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giovanni 26/09/08 4:13PM

I wonder if anyone remembers King OMalley and his attempts to separate the Australian economy from international markets in the 1930s. Suddenly a lot of old fashioned attitudes to banking resonate with newfound clarity.
"The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in iniquity and born in sin…..bankers own the earth. Take it away from them, but leave them the power to create money, and with a flick of the pen, they will create enough money to buy it back again…….take this great power away from them and all the great fortunes like mine will disappear, and they ought to disappear, for then this would be a better world to live in …… but if you want to continue to be slaves of the bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit." The writings of Sir Josiah Stamp, President of the Bank of England, at the University of Texas, 1920.
By the way, before Rockjaw gets on this page and spoils everything, those incensed by his comments should realise that he starts from the premise that the socialists run wall street, and that the Russian Revolution, German Fascism and Rockefeller’s New Deal were all part of the same consipiracy. When he calls the American economy a socialist economy and modern China and Russia ‘the only examples’ of free market economies in the world today - he means it. Google Antony T Sutton and you will see where he gets some of this stuff from.
Enjoy.

Rockjaw 26/09/08 5:21PM

Well said Bob Dumpling!

"Let’s imagine they let the market dictate and we see a massive crash. What happens? " - absolutely, let them go bust, no one is going to die, and the market will right itself without the need to labour the productive with the costs of this massive failure.

"The past few decades have seen a massive migration of capital from real, productive industries to the "speculative sector" - add to "speculative" those derivatives the bankers love so much and I believe you have summed it up in a sentence!

Giovanni, Anthony Sutton hey? Never heard of him, but I’ll rush out and buy a copy of his book, and thanks for the reference!

I must say though, giovani, people who have the courage of their convictions to hold views which are not mainstream are generally a whole lot more interesting, intelligent and original than the rather more boring brainwashed drones you seem to prefer.

Besides, it is obvious from the carnage suffered by today’s mainstream traders as opposed to the successes of the few original thinkers, that to follow the mainstream is a VERY fatal flaw. This fact can easily be verified with any of the many economically depressed and soon to be more depressed traders which Bob Dumpling talks about in this piece.

The only traders who will survive this mess are the original thinkers mate, the ones who tried warning you all of this mess years ago already. Maybe even Anthony Sutton himself?

Original thought comes highly recommended giovanni, you should seek the rewarding experience of a little original thought yourself.

Venise Alstergren 26/09/08 9:58PM

Lockjaw: If you had written your rant without the socialist diatribe you would have made some valid points.
Para I) Yes, the market will crash, it has to in order to establish true market worth.

Para 2) Of course there’s been a massive flow of capital out of the manufacturing industries, or productivity, as you so rightly call it, to a huge increase in capital in the money market. As the world is running out of countries whose basic wage is so much cheaper, it has lead to a far more technological era. And until there a better system is invented the money market is the ideal way to raise money for venture capital. No country and no economy on earth, be it Socialism, Capitalism, or Kimilsungism can prevent the greedy, and the crooked from profiting from any form of money. It is only in America that such dealing in derivatives, and shorting, and total gut-wrenching greed can exist. I have always imagined Americans to be so utterly crooked, is because they have these mad far right-wing fundamentalist churches. They say sorry to God then rush out and root the system.

4) I fail to see how original thinkers, of whom there may be one in every 50,000 people, can be characterized by the terms courage, interest and intelligence. These three qualities are to be found on the ‘other side’ of your dichotomy. ‘Your drones’ as I think you call them. Hundreds of people knew the crash was coming, it’s just many of those ‘capable of original thought’ also thought they could make a buck out of a sure thing. These were the people manipulating the market, only to be taken out by not knowing the exact date of its happening.

5) The carnage of your ‘mainstream traders’ is as nothing compared to the misery to be endured by the small punter who was acting on what he he/she believed to be expert advice. Or would you rather penalize them because they are the poorer element in society?

6)Original thought produced the safety pin and original thought invented derivatives. The only way to get rid of original thought, is to thrust people’s heads into gas ovens, or better still try drowning at birth every child that DOESN’T look stupid.

The synopsis of my blog is this. As you are such a fucking genius with money, you can prove it by showing us a legally witnessed, and dated, copy of your share portfolio. Both before the fall, and as it is now. Or are you going to say that you don’t hold with such a Capitalist enterprise as investing?
In which case if you noplayada game you have no fucking right to criticize those who do.
In four simple words, Lockjaw, you are an oaf.

