Good Summary of Current Debt Issues

I ran across a rarity, a good summary of the current "sovereign" debt crises. I put "sovereign" in quotes for an important reason. The debt crises is much wider than the current focus on government's problems and calling the current iteration of the debt crises "sovereign" is completely misleading.

The article was on Marketwatch and you can read it here.

It starts out with:

The debt mountain that brought down some of the world's biggest banks and dragged the international financial system to the brink of disaster has simply shifted to governments.

But from then on, it focuses entirely on the debt levels in the hands of governments.

What is desperately missing from EVERYTHING I read about the "credit crises", the "debt crises" the "bailouts" etc. is anything about where all of the "cash" that was "lent" to create all this "debt" went. Wall Street does not "create" money. Lenders lend money based on a fractional reserve system which ultimately "creates" money. However, what really happened over the first decade of this century was the largest wholesale transfer of "cash", "real money" from the legacy banking system, pension funds, 401k's etc. to the unregulated "financial industry" and the pockets of the people who ran / run that industry (which incidentally, after 1999 deregulation included much of the regulated banking industry as well since they were part of larger conglomerate organizations that sought to rape their retail customers with fees that became 1/3 of their profits and steal their savings by transferring their money to the unregulated pyramid schemes and gambling ventures fed by reckless lending) including Private Equity, Hedge Funds and other unregulated financial ventures. Along with the hoarding of cash by countless corporate executives who pull tens of billions of dollars every quarter from both the "publicly traded" companies and those held by "private equity" firms, there was the approximately $5 Trillion in "profits", "bonuses" and "fees" that came out of every transaction over the course of about a decade.. 

This sum of money came to light in a Bloomberg article I read some weeks ago:

The suits provide a window into the offshore structures and secrecy jurisdictions the world’s richest people use to manage, preserve and conceal their assets. According to Tax Justice Network, a U.K.-based organization that campaigns for transparency in the financial system, wealthy individuals were hiding as much as $32 trillion offshore at the end of 2010. Fewer than 100,000 people own $9.8 trillion of offshore assets, according to research compiled by former McKinsey & Co. economist James Henry.

You should read the entire 5 part series.  Very good stuff.

Now, I had another thought when reading this series.  It seems that from France to England to Singapore and Hong Kong that "governments" are getting fed up with tax evasion while the developed world is mired in debt.  Now it is not the fault of the industialists and financiers that so many governments are bankrupt, but they have benefited from the process more than anyone, in fact they are the chief beneficiaries esp as governments seek to keep the bondholders, stockholders and large depositors "whole" while raping the taxpayers (citizens) of their financial futures.  So as we enter the next "phase" of crises, from debt, to Syria to the implosion of N. Africa and the Middle East to Pakastan and the inability of bankrupt "democratic" nations to deal with the fallout, the piper must be paid.  Technology makes it much easier to track all this cash and now the NSA pretty much has a database of all communications since BEFORE the financial crises, it seems it would not be much effort to root out the cash and say to the holders of these $30 Trillion:

The governments of the world that matter (those industrial nations where all the technology is held irrespective of the slaves that actually produce everything) need to deal with a rapidly disintegrating global stability in order to prevent another wholesale globally destructive war, but we don't have any money.  The $30 Trillion held by the industrialist / global rich, spread out amongst the top bankrupt industrial nations, would just about bring us to break even.  In order to ensure a future (read future stability and markets to sell to) for humanity without wholesale destruction, we are going to confiscate your cash.  We will allow you to keep your productive assets as we will need your productive capacity to wage our campaign to stabilize the planet.  So you may loose your current cash, but you will have the capacity to make it all back inside of a generation (15 years +/-).  You may not like this, but you have no choice.  There simply is nowhere left on earth to hide and we need the money.

 Mark my words on this one.  It is going to happen.

Buffett Chain Mail? What a Joke!

I received this message in a "chain mail" today:

Wind of Change
Warren Buffet is asking each addressee to forward this email to a minimum of twenty people on their address list; in turn ask each of those to do likewise. At least 20 if you can. It has to stop somewhere.

In three days, most people in The United States of America will have this message.

