You can’t handle the truth…
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Monthly Archives: September 2008
CNBC says it perfectly
I have CNBC on in the background and between reading and watching the events unfold one of the anchors labeled the situation perfectly.
He essentially said that a close of 200 – 300 (in the DOW) points down won’t send a strong signal to everyone that there really is a crisis. However, if the market closes down sharply then that will send the needed signal that something “MUST” be done. We are being spoon fed a load of crap.
This bill will probably eventually pass… With the amount of panic and amount of “wealth” lost today I wonder if the level of support will start to shift from negative to positive.
CNBC is also saying that Barney Frank said that they were going to monitor the market’s reaction after the vote. So, lets go through the motions and see how the markets react to a no go on the bill and then if they freak out we can make sure it will pass on the second go around.
Anybody ever been to a musical, a play, or a performance of any kind? Well, there are scenes and each is carefully planned out. First you lay the ground work and setup the plot, then there is a climax, and a resolution. I highly doubt we are even close to the climax, which means we have a long way to go laying the groundwork.
Before the Bailout Vote
Friday closed up perhaps on anticipation that the bailout package would go through, and make everyone feel warm and fuzzy inside. We don’t have an agreed upon package and some interesting things are occurring in the market:
1) The Dollar is rallying
2) US markets are down severely
3) World markets are down
4) Bonds are up, yields are down
5) Commodities except Gold and Silver are down
Is this the beginning of the end? The Fed pumped another $600bn + into the markets, which is a signal that the dollar will be inflated rapidly. We don’t get to see the effects immediately, but one would presume that with that much money floating around the dollar would be falling, gold and silver rallying, commodities rallying, and even the markets would be rallying.
CONCERN:
Everyone is watching and waiting to hear about the bailout news. If it passes what will happen? Some are saying that the markets are already to far gone, and the downturn is spreading into Europe.
BAFFLED:
The dollar is gaining strength, which is ironic because of the amount of liquidity the Fed is creating. Long-Term this can’t mean anything good for the dollar. Short-term there has to be massive buying of the dollar to keep it from falling. Imagine if the dollar fell at the same time the market fell… I’d want my shot gun at my doorstep just in case.
Beyond this I don’t have much to say at the moment. There is an amazing amount of uncertainty and fear floating around that if it all comes crashing down at once… If this bill passes, which is vehemently opposed by much of the public, we will probably see a little rally. I figured that when I woke up the market would be in full bear market correction, however prior to bed the futures markets were indicating the contrary.
WILL SOMEONE PLEASE TELL ME WHY THEY THINK THE DOLLAR IS RALLYING?
Sometimes the obvious isn’t so obvious:
The dollar… other central banks around the world are also inflating their currencies. How long this will continue I have no idea, but if everyone inflates in tandem presumably nothing changes. Well, until there is a complete loss of confidence in once currency or another. Then… <Fill in the blank>
Why America Rocks!
Many of us worry about our own personal bubble or world within. We sometimes forget that we are part of a larger system. No, I’m not talking about anything spiritual or religious, but a system as a whole… The Earth is a system and for everything on Earth to function there are interdependencies. Those interdependencies begin to break-down when a system fails or is interrupted.
For example: When people feel scared or helpless they look towards authority for the answers. Folks, the answer is within yourself and everyone around you. Why not talk to the person next to you at the street crossing, in line, on the bus, airplane, or train?
CarrotMob came up with an idea that coordinates a group to make a difference or change. I like the idea of giving a business, customers, in exchange for something. In this instance it is a ton of customers for 22% of profits to go towards improving energy efficiency of the store.
Say on a normal day you pull in $2000.00, but on the day CarrotMob comes around you pull in $9000.00. Okay so now you are taking 22% of your profits and putting them towards a long-term energy conservation program that is directly benefiting you the store.
Let’s have some fun with numbers (these are only an example to illustrate a point):
Normal Day:
Sales: 2000.00 @ 25% profit margin = $500.00 Gross Profit
CarrotMob Day!
Sales: 9000.00 @ 25% profit margin = $2250.00 profit – 22% = $495.00
== Gross Profit $1755
Whoa! Even after giving away 22% of profits they still made more in that one day than a normal day and they now have long-term energy savings.
