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

[ArdVan]

Here's another article describing, what may have happened:

_http://elainemeinelsupkis.typepad.com/money_matters/2008/09/mystery-of-600.html

The Sphinx just released over $600 billion to all the worlds banks! Indeed...at the hearings in Congress that I attended at the very end, everyone made some sort of strange mention of '$600 billion stuck in LONDON.' I noted this down and got very excited. The Lehman Brothers executive sitting next to me had also mentioned this sum, too! So I have been watching the news for mention about this and here it is: Bernanke got his $600 billion to flood world banks with dollars because dollars are disappearing. This is the Derivative Beast eating money. I am certain of this.

...

Follow the money, they always say! Well, this $600 billion should be followed: it went across the planet. The tiny window the Fed created as an 'experiment' which was not supposed to be scary, that tiny window into the Outer Darkness, this small hole into the Cave of Wealth and Death has been expanding rapidly since it first was poked into the cave's wall.

All the reserves of the Federal Reserve are now gone. The ONLY way the Fed can flood the world with dollars is to beg all the other banks to give us dollars for us to give them. Got that? HAHAHA. This is how the Outer Darkness operates! Up is down and in is out. Everything is the opposite. So the Federal Reserves, which is neither federal nor has reserves, is now the conduit for flash flows of money created out of thin air....by our trade rivals.

 

[mamadrama]

so, apparently the FED just secretly handed out $630 billion anyway? right before the $700 b. was shot down?
good catch!

Whoa ho, I'll say. I called my reps and their assistants are claiming absolutely no knowledge of this fwiw.

 

[JonnyRadar]

Whoa ho, I'll say. I called my reps and their assistants are claiming absolutely no knowledge of this fwiw.

yep, something is rotten here.

not only did the FED apparently slip $630 billion to the banks, Bush appears to have signed a bill tuesday that promised the same amount (!) to the government/military budget?

_http://www.kaisernetwork.org/daily_reports/rep_index.cfm?DR_ID=54760

Administration News | President Bush Signs $630B Continuing Resolution
[Oct 01, 2008]

President Bush on Tuesday signed into law a more than $630 billion continuing resolution (HR 2638) that would fund at current levels the budgets of most Cabinet departments and federal agencies until March 6, 2009, CongressDaily reports (CongressDaily, 10/1). The bill, which the House passed last week and the Senate approved on Saturday, also includes the $73 billion fiscal year 2009 Military Construction-Veterans Affairs appropriations bill and two other FY 2009 spending bills (AP/Houston Chronicle, 10/1). The new fiscal year began on Oct. 1, and Bush had not received any of the 12 annual appropriations bills from Congress (CongressDaily, 10/1). Bush said, "I am disappointed that the Congress passed a long-term continuing resolution," rather than the individual appropriations bills. He added, "There is much work to be done, and the Congress should not adjourn for the year without finishing important business on spending, taxes, and free trade agreements" (Higa, CQ Today, 9/30).

and this...

_http://www.opednews.com/articles/Senate-Slips-Huge-Pentagon-by-Tommy-News-080930-123.html

Senate Slips Huge Pentagon War Funding Bill in Under The Radar.

-by Tommy News

The Senate has acted against the will of the American people and caved to the Bush Administration yet again. US Senators donned their Harry Potter invisibility cloaks and under the cover of darkness late Saturday night, with the smoke and mirrors distraction of the Wall Street bailout, quietly voted on and passed a huge, outrageous spending bill that gives an additional $488 Billion dollars to the Bush Administration and The Pentagon for funding of the wars in Iraq and Afghanistan.

There has been a near media blackout of this vote, and we need to get the word out that this outrageous warfunding is quietly continuing while the news media is being distracted by the gigantic and horrendous Wall Street bailout bill.

While we have all been preoccupied with the staggering $700 billion bail-out of wall street, boggled with the size of the dollar amount, having to raise the National debt limit and borrow money from foreign nations to fund it, late Saturday night the Senate passed a bill of a comparably huge dollar amount which made little news, but gives $488 Billion to the Pentagon for the continued funding of the the war, There has been a near media blackout of this vote, and we need to get the word out that this outrageous warfunding is quietly continuing while the news media is being distracted by the gigantic and horrendous Wall Street bailout bill.

The Pentagon is in line for a record budget. In addition to $70 billion approved this summer for operations in Iraq and Afghanistan, the Defense Department would receive $488 billion, a 6 percent increase. The spending bill was bundled in with a bill which also offers aid to victims of flooding in the Midwest and recent hurricanes across the Gulf Coast. The total cost of the spending legislation exceeds $630 billion.

Such a huge bill usually would dominate the end-of-session agenda on Capitol Hill. But it went below the radar screen because attention focused on the congressional bailout of Wall Street.

