ch.annel2-i.s-n.ow-a.ngry

And shit, they have all our money.

BEIJING, Sept 25 (Reuters) - Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis, the South China Morning Post reported on Thursday.

Seriously, we’ve been buying cheap shit merchandise from China on credit these past 30 years. We’ve larded up on it cuz hey, it’s cheap. Now they’ve been put through slavery and polluted by our greed, and our greed is attempting to have a meltdown on a global scale. They are saying our banking system isn’t creditworthy - a point Mish has been making repeatedly about the nearly 7 trillion dollars of deposits, 247 billion of which are actually kept on hand which makes the banking system insolvent if more than a small percentage of depositors withdraw - and not to mention the fact that these banks are also sitting on explosively devaluing assets. Make no mistake, China hasn’t taken our money, we’ve thrown it at them. We couldn’t throw it fast enough. Now, our pocketbook is weak - our debt outweighs our savings. 7 trillion in the bank and 12 trillion in total US mortgages on the balance sheet - not to mention the national debt of 9.6 trillion on the way to a potential 11 + ? Lets face it, these bailouts aren’t gonna suddenly start getting smaller, now that the strong are swallowing the weak and de-gaining. JP Morgan bought WaMu for 1.9 billion and 30-45 billion in future write-downs from the tragic mortgages WaMu is currently serving, and don’t forget the 1.7 or so trillion worth of derivatives deals JP Morgan is involved in, with no one having any money it’s going to be hard for those derivatives to keep paying (and lets face it, the ripples of interference in a wave pattern like this just get rougher as it goes).The world’s fourth-largest economy just cut off lending to the largest. They keep talking about too big to fail in terms of corporations, but what about countries? Our president claims that horrible, terrible things will happen if we don’t get this 700 billion to our banks - but where, exactly, will this debt be coming from, is the rest of the world going to prop us up?We don’t even want to prop us up - we realize it will just worsen things and draw out the inevitable Depression 2.0 that is coming. In medicine, you can’t heal until you’ve cut out the sickness - leaving in the sickness and treating the symptoms will only draw out and dampen the healing process. The sickness, in our case, is debt. The US holds over 21 trillion dollars in debt, personally and federally. A trillion here, a trillion there, and soon we’re talking about real money. With only 7 trillion in the bank (i.e. lent out by banks) that leave approximately 14 trillion held by private and/or foreign interests - of course those numbers are going to be off because of the laughable status of Fannie and Freddie - I think at this point they are technically owned by everyone everywhere.  When one of the big 3 (Citi, JPM, BofA, all now or soon to be worth 2 trillion or more a piece) fails due to derivatives, who’s gonna be big enough to Fail them out?  

Mr. Lewis began rapidly building his stake in Bear Stearns last summer, shortly after the bank announced that two internal hedge funds had imploded. In December, his stake rose to just under 10% from about 7% when Bear’s stock price fell below $110, forcing him to make good on an options trade he had made with another party.

Ouch. From $110 last summer to $2 today. That’s barely enough months to require both hands to count up to and they’ve lost 99% of their worth.

Comix on the Washington Post

I’m pretty sure even my betta fish understood that.

PS. Bear Sterns, with 13 trillion dollars or so in leveraged funds, might be about to sell sold for $2 a share, down from $62 or so at the start of last week. Can we say ouch my pocketbook is on fire. Watch those one and two zeros disappear from your balance sheet.

But if those assets decline in value, the Fed would bear any loss, not J.P. Morgan.

If you’re an amateur like me, you can use a program like Buddi to keep track of your monetary assets and budget expenses. All I know is my dollars may be fairly worthless compared to a year ago, but at least there are black numbers to my name and not red ones. I hope some of you can say the same.

1. Bartender, This CPI Not So Think As You Good It Is!

Another round, please! The futures this morning spiked hard on what conventional wisdom suggests was a truly impressive Consumer Price Index print. Consumer prices in February came in unexpectedly unchanged thanks largely to 0.5% decline in Energy prices that, seasonally adjusted, turned into a 2% decline.

Consumer prices were forecast to rise 0.3%, according to the median estimate of 81 economists by Bloomberg.

Looking inside the CPI, Medical Care costs rose 0.1%, the smallest increase since March 2007. Food, which accounts for about 20% of the CPU, continued to show gains, up 0.4% increase.

The reality, however, is that this inflation measure is a lagging indicator no matter how it is sliced and diced. But credit markets are leading indicators. And while economists and market participants fight over the legitimacy of this CPI print, the credit markets continue to scream deflation.

My thought: What if the price Americans were paying in oil subsidies payed for by out tax dollars (the very same oil subsidies that we denigrate Venezuela for having) were factored into the CPI?

If you go to the first three web sites listed below, you’ll learn that the oil subsidies in the US are in the range of $20 to $55 billion per year (averaging and rounding off). The high end includes the military costs of “defending” Persian Gulf oil; the low end doesn’t.

So add that to the price at the pump and see what we get, I’m too tired to do the math right now (2am and don’t feel like decyphering the Consumer Price Codex at the moment). The above link is rather specious but I’ve had trouble coming up with hard data about oil subsidies. And you think all those taxes you pay at the pump are going to the gov and back to the roads, but it’s robbing Peter to pay Dick because all that money is at the very least going straight back to Big Oil. Conservative estimates put it at an extra 32 cents per gallon. Now, I pay about $400 bones in taxes per quarter, and in the last three month’s I’ve spent approximately $233 on gas in the last quarter (and that’s not counting cash or December, this is for the quarter ending 3/31), which, at an average of $3 a gallon ($3.41 now with Safeway discount) gives me roughly 78 gallons of gas bought in 2 1/2 month. That’s an extra $25 at the pump, so that means $25 less of my taxes going to pay for things for you and I. It’s going to help us drive our machines of war over Iraqis, and Saudi born Iraqi jihadis. Or at least a good $20 bucks worth is.

