The [Economic] Bomb Has Yet to Detonate: Why the Bail-Out is a Lie!

[PepperFritz]

Here I've been waiting for the neo-cons to pull off another false-flag "terrorist attack", as the "excuse" to move their agenda forward. But it looks like the current "financial crisis" may have been orchestrated to be the "Reichstag" that frightens the masses into submission. McCain has already "suspended" his campaign due to the "economic crisis". As Anart so perceptively pointed out elsewhere:

You can't 'suspend and election' unless you lay the groundwork by 'suspending a campaign' --- I think it's a little mass conditioning. Who ever heard of 'suspending a campaign' due to emergency? Ok - that's 'normal' now --- what's next? Oh - wait --- I know -- 'suspending the election'..........

Man, this is gonna get ugly. Like the C's said, there are all kinds of "bombs" other than nuclear ones....


Naomi Klein: The Bomb Has Yet to Detonate
Rady Ananda
OpEdNews.com
Mon, 22 Sep 2008 15:15 EDT

In this Bill Maher segment, Naomi Klein argues that by transferring Wall Street's gambling debt to Main Street (what she calls crybaby capitalism), the shock doctrine will come into play:

"They have moved the disaster from Wall Street to Main Street by accepting those debts.... But the bomb has yet to detonate. The bomb is the debt that has now been transferred to the taxpayers.

"So it detonates when/if John McCain becomes president in the midst of an economic crisis, and says, 'Look! We're in trouble. We've got a disaster on our hands. We have to privatize social security. We can't afford health care. We can't afford food stamps. We need more deregulation, more privitization.'

"You know the thesis of the Shock Doctrine is that you need a disaster to rationalize pushing through these very unpopular policies.

"So, the real disaster has yet to come. The real disaster is the debt that is going to explode on the American taxpayers. And then they do economic shock therapy."

Andrew Sullivan, author of The Conservative Soul and writer for TheAtlantic.com, argues with her, unsuccessfully. Klein retorts with, "This is socialism for the rich. Look, if we're socializing things, let's nationalize something profitable. Let's go for Exxon. They're socializing junk!"

 

[PepperFritz]

Re: Naomi Klein: The Bomb Has Yet to Detonate

...it looks like the current "financial crisis" may have been orchestrated to be the "Reichstag" that frightens the masses into submission....

Here's another "connect the dots" article suggesting that we may be looking at the new Reichstag/911....


[moderation : article already published here]

 

[Laura]

Re: Naomi Klein: The Bomb Has Yet to Detonate

Very good catch, Pepperfritz! I admit that it slipped by me! And whoda thunk that a "financial bomb" could be so devastating? And others ARE calling it a "bomb", too! Those Cs just amaze me sometimes.

US taxpayers are being enrolled in an economic chain gang

By Jeff Randall
25/09/2008

"To preserve their [the people's] independence, we must not let our rulers load us with perpetual debt. We must make our selection between economy and liberty, or profusion and servitude" - Thomas Jefferson

There was a time, early in America's history, when its leaders believed in financial discipline. No more. Perpetual debt, which Jefferson feared would enslave future generations, is clamped on Uncle Sam's undercarriage like a ball and chain. US public borrowing is $9.8 trillion - and rising.

Jefferson, America's third president (1801-09), is widely regarded as the White House's most intellectually gifted occupant. He believed that "banking institutions are more dangerous to our liberties than standing armies", and that "the principle of spending money to be paid by posterity … is but swindling futurity on a large scale."

If Congress approves the Treasury Secretary's $700 billion bail-out of dysfunctional banks, it would be hard to invent a better example of what Jefferson foresaw: authorised "swindling". Tomorrow's Americans and those who come after them will pay and pay for the grotesque excesses and self-indulgence of today's flim-flam merchants.

As Jefferson put it: "If we run into such debt, as we must be taxed in our meat and in our drink, in our necessaries and our comforts … [we will have] no means of calling our mis-managers to account but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow sufferers."

Having failed to deliver victory in the War on Terror, President Bush is hoping for better luck in the War on Error. His goal is to limit damage from the egregious mistakes of sub-prime mortgages; his tactics are to carpet-bomb the banking system with federal funds. The upshot, in Jeffersonian terms, is that US taxpayers are about to be enrolled in an economic chain gang.

