The following story is a possible fictional time line for the day the dollar died. I hope not to instill fear or loathing but to give everyone some perspective on a POSSIBLE outcome which does not really take much of a reach to come to any conclusion. Despite popular belief and promises from those who wish to rob you of your savings and investments, the collapse of the dollar might just be an event measured in hours, not days as their control is not what it seems….

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MIKE WAS LESS THAN AN HOUR FROM home in Minnesota after dropping his load off in Fargo but knew he needed to top his tank off this Sunday evening to insure his rig would make it home. He pulled into the Petro Truck Stop just outside of Fargo and hopped out of the cab into the bitter twenty below temperatures which he could not believe had already hit at ten o’clock at night. He slid his fuel card into the pump waiting for the next prompt when the “SEE ATTENDANT” message flashed in the screen. He blustered, figured it was another card problem and whipped out his Master Card and slid it in after the pump reset and again the “SEE ATTENDANT” message flashed up. “What the hell is going on?” he thought to himself as he wandered into the long line of drivers boisterously yelling at managers and clerks alike.

Tom finished up his shift on the docks at the Nestle warehouse in Hampton, Georgia at exactly 11 o’clock at night and decided that because of the scuttlebutt he had been reading on the message boards, it may not be a bad idea to pick up a few cans of food and some toilet paper at the local Wal-Mart Super center. Even though it was a Sunday night, they were always stocked and it was just five minutes out of the way to his home. As he walked inside the store, his mouth dropped. It looked like the day after Thanksgiving sale with every register open and ten plus people deep at 11:30 p.m. “Oh my God!” he gasped as he walked in grabbing the last shopping cart with the wheel that was half locked up. As he walked as fast as he could to the aisle with the paper goods, he looked at all the shelves then noticed the clerk who looked stunned himself.

“How in the SAM HELL does Wal-Mart sell out of Toilet Paper son?” he screamed at the eighteen-year-old kid. “Sir, I don’t know what is going on. Is the world ending? I’m a little freaked out!” the clerk stammered. Tom realized that he was not to blame and as he calmed down said to the kid “Son, I don’t know what is going on either. It must be an ice storm on the way. Are you folks getting another truck soon?” The clerk said in a very low voice “Sir, I think there are two coming at 2 a.m. I would wait here if I were you.” With that information Tom slinked outside to his car and called his wife at home just before midnight to tell her he would be staying to wait on the Wal-Mart trucks.

1730 ET…February 21, 2010

It was a typical Sunday night in my household, a tremendous dinner, nice weather in Florida and of course a chance to chat with my friends online about the events of the world. The big news was that on Friday, February 19, 2010 the US Dollar Index closed at 69.07 far below any level in history and of course shattering all known technical support. As I grabbed a glass of Port and settled in front of my computer at 5 p.m. Eastern to watch the Asian fireworks and watch Bloomberg and CNBC-Asia on my computer, I noticed the Middle Eastern markets closed in horrid shape. The Israeli market closed three hours after the open and down 22% for the session. The Saudi markets closed after one hour and down 41%. Other regional markets did not open or were shut down due to national emergency declarations. As I tuned in expecting the usual repeat on Bloomberg, it was live with a somewhat excited news babe reading information from a blog reporting “rumors” that the CEO’s of Citigroup and Bank of America were in meetings since 11 a.m. with the New York Fed. At that point, it was time to put the port up and break out the hard stuff.

Gold had closed at a record high again, up some $37 to finish Friday’s session up at $1289 and change so I figured it would be jumping again with all of this worldly instability on display. I searched the boards and feeds like mad, looking for anything on an Iranian attack or outbreak of war elsewhere in the world but nothing was found at all. As 6 p.m. Eastern flipped up on my watch, CNBC interrupted their programming with a live update from New York instead of Australia or Tokyo about the meeting at the NY Fed. Bloomberg also broke from their Asian coverage with a brief story but no details as to why there was a meeting today or who else was there. As the New Zealand markets opened, the prices went nuts but shockingly to the upside. Their markets shot up 11% on the open to break over the 3900 price level but that was not the story. As the futures opened in Chicago for the evening session, no matter where you were in the world that day or night, you printed that screen at 6:04 p.m. Eastern time as the prints were staggering:

Gold UP $212.15 to $1501.15

Silver UP $39.13 to $81.06

US DOLLAR INDEX DOWN 9.5869 or just over 14% to 59.4830

US S&P FUTURES DOWN 49.13

US DOW FUTURES DOWN 472

NASDAQ FUTURES DOWN 135

Holy Smokes! This was an absurd way to start the night and my phone started ringing along with text messages and emails out my wazoo. The sense of panic was evident on Bernie Lo’s face as he came on to the air discussing what was happening in the futures market and fortunately he announced that Jim Rogers would be joining him after the next break. As the commercial started at 6:09 p.m. Eastern the scroll at the bottom of the screen was bright red with the headline:

ALL U.S. EQUITY FUTURES ARE LOCK LIMIT DOWN…. TRADING SUSPENDED UNTIL 0900 ET MONDAY FEB 22….US DOLLAR BEING SOLD ACROSS THE BOARD

By 6:15 the Euro was trading at $1.92, the Kiwi (New Zealand Dollar) at $1.26, the Aussie Dollar well beyond par at $1.39 and the Canadian Loonie rocketing past par to $1.33. The U.S. Dollar was in a full-fledged collapse and the world was putting money anywhere they could to escape the carnage. As the New Zealand equity markets struggled to handle the order flow an announcement emerged at 6:27 p.m. Eastern time that they would no longer accept U.S. dollars within their nation for the next 72 hours until the United States Federal Reserve Bank introduced stability measures. That instantly turned a huge move to the upside to down 17% in less than three minutes and soon thereafter, trading was suspended by 7 p.m. Eastern time. Instead of waiting to see what was next, I left at 6:51 p.m. to run down the street and take $500 from the local grocery store ATM, returning just in time for the top-of-the-hour news.

1900 ET

The Australian markets attempted to open but due to order imbalances they were delayed twenty-seven minutes. It was a buying frenzy in Australia also as the Aussie Dollar was skyrocketing higher and gold continued to gain, now up $273.20 per ounce in less than two hours of trading. The Chicago board was going to make a statement at 8 p.m. ET and the world was holding its collective breath because something bad was happening again in the United States and everyone wanted to buy into foreign markets to escape the American disaster on the horizon. After a brief opening, the Australian government followed suit with the New Zealand announcement and suspended acceptance of the U.S. Dollar for commerce until further notice. The Japanese were very quiet in the mean time as they announced at 7 p.m. they would keep their markets closed but the huge move in the Yen caused massive concerns as noted by the central bank. The yen appreciated from a close of 79.8213 on Friday the 19th to an opening of 48.7326 in less than an hour of trading. Nobody wanted dollars and even fewer people it was discovered wanted the British Pound. The Pound for the first time in its history was worth less than 100 yen and it was well on its way to joining the US Dollar in a death spiral.

2000 ET

The internet is crawling. Message boards were lit up with record numbers of participants. Rumors swirled about declarations of martial law, bank holidays, secret wars and other crazy things. Yet my phone messages, conversations, texts and emails told me there was something very very wrong. Two of my friends called me to tell me the consequences of the failed 30-year-bond auction last Thursday came home to roost over the weekend. Citi and BoA were rumored to have a huge CDS obligation due to the interest rates being blown outside of the norm and the 6.05% yield from the auction cost the banks an estimated $400 billion each if they were forced to settle open swap contracts and derivative issues by Monday or the end of the month. The swaps and derivatives which were to prevent the collapse may actually have finally started it but nobody could verify anything that was happening as the NY Fed looked like a war zone with hundreds of cameras around the building and reporters speculating endlessly on every cable channel.

2100 ET

I did not know who to believe but when Bloomberg played the excerpt from Jim Rogers’ interview just after the top of the hour where he said “this is what a currency collapse looks like and if you were not prepared, you were wiped out” really resonated with everyone on the Bloomberg set and throughout the news worldwide. The Chicago Futures were closed by order of the CFTC and SEC and that was the big announcement but it was assumed anyways because there was no way the COMEX or anyone else could possibly have kept up with the demand for precious metals as the last print had gold over $1579 per ounce and worse, the base metals closing at obscene prices like $6.79 per lb. for copper! The Shanghai markets were ordered open for domestic participants only and no overseas selling was allowed nor trading in US Dollars thus allowing the communists to manage their banking situation without outside influence. Unfortunately a rumor was confirmed on FNC later in the hour that Chinese troops were deployed to all U.S. and British bank branches inside their nation. That only permeated the panic already felt on the internet and in the air. The news at the top of the hour was even more shocking.

2200 ET

CNN led the hour off with coverage of the “FINANCIAL CRISIS OF 2010? with breaking news about two hedge fund managers committing suicide in their offices in New York. That did not help the confidence level nor did the statement from Treasury Secretary Timothy Geithner at 10:09 p.m. Eastern that the “government was in full control of the situation and that the panic world wide was unwarranted.” When he finished the statement assuring that the financial markets would probably open on time in the morning, the snicker from CNBC’s team of Gasparino and Griffith spoke volumes about what was really occurring.

2300 ET

Somehow a picture of Goldman Sachs CEO Blankfein and JP Morgan’s CEO Jamie Dimon entering the New York Federal Reserve building was leaked out and broadcast on cable news and financial news outlets causing more discussions and a genuine sense of panic to grip everyone. Reports about credit cards not working for the last two hours nationwide were swamping the newsrooms but no comments from VISA, Master Charge or anyone else was forthcoming.

0000 ET February 22, 2010

It was officially a panic. Reports on local news stations about grocery store shelves being cleaned out and ATM machines running out of money hours ago and not being refilled were broadcast nationwide. Even my local station had a story about accessing the reporter’s bank account online and all they got was a very scary message as they attempted to reach his bank’s web page: 404 – NOT FOUND

0100 ET

WWOR and WCBS started reporting that gas stations in the New York City and northern New Jersey areas were running out of gas even though credit cards did not work. The cable news stations and financial news networks just recycled earlier news with updates at the top of the hour. The world markets were closed and everyone was holding their breath to see what happened the next morning.