Venise Alstergren 26/09/08 10:02PM

Lockjaw: If you had written your rant without the socialist diatribe you would have made some valid points.
Para I) Yes, the market will crash, it has to in order to establish true market worth.
Para 2) Of course there’s been a massive flow of capital out of the manufacturing industries, or productivity, as you so rightly call it, to a huge increase in capital in the money market. As the world is running out of countries who basic wage is so much cheaper, it has lead to a far more technological era. And until there is a better system is invented the money market is the ideal way to raise money for venture capital. No country and no economy on earth, be it Socialism, Capitalism, or Kimilsungism can prevent the greedy, and the crooked from profiting from any form of money. It is only in America that such dealing in derivatives, and shorting.
4) I fail to see how original thinkers, of whom there may be one in every 50,000 people, can be characterized by the terms courage, interest and intelligence. These three qualities are to be found on the ‘other side’ of your dichotomy. ‘Your drones’ as I think you call them. Hundreds of people knew the crash was coming, it’s just many of those ‘capable of original thought’ also thought they could make a buck out of a sure thing. These were the people manipulating the market, only to be taken out by not knowing the exact date of its happening.
5) The carnage of your ‘mainstream traders’ is as nothing compared to the misery to be endured by the small punter, who was acting on expert advice. Or would you rather penalize them because they are the poorer element in society?
6)Original thought produced the safety pin and original thought invented derivatives. The only way to get rid of original thought, is to thrust people’s heads into gas ovens, or better still try drowning at birth every child that DOESN’T look stupid.
The synopsis of my blog is this. As you are such a fucking genius with money, you can prove it by showing us all with a legally witnessed, and dated, copy of your share portfolio. Both before the fall, and as it is now. Or are you going to say that you don’t hold with such a Capitalist enterprise as investing?
In which case if you noplayada game you have no fucking right to criticize those who do.

Venise Alstergren 26/09/08 10:04PM

Sorry New Matilda, I thing I double pressed the comment button. I grovel.

Cheers

Venise

Rockjaw 27/09/08 3:51AM

Venise, nobody will judge you for simple mistakes like posting a rant twice.

Anyway, I don’t need to show you my "share portfolio" because I have none. That’s right, I have no share portfolio at all - no shares - they are all a scam - a load of crap for bullshit artists who attempt reap where thay have not sown. Work Venise, work, that is how you create wealth, any other way is theft.

Do you think we are all mashugana?

Instead of a share portfolio what I do have is loads of bullion and other commodities, real economic goods which I have bought in increments over the years, and if you were a member of NM for long enough you would already know, as other older NM readers do, how I have encouraged others to ditch paper and to store their wealth in bullion over all other asset classes, on these New Matilda’s blogs, and in the face of the same criticism which you and various quasi intellects and semi educated contributors to this site have unwisely responded with over the years.

When the price of silver was at $4.00 and the price of gold was at $300.00 I bought and advised everyone else to do the same. Today I own no crappy shares or paper "money" issued by any of the bullshitters in Canberra or the RBA. My net worth has appreciated over 500% as paper "money" has depreciated - and that value will continue to appreciate throughout this crisis. I can sleep well at night knowing that my wages and earnings are safe from the thieving hands of your elected government and non representative Central Bankers, just like our grandparents did before us.

Commodities, real economic goods, rather than the paper "wealth" of fools and parasites Venise, they are what will rule supreme today and will continue to appreciate in value as the rest of the investment world’s "portfolios" sink in direct proportion with their paper and their arrogant ignorance.

Beware of we fools Venise, for there are times when even we have a contribution to make!

Commodities will double in value against paper assets over the next year or two Venise, and then we can compare portfolios - ok?

Jonah Bones 27/09/08 11:28AM

Only people who haven’t read the history of the people of America , would ever trust their government or their capitalists.
Rockjaw is spot on people are greedy and have got their just desserts.
Years at uni studying financial markets theory is a good grounding for understanding what an absolute nonsense these markets represent.

Venise Alstergren 27/09/08 5:10PM

Rockjaw (sorry about the original spelling mistake). Thank you for reading my post before commenting. Well, I think you read it. So many people skim the first couple of lines, and then comment.
What does ‘mashugana’ mean: Obviously it means fuc*ing idiot, but what language is it, or is it a play on words? Yep, I’m pretty new to NM, funnily enough I seem to remember you responding to one of my previous blogs.Got it!, 17/09/08. I was complaining about Abdul Nacer Benbrika, having arrived in Oz and gone straight onto the dole, whilst impregnating his wife with about seven kids-all at the expense of the Taxpayer. In your blog you criticized me for saying he was a bludger. Surely your whole rationale would be in favour of work; not bludging.
Why should I argue about someone who has amassed a heap of bullion? At times like these it is certainly the way to go. I would love to have done that but along with a cast of millions, I have to live off the dividends of companies shares. Which, in my humble opinion, doesn’t make me, or the millions of other people who’ve worked all their lives to have some money to live on, parasites.. Nor do I have a strongbox to hold enough bullion to empower me. On the subject of bullion; do you just trade in it? As opposed to actually having possession of such commodities? If the latter, I hope you have a v. strong strongbox.
At what stage of my blog did I suggest you were a fool? And why are you so hostile to someone who dares to present a different point of view to your own? At no time did I suggest I was an intellectual. I have to say your rhetoric has completely overpowered any reason you possessed.