The prospect is unappealing, but, we are told, there's no alternative. Hank Paulson's plan offers fewer details than his weekly milk bill, but now, it seems, is no time for nit-picking. Having collected sacks of gold at Goldman Sachs, this former champion of free markets wants to nationalise assets at a pace not seen since Che Guevara was lighting cigars with Batista's legacy.

No wonder so many Congressmen look queasy. They must persuade constituents, many of whom are losing jobs and homes in the credit crunch, that it is a bright idea to rescue those who profited hugely from the creation of dark instruments. Not for the first time, Wall Street is bilking Main Street.

For those who work in the fast lane of finance, the speed of decline has been ear-popping. Less than a year ago, America's investment banks were wallowing in record bonuses, totalling almost $38 billion. Yes, billion.

Their pool of monopoly money was greater than the GDP of Bulgaria. Split among 186,000 workers at Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns, it equated to an average of more than $200,000 per person, about four times the median US household income.

Goldman's chairman, Lloyd Blankfein set a new standard in executive gluttony, collecting $68 million (about one third in cash), but at least his bank is still standing. Richard Fuld, Lehman's chief executive, trousered $41 million. Nice work, except that he took the lot in the bank's shares. Nine months later, when Lehman went bust, Fuld's bonus joined his reputation, in the trash-can.

Banking's bacchanalia has morphed into a therapy group for manic depressives. Those still in work look around the room and wonder how many will be flipping burgers by Christmas. In an interview with Fortune magazine, Mr Paulson admits: "Raw capitalism is a dead end. I've seen it."

Now I have heard it all. What next?

In place of rip-roaring markets, according to a Wall Street trader, America has embraced "trickle-down communism". This system involves the state paying "cash for trash" to benefit a few miscreants, and then hoping that some of the taxpayers' largesse will trickle down to the masses.

Toxic rubbish will not be made to disappear by Mr Paulson's proposals. All that will be different is ownership. It will be like removing nuclear waste from a failing business and parking it in a government building. The risk moves from private to public.

It is this form of regressive redistribution that Messrs Bush and Paulson are peddling as the road to redemption for Western finance. Excuse my cynicism, but would you buy a used derivative from either of them?

After Hurricane Katrina and the flooding of New Orleans, Mr Bush's record on rescue missions does not inspire confidence. As for Mr Paulson, if he's so insightful, why, when he was earning an $18 million bonus at Goldman in 2006, did he not spot the radio-active dump piling up in his industry's back-yard?

Mr Paulson's sales pitch is essentially: "American capitalism, I love you! But we only have 14 hours to save the Earth!" In return for a promise to head off financial obliteration, he is demanding a cheque of disturbing blankness. It is to be a bail-out with precious few strings, plus immunity from review "by any court of law or administrative agency". His legal team must have chuckled when they slipped in that one.

The scheme is under attack from right and left. George Soros, the investor who helped break the pound in 1992, is in favour of action to stem insolvencies, but insists that Paulson's plan falls short. Paul Krugman, professor of economics at Princeton, has little faith in Paulson as a fixer: "He's making it up as he goes along, just like the rest of us."

Outside Washington, in the real world, there is a growing clamour for something to be done. Ordinary voters are in pain. They want government to make it go away. But there is no magic powder.

Those who borrowed to buy assets at the wrong prices will have to suffer, as financial gravity re-asserts its downward pull. There is no policy yet invented that can make fifty cents worth two bucks forever.

Any long-term solution will have to recognise that contraction cannot be deferred in perpetuity. Having restored stability, it should punish those who created the mess. Where's the retribution in Paulson's package? It looks too much like a parachute for his chums at the back of a burning plane.

Finally, there needs to be an overhaul of banking governance. The rules of the game were, in effect, made redundant by the ingenuity of financial engineers. We do not need more regulation, but more appropriate regulation.

Which brings us back to Jefferson. Two hundred years ago, he demanded: "The issuing power should be taken from the banks and restored to the people to whom it properly belongs." Twas ever thus.

But we know what is behind this:

The Expansion of the Pathocracy

The world’s tendency to fasten its gaze adoringly upon its rulers has a long tradition dating back to the times when sovereigns could virtually ignore their subjects’ opinions. However, rulers have always been dependent upon the social and economic situation in their country, even long ago, and even in pathocratic systems, and the influence of various social groups has reached their thrones by various means. {...} only an objective comprehension of the historical phenomenon and its essentially deviant nature permits light to be shed upon the causes of the perennial deceitfulness of this macrosocial pathological phenomenon. {...}

The actions of this phenomenon affect an entire society, starting with the leaders and infiltrating every village, small town, factory, business, or farm. The pathological social structure gradually covers the entire country, creating a “new class” within that nation. This privileged class of deviants feels permanently threatened by the “others”, i.e. by the majority of normal people. Neither do the pathocrats entertain any illusions about their personal fate should there be a return to the system of normal man.

