stearns, Washington Mutual and countless others due to toxic assets that careless executives kept on their balance sheets and marketed to investors. The Big Five banks (JPM, Goldman, BOA, Citi, Wells Fargo) had about $600 billion of potential derivatives LOSSES. Actual realized losses in the tens of billions. JPM realized a $6 billion loss in 2012 alone over another derivatives bet gone wrong. Realized losses are a big deal. JPM can handle it since they are backed by the global elites along with Goldman as the bankers of record. These banksters can do no wrong because no one in government and any relevant regulatory authority will take them to task. In fact, embattled Attorney General Eric Holder was quoted last week of saying the following - "I am concerned  that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy." Are you kidding me? Who says this? Imagine stealing money from your grandparents and then someone saying you can't be prosecuted because it might have a negative impact on other criminals. Our financial system is a joke.

Don't get me started on the lack of taxes hedge funds have to pay. Now, we can rail against evil corporations, but tax rates haven't changed for the average company in 25 years (30-40%, 0% if you are GE and have the best tax accounting team in the world). Hedge funds, while not evil either, are not subject to the high taxes of corporations . Instead, due to the carried-interest loophole, hedge fund managers are allowed to treat the money they receive from investors as capital gains, subject to a 15 percent tax rate. I'm fine with hedge fund managers like John Paulson, Phil Falcone, and George Soros earning billions on their investing genius, but please pay an equivalent corporate tax since chances are you don't have the same overhead as a company that actually manufactures things and pushes product out across the country/world. I'd also love it if Soros got hit by a truck and died an extremely painful death. But enough about me.

We also watched the same banks and corporations that received taxpayer bailout money give lavish bonuses to their top executives. Check out this chart from 2009 of the some of the top banks:

This continued into 2010-2011 before Congress finally stepped in to pretend to curb it. JPM and Goldman continue to thrive in this pretend economy despite receiving sizable bailouts. Oh, and don't expect the clowns who sold toxic assets to accredited investors to go to jail. Unless you ran a Ponzi Scheme, you are safe. Who cares if you pissed away billions of dollars? Look at Jon 'The Slime' Corzine, who pilfered client account funds to the tune of $700 million into its operating account to cover shortfalls. No ex-Goldman exec would unknowingly do that. No jailtime for this piece of shit either. This guy was an ex-NJ governor and potential Obama advisor and he gets away scott-free. What about the countless other hedge fund managers who made bad derivatives bets with other people's money? JPM, Goldman, HSBC, you name it. What about the LIBOR scandal where JPM, Barclay's, Bank of America and others manipulate the London Inter-bank Overnight Rate? Small fine and slap on the wrist, go about your business. No one will hold banks responsible, not now, not then, not ever.

Now we look at the markets, who have been pumped full of easy money from the Fed, banks and every other type of business are doing well right now since they are experiencing financial roid-rage to the highest degree as a result of $2 trillion being printed out of thin air. Of course the sheeple are celebrating. Life is good on Wall Street. We are approaching the same type of illusory exuberance as 2007, the pride before the fall. Well guess what - the bond bubble is about to burst and the dollar is about to crash.

So what can we expect in the next crisis? Well, my money is on a further consolidation of the big banks, with Citi and Morgan Stanley playing the role of Bear Stearns and Merrill Lynch as the odd men out when the system collapses. Rumors abound that there is crack staff of 400 government accountants investigating the viability of a major investment institution that is likely to fall very soon. Expect JPM and Goldman Sachs to be the Big Two left standing. Maybe Bank of America stays alive too. All of the QE money is going straight to these banks, so in essence, the Fed owns your mortgage. You are Ben Bernanke's bitch. These large-scale banks can bet the good and the bad in the economy, so no matter what happens, they win. Read 'Why I Left Goldman Sachs' by former GS US equity derivatives head Greg Smith. Eye-opening accounts of high level scumbag activity. These companies are backed by the richest families in the world (subject of a future post, I've given high level info before though), an occultist group of old-money elitists bent on world domination. They also appoint ex-Goldman heads to the highest levels of the global banking hierarchy. And you thought the Bill Belichick coaching tree was impressive? These folks dominate EUROPE alone:

Not to mention the domestic influence of current CEO Lloyd Blankfein, former Treasury Secretaries Hank Paulson and Robert Rubin, ex-Merrill CEO John Thain (ran it into the ground with derivatives exposure), and the aforementioned Jon Corzine. These people pull a good portion of the strings behind the Federal Reserve and any administration that takes the White House. There's nothing we can do to stop them, but we keep our eyes open and diversify our assets as best as possible before the dollar crashes and the great banking consolidation begins. Wall Street most certainly is not looking out for you. Watch their moves in the coming weeks/months. Hundreds of bank execs (small and large) are slowly retiring early and moving out to the Midwest. Good spot to be once the derivatives crash/bond crash happens. That's enough for now.

Up next - Part IV of the blame-game. Guess who the last responsible party is? YOU!!!!!!

No comments:

Post a Comment