Tuesday, January 04, 2011

Recovery? Please.

Bottom line: THERE IS NO "RECOVERY."

A few years ago we had a massive banking and credit crisis. In fact, it wasn't much of a 'crisis' if you ask me. It was a natural economic cycle. Economic cycles work in years and many times even decades. This is the nature of them. Ask any serious economist. There have been decades of lopsided growth, contraction and outright booms in economies before, all over the world. Its the nature of men and markets to expand to meet demand for goods and services, and typically they over-expand. For the past 20 years credit expanded and a few years ago that came to an end. That's just economics. Its happened before and I'm sure it'll happen again. The important point is that its over. It was in place for a long time but now overall credit is shrinking, not expanding. For you mathematical folks, what's happening is called "reversion to the mean." Basically, our credit and banking system became too large and over-sized. The system was out-of-balance and is now righting itself.

Well, it tried to right itself. It would've corrected the imbalance in a matter of weeks and the economy would've gone back to organic recovery. Instead, the Federal Reserve Board stepped in to save the gambling, swashbuckling banksters and their friends to the tune of some 12 trillion dollars to keep the ponzi scheme afloat. But of course, this was done in the name of saving "the system," and by extension.... you and me?

That last part is the problem. Bailing out the banks, foreign banks, hedge funds, pension funds and every other squealing gambler does NOTHING for you and me. NOTHING. Your debts are due. Period. Best thing for you to do is refuse to pay any bank that was [illegally] bailed out. That includes all top-four big banks: Bank of America, Citigroup, Wells Fargo and JPMorgan Chase. Your debt will be a total loss for the bank that they must right off. Your debt will be sold to a debt collection agency for 25 cents on the dollar who will try to talk you into paying with empty threats. Then your debt will be sold for 15 cents on the dollar to another agency who will do the same thing. If after 6 years (less or more depending on your state), the statute of limitations runs out and your debt is considered free and clear. Any effort to collect it after that is null and void, regardless of what the collector demands or claims. Period. That is the law. I guarantee banksters are at this very moment trying to convince states to change these laws to 25 years or more, but for now it is what it is. If you did this, yes, your credit score would be pretty bad and you wouldn't be able to use any credit cards that didn't carry really steep interest rates for a while, but so what. Declaring bankruptcy is worse, as your debts will not be discharged. Since "they" "reformed" bankruptcy, you have to pay the bulk of your debt back over a period of time, in essence rendering you a debt slave. You're better off negotiating with a second or third-level collection agency. After all, they paid 15 cents on the dollar for your debt. If they can collect $2,000 out of $10,000, they will be making money.

There are no bailouts in capitalism. That is something the "regulators" and "authorities" will never tell you. First off, the "regulators" and "authorities" are all former Wall St. people who intend on working there again - this is common knowledge by now. Secondly, these people will never tell you they never had to do anything when the big banks got in trouble. The whole banking system would've resolved itself with not one taxpayer nickel. The bad banks go under, their bad loans are bought by banks that are not in trouble and then IF - that is, IF, there are people or businesses that are good credit risks that need loans, the small and medium banks that expanded into the place left by the large, failed banks, will make those loans. The derivatives trade, mortgage-backed securities and other packaged, high-risk rubbish would've been sold off for the pennies on the dollar is was worth and the Wall St., passing-paper economy that resulted in outrageous bonuses would've collapsed, but Main St. would've gone on as usual. After all, Main St. America does not get their small business loan from Goldman Sachs. This much should be obvious.

None of this would cost you and I one nickel. But of course "we" could not "let" that happen because it was "bad" for... "us." That is a complete lie. There is no direct trace between Wall St. and Main St.. If anything, your loan from Wells Fargo, BofA, or JPMorgan Chase, should it be liquidated when the bank collapsed, would be sold for less than it was worth in all likelihood. Probably 70 or 80 cents on the dollar if you typically pay at least your minimum balance on time. If you don't, it would be sold off for much less... as little as 25 or 30 cents on the dollar. In that case, the new owner of your loan would only have to recoup half of your debt with them to make a good profit. You win, they win.

But "we" couldn't "let" that happen, even though that is how free markets have been dealing with such problems since time began. No, "we" needed to save the "banks." Banks that of course, demanded your debts bank at once as they were still insolvent. How nice for them that "we" saved them from collapse... Question: How can you save someone who has already collapsed? You can't put a volcano back together after it has erupted and yes, this is pretty much the same thing... Once a bank is known to be insolvent, other banks won't do business with it for all the tea in China. And since we have 4 HUGE banks that STILL have Trillions in bad loans (nicknamed "toxic paper"), those banks will be bleeding money for years and years, even with bailout money. This is also common knowledge among finance folks. So with no loans to make (the economy is still in very bad shape) and no mortgages to package and sell-off for fat fees, what did the banks do to keep from going out of business?


They basically lied, lied, and lied some more. They dumped all the bad loans they could onto The Fed and the rest they threw into a bucket on their balance sheet called "Level 3 assets." That's supposed to mean, those assets are hard to value and typically contain really esoteric and odd securities or assets. Its pretty much a very small accounting category every bank can use that has a relatively small number in it. But in this case, it was the perfect loophole. Level 3 was immediately saddled with mortgage and credit card loans. Those NEVER get thrown into Level 3 - because they are not hard to value and never have been. The problem is that those things were now worth a fraction of what they used to be worth, and the only way to hide that, in a panic, is to slap them under "Level 3." The "regulators" should've balked at this and demanded those loans be taken out of "Level 3" and properly valued - REGARDLESS of their value. But this made our banksters sad :( and would've shown the massive losses they had hidden, so "we" couldn't force them to do that. So the bankers sit around and wait for their collapsing loans that no one is paying (called a non-performing loan or NPL), to be completely worthless and in the meantime they pray and demand more free money from the Fed to try to make money with... usually in HIGHLY non-banking types of ways... like buying stocks, bonds, commodities (oil, gas, soybeans, wheat, etc.) to profit from the rising prices abnormally low interest rates are causing (generally called "inflation"), and basically drive up the cost of everything you need and consume. "We" must let "them" do that to us as "the banks must be saved at all costs," we are told.

After all, its good for 'our' economy.

If you suspect the rising of prices (without additional demand from consumers) butchers the economy and kills your discretionary spending on other things like gadgets, cars, clothes, toys and all things that make the economy grow, then you would be right. But screw you. That's Wall St.'s attitude. They have their own problems. And while they laugh about the public's ruination for their profit, they only watch in horror as time passes, knowing the banks are still bankrupt, and now entire nations, having brought billions in bank debt onto their own books, are the next to fall.

Nations don't fall. Power brokers in National capitals with HUGE egos don't go home with empty pockets to tell their wives their bad decisions helped bankrupt the nation and now they will have to get real jobs to feed the kids. Not with unofficial unemployment at 18%. Yikes. Who would want to look for work now!?!?!?! Being King is a much better gig.

So Nations will next war with each other. After all, if you don't distract people from asking questions about why the banks need TRILLIONS in permanent bailout funds, you might not get reelected anyway and your friends in "finance" might lose the gravy train you have made for them. So its "defend 'our' country" and a call to arms. 'We' have to kill some 'bad' people to defend 'our' nation. Who will we kill? It doesn't really matter. They'll make something up. A shot is fired, someone fires back, etc. etc.. It'll be shoot first and ask questions later. Even more so with all the countries in massive debt and no way out.


You should be pretty disgusted by now. So get ready. Instead of going to war, perhaps there is a better solution for 'our' nation.


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