Infinite Unknown

“But, realistically, all ordinary people can do today is try to survive, perhaps by working with friends and neighbors in planting food and living within the underground economy. At least people might not then have to starve to death, because hard as it is to believe that “it could happen here,” widespread famine in the U.S. seems a real possibility over the next several years. Nations take such risks when they allow capitalist agribusiness to destroy local agriculture.”

With the economic news of the week of July 14-the continuing crisis among mortgage lenders, the onset of bank failures, the announced downsizing of General Motors, the slide of the Dow-Jones below 11,000-we are seeing the ongoing collapse of the U.S. economy.

Even the super-rich are becoming nervous as cries for an emergency suspension of short selling ring out.

What is really taking place, however, is that the producing economy of working men and women is being crushed by the overall debt burden on households, businesses, and governments that could reach $70 trillion by 2010. The financial system, including mortgage giants Fannie Mae and Freddie Mac, is bankrupt, as the debts it is based on cannot be repaid.

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Tags: Alan Greenspan, Bank of England, bankruptcy, bubble, crash, debt, Economy, famine, Fannie Mae, Fed, Federal Reserve, financial crisis, financial system, Food Prices, Food shortages, Freddie Mac, Freemasonry, George Bush, Government, Henry Kissinger, Iraq, Middle East, Nazi Germany, Oil, U.S.

The following statement is written by Congressman Paul about the pending financial disaster.

He will introduce this statement as a special order and insert it into the Congressional Record next week. Fortunately, we have the opportunity to debut it first on the Campaign for Liberty blog. It reads as follows:

I have, for the past 35 years, expressed my grave concern for the future of America. The course we have taken over the past century has threatened our liberties, security and prosperity. In spite of these long-held concerns, I have days-growing more frequent all the time-when I’m convinced the time is now upon us that some Big Events are about to occur. These fast-approaching events will not go unnoticed. They will affect all of us. They will not be limited to just some areas of our country. The world economy and political system will share in the chaos about to be unleashed.

Though the world has long suffered from the senselessness of wars that should have been avoided, my greatest fear is that the course on which we find ourselves will bring even greater conflict and economic suffering to the innocent people of the world-unless we quickly change our ways.

America, with her traditions of free markets and property rights, led the way toward great wealth and progress throughout the world as well as at home. Since we have lost our confidence in the principles of liberty, self reliance, hard work and frugality, and instead took on empire building, financed through inflation and debt, all this has changed. This is indeed frightening and an historic event.

The problem we face is not new in history. Authoritarianism has been around a long time. For centuries, inflation and debt have been used by tyrants to hold power, promote aggression, and provide “bread and circuses” for the people. The notion that a country can afford “guns and butter” with no significant penalty existed even before the 1960s when it became a popular slogan. It was then, though, we were told the Vietnam War and a massive expansion of the welfare state were not problems. The seventies proved that assumption wrong.

Related articles and videos:
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- Fortis Bank Predicts US Financial Market Meltdown Within Weeks
- Barclays warns of a financial storm as Federal Reserve’s credibility crumbles
- Jim Rogers: Avoid The Dollar At All Costs
- Ron Paul on Iran and Energy June 26, 2008
- Marc Faber: ‘Misleading’ Fed Should Let Banks Fail

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Tags: Alan Greenspan, bubble, civil liberties, Congress, crash, Depression, Dollar, Fed, Federal Reserve, financial crisis, Gold, Government, Hyperinflationary Depression, Inflation, Meltdown, Military, Monetary System, Recession, Ron Paul, Stagflation, Stock Market, U.S., Unemployment, Wall Street

Vincent Quinones works on the floor of the New York Stock Exchange Wednesday after the Federal Reserve issued a mixed assessment of the economy. Yesterday, the Dow Jones industrial average closed down 358 points. (By Andrew Harrer — Bloomberg News)

So much for that second-half rebound.

Truth be told, that was always more of a wish than a serious forecast, happy talk from the Fed and Wall Street desperate to get things back to normal.

It ain’t gonna happen. Not this summer. Not this fall. Not even next winter.

This thing’s going down, fast and hard. Corporate bankruptcies, bond defaults, bank failures, hedge fund meltdowns and 6 percent unemployment. We’re caught in one of those vicious, downward spirals that, once it gets going, is very hard to pull out of.

Only this will be a different kind of recession — a recession with an overlay of inflation. That combo puts the Federal Reserve in a Catch-22 — whatever it does to solve one problem only makes the other worse. Emerging from a two-day meeting this week, Fed officials signaled that further recession-fighting rate cuts are unlikely and that their next move will be to raise rates to contain inflationary expectations.