This is one idea that really should be passed around.
*Congressional Reform Act of 2013
1. No Tenure / No Pension.
A Congressman/woman collects a
salary while in office, and receives no
pay when they're out of office.
2. Congress (past, present & future) participates in Social Security.
All funds in the Congressional Retirement Fund move to the Social Security system immediately. All future funds flow into
the Social Security system, and Congress participates with the American people. It may not be used for any other purpose.
3. Congressmen/women can purchase their own retirement plans, just as all Americans do.
4. Congress will no longer vote themselves a pay raise. Congressional pay will rise
by the lower of CPI or 3%.
5. Congress loses their current health care system and participates in the same
health care system as the American people.
6. Congress must equally abide by all laws they impose on the American people.
7. All contracts with past and present Congressmen/women are void effective 12/31/13. The American people did not make this contract with Congressmen/women.
Congressmen/women made all these contracts for themselves. Serving in Congress is an honor, not a career. The Founding Fathers envisioned citizen legislators, so ours should serve their term(s), then go home and back to work.
If each person contacts a minimum of twenty people then it will only take three days for most people (in the U.S. ) to receive the message.
Don't you think it's time?
THIS IS HOW YOU FIX CONGRESS!
If you agree with the above, pass it on.  If not, just delete.
You are one of my 20+ - Please keep it going, and thanks.

This message came from someone I know as an artist, curator, professional in the arts for his entire career.  Sad that we have gotten to a point that someone like this, like any American would buy into this kind of BS.

My response was this:

Hmmmm,
Perhaps this message creates a pause and a thought...  With the US economy, it's increasingly oligopolised industries and income disparity raging out of control, one should question taking advise from a 21st century raging industrialist who has amassed a company employing 300,000 people and makes billions of dollars on everything from insurance to railroads, power companies and candy bars.

Imagine if email existed in 1913 and this message came from JP Morgan.  Do you think the American People, who had not yet been indoctrinated into the "entrepreneur is a hero" myth that has been sold to us with increasing vigor since these "entrepreneurs" crashed the global financial system in 2008, leaving only mega industrialists and oligopolies that were immune from lowering prices, gouging the consumer with ever higher prices and ever lower quality goods produced by slave labor that is mostly off of our shores while over 35,000,000 Americans (about 1/4 of the work force) might as well also be called "slave labor" as their average hourly wage is about $7.50 an hour, would rally to spread the word of JP Morgan?

Yea, the Wall Street financed PR message and brainwashing by the corporate media actually leaves smart thoughtful people sending chain mails to pronounce the desires of one of the world's largest industrialists.

Think about this message.  What does every industrialist want? 
* Less government = yes
* Less efficient government = yes
* Less need to buy off politicians = yes
* Stronger industry financed "think tanks" that can create every more industry favorable legislation that a bunch of green legislators would "rubber stamp" even more so than now = yes
* Larger and more powerful military to give the industrialists more access to raw materials and energy = yes
* Larger and more powerful military to ensure the "citizens" are kept at bay while the real tax on society, oligopolistic profits, maintain their growth and enrich those who own the largest companies while completely undermining the rights of the workers = yes
* Access to cheap money to continue to amass every larger conglomerates = yes
* To sum up: A completely unhindered capitalist playground with no regulations or protections for the people (workers) = yes
* To take over all government protections for it's citizens like Social Security = yes

I could go on as you might well know.  What is wrong with our government is not it's pensions or pay raises.  What is wrong with our government is that it has been completely corrupted by the military industrial complex and corporate lobbying (35,000 people and $5,000,000,000 a year estimate in Washington alone). 

If Warren Buffet really cared about better government he would be sending out a "voter registration application" and a strong appeal that all Americans take the time to follow his newly created Newsletter (housed in one of his already existing 3 media properties) that informs Americans weekly of the ignorant and pro-industry legislation that is consistently passed / rubber stamped by our government with pretty citizen friendly names that in fact are anything but citizen friendly.  Maybe he would be encouraging Americans to get involved in their local governments, attend community meetings, attend election rallies, write their congressperson and ask them why the US Legislative Branch of Government has FAILED TO EVEN PASS AN ANNUAL BUDGET IN THREE YEARS, one of the most fundamental and basic responsibilities in government!!