Rockjaw 27/09/08 6:38PM

Venise, I referred to myself as a fool and only implied that you called me one. I am a fool because I spent too many valuable years of my life wasting my time gaining tertiary qualifications from other fools who sadly still believe that they are learned economists. But "usus magister est optimus" - experience is the optimum teacher.

"Mashugana" a little less latin and a little more Yiddish for those who have no experience.

Bullion is still available to buy at the moment, but if you do your research you will discover that it is already becoming extremely difficult to source. It is never too late to convert paper to bullion, it just takes getting over the culture shock and going back to our roots, to days, not long ago, when everyone did it automatically.

If you do decide to buy bullion, make certain it is not in the form of "certificates" but that it is physically delivered to you to be held in storage under your own control.

The reason for this is that the thieves in our banking system are also very prevalent in the bullion markets and so what they do is they sell you a certificate which they claim represents bullion when in reality the sellers do not possess the bullion. There are rumours and suspicions about ABC and Perth Mint for example, and even Johnson Matthey are being talked about in whispers these days.

Also know that by far the greatest majority of those investments which are approved for superannuation funds are limited to those which promote the growth in demand in paper assets, in other words, those investments most likely to go up in smoke as this financial crisis unfolds. Just a little fingerprint left behind by the greedy governments who have profited and participated in these paper scams all these years, they want us to store our wealth in their paper which keeps them in pocket and in power.

Here is a little test for you, ask your SuperAnnuation Fund or your investment advisor to buy bullion and then sit back and watch the reaction.

Governments get to participate in the creation of paper, they benefit from the first use, then they coerce you and bullshit you into buying it as part of your superannuation or savings, thus maintaining a demand for even more of their worthless paper. When the system finally crashes, it is not the government or the banks who lose when the paper’s value disappears, but you, the poor schmuck (another Yiddish word) who was "Mashugana" enough to fall for the scam.

Their idea is that you keep buying their paper and the academics keep you under the mistaken belief that the paper really has value. The Central Banks and Governments can then keep creating new paper from nothing until finally, you lose the "value" of that paper in market crashes such as this current one. That is how simple the money scam works. They create the paper and you work to finance it. Simple! You got to love those Keynesians! They have turned confidence trickery into an art form!

That is why people are discouraged from buying bullion, because bullion forces their paper back from your hands and into the hands of those who created it rather than into your "paper portfolio". When you force that paper back into their hands they have to suffer these losses, and not you.

That is why they want to bail out the banks, that is why they have fine tuned the system into the crappy one we have today and that is why they lie about the major economic indicators, such as the inflation rate.

Paper "dollars" are nothing more than "IOUs" from the state. They represent a debt, a loan from us to them, and when the market crashes, we lose our claim and go broke.

Bullion is nobody’s debt, which is why it is real money, but don’t tell a Keynesian that, they hate it, because if everybody moves away from their shitty paper system, well then their whole cushy little scam through which they fund their nice comfortable little lifestyles will go bust.

Heavens above! They might even have to WORK for a living! Horror of horrors!

If you must buy shares, buy them abroad, beyond the reach of those greedy little assholes from Canberra or those crooked little bastards at the RBA. Buy resource stock, energy and technology, in that order, and stay away from all banks and insurance or finance companies.

You don’t buy abroad because they are more honest abroad, but because most nations tend to protect foreign investors better than their own citizens.

If you need to use bullion as surety for loans, then you should consider buying bullion in Dubai where any banker who sells you gold which does not exist, like they do in the "West", is taken to the market place and his hand is chopped off like any other common thief. Banks will lend you money if you hold gold in Dubai.

Strangely enough, they won’t lend you money if your gold is held in a western bank! Why? Because they know you have been scammed! There is no gold!

In the west we do not punish our banking thieves, instead we reward them with nice lifelong welfare packages to keep them in a life of luxury. After all, they deserve it, it is through them that our governments can steal our wages and the livings of our fixed income earners, so of course the bankers need to be saved, how else could the western governments defraud us?

mil-observer 28/09/08 11:22AM

Top calls, loud and clear, from rockjaw. I think you misspelt "meschuggene" though! Your other reference tempts me to paraphrase the Latin to describe the prevailing monetsarist dogma and its free-market mania too: "Usurus magister est optimus".