The bill was quietly rushed to Bush's desk to be signed into law, and John McCain rushed quietly back out of Washington and yet again avoided having to vote on another controversial spending bill. When the roll call on final passage occurred, McCain was at his campaign headquarters in Crystal City, Va., only five miles from the Capitol. McCain has missed a staggeringly huge number of Senate votes.

With the election fast approaching, I want to give you a breakdown of the 78-12 Senate vote as recorded in the Congressional Record. I urge you to take this outrageous spending vote into strong consideration when you cast your votes on November 4th.

*From the Congressional Record:*

so in the midst of collapse, i guess it's a good time to toss around almost 1.3 trillion (!) while the public thinks they gained a victory by voting down a "bailout"...



edit: forgot to include this link - senate record of the continuing resolution: _http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=110&session=2&vote=00208

 

[mamadrama]

so, apparently the FED just secretly handed out $630 billion anyway? right before the $700 b. was shot down?
good catch!

Well, not so fast it seems. I had a long conversation with one of my House Rep's aids and he cleared this up as well as a little of my economic policy ignorance.

I also found it helpful to do a little review of the monetary policy of the Federal Reserve to understand this $630 billion infusion is fairly standard operation. The banks give notes to the Feds in return for the cash, so it's not just a give away. Here is a wiki link to the purpose and policies of the FR to help clarify. Federal Reserve

The primary motivation for creating the Federal Reserve System was to address banking panics[12]. Other purposes are stated in the Federal Reserve Act, such as "to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes."[13] Before the founding of the Federal Reserve, the United States underwent several financial crises. A particularly severe crisis in 1907 led Congress to enact the Federal Reserve Act in 1913. Today the Fed has broader responsibilities than only ensuring the stability of the financial system.[12]

Current functions of the Federal Reserve System include:[12][14]

To address the problem of banking panics
To serve as the central bank for the United States
To strike a balance between private interests of banks and the centralized responsibility of government
To supervise and regulate banking institutions
To protect the credit rights of consumers
To manage the nation's money supply through monetary policy to achieve the sometimes conflicting goals of
maximum employment
stable prices
moderate long-term interest rates
To maintain the stability of the financial system and contain systemic risk in financial markets
To provide financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system
To facilitate the exchange of payments among regions
To respond to local liquidity needs
To strengthen U.S. standing in the world economy

Addressing the problem of bank panics
Further information: bank run and fractional-reserve banking
Bank runs occur because banking institutions in the United States usually practice fractional-reserve banking and do not have enough cash in reserves to give to all of their depositors simultaneously. Bank runs can lead to a multitude of social and economic problems. The Federal Reserve was designed as an attempt to prevent or minimize the occurrence of bank runs, and to respond appropriately when they do happen.





Elastic currency
One way to prevent bank runs is to have a money supply that can expand when money is needed. The term "elastic currency" in the Federal Reserve Act doesn't just mean the ability to expand the money supply, but also to contract it. Some economic theories have been developed that support the idea of expanding or shrinking a money supply as economic conditions warrant. Elastic currency is defined by the Federal Reserve as:[11]

Currency that can, by the actions of the central monetary authority, expand or contract in amount warranted by economic conditions.

Monetary policy of the Federal Reserve System is based partially on the theory that it is best overall to expand or contract the money supply as economic conditions change. In practice, the Federal Reserve has never contracted the monetary supply since the Great Depression, on the fear that contracting the money supply may cause a deflationary recession, and because according to the operating theory of the Federal Reserve, monetary supply should expand as the economy expands to accommodate larger volumes of transaction.


Check clearing system
Because some banks refused to clear checks from certain other banks during times of economic uncertainty, which increased financial problems, a check-clearing system was created in the Federal Reserve System. It is briefly described in The Federal Reserve System—Purposes and Functions:[11]

By creating the Federal Reserve System, Congress intended to eliminate the severe financial crises that had periodically swept the nation, especially the sort of financial panic that occurred in 1907. During that episode, payments were disrupted throughout the country because many banks and clearinghouses refused to clear checks drawn on certain other banks, a practice that contributed to the failure of otherwise solvent banks. To address these problems, Congress gave the Federal Reserve System the authority to establish a nationwide check-clearing system. The System, then, was to provide not only an elastic currency—that is, a currency that would expand or shrink in amount as economic conditions warranted—but also an efficient and equitable check-collection system.


Lender of last resort
Further information: Lender of last resort
The Federal Reserve has the authority and financial resources to act as “lender of last resort” by extending credit to depository institutions or to other entities in unusual circumstances involving a national or regional emergency, where failure to obtain credit would have a severe adverse impact on the economy.[15]

Through its discount and credit operations, Reserve Banks provide liquidity to banks to meet short-term needs stemming from seasonal fluctuations in deposits or unexpected withdrawals. Longer term liquidity may also be provided in exceptional circumstances. The rate the Fed charges banks for these loans is the discount rate (officially the primary credit rate).