A normal person deprived of privilege or high position will go about finding ... work which will earn him a living; but pathocrats never possessed any solid practical {abilities} ... If the laws of normal man were to be reinstated, they and theirs could be subjected to {evaluation and exposure of thier} psychological deviations; they would be threatened by a loss of freedom and life, not merely a loss of position and privilege. Since they are incapable of this kind of sacrifice, the survival of a system which is the best for them becomes a moral imperative. Such a threat must be battled by means of any and all psychological and political cunning implemented with a lack of scruples with regard to those other “inferior-quality” people that can be shocking in its depravity.{...}

Pathocracy survives thanks to the feeling of being threatened by the society of normal people, as well as by other countries wherein various forms of the system of normal man persist. For the rulers, staying on the top is therefore the classic problem of “to be or not to be”.

We can thus formulate a more cautious question: can such a system ever waive territorial and political expansion abroad and settle for its present possessions? What would happen if such a state of affairs ensured internal peace, corresponding order, and relative prosperity within the nation? The overwhelming majority of the country’s population would then make skillful use of all the emerging possibilities, taking advantage of their superior qualifications in order to fight for an ever-increasing scope of activities; thanks to their higher birth rate, their power will increase. This majority will be joined by some sons from the privileged class who did not inherit the pathological genes. The pathocracy’s dominance will weaken imperceptibly but steadily, finally leading to a situation wherein the society of normal people reaches for power. This is a nightmare vision to the psychopaths.

Thus, the biological, psychological, moral, and economic destruction of the majority of normal people becomes, for the pathocrats, a “biological” necessity.

Many means serve this end, starting with concentration camps and including warfare with an obstinate, well-armed foe who will devastate and debilitate the human power thrown at him, namely the very power jeopardizing pathocrats rule: the sons of normal man sent out to fight for an illusionary “noble cause.” Once safely dead, the soldiers will then be decreed heroes to be revered in paeans, useful for raising a new generation faithful to the pathocracy and ever willing to go to their deaths to protect it.

Any war waged by a pathocratic nation has two fronts, the internal and the external.

The internal front is more important for the leaders and the governing elite, and the internal threat is the deciding factor where unleashing war is concerned. ... After all, pathocrats give short shrift to blood and suffering of people they consider to be not quite conspecific. Kings may have suffered due to the death of their knights, but pathocrats never do: “We have a lot of people here.” {...}

Pathocracy has other internal reasons for pursuing expansionism through the use of all means possible. As long as that “other” world governed by the systems of normal man exists, it inducts into the non-pathological majority a certain sense of direction. The non-pathological majority of the country’s population will never stop dreaming of the reinstatement of the normal man’s system in any possible form. This majority ... must therefore be distracted from this purpose, and the masses must be “educated” and channeled in the direction of imperialist strivings. This goal must be pursued doggedly so that everyone knows what is being fought for and in whose name harsh discipline and poverty must be endured. The latter factor – creating conditions of poverty and hardship - effectively limits the possibility of “subversive” activities on the part of the society of normal people.

The ideology must, of course, furnish a corresponding justification for this alleged right to conquer the world and must therefore be properly elaborated. Expansionism is derived from the very nature of pathocracy, not from ideology, but this fact must be masked by ideology. Whenever this phenomenon has been witnessed in history, imperialism was always its most demonstrative quality.

In short, Naomi Klein's "Shock Doctrine" must be - economic bombing - is undertaken on the internal front.

I doubt that Bush & Co are "scared," they are just following "The Dominionist Plan."

 

[Ruth]

Re: Naomi Klein: The Bomb Has Yet to Detonate

The global financial "crisis" is forcing many people to re-evaluate what is important or valuable to them. This, I say, hopefully, rather than just shutting their eyes and pretending that everything is just going to go on as normal. Because it isn't! But the 'fat lady hasn't sung', yet.

I don't think the worst has happened yet, as we all seem to be waiting with 'baited breath' for her to make her appearance... :O I hope all people are ready for the extent of any eventual calamity when it happens. If a person knows what to expect, has re-evaluated their priorities and made contingency plans to minimise 'damage' when things really start happening, then it won't be so bad.