Interesting that you refer to the example of Dubai: I understand that to be old Quranic law which draws - if I’m not wrong - from earlier Torah edicts to some extent. So many years ago did elders prohibit the trading of that which cannot be seen and does not exist.

However, keep in mind that quite a few Nobel prizes went to the architects of these more recent debt and derivatives bubbles.

mil-observer 28/09/08 12:04PM

Rockjaw is also correct to identify that so many in government are in thrall to such fake economics. This appalling situation promises yet greater disaster when we consider the extent of relinquished state sovereignty. If not purged and deposed, such flunkies’ cowardice, greed and myopia will ensure both their own destruction and the demise of the state they usurped and corrupted.

An instructive case for comparison is the procurement of fighter jets. For example, Indonesia began its state-of-the-art Sukhoi acquisition via a barter deal with Russia, including even palm oil and rice trade, if I’m not mistaken! By contrast, the toady-snobs and covert racists of Australia’s Howard regime snared this country into perhaps the most fictitious aircraft procurement in history. Welcome to the JSF, a project no doubt based around foul-smelling "projected revenue streams" and fantasies of future market pig-outs.

Well done, dickheads! I suppose that means we’ll get to see blubber-guts Joe Hockey (not his real name) back on the Kokoda track, but armed this time?

Traitors. Cowards. Usurers.

banville84 29/09/08 10:21AM

Rockjaw re your post….

From Ted Butler commentary:-

The Sensible Swiss

This week I received an e-mail from a Swiss money manager, a friend and trusted source. He informed me that a very large and conservative Swiss bank had informed a number of their clients that they would no longer be offered paper gold or silver certificates in the bank’s name. It seems the bank had previously granted the accounts because it was able to protect itself against an upside move with a derivatives contract with another financial institution. Due to the financial turmoil, the bank was no longer comfortable with the counterparty risk from the other financial institution. Instead, the Swiss bank informed its clients, all paper transactions had to be converted to physical or physical ETF positions (There are Swiss ETFs for gold and silver). My friend informed me that other Swiss banks were likely to follow this bank’s lead.

As long-time readers know, the issue of bank silver certificates that were not backed by real metal is one I have written about frequently

In essence, the banks that issued such certificates were short the metal, and taking an enormous risk in the event of a sharp price rise. Because they had been issued for decades, the cumulative amount of the short position in silver amounted to, perhaps, billions of ounces. This was a short position separate and distinct from the massive COMEX short position.

That the large and conservative Swiss bank is seeking to reduce or eliminate it’s short exposure to silver at this time makes sense. The bank has seen that silver prices can move sharply higher and that counterparty guarantees can vanish in an instant. It is sensible and practical that it would take such actions now, after silver prices moved sharply lower.

The resultant move by former paper owners of silver into real metal is destined to put additional pressure on the existing supplies of metal. It is hard to imagine a more critical time for this to occur than now. Every indication is one of tightness in the physical silver supply. The potential creation of a brand new source of silver physical demand could be profound."

Rockjaw 29/09/08 12:50PM

banville84, tell that to your "mainstream economists" and you will hear gales of laughter.

JP Morgan, Goldman Sachs and even mining house like Barrick and Anglo have been participating in these schemes for decades already!

Soon after the gold price struck 986 and silver posted over 20 certain banks belonging to the Cartel suddenly increased their short positions as much as 5 - 6 times the total number of shorts ordinarily seen on the exchange!

Not one single authority investigated this obvious fraudulent activity! Not one single authority banville.

Your average "mainstream economist" appears to think that an original thought can only be the result of a group effort. Apparently simple common sense can only be the result of consensus and so none of them will either see nor understand the mechanics of these markets correctly, certainly not in time to alert the public they supposedly serve.

Last week, the world’s largest gold refiner, Rand Refineries in South Africa, literally sold out every last gramme of gold to a Swiss buyer. This is the first time in history this has occurred. Imagine that banville, the world’s biggest gold producer is out of stock!

Gold and Silver suppliers the world over are entirely out of stock and are unable to source further stocks of bullion at present.

Australian refiner Johnson Mathey have suspended trade and have closed down offices in at least two instances we are aware of.

Various exchanges have delayed delivery of bullion, in some cases the delays are now as long as four to five months.

The bullion market is a very good example of what happens across the board with the banking industry banville, here is a typical example:

JP Morgan, a bullion bank, issues a certificate for 10 tonnes of gold to a gold dealer. The gold dealer then takes the certificate to the exchange where he offers the gold for sale. The price plummets due to the size of the order and the bullion bank is able to repurchase gold at a cheaper price.