0200 ET

As I struggled to stay awake, NY Federal Reserve President Denis Hughes came to the microphones with Dimon, Blankfein and shockingly Ben Bernanke. Hughes immediately deferred to Bernanke who said that the President would address the nation at 7 a.m. Eastern Time and that he felt the crisis was averted for the moment and that everyone should have faith in the United State’s policy of a strong currency and banking system. After that statement was concluded, Bloomberg switched to a banking analyst from Singapore who said that the U.S. was now a hulking smoking black hole in the ground and the only thing it was good for was to return those worthless dollars back to “THAT” nation so “THEY” could burn them to stay warm this winter.

0300 ET

Someone on the message board posted a story from WTOP that military police were seen setting up roadblocks throughout Washington, D.C. There was no video or other confirmation within that hour. I had to make double strength coffee at that point in time but instead set my alarm for 0500 to try to grab a nap. I was not about to miss what was going to be a day to remember in American history.

0509 ET

So sue me! I hit my snooze button then realized I fell asleep with the computer and television on and the news was flying. In big bold red at the top of CNBC’s screen was the announcement COUNTDOWN TO SPEECH and a counter moving towards 0700 Eastern. As I flipped the channels half awake, I noticed a BREAKING NEWS announcement on CNN and there was a feed from WSB in Atlanta, GA with their helicopter video of the Georgia State Patrol closing off all streets within three blocks of the Federal Reserve Bank in Atlanta and also around the Federal Home Loan Bank. That sent a chill down my spine as I flipped back on to the computer to see over two hundred unread emails and message upon message about shortages, internet outages, credit card problems and worst of all, gas stations running out of fuel. The other shocker was the suspension of international flights in many U.S. cities as the suppliers put every airline on C.O.D. effective immediately at 2:30 a.m. Eastern Time and that suspended a ton of flights inside the United States and worldwide. The cascading effects were stunning, even to those of us who were warning about it.

0530 ET

Several European markets attempted to open in coordination with Middle Eastern markets but the declines were so severe that within ten minutes of trading the authorities shut them all down within a half hour:

Russia –35%

Saudi Arabia –43%

Israel –22%

Switzerland –17%

Germany’s DAX –41%

CAC 40 – 29%

FTSE 100 – 32%

The Euro was up another 10% against the dollar and the Swiss Franc was now worth over $1.40 U.S. As the discussions about the problems with the U.S. dollar accelerated, banks were being shut down in Europe in nation after nation to prevent runs. Sadly for the Brits, the Sterling was now trading so poorly in Europe that it was worth just 1/3 of a Euro at some trading desks. By the top of the hour, video of riots in front of banks in Frankfurt and Glasgow were broadcast nationwide. At 5:55 a.m. Eastern the news took a dark turn with this BREAKING NEWS headline:

OBAMA AND BERNANKE TO SPEAK TO THE NATION AT 6 A.M. EST

0600 ET

The speech was low key, solemn and to the point. Obama announced a one-week bank holiday. All credit card transactions and all collection actions of any sort were hereby suspended for seven days. All financial markets were closed until further notice. All mortgage and bill payment due dates were suspended for thirty days and no past due notices nor penalties were to be allowed by Federal Law. All schools were closed for seventy-two hours be they public or private. The city of Washington, D.C. was hereby declared to be under a state of martial law and all citizens were ordered to observe a curfew from 8 p.m. to 8 a.m. daily. Just as that sunk in, Ben Bernanke stepped up to the microphone to announce that President Obama, Treasury Secretary Geithner and all of the Federal Reserve Presidents along with himself were going to depart for Geneva for an emergency meeting of the G-20, IMF, World Bank and United Nations Financial Stability Working Group. Bernanke also announced that Citigroup, N.A. and Bank of America were hereby nationalized and placed under control of the United States Treasury under the auspices of the FDIC and that Sheila Bair would have an announcement at 8 a.m. Eastern. As he finished the announcement, an obviously exhausted Federal Reserve Chairman concluded by assuring the citizens of the nation that a stable currency was their only goal from this meeting of world financial leaders. I noted he did not say what currency though he was referring to.

0800 ET

By now, CNBC, Fox Business and Bloomberg were knee deep in wall-to-wall coverage but so were the broadcast and cable networks. America was on the brink was the preaching and screaming and the “bulls” were being gored by the permabears every time they uttered any statements about “how we’ve been through worse” etc., etc.

The announcement of the seizure by the FDIC of two of the largest banks in the world was pretty standard and short. The follow up statement by Ms. Barr though is what caused every newsroom to take pause when she stated that “further consolidations will be announced in the next seventy-two hours.”

The Bubblemedia was stunned and even shocked when Canada announced that they would attempt to open their financial markets for two hours of trading and that their banks would be open for normal domestic customers and business from 10 a.m. until noon Eastern time. Everyone on television looked at each other and just asked “How?”

0900 ET

I had forgotten to call in sick to work but then again the phone call from the company owner was pretty much a “well now what” as we laughed in a gallows humor discussion. He understood why I was home and he had already told the employees that he was closing at noon and would reopen when we could actually collect real money on what we sold and leased out. I told him I would call him at home later or meet him with a bottle on the golf course in the morning, weather permitting.

The chilling video of the Federal Reserve heads, Geithner and Obama boarding Air Force One to leave for Geneva from Washington, D.C. really had an impact on me.

1000 ET

The Canadian markets opened up 10% in ten minutes then rolled over down 31% by 10:30. The scary part was that the Canadian dollar kept on rising even though commodity trading was suspended and everyone was wondering just what gold would be priced at if the markets were allowed to trade.

As the day wore on, it was a blur of shocking story after shocking story. The President and his entourage arrived in Switzerland along with other world leaders but little was discussed or disclosed. The reports of banks being fire bombed by nuts throughout parts of the U.S. made the international news and caused all of us to feel somewhat uncomfortable as to what was next. The 8 p.m. interruption of normal prime time programming with a FEMA NEWS ALERT which lasted ten minutes and was repeated at the top of every hour with little if any information caused even more panic in the masses. Today I watched our dollar die in a matter of hours even though I knew how it was killed months if not years ago. I just wondered how bad the announcement out of Geneva was going to be as our bankers and politicians sold our souls out to save their rear ends.

I also wondered if I would ever sleep again.

Why does everyone get their panties Ina whirl over hedge fund managers pay? Though they make mistakes, surely their function in society [(usually, though not always) the efficient allocation of capital] is higher than that of an professional athlete whose sole purpose is put a ball in a net.

Jealousy and a culture of victimization.

What Facebook Can’t Give You–
Over 52 Years, These Men Have Evolved Into Movers and Shakers—Together

Wall Street Journal | November 25, 2009

“We were all young kids starting out, and it is easy when you are so involved in building your career to lose touch with other people who are outside your field…It helped me to understand why other people do what they do—which is important in life and in business. You don’t learn anything from talking to sameness.”

— Robert Menschel, Senior Director with Goldman Sachs for 55 years (member of the Wednesday 10)

Read the article in the Wall Street Journal online here

(GiaVang.com.vn – Giá vàng Việt Nam và Thế Giới) – Mặc dù bộ trưởng tài chính mới của Nhật Hirohisa Fuiji, cho biết quan điểm không ủng hộ một đồng tiền nội địa có giá thấp, song các ngân hàng lớn trên thế giới lại cho rằng ông Fuiji sẽ phải chấp nhận điều mà ông không thích.

Trong khi đồng Yên tăng giá so với hầu hết 16 đồng tiền được chấp nhận trong giao thương quốc tế kể từ chiến thắng vang dội của Đảng Dân chủ Nhật Bản trong cuộc bầu cử hồi tháng 8, các ngân hàng lớn lại dự đoán rằng đồng Yên sẽ giảm 5,1% so với USD và 0,8% so với Euro vào cuối năm nay.

Theo khảo sát dựa trên 40 đánh giá trung gian của Bloomberg, nền kinh tế hiện tại của Nhật Bản quá yếu để có thể duy trì được một tỷ giá mạnh. Khảo sát này cho thấy, Nhật Bản có thể là nước duy nhất trong nhóm G-10 sẽ không nâng giá mua đồng Yên trong năm 2010 và duy trì tỷ lệ lãi suất thấp hơn 0,1%.

Cũng theo các đánh giá trung gian, nền kinh tế sẽ tăng trưởng 0,8% vào năm 2010, khiến các tài sản tại Nhật Bản có lợi thế hơn so với các nước có giá mua đồng tiền cao hơn.
Trong khi Goldman Sachs đánh giá đồng Yên sẽ giảm từ 92,03 Yên/USD xuống còn 98 Yên/USD và từ 124,88 Yên/Euro xuống 142 Yên/Euro, các ngân hàng khác như Bank of America, HSBC còn có những dự đoán tồi tệ hơn.

Source: Đồng Yên sẽ giảm giá vào cuối năm

(GiaVang.com.vn – Giá vàng Việt Nam và Thế Giới) – Mặc dù bộ trưởng tài chính mới của Nhật Hirohisa Fuiji, cho biết quan điểm không ủng hộ một đồng tiền nội địa có giá thấp, song các ngân hàng lớn trên thế giới lại cho rằng ông Fuiji sẽ phải chấp nhận điều mà ông không thích.

Trong khi đồng Yên tăng giá so với hầu hết 16 đồng tiền được chấp nhận trong giao thương quốc tế kể từ chiến thắng vang dội của Đảng Dân chủ Nhật Bản trong cuộc bầu cử hồi tháng 8, các ngân hàng lớn lại dự đoán rằng đồng Yên sẽ giảm 5,1% so với USD và 0,8% so với Euro vào cuối năm nay.

Theo khảo sát dựa trên 40 đánh giá trung gian của Bloomberg, nền kinh tế hiện tại của Nhật Bản quá yếu để có thể duy trì được một tỷ giá mạnh. Khảo sát này cho thấy, Nhật Bản có thể là nước duy nhất trong nhóm G-10 sẽ không nâng giá mua đồng Yên trong năm 2010 và duy trì tỷ lệ lãi suất thấp hơn 0,1%.