In making these loans, the Fed serves as a buffer against unexpected day-to-day fluctuations in reserve demand and supply. This contributes to the effective functioning of the banking system, alleviates pressure in the reserves market and reduces the extent of unexpected movements in the interest rates.[16]

For example, on September 16, 2008, the Federal Reserve Board authorized an 85 billion dollar loan to stave off the bankruptcy of international insurance giant American International Group (AIG).[17][18]


Central bank
Further information: Central bank
In its role as the central bank of the United States, the Fed serves as a 'banker's bank' and as the government's bank. As the banker's bank, it helps to assure the safety and efficiency of the payments system. As the government's bank, or fiscal agent, the Fed processes a variety of financial transactions involving trillions of dollars. Just as an individual might keep an account at a bank, the U.S. Treasury keeps a checking account with the Federal Reserve through which incoming federal tax deposits and outgoing government payments are handled. As part of this service relationship, the Fed sells and redeems U.S. government securities such as savings bonds and Treasury bills, notes and bonds. It also issues the nation's coin and paper currency. The U.S. Treasury, through its Bureau of the Mint and Bureau of Engraving and Printing, actually produces the nation's cash supply; the Fed Banks then distribute it to financial institutions.[19]


Federal funds
Main article: Federal funds
Federal funds are the reserve balances that private banks keep at their local Federal Reserve Bank.[20][21] These reserve balances are the "reserves" in "federal reserve", hence the name of the system. The purpose of keeping funds at a Federal Reserve Bank is to have a mechanism through which private banks can lend funds to one another. This market for funds plays an important role in the Federal Reserve System as it is what inspired the name of the system and it is what is used as the basis for monetary policy. Monetary policy works by influencing how much money the private banks charge each other for the lending of these funds.


Balance between private banks and responsibility of government
The system was designed out of a compromise between the competing philosophies of privatization and government regulation.[19] While planning the design of the system, some people wanted the system to have generally private aspects whereas others wanted more government involvement. The system that resulted ended up being a compromise between these two philosophies. In 2006 Donald L. Kohn, vice chairman of the Board of Governors, summarized the history of this compromise:[22]

Agrarian and progressive interests, led by William Jennings Bryan, favored a central bank under public, rather than banker, control. But the vast majority of the nation's bankers, concerned about government intervention in the banking business, opposed a central bank structure directed by political appointees. The legislation that Congress ultimately adopted in 1913 reflected a hard-fought battle to balance these two competing views and created the hybrid public-private, centralized-decentralized structure that we have today.

In the current system, private banks are for-profit businesses but government regulation places restrictions on what they can do. The Federal Reserve System is the part of government that regulates the private banks. The balance between privatization and government involvement is also seen in the structure of the system. Private banks elect members of the board of directors at their regional Federal Reserve Bank while the members of the Board of Governors are selected by the President of the United States and confirmed by the Senate. The private banks give input to the government officials about their economic situation and these government officials use this input in Federal Reserve policy decisions. In the end, private banking businesses are able to freely run a profitable business while the U.S. government, through the Federal Reserve System, oversees and regulates the activities of the private banks.


Government regulation and supervision
The Board of Governors is the part of the Federal Reserve System that is responsible for supervising the private banks. A general description of the types of regulation and supervision involved is given by the Federal Reserve:[11]

The Board also plays a major role in the supervision and regulation of the U.S. banking system. It has supervisory responsibilities for state-chartered banks that are members of the Federal Reserve System, bank holding companies (companies that control banks), the foreign activities of member banks, the U.S. activities of foreign banks, and Edge Act and agreement corporations (limited-purpose institutions that engage in a foreign banking business). The Board and, under delegated authority, the Federal Reserve Banks, supervise approximately 900 state member banks and 5,000 bank holding companies. Other federal agencies also serve as the primary federal supervisors of commercial banks; the Office of the Comptroller of the Currency supervises national banks, and the Federal Deposit Insurance Corporation supervises state banks that are not members of the Federal Reserve System.

The aid also gave me a website that has a lot of information and articles about the bailout and just economic issues in general. It is:
_http://realclearmarkets.com/

 

[JonnyRadar]

Well, not so fast it seems. I had a long conversation with one of my House Rep's aids and he cleared this up as well as a little of my economic policy ignorance.

i admit i am also ignorant of economic policy, just seemed odd to see these two stories both in the same day, referring to roughly the same amount of money being tossed around...

care to enlighten? very curious to hear what the house rep's aid had to say!

edit: sorry laurel, posted before i saw that you inserted the information.

 

[Bobo08]

In this article, we read this:

And now for the complicated and scary stuff. Today is the beginning of "auction season", when the International Swaps and Derivatives Association starts a series of auctions to settle who pays what to whom on a plethora of credit derivative contracts relating to businesses that have gone into default.

It's settlement time on those humungous insurance policies for corporate debt, called credit default swaps, which I've mentioned to you as being another potentially lethal flaw in the financial economy.