October 23rd has 'popped' into my head as (maybe) a significant date. Perhaps something will happen then?

It seems to me that the USA might have some trouble with coming to any sort of bi-partisan agreement on how to manage this 'bail out'. They are quibbling over something that needs to be done urgently and if done badly will cause more harm than good. Of course, when has the resilient and PTB supported Bush puppet ever done anything well, apart from ruination?.

 

[Niall]

Re: Naomi Klein: The Bomb Has Yet to Detonate

If a person knows what to expect, has re-evaluated their priorities and made contingency plans to minimise 'damage' when things really start happening, then it won't be so bad.

When things really start happening? What, like, sometime in the future?!?

It seems to me that the USA might have some trouble with coming to any sort of bi-partisan agreement on how to manage this 'bail out'. They are quibbling over something that needs to be done urgently and if done badly will cause more harm than good.

You seem to be agreeing with the media discourse that's being played on this 'bail out'. Selling the illusion that 'something needs to be done urgently' is pivotal to the heist 'bail-out'.

Michael Hudson explains why it's a 'giveaway' and that the 'quibblers' are looking to plunder the US economy just as Russia was in the nineties:

http://www.cassiopaea.org/forum/index.php?topic=9826.msg71661#msg71661

 

[Ruth]

Re: Naomi Klein: The Bomb Has Yet to Detonate

If a person knows what to expect, has re-evaluated their priorities and made contingency plans to minimise 'damage' when things really start happening, then it won't be so bad.

When things really start happening? What, like, sometime in the future?!?

Sorry, I should have said "when things get worse".... :(

You seem to be agreeing with the media discourse that's being played on this 'bail out'. Selling the illusion that 'something needs to be done urgently' is pivotal to the heist 'bail-out'.

I see the economy like I would see a sick person. Knowing they are sick and taking them to the hopsital won't necessarily help them at all. This will partly depend on whether anything can be done, if anything is done at all, and if what is done is the correct thing to do... There does, however come a 'point of no return'. When nothing can be done to save anything or anyone. That could happen, and then it will be up to individual to try and minimise any economic 'hurt' they feel after our 'patient' dies.

Found this rather interesting astrology blog. Seems like some pretty heavy stuff is coming this way (including meteors).
_http://astrotransits.blogspot.com/

 

[PepperFritz]

Re: Naomi Klein: The Bomb Has Yet to Detonate

...whoda thunk that a "financial bomb" could be so devastating? And others ARE calling it a "bomb", too! Those Cs just amaze me sometimes....

Laura, I'm more and more convinced that this is what the C's were referring to in the Sep.3/08 session. It's becoming clear that things have indeed passed the point of "no return". Everything I've read indicates that bailout-or-no-bailout, the U.S. economy is in a spiralling nose-dive that cannot be stopped. I've had an anxious knot in my stomach for the past week, and now I think I know why....




USA heading for destruction! ... Passed the point when
anything could possibly be done to change the outcome.
Cassiopaea Transcript, Sept.3, 2008

What’s being put around behind the scenes is that we’re
looking at 1930s stuff. We’re looking at catastrophe, huge,
amazing catastrophe. Everybody is extraordinarily scared.
It’s going to be really, really nasty.
Bailout failure 'will cause US crash’
Tim Shipman, U.K. Telegraph, Sept.29, 2008




Black Monday?
House and Global Investors Vote "No" on Paulson Bailout
by Mike Whitney, Counterpunch, Sept.29, 2008

Today the US House rejected Treasury Secretary Paulson's $700 billion Emergency Economic Stabilization Act of 2008. Paulson said he has the votes, but Paulson was wrong. The House bucked the Paulson's claim that buying up the illiquid mortgage-backed assets from the nation's banks would be enough to save the financial system from an impending meltdown. The jury remains out on that question, too. Professor Nouriel Roubini, chairman of Roubini Global Economics, summed it up like this, "You're not resolving the two fundamental issues: You still have to recapitalize the banking system, and household debt is going to stay high". A large number of economists believe Roubini is right. The bill would not solve the underlying problems.

There is a crisis. The banking system is undercapitalized, the credit markets are frozen, and foreign creditors are beginning to slow their purchases of US debt. It's all bad. At the same time the number of casualties among the financial giants--Bear Stearns, Indymac, AIG, Lehman, Washington Mutual--continues to grow. Three more struggling European banks were added to the list of financial institutions that needed emergency government assistance this past weekend. It's no wonder Congress feels like they have to do something to stop the bleeding.