Cũng theo các đánh giá trung gian, nền kinh tế sẽ tăng trưởng 0,8% vào năm 2010, khiến các tài sản tại Nhật Bản có lợi thế hơn so với các nước có giá mua đồng tiền cao hơn.
Trong khi Goldman Sachs đánh giá đồng Yên sẽ giảm từ 92,03 Yên/USD xuống còn 98 Yên/USD và từ 124,88 Yên/Euro xuống 142 Yên/Euro, các ngân hàng khác như Bank of America, HSBC còn có những dự đoán tồi tệ hơn.

Source: Đồng Yên sẽ giảm giá vào cuối năm

Blankfein and Goldman’s brass , decided to embark on a social enterprise experimental program by offering about $100 million, per year over five years to the capital starved American small and mid-size enterprises.  The 10,000 Small Businesses Initiative will distribute about $100 million per year over the next five years to SMEs through Community Development Financial Institutions. And then they did the same for 10,000 women….

So in business arithmetic it amounts to about a $10,000 dollars loan each enterprise before we add the women which then brings it down to a $5,000 per woman or man owned enterprise. Now if any of you has done some business knows how far a $5k check goes in American business….. Maybe the cost of the legal fees for a month’s work  to just handle the Goldman usurious arrangement. That’s it. Gone the fiver…

But if the 10,000 small business fund is the best social innovation Goldman Sachs had to offer; they are to follow this with the 10,000 women fund as has been announced.

We fully expect that the 10,000 children fund will follow, then the 10,000 invalids fund, the 10,000 gays fund fast behind and finally the 10,000 vanities…

But let’s not rush ahead of history making Asperger syndrome sufferers’ own intelligent designs for society’s ills.

These Marie Antoinettes – these lords of  the universe and these crack team leaders of the corporate investment bankers of this world; have heard the cries from the despondent masses and decided to act.

They thought hard and decided that the best policy would be to share some cake. 

Or more practically they decided to throw some coins to the beggars. They opened up their petty coin purse to give some alms to the peasants lining the steps of the cathedral begging bowl in hand.

Or was it natural preservation and in their infinite wisdom Blankfein and Co woke up and understood that the real economy needs the peasants and the poor alive and licking the hand that feeds them.

They realized that to avoid social unrest they must give something… albeit as little as possible but still something.

They want to give a bit of cash to prime the pump. A little capital here and there to resuscitate and incubate the critical SME segment as an absolute prerequisite to a vibrant economic recovery.    The buzz about this news as philanthropy is wrong. It is in the marketplace where the reaction, played out – ranging from cynical suspicion at one extreme to puzzled bemusement and  ecstatic aplomb at the other with the anarchist crying out for the bankers heads and stripes.

What motivated Goldman to announce this initiative is an interesting question.  Was it guilt, greed or a sense of corporate social responsibility?  Some suggest it is a master PR move to counter a growing public perception that Goldman Sachs,  the poster child of greed, avarice and sloth and probably all the other dreadful sins, along with the biggest one of them all; that of raiding the public purse.

The exceptional government favoritism and bailout largess,  from none other than their very own ex-chairman Paulson; reminds one of the Oil men leveraging the White House in the Bush-Chenney years to line their pockets. Now with Paulson in the Treasury, giving to his colleagues came naturally as came the turn of the Bankers to use the public lever to save themselves while stealing the public wealth.  Geithner tried to stem this tide, because make no mistake this is Raiders of the Universe stealing the public purse in the largest transfer of wealth – history has ever seen. 

All the while You were chanting:  YES WE CAN

Yes we can…

Yes they DID.  

The DID raid the public purse and took the coin of the realm for their own.  

Revolutions started with a lot less and the Guillotine was primed well – with the fools heads who didn’t heed History’s lessons.

Clearly and brazenly Goldman has leveraged its unfair and government (our Commons) advantage to achieve historic levels of profitability, and enable the management to pay obscene bonuses to themselves and a handful of the company’s top echelon employees. The golden busy bees. Those crack teams of finance, the rainmakers and the nectar drinkers. The crackers…

The Goldman leaders don’t need to worry for money ever again. Never for the next seven generations of their family need they care for working. They are set for 7 lives. Like the cats.

What kind of incentive is that?

Why would they care to work hard after that ever again?  Fat cats don’t chase mice…

Maybe that’s fashionable environmental thinking for you. Seven generations ahead provision for wealth preservation. Fools…

In my book incentive means: Stay lean – stay hungry – catch the …. gift mice.

But then again, capital has no psyche,  and half a billion dollars is a small bill to underwrite absolution of such gigantic scale for their form of persistent guilt.  True to its nature, capital always  seeks a place where it will find its greatest return. 

What Goldman and Buffett are doing is simply casting some oil and bread in the waters of a distressed economy. 

Its wise to ascribe the best intentions and virtuous motivations to actions that we may not fully understand.  But is wiser to seek to understand these action fully, especially if they are to affect society at large.

This 10,000 something funny, guilt-fund program should be viewed as an event in the history of PR, marketing, branding, corporate social responsibility, corporate hubris, and social entrepreneurship.  Its important to understand that institutions that practice corporate social responsibility do not engage in it, solely as a philanthropic  endeavor.  Indeed, the benefits of good corporate citizenship pays multidimensional dividends.  All ultimately accrue to the benefit of company shareholders and the larger community of corporate stakeholders.

Goldmans move to prime the pump of capital formation initiative for SMEs seeks to mitigate macroeconomic risk factors that are prolonging the recession and pressuring Goldman’s business.   Goldman needs a vibrant US economy if it is to sustain its profitability,  long term growth and global competitiveness.  Goldman needs a strong regional and local banking sector to support its securitization, investment banking and corporate finance business units.   Healthy SMEs are a critical component to a healthy commercial banking sector. 

Goldman recent charter as an FDIC bank holding company may also be a factor to consider. They were insured by the government to survive during the floods; they were insured by the government to make their acquisitions during the bust and now they are insured to continue this job… of being the T-Rex of the jungle. 

Well there is a place for T-Rex but please, watch out for these pesky asteroids – please.  Fossilized bones abound in the natural history museums…

Sadly, there are no fossils left of the dinosaur enablers, so we don’t know exactly what they looked like – except that they belonged in the bureaucratic trilobites family, with small wire rimmed glasses.

But even this half billion pittance of an SME lending initiative – will provide interesting insights into the dynamics of a local bank market space and potential lines of business that are relatively new to Goldman Sachs.  This fake philanthropy initiative might  just be an entry for  a slate of community banks asset acquisition program.  The community banking sector is plagued with over capacity, underperformance and  is in dire need of consolidation. 

Goldman’s  crack team of corporate finance and M&A professionals expertise would be put to good use here. Provided they don’t smoke their crack overly too much. Or at least the community doesn’t find out. The peasants might revolt as they know both the smell of crack and the smell of BS. The people on the bazaar and on the market street are far more savvy than the Raiders of the government purse would ever give them credit for.

Goldman’s action to micro-finance SMEs will also serve to incubate a new class of High Net Worth (HNWs) investors. You gotta  love these acronyms. HNWs much like SUVs will be  flush with cash from successful entrepreneurial endeavors, – or so the Goldman’s reasoning goes – the nouveau-riche will be eager to deploy their excess cash and dormant capital into equities and bonds, hedge funds and private equity partnerships. 

In some communities like Detroit’s east and NY and LA and the rest of middle America the only ones with the cash will be the other masters of the Universe – the drug dealers. The only ones with cash in America today – except the Goldman bankers that is. So a healthy equity markets and a growing Alternative Investment Management  market is key to a healthy Goldman local street banking business. This alternative investment management franchise and the enfranchisment of the ones who need to launder capital fast will prove to be a new boon for the investors. A new line of business for Goldman Sachs that completes the circle of the purveyors of the American dream to the actual producers of the pipe dream.

Crack teams all around abound – but none more so than the bursting balloon of  greed that Goldman represents.

The real heroes – community banks, principal lenders to SMEs are  still reeling from the credit crisis and are deeply concerned about the troubled assets on their balance sheets.  They are the Bankers who know their neighborhood and their people and the real risk profiles. They now can’t afford more write downs on non-performing loans and remain highly risk adverse to credit default exposures but they want to support their community’s dreams.  

Unfortunately due to lack of support, these local banks have responded to the ongoing crisis, by drastically reducing credit to SMEs and by curtailing new lending activity.  The strain of a two-year recession and limited credit access has been in turn, taking its toll on the very SMEs that fuel the American dream of a perpetual growth economy.  The recession has hurt sales growth across all market segments causing SMEs to layoff employees or shut down driving unemployment rates ever higher. 

Yet Goldman claims that they want to access this sector for profits. And these sector would boost Goldman’s securitization and restructuring advisory businesses positioning it to deepen its participation in the PPIP and TALF programs. Whom are they kidding?  

Maybe the Treasury department?

The financial condition of commercial and regional banks is expected to remain stressed for the foreseeable future.  Community banks have large credit exposures to SME and local commercial real estate.  Consumer credit woes and high unemployment rates will generate continued losses from credit cards and auto loans.  Losses from commercial real estate loans due to high vacancy rates are expected to create significant losses for the sector.

Reduced revenue, protracted softness in the business cycle and closed credit channels are creating perfect storm conditions for SME’s. Bank’s reluctance to lend and the high cost of capital from other alternative credit channels coupled with weak cash flows from declining sales are creating liquidity problems for many SMEs.   Its a growing contagion of financial distress. 

In all likelihood, the reality of this contagion would infect Goldman and in turn would have a profound impact on the company’s financial health. So they don’t really want it right?

 The 10,000 Businesses something or other guilt-fund initiative is just that.

No two ways about it. Maybe it will strengthen the free flow of investment capital to finance national economic development and empower SMEs and then maybe it will be another black hole.  If it strengthens free market capitalism with the potential to pool, unleash and focus investment capital into a strategic market segment that has no access to public equity and curtailed lines of traditional bank credit,(as the Goldman’s PR machine says) is questionable. At least its main supposition, is completely unsupported by the evidence at hand.

