"Thank you, Mr. Drudge! This guy is must-reading."
OK, so the bottom line is that you got played for a fool if you bought into the $1-trillion bailout bill Congress passed. You probably didn't notice that the day it passed, the Fed shoveled $630-billion out the door, and is still pumping out hundreds of billions more even with its passage.
The so-called "death spiral" we are seeing, according to Mr. Evans-Pritchard, so bad that he says the world is within days of a complete financial meltdown. It's reasonable to ask why the bailout bill - heralded as the answer to the question of how to stop this disaster in its tracks, is doing nothing of the sort. Re-read the paragraph above; the Fed is throwing hundreds - and hundreds - of billions of dollars at this, and the move they throw, the more this monster wants to eat.
Why? Because buying up the so-called "toxic assets " of the US financial system is not, and never was, the answer. All that bit of insanity did was feed the money-lust of the world's financial institutions for more.
The reason they lust for more is because the real answer to the world's problem is recapitalizing the world financial system. In short, the so-called "Masters of the Universe" stole the world blind, and pocketed the money into their own accounts.
What we really have is a 21st Century Bonnie & Clyde experience; the difference is that our generation's Bonnies and Clydes use computers instead of guns to steal from the world's depositors, and they use corporate jets and a completely corrupt US government to get-away from the law instead of a straight-six Ford.
You have to recapitalize the world's banks because these modern-day bank robbers drained them dry.
There are some lessons here:
1) You are not rich, and way more than likely, you never will be rich - not on the level I use the word. When the CEO of Washington Mutual - WaMu for its officially shortened name - can walk out the door with $19-million in compensation for 3 weeks work, that type of legalize theft is the level I'm talking about as "rich." I don't know who you are that is reading this, but I won't lose any money betting you are not playing in that league.
What that all means then is that you are the one who is being stolen from, and not the one doing the stealing.
2) The next time some idiot comes up to you screaming that taking that type of compensation away from the truly rich constitutes "class warfare," tell the idiot he or she is correct. But not for the reasons the idiot screams.
This class warfare is already being waged on you by the truly rich. They spoils of their class warfare on you is that you are being drained dry by the truly rich.
In short, the class war is already begun; are you going to defend yourself from their war on your life's earnings? Then you better start telling the idiots to get out of your face so you can see clearly as you take your shots at the truly rich to get back what they stole from you.
Those two ideas will do for tonight. I have to be up early tomorrow to get ready for Sarah-cuda's visit to Pensacola.
Here is the article by Mr. Evans-Pritchard to end your night.
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Germany takes hot seat as Europe falls into the abyss
We face extreme danger. Unless there is immediate intervention on every front by all the major powers acting in concert, we risk a disintegration of global finance within days. Nobody will be spared, unless they own gold bars.
By Ambrose Evans-Pritchard
Last Updated: 8:37PM BST 06 Oct 2008
Investors will learn today whether the Paulson bail-out - fattened to $850bn (£480bn) by Congress - can begin to halt the death spiral in the credit system. So far, the response looks terrible.
Germany is now in the hot seat. The collapse of a rescue deal for Hypo Real Estate on Saturday threatens a €400bn (£311bn) bankruptcy that nearly matches the Lehman Brothers debacle for sheer scale.
Chancellor Angela Merkel has been forced to pull her head out of the sand, guaranteeing all German savings, a day after she rebuked Ireland for doing much the same thing. Reality intrudes.
During the past week, we have tipped over the edge, into the middle of the abyss. Systemic collapse is in full train. The Netherlands has just rushed through a second, more sweeping nationalisation of Fortis. Ireland and Greece have had to rescue all their banks. Iceland is facing an Argentine denouement.
The US commercial paper market is closed. It shrank $95bn last week, and has lost $208bn in three weeks. The interbank lending market has seized up. There are almost no bids. It is a ghost market. Healthy companies cannot roll over debt. Some will have to sack staff today to stave off default.
As the unflappable Warren Buffett puts it, the credit freeze is “sucking blood” out of the economy. “In my adult lifetime, I don’t think I’ve ever seen people as fearful,” he said.
We are fast approaching the point of no return. The only way out of this calamitous descent is “shock and awe” on a global scale, and even that may not be enough.
