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

Found via CR’s blog - but the main part is in images so i’ll just quote a bit from those, but really this is pretty fucking amazing:

Madoff [stated] that his investment advisory board was a fraud. [He] stated that he was “finished,” that he had “absolutely nothing,” that “it’s all just one big lie,” and that it was “basically, a giant Ponzi scheme.” … [He] also stated that he estimated the losses from this fraud to be at least approximately $50 billion.

That’s only one hedge fund, hopefully the other were more scrupulous, but considering how much fallout there’s been in the hedge-fund industry…

Sure, most of the crash of 29 and the great depression stock loss happened that October - we just had our black October, you can see it in the huge drop at the end of the blue line. But there’s no reason for things to get better until things start getting better, and with unemployment setting records there is no way we’re in for a quick recovery. Putting money in stocks right now is guaranteed to lose you money in the short term unless you are really lucky. And by short term, I’m guessing next 2-5 years.  Banks and businesses are failing left and right. Titans of industry, $2 trillion dollar Citi is about to collapse like the house of cards it has proven to be. I’m guessing many people called a bottom to the crash of 29 after the month of October was over, because it was so bad, how could it get worse?  And they were sorta right, they had a slight recovery, but went on to skid for nearly three years and remained nearly flat until the 80s & 90s. After that, there was an exponential curve, a parabolic arc up that gravity eventually catches. People have been calling a bottom to markets since January at least. How long before companies on the Dow Jones index start going bust? Good thing they replaced AIG with Kraft a few months back - or maybe not, since Kraft has actually lost a higher percentage of net worth since the switch.   If it were just America, it would be one thing. But this thing is global, folks, just like the Depression 1.0 - this will take a while to recover from, even if it doesn’t turn out to be Depression 2.0. 

China’s stimulus plan comes on top of more than $4 trillion in government pledges around the world for bank bailouts, credit guarantees and fiscal spending to contain the damage from the worst financial turmoil since the 1930s Great Depression.

It pains me to trot out that old warhorse again but ‘a few trillion here, a few trillion there, now you’re talking about real money.’

Trillions of dollars shouldn’t even come up in polite conversation, but now it wont go away. Oh well, win big, fail big. Swish! 25% of the world’s economy, 25% of it’s fail. Oh well, as long as money is a made up concept, we can just make up some more of it to FIX EVERYTHING.

EVERYTHING!

The current predicament was not caused by insufficient government regulation and the risk of future disruptions will not be mitigated by increased government regulation. The mortgage market was already heavily regulated prior to the crisis, but had it been even more regulated and had the regulations severely crimped, rather than boosted, the abilities and desires of financial corporations to expand the supply of mortgage-related instruments, then the focal point of the boom would have shifted; however, bubbles would still have formed somewhere and these bubbles would subsequently have burst, leaving financial wreckage and major economic dislocations in their wake (the bust is always and everywhere a consequence of the preceding boom). The reason is that the boom was caused by the central bank fixing the price of short-term credit at an artificially low level for a prolonged period, thus encouraging trillions of dollars of investments and new business ventures that should never have seen the light of day. In effect, the central bank created an environment in which prudent lending practices were punished and reckless lending practices were rewarded.

And the Fed, through it’s control of the interest rate, is inherently socialist.

Will the government’s coordinated actions be able to save us all? For all my glib trash talking, I hope so. I hope the elected and appointed leaders of this crisis actually do us some good, and don’t turn out to be more of the same. My late grandfather, who raised me, lived through Depression 1.0 - which no one saw coming. Herbert Hoover, 4 days before Black Tuesday, said that the American markets were the finest in the land and there was no end of the good times. 4 days later the stock markets started their 40 % decline. Depression 1.0, things happened like a Lamborghini and Ferrari hitting head on, compared to our current troubles. Does that mean it can’t happen again, since we are aware of it and fighting it?

