i. A people adrift have forgotten themselves.

ii. Those so lost often prefer false memories.

iii. The greatest lies are most soothing.

One can be well educated and still know nothing.

Honor deserves reciprocation; respect is something else.

Reaction has many sources; some are just less active.

“Why get my knuckles sore?” I asked the hammer.

Ignoring baser realities invites weakness to come knocking.

Does Not Need

On Al-Qaeda Web Sites, Joy Over U.S. Crisis, Support for McCain. Here are examples of support a US Presidential candidate does not need:

Al-Qaeda is watching the U.S. stock market's downward slide with something akin to jubilation, with its leaders hailing the financial crisis as a vindication of its strategy of crippling America's economy through endless, costly foreign wars against Islamist insurgents.

And at least some of its supporters think Sen. John McCain is the presidential candidate best suited to continue that trend.

"Al-Qaeda will have to support McCain in the coming election," said a commentary posted Monday on the extremist Web site al-Hesbah, which is closely linked to the terrorist group. It said the Arizona Republican would continue the "failing march of his predecessor," President Bush.

The Web commentary was one of several posted by Taliban or al-Qaeda-allied groups in recent days that trumpeted the global financial crisis and predicted further decline for the United States and other Western powers. In language that was by turns mocking and ominous, the newest posting credited al-Qaeda with having lured Washington into a trap that had "exhausted its resources and bankrupted its economy." It further suggested that a terrorist strike might swing the election to McCain and guarantee an expansion of U.S. military commitments in the Islamic world.

"It will push the Americans deliberately to vote for McCain so that he takes revenge for them against al-Qaeda," said the posting, attributed to Muhammad Haafid, a longtime contributor to the password-protected site. "Al-Qaeda then will succeed in exhausting America."

It was unclear how closely the commentary reflected the views of al-Qaeda leader Osama bin Laden, who has not issued a public statement since the spring. Some terrorism experts said the support for McCain could be mere bluster by a group that may have more to fear from a McCain presidency. In any event, the comments summarized what has emerged as a consensus view on extremist sites, said Adam Raisman, a senior analyst for the Site Intelligence Group, which monitors Islamist Web pages. Site provided translations of the comments to The Washington Post.

"The idea in the jihadist forums is that McCain would be a faithful 'son of Bush' -- someone they see as a jingoist and a war hawk," Raisman said. "They think that, to succeed in a war of attrition, they need a leader in Washington like McCain."

Islamist militants have generally had less to say about Sen. Barack Obama of Illinois. Leaders of the Iranian-backed group Hezbollah expressed a favorable view of Obama during the primary campaign but later rejected the Democrat after he delivered speeches expressing support for Israel.

I'm still not going to vote for either.

Low Hanging Fruit

You don't see something like this everyday: Letter: Andrew Lahde, Lahde Capital Management:

Today I write not to gloat. Given the pain that nearly everyone is experiencing, that would be entirely inappropriate. Nor am I writing to make further predictions, as most of my forecasts in previous letters have unfolded or are in the process of unfolding. Instead, I am writing to say goodbye.

Recently, on the front page of Section C of the Wall Street Journal, a hedge fund manager who was also closing up shop (a $300 million fund), was quoted as saying, “What I have learned about the hedge fund business is that I hate it.” I could not agree more with that statement. I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.

There are far too many people for me to sincerely thank for my success. However, I do not want to sound like a Hollywood actor accepting an award. The money was reward enough. Furthermore, the endless list of those deserving thanks know who they are.

[...]

Lastly, while I still have an audience, I would like to bring attention to an alternative food and energy source. You won’t see it included in BP’s, “Feel good. We are working on sustainable solutions,” television commercials, nor is it mentioned in ADM’s similar commercials. But hemp has been used for at least 5,000 years for cloth and food, as well as just about everything that is produced from petroleum products. Hemp is not marijuana and vice versa. Hemp is the male plant and it grows like a weed, hence the slang term. The original American flag was made of hemp fiber and our Constitution was printed on paper made of hemp. It was used as recently as World War II by the U.S. Government, and then promptly made illegal after the war was won. At a time when rhetoric is flying about becoming more self-sufficient in terms of energy, why is it illegal to grow this plant in this country? Ah, the female. The evil female plant – marijuana. It gets you high, it makes you laugh, it does not produce a hangover. Unlike alcohol, it does not result in bar fights or wife beating. So, why is this innocuous plant illegal? Is it a gateway drug? No, that would be alcohol, which is so heavily advertised in this country. My only conclusion as to why it is illegal, is that Corporate America, which owns Congress, would rather sell you Paxil, Zoloft, Xanax and other addictive drugs, than allow you to grow a plant in your home without some of the profits going into their coffers. This policy is ludicrous. It has surely contributed to our dependency on foreign energy sources. Our policies have other countries literally laughing at our stupidity, most notably Canada, as well as several European nations (both Eastern and Western). You would not know this by paying attention to U.S. media sources though, as they tend not to elaborate on who is laughing at the United States this week. Please people, let’s stop the rhetoric and start thinking about how we can truly become self-sufficient.