The 10,000 guilt-fund for Businesses initiative  will ideally encourage wider participation by the banking and private equity funds but don’t really count on it. Nobody wants to go to bed with GS in a deal as a minority. In the aggregate, this will help to achieve GS strategic objectives, build wealth and realize broader goals to assure sustainable growth and global competitiveness. Or not.

One thing is for certain:

All of this is to the benefit Goldman Sachs’ shareholders and its global investment banking franchise squib.  

Guilt Free

Conscious Free.

Drug Free.

Triple X. Trifecta for GS again. Or maybe not so…

Certainly the last one isn’t true.

Let’s replace that with Ethics free.

Yours,

Pano D Kroko

PS: I suggest Blankfein goes back to his thinking space and sharpens his pencils and comes up with something really giving back to the Republic what they really owe to give. 

Otherwise not only He isn’t a proper leader – but he is not intelligent enough to read the writing on the wall.

PS: Right around the end of the 18th century the French devised a good method for capping bankers and others’  pay…

PS2: To understand the causes of the Guilt-in or more popularly known as guillotine, see bellow the causes of the French Revolution:

”Adherents of most historical models identify many of the same features of the Ancien Régime as being among the causes of the Revolution. Economic factors included widespread famine and malnutrition, due to rising bread prices from a normal 8 sous for a 4-pound loaf to 12 sous by the end of 1789, which increased the likelihood of disease and death, and intentional starvation in the most destitute segments of the population in the months immediately before the Revolution. The famine extended even to other parts of Europe, and was not helped by a poor transportation infrastructure for bulk foods. The Environment was a key factor in it then as it is now. Recent research has attributed the widespread famine to an influence of the El Niño effect following the 1783 Laki eruption in Iceland, or colder climate of the Little Ice Age combined with France’s failure to adopt the potato as a staple crop, and the financial elite raiding the Treasury for the benefit of the courtiers, the Queen, the King and themselves.

Another cause was the fact that Louis XV fought many wars, bringing France to the verge of bankruptcy, and Louis XVI supported the colonists during the American Revolution, exacerbating the precarious financial condition of the government. The national debt amounted to almost two billion livres. The product of war is always penury of the Chancellor. The additional social burdens caused by the war included the huge war debt, made worse by the monarchy’s military failures and ineptitude, and the lack of social services for war veterans or for any of the poor classes. The corrupt, inefficient and antiquated financial system was unable to manage the national debt, something which was both caused and exacerbated by the burden of a grossly inequitable system of taxation and rewards. Another cause was the continued conspicuous consumption of the noble class, especially the court of Louis XVI and Marie-Antoinette at Versailles, despite the financial burden on the populace. High unemployment and high bread prices caused more money to be spent on food and less in other areas of the economy. The Roman Catholic Church, the largest landowner in the country, levied a tax on crops known as the dime or tithe. While the dîme lessened the severity of the monarchy’s tax increases, it worsened the plight of the poorest who faced a daily struggle with malnutrition. There was too little internal trade and too many customs barriers.

There were also social and political factors, many of which involved resentments and aspirations given focus by the rise of Enlightenment ideals. These included resentment of royal absolutism; resentment by the ambitious professional and mercantile classes towards noble privileges and dominance in public life, as many of these classes were familiar with the lives of their peers in commercial cities in the Netherlands and Great Britain; resentment by peasants, wage-earners, and the bourgeoisie toward the traditional seigneurial privileges possessed by nobles; resentment of clerical advantage (anti-clericalism) and aspirations for freedom of religion, resentment of aristocratic bishops by the poorer rural clergy, continued hatred for Catholic control, and influence on institutions of all kinds by the large Protestant minorities; aspirations for liberty and especially as the Revolution progressed republicanism; and anger towards the King.

Any similarities with real or existing persons, corporate leaders or kings of finance, fictional  banker-wanker remonstrations of innocence, national states or corporations and banks present or past; any similarities with persons and events and even attributes; are purely accidental, coincidental and unintended. After all this is a work of humour and fiction much like the 10,000 something headless or brainless or other benefit for the community… out of the wankers largesse.

Extreme left journalist George Monbiot ignored all the facts I provided when he was pointing a finger at me. He’s ignoring them again, which forces him to assume the deniers are at fault. He wrote, “There is no point in denying it: we’re losing. Climate change denial is spreading like a contagious disease. It exists in a sphere that cannot be reached by evidence or reasoned argument; any attempt to draw attention to scientific findings is greeted with furious invective. This sphere is expanding with astonishing speed.”

The sphere is expanding for several reasons.

• All evidence rejects the hypothesis that human CO2 is causing warming or climate change.
• Facts are gradually getting to the public despite obstructionism by journalists like Monbiot.
• Temperature projections of the Intergovernmental Panel on Climate Change (IPCC) are consistently wrong.
• Record cold temperatures are occurring everywhere.
• Motives of those pushing the need for reduction in CO2 are being exposed.
• Economic costs of a completely unnecessary action are emerging.

What do you think? According to a recent research report by ‘Goldman Sachs’, the market will see one of it’s biggest rally’s of 2009 by the end of December…

Source: read more Goldman Sachs says Big Rally ahead

NYT – Opaque markets breed insider profits and abuse of investors. Sunshine can bring competition and lower costs even if regulators do little beyond letting the sunlight shine.

You might think that as Congress considers just how much regulation is needed for the shadow financial system — the one that largely escaped regulation in the past — letting in such light would be an easy and uncontroversial move.

But it is not proving to be easy at all, and is one part of the Obama administration’s financial reform package that is most in jeopardy.

Timothy Geithner, the secretary of the Treasury, will testify before the Senate Agriculture Committee next week in an effort to hold on to important provisions of the proposal that have come under attack by banks fearful of losing one of their most profitable franchises — the selling of customized derivatives to corporate customers. Remarkably, the banks have persuaded customers that keeping the market for those products secret is in their interest.

Last week, Gary Gensler, the chairman of the Commodities Futures Trading Commission, faced the same panel, and ran into questions that indicated at least some senators were sympathetic to efforts to keep large parts of the derivatives market in the dark.

Those markets allow companies to bet on — or, if you prefer, hedge themselves against losses from — changing interest rates and commodity prices. They also allow investors to use credit-default swaps to bet on whether a company will go broke. The administration wants to standardize those products when possible, and force the trading of them onto exchanges when possible.

Banks want to whittle away the reforms if they can, and to minimize the roles of the C.F.T.C. and the Securities and Exchange Commission, experienced market regulators who have been generally kept away from over-the-counter derivatives in the past. Instead, the banks would like to leave it to banking regulators to oversee the dealers, something regulators totally failed to do in the past. Unless Mr. Geithner can persuade legislators otherwise, one of the great bank lobbying campaigns will have succeeded, in large part because some companies that buy derivatives from banks have been persuaded that their costs will rise if needed reforms were made.

The opposite is probably true. The history of nearly all markets is that customers suffer if dealers are able to keep them ignorant of what is actually going on.

Until the beginning of this decade, that was true in the corporate bond market, where actual trades were kept confidential. That made it easy for bond dealers to charge big markups when they sold bonds to customers.

After regulators forced timely disclosures, the bid-ask spreads — the difference between what customers paid when they bought bonds and what they could get when selling them — declined significantly. The result was smaller profits for bond dealers, and better returns for bond investors.

“It is now time,” Mr. Gensler testified, “to promote similar transparency in the relatively new marketplace” for derivatives traded over the counter.

“Lack of regulation in these markets,” he added, “has created significant information deficits.”

More

The ‘Fall of the Republic’, Obama’s unkept promises and lies, the economic crisis as part of a bigger new world order strategy, the swine flu hoax, the fraud behind the Federal Reserve – Alex Jones talks about all this in an exclusive interview with RT’s Anastasia Churkina.

The next company for which i got qualified to the interview round was Goldman Sachs. There was a long between DirectI and GoldmanSachs during which I appeared for few companies which i couldn’t clear the apti- I was not very good in C as I had stopped using it in the 3rd year itself cause of which I used to do real bad in C-Aptis.Goldman Sachs recruitment procedure included- Apti, Group Activity, Technical Interview. Goldman Sachs(GS) increased their cut-off from 7.5 to 8 which gave me a real good chance to clear the apti. And their apti was not that difficult either. There were few simple C based questions and few quant questions and few question on Data Interpretation (which i did not attempt). This time I started off with the Technical Section as it takes less time to complete Technical than the Quant. I had lot of time to attempt the Quant section. GS also had coding test followed by an essay writing We were asked to write efficient code/algo for 2 questions they had given. One was- Deleting the characters from the source string based on the input for the characters to be deleted and the other was some crazy game which i did not even attempt. Then in the essay we were asked to write our 3 qualities and support them with certain examples. Actually we were given 7 minutes to write the essay but I wrote the essay when we were asked to write the code I had lots of time left during the coding session so instead of wasting it I wrote the essay as well

I was pretty confident of clearing the Apti and by 8 in the night our class Placement Coordinator called me up and told me that I was thru to Group Activity and asked me to come immediately to the Placement Department for the Group Activity. At the department I found that they had shortlisted some 20 ppl for the Group Activity. In the group activity we were divided in to 10 ppl in a group and were asked to analyse a certain situation. The situation was- There’s a ship in the midst of the sea and it is damaged. They had given us the map of the location- How far the coast was from the point where the ship is located and the direction of the current. From among the people in the ship we were given profiles of some 8-10 ppl. Our task was to choose the Captain and Vice Captain of the ship. We were asked to read the profiles of all of them and then we had to discuss to a conclusion. Everyone was engrossed in reading them, few were continuously writing, filling pages. Everyone was reluctant to start off which is where I initiated the discussion with 2 ppl whom i chose as the Capt and V.Capt and listed the reasons why they should be. This sparked off the josh with in all of them and then the discussion started. There were few who weren’t allowing others to speak- Not even me. There were few MCA ppl who were reluctant to speak but then I was playing the role of moderator and encouraging others to speak out. The discussion went on well and we were able to reach to a conclusion in the time provided and the profiles chosen were the ones which I had initially suggested. In the other panel they were not able to come to a conclusion. We all came out and were anxiously waiting for the results. It’s obvious that no one wants to go back after coming so far. After sometime the GS team came out and announced tat- “All of them are through to the interview round” After hearing to this everyone was so excited as if they had got placed

My interview was at 8:30AM. I got up pretty early completed my prayers , had bath and then was in the department by 8:00. This was my second interview and everyone was expecting me to get placed easily looking at my developer profile They told that we had to go to each of the panel and all of them would together decide the candidates. I told to myself pukka 4-5 rounds of interview. Was a bit nervous- and went in for the first round- this was my first experience of F2F interview. In the interview the Interviewer asked me my fav topics and I ****blatantly* told him- OOPS, Java, Data Structures, Web Technologies. He asked me series of Java questions which I easily answered- He asked me wat’s Immutability, then showed me a code snippet having “final” reference variable and asked me few questions on tat, asked about HTTP State maintenance, then asked about Servlets, asked which DS is used for evaluation of expressions and asked me to show it. Then he asked me to design the classes for a certain situation. The interview went on really really well. After each round all of them got together to decide the selected students for next round. And then they got a print out and put it up. We used to go to the list after each round and look if our name was present or not.