Before the stock market opened on Monday, the futures markets had slumped heavily into negative territory, while the TED spread, an indicator of stress in interbank lending, had widened to 3.19, a level that suggests another rocky week of trading ahead. Could this be another Black Monday?

Paulson's bill was designed to avert a system-wide crash by clearing the banks' balance sheets so they could resume extending credit to consumers and businesses. The hope was that massive infusion of capital would "turn back the clock" to the happy days of low interest speculation and bubble economics. Paulson is a "one trick pony" who firmly adheres to the belief that wealth creation depends on maximum leverage and an ever-weakening currency. But that world view is no longer applicable after reaching Peak Credit, where consumers are no longer able to make the interest payments on their loans and businesses and financial institutions are forced to curb their spending and dump their toxic assets at firesale prices. The system is deleveraging and nothing can stop it. Paulson has yet to accept the new reality.

Besides, there was no guarantee that the banks would use the money in the way that Paulson imagines. As one Wall Street veteran explained to me, "I don't see one penny of that $700 billion ending up helping the broader economy. I see it being used to prop up share prices so the insiders can salvage as much as possible when dumping their shares".

Indeed, the $700 billion is just part of a massive "pump and dump" scheme engineered with the tacit approval of the US Treasury and the Federal Reserve. Once the banksters have offloaded their fraudulent securities and crappy paper on Uncle Sam, they will do whatever they need to do pad the bottom line and drive their stocks up. That means they will shovel capital into hard assets, foreign currencies, gold, interest rate swaps, carry trade swindles, and Swiss bank accounts. The notion that they will recapitalize so they can provide loans to US consumers and businesses in a slumping economy is a pipedream.

The US is headed into its worst recession in 60 years. The housing market is crashing, securitzation is kaput, and the broader economy is drifting towards the reef. The banks are not going to waste their time trying to revive a moribund US market where consumers and businesses are already tapped out. No way; it's on to greener pastures. They'll move their capital wherever they think they can maximize their profits. In fact, a sizable portion of the $700 billion will likely be invested in commodities, which means that we'll see another round of hyperbolic speculation in food and energy futures pushing food and fuel prices into the stratosphere. Ironically, the taxpayers’ largesse will be used against them, making a bad situation even worse.

Then again, if a rehabbed bill isn't passed, no one can predict with certainty what will happen. Here's how Tim Shipman summed it up in "Bailout Failure Will Cause US Crash", in the UK Telegraph:

"Officials close to Paulson are privately painting a far bleaker portrait of the fragility of the global economy than that advanced by President George W Bush in his televised address last week.

One Republican said that the message from government officials is that 'the economy is dropping into the john.' He added: 'We could see falls of 3,000 or 4,000 points on the Dow [the New York market that currently trades at around 11,000]. That could happen in just a couple of days.

'What’s being put around behind the scenes is that we’re looking at 1930s stuff. We’re looking at catastrophe, huge, amazing catastrophe. Everybody is extraordinarily scared. It’s going to be really, really nasty.'”

The fear on Capital Hill is palpable, especially among the Democrats who have led the effort to pass Paulson's boondoggle ASAP. Speaker of the House, Nancy Pelosi, and fellow Democratic Party leaders, Chris Dodd, Harry Reid and the blabbering blowhard from Massachusetts, Barney Frank, did everything in their power to sandbag dissenters, quash resistance, and rush the bill to a vote without the usual deliberation and debate. Rep. Marcy Kaptur (D-Ohio) was one of many angry members of congress who lashed out at Pelosi's highhandedness. It's all caught on a one minute video:

Rep. Marcy Kaptur: "The normal legislative process that should accompany a monumental proposal to bail out Wall Street has been shelved. Yes, shelved! Only a few insiders are doing the dealing. These criminals have so much power they can shut down the normal legislative process of the highest lawmaking body in this land. All the committees that should be scanning every word that is being negotiated have been benched. And that means the American people have been benched. We are constitutionally sworn to protect this country against all enemies foreign and domestic, and yes, my friends, there are enemies....The people who are pushing this bill are the very same one's who are responsible for the implosion on Wall Street. They were fraudulent then; and they are fraudulent now.We should say No to this deal".