In the coming three weeks, payouts of hundreds of billions of dollars may be made - or at least demanded - to cover losses arising from the defaults on the debt of Fannie Mae, Freddie Mac, Lehman and Washington Mutual.

Sandy Chen, the analyst at Panmure who's been a smart predictor of credit-crunch accidents, estimates that payments on Lehman's battered bonds could be as much as $350bn.

Now the problem here is that for every beneficiary of these payments, there's an underwriter - those who provided the CDS insurance - which has to find the cash. And, as I've pointed out, this was a largely unregulated market, so the great fear in markets is that some underwriters have insufficient capital and will simply collapse when the claims are made.

That in turn would hurt financial institutions expecting to be paid out on their CDS contracts and damage others with separate exposure to the collapsed businesses. The shock to the system could be very severe.

To compound the current anxiety about all this, the CDS market is so opaque that it's impossible to know right now who is holding the radioactive baby.

This gigantic CDS mess has contributed to the seizing up of money markets in recent weeks, the tendency of all banks and financial institutions to hoard cash - because no-one knows who or what may be vulnerable during the CDS auction season.

That, as if you needed telling, is just one more reason why the US $700bn bank bail-out is no panacea, even if we should be relieved that it has passed its first Congressional hurdle.

The financial weather ahead remains stormy and unpredictable.

This CDS thingie could be the financial bomb waiting to detonate.

 

[Mountain Crown]

[quote author=Bobo08]To compound the current anxiety about all this, the CDS market is so opaque that it's impossible to know right now who is holding the radioactive baby.[/quote]

The importance of the petro dollar regarding the semblance of US economic stability relates to this. Can anyone here address this in layman's terms?

 

[seek10]

The entire bailout thing became beyond the sickening level

It is not even 3 days they snatched blank cheque of initial $700 billion dollars at gun point and now the same media which cried for the support and now bombarding $700 billion is useless unless home prices goes up. This is INSANE. Why did they give emperor powers for the paulson.

http://news.yahoo.com/s/ap/20081005/ap_on_bi_ge/financial_meltdown_credit
For bailout to work, housing market needs to mend

NEW YORK - Washington's financial bailout plan is now law. So the credit spigot will start flowing again, banks will resume lending, and an economic recovery can begin, right?


Wrong. Experts say the most important thing that needs to happen before the $700 billion bailout even has a chance of working: Home prices must stop falling. That would send a signal to banks that the worst has passed and it's safe to start doling out money again.

The problem is the lending freeze has made getting a mortgage loan tough for everyone except those with sterling credit. That means it will take several months or longer to pare down the glut of houses built when times were good — and those that have come on the market because of soaring foreclosures — before home prices start appreciating.

Housing is a critical component to the U.S. economy and by extension the availability of credit. Roughly one in eight U.S. jobs depends on housing directly or indirectly — from construction workers to bank loan officers to big brokers on Wall Street. A turnaround in housing prices would boost confidence in the wider economy and, experts hope, goad banks into lending again.

"Housing traditionally does lead the economy through a recovery. I think it's going to be critical for a sustained recovery in this cycle, too," said Gary Thayer, senior economist at Wachovia Securities.

In the meantime, people like Alicia Elliott are adjusting to a new American reality: Life without credit.

The 21-year old Morgantown, W. Va., resident just bought a used mobile home, borrowing $4,000 from friends and family because she couldn't get a bank loan.

"I tried to. Couldn't do it. It's just hard to get a loan," said Elliott, who works as a cashier at a Lowe's Cos. store.

She used to get bombarded with offers for credit cards. Now she can't even get one. "I get denied one after another after another. It doesn't matter if you have a co-signer or not," she said.

Trey Simmons, a 31-year-old barber at a Dallas hair salon, said he worries tighter lending standard will squash his goal of buying a home next year.

"Credit is a privilege everybody can't get," Simmons said. "I had credit at a young age and messed up."

He now operates on a strictly cash basis. "If I don't have it," he said, referring to cash, "I don't spend it."

The dilemma boils down to a matter of trust.

"Credit, by definition, means trust and faith, and for many reasons trust and faith have been damaged," said Sung Won Sohn, an economics professor at California State University, Channel Islands.

Sohn said the near certainty of a recession makes it too risky for the thousands of small and medium-sized banks across the country to lend to people like Elliot.

"Banks know the economy is getting worse, so ... they will keep being cautious," said Sohn, a former banking executive.

Still, the government hopes that by scooping up billions of dollars in bad mortgage debt and other toxic assets, banks eventually can clean up their shaky balance sheets, crack open the vaults and send money washing through the system again.

The rescue plan also raises the federally insured deposit limit from $100,000 to $250,000, a move that could boost banks' reserves and further grease the lending wheels.

Rep. Barney Frank, D-Mass., the Financial Services Committee chairman and a key negotiator over the past weeks, said the measure was just the beginning of a much larger task Congress will tackle next year: overhauling housing policy and financial regulation in a legislative effort comparable to the New Deal.

