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.

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.

Maximum Advantage in all Things: Bailout #5

Black Monday? Only for Scum (See "Ayes"). I'm shocked, and somewhat happy... And it was made possible by Republicans?

Credit crunch banker leaps to his death in front of express train. Now that's a good start!

It's worth every dime of my retirement to watch the banks go up in flames.

Maximum Advantage in all Things: Bailout #2

Propaganda, as disseminated through the press, often seeks to convey unity and consensus, even where none exists. Scare tactics are also employed to sway the doubters.

More lies:

“This entire proposal is about benefiting the American people because today’s fragile financial system puts their economic well being at risk,” Mr. Paulson said. Without action, he added: “Americans’ personal savings and the ability of consumers and business to finance spending, investment and job creation are threatened.
-Link.

Yet, most Americans have no savings! The motivation is simple: the rich crooks certainly do want to unload their investments before the inevitable crash, and they want you to pay for it. And a stupid, distracted public will likely let them. This measure will buy some time (and a whole lot of Swiss Francs). Meanwhile everyone else pays to bailout piracy. In a service economy, as pointed out by Paul Craig Roberts and numerous others, little or no savings is to be expected. Also we learn from our crooked, lying, warmongering "Dear Leader" that looting the treasury is noble, and that we must rise above politics in doing so. It also appears the slimy, craven congress will go along with some changes. Meanwhile, everyone else gets to experience massive inflation or even hyperinflation. (Of course, the books are cooked to make inflation appear lower, and therefore keep wages low by lying with statistics. But that is another story.) One way or another, their system will fail. The only question is whom it will fall on. If it falls on you, just don't forget who pushed it down.

Maximum Advantage in all Things: Bailout #1

Now that the initial shock has worn...

This Bailout could never be possible were the US, as a technological nation (note: I do not say society), not beholden to the technical morality. Thieves are bailed out, because, we are rationalized, doing so would be worse. And who are we supposed to trust, at their lying word, but the very same politicians who enabled these crooks in the first place?!? It's a simple a looting of the Treasury, but we should be reassured that it could be worse! Traditional and/or opposing moralities would find the notion repugnant. Yet, Federal Government Officials and the big money press, see no shame as their moral framework is that of the hollow machine. Their precious system might fail quickly rather than slowly. Thus they retain their position at the expense of everyone else. In an alternate moral scheme, many responsible would see serious jail time, instead we see golden parachutes and big Federal Pensions. They have created their own anti-natural Verbal World, and may therefore be counted upon to almost always aspire to the greatest errors.

Probable Result:

The Moral Authority of the Federal system is truly bankrupt. A government that robs from its citizens to pay thieves has sunk below the level of a Kleptocracy into outright banditry. As a result, respect for the law will be eroded until it crumbles. Consequently, they destroy their legitimacy.

For robbing me, I can at least be consoled that they will suffer far worse in the end. (As long as I never kid myself that it will mean justice.)

Hopefully, I can spit at them as they lie in the gutter (and tell them to go get a Job).

See Also & Also.

$700 Billion!?!

$700 Billion Is Sought for Wall Street in Vast Bailout. The biggest swindle in history is in the works. The government wants to bail out the crooks who started this financial disaster, and we're supposed to just bend over and take it?!? The political class is nothing but an enabler of thieves. Wall Street deserves to fail, and indeed nothing else offers any hope for the USA. The fact that rioting has not broken out shows the inherent cowardice of Americans yet again. Have fun starving, suckers.