I was selected for 2nd Round and this was a horrible round- fulltoo HR questions and questions about my projects. At the end he asked me to write a algo, though i could explain the process to solve it I wasn’t able to write down the code properly. After this round I thought I was out but then I got thru that round as well. 3rd Round was the best of all the rounds. I was interviewed by an Architect and he was like aware of all the latest developments in terms of technology. We discussed about issues like “Composition over Inheritance” then he gave me puzzles to solve which i did not. But he gave me certain problems and I had to explain him how I would solve- I answered all of them in no time. He was like really happy so was I . So u would have got to know by now that I was selected to the 4th round which was the last round. Out of the 20 ppl we started with 4 ppl survived till the last round and I was one among them This was the worst ever interview for me- They drilled down to each and every aspect of my resume, my strengths, interests, behavior and all. I had a terrible time. This round they wanted to chk if I really can work at GS. They kept on telling that I could apply elsewhere and get a better development or research oriented job. They were like concerned if I would be happy working at GS. They had told in the presentation that it’s a development profile but in the interview they told me that Its little of development but more of a maintenance job The mistake I did was I spoke a lot- This was my first experience and did not know how to face such kind of Behavioural Interviews. So after a gruelling 30 minutes I finally came out guaranteed that I would not be selected. And to my shock these juniors were sitting outside for their Intern interviews. So finally after a long wait they called 4 of us inside. I thought that they would tell all 4 are selected. I still remember the words he told- “You all have come so far which means u are all really good. But we have rules to follow and so we cannot take all of them”. After this I immediately got to know that I am gone . And he looked at me and said “Sorry Mohamed, we cannot take u in”. Suddenly I could hear “Yes!”, “Yes!”, “Ah!” … I silently congratulated 3 of them and went out. I was so terribly upset tat day. But then told to myself that I can get a much better job than this. They kept telling through out the 4th round that I am not suitable for the job and i think they asked me for some 10 times why i want to join GS. And all the times I did not have an answer to impress them.

Few take aways from the interview

• Read in detail about the company and what they are doing.
• Prepare for questions like “Why do u want to join”, “How can u make a difference”, “strengths and interests”, “Why I should select u”.
• Understand their requirement- See for what position they are recruiting u.
• Project u’r interests according to the position u are being interviewed for.
• Talk less- Talk only when asked for. Too much talking will create problem.
• Be through with u’r resume.
• Be ready to have a valid reason for the GPA or percentage variations.

]]> http://prattleonboyo.wordpress.com/2009/11/27/black-friday/ Fri, 27 Nov 2009 14:00:17 +0000 Peyton Farquhar http://prattleonboyo.wordpress.com/2009/11/27/black-friday/ http://pakalert.wordpress.com/2009/11/27/dubai-debt-sends-panic-a-dangerous-new-phase-in-the-global-economic-crisis/ Fri, 27 Nov 2009 12:58:12 +0000 pakalert http://pakalert.wordpress.com/2009/11/27/dubai-debt-sends-panic-a-dangerous-new-phase-in-the-global-economic-crisis/ http://markusgaertner.wordpress.com/2009/11/26/ol-sause/ Thu, 26 Nov 2009 20:05:16 +0000 markusgaertner http://markusgaertner.wordpress.com/2009/11/26/ol-sause/ http://institutionalfinancialderivatives.com/2009/11/26/the-card-game-new-full-length-documentary/ Thu, 26 Nov 2009 17:56:56 +0000 Institutional Financial Derivatives, Inc. http://institutionalfinancialderivatives.com/2009/11/26/the-card-game-new-full-length-documentary/

PBS Frontline – As credit card companies face rising public anger, new regulation from Washington and staggering new rates of default and bankruptcy, FRONTLINE correspondent Lowell Bergman investigates the future of the massive consumer loan industry and its impact on a fragile national economy.

In The Card Game, a follow-up to the Secret History of the Credit Card and a joint project with The New York Times, Bergman and the Times talk to industry insiders, lobbyists, politicians and consumer advocates as they square off over attempts to reform the way the industry has done business for decades.

“The card issuers could do anything they want,” Robert McKinley, CEO of CardWeb.com, tells FRONTLINE of the industry’s unchecked power over consumers. “They could change your interest rate. They could impose an annual fee. They could close your account.” High interest rates along with more and more penalty fees drove up profits for the industry, Bergman finds, as the banks followed the lead of an aggressive upstart: Providian Bank. In an exclusive interview with FRONTLINE, former Providian CEO Shailesh Mehta tells Bergman how his company successfully targeted vulnerable low-income customers whom Providian called “the unbanked.”

“They’re lower-income people-bad credits, bankrupts, young credits, no credits,” Mehta says. Providian also innovated by offering “free” credit cards that carried heavy hidden fees. “I used to use the word ‘penalty pricing’ or ’stealth pricing,’” Mehta tells FRONTLINE. “When people make the buying decision, they don’t look at the penalty fees because they never believe they’ll be late. They never believe they’ll be over limit, right? … Our business took off. … We were making a billion dollars a year.”

It took the economic collapse in the fall of 2008 to set the stage for potentially historic change in the consumer credit business. President Obama and his team pushed through a credit card reform bill in May, and they’re now looking to establish a new Consumer Finance Protection Agency. But the banking and financial services industries contribute huge amounts of money to Congress — and the jury is still out on whether the new regulations can pass. “It’s a step in the right direction, but it’s a modest step,” says Harvard law professor Elizabeth Warren. “It’s a set of very discrete new laws. And the credit industry instantly set to work on how they could run around them. By itself, that set of rules won’t change the game.”

“It’s hard for them to get a bill through the U.S. Senate when the industry is pouring money into Washington,” says Martin Eakes of the Center for Responsible Lending of the banks’ political clout. “As Sen. [Dick] Durbin from Chicago recently said, ‘the banks, even as unpopular as they are right now in this crisis, still own this place.’”

Bernard Madoff entrou para a história como ninguém deseja, ao ser o mentor do esquema Ponzi que resultou em um prejuízo total de US$ 50 bilhões, segunda maior fraude da história dos EUA, atrás apenas do escândalo da Enron em 2001, com perdas de US$ 63,4 bilhões.

Imagine se existisse uma fraude 50 vezes superior à de Madoff, com cerca de US$ 2,5 trilhões em perdas. Além do montante expressivo, idealize uma periodicidade mensal para tal prejuízo. Do impossível para a realidade subliminar, esse é o provável montante que os traders e bancos roubam da renda real do mundo através do petróleo.

Em artigo publicado no website Seeking Alpha, Philip Davis desnuda a possibilidade da maior fraude existente na história, ao revelar como aproximadamente 99% dos negócios nos mercados futuros de petróleo não passam de meras especulações, em um esquema envolvendo bancos, petrolíferas e até a própria imprensa.

Fantasma de mão dupla

“US$ 2,5 trilhões é menos do que o preço excedente que a população é manipulada todo mês para pagar por um barril de petróleo”, afirma Davis, ao ressaltar que tais roubos ocorrem na ICE (Intercontinental Exchange).

Criada em 2001, a ICE possui como fundadoras as petrolíferas BP (British Petroleum), Royal Dutch Shell e Total, além dos bancos Morgan Stanley, Goldman Sachs, Deutsche Bank e Société Générale. A bolsa é sediada em Altanta, nos EUA, mas a regulação norte-americana passa longe das negociações.

Tamanha falta de regulação gera as chamadas dark pools of liquidity, ATS (Alternative Trading Systems) usados por traders que procuram movimentar grandes quantias sem revelar as operações no mercado aberto. Como decorrência, a especulação toma forma, e explica como o barril de petróleo saltou de US$ 40,00 para US$ 80,00 somente este ano, em meio à fraca demanda física pela commodity.

Á procura da verdade, Davis mostra que investigação do Congresso dos EUA datada de 2003 descobriu como a ICE é usada para facilitar negociações “round trip” (viagens de ida e de volta), nas quais uma firma “A” vende energia para uma empresa “B”, que vende novamente o mesmo montante de volta para a firma “A”: o resultado real é nulo, mas o sinal ascendente para os preços do petróleo não.

Preços disparam e ignoram demanda real

Na época em que a DMS Energy foi investigada pelo governo norte-americano, a empresa de energia assumiu que nada menos de 80% das negociações em 2001 eram fantasmas. Em movimento semelhante, a Duke Energy revelou que negociou US$ 1,1 bilhão através das round trips, sendo dois terços comercializados na ICE.

“Você pode enxergar o dano causado pelo Goldman Sachs e por sua gangue de ladrões quando olhar a diferença de preços antes da criação da ICE e depois da criação da ICE”, afirma Davis, ao ressaltar que, em apenas cinco anos após a criação (de 2001 a 2006), os preços das commodities triplicou – contraparte impossível na demanda.