Now, watch the video…
Carrotmob Makes It Rain from carrotmob on Vimeo.
Crazy right? NO
I think we have forgotten, but are starting to wake-up that as a group of individuals we have the ability to do anything.
Let’s now take this to a bigger scale as CarrotMob does at the end of the video. What if a hundred thousand people went to a solar manufacturer and said hey we all want solar for our houses. If we guarantee 100,000 orders will you give us a discount?
This isn’t a new idea… collective pooling of money to make purchases. However, what makes me excited is that this isn’t a Business – Business transaction, but a Group – Business transaction. Sure there are more complexities involved when you are dealing with 100,000 orders versus a bunch of orders for one company, but it is possible.
We are a nation founded on thinking outside the box to come up with innovative and new ideas. The energy crisis that we are and will be facing isn’t outside the grasp of an entrepreneur. Unfortunately there is a big BUT here…
What motivates an entrepreneur? :: wealth
What inhibits an entrepreneur? :: regulations and taxes
You say that regulations are necessary… perhaps, but what happens when there is a corn subsidy or ethanol subsidy? – Money that may have gone towards an innovative idea is redirected towards corn and ethanol, which may not be the best solution. I don’t know about you, but I highly doubt a few individuals are capable of deciding what is for the greater good, using public money. There are unforeseen consequences of such actions.
It is what we don’t see that concerns me. What could be manufactured instead of ethanol plants? We may never know to the full extent because the path of least resistance leads companies to produce ethanol. If I’m guaranteed certain monies from the gov’t, if I do this (the entrepreneurial idea with no subsidy) or that (governmental idea with subsidy), of course I’ll do that because it is easier and has an implicit profit regardless of the profitability of the company.
In looking at the present bailout package… my concern is what we are missing and not seeing. If this package or a variation thereof passes what could that money have been used for? $700 bn dollars is a lot of money. We are going to be over a trillion dollars in debt after it is passed and that is only for THIS year.
The bankers and government officials “employed” by the bankers don’t want you nor I to truly understand how the present system works. Just take a look at my previous post.
In conclusion I hope that you realize that as a group of individuals we can do anything. Fear will keep us paralyzed, major traumatic events allow the Constitution to be thrown out the window, and the media feeds us a story they want us to believe. We are a nation of entrepreneurs! You have a choice.
History has its warnings:::
Given the current climate I think a quick look to the past is appropriate:
“Two thousand years ago a Roman Senator suggested that all slaves wear white armbands to better identify them.” “No,” said a wise Senator. ” If they see how many of them they are they will revolt.”
Steal:
to take the property of another wrongfully and especially as a habitual or regular practice
- Webster’s Dictionary
“It is well that the people of the nation don’t understand the banking system for if they did, I believe there would be a revolution before tomorrow morning.”–Henry Ford
“We have, in this country, one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board. This evil institution has impoverished the people of the United States and has practically bankrupted our government. It has done this through the corrupt practices of the moneyed vultures who control it.”– Congressman Louis T. McFadden
“I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the government at defiance. The issuing power (of money) should be taken away from the banks and restored to the people to whom it properly belongs.”– Thomas Jefferson, U.S. President
“History records that money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it’s issuance.”– James Madison
“Most Americans have no real understanding of the international money lenders. The accounts of the Federal Reserve System have never been audited. It operates outside the control of Congress and manipulated the credit of the United States.”– Senator Barry Goldwater (Rep. AZ)
“If, as it appears, the experiment that was called “America” is at an end… then perhaps a fitting epitaph would be… here lies America the greatest nation that might have been had it not been for the Edomite bankers who first stole their money, used their stolen money to buy their politicians and press and lastly deprived them of their constitutional freedom by the most evil device yet created— The Federal Reserve Banking System.” – G.D. McDaniel
”This [Federal Reserve Act] establishes the most gigantic trust on earth. When the President [Wilson] signs this bill, the invisible government of the monetary power will be legalized….the worst legislative crime of the ages is perpetrated by this banking and currency bill.”– Charles A. Lindbergh, Sr. , 1913
”From now on, depressions will be scientifically created.”– Congressman Charles A. Lindbergh Sr. , 1913
“The Federal Reserve bank buys government bonds without one penny…”– Congressman Wright Patman, Congressional Record, Sept 30, 1941
“The Federal Reserve banks are one of the most corrupt institutions the world has ever seen. There is not a man within the sound of my voice who does not know that this nation is run by the International bankers.”