Drastic rate cuts would be a good start. Central bankers still paralysed by a misplaced fear of inflation – whether in Europe, Britain, or the US – have become a public menace and should be held to severe account by our democracies. The imminent and massive danger is now self-feeding debt deflation.
The lesson of the 1930s is that any country trying to reflate in isolation will be punished. The crisis will ricochet from one economy to another until every one is crippled. We are seeing it play again in this drama as our leaders fail to rise above their narrow, parochial agendas.
The European Central Bank – which raised rates into the teeth of the crisis in July – has played a shockingly destructive role in this enveloping slump. Its growth predictions this year have been, and still are, delusional. Neglecting its global role, it has vastly complicated the fire-fighting efforts of Washington.
It could have offered “cover” to the US Federal Reserve this spring when Ben Bernanke was forced by events to slash rates to 2pc. It could at least have signalled an end to monetary tightening. That is how an ally ought to behave.
Instead, it stuck maniacally to its Gothic script, with equally unhappy consequences for both sides of the Atlantic, as well as for China, Japan, and India. The euro rocketed yet further, which it turn set off an oil shock as crude metamorphosed into an anti-dollar with leverage.
The ECB policy was self-defeating, even on its own terms. It merely drove headline inflation even higher, while deeper forces of underlying debt deflation pulled the real economies of Germany, Italy, France, and Spain into a recessionary vortex.
Far from offering reassurance, the weekend mini-summit of EU leaders served only to highlight that nobody is in charge of this runaway train. There is still no lender of last resort in euroland. The £12bn stimulus package is risible.
Angela Merkel has revealed her deep limitations. It was she who vetoed French efforts to launch a pan-EU rescue package, suspecting that any lifeboat fund would prove to be Trojan Horse – a way of co-opting German taxpayers into colossal transfers of wealth to Latin Europe.
In that she is right, but it is too late now for dysfunctional EU political games. By demanding that those who caused the damage should pay for it, she crossed the line into caricature, or worse.
Her comments echo word for word the “we’re alright Jack” attitudes of Euro-pols during the first US banking crises in 1930-1931, until the storm hit Europe and the entire cast was swept away by furious electorates, or simply shot. Thankfully, this EU stupidity is at last drawing serious criticism.
“We have to make sure Europe takes its responsibilities, like the US: action must be taken quickly and in a concerted manner,” said IMF chief Dominique Strauss-Kahn.
As for the US itself, it has not yet exhausted its policy arsenal. It can escalate further up the nuclear ladder. The Fed can cut interest rates from 2pc to zero. If that fails, it can let rip with the mass purchase of US debt.
“The US government has a technology, called a printing press,” said Fed chief Ben Bernanke in November 2002. (His helicopter speech).
In extremis, the Treasury/Fed can swoop into any market to shore up asset prices. They can buy Florida property. They can even buy SUV guzzlers from the car lots in Detroit, and mangle them in scrap yards. As Bernanke put it, the Fed can “expand the menu of assets that it buys.”
There is a devilish catch to this ploy, of course. It assumes that foreign creditors will tolerate such action.
Japan entered its Lost Decade as the world’s top creditor, with a vast pool of household savings to cushion the slump. America starts its purge with net external liabilities of $3 trillion, and a savings rate near zero. Foreigners own over half the US Treasury debt, and two thirds of all Fannie, Freddie, and other US agency bonds.
But the risk of a dollar collapse is one for the distant future. Right now the world faces the opposite problem. There is a wild scramble for dollars as a $10 trillion pyramid of global lending based on dollar balance sheets “delevers” with a vengeance.
This is a “short squeeze” on those who have used the dollar for a vast global carry trade. International banks are facing margin calls on their dollar leverage. It is why the Fed is having to provide $1.25 trillion in dollar liquidity for the entire global system, according to estimates by Brad Setser from the Center for Geoeconomic Studies.
The crisis engulfing Europe, Asia and emerging markets, makes life easier for Washington. The United States is becoming a safe-haven again.
The Fed can now hope to pursue monetary stimulus “a l’outrance” without being slapped down by the currency, debt, and commodity markets. Take comfort where you can.