In the meantime, the Treasury Department is moving swiftly to get the plan started. Treasury Secretary Henry Paulson said Friday he did not wait for final approval of the measure to begin preparation. He has been lining up outside advisers as his staff works out details on a multitude of complex issues.

But several hurdles could trip up the plan. For starters, even when the Treasury starts buying bad assets, some banks may hoard the cash they receive in return until they see how the plan pans out. That has the potential to make the lending logjam worse, said Vincent R. Reinhart, former director of the Federal Reserve's monetary affairs division.

"They may sit on the sidelines and wait to see (the bailout) get some traction. The problem is if everybody sits on the sidelines, nobody gets in the game. It's a risk," he said.

It also creates a vicious cycle: No trust means no lending; tight credit means it's harder to buy a home; the more difficult it is to buy or sell a home, the further home prices will fall; and the further prices drop, the more foreclosures there will be.

U.S. home prices — down 20 percent from their peak in July 2006 — still have further to fall, and must hit bottom before demand picks up. The long-awaited bottom in prices could be a year or more away.

But Jim Gillespie, chief executive of Coldwell Banker Real Estate, said he hopes that lower prices, combined with the government's actions will jump-start stagnant demand. The federal bailout plan, he said, "will give people reassurance that mortgage money is available."

Jobs are another big concern. The stranglehold on credit has choked companies big and small that depend on regular inflows of borrowed money to pay employees and stay afloat.

The Labor Department said Friday that employers cut 159,000 jobs in September, the fastest pace of losses in more than five years. Experts say that number will grow as the effects of the credit gridlock course through the economy in coming days and weeks.

The nation's unemployment rate is now 6.1 percent, up from 4.7 percent a year ago. Over the last year, the number of unemployed people has risen by 2.2 million to 9.5 million.

The unemployment rate could rise to as high as 7.5 percent by late 2009, economists predict. If that happens, it would mark the highest since after the 1990-91 recession.

Boosting employment is critical to kick-starting lending because "if jobs are growing, then incomes are a growing, and if incomes are growing then people are consuming," Reinhart said.

Consumers and businesses have retrenched so much that some analysts fear the economy stalled or shrank in the third quarter that ended last week. The Labor Department report Friday showed wage growth for workers is slowing, meaning they'll be more hard-pressed to spend, especially for something as expensive as a home.

Many economists predict the economy will contract in the final quarter of 2008 and the first quarter of next year. That would meet the classic definition of a recession — two consecutive quarters of a shrinking economy.

One bright spot: optimism hasn't been totally squashed yet.

Morgan Cavanaugh, proprietor of Moriarty's Pub in downtown Cleveland, has been trying to sell another bar he owns to ease his workload, but the prospective buyer hasn't been able to raise the money.

Now that the bailout legislation has the green light, he's hopeful he'll get a deal done.

"It passed. Let's work something out," Cavanaugh told the man over a cell phone Friday just after the House approved the plan.

He flipped the phone shut and smiled from behind the weathered mahogany bar of his 75-year-old Irish pub.

"He's going to put the loan request in again. It's looking up," Cavanaugh said.

___

see how the propaganda works. Plunder trillions based on 'according to some analysts' and show the blind optimism of some individuals as the sign of economy.

Now they will allow the market to collapse and buy every thing and they are the owners. In recent reports top 400 wealthiest got the richer from 38% of entire US wealth to 58% in just 2 years from 2006 to 2008. With this $700 billion dollars startup , they can get entire US wealth with in months ? .
It is beyond my comprehension and now the reports of 70,000 body bags reported in Katrina disaster is good remainder ,what is in pipeline. STS always takes shortest possible route. single gun shot wounds ?

 

[Pierre]

[quote author=Bobo08]To compound the current anxiety about all this, the CDS market is so opaque that it's impossible to know right now who is holding the radioactive baby.

The importance of the petro dollar regarding the semblance of US economic stability relates to this. Can anyone here address this in layman's terms?
[/quote]

A broad majority of the petrol market is negotiated in dollars. It means that petrol producers sell oil barrels and, in exchange, they take dollars. This oil trade increases the demand for dollars.

However most operators want to get rid of their dollars because it value is dropping and will drop even more.

The value of the dollar is dropping because the Fed is creating tons of dollars (one reason is to provide money to the bankrupt banking system)

Creating more dollars reduce the value of each dollar notes, currencies like commodities see their value drop when their supply increases.

So the oil market is one of the very last field that generates an important demand for dollars and allows (amongst other artificial demand tricks) to maintain its actual rate VS others currencies and commodities.

It is clear ?

 

[Mountain Crown]

Isn't the reason dollars are the instrument of trade in the oil market because the US economy is perceived as strong, even though the derivatives mess proves it otherwise? In light of the present situation, can this perception continue?

Haven't there been countries recently refusing the petrol dollar as their medium of exchange?