With that I say goodbye and good luck.

All the best,

Andrew Lahde

I laughed so hard I almost fell off my chair. In other words, this guy was stoned and still did better than the "low hanging fruit." His rant also sounds like a warning of the perils of intellectual inbreeding to me...

Only Make Things Worse

Can a President Tame the Business Cycle? No, he can only make things worse. For example, Clinton deregulated the banking industry, but it took a colossal failure in the form of his predecessor to really run things into the ground. Hope doesn't pay the bills. Anyone believing otherwise is deluded.

Going As Expected

It's nice to know how the bailout is really going to work as expected. As reported in Wall Street banks in $70bn staff payout, welfare for the rich continues unabated. If you run people's retirement savings and your own company into the ground, you can expect to be rewarded:

The sums that continue to be spent by Wall Street firms on payroll, payoffs and, most controversially, bonuses appear to bear no relation to the losses incurred by investors in the banks. Shares in Citigroup and Goldman Sachs have declined by more than 45% since the start of the year. Merrill Lynch and Morgan Stanley have fallen by more than 60%. JP MorganChase fell 6.4% and Lehman Brothers has collapsed.

At one point last week the Morgan Stanley $10.7bn pay pot for the year to date was greater than the entire stock market value of the business. In effect, staff, on receiving their remuneration, could club together and buy the bank.

Oh well, at least we'll know whom to beat and rob during the rood riots.

Savings? What Savings?

One thing I am finding annoying are all the lame comparisons with 1929. I've got news for these people: This isn't 1929! Americans have little or no savings. (I know I don't--at least not in fiat currency.) As pointed out in No savings allowed, if your job goes in the crapper, most Americans have nothing to fall back on but unemployment. This means the situation is both individually better, but probably collectively far worse as there is nothing to re-build upon (not to mention that US industry has been dismantled and "outsourced" overseas). To make matters worse, after all the money has been printed to pay for bank bailouts and other government programs, even those who do have money will end up with nothing. In 1929, if you had all your money under a mattress, you could conceivably ride it out. Soon, even that option will cease to exist. So my advice is to buy physical gold (assuming you can find it for $100 over spot), and if you can't afford it buy silver (assuming you can find it for $4.50 over spot). Prices are being Manipulated, so you might as well take advantage of the situation and at least have something in reserve for The Fall.

The Mogambo Guru is (Nearly) Never Wrong

From Reserving the right to destroy the dollar:

...The Federal Reserve, on behalf of the people of the United States, is giving hundreds of billions of dollars to foreign central banks to bail them out, too!

And then those selfsame foreign central banks used this money to buy $43 billion of US government and agency debt last week! Gaaaahhh! My head is spinning! This is insane!

The Federal Reserve, in case you did not realize it, is not federal, in that it is a private bank owned by shadowy, nasty, greedy people hiding behind corporate shells, and it has no real reserves, but can create money anytime it likes, like last week, as the Fed created some money and then used the money to buy government bonds for itself! Hahaha! The Fed's stash of government bonds rose last week by $8.27 billion!

To show you that the Federal Reserve should instead be called the Government Slush Fund (GSF), the government borrowed most of this new money, as we realize when we see that Treasury Gross Public Debt went up by an eye-popping $336 billion last week, reaching the staggering total of $10.124 trillion!

In fact, in the last 12 months, the national debt went up by $1.062 trillion! Gaah! We're freaking doomed! Not only is the federal budget a mind-blowing $3 trillion in the $14 trillion American economy, but Congress is now spending an average of $88 billion per month (every damned month!) more than the government's revenues, which is 30% more than what they budgeted! Insane, incompetent morons!

And all of this money created by the Federal Reserve - all those stupefying trillions and trillions of new dollars and credit - increases the money supply, which will increase prices in a persistent, grinding inflation, getting worse and worse, which will destroy America as it has destroyed every other idiotic country that tried such a stupid, stupid thing.

[...]

And right now I gotta think that the Big Glorious Money (BGM) is going to be made in silver, mostly because Ted Butler, in the Market Update from investmentrarities.com, writes that "silver has never been a better investment at precisely the same time its price performance has never been more extreme", by which he concludes from the latest Commitment of Traders report that the commercial traders at the COMEX "have built up a record or near-record net long position in both gold and silver futures" and that they have also "established a record long position in call options for the first time in history."