No, Good old Warren would not dare to do that!!!  He is an industrialist operating in the largest capitalist playground in the world and he wants MORE!!  And you?  Well just like the famous words of David Lee Roth from the band Van Halen sang right about the start of the cycle (1978) that has created the economic environment we now live in, Warren can sing loud and clear:  "if you want it got to bleed for it baby !"   http://www.youtube.com/watch?v=a_-fmg23UXk

Life is a responsibility not a right.  Digest that for a minute!

I dare you to pass this note around!

P

Buffett Assets: http://en.wikipedia.org/wiki/List_of_assets_owned_by_Berkshire_Hathaway
JP Morgan info: http://en.wikipedia.org/wiki/List_of_assets_owned_by_Berkshire_Hathaway

America, Land of the Free

Yes, if you are in the right shoes in America, you are Free from the Law, Free from Responsibility and you get a Free Ride on the Capitalist Train that keeps you Free of Any Consequences for reckless action.  This truly is the Capitalist Playground of the Earth where you can recklessly dupe hundreds of billions of dollars from any source that is stupid enough to play with you and it is all considered Clean Fun and be Dammed if your actions destroy lives, are detrimental to society or bankrupt companies leaving your customers out billions of dollars.

Yes, America is a great land and a place for every punk ass spoiled 72 degree pig that gets an ivy league education to rob, steal, cheat or by any other means rake out as much money from the rest of the ignorant ass working stiff who could not define the word "market" if they had $100,000 sitting in a suitcase in front of them. 

I don't think there is a nation on the planet where the populace has their every move dictated by the whims of the corporate super citizens that operate around them stealing as much from them as humanly possible while at the same time canceling any voting "authority" they may have, all with complete impunity.

Here you go.  In brief, Corzine is off Scott Free by Department of "Justice" (what a joke of a name for the institution, it should be renamed "Department of Ivy League Values Superimposed on Those Without the Money or Power or Knowledge to Know the Difference") even though the Commodities Futures Trading Commission has filed "civil" charges against him successfully.

Yes the CFTC can use evidence like: "To support the allegations, the CFTC used a recorded telephone conversations to support their charges that Corzine was fully aware of the transfers."

But the DOJ does not have enough evidence.  The God Damn Defence Department has recorded damn near everything since 2007, before the "Financial Crises" really hit the fan, but nobody, I mean NOBODY has any evidence to charge anyone "criminally" for anything that happened.  Yea, just pay some "fines" and go about raping the country my man.

God Bless America...

Independence Day

Due to an event on 3 July I was helping to produce, I ended up home in Washington, DC for the 4th of July.  I called on my friend Keith, who I know does not trek down to the Mall, to hang out a bit in the neighborhood.  After a couple beers at the local attempt to open a "local only" grocery, which is becoming less of a "local only" grocery as the new owners quickly realized would completely fail as a business model, we head to another watering hole where multiple TVs blare useless garbage all day.  Is there anything worse then Wolf Blitzer talking about Egypt?  I don't think so.  But not to be undone, there was our Commander and Chief making some kind of a speech on the balcony of his temporary home at 1600 Pennsylvania Ave. NW, just few blocks away from where Keith and I were enjoying our hormone / antibiotic / GM fed, Sysco delivered chicken wings.

It was unbelievable.  Did he have anything to say about our independence?  Rights? No Way!!  (He saved that for his weekly address apparently)  Those are being taken away as fast under his administration as they were under door knob idiot president W. before him, in fact things are getting worse.  Here is my statement on our 4th of July Celebration for 2013 after hearing / reading (on the teleprompter) some of his balcony statement before asking the bartender to please turn it off!!

Saw the pathetic speech by our military commander, I mean president, who took a celebration of independence and our bill of rights, things we are loosing more every day, and instead of celebrating these rapidly declining freedoms, he spews out all this shit about wounded warriors and military this and that. I am through with this military run nation and these thoughtless drones who participate and don't have a clue how badly damaged our reputation is becoming every day all over the planet. Yes, independence day!  It is all a charade to hypnotize the masses and reinforce the well orchestrated myth that is America. I shall not celebrate again until this nation is free again from the shackles of the military domination and control.  Where our best and brightest can contribute to humanity instead of only having the opportunity to contribute to destruction.