– Congressman Louis T. McFadden (Rep. Pa)
“Some people think the Federal Reserve Banks are the United States government’s institutions. They are not government institutions. They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign swindlers”
–Congressional Record 12595-12603 — Louis T. McFadden, Chairman of the Committee on Banking and Currency (12 years) June 10, 1932
”When you or I write a check there must be sufficient funds in out account to cover the check, but when the Federal Reserve writes a check there is no bank deposit on which that check is drawn. When the Federal Reserve writes a check, it is creating money.”
– Putting it simply, Boston Federal Reserve Bank
1.8 trillion dollars worth of bailout funds!
CNBC ran an interesting piece on the accumulated sum of the bailouts to date. The 700 billion bailout is still in the works, but something is bound to pass through both the House and Senate now that WaMu is toast. Here is a link to the article.
Beside the entire situation to be troubling I find it ironic that the Fed vowed not to help with the Lehman debacle, but hold on…
—At least $87 billion in repayments to JPMorgan Chase [JPM 44.62
1.16 (+2.67%)
] for providing financing to underpin trades with units of bankrupt investment bank Lehman Brothers [LEH 0.275
-0.052 (-15.9%)
… $87 bn refund to JPMorgan Chase? What is really going on here?
The rest of the article goes on to prove how we get to $1.8 tn in proposed bailout expenses. How are we going to pay for this? Backup a bit and look here. A picture truly is worth a trillion words.
Zeitgeist, The Movie
I will be watching this in its entirety shortly, but watched a bit and found it quite intriguing. You can decide for yourself.
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Force FED chickens…
Ironic that WaMu’s collapse happens to coincide perfectly with this bailout proposal trying to be hurriedly pushed through Congress. It will for sure pass now <that was my take last night><now we are seeing major hiccups in the process (thankfully)>. We have been sold out by various individuals in the United States Government. Very unfortunate indeed, and some say the greatest looting operation ever in history. Mark my word it isn’t over and will continue to spread to regional banks. I find it interesting that Goldman Sachs and JP Morgan are the golden children in this whole mess, not to mention that Paulson used to be CEO of Goldman. Coincidence?
In the EXTREME case you are going to want to have food and water on hand. A decent supply. I don’t know if it will get to that, but there is a lot of uncertainty in people’s minds. When they are fearful they do stupid things. Besides it never hurts to be prepared for an earthquake. I’m concerned about a run on the dollar starting abroad than at home.
Yes, I realize I sound like a doomsdayer, but I’m just taking a pragmatic approach to the whole thing. Show me some good news in this mess and I might be willing to alter my view slightly.
Has it occurred to you that we were fed the same crap with respect to going into Iraq about weapons of mass destruction? This administration has been credited with being stupid, but I’m starting to wonder if that was all a line. They have systematically destroyed the dollar, taken us to a never ending war – Iraq, allowed the credit bubble to get as big as it did, and in the end who gets to pay the bill? The taxpayer.
And I’ll now step off my soapbox 
-T
And don’t forget about Voltaire!
“Paper money eventually returns to its intrinsic value – zero”
~ Voltaire – 1729
Fed inflating with no restraint – Hyperinflation?
A picture is worth a trillion words…
Money Supply 09/25/2008
Frankly I’m not surprise to see what the Fed is doing and can only imagine what this is going to look like if this bailout goes through. There is a precedent throughout time that inflating the monetary supply only prolongs the inevitable. This is a sad state of affairs and I see only troubled times ahead for the once mighty dollar. Like the Romans who clipped their gold and silver coins the United States is creating more and more money from nothing. Why do we need a bailout package when we can just print money? It isn’t actually printed anymore, but issued through treasuries between the Fed, the Treasury, and private banks.