Republicans were equally furious at the way the Pelosi Politburo kept the rank and file out of loop as much as possible. Rep. Michael Burgess (R-Texas) summarized the feelings of a great many congressmen who felt they were being railroaded by Pelosi and Co: "We have seen no bill. We have been here debating talking points ...House Republicans have been cut out of the process and derided by the leaders of the House Democrats as "unpatriotic" for not participating in supporting the bill. Mr. Speaker, I have been thrown out of more meetings in the last 24 hours than I ever thought possible as an elected official of 800,000 citizens of N. Texas....Since we didn't have hearings, since we didn't have markup, let's at least put this legislation up on the Internet for 24 hours and let the American people see what we have done in the dark of night. After all, I have never gotten more mail on a single issue than on this bill that is before us tonight."

Rep Dennis Kucinich (D-Ohio) gave the best speech of the day railing against the financial industry and defending the interests of working class Americans.

Rep. Dennis Kucinich: "The $700 bailout bill is being driven by fear not fact. This is too much money, in too short of time, going to too few people, while too many questions remain unanswered. Why aren't we having hearings...Why aren't we considering any other alternatives other than giving $700 billion to Wall Street? Why aren't we passing new laws to stop the speculation which triggered this? Why aren't we putting up new regulatory structures to protect the investors? Why aren't we directly helping homeowners with their debt burdens? Why aren't we helping American families faced with bankruptcy? Isn't time for fundamental change to our debt-based monetary system so we can free ourselves from the manipulation of the Federal Reserve and the banks? Is this the US Congress or the Board of Directors of Goldman Sachs?”

There was greater opposition to the Paulson bill than any legislation in the last half century. The groundswell of public outrage has been unprecedented, and yet, Congress, completely insulated from the demands of their constituents, continues to blunder ahead following the same pro-industry script as their ideological twins in the White House. There's not a dime's worth of difference between the two parties. Not surprisingly, neither Pelosi nor any of the Democratic leadership has even met with any of the more than 200 leading economists who have stated unequivocally that the bailout will not address the central problems that are wreaking havoc on the financial system. Instead, they have caved in to Bush's demagoguery and the spurious claims of G-Sax bagman Henry Paulson, a man who has misled the public on every issue related to the subprime/financial fiasco so far.

There are parts of Paulson's Emergency Economic Stabilization Act of 2008 that every US taxpayer should understand, even though the media is keeping those facts obscured. In sections 128 and 132; the proposed bill would have suspend "mark to market" accounting. This means that the banks would no longer be required to assess the worth of their assets according to what similar assets fetched on the open market. For example, Merrill Lynch just sold $31 billion of mortgage-backed securities for $6 billion, which means that similar bonds should be similarly priced. Simple; right? The banks need to adjust the value of those assets on their balance sheet accordingly. This gives investors and depositors the ability to know whether their bank is in bad shape or not. But Paulson's bill lifted this requirement and allowed the banks to assign their own arbitrary value to these assets, which is the same old Enron-style accounting scam.

Paulson's bill also proposed the "Elimination of FASB 157 and 0% reserves". This is just as sketchy as it sounds. FASB or Financial Services Regulatory Relief Act reads:

"Federal Reserve Banks are authorized to pay banks interest on reserves under Section 201 of the Act. In addition, Section 202 permits the FRB to change the ratio of reserves a bank must maintain relative to its transaction accounts, allowing a zero reserve ratio if appropriate. Due to federal budgetary requirements, Section 203 provides that these legislative changes will not take effect until October 1, 2011."

It's all legal mumbo jumbo to conceal the fact that the banks can continue to operate with insufficient capital, which is why the system is currently blowing up. It all get's down to this: The reason the system is exploding is because the various financial institutions have been allowed--via deregulation--to act as banks and create as much credit as they choose without a sufficient capital base. When one reads about massive deleveraging, this relates directly to the fact that under-capitalized businesses were operating with too much debt in relationship to their capital. That's it in a nutshell; forget about the CDOs, the MBSs, the CDS and the whole alphabet soup of derivatives garbage. They were all inserted into the system so Wall Street landsharks could expand credit without supervision and balance trillions of dollars of debt on the back of a one dollar bill. This is why Paulson wants to suspend the rules which would bring credibility and trust back to the system. After all, that might impinge on Wall Street's ability to enrich itself at the public's expense.