Banks Offloading Risk to Who?

Here is another rant inspired by a Bloomberg article I read a couple weeks ago.  Those folks at Bloomberg do some very informative reporting.

Everything in the article is fascinating.  To imagine for an instant, after the absolute crash we had in credit markets such a short time ago and the reality that technically, as I write this post, dozens of very large banks around the globe are insolvent if they were required to be honest about the current market value of the "assets" on their balance sheets, that the monetary "authorities" around the world would even entertain the idea that banks could "buy" credit protection against default of loans on their books is ludicrous, insane, archaic, incomprehensible and absolute madness, yet it is happening!!!

The only question one has to ask is, "Who are these people providing "insurance" on these portfolios of loans banks are buying and what capital do they employ to show that in a crises they could actually provide the "protection" they are offering?"  We are just living Credit Crises 2.0 in the making.  There are still tens of trillions of dollars of "credit protection" out there being bought, sold, securitized, traded, passed off, derivativeized etc. by a completely unregulated global financial "industry" for crying out loud, with no rational capital requirements or other oversight by anyone and being backstopped by governments, who are already ill equipped to do anything to prevent another disaster!!

The fact that institutions still functioning as "banks" with the backing of their activities by "taxpayers" through "insurance" still go about gambling on a global scale is insane to say the least and downright financially apoplectic to put it in real terms.

Now we have the largest "money manager" in the US, Blackstone, orchestrating "insurance" against losses on pools of loans on the books of international financial institutions.  Since when is Blackstone an insurance company?  And what assurances do we have that those who have provided the "insurance" actually have the capability of delivering on this insurance? Are we really going to let a government insured global institution hold less capital against their loan book because they have purchased "insurance" from an unregulated industry?

From what I see of this deal between Blackstone and Citigroup it looks like the same financial engineering that Greece used to hide liabilities and underreport the amount of debt they had on their books when lying to the ECB and European Governments.  It may be a different way going about it, but the effect is the same, and where did it get Greece?

From the article:

“It’s a form of financial engineering,” said Philippe Bodereau, London-based head of European credit research at Pacific Investment Management Co., the world’s largest bond investor.

According to the article, Blackstone was able to do this because of how "regulators are viewing loan exposures".  Hmmm, so regulators are now thinking banks can financially engineer their balance sheets to offload exposure to loans on their books. 

I will never forget when back in 2006 when Bernanke actually said that banks had become sophisticated enough to manage risk and that implied regulation and oversight was not as needed in the past.  This mind think from the Fed, Treasury and our congress (who passed the deregulation at the encouragement of Wall Street firms and the Fed) was the most ignorant and destructive thinking that ever perpetuated our collective attitude towards the financial industry.  These people were all seduced by the same greed that drives the industry and to think for a minute the financial industry in a capitalist system has ANY objective but to create ways to scrape as much cash from the national (now global) till as humanly possible until there simply is no more, is to have a lobotomy!

Without strong and active regulation in a capitalist system is to turn all humanity into slaves.  You might as well just put everyone in a meat grinder and feed them to those who know how to best exploit the system.

Back to the article.  This is a notable quote:

The Blackstone deal is one of the first examples involving a private-equity firm, which traditionally look to take a more active role in managing assets. It demonstrates the extent to which banks are prepared to pay up for capital when other sources, such as issuing shares or unsecured bonds, are closed.

What does this say?  1) Private equity, traditionally having a history of actually managing the firms (assets) they take an interest in (though mostly they find cash rich companies, rape them, load them with debt, then float them again), now are interested in filling a role of "financial engineering" to the banking industry because no real investor will buy the bank's "shares, unsecured bonds" or whatever other shit they can come up with to raise money, cause any real investor knows they are INSOLVENT!!  But it does seem that a bunch of investors in the world of "unregulated finance" are more than willing to take millions of dollars of the bank's money to help the banks further understate their liabilities.  Why not?  There is absolutely NO RISK in doing so because the next time the "shit hits the fan" the unregulated pigs can just go out of business.  They have already banked their millions in fees providing this "service" to the industry and as we all know, NOBODY anywhere in the world was held accountable for anything that happened in 2008-09, NOBODY. So why the hell not take the banks money while they have it.