Clear? What's that?

 

[Pierre]

Isn't the reason dollars are the instrument of trade in the oil market because the US economy is perceived as strong,

Yes one reason was that the US economy and therefore the US currency were considered as strong.

even though the derivatives mess proves it otherwise? In light of the present situation, can this perception continue?

Future is open, isn't it ? ;)

The US economy is obvioulsy getting weaker and weaker. Though the illusion still holds thanks to massive injection money and a "high" dollar rate artificially maintained by central banks.

Maybe they will try to keep the dollar afloat until the election. But considering the huge quantity of dollars that is created, it will have to drop sooner or later.

Haven't there been countries recently refusing the petrol dollar as their medium of exchange?

Yes Venezuela or Iran made this move. It was a financial, economical and also political move.

 

[JonnyRadar]

as of approx. 11:00 AM EST

_http://ap.google.com/article/ALeqM5gHs5OM3gFG_DytQQZFbWfgPT08MAD93L2DU80

Wall Street tumbles amid global sell-off

By JOE BEL BRUNO

NEW YORK (AP) — Wall Street tumbled again Monday, joining a sell-off around the world as fears grew that the financial crisis will cascade through economies globally despite bailout efforts by the U.S. and other governments. The Dow Jones industrials skidded more than 500 points and fell below 10,000 for the first time in four years, while the credit markets remained under strain.

The markets have come to the sobering realization that the Bush administration's $700 billion rescue plan won't work quickly to unfreeze the credit markets, and that many banks are still having difficulty gaining access to cash. That's caused investors to exit stocks and move money into the relative safety of government debt.

Over the weekend, governments across Europe rushed to prop up failing banks. The German government and financial industry agreed on a $68 billion bailout for commercial-property lender Hypo Real Estate Holding AG, while France's BNP Paribas agreed to acquire a 75 percent stake in Fortis's Belgium bank after a government rescue failed.

The governments of Germany, Ireland and Greece also said they would guarantee bank deposits.

The Federal Reserve also took fresh steps to help ease seized-up credit markets. The central bank said Monday it will begin paying interest on commercial banks' reserves and will expand its loan program to squeezed banks.

Investors took a bleak view of the future, seeing no end to the crisis in the near term.

"This is a psychologically important moment that we passed below the 10,000 level," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "But, the issues are worldwide. The fact is people are scared and the only thing they're doing is selling."

In late morning trading, the Dow Jones industrial average fell 503.13, or 4.87 percent, to 9,822.25, dropping below 10,000 for the first time since Oct. 29, 2004. At one point, the Dow was down 587 points.

Broader indexes also tumbled. The Standard & Poor's 500 index shed 61.68, or 5.61 percent, to 1,037.55; and the Nasdaq composite index fell 117.52, or 6.03 percent, to 1,829.87. The Russell 2000 index of smaller companies dropped 36.07, or 5.82 percent, to 583.33.

 

[Niall]

This CDS thingie could be the financial bomb waiting to detonate.

I think you're right.

Remember this from the recent SOTT Dot-Connector:

The plan then is to use and blatantly abuse the accumulated power, to create crises and to destroy the credibility of any authority, and to drive society to the point of collapse, in order to show the 'wrongness' of the current order. At this point the 'new order' can be brought in as the potential saviour:

We shall contrive to prove that we are benefactors who have restored to the rent and mangled earth the true good and also freedom of the person, and therewith we shall enable it to be enjoyed in peace and quiet, with proper dignity of relations, on the condition of course, of strict observance of the laws established by us. - (protocol 22)

A repeating theme throughout the protocols is the use of money as the ultimate control mechanism, and of a system of usury and entrapment which will be used to gain total global control. This is a theme which is often covered by SOTT, and it seems it has now reached the 'crunch point'. Protocol 20 and 21 describe a system of instigated run-away debts through money-lending, usury and inflation of fiat currency, whereby eventually everything that can be converted to an 'economic asset' is so, these assets are progressively seized from the people, and the entire wealth of the state becomes transferred into the hidden hands of the money lenders. We are told how unstoppable is this financial black hole:

In our hands is the greatest power of our day - gold.

[...]

We shall so hedge about our system of accounting that neither the ruler nor the most insignificant public servant will be in a position to divert even the smallest sum from its destination without detection or to direct it in another direction except that which will be once fixed in a definite plan of action. - (protocol 20)

The 'Protocols' then tell us where this is leading:

When we ascend the throne of the world all these financial and similar shifts, as being not in accord with our interests, will be swept away so as not to leave a trace, as also will be destroyed all money markets, since we will not allow the prestige of our power to be shaken by fluctuations of prices set upon our values, which we shall announce by law at the price which represents their full worth without any possibility of lowering or raising.