Nouriel Roubini sites a study by Barry Eichengreen, "And Now the Great Depression", which points out why Paulson's $700 billion plan is likely to fail:

"Whenever there is a systemic banking crisis there is a need to recapitalize the banking/financial system to avoid an excessive and destructive credit contraction. But purchasing toxic/illiquid assets of the financial system is NOT the most effective and efficient way to recapitalize the banking system....

“A recent IMF study of 42 systemic banking crises across the world provides evidence of how different crises were resolved.

“First of all only in 32 of the 42 cases there was government financial intervention of any sort; in 10 cases systemic banking crises were resolved without any government financial intervention. Of the 32 cases where the government recapitalized the banking system only seven included a program of purchase of bad assets/loans (like the one proposed by the US Treasury). In 25 other cases there was no government purchase of such toxic assets. In 6 cases the government purchased preferred shares; in 4 cases the government purchased common shares; in 11 cases the government purchased subordinated debt; in 12 cases the government injected cash in the banks; in 2 cases credit was extended to the banks; and in 3 cases the government assumed bank liabilities. Even in cases where bad assets were purchased – as in Chile – dividends were suspended and all profits and recoveries had to be used to repurchase the bad assets. Of course in most cases multiple forms of government recapitalization of banks were used." (Nouriel Roubini's Global EonoMonitor.)

In short, it wouldn't work. Nor was it designed to work. The bill was just Paulson's way of carving a silver canoe for he and his brandy-drooling investor buddies so they can paddle away to some offshore haven while the rest of us drown in a bottomless ocean of debt.

 

[mamadrama]

Re: Naomi Klein: The Bomb Has Yet to Detonate

Very good catch, Pepperfritz! I admit that it slipped by me! And whoda thunk that a "financial bomb" could be so devastating? And others ARE calling it a "bomb", too! Those Cs just amaze me sometimes.

I've noticed the word "crater" being used, too to describe the economic crisis. One example was when McCain told Letterman, "the economy is about to crater," as an excuse for not appearing on the show.

_http://www.youtube.com/watch?v=XjkCrfylq-E

 

[Pierre]

Re: Naomi Klein: The Bomb Has Yet to Detonate

Then again, if a rehabbed bill isn't passed, no one can predict with certainty what will happen.

But if this bill is passed no one can predict with certainty what will happen either.

This bill is sold on the verge of predictability, assuring a nicer future, but this is a lie. It doesn't address any of the fundamental problems currently faced by the US economy.

The only thing that we know if this bill is passed is that US citizens will see their debt increase by more than $2000.

 

[Beau]

Re: Naomi Klein: The Bomb Has Yet to Detonate

It did not pass...

(WESTMINSTER, COLO.) - Barack Obama called for calm today, after the House rejected $700 billion rescue plan.

“It's important for the American public and for the markets to stay calm because things are never smooth in Congress,” Obama said at a rally outside of Denver.

He added, I'm confident that we are gonna get there, but it's going to be a little rocky.”

News that the bailout plan was rejected broke moments before Obama was expected to speak at Mountain Range High School. Campaign aides say he immediately telephoned Treasury Secretary Henry Paulson and House Speaker Nancy Pelosi.

As of this morning, Obama had planned to travel to Washington when the bill was to be voted on in the Senate later this week. It remains unclear if Obama will travel to the Capitol sooner than that to partake in further negotiations.

Today, Obama praised the Democratic and Republican leadership for their work on the rescue plan, but said it is important for Congress to “step up to the plate.” He was cautious not to fault John McCain specifically for the financial crisis, but rather blamed the crisis on the philosophy that drove the Bush Administration.

Obama explained that it is “a philosophy that says we should give more and more to those with the most and hope that prosperity trickles down on everyone else, a philosophy that says even common-sense regulations are unnecessary…it's a philosophy that prefers scoring political points to showing leadership.”

He said what’s need now is “adult supervision” of the White House - “What we have seen over the last few weeks is the final verdict on this failed philosophy. This is the consequence of 8 yrs of irresponsibility. And it is time that we had some adult supervision in the White House, that's what I am running for President of the United States.”

From CBS News

My guess is Obama is calling for calm because if their is chaos, their are no elections. Hello martial law.