But here is the amazing thing, there was never any gold in the first place. J P Morgan never had any gold to begin with. If you or I did this, we would live the rest of our natural lives in jail.

The result is that the official price of bullion plummets and so investors who understand the markets buy at those cheap prices but sellers and producers soon disappear from the markets because they refuse to sell their bullion at give away prices.

That is where we are right now. The physical market has no sellers. No product is available! But there is LOADS of PAPER bullion - no shortage in fact, you can buy bullion by the tonne on the exchanges - but you can no longer expect guaranteed delivery.

What do you think is going to happen next banville? We are going to witness a default, a commerical signal failure and the markets are going to go ballistic. Prices are going to go through the roof until there are enough sellers willing to release their bullion at the more realistic prices.

And the exchanges? Do you think people will still have faith in pricing mechanisms which rely on fraud to determine price?

Don’t ask an economist that question, economists apparently have to consult their colleagues and gain consensus before they can form an opinion or an original thought.

And did you know that this fraudulent practice is actually LEGAL? How? Here is a clue "we are from the government, we are here to help you".

bobdumpling 29/09/08 5:27PM

Thanks everyone for your comments, especially Rockjaw and banville. The investment in paper assets is very interesting… amazing how many are now caught out and our enlightened economists seem to accept it.

Rockaw, that’s a great NYT link on the Eltham article re: Sweden 1992

I was interested to read the German Finance Minister suggest, America’s days as an economic superpower are over:
http://www.upi.com/news/issueoftheday/2008/09/26/German_leader_warns_US_…

Rockjaw 29/09/08 10:33PM

Never underestimate our American cousins Bob, the British branch of the same thieves have already made that mistake once before and have paid dearly for it.

I think the American taxpayers may yet discover the true aspirations of "The Lobby" which has arrested their Republic, and when they do? They will reinstate their Republic, withdraw from aspirations of empire, return their military back to home soil and then look out above, they will rise straight to the top again, only this time their dollar really will be "as good as gold" like their law defines it to be.

bobdumpling 30/09/08 9:44AM

Well the House of Reps says no!

The MSM (and the market) will probably go into a tail spin now.

Some interesting comments around on why the bailout would have been a bad thing:

Ken Rogoff from Harvard says the bailout would be taking a manageable problem and making it into a more intense crisis. He says that credit is frozen primarily because banks want to avoid dealing with other banks that might drive a hard bargain, and instead would rather wait for free money from the government. Without the prospect of that free money, Rogoff suggests that credit would probably begin moving again, if slowly.
http://tpmcafe.talkingpointsmemo.com/2008/09/26/is_the_crisis_real/

Dean Baker of the Center on Economic and Policy Research says that spending so much cash so quickly on such a poorly conceived plan could have the effect of making it impossible to fund economic stimulus that is the real way out of this mess.

Looks like it’s time to meet with the ex-Swedish assistant finance minister and start talking like it’s 1992!

Rockjaw 30/09/08 10:44AM

Theft, fraud and corruption have left a ring around Capitol Hill too dark to wash away this easily Bob.

They will rehash the bill and Congress will pass it. They know which side their bread is buttered and besides, the Dems on the left come at a big discount during times of trouble. The bigger the trouble the bigger the discount and they know they had best haggle quickly while the banks still have a buck or two to grease the left palm!

I have 40 pieces of silver which says the bill will go through - any takers?

George

mil-observer 30/09/08 12:11PM

C’mon rockjaw! Obama is so on Soros’ payroll it may as well be etched into Capitol Hill marble. That is one big reason why Obama essentially talks up his support for the Paulson scam (with some trivial and populist "conditions" attached). "Dems on the left" indeed. I would expect your astute mind to snap out of such a simplistic binary mindset at some stage.

If bobdumpling’s summary is accurate, then that Ken Rogoff seems to be another tunnel-visioned free-market yes man in thrall to some puerile notion of Darwinian competition. Useless.

The bill to be massaged and passed? Dark times indeed if it does get through, because Americans would have to kiss their republic goodbye - pending another war of independence - and that would be further cause for the world to lament.

Rockjaw 04/10/08 2:02PM

Hey Bob, I’ll settle for 30 pieces of silver mate! The bill is through!

Now we should look carefully as they paint the charts and try to manipulate the markets into looking healthy.

Already Paulson’s "plunge protection team" have managed to call the Dow higher 178 times in a row after a debacle the previous day!

On a roulette table, if you were to win on black vs white or odds and evens or heads and tails 178 times in a row, I can assure you, the Casino bosses would throw you out, but our economists still manage to convince our dimwitted traders that there is a reasonable explanation for all those strange price actions! Lol. No fool like a greedy fool!