We shall replace the money markets by grandiose government credit institutions, the object of which will be to fix the price of industrial values in accordance with government views. These institutions will be in a position to fling upon the market five hundred millions of industrial paper in one day, or to buy up for the same amount. In this way all industrial undertakings will come into dependence upon us. You may imagine for yourselves what immense power we shall thereby secure for ourselves... - (protocol 21)

It looks as though this global coup d'etat will be carried out using the collapsing global economy as a major means to wield power and to beat the population into submission or starvation.

The unexpected rejection by congress of the 'financial bailout bill' is especially interesting, and means we will all have to pay close attention to what happens next. With the spectacular rise to prominence of Sarah Palin, as a possible representative of things to come, we truly live in 'interesting times'.

They're amplifying the fear in order to lay the most fertile grounds possible to apply the shock therapy.

The following article on SOTT reads like it was lifted straight from the Protocols of the Pathocrats. It's written in the haughty tone of one who sees all our woes, lays the blame squarely at the feet of incompetent national leaders, then offers the only possible solution in the form of a glorious global financial institution. Insider leaks have already provided the newspeak term elsewhere - Global Monetary Authority.

Nobody will be spared, unless they own gold bars

We face extreme danger.

PANIC!!!

Unless there is immediate intervention on every front by all the major powers acting in concert, we risk a disintegration of global finance within days. Nobody will be spared, unless they own gold bars.

See Rs1's comment regarding this on the SOTT page. What use is gold to us in the eventuality of there no longer being a market for it??

Investors will learn today whether the Paulson bail-out - fattened to $850bn (£480bn) by Congress - can begin to halt the death spiral in the credit system. So far, the response looks terrible.

Germany is now in the hot seat. The collapse of a rescue deal for Hypo Real Estate on Saturday threatens a €400bn (£311bn) bankruptcy that nearly matches the Lehman Brothers debacle for sheer scale.

Chancellor Angela Merkel has been forced to pull her head out of the sand, guaranteeing all German savings, a day after she rebuked Ireland for doing much the same thing. Reality intrudes.

During the past week, we have tipped over the edge, into the middle of the abyss. Systemic collapse is in full train. The Netherlands has just rushed through a second, more sweeping nationalisation of Fortis. Ireland and Greece have had to rescue all their banks. Iceland is facing an Argentine denouement.

The US commercial paper market is closed. It shrank $95bn last week, and has lost $208bn in three weeks. The interbank lending market has seized up. There are almost no bids. It is a ghost market. Healthy companies cannot roll over debt. Some will have to sack staff today to stave off default.

As the unflappable Warren Buffett puts it, the credit freeze is "sucking blood" out of the economy. "In my adult lifetime, I don't think I've ever seen people as fearful," he said.

We are fast approaching the point of no return. The only way out of this calamitous descent is "shock and awe" on a global scale, and even that may not be enough.

Interesting choice of words, eh? Economic shock therapy here we come.

Drastic rate cuts would be a good start. Central bankers still paralysed by a misplaced fear of inflation - whether in Europe, Britain, or the US - have become a public menace and should be held to severe account by our democracies. The imminent and massive danger is now self-feeding debt deflation.

Man, the hubris! For a generation or two now, all we have heard from the gatekeepers has been the idolisation of Milton Friedman's Monetary Theory which worships low inflation at all costs.

The lesson of the 1930s is that any country trying to reflate in isolation will be punished. The crisis will ricochet from one economy to another until every one is crippled. We are seeing it play again in this drama as our leaders fail to rise above their narrow, parochial agendas.

Did you catch the not-so-veiled threat to any one country "trying to reflate in isolation"??

ie Anyone caught attempting to tackle their economy's problems outside of the proscribed channels will be punished by our hidden hand.

No mavericks please; we have a program to execute.

The European Central Bank - which raised rates into the teeth of the crisis in July - has played a shockingly destructive role in this enveloping slump. Its growth predictions this year have been, and still are, delusional. Neglecting its global role, it has vastly complicated the fire-fighting efforts of Washington.

*splutters* Washington's fire-fighting efforts?? Try pyro-maniacal fire-breathing horned, winged beast...

It could have offered "cover" to the US Federal Reserve this spring when Ben Bernanke was forced by events to slash rates to 2pc. It could at least have signalled an end to monetary tightening. That is how an ally ought to behave.

The blame always lies elsewhere when it comes to psychopaths.

Instead, it stuck maniacally to its Gothic script, with equally unhappy consequences for both sides of the Atlantic, as well as for China, Japan, and India. The euro rocketed yet further, which it turn set off an oil shock as crude metamorphosed into an anti-dollar with leverage.

The ECB policy was self-defeating, even on its own terms. It merely drove headline inflation even higher, while deeper forces of underlying debt deflation pulled the real economies of Germany, Italy, France, and Spain into a recessionary vortex.

Far from offering reassurance, the weekend mini-summit of EU leaders served only to highlight that nobody is in charge of this runaway train. There is still no lender of last resort in euroland. The £12bn stimulus package is risible.