Since last June, we’ve seen a fairly consistent pattern to the economic mood swings. Every three months or so, there’s a round of bad news about housing, followed by warnings of more bank write-offs and then a string of disappointing corporate earnings reports. Eventually, things stabilize and there are hints that the worst may be behind us. Stocks regain some of their lost ground, bonds fall and then — bam — the whole cycle starts again.

It was only in November that the Dow had recovered from the panicked summer sell-off and hit a record, just above 14,000. By March, it had fallen below 12,000. By May, it climbed above 13,000. Now it’s heading for a new floor at 11,000. Officially, that’s bear market territory. We’ll be lucky if that’s the floor.

In explaining why that second-half rebound never occurred, the Fed and the Treasury and the Wall Street machers will say that nobody could have foreseen $140 a barrel oil. As excuses go, blaming it on an oil shock is a hardy perennial. That’s what Jimmy Carter and Fed Chairman Arthur Burns did in the late ’70s, and what George H.W. Bush and Alan Greenspan did in the early ’90s. Don’t believe it.

Truth is, there are always price or supply shocks of one sort or another. The real problem is that the underlying fundamentals had gotten badly out of whack, making the economy susceptible to a shock. The only way to make things better is to get those fundamentals back in balance. In this case, that means bringing what we consume in line with what we produce, letting the dollar fall to its natural level, wringing the excess capacity out of industries that overexpanded during the credit bubble and allowing real estate prices to fall in line with incomes.

The last hope for a second-half rebound began to fade earlier this month when Lehman Brothers reported that it wasn’t as immune to the credit-market downturn as it had led everyone to believe. Lehman scrambled to restore confidence by firing two top executives and raising billions in additional capital, but even that wasn’t enough to quiet speculation that it could be the next Bear Stearns.

Since then, there has been a steady drumbeat of worrisome news from nearly every sector of the economy.

American Express and Discover warn that customers are falling further behind on their debts. UPS and Federal Express report a noticeable slowdown in shipments, while fuel costs are soaring. According to the Case-Shiller index, home prices in the top 20 markets fell 15 percent in April from the year before, and Fannie Mae and Freddie Mac report that mortgage delinquency rates doubled over the same period — and that’s for conventional home loans, not subprime. United Airlines accelerates the race to cut costs and capacity by laying off 950 pilots — 15 percent of its total — as a number of airlines retire planes and hint that they may delay delivery or cancel orders of new jets from Boeing and Airbus. Goldman Sachs, which has already had to withdraw its rosy forecast for stocks, now admits it was also too optimistic about junk bond defaults, and analysts warn that Citigroup and Merrill Lynch will also be forced to take additional big write-downs on their mortgage portfolios.

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Tags: Airbus, airlines, Alan Greenspan, bank failure, Boeing, China, Citigroup, Depression, Fannie Mae, Fed, Federal Reserve, Freddie Mac, General Motors, George Bush, Goldman Sachs, hedge funds, India, Inflation, Jimmy Carter, Lehman Brothers, Meltdown, Merrill Lynch, Mississippi, Oil, Oil Prices, Rate Cut, Recession, Stock Market, Unemployment, Wall Street

Worldwide, it is $596 TRILLION dollars *. The derivatives market dwarfs the real market for goods and services, and acts likes an unregulated black market.
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A couple of months ago, a financial analyst who sells derivatives told me that fears about a meltdown in the derivatives market were unfounded.
Yesterday, he told me - with a very worried look - “THE DERIVATIVES MARKET IS UNWINDING!”

What does this mean? What are derivatives and why should you care if the market is unwinding?

Well, it turns out that the reason that Bear Stearns was about to go belly-up before JP Morgan bought it is that it had held trillions of dollars in derivatives, which were about to go south. (The reason that JP Morgan was so eager to buy Bear Stearns is that it was on the other side of these derivative contracts — if Bear Stearns had gone under, JP Morgan would have taken a huge hit. But the way the derivative agreements were drafted, a purchase by JP Morgan canceled the derivative contracts, so that JP Morgan didn’t experience huge losses. That is probably why the Fed was so eager to broker - and fund - the shotgun marriage. JP Morgan is a much larger player, and if Bear’s failure had caused the derivatives hit to JP Morgan, it probably would have rippled out to the whole financial system and potentially caused an instant depression).