Of course it can happen again. Just being aware of history doesn’t give you an escape card, though inattention will surely lead to repeats (fool me once…), but compared to what is at stake now, 1929 looks like a lovely little tea-party. The credit default swap (CDS) market (which is currently legally obligated to be unregulated thanks to legislation Phil Gramm [McCain’s supposedly real pick for Sec of Treas, his former economic advisor until he let his real feelings about the American public out in June {a nation of whiners in a mental recession, they should just keep giving the rich all their money and not complaining}]) is now worth over $65 trillion dollars. These CDS are protection money (unregulated insurance, kinda like the mafia was the unregulated cops) from investments failing. However, there is not enough money in the world (I’m guessing, the world GDP was $65 trillion estimated in 2006) to be brought in to actually cover all of those should a real chain reaction start.

And that’s just CDS. The entire derivatives market, last I checked, was upwards of $500 trillion in contracts written promising future money to people. That’s the world economy times almost 10 years, assuming every penny went into paying these contracts off. Hopefully they’re long term like mortgages so there will be years to assure order unwinding of these tentactular institutions before they go all kraken on our economy for real.

Remember, one of those statistics they use to reassure us is that 90% of mortgagees are doing fine with their crushing debt burdens (A friend of mine is 100k underwater and sinking with every payment, thankfully not ARM so she will no be becoming homeless anytime soon.) but what they don’t mention is that 10% of mortgages is worth up to $1.2 trillion dollars (plus or minus who knows? If that 10% were all wealthy investors not caring if their credit is ruined and not wanting to lose even more money, if it’s 3 million mortgages times half a million each that’s $1.5 trillion. And considering how high the median home price has been lately, I’d expect my number to be more low than average), that means that we’ve only seen roughly half of total mortgage writedowns coming.

And all that crazy talk above with unimaginably large numbers (seriously, $500,000,000,000,000 is hard enough to figure out how many zeros to put in it, let alone try to pay that shit back) is why our planetary ur-govermental alliance is dumping money and cutting their artificially set interest rates like mad. People are starting to figure out that most of this “money” isn’t even real, it’s not there.

Why is it not there? Fractional Reserve Lending. Money from the imagination, credit conjured from the black heart Wall Street.

The dow is now 34% off-peak, in fact the 52 week high is about to start dropping because it was hit almost (Oct 9th) a year ago today. To kind of start the great depression, albeit a few years of delay, the dow dropped 40%, however it did that in october of a single year, not between one october and the next.

I don’t know where it’s heading but I think a tipping point has finally been reached when the greater pool of fools is rapidly emptying out trying to regain any pennies that aren’t looking like they’re going to be there tomorrow.

$2 trillion worth of US retirement funds tied to the stock market have evaporated in the last week and a half. Someone collected that money on the way up. On the way up, the price of oil was going up, making US dollars go down, now that it’s reversed…

The market is a finely tuned machine designed to separate the unwary from their money over very long terms.

Almost overnight, its population became the wealthiest on Earth. Tracy McVeigh in Reykjavik finds that the credit crunch is making the cash disappear.

Iceland is on the brink of collapse. Inflation and interest rates are raging upwards. The krona, Iceland’s currency, is in freefall and is rated just above those of Zimbabwe and Turkmenistan. One of the country’s three independent banks has been nationalised, another is asking customers for money, and the discredited government and officials from the central bank have been huddled behind closed doors for three days with still no sign of a plan. International banks won’t send any more money and supplies of foreign currency are running out.

People talk about whether a new emergency unity government is needed and if the EU would fast-track the country to membership. On Friday the queues at the banks were huge, as people moved savings into the most secure accounts. Yesterday people were buying up supplies of olive oil and pasta after a supermarket spokesman announced on Friday night that they had no means of paying the foreign currency advances needed to import more foodstuffs.

“no means of paying the foreign currency advances needed to import more foodstuffs.”

“One of the country’s three independent banks has been nationalised, another is asking customers for money, and the discredited government and officials from the central bank have been huddled behind closed doors for three days with still no sign of a plan.”

Also notice the first sentence, “its populace became the wealthiest on earth,” - we’re among them. Danger lurks for those who can’t see beyond the bread and circuses.