Suddenly, being a really stupid guy, I was instantly lost, and I realized with horror that his seemingly cryptic remarks about futures and options meant that I was being asked to do some thinking to make any sense of it, and I was going to complain like the little crybaby that I am that I don't like to think, and that, like most people, I just want things handed to me.

Apparently, Mr Butler could see the sudden blank look of incomprehension and total befuddlement on my face, and, taking pity on me and fellow mental midgets everywhere, offers that he figures it means that these commercial traders are "positioned for an upside move in gold and silver" and "they are positioned for it to occur soon."

The real significance of this is that, as a result of long experience, he deems these commercial traders (other than the eight largest traders) as being "nearly-always-correct"! Whee!

And that means that I, being "nearly-always-incorrect" about everything, will soon be right for a change! How nice! Hey! This investing stuff is easy!

So buy silver (which I do despite silver rounds being sold at $4.50 over spot). Then you might want to start thinking about replenishing your stockpile of food and ammo...

One of the most hated men in America.

The Burning Continues

"The Republicans pillage the soil and the Democrats salt the Earth."

The economy continues to burn in a conflagration of worthless paper. So let's at least stay warm with its flames.

Nations Weigh Global Action to Crisis. They're going to take "action." As if incompetence were a virtue!

US stocks slide to five-year low. And it ain't over yet.

The Russians get on message. Dumping the dollar. (See Also.)

To the Bunkers! Just like Hitler?

The GOP Peddles Economic Snake Oil. As if the Democrats offer anything better. (Of course, even when the Republicans do the right thing, they do it for the wrong reasons.) The Republicans pillage the soil and the Democrats salt the Earth.

The world is at severe risk of a global systemic financial meltdown and a severe global depression. Can it, in theory, be stopped? Of course, but I have faith that so-called leaders will always do the wrong thing (at least from their perspective).

National Orientation. And here's why: they will never be oriented correctly, because they have lost the ability to observe as a consequence of intellectual inbreeding.

I'll certainly have fun pissing on their graves!

Crash and Burn Time?

Is this finally the time for the crash and burn of the economic system and the nation state? The answer is "maybe." (Although I suspect that it is at least the beginning.) Here are a few thoughts related to the subject from around the web.

Global Guerrillas:

Trend Line Assumptions

Here are some assumptions that underly all current activities related to the global financial crises:

• Optimistic long term outcomes. Things are going to get better. Pollyanna mindsets.
• The system, as it is currently configured, is the best possible or the only possible system. Faith in ideology.
• Nation-states, singularly or collectively, are bigger and stronger than the financial/market system. The US is the guardian of this system. 20th Century legacy thinking.

The above assumptions lead to offensive (all we need to do is find the right leader) or reactive (whack a mole) mindset/policy. If you reverse them, you develop a defensive and opportunistic mindset/policy.

This faith is ideology is very similar to faith in technological progress. "They'll think of something..." (Whomever they might be?) Positive thinking is a lie for negative situations.

Paul Craig Roberts: A Futile Bailout as Darkness Falls on America.

As the US Treasury has not got $7, much less $700 billion, it must borrow the bailout money from foreign creditors, already overloaded with US paper. At what point do America’s foreign bankers decide that the additions to US debt exceed what can be repaid?

This question was ignored by the bailout. There were no hearings. No one consulted China, America’s principal banker, or the Japanese, or the OPEC sovereign wealth funds, or Europe.

Does the world have a blank check for America’s mistakes?

This is the same world that is faced with American demands that countries support with money and lives America’s quest for world hegemony. Europeans are dying in Afghanistan for American hegemony. Do Europeans want their banks, which hold US dollars as their reserves, to fail so that Paulson can bail out his company and his friends?

I'd be willing to bet that is a big NO.

Mike Whitney: Edge of the Abyss.

[I]f something is not done to increase the flow of credit immediately, the stock market will tumble, unemployment will spike, and many businesses will grind to a standstill. We could be just days away from a severe shock to the system. Secretary of the Treasury Henry Paulson's $700 billion bailout does not focus on the fundamental problems and is likely to fail. At best, it puts off the day of reckoning for a few weeks or months. Contingency plans should be put in place so the country does not have to undergo post-Katrina bedlam.

[...]

So, how does Paulson expect to recapitalize the banks, which are loaded up with $2.4 trillion in mortgage-related investments, when congress's bill allocates a paltry $700 billion for the rescue plan? It's impossible. Just as it is impossible to keep prices artificially high with this kind of government buy-back program. These structured investments were vastly overpriced to begin with due to the fact that the market was hyperinflated with the Fed's low interest credit. As Doug Noland said, "This Credit onslaught fostered huge distortions to the level and pattern of spending throughout the entire economy. It is today impossible both to generate sufficient Credit and to main previous patterns of spending. Economic upheaval and adjustment are today unavoidable." (Doug Noland's Credit Bubble Bulletin)

Yes, and "economic upheaval" leads to political upheaval and blood in the streets. Is that what Bush wants; a chance to declare martial law – as threatened to recalcitrant congresspersons during the arm- twisting over the bailout - deploy his North Com. troops within the United states to put down demonstrations of middle class people fighting for bread crumbs?

