Wall Street's 'Disaster Capitalism for Dummies'

By Paul B. Farrell, MarketWatch

"Wall Street's Disaster Capitalists screwed up, likely planned or let happen this meltdown and recession. Yet America's clueless taxpayers just reward them by giving the screw-ups massive bailouts, control over more than $2 trillion of tax money, and the power to clean up the mess they made."

...

"America is no longer a democracy. Voting is irrelevant. Best case scenario: We're a plutocracy, a government ruled by the wealthy, the richest 1%, the Forbes 400, the influential wealthy elite, while the other 99% are their "servants." Meanwhile, the inflation-adjusted income of wage-earners has declined for three decades."

Read the entire post.

Credit Default Swaps - 'Weapons of Mass Destruction'

In the world of corporate spin and greed, this might be the Grandaddy of all nefarious cons. If this is how the greedy rich get richer, perhaps its time for an entirely new system.

In related news:

1. Apparently Global Warming is being put on hold until the global economy is straightened out.
2. The next episode of 'The Universe' on the 'History Channel' apparently includes more fantasy by our 'leading' boffins about humans needing a second home on another planet. This I gotta see.... more later.
   

Good to see that the inmates are still running the asylum.

Who is Barak Obama?

This looks interesting: read Comment by Lynda: October 8th, at 1:32 am - a comment on Gretawire.
Your homework today is to go read or watch The Manchurian Candidate.

Fox: good for a laugh

Watching the cable news channels over the past few weeks, its not hard to draw these conclusions about Fox "News" Channel:

1. Almost all Fox reporters are extremely Republican biased, and often their attempts at any sort of balance still involve subtle & less subtle bias, eg arguing & being negative with Democrats far more so than with Republicans, cutting them off mid-sentence, & attempting to ridicule them at every opportunity. Of course they would vehemently deny this, but that just reflects how blinded Americans are to their preferred party. If you are an independent American or a non-American (the other 96% of the world) you just need to watch it yourself.
   
2. Their slogan is "Fair and Unbiased". That would be like Hitler's Nazi Party having the hide to use "A fair go for the Jews".
3. There are laws in the USA about declaring political contributions, and about party advertising. The Fox budget ought to be included into the Republican and McCain campaign declarations.
   
4. Bill O'Reilley is reasonable entertainment, but as a serious commentator is little more than a bad joke.

The Economy: Australia 1, USA 0

In the USA:

1. Absurd levels of housing loans were extended for many years to people who could never afford them. These people cold be excused for hoping that the mortgages would be a better option than spending similar amounts on rent.
2. Rampant credit equals high debt levels, and feeds into high house prices as easy money and more buyers force prices up. The higher the house prices, the more credit and thus debt ensues. This vicious circle spiralled out of control.
   
3. No laws of oversight were set up, for instance to prevent lenders from promoting untenable loans in order to collect commissions.
   
4. Politicians supported this system for personal gain: both in monetary kickbacks from lenders and to retain office.
5. The system, the economy, collapsed when the straw of a petrol price surge broke the camels back.
   
6. A bill that many of the public and politicians themselves accepted as bad got passed. Many politicians had little comprehension of the economic issues, abdicated all leadership, panicked, and voted 'to do something'. The bill will firstly help the rich and the powerful. The ugly side of the 'American Dream' is evident for all to see. It seems second-nature for their rich and rampant capitalist leaders to make things work for themselves first. Yet again their poor will get the crumbs at the table.
7. American banks have no confidence in each other's robustness, so are currently unwilling to lend at any rate. Therefore rate cuts would be pointless.
8. The USA is headed for a depression. Whether their political system can serve them and what mayhem might result is entirely a matter of conjecture at this time. However if the highly partisan political views as expressed on the Fox newschannel, and those reported in their legislative assemblies is any indicator, then it seems highly unlikely that sufficient sensible and logical thinking will prevail that might lead them to make sane laws to lead them back to prosperity for a very long time.
   

In Australia:

1. Financial system regulation has been well maintained for decades, so there has been less excess in lending compared to the USA.
2. Political corruption seems to be much less rampant than in the USA.
3. Housing price increases have been somewhat more sedate, as mortgage rates and conditions have been set sensibly.
4. Our financial system, and banks, have remained sound. Recessionary pressure mostly results from an expected drop in value (price and volume) of exports to trade partners in Asia who are already in recession or expected to head that way, due to their exposure to the USA. Australian recessionary pressure is therefore somewhat indirectly attributable to the expected deep recession in the USA.
5. The Reserve Bank of Australia has acted decisively today to cut interest rates by 1%. This ought to help counter our possible slowdown. This is appropriate for Australian circumstances, but is not a suitable action for the USA to take.