Para Chris Cook, ex-diretor da International Petroleum Exchange, os laços entre bancos e petrolíferas são bem mais antigos do que se pensa. “Parece-me claro que o Goldman Sachs e a BP vêm trabalhando em cooperação – ao menos em um nível estratégico – por pelo menos 15 anos”, diz Cook.

A ponte mais do que estreita entre bancos e petrolíferas lembra a tese de Vladimir Lenin no texto “Imperialismo, fase superior do capitalismo”, no qual explicita a junção entre capital industrial e capital bancário, resultando apenas em um tipo de capital: o financeiro.

Petróleo: causa da recessão?

Antes da existência da ICE, as famílias norte-americanas gastavam, em média, 7% de sua renda em alimentos e combustíveis. No último ano, a proporção saltou para 20%. “Isso é 13% da renda de todo norte-americano, o que dá mais de US$ 1 trilhão por ano, roubados através da manipulação do mercado”, completa Davis, citando que, em uma escala global, US$ 4 trilhões são roubados por ano – 80 vezes o tamanho da fraude de Madoff.

Nesse sentido, Jeff Rubin, economista-chefe do CIBC (Canadian Imperial Bank of Commerce), sugere que a recessão corrente foi causada pelos altos preços do petróleo, ao afirmar que as hipotecas não pagas nos EUA são apenas um sintoma da doença causada pelo óleo bruto. Talvez explique porque o Japão e algumas economias na Zona do Euro entraram em recessão antes mesmo da bolha norte-americana estourar.

Além disso, os elevados preços do petróleo foram responsáveis por quatro das últimas cinco recessões do mundo, podendo ter começado também a atual, caso confirmada a tese. “Os choques do petróleo criam recessões, ao transferirem bilhões de dólares de economias em que os consumidores gastam cada centavo que possuem para países com alta taxa de poupança. Enquanto esses petrodólares podem ser reciclados de volta para fundos soberanos de investimento, eles não são reciclados para a demanda real”, completa Rubin.

Parabéns, você construiu Dubai

Embora sem provas concretas, dada à falta de regulação na ICE – reguladores seriam subornados? -, a teoria da manipulação pode ser verdadeira, em um mercado cansado de especulação. Ou seria o próprio mercado a personificação da especulação?

Entre tantas questões, sempre lembre: quanto será da minha renda que está indo para a construção de um palácio de ouro no Oriente Médio, ou para algum trader do Goldman Sachs?

Fonte: Infomoney

Bloomberg – The concentration of the credit- default swaps market in the hands of a few players is increasing risk and should be remedied by more transparent reporting, according to Celent.

Five banks including Goldman Sachs Group Inc. and JPMorgan Chase & Co. accounted for about 90 percent of the credit-default swaps market in 2009, the Boston-based research firm said in a Nov. 25 report.

“The leading banks and dealers in the over-the-counter derivatives market are the main buyers and sellers of CDS and hence the chances of having them as a counterparty are quite high,” Anshuman Jaswal, a Celent analyst and author of the report, wrote in an e-mailed note. “This circularity within the system increases risk and we need to tackle it.”

Moves to regulate the OTC derivatives market by introducing measures such as central clearinghouses accelerated after President Barack Obama’s administration described the securities as a “major source of contagion” in the global financial crisis. The derivatives market outside exchanges relies on counterparties negotiating their own buy and sell orders, with no guarantees either will complete the trade.

Daily reporting of individual transactions to regulators and central data repositories would “help build an important check into the system,” the report said. It also said clearer guidelines are needed on conflicts of interest.

Credit-default swaps are contracts investors use to protect against bonds defaulting. Traders use them to speculate on credit quality and the contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements.

Barclays Plc, Deutsche Bank AG and Morgan Stanley round out the top five banks. U.S. banks Goldman Sachs, Morgan Stanley, JPMorgan, Bank of America Merrill Lynch and Citigroup Inc. account for $29 trillion of the total outstanding U.S. credit derivatives market, Celent said. That’s 95 percent of the market, leaving $1.38 trillion for all other firms.

“This poses a dilemma for the participants as well as the regulators as the counterparty risk is quite concentrated,” the report said.

Good morning and Happy Thanksgiving to PSW readers! Here’s a artcle on GS’s contribution to small businesses.  - Ilene  

Charitable Giving

Courtesy of The Epicurean Dealmaker

"Guess what? I have flaws. What are they? Oh I dunno, I sing in the shower? Sometimes I spend too much time volunteering. Occasionally I’ll hit somebody with my car. So sue me—no, don’t sue me. That is opposite the point I’m trying to make."

"Do I need to be liked? Absolutely not. I like to be liked. I enjoy being liked. I have to be liked. But it’s not like this, compulsive, need, to be liked. Like my need to be praised."

— Michael Scott, The Office

In an otherwise less than sympathetic piece on the public relations travails of the Vampire Squid everybody loves to hate, Financial Times journalist Chrystia Freeland credits the investment bank’s recently announced 10,000 Small Businesses initiative as "cleverly conceived" and "designed for maximum effect." I have to disagree.

Like many of you, I am sure, I was impressed when I heard Goldman was going to donate $500 million to a myriad of small businesses, which are widely perceived to be the primary engines of job creation in our economy. Oh goody, I thought: half a billion bucks mainlined into the veins of those businesses best able to kick start the economy back into rude health. What a coup.

Then I read the blasted thing. It is not pretty. Sixty percent of the committed funds will be distributed for "lending and philanthropic support," but this will be directed through "Community Development Financial Institutions." Call me a skeptic, but this does not sound like high powered money coursing directly into the working capital accounts of productive enterprises which can use it. Instead, it sounds like a $300 million slush fund for the functional equivalent of community NGOs. The remaining forty percent—200 million clams—will go toward "education."

Oh great, Lloyd, that’s just what every small businessman needs: an education. After all, everybody knows what the owner of a chain of dry cleaners or a machine tool factory really needs is "scholarships," greater "educational capacity," and mentoring by some half-assed social worker out of an abandoned storefront. Why stop there, though? Why not endow a hundred spots at Harvard Business School in perpetuity so Hmong immigrants can learn to apply CAPM and discounted cash flow analysis to their corner delicatessens? ¹

Either that, or you could pull your head out of your ass and actually lend some money to these guys instead. Heck, set up a small business lender with half a billion in capital, lever it up ten to one, and loan five billion dollars out to struggling small businesses. You might actually spur some real economic growth, rather than employing an army of aspiring bureaucrats to fill out scholarship applications in triplicate. Plus, you might finally earn some respect from a country which suspects you and your peers are constitutionally incapable of taking a crap without consulting the Harvard Business Review or the McKinsey Handbook of Corporate Obfuscation for instructions. ²

This idea scales attractively, too: Put in a billion of equity, and loan out ten billion, and people might even stop whispering disparaging remarks about the size of your junk in the corridors of Capitol Hill. Now there’s a return on capital.

* * *

On the other hand, given that you run an investment bank, if you want to raise some serious money for charity, you could always open a Swear Jar. Just make sure it’s big enough.

¹ Well, okay, that was a cheap shot. You and I both know doing any such thing would destroy the exclusivity and aura of an HBS education, which would be a societal catastrophe too terrible to contemplate. (Not to mention wasting two years out of the lives of otherwise productive elements of the economy.) Just kidding, bro.
² I mean really, who comes up with this shit? I know you couldn't give a damn about tiny ass businesses which will never grow large enough to become paying customers of your firm, but you are theoretically announcing this program for public effect, no? Why not make it clear, simple, and understandable, instead of a convoluted, bureaucratic mess apparently derived from some EU functionary's wet dream? Bank? Lending? Ring a bell?

© 2009 The Epicurean Dealmaker. All rights reserved.

Radar InfoMoney:

A ausência dos mercados norte-americanos não garante uma sessão favorável no restante do mundo. Pelo contrário, a quinta-feira (26) começa negativa às bolsas europeias e ao Ibovespa futuro, muito em função do fundo de investimento Dubai World.

Gerido pelo governo de Dubai, o fundo pediu extensão do prazo de pagamento de suas dívidas, disseminando o receio entre investidores de que os US$ 59 bilhões não consigam ser honrados e o país venha e declarar moratória.

Recomendações de “venda” de diversos papéis de companhias europeias por parte dos analistas do Goldman Sachs também contribuem para o movimento de queda observado nas bolsas por lá.

Petrobras paga proventos
Embora a quinta-feira traga preocupação à maior parte dos investidores, por aqui, o dia é de notícia positiva aos acionistas da Petrobras (PETR3, PETR4). A estatal anunciou o pagamento da primeira parcela de juros sobre capital próprio, a ser realizada na próxima segunda-feira (30), no valor de R$ 0,30 por ação.

Rating da GOL
A GOL (GOLL4) também marca presença no noticiário doméstico. Na noite da última quarta-feira, a agência de classificação de risco Fitch Ratings alterou a perspectiva dos ratings da empresa de negativa para positiva, refletindo “a significativa participação de mercado da companhia no setor brasileiro de linhas aéreas, sua confortável posição de liquidez e alta alavancagem”.

Rumores no setor bancário
Outro setor que é destaque no noticiário desta quarta-feira é o bancário. Rumores dão conta de que a Caixa Econômica Federal venha a anunciar a compra de pouco menos da metade do capital social do Banco Panamericano na próxima semana, a despeito de disputas entre as duas companhias quanto ao preço a ser desembolsado na operação.

Assim como o Panamericano, o Banco Sofisa também vem sendo alvo de rumores quanto a uma possível venda de seu capital à Caixa Econômica Federal. No entanto, a instituição divulgou comunicado nesta manhã negando quaisquer operações neste sentido.

Metalfrio
Por sua vez, a Metalfrio veio a público nesta manhã para anunciar ajustes em suas operações na Rússia, “visando a maximização da eficiência operacional”. O lucro bruto da empresa no país somou R$ 3 milhões nos três primeiros trimestres deste ano, revertendo prejuízo contabilizado no mesmo período de 2008.