In addition, the subprime prime loan crisis is intimately connected to the unwinding of the derivatives market. Specifically, loans were repackaged into derivatives called collateralized debt obligations (or “CDO’s”) and sold to both big and regional banks and investment companies worldwide. The CDO’s were highly-leveraged — many times the amount of the actual loans. When the subprime loan crisis hit, the high leverage magnified the fallout, and huge sums of CDO derivatives became essentially worthless.

Do you remember when wealthy Orange County, California, went bankrupt in 1994? Yup, that was because it had invested in bad derivatives.

And, according to a recent article by one of the world’s top derivative insiders, the market for credit default swap (”CDS”) derivatives is also unraveling.

And reported just today, Lehman Brothers is now on the edge, due to exposure to derivatives.

Derivatives are the Elephant in the Living Room

The subprime mortgage crisis is bad, and is hurting many people, and slowing the economy. High oil and food prices are bad, and are hurting many people, and bringing down the economy. But — according to top insiders — derivatives are the elephant in the room . . . the single largest threat to the U.S. and world economy.

One reason is that, according to Paul Volcker, the former chairman of the Federal Reserve, the entire modern financial system is based upon derivatives, and the financial system today is entirely different from the traditional American or global financial system because derivatives - a relatively new concept - now underly the entire fabric of the financial system. In short, many of the people who know the most about derivatives say that the current system is a house of cards built upon derivatives.

Moreover, as mentioned above, the subprime and derivatives crises are closely linked. Similarly, Britian’s New Statesman newspaper links derivatives and rising food and commodity prices: Continue reading »

Tags: Alan Greenspan, Bear Stearns, Ben Bernanke, Commodities, Derivatives, Derivatives market, Fed, Federal Reserve, Food, Food Prices, George Bush, JPMorgan, mortgage crisis, Mortgages, Paul Volcker, U.S.

“Fannie Mae said it expects “severe weakness” in the housing market in 2008, bringing increased mortgage defaults and foreclosures.”

(This sounds a “little bit” different to what Mr. Alan Greenspan told the public recently. - The Infinite Unknown)

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Fannie Mae reported losses of $2.2 billion in the first quarter and the nation’s largest buyer of home loans said Tuesday it would cut its dividend and raise $6 billion in new capital, with expectations that the housing slump will persist into next year.

Home prices fell faster in the first quarter than Fannie Mae had expected, the government-sponsored company said, and it will open a $4 billion share offering immediately, with the remainder being offered in the “very near future.”

Fannie Mae’s federal regulator, the Office of Federal Housing Enterprise Oversight, announced Tuesday that following the stock sale, it will cut the capital surplus cushion the company has to maintain by 5 percentage points to 15 percent. Another five-point cut will come in September, provided there is “no material adverse change” in the company’s regulatory compliance. Continue reading »

Tags: Alan Greenspan, Fannie Mae, Fed, Federal Reserve, Foreclosures, Mortgages

THE BAILOUT BOYS: S.E.C. Chairman Christopher Cox (left) with Paulson, President Bush and Bernanke.

The big banks’ fear of big losses is threatening to bring down the entire system, with dire consequences for all of us. Here’s what’s going on, and what we can do about it.

(Fortune Magazine) — What in the world is going on here? Why is Washington spending billions to bail out Wall Street titans while leaving struggling homeowners to fend for themselves? Why are the Federal Reserve and the Treasury acting as if they’re afraid the world may come to an end, while the stock market seems much less concerned? And finally, what does all this mean to those of us who aren’t financial professionals?

Okay, take a few breaths, pour yourself a beverage of your choice, and I’ll tell you what’s happening - and what I think is going to happen. Although I expect these problems will resolve themselves without a catastrophic meltdown, I’ll also tell you why I’m more nervous about the world financial system now than I’ve ever been in my 40 years of covering business and markets. Continue reading »

Tags: Alan Greenspan, Bank, Bear Stearns, Ben Bernanke, Chaos, Depression, Federal Reserve, Fortune Magazine, Goldman Sachs, Hank Paulson, Meltdown, Recession, Stock Market, Treasury Secretary, Wall Street

It is incredible to see the rampant devaluation of the U.S. Dollar. The Federal Reserve just hours ago made a rare cut of 25 basis points during the weekend which will cause even more inflation. Gold immediately moved up $20 an ounce and the U.S. Dollar Index plunged under 71 in international trading. If this type of market activity continues the U.S. Dollar will have no value in a few months. While it is probably unlikely that we will see a hyper-inflationary collapse of the U.S. Dollar within the next few months, these policies are entirely unsustainable. If the Federal Reserve does not move to defend the value of the U.S. Dollar we will eventually see a hyper-inflationary collapse and worldwide financial turmoil. This view is also shared by other well respected financial analysts. Peter Schiff recently raised concerns about a hyper-inflationary collapse of the U.S. Dollar, Robert Reich a former Clinton cabinet member believes we are facing a depression and Alan Greenspan the man who caused this whole mess wrote in the Financial Times stating that we are facing the worst financial crisis since World War II. What’s amazing is that the Federal Reserve isn’t even trying to protect the U.S. Dollar because all they care about is saving the power of their private banking cartel. They don’t care about the U.S. Dollar nor do they care about the country itself. They are destroying this country through their actions and there needs to be an investigation into the controllers of this bank.