Time to fight?!? Possibly. Although, frankly, I doubt the US military could occupy the entire country without destroying itself. Will troops really stay in the ranks when their own families are going hungry? (Considering many enlisted soldiers' families are living on food stamps, it is a likely possibility.) When the dollar is worthless, how are the troops going to be paid and fed? Just like the police in New Orleans left their posts to take care of their families, I doubt many would stick around. Besides, the US military cannot even occupy a country (Iraq) the size of California successfully. What are they going to do when it's everywhere?

At the very least, I would advise stocking up on food for about the next six months.

Maximum Advantage in all Things: Bailout #6

The US House of Representatives finally succumbed to their whorish impulses after being enticed by a pork laden bailout bill. It will not stop the inevitable, it merely drags the rest of us kicking and screaming over the edge into the no-so-fun land of hyperinflation. At least I'll know whom to blame. Their system is doomed. Entropy will not be denied.

Readings:
Why Paulson's Plan is a Fraud. There are so many reasons. Also, why does the population of a country that prides itself on individuality keep acting like sheep. Could it be, all that individualism is as a puffer fish?

As one reader put it,“We have debt at three different levels: personal household debt, financial sector debt and public debt. The first has swamped the second and now the second is being made to swamp the third. The attitude of our leaders is to do nothing about the first level of debt and to pretend that the third level of debt doesn't matter at all.”

Dismal math. You think it's bad now? Wait until the Asians stop buying (but at least the Bailout will never really be funded by the treasury: since the isn't one). Let's all hold hands and flush...

Concerning Europe:

Thanks to decades of mollycoddling their domestic industries, you now have a situation where European banks - many of whom Asians haven't even heard of - are now bigger than the GDPs of their home countries. Why does the ratio of assets over GDP matter? Because to pay for failed banks to foreign creditors and all that, governments have to run a surplus to GDP for a while.

Let's take an example. Iceland moved to guarantee its banking sector even as its top three banks are about 13 times the size of its GDP. In other words, if the government runs a budget surplus of 10% of GDP (massively contractionary fiscal policy), it would still take a trifling 130 years or so to pay for all its borrowings needed. For Switzerland, this figure is a mere 100 years, while for those like Belgium, that ratio stands at some 75 years. Remember, these are just figures for the bank losses, not counting all the other stuff that will be lost as a result of the failure of the banking system; for example the industrial base, trade and so on.

The fact that not a lot of people take a logical view of math can be absorbed by the rise in Irish banking deposits this week after the government moved to guarantee the banks. Aren't the Europeans a wonderful people, so trusting and naive in the ways of the world?

Now, that is nuts! It seems the belief that Europe could survive a US meltdown was in error.

Financial and Corporate System is in Cardiac Arrest: The Risk of the Mother of All Bank Runs. (See also The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster.) It isn't just bad mortgages. All the bubbles are popping:

The run on the shadow banking system is accelerating as: even the surviving major broker dealers (Morgan Stanley and Goldman Sachs) are under severe pressure (Morgan losing over a third of its hedge funds clients); the run on hedge funds is accelerating via massive redemptions and a roll-off of their overnight repo lines; the money market funds are experiencing further withdrawals in spite of government blanket guarantee.

- A silent run on the commercial banks is underway. In Q2 of 2008 the FDIC reported $4462bn insured domestic deposits out of $7036bn total domestic deposits; thus, only 63% of domestic deposits are insured. Thus $ 2574bn of deposits were not insured. Given the risk that many banks – small, regional and national – may go bust (as even large ones such as WaMu and Wachovia went recently bust) there is now a silent run on parts of the banking system. Deposit insurance formally covers only deposits up to $100000. Thus any individual, small or large business and/or foreign investor or financial institution with more than $100000 in a FDIC insured bank is now legitimately concerned about the safety of its deposits. Even if as likely the deposit insurance limit will be temporarily raised to $250000 by Congress there will still be a whopping $1.9 trillion of uninsured deposits (or 73% of total deposits); thus, a huge mass of uninsured deposits will remain at risk as even small businesses have usually more than $250K of cash while medium sized and large firms as well as any domestic and foreign financial institution or investor with exposure to US banks has average exposure in the millions of dollars. Particularly at risk are the cross border mostly short term interbank lines of US banks with their foreign counterparties that are estimated to be close to $800 billion.

The fun never ends.