Ciao a tutti i trader,
Banca d’Irlanda non arresta la sua decisa discesa arrivando a toccare gli 87,37 e stabilizzandosi nei paraggi degli 88. Continuiamo a tenere il titolo d’occhio in attesa dell’arrivo del livello di lateralizzazione che sembrava essere stato raggiunto lunedì.

Banca d'Irlanda

Mediobanca

Grafici

Rimane interessante ARCELOR 10 XS0176671732 nel trading range 101,8-103,8.
GS 17 VRN XS0212843352 sotto i 90,70 può essere un ingresso da tenere d’occhio per un punto percentuale.
Anche oggi MERRILL LYNCH 11 IT0006621285 risulta avere un buon denaro 91,03 ma le macchinette infestano il titolo e c’è da combattere.
Terrei in watchlist anche LATVIA 14 4.25 (XS0189713992) che essendo in fase di lateralizzazione potrebbe far scattare qualche buon ingresso.

O real se converteu na moeda mais sobrevalorizada do mundo devido a uma crescente “muralha de dinheiro” que tem compensando os esforços do governo para conter a valorização, afirmou na quarta-feira o banco Goldman Sachs.

Os investimentos líquidos de portfólio mensais atingiram a assombrosa cifra de US$ 17,6 bilhões em outubro, saltando do intervalo de entre US$ 6 bilhões e US$ 8 bilhões registrado desde março, quando os mercados financeiros começaram a se recuperar, afirmou a instituição.

Em 2007 e 2008, antes da crise do Lehman Brothers, o País atraía cerca de US$ 3,3 bilhões em investimentos mensais. O Brasil estabeleceu um imposto financeiro de 2% sobre os investimentos estrangeiros em ações e renda fixa e um imposto de 1,5% sobre as operações realizadas com ADR de empresas brasileiras.

Embora os impostos inicialmente ajudaram a estabilizar os investimentos, “há indicações de que as pressões de valorização estão em alta de novo”, disse o economista da Goldman Sachs Thomas Stolper em um relatório.

“Isso incrementa a pressão para implementar uma mescla de políticas mais coerentes ou, alternativamente, existe um risco crescente de que medidas adicionais têm de ser implementadas para frear os ingressos de capital”, acrescentou.

Fonte: Terra

Bloomberg Markets – Taxpayers may have spent $13 billion more than necessary when government officials, acting in private, struck deals with big banks on AIG’s credit-default swaps.

In the months leading up to the September 2008 collapse of giant insurer American International Group Inc., Elias Habayeb and his colleagues worked nights and weekends negotiating with banks that had bought $62 billion of credit-default swaps from AIG, according to a person who has worked with Habayeb.

Habayeb, 37, was chief financial officer for the AIG division that oversaw AIG Financial Products, the unit that had sold the swaps to the banks. One of his goals was to persuade the banks to accept discounts of as much as 40 cents on the dollar, according to people familiar with the matter.

Among AIG’s bank counterparties were New York-based Goldman Sachs Group Inc. and Merrill Lynch & Co., Paris-based Societe Generale SA and Frankfurt-based Deutsche Bank AG.

By Sept. 16, 2008, AIG, once the world’s largest insurer, was running out of cash, and the U.S. government stepped in with a rescue plan. The Federal Reserve Bank of New York, the regional Fed office with special responsibility for Wall Street, opened an $85 billion credit line for New York-based AIG. That bought it 77.9 percent of AIG and effective control of the insurer.

The government’s commitment to AIG through credit facilities and investments would eventually add up to $182.3 billion.

Beginning late in the week of Nov. 3, the New York Fed, led by President Timothy Geithner, took over negotiations with the banks from AIG, together with the Treasury Department and Chairman Ben S. Bernanke’s Federal Reserve. Geithner’s team circulated a draft term sheet outlining how the New York Fed wanted to deal with the swaps — insurance-like contracts that backed soured collateralized-debt obligations.

Subprime Mortgages

CDOs are bundles of debt including subprime mortgages and corporate loans sold to investors by banks.

Part of a sentence in the document was crossed out. It contained a blank space that was intended to show the amount of the haircut the banks would take, according to people who saw the term sheet. After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar. The content of its deliberations has never been made public.

The New York Fed’s decision to pay the banks in full cost AIG — and thus American taxpayers — at least $13 billion. That’s 40 percent of the $32.5 billion AIG paid to retire the swaps. Under the agreement, the government and its taxpayers became owners of the dubious CDOs, whose face value was $62 billion and for which AIG paid the market price of $29.6 billion. The CDOs were shunted into a Fed-run entity called Maiden Lane III.

Habayeb, who left AIG in May, did not return phone calls and an e-mail.

Goldman Sachs

The deal contributed to the more than $14 billion that over 18 months was handed to Goldman Sachs, whose former chairman, Stephen Friedman, was chairman of the board of directors of the New York Fed when the decision was made. Friedman, 71, resigned in May, days after it was disclosed by the Wall Street Journal that he had bought more than 50,000 shares of Goldman Sachs stock following the takeover of AIG. He declined to comment for this article.

In his resignation letter, Friedman said his continued role as chairman had been mischaracterized as improper. Goldman Sachs spokesman Michael DuVally declined to comment.

AIG paid Societe General $16.5 billion, Deutsche Bank $8.5 billion and Merrill Lynch $6.2 billion.

More

Red Alert: The Second Wave of The Financial Tsunami

Red Alert: The Second Wave of The Financial Tsunami
The Wave Is gathering force & could hit between the first & second quarter of 2010By Matthias Chang

Global Research, November 22, 2009
Future Fast Forward

Many of my friends who have been receiving my e-mail alerts over the last two years have lamented that in recent weeks I have not commented on the state of the global economy. I appreciate their anxiety but they forget that I am not a stock market analyst who is paid to write articles to lure investors back into the market. My website is free and I do not sell a financial newsletter so there is no need for me to churn out daily forecasts or analysis.

However, when the data is compelling and supports an inevitable trend, it is time for another review. This Red Alert is to enable visitors to my website to take appropriate actions to safeguard their wealth and welfare of their families in the coming months.

Since the last quarter of 2008, unrelenting currency warfare has been waged by the key global economies and while this competition thus far has been non-antagonistic, it will soon be antagonistic because the inherent differences are irreconcilable. The consequences to the global economy will be devastating and for the ordinary people, massive unemployment and social unrest are assured.

The policy-makers of these countries faced with the total collapse of the international financial architecture have concluded that the solution, the only solution is quantitative easing (i.e. massive injection of liquidity) to salvage the “too big to fail” banks and reinflate their depressed economies. This is best reflected in Bernanke’s candid remark that, “the US government has a technology, called the printing press (or today, its electronic equivalent), that allows it to produce as many US dollars as it wishes at essentially no cost”.

This is the crux of the problem!

The Irreconcilable Differences

Some two decades ago, it was decided by the global financial elites that the framework for the global economy shall consist of:

1) A global derivative-based financial system, controlled by the US Federal Reserve Bank and its associate global banks in the developed countries.

2) The re-location from the West to the East in the production of goods, principally to China and India to “feed” the developed economies.

The entire system was built on a simple principle, that of a FED-controlled global reserve currency which will be the engine for growth for the global economy. It is essentially an imperialist economic principle.

Once we grasp this fundamental truth, Bernanke’s boast that the “US can produce as many US dollars as it wishes at no cost” takes on a different dimension.

I have talked to so many economists and when asked what is the crux of the present financial problem, they all respond in unison, “it is the global imbalances… the West consumes too much while the East saves too much and consumes not enough”. This is exemplified by the huge US trade deficits on the one part and China’s massive surpluses on the other.

Incredible wisdom and almost everyone echoes this mantra. The recent concluded APEC Summit was no different. This mantra was repeated as well as the call for freer trade between trading nations.

This is a grand hoax. All the current leaders on the world’s stage are corrupted to the rotten core and as such have no interest to call a spade a spade and expose the inherent contradictions within the existing financial system.

The call for a multi-polar world is meaningless when the entire global financial system is based on the unipolar US dollar reserve currency. This is the inherent contradiction within the present system and the problems associated with it cannot be resolved by another global reserve currency based on the IMF’s Special Drawing Rights as advocated by some countries. It was stillborn, the very moment it was conceived!

The leaders of China, Japan and the oil producing countries of the Middle East are all cursing and pissing about the current situation, but they don’t have the courage of their convictions to spell it out to their countrymen that they have been conned by the financial spin masters from the Fed acting on the instructions from Goldman Sachs.

Tell me which leader would dare admit that they have exchanged the nation’s wealth for toilet papers?

The toilet paper currency pantomime continues.

We have now reached a stalemate in the current currency war, not unlike the situation of the Cold War between the NATO pact countries and the Warsaw pact countries. Both sides were deterred by the MAD (Mutually Assured Destruction) doctrine of nuclear wars. The costs to both sides were horrendous and it was only when the Soviet Union could not continue with the pace and cost of maintaining a nuclear deterrent and was forced into bankruptcy that the balance tilted in favour of the NATO alliance.

But it was a pyrrhic victory for the US and it allies. What kept the ability of the US to maintain its military might and outspend the Soviet Union was the right to print toilet paper currency and the acceptance of the US dollar by her allies as the world’s reserve currency.

But why did the countries allied to the US during the Cold War accepted the status quo?

Simple! They were all conned into believing that without the protection of Big Brother and its military outreach, they would be swallowed up by the communist menace. They agreed to march to the tune of the US Pied-Piper.

The next big question – why did the so-called “liberated” former communist allies of the Soviet bloc jump on the bandwagon?

Simple! They all believed in the illusion that was fostered by the global banks, led by Goldman Sachs that trading and selling their goods and services for the toilet paper US reserve currency would ensure untold wealth and prosperity.

But the biggest game in town was the Asia gambit. Japan, after a decade of recession following the burst of her property bubble did not have the means and the capacity to bring the game to the next level as envisaged by the financial architects in Goldman Sachs.

And China was the biggest beneficiary. The senior management of Goldman Sachs brokered a secret pact with China’s leaders that in exchange for orchestrating the most massive injection of US dollar capital and wholesale re-location of manufacturing capacity in the history of the global economy, China would recycle their hard-earned US toilet paper reserve currency wealth into US treasuries and other US debt instruments.