This is going to be very interesting, especially as the next wave of credit defaults builds up momentum and the world’s oil and energy reserves stop flowing to the western market places and divert to the more productive east bloc and developing nations. Think $200/barrel oil very soon.

The months and years ahead are going to be VERY ugly!

Paulson, Goldman Sachs, Central Bankers and statists had a win yesterday and the workers and shop owners of the world suffered a huge loss.

Look out boys and girls, the winners are coming for their winnings over the next few years, I hope you have buried a few bones in the garden because this has been a "winner take all game"!!

mil-observer 04/10/08 3:39PM

"Statists" had a big win eh? ROFL, more of rockjaw’s confusion over labels. Must be a symptom of working with funny money: what’s printed on the can is very different from the contents.

The neolib Whore State just got pack raped - they didn’t even buy it a drink. This is endgame, and they’re going for a dictatorship of bankers.

At some stage workers will have to prepare for a people’s war. And note the popular support for Russia during the Georgia scenario, so popular disgust is widespread for the western whore elite of politicians and its feudal overlords.

Rogerio 04/10/08 4:03PM

Hey Rockjaw, what is it with the US dollar these days?
The Dow is in the tank, the jobs numbers are far worse than expected, their interest rates are plummeting like Japan’s did and there are rumours of more rate cuts next week, the ten year treasury looks like it just went through a car wash, the economic growth rate is at it’s lowest in 33 years.
Annualised growth rate is a MINUS 13.3 percent! Oh my gosh!!
At that rate it would take less than a decade for the whole country to rely on the world for basic food aid.
Arnold Schwarzenegger says the richest state in America is bankrupt and needs a 7 billion dollar bail out, three of their biggest banks have gone insolvent in months, their biggest insurance company has gone bust.
The US Federal Debt is a stunning 10 Trillion dollars and climbing faster than ever before in history, credit crisis woes bigger than the Great Depression are daily news and yet the US dollar is flying to record highs?
Do you think perhaps Australians have it all wrong? Maybe we should also declare bankruptcy and demand bail outs to bolster our own currency, after all it works for the US$.

What are your thoughts?

Rogerio

mil-observer 04/10/08 4:48PM

What planet are you on? Who has been declaring actual bankruptcy here? One of the main goads from the bail outs is that they would somehow prevent bankruptcy.

Schwarzenegger is on record as an admirer of Hitler (seems one reason he got the job), and a steroid popper, so it helps to avoid his strange logic i.e., "bankruptcy means need for bail out"… have to appreciate his gauche and naive openness about the fact of bankruptcy though - no such candid admission from the other parasites among his financier overlords.

Rockjaw 06/10/08 2:31AM

Rogerio, the US dollar is basically host to all of this bad debt. At some point the world will turn their backs on the USD as the host of this global debt, but that time has clearly not yet arrived altrhough I suspect it will happen soon enough.

Structurally the movement into dollar seems illogical, but intuitively many traders are thinking that as these highly leveraged investments are suddenly finding that there is neither a counter party nor liquidity to further sustain the inverted pyramid.

As you go through this global deleveraging process what will happen is that you would have to sell the underlying asset to buy the dollar which underpins the financing or liquidity supporting the leveraged finance product.

If you are invested in foreign bonds, commodities etc to repatriate that money home involves buying the dollar which would explain the spike in the USDX and the general decline in equities and asset classes such as the commodity index.

We need to really keep our eyes on the value of the currency because this could very easily be an illusion. Now, as anyone knows, to prevent this crisis from growing any further, any seasoned trader will tell you that the trick is not to supply more credit, but rather to support the underlying asset. But here is the problem, Bernanke’s dollar printing antics have led to a rise in nominal value of every asset class, so how do you support EVERY asset class with such a small amount of cash as $700 billion?

Think of a catastrophe suffered by beef farmers, like a drought. Economists will forecast a rally in the price of beef, but the price of red meat will first experience a steep decline. Why? Because all farmers will rush their cattle to market for sale to salvage some value rather than lose the lot. A typical hairpin curve will present itself on the price curve to first apparently show the economists all incorrect as the price dips and then later to exonerate them as the price spikes in a large rally.

This is what I suspect may be the case with the US Dollar right now only think billions of times bigger than a regional beef market. Think tsunami, where the low water mark first disappears, people rush out to gather the stranded fish not realising that they will probably all be killed in the huge wave which will follow. Similarly the USD and commodities will act as people rush out to gather up the US$ in the current rally while the huge wave of newly printed paper makes it’s way to the markets.

Very very ugly.