We are headed towards a recession if we aren’t already in one. Inflating the money supply while in a recession presumably means higher prices. The contraction in prices we recently saw was perhaps a byproduct of the Fed contracting the money supply, which it has now reversed course. During the Great Depression of 1929 many banks tried using their depositor’s money to help keep the market afloat just as the Fed is now doing… The outcome? You know what happened…
Now we are taking the opposite position and inflating. What happened to Rome… and thanks to Mike Hewitt at dollardaze.org he lists many countries plagued by hyperinflation.
- Angola (1991-1999)
- Argentina (1975-1991)
- Austria (1921-1922)
- Belarus (1994-2002)
- Bolivia (1984-1986)
- Brazil (1986-1994)
- Bosnia-Herzegovina (1993)
- Bulgaria (1991-1997)
- Chile (1971-1973)
- China (1939-1950)
- Free City of Danzig (1923)
- Ecuador (2000)
- England
- Greece (1944-1953)
- France (1789-1797)
- Georgia (1995)
- Germany (1923-1924, 1945-1948)
- Greece (1944-1953)
- Hungary (1922-1924, 1944-1946)
- Israel (1979-1985)
- Japan (1944-1948)
- Krajina (1993)
- Madagascar (2004)
- Mexico (2004)
- Nicaragua (1987-1990)
- Persian Empire (1294)
- Peru (1984-1990)
- Poland (1922-1924, 1990-1993)
- Romania (2000-2005)
- Ancient Rome
- Russia (1921-1922, 1992-1994)
- Taiwan (late-1940′s)
- Turkey (1990′s)
- Ukraine (1993-1995)
- United States (1812-1814, 1861-1865)
- Yap (late 1800′s)
- Yugoslavia (1989-1994)
- Zaire (1989-1996)
- Zimbabwe (1999 – present)
The fiat money system that we presently have, which in its present form has only been in existence since 1971 when we went off the gold standard. To say that we have a precedent for what may or may not happen is incorrect. We are now in uncharted territory, however history has its lessons.
Auto Industry Bailout!
While we all have our eyes on Bernake, Paulson, Bush and $700,000,000,000,000.00 what is another $25,000,000,000,000.00 for some automakers. There were signs of distress and as the Financial Times reports (article) they have been lobbying Washington for sometime for a “loan”.
The continuing resolution provides funding for $7.5bn, which is the estimated subsidy on the loans – in other words, the cost to the government of providing them at well below market rates.
Well it is a loan after all so we are only giving them $7.5bn instead of $25bn because they have to pay it back. Where I ask did we get in the business of bailing out private industry? No it isn’t anything new unfortunately.
Most American cars are crap. They are ugly, fall apart, and aren’t worth the steel they sit on. Would I choose to spend my tax dollars on helping out a flailing industry? If the auto industry didn’t foresee higher gas prices, and thus a slowing of SUV sales well then they deserve to go out of business.
I’m leaving out the part about the autoworker. This isn’t about Ford or GM it is about the laborer who would lose their job. I think I’m going to have to do an article about Econ 101, but from and Austrian and NOT Keynesian perspective. All we are doing by subsidizing and bailing out all these corporations is encouraging mediocracy and unnecessary risk taking.
If I started an auto company and nobody liked my cars then I go out of business, my employees find other jobs, and life moves on. Instead we take taxpayer dollars that we have no choice in providing to the government and prop up failing industry. It is an easy sell because as Shelly Lonbard, and analyst at Gimme Credit, a corporate bond research company, told clients this week that
“blue collar workers are more sympathetic victims than ‘rich’ investment bankers. So it’s easier to defend loans designed to save close to 100,000 jobs in the shrinking US manufacturing industry.”
Question: Why is the US auto industry shrinking?
Answer: Labor unions, pension benefits, poor products, and government subsidies. Please add to this list in the comments as it isn’t all inclusive.
Who is next? Biotech, Johnson and Johnson, Microsoft, Amazon, Etrade… let’s just sprinkle some money to anyone who lobbies enough. I’m sick.