FEED ME MORE!!!

Angela Merkel has revealed her deep limitations. It was she who vetoed French efforts to launch a pan-EU rescue package, suspecting that any lifeboat fund would prove to be Trojan Horse - a way of co-opting German taxpayers into colossal transfers of wealth to Latin Europe.

In that she is right, but it is too late now for dysfunctional EU political games. By demanding that those who caused the damage should pay for it, she crossed the line into caricature, or worse.

Translation: By daring to suggest reckless, conscienceless gamblers should suffer the consequences of their own irresponsibility - and perhaps ultimately forcing them to contribute something to the real economy like everybody else - Merkel crossed the line set by us to her when we put her in power. She now risks character assassination, or worse.

Her comments echo word for word the "we're alright Jack" attitudes of Euro-pols during the first US banking crises in 1930-1931, until the storm hit Europe and the entire cast was swept away by furious electorates, or simply shot. Thankfully, this EU stupidity is at last drawing serious criticism.

Notice how this is linked with those damn liberal appeasers who nearly got us all killed because they couldn't see fascism coming last time around? The Credit Crunch is the New Hitler!

"We have to make sure Europe takes its responsibilities, like the US: action must be taken quickly and in a concerted manner," said IMF chief Dominique Strauss-Kahn.

...and, he should have added, in a conceited manner. What he really means is: "We have to make sure our minions in the EU follow the program. Like our good Pavlovian dogs in the US, who we like totally own."

As for the US itself, it has not yet exhausted its policy arsenal. It can escalate further up the nuclear ladder. The Fed can cut interest rates from 2pc to zero. If that fails, it can let rip with the mass purchase of US debt.

Nuclear?? You chose nuclear as an analogy for 'drastic measures'?!?

"The US government has a technology, called a printing press," said Fed chief Ben Bernanke in November 2002. (His helicopter speech).

In extremis, the Treasury/Fed can swoop into any market to shore up asset prices. They can buy Florida property. They can even buy SUV guzzlers from the car lots in Detroit, and mangle them in scrap yards. As Bernanke put it, the Fed can "expand the menu of assets that it buys."

There is a devilish catch to this ploy, of course. It assumes that foreign creditors will tolerate such action.

Japan entered its Lost Decade as the world's top creditor, with a vast pool of household savings to cushion the slump. America starts its purge with net external liabilities of $3 trillion, and a savings rate near zero. Foreigners own over half the US Treasury debt, and two thirds of all Fannie, Freddie, and other US agency bonds.

But the risk of a dollar collapse is one for the distant future. Right now the world faces the opposite problem. There is a wild scramble for dollars as a $10 trillion pyramid of global lending based on dollar balance sheets "delevers" with a vengeance.

This is a "short squeeze" on those who have used the dollar for a vast global carry trade. International banks are facing margin calls on their dollar leverage. It is why the Fed is having to provide $1.25 trillion in dollar liquidity for the entire global system, according to estimates by Brad Setser from the Center for Geoeconomic Studies.

The crisis engulfing Europe, Asia and emerging markets, makes life easier for Washington. The United States is becoming a safe-haven again.

The US. Is becoming. A safe-haven. Again.

What on Earth does he mean by that?

How deluded must you be to describe the US as a safe-haven? For whom exactly? For predators freed from the shackles of those 'other' people?

The Fed can now hope to pursue monetary stimulus "a l'outrance" without being slapped down by the currency, debt, and commodity markets. Take comfort where you can.

Whew, what a load of paralogical claptrap! You could nearly invert everything Prat-chard says and get a more accurate analysis of the situation.

 

[PopHistorian]

I'm amazed at how openly the media is telling us that the economy is doomed, even dropping the "depression" word now. To me, this is marked and different. A CNN headline yesterday, "Poll: 60% Believe Depression Likely"
( _http://vzw.cnnmoney.mlogic.mobi/money/lt_ne/lt_ne/detail/97251;jsessionid=6DD57235AAF076A953943048808B74B0). This morning, Jim Cramer of TheStreet.com and MSNBC (who has never been any use, but still commands a huge audience) actually says, "This is a worldwide crash" and "Sell now!"
(_http://www.thestreet.com/story/10440902/1/cramer-its-a-worldwide-crash.html).
One CNN analyst, in prime time, said that if farmers can't get loans to plant crops, there'll be worldwide hunger and starvation. Well, that's pretty overt.

First they sold the bail-out hard, saying that the stock market wanted it bad, but when the stock market plummeted after the bail-out was passed, the same analysts said, "well, this wasn't going to help the stock market, this is just to get the credit market out of gridlock." On the day of the 777 Dow point drop, Campbell's Soup was a big gainer. Apparently, like peanut butter sales, it is a barometer of public concern with the economy (not to mention a mind-melting dose of MSG if you eat it. :P )

I'd agree that it probably has "passed the point of "'no return,'" maybe for multiple reason.