This was the necessary condition precedent for the global financial casino to rise to the next level of play.

Why?

The New Game

The financial architects at Goldman Sachs had a master plan – to dominate the global financial system. The means to achieve this financial power was the Shadow Banking System, the lynchpin being the derivative market and the securitization of assets, real and synthetic. The stakes would be huge, in the hundreds of US$ trillions and the way to transform the market was through massive leverage at all levels of the financial game.

But there was an inherent weakness in the overall scheme – the threat of inflation, more precisely hyperinflation. Such huge amounts of liquidity in the system would invariably trigger the depreciation of the reserve currency and the confidence in the system.

Hence the need for a system to keep in check price inflation and the illusion that the purchasing power of the toilet paper reserve currency could be maintained.

This is where China came in. Once China became the world’s factory, the problem would be resolved. When a suit which previously cost US$600 could be had for less than US$100, and a pair of shoes for less than US$5, the scam masterminds concluded that there would be no foreseeable threat to the largest casino operation in history.

China agreed to the exchange as it has over a billion mouths to feed and jobs for hundreds of millions needed to be secured, without which the system could not be maintained. But China was pragmatic enough to have two “economic systems” – a Yuan based domestic economy and a US$ based export economy, in the hope that the profits and benefits of the export economy would enable China to transform and establish a viable and dynamic domestic market which in time would replace the export dependent economy. It was a deal made with the devil, but there were no viable alternative options at the material time, more so after the collapse of the Soviet Union.

The Next Level of the Game

The next level of the game was reached when the toilet paper reserve currency literally went virtual – through the simple operation of a click of the mouse in the computers of the global banks.

The big boys at Goldman Sachs and other global banks were more than content to leave Las Vegas for the mafia and their miserable billions in turnover. The profits were considered dimes when compared to the hundreds of trillions generated by the virtual casino. It was a financial conquest beyond their wildest dreams. They even called themselves, “Master of the Universe”. Creating massive debts was the new game, and the big boys could even leverage more than 40 times capital! Asset values soared with so much liquidity chasing so few good assets.

However, the financial wizards failed to appreciate and or underestimate the amount of financial products that were needed to keep the game in play. They resorted to financial engineering – the securitization of assets. And when real assets were insufficient for securitization, synthetic assets were created. Soon enough, toxic waste was even considered as legitimate instruments for the game so long as it could be unloaded to greedy suckers with no recourse to the originators of these so-called investments.

For a time, it looked as if the financial wizards have solved the problem of how to feed the global casino monster.

Unfortunately, the music stopped and the bubble burst! And as they say the rest is history.

The Goldman Sachs Remedy

When losses are in the US$ trillions and whatever assets / capital remaining are in the US$ billions, we have a huge problem – a financial black-hole.

The preferred remedy by the financial masterminds at Goldman Sachs was to create another hoax – that if the big global banks were to fail triggering a systemic collapse, there would be Armageddon. These “too big to fail” banks must be injected with massive amount of virtual monies to recapitalize and get rid of the toxic assets on their balance sheet. The major central banks in the developed countries in cahoots with Goldman Sachs sang the same tune. All sorts of schemes were conjured to legitimize this bailout.

In essence, what transpired was the mere transfer of monies from the left pocket to the right pocket, with the twist that the banks were in fact helping the Government to overcome the financial crisis.

The Fed and key central banks agreed to lend “virtual monies” to the “too big to fail” global banks at zero or near zero interest rate and these banks in turn would “deposit” these monies with the Fed and other central banks at agreed interest rates. These transactions are all mere book entries. Other “loans” from the Fed and central banks (again at zero or near zero interest rates) are used to purchase government debts, these debts being the stimulus monies needed to revive the real economy and create jobs for the growing unemployed. So in essence, these banks are given “free money” to lend to the government at prior agreed interest rates with no risks at all. It is a hoax!

These “monies” are not even the dollar bills, but mere book entries created out of thin air.

So when the Fed injects US$ trillions into the banking system, it merely credits the amount in the accounts of the “too big to fail” banks at the Fed.

When the system is applied to international trade, the same modus operandi is used to pay for the goods imported from China, Japan etc.

For the rest of world, when buying goods denominated in US$, these countries must produce goods and services, sell them for dollars in order to purchase goods needed in their country. Simply put, they have to earn an income to purchase whatever goods and services needed. In contrast, all that the US needs to do is to create monies out of thin air and use them to pay for their imports!

The US can get away with this scam because it has the military muscle to compel and enforce this hoax. As stated earlier, this status quo was accepted especially during the Cold War and with some reluctance post the collapse of the Soviet Union, but with a proviso – that the US agrees to be the consumer of last resort. This arrangement provided some comfort because countries which have sold their goods to the US, can now use the dollars to buy goods from other countries as more than 80 per cent of world trade is denominated in dollars especially crude oil, the lifeline of the global economy.

But with the US in full bankruptcy and its citizens (the largest consumers in the world) being unable to borrow further monies to buy fancy goods from China, Japan and the rest of the world, the demand for dollar has evaporated. The dollar status as a reserve currency and its usefulness is being questioned more vocally.

The End Game

The present fallout can be summarized in simple terms:

Should a bankrupt country (the US) be allowed to use money created out of thin air to pay for goods produced with the sweat and tears of hardworking citizens of exporting countries? Adding insult to injury, the same dollars are now purchasing a lot less than before. So what is the use of being paid in a currency that is losing rapidly its value?

On the other hand, the US is telling the whole world, especially the Chinese that if they are not happy with the status quo, there is nothing to stop them from selling to the other countries and accepting their currencies. But if they want to sell to the mighty USA, they must accept US toilet paper reserve currency and its right to create monies out of thin air!

This is the ultimate poker game and whosoever blinks first loses and will suffer irreparable financial consequences. But who has the winning hand?

The US does not have the winning hand. Neither has China the winning hand.

This state of affairs cannot continue for long, for whatever cards the US or China may be contemplating to throw at the table to gain strategic advantage, any short term gains will be pyrrhic, for it will not be able to address the underlying antagonistic contradictions.

When the survival of the system is dependent on the availability of credit (i.e. accumulating more debts) it is only a matter of time before both the debtor and creditor come to the inevitable conclusion that the debt will never be paid. And unless the creditor is willing to write off the debt, resorting to drastic means to collect the outstanding debt is inevitable.

It would be naïve to think that the US would quietly allow itself to be foreclosed! When we reach that stage, war will be inevitable. It will be the US-UK-Israel Axis against the rest of the world.

The Prelude to the End Game

The US economy will be spiraling out of control in the coming months and will reach critical point by the end of the 1st quarter 2010 and implode by the 2nd quarter.

The massive US$ trillions of dollars stimulus has failed to turn the economy around. The massive blood transfusion may have kept the patient alive, but there are numerous signs of multi-organ failure.

There will be another wave of foreclosures of residential and more importantly commercial properties by end December and early 2010. And the foreclosed properties in 2009 will lead to depressed prices once they come through the pipeline. Home and commercial property values will plunge. Banks’ balance sheets will turn ugly and whatever “record profits” in the last two quarters of 2009 will not cover the additional red ink.

Given the above situation, will the Fed continue to buy mortgage-backed securities to prop up the markets? The Fed has already spent trillions buying Fannie Mae and Freddie Mac mortgages with no potential substitute buyer in sight. Therefore, the Fed’s balance sheet is as toxic as the “too big to fail” banks that it rescued.

In the circumstances, it makes no sense for anyone to assert that the worst is over and that the global economy is on the road to recovery.

And the surest sign that all is not well with the big banks is the recent speech by the President of the Federal Reserve Bank of New York, William Dudley at Princeton, New Jersey when he said that the Fed would curtail the risk of future liquidity crisis by providing a “backstop” to solvent firms with sufficient collateral.

This warning and assurance deserves further consideration. Firstly, it is a contradiction to state that a solvent firm with sufficient collateral would in fact encounter a liquidity crisis to warrant the need for a fall back on the Fed. It is in fact an admission that banks are not sufficiently capitalized and when the second wave of the tsunami hits them again, confidence will be sorely lacking.

Dudley actually said that, “the central bank could commit to being the lender of last resort… [and this would reduce] the risk of panics sparked by uncertainty among lenders about what other creditors think”.

To put it bluntly what he is saying is that the Fed will endeavour to avoid the repeat of the collapse of Bear Stearns, Lehman Bros and AIG. It is also an indication that the remaining big banks are in trouble.

It is interesting to note that a Bloomberg report in early November revealed that Citigroup Inc and JP Morgan Chase have been hoarding cash. The former has almost doubled its cash holdings to US$244.2 billion. In the case of the latter, the cash hoard amounted to US$453.6 billion. Yet, given this hoarding by the leading banks, the New York Federal Reserve Bank had to reassure the financial community that it is ready to inject massive liquidity to prop up the system.

It should come as no surprise that the value of the dollar is heading south.

When currencies are being debased, volatility in the stock market increases. But the gains are not worth the risks and if anyone is still in the market, they will be wiped out by the 1st quarter of 2010. The S&P may have shot up since the beginning of the year by over 25 per cent but it has been out-performed by gold. The gains have also lagged behind the official US inflation rate. It has in fact delivered a total return after inflation of approximately minus 25 per cent. When Meredith Whitney remarked that, “I don’t know what’s going on in the market right now, because it makes no sense to me”, it is time to get out of the market fast.

In a report to its clients, Société Générale warned that public debt would be massive in the next two years – 105 per cent of GDP in the UK, 125 per cent in the US and in Europe and 270 per cent in Japan. Global debt would reach US$45 trillion.

At some point in time, all these debts must be repaid. How will these debts be repaid?

If we go by what Bernanke has been preaching and practising, it means more toilet paper currency will be created to repay the debts.

As a result, debasement of currencies will continue and this will further aggravate existing tensions between the competing economies. And when creditors have enough of this toilet paper scam, expect violent reactions!
Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.

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