Funny that now all that is needed to be President is to be an adult. Who knew! :P

 

[JonnyRadar]

Why Bail? The Banks Have a Gun Pointed at Their Head...

http://www.sott.net/articles/show/166644-Why-Bail-The-Banks-Have-a-Gun-Pointed-at-Their-Head-and-Are-Threatening-to-Pull-the-Trigger

ok, i'm gonna give away my economic ignorance here... but i have a few questions. i find as i'm talking to people about this issue (the "bailout"), more often than not i'm saying "umm, i'm not sure...!"

so, the bailout is a temporary fix to a problem that will ultimately manifest in the collapse (or at least a heavy depression) of the economy. so at the very least, the US will experience an economic slump that will "take it down a notch" - if not total collapse.

my question is, i guess - if something akin to the bailout isn't done, won't our economy collapse in like... a month or two? as the Cs have said, apparently we're beyond the point of no return, so to speak. i'm not really "worried" about that. it's been evident for a while that our system is screwed, so that's a given. but it's been interesting to hear (i listen to a lot of radio) that so many people are "arguing against the bailout," when if something of such a drastic sloppy-bandaid nature isn't done, it seems as though we're looking at 1929 within the next 8-12 weeks?

perhaps i'm worrying about something placed in a future that is not set, but as so many have said, and i echo the sentiment, it really seems like we're right on the doorstep of total economic collapse - bread lines, fights at the gas station, mass poverty/starvation, etc... and with the mindset of a lot of americans (especially in rural areas where gun cabinets abound) might as well throw in some domestic disturbance as well...

can anyone with some more financial/economic knowledge shed some light on the situation? specifically in regards to the actual state of the economy? though data and signs point to collapse, i find myself lacking in the ability to explain this to people who ask.

 

[Mark7]

Re: Naomi Klein: The Bomb Has Yet to Detonate

Is it time to stock-up on camping supplies and head for the woods yet? If in the future I live in a tent city I hope it's a nice tent city with friendly neighbors.

Seriously, our current expensive housing, and the desire to live in a climate controled home where water and electricity is piped in and waste is piped out is the greatest burden on our backs. Next is the price of an automobile and fuel to get back and forth to our corporate jobs.

Are there any (even temporary) alternatives?

Heres a link to a possible alternative - in development at least....

_http://www.biohome.net/index.php

Egalitarian hunter-gatherer, circle people have lived in more simpler ways for how long? Hundereds of thousands of years?

What if we used technology to make it a little easier.

Having some such technology in place before the comets start falling could make things better, imhop.

 

[PepperFritz]

Re: Naomi Klein: The Bomb Has Yet to Detonate

Funny that now all that is needed to be President is to be an adult. Who knew! :P

Heck, an adolescent with the skills of a hall-monitor would be an improvement at this point....

 

[go2]

Re: Naomi Klein: The Bomb Has Yet to Detonate

I see the economy like I would see a sick person.

The economic organization on this planet is a criminal enterprise, designed to enslave mankind. The banking cartel is not sick, but is an efficient predator. The collapse is more like a controlled demolition allowing those at the top of the food chain to pick up the apples after they shake the tree, so to speak. The following interview with Max Keisar
touches on the collapsing fiat money system. This will rob all holders of USD denominated assets of their property and transfer title to the few who benefit from this system of usury and fraud.

http://www.youtube.com/watch?v=Ev4nt3RRivk

 

[PepperFritz]

Re: Naomi Klein: The Bomb Has Yet to Detonate

Then again, if a rehabbed bill isn't passed, no one can predict with certainty what will happen.

But if this bill is passed no one can predict with certainty what will happen either. This bill is sold on the verge of predictability, assuring a nicer future, but this is a lie. It doesn't address any of the fundamental problems currently faced by the US economy....

The statement you responded to was made by author of the article I posted, not me. I'm in complete agreement with you that the assurances being made by the architects of the bail-out proposal are bald-faced lies -- and that they know it. As I stated above, "Everything I've read indicates that bailout-or-no-bailout, the U.S. economy is in a spiralling nose-dive that cannot be stopped." The "crisis" was set in motion some time ago, and is now like a runaway train, gaining speed and momentum as it goes.

At best, the bail-out (this one or a subsequent "modified" one) is a shockingly blatant move to ensure that the thieves who caused the crisis in the first place do not have to suffer the consequences of their psychopathic greed, and that the debt is instead placed on the doorstep of the average American citizen. At worse, it is a pre-arranged "reward" for assisting in the creation of another "crisis" designed to frighten the masses into submission. When the bottom falls out, they'll all nod their heads sagely and warn how much worse it *could* have been if the bail-out had not been put into effect....

Any way you look at it, it's bad. Really bad.