Alan Greenspan saying that we are facing the worst financial crisis since World War II is like a killer returning to the scene of their crime and explaining the results of their crime. Greenspan recently told nations in the Gulf to drop their currency pegs to the U.S. Dollar which encouraged a further drop in the U.S. Dollar. Greenspan’s Financial Times article will cause an even greater acceleration in the collapse of the currency. As the former head of the Federal Reserve, his comments still hold a great deal of importance with people around the world. This means that his comments can literally move the value of the U.S. Dollar one way or another. It is incredibly sick how Greenspan can get away with creating the current crisis we face with his low interest rate policies earlier this decade and analyze the problems that are occurring today that were a result of his own policies with no criticism from the corporate controlled media.

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Tags: Alan Greenspan, Bear Stearns, Ben Bernanke, Dana Perino, Depression, Dow Jones, Fed, Federal Reserve, financial crisis, George Bush, Gold, gulf states, JPMorgan, Middle East, Peter Schiff, Robert Reich

The Financial Tsunami, Part IV.What had emerged going into the new millennium after the 1999 repeal of Glass-Steagall was an awesome transformation of American credit markets into what was soon to become the world’s greatest unregulated private money creation machine.

The New Finance was built on an incestuous, interlocking, if informal, cartel of players, all reading from the script written by Alan Greenspan and his friends at J.P. Morgan, Citigroup, Goldman Sachs, and the other major financial houses of New York. Securitization was going to secure a “new” American Century and its financial domination, as its creators clearly believed on the eve of the millennium. Continue reading »

Tags: Alan Greenspan, Bear Stearns, Citigroup, Citigroup NASDAQ, F. William Engdahl, Fed, Financial Tsunami, Goldman Sachs, J.P. Morgan, LTCM hedge fund, Meltdown, Merrill Lynch, NYSE, TBTF, Too Big to Fail

Robert Reich warns a recession, or worse, could be coming.

Think the last few days have been bad for Wall Street and the rest of the world’s markets? Hang on, things are probably going to get worse, says Robert Reich, President Clinton’s former secretary of Labor and author of the recent book “Supercapitalism: The Transformation of Business, Democracy and Everyday Life.” According to Reich, who currently teaches public policy at the University of California, Berkeley, the United States might even be headed toward a depression.

Reich: 'Now we have a mess on our hands. Bernanke has the only
       pooper-scooper in town, but it is too small for the job.'

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Tags: Alan Greenspan, Bernanke, Clinton, Depression, Dow, Economy, Fed, global, Henry Paulson, IRS, Nasdaq, Rate Cut, Recession, Robert Reich, S&P 500, Treasury Secretary, Wall Street

“I would tell audiences that we were facing not a bubble but a froth - lots of small, local bubbles that never grew to a scale that could threaten the health of the overall economy.” Alan Greenspan, The Age of Turbulence.

That used to be Mr Greenspan’s view of the US housing bubble. He was wrong, alas. So how bad might this downturn get? To answer this question we should ask a true bear. My favourite one is Nouriel Roubini of New York University’s Stern School of Business, founder of RGE monitor.

Recently, Professor Roubini’s scenarios have been dire enough to make the flesh creep. But his thinking deserves to be taken seriously. He first predicted a US recession in July 2006*. At that time, his view was extremely controversial. It is so no longer. Now he states that there is “a rising probability of a ‘catastrophic’ financial and economic outcome”**. The characteristics of this scenario are, he argues: “A vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe.”

Prof Roubini is even fonder of lists than I am. Here are his 12 - yes, 12 - steps to financial disaster. Continue reading »

Tags: Alan Greenspan, bankruptcy, Ben Bernanke, Dollar, Economy, Fed, Federal Reserve, Goldman Sachs, hedge funds, losses, Mortgages, Nouriel Roubini, Recession, RGE monitor, risks, Stern School of Business, U.S.