If we fail to reprime the system, well then there is a very real possibility that we really will suffer a similar form of deflation as the one suffered during the previous Great Depression. My personal view is that we may witness deflationary pressures only briefly where after the international markets will absorb trillions of new paper issued by the central banks, or, in other words, simple hyperinflation.

Now would be a good time to make your way to the safety of the high ground offered by precious metals.

Let me know what your thoughts are Rogerio

George

Rogerio 06/10/08 3:49PM

Got it, I think.

Unwinding of leverage as a result of counter party risk is causing short selling of underlying assets back into the dollar which is the currency in which the loans are denominated. The system feeds on itself and causes exaggerated highs in the dollar and equally violent declines in the underlying assets.
This causes unusual demand for dollar and could explain the falling prices of assets in general.

Do I understand you correctly?

So if you could figure out which assets would be most oversold it would be a good thing to buy into those assets at bargain prices and wait for the market to recover, yes?
Also, would it be a good thing for those of us with a little equity to perhaps borrow some USD at the current high value and convert them to Australian equities or other assets to be resold when the AUD recovers and the USD slumps? Or do you think that is too risky?

Rockjaw 06/10/08 5:51PM

Well, we are borrowing the USD like Mr Toad’s wild ride at the moment Rogerio.

For bullion we presently find that the only honest exchange is this one:-

http://www.dgcx.ae/content/Home.en.About_Us.DGCX.aspx where you can speak with fellow Aussie, David Rutledge

or this one

http://www.dmcc.ae/ where you can speak with Ian McDonald.

Ask Ian about the launch of the new "Sharia Asset Management Company"

You can certainly rest assured that your money is safe in the hands of any reputable Muslim Financial Centre while the world rides out the mess caused by our banking fraudsters in the West.

Ironically, we find that where it comes to assets you cannot presently trust any of the financial centres controlled by Christians, Zios or Atheists, so forget about the "west" right now, stay away from them, they are all sheisters and most of them are in trouble.

If you want honesty and integrity you either buy a dog or you move your asset portfolio to Asia or one of the Muslim controlled exchanges like the one in Dubai.

Interestingly enough, bullion held in the DMC in Dubai attracts many offers from banks for loans with your bullion as surety because at least the lending banks know that the gold actually EXISTS whereas with bullion which you might BELIEVE is being held on your behalf by any bank in the West, including Australia, you could not get a bank to lend you a crooked cent. The reason is because they KNOW there is no gold held by any western bank on behalf of their clients. They are all crooked, right down to the very last one. You are warned, be careful.

Any slick Western banker who tries to sell you a certificate or other promise to store or hold bullion on your behalf, he’s lying, give him nothing, or, better still, chop his hand off as he tries to pickpocket you.

We hold a fairly healthy cash balance for future buying opportunities and that balance is being held primarily in CHF and JPY, although we do hold a variety of other commodity currencies as well.

Hope that helps

George

Rogerio 07/10/08 1:24PM

Staggering! That is how I would describe a conversation with my Australian bankers today. You mentioned "Orwellian" in one of your posts George but only now do I understand how serious your remark was.

I will not mention specific names but I have just learnt exactly how Orwellian the Australian system has become. Between the Federal Government and the banks ordinary Australians are basically screwed. There is simply no protection whatsoever.
I also spoke with a number of bullion dealers who tell me that recently everyone is being visited by government officials who are suddenly concerned that bullion may be a "terrorist threat". Strange that it has never been a threat until now when Australians are trying to protect themselves from financial disaster.
The only regulations in place are specifically designed to herd us all into financial disaster whilst protecting the banks and Canberra from these crises which they themselves are responsible for.
As of 2009 it will be illegal to sell bullion without providing a full 100 point identification. I can already see black booted armed officials shouting "Und pleez stand in zat line to present your identification papers und your written authority to buy bullion"

I found it all so arrogant, so disturbing and so utterly outrageous that I wondered whether it was real or a hoax.

I then rang your recommended people in Dubai. What a difference! Everyone I spoke with actually SOUNDED as though they lived in a FREE country. They even sounded HAPPY! Imagine that! Remember free and happy people?

This has been a huge learning curve for me thanks George.

Before the end of this week every cent I own will be sent offshore where I will not need to present identification papers each time I want to pay my rent.

I am surprised we have not been forced to stand in line and have Federal government registration numbers tattooed on our foreheads yet.

Rockjaw 07/10/08 5:09PM

But you exaggerate Rogerio, our Orwellian system is surely nowhere near as nice as you describe.