Thinking this quote though will almost make you laugh:

Private-equity firms have struggled to achieve returns exceeding 10 percent after banks cut off credit in the aftermath of the financial crisis, starving the industry of the leverage required to match previous returns. 

So poor private equity has been cut off from loose credit because the banks are insolvent.  So what to do.  Hmmm, why don't we find a way to make the banks look solvent. Then they can go back to reckless lending to us again.  Genius!

So what is the debt?  Part of a $500 billion book of loans out the "shipping industry", an industry that if you read anything now, is floating on borrowed time.   Commerzbank, an institution everyone knows is technically insolvent, made some risk adjustments to their books and wallah, lowered their reserve requirements by over $9 billion. This is significant. Citi is trying to offload it's reserve requirements to the same industry.  We all know where this is going.

I like this quote to:

Blackstone spent five months to develop a structure that the Financial Services Authority, the U.K.’s financial regulator, would accept, one of the people said.

You know, if it took five months to "develop a structure" that there was another year prior to that with a bunch of computer programs and mathematicians creating "models" and other "engineered" outcomes to ultimately approach regulators with the proposal.  And we all know, the smart people are NOT the regulators.

And how does the article end?

“The government is jumping up and down asking banks to lend more to small and medium-sized businesses at the same time as stricter capital rules come in,” Walsh said. “The banks can either say: ’I’m sorry, we’ll have to wait until people pay off their loans,’ or the regulators could look at sensible ways of releasing those assets from their banks’ balance sheets so as to free-up capital to allow them to lend to more businesses.” 

"The government", yea the same government that deregulated the financial industry while allowing taxpayers to stay on the hook to their activities, and has, in the case of the US, failed to even pass it's own budget for three years; the same government that bought into the idea that they did not need to be involved in the rapidly globalizing financial industry that has become way to large and unwieldy for ANY central bank to bail out; the same government that does not even understand how to manage a balance sheet; that government is now looking for ways to allow their insolvent banking industry to "lend more".  Go figure. 

Wash, Rince, Repeat

I read this article in Bloomberg the other day about the new Private Equity entities buying

thousands of single family homes with bundles of money lent to them for the purpose.   

Since there are no individuals that can get a loan on the massive numbers of foreclosed houses 

sitting on the market regardless of interest rates or valuations (One of the main culprits is 

still trying to figure out the value of the property), the loose fed money floating into the 
banking system has yielded another result; The banks and their gambling clients who STILL 

borrow from them for their casino games just as they did before the crash, take the loose 

Fed cash sitting on the books, lend it to private equity et al, who in turn will buy tens 

of thousands of the houses and convert them to rentals. Then these mega loans can be securitize 

in the same way they used to securitize the sub-prime garbage lent out to individuals during the

real estate bubble, and sell the debt in tranches to "investors" and make a bundle. Then of 

course there are derivatives and other kinds of fun financial "products" you can create from 

the debt instruments. And the beat goes on...

Meanwhile the poor suckers who will never be able to buy a house again (the vanishing home owing 

class, I refuse to call them "middle class" just because they could buy a mass produced, cookie 

cutter poorly built, low quality slap it up stick and press board built plastic siding suburban 

"house"), will rent from these new mega house owning faceless corporations, who will inevitably 

hire "nationally owned" McDonald's quality contractors to do everything from service the HVAC to 

take care of the lawns, turning what is left of the independent trade business owner who makes 

his money (and decent money at that) servicing individual home owners, into a low wage earning 
employee of some mega national home servicing company. This is when the last vestiges of "middle 

class" opportunity vanish from the landscape forever.  Think "Brazil" the movie. 

I gave this "party" we are having with entirely reckless monetary policies until April 2013 about

18 months ago.  Perhaps I was a bit ahead of the curve?  Time will tell.  But either way one looks

at the situation; the continued overly broad and dysfunctional influence of the financial "industry"

over our economy without productive investment happening, along with our ineffectual government, 

over influence by monetary "authorities" over the direction of our economy (to the extent of 

obsession), and lack of wealth creation on the part of individuals or industry, this slow motion

train wreck is likely to stop moving forward soon in a tangle of nearly impossible wreckage to clean

up.