The United States has a capitalist mixed economy, which is fueled by abundant natural resources, a well-developed infrastructure, and high productivity. According to the International Monetary Fund, the United States GDP of more than $13 trillion constitutes over 25.5% of the gross world product at market exchange rates and over 19% of the gross world product at purchasing power parity (PPP).^[4] The largest national GDP in the world, it was slightly less than the combined GDP of the European Union at PPP in 2006.^[62] The country ranks eighth in the world in nominal GDP per capita and fourth in GDP per capita at PPP.^[4] The United States is the largest importer of goods and second largest exporter. Canada, China, Mexico, Japan, and Germany are its top trading partners.^[63] The leading export commodity is electrical machinery, while vehicles constitute the leading import.^[64] The national debt is the world’s largest; in 2005, it was 23% of the global total.^[65] As a percentage of GDP, U.S. debt ranked thirtieth out of 120 countries for which data is available.^[66]

$13,000,000,000,000/$150,000,000,000=1%

So, a 1% capital boost is somehow supposed to save our economy. 1% that we’re loaning to ourselves. Actually, that’s 1% that we’re borrowing from foreign countries or financing to ourselves through self-bought debt. Explain to me why that’s a good idea again?

Back in Reagan’s time the saying inched up to be “A billion here, a billion there, pretty soon we’re talking about real money.” We’re starting to get to the point that billions are becoming more meaningless. US military spending is now half a trillion dollars. Every year. A 75% increase in the past 7 years. Also, shockingly enough, our deficit is almost half a trillion dollars a years, though that’s gone down from it’s high of $431 billion in 04 (or whenever, it’s too late to fact-check myself right now.)

Sure, we got a bunch of shiny toys and a country or two invaded, but we don’t have any rich aunts that are going to pass away and leave us enough money to get out of debt. In fact, if every billionaire in the US passed away tomorrow and left all their money straight to the gov with an order to use it to pay the debt only, we’d be right back at nearly $10 trillion in debt by the end of the next president’s term.

Right now, the White House is asking Congress for $70 billion in supplemental war funding. Judging by past spending, that $70 billion will last about four months. Add up all projected defense-related spending for fiscal 2009 and $515 billion balloons to $750 billion — almost a third of all U.S. federal spending today. To put it another way, if the Pentagon were an independent country, it would be the 10th richest in the world.

Sneak sneak my pretties.

It occurs to me that in all these shady-lending things going on in the media, and people calling for reforms in fucked-up markets, that no one mentions the practice of payday loansharking. If any industry needs some regulation hardcore, it’s that one. They don’t break your knees, they just ruin your credit and make you more in ‘need’ of their sketchy services.

Ben S. Bernanke, the chairman of the Federal Reserve, signaled his readiness on Wednesday to further reduce interest rates even though inflation has picked up speed, and he called again for more effective rules to deter questionable lending practices.

and the decline in household wealth as a result of falling home prices.

“Decline in household wealth as a result of falling home prices.” I’d like to point out that that is actually Not True. Households are not losing wealth, they are losing the opportunity to go deeper into debt based on inflated valuations of their homes. This is actually increasing debt-safety by stopping home-based lines of credit and forcing people to just repay them, instead of making payments and getting deeper in debt to equity-based credit on homes they don’t own yet. Sure, it’s bad for the rich people that these homedebters were getting in hock to, because their companies now wont be able to be irrationally valued on the stock markets and all their hedge funds that were paid for by junk will tank, which of course will hurt the investors and retirees they’ve suckered, but that would have happened anyway, eventually.

Things will work out, everything is a balance, and like any good pendulum when it swings too far to one side it will come crashing back, then swing again. The ‘wealth’ of a home shouldn’t be spendable, you’re risking your domain for some fast cash. Some of those who have done so will be alright, because they are skilled and will keep their jobs. Some will not. These could even be people that at one point owned their homes, now getting them taken away for some cheap bling from the rich man. From slavery for pyramids to slavery by debt, willingly walked into.

Mocking of the early visionaries is part of the topping process. Group think sets in and is reinforced over the years. Risk premiums drop as the long term trend reaches the peak. That takes time. Memories fade. Does anyone fear another great depression? Heck, does anyone even remember it, let alone fear it?

I was raised by someone who was about 10 when the Great Depression hit. I remember the stories, the lifetime scars it left on the hearts and souls and bodies of those hardest hit by the depression, the poor immigrant families of the day.  I myself am very young, but was always raised with the attitude of be lucky for what you have because one day you might not have it. And I see examples of this every day in the homeless whose lives have been destroyed by either mental illness or drug abuse (another form of mental illness). They were once like me, but they lost what they had. Well, as a nation we had that problem in the 30s. And it can happen again, because mobs rule and when the biggest mob is poor and not spending any money…

China’s increasing involvement in the United States economy, including the recent purchase by a Chinese government investment fund of stakes in the private equity firm Blackstone and in the investment banker Morgan Stanley, has aggravated concerns in Congress. But the Bush administration does not view these as threats to national security.

Oh crap, did we sell our country for some shiny dvd players and cheap WalMart baubles?

Bush, citing some experts, said the U.S. was not in a recession, although he acknowledged “that the signs are troubling enough” to justify the $168 billion economic rescue plan that passed Congress this past week.

$168 billion drop-in-the-bucket phoney-baloney tax rebate that just equals  another $168 billion in debt for the US because that money is coming from fucking no-where.

Save your ‘tax-rebate,’ don’t spend it, because you’re going to owe that money back in taxes next year and you will be a-crying.