Venise Alstergren 07/10/08 6:27PM

I was browsing back across these pages: So much heat, so much passion. To me it is quite apparent, and has been for many years, that the USA is on a fast fade-out to history. If the Republicans get the blessing of enough voters they will win. Depressing to realize that the rednecks are the ones with the energy to get off their backsides and vote. (who dares to think mandatory voting is not democratic?) And when the McCain/Palin ticket does win. And as they up the ante with their insane wasting of resources in order to go to war on the slightest pretext-WMD anyone? And the giant corporations who produce the war materiél who urge them on. (The same lovely people who kept on doing business with the fascists; right through the good old world war two)
Then will people realize that not even the golden streets of Eldorado can support such an extortionate, out- of- control, form of Casino Capitalism. America is doomed: is it too late to hope the Australians can cut the painter which tethers us to the American Titanic?

bobdumpling 09/10/08 2:39PM

Thanks for the update Rogerio. Interesting that the free market can be so exclusive.

Prior to the initial failed bailout bill, Nick Paumgarten wrote the following in the New Yorker… not a bad look at what may or might be:

"Glenn Greenberg, a value investor who started as an investment banker in the nineteen-seventies, thinks that Wall Street has been chastened. “It’s kind of like when you get in a big mess and you say, ‘Please, God, if you let me off this time, I’ll never do it again,’ ” he said.

One problem is that the contrivers mistook their art for a science. A pre-modern money manager explained last week, “They looked at it all as a science experiment.” They tested each new product—each hypothesis—against a bunch of historical precedents, running computer models to see how the product would fare under the conditions of various bygone catastrophes. “The problem was, they didn’t have any historical precedent for when it all melts down. The historical precedents they used are not relevant.”

In fact, it wasn’t science at all. It was more like what anthropologists and psychologists call magical thinking—the tendency to believe that wishing it so makes it so. For years now, people have clung to the conviction that you can have outsized returns with little risk, leverage without recoil. This is what the clever financiers claimed that their inventions could do. Their colleagues and clients wanted to believe them. They all wanted to believe that their credit-default swaps could continue to insure against debt defaults.

It’s hard enough to understand credit-default swaps when you know what they are; if you don’t know, forget it. But since they are one of several inventions that may sink this city, and maybe the country, into a new era of penury and thrift, if not downright depression, let’s have a go: a credit-default swap is a financial contract between one party and another which protects against a default on a debt. The trick on Wall Street has been to negotiate and trade them like crazy; there are sixty-two trillion dollars in credit-default swaps outstanding. The question of their worth has mystified even the druids who created them, especially because, it turns out, the swaps haven’t really insured against anything. They are like Wiz bucks, in a world without the Wiz (which is essentially the one we live in, by the way—the electronics chain tanked in 2003).

Magical thinking enables you to see good where there may be only bad, and it is tempting to try out a little magic on this mess. For example: let’s postulate that the collapse of the financial-services industry spells catastrophe for New York City, a return to the nineteen-seventies. Lost tax revenues, budgetary shortfalls, unemployment (not only of those in finance but of the hordes who rely on them), plunging property values, vanished retirement accounts. Let’s cut this up, like a pile of bad debt, into various strips, and, as the rating agencies did to various slices of subprime-mortgage debt, take the top layer and, abracadabra, rate it triple A. Throw out the other strips, the grim probabilities—the crime, the decaying infrastructure, the hardship all around, the heroin and the syphilis. What do we have left? The bright side: maybe Manhattan will become affordable again, and cool, and dangerous. Dangerous in theory, but not to you or your family and friends. Dirty, but in a good way. Night clubs where anything goes. Art, music, Billy Martin.

Hit the bid."

Read the full article here: http://www.newyorker.com/talk/2008/09/29/080929ta_talk_paumgarten

Rogerio 09/10/08 5:35PM

Interesting take bobdumpling, like something out of Tolkien.

Your article as well as Ben Eltham’s have been real eye openers though, and I am very grateful to learn something about economics and other topics which I previously despised and had absolutely no interest in understanding.

Our financial system really is horribly flawed in every respect, but I disagree with Rockjaw’s take that there is nobody out there to alert us to these problems.

Rockjaw’s pet topic of bullion, for example, here is a CNBC broadcast where his views are clearly expressed. But for these NM articles the content of this news broadcast would have sailed right over my head.

http://www.cnbc.com//id/15840232?video=880574352&play=1

mil-observer 10/10/08 11:14AM

This will not stop, or even ease off, with the $1.6 trillion of the current commercial paper market. There is a much greater, massive amount left to go. The derivatives sludge is yet to be called in, and that is when things really blow. That is the longer-term bubble from Greenspan’s idiocy - ballooning since the early nineties if I’m not mistaken.

So whether their actions are cowardly, stupid or both, the mainstream political leaders are just performing like dancing bears for similarly misguided bankers - all to do the impossible i.e., save a giant bubble.

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