• The scorecard so far: Australia 1, USA 0
  

On the passing of the US Bailout Bill

Further thoughts:

1. Many people, including congressmen who voted for it, are saying that this was a bad bill but they 'had to be doing something'. To them I say 'Wrong. You need to be making good decisions, not "any" decision. A bad bill is worse than doing nothing, not better. Taking a step backwards is not progress. Never confuse frantic activity with progress.'
2. Like in many institutions I have been in, once people focus on one idea, other better alternatives that appear later get shunned, and people proposing them are often labelled 'out of step' or 'troublemakers'. However in the history of mankind, all changes start with one 'out of step' person, who is often misrepresented and/or shunned, as the thundering herd heads for the cliff. The herd is impatient, and like lemmings, take great comfort in all running the same way.
   
3. I have a lot of respect for those who votes against this bill on the grounds that it will not fix the problem, but will bail out failed corporates and mortgagees who mostly ought never to have had loans in the first place.
4. I am disappointed with both Presidential candidates who have shown no leadership, in following the herd, when they both know that this is a bad bill. They especially ought to have put up alternatives. Either could have suggested solutions whereby the loans remain where they are. However neither would do this for fear of becoming the owner of the problem. They decided to hide in the herd.
   
5. Perhaps I should let them read the essay I wrote in late 2001 pointing out a core problem with the western economic model that I still think is at the heart of their problem. I am still not sure they are ready for that though. Certainly the talking heads of the US legislature & the cable news channels seem incapable of extending their 3 to 10 second soundbytes more than one step beyond the obvious symptoms.
   
6. I expect the stockmarket will nosedive this week, probably beginning Monday 6th. Irrespective of short-term swings, the trend must be down for a while yet. The question is how far. In the interests of preventing panic I shall keep my thoughts to myself. As a student of history though, its hard to ignore its lessons: All empires come and go, and many collapse very quickly when the rot surfaces.
7. I hope the USA does not tear itself apart over this. I think they are too civilised for this to happen. More likely, if Obama is elected:

• They will cut back on the military budget (erroneously spun as 'defense' when its really for offense) and so put out of and lose military influence and presense in Iraq and Afghanistan. A weakened USA might create a power vacuum and problems in many countries, and Russia, Iran, and many 'terrorist' groups might flourish. Perhaps a great counter for this would be for the USA to follow the USSR into oblivion, replaced by up to 50 new countries. It would be hard for so many other entities to be at odds with a country that does not exist. Or perhaps the flag should not be waved so vigorously in the face of the rest of the world. I pointed this out in late 2001 as well. Many people do not like it.
  
• or Obama will be neutralised by the same type of shadowey figures that had been behind such acts as having Kennedy assassinated, helping the Taliban supply heroin to US GIs in Vietnam and elsewhere to finance the Taliban against Russia in Afghanistan, hiding behind the Bushes and pushing them into Iraq to keep their munitions and oil businesses going, coordinating the 9/11 destruction of the World Trade Centre buildings and firing a missile into the Pentagon, etc ,etc.
  

US elections and economic woes

I must have just watched over 100 hours of news about the US & global economic meltdown, and the US Presidential election, on CNN, Fox, BBC, & Australian Business Channel cable TV, since mid September. What did I get out of it?

1. The US meltdown was initially seen as being a problem with subprime mortgages. It took days for commentators and 'experts' to announce that this is merely a symptom. The real reason is a combination of greed in financial institutions and borrowers, and systemic failure to have adequate controls in place that allowed rampant high risk loans in an economy that does not produce sufficient real wealth to cover it.
   
2. The current bill before the US Congress is a dud. Some in the US have clearly stated during its first passage that its focus is all wrong, yet still it blunders on. This reflects poorly on the US system of government. The real losers will be democracy, the USA & the world at large. The American public do not want the ownership of bad loans switched to the government. This will burden them, be relatively expensive & inefficient to administer & let the perpetrators of the problem, as seen by the public, off the hook. However once the core of the first bill was put up in the House of Representatives it seemed that no significant alternatives could be heard. The American public is being ignored. The Senate passed the same bill that the House of Representatives rightly voted out, with some stupid politically-inspired addons, most of which will anger the public even more, as they are seen to be treated condescendingly.
   
3. If the current bill passes the House of Representatives the second time round, the measures might give some brief but passing respite, but will not fix the problem long-term. The American public and global stockmarkets seem to already know this, but American politicians seem to be in marching like lemmings in lockstep along the cliff.
4. Irrespective of the outcome in the US legislative assemblies, the broader issue of fixing an economy in the face of environmental pressures is not being adequately addressed. Its as if when the chips were down, the global environmental problems got shifted into the too-hard basket. Barak Obama's ideas about focussing on alternative energy as a way to minimise dependence on hydrocarbons in his first debate was great. This has been ignored since then, whereas I believe there needs to be a strategic focus on it.
   
5. In summary, it seems to me that so far, the American system has proven to be incapable of making the hard decisions required to settle their economy, let alone do so in an environmentally sustainable way. In other words, the USA is broke, and its economic and political systems are as well.

I am sure I can find others who I think are on the right track.

• http://business.blogs.cnn.com/2008/10/03/will-the-bail-out-package-fix-the-economy/