 WSJ: Paulson to Tap Adviser to Run Rescue Program 

Treasury Secretary Henry Paulson is expected to tap Neel Kashkari, a key adviser on whom he has come to rely heavily during the financial crisis, to oversee Treasury’s $700 billion program to buy distressed assets from financial institutions, according to people familiar with the matter.

Mr. Kashkari, 35 years old, a Treasury assistant secretary for international affairs and a former Goldman Sachs Group Inc. banker, is expected to be named interim head of Treasury’s new Office of Financial Stability as early as Monday.

Cronyism - Mr. Paulson was CEO of GS from 1999 to 2006 - from when the Dow hit 10,000 to when the subprime crisis started to make waves. Notice how Goldman Sachs has been conspicuously absent from the subprime woes that Paulson and Bernanke said weren’t any big deal. I don’t know if it really means anything, but why not tap Warren Buffet for this job. He could probably do it in a spare hour a day and get far better deals than these jokers that didn’t see a problem coming for the last year when respected economists have been predicting at least a trillion dollars in losses (who have since revised their opinions upwards to at least two trillion in losses).

Well, a ‘trillion dollars worth of wealth’ was wiped out in the stock market with a 5% drop last monday. It’s sitting at -4.7% (and that’s the smallest index drop, the Dow) with three and a half hours to go, and has been falling most of the day. I guess that’s another trillion dollars, “gone.” Where does that money go? I mean, someone is buying on the way down, and selling on the way up. Everyone is trying to, which of course is a butterfly effect. Some big players are booking profits from the selloff though, you can bet.

So if that was wiped out of US wealth, does that mean it’s gone to foreign interests?

(Reuters) - California may need an emergency loan of up to $7 billion from the federal government within weeks, the Los Angeles Times on Friday quoted Gov. Arnold Schwarzenegger as saying in a letter to U.S. Treasury Secretary Henry Paulson.   

In the letter dated October 2, Schwarzenegger called for the passage of the $700 billion financial industry bailout plan which the U.S. House of Representatives is expected to vote on Friday, the Times said.

“Absent a clear resolution to this financial crisis, California and other states may be unable to obtain the necessary level of financing to maintain government operations and may be forced to turn to the federal treasury for short-term financing,” Schwarzenegger wrote in the letter, according to the paper.

States are now heading towards insolvent. We need a new business plan for our government. The current one in’t functioning too well. Our budget needs supercategories: “absolutely need” “earning assets” “can be cut/postponed.

“The “absolutely need” category will need to be streamlined to ensure as little waste as possible. The solution: an “open” “source”, web-enabled process. “Open” because the barrier for entry will be the requirement of proof of voter registration or california residence (or, you know, whatever is legally allowed), “source” because the web platform itself isn’t the open part, the california business plan (budget) will be the open part. This web platform should automatically organize and categorize items in the budget based on various user interactions, i.e. most favorite, least favorite, etc. The purpose of the system will be to highlight both waste and success, not to demonize the waste but to help turn it around. If this truly is a democracy, use the power of the connected people to find what’s good and bad and help legislature fix it.

The trick, of course, would be able to get people to use it. Even though the platform software may not necessarily be open source, it should at least allow for the inclusion of cell-net access, and possibly kiosks at government/public buildings, i.e. library, courthouse, civic center. There’s a potential for up to 60 million eyeballs helping keep tabs on how well our state is doing. If half that amount of people put in a half an hour a year checking out parts of the state business plan in a year, that would be the equivalent of 15 million eyeball-hours. I can’t imagine our state.gov has the ability to muster even a fraction of that keeping tabs on California’s financial health.

This system will pair up humans and computers, with each doing what they do best - the computers tracking all the information, the humans deciding whether or not it’s interesting. It would root out corruption at every level, and keep all the money honest to the people who are paying it. If the people of California make it strong, why not let us all make it smart, too. I know there is enough silicon in the state to handle a system, and you could easily get the Californian brain trust involved by tapping the network of universities and offering tax incentives to the highest tech companies in the world that work in this state of ours.

Please make the click for fun with truth! Ever notice how little our government officials refer to us as ‘the people’ or ‘citizens’ and instead refer to the ‘taxpayer’ or ‘consumer’ (which are one and the same anyway).