NEW JERSEY BOND RATINGS FALL

Posted on February 11, 2011 by Neil Garfield

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

THE NEXT WAVE: MUNICIPAL BOND RATINGS AND DEFAULTS

EDITOR’S NOTE: With heads stuck in the sand, avoiding the “third rail” of acknowledgment that tens of trillions of dollars of mortgage transactions are fatally defective, which would save or partially save the budgets of most states, counties and cities, New Jersey took it on the chin with a downgrade in the announced quality of their bonds. This from the rating agencies that told the states,, counties, cities and investors that CDOs were AAA rated (virtually risk free).

Meanwhile the spin machine is running full time reminding readers and listeners that bankruptcy is not an option under current law for government entities. Of course they avoid the obvious — the legal remedy of bankruptcy has nothing to do with the factual reality of BEING bankrupt.

As the stimulus money runs out, the downgrading will reach a roar, and while the SEC searches around for alternatives to the current rating agencies, we will still be marching to the tune of S&P, Moody’s, and Fitch. Defaults seem inevitable but anyone who says so is verbally beaten to death. We like to wait for our disasters to strike before we do anything about them.

The facts are simple: government is running out of money and prospects. People don’t have enough money as it is, so raising taxes is not going to produce more revenue. We’re not training our workers to function in the modern economy, so the prospect of greater commerce or revenues to tax are also pretty dim. Past commitments for pensions and other forms of safety nets are getting expensive because the governments are not producing the tax revenue that was projected when those commitments were made.

The ONE place where the money can be located, the one source of tax revenue that is owed but both unpaid and unreported (Wall Street) is off limits. The simple admission of the scheme — that the mortgages, notes, loans, obligations and receivables generated by the holographic image of a financial structure that was never intended to be real — would produce substantial revenue, and allow for substantial recovery of losses taken by governments when they too bought mortgage backed securities that did not exist in form or substance.

It isn’t a magic bullet. But it would make the crisis aspect of our situation go away and return wealth to where it was stolen from — the middle class and poor. It isn’t the whole solution. But reality has a way of coming around to bite you. China is now positioning itself to have its own currency creep into the world markets as the world’s reserve currency. I don’t know if they will be successful (the idea that China is infallible has been bandied about without merit), but I DO know that central bankers, and commercial bankers around the world do not trust Wall Street, do not trust the the American government to do anything except protect Wall Street and do not trust the U.S. dollar.

If we lose our position in the world currency market, people should take notice. we will have a shellacking that will dwarf the 2010 elections. Financially, we are on the precipice of a looming crisis that far exceeds the scope of the Great Recession and thus threatens to compete with the Great Depression. While the White House and Congress continue to take their regulatory advice from the people who created this mess, the Court systems are getting the hang of it, and the remedy is coming faster and faster for most people, if they can hang on. The fraud might be addressed in large scope, but through the Court system, it may come too late to help us retain our market position in the world.

Costs Soaring, New Jersey Bond Rating Is Lowered

By RICHARD PÉREZ-PEÑA

NY Times

A top credit-rating firm lowered New Jersey’s bond rating on Wednesday, citing ballooning pension and other costs, and Gov. Chris Christie and Democrats in the Legislature wasted no time in blaming each other.

The firm, Standard & Poor’s, downgraded New Jersey’s general-obligation rating to AA-, from AA, and dropped the ratings on some other state debts even lower. The changes will increase the interest rates that the state must pay when it borrows money.

Standard & Poor’s has given lower ratings to just two states, California and Illinois; four others stand with New Jersey at AA-, which is the fourth-highest rating. The firm rates New York and Connecticut a notch higher, at AA.

A Standard & Poor’s credit analyst, Jeffrey Panger, cited New Jersey’s underfinanced pension and employee benefit funds, and his firm’s shift to putting more emphasis on such obligations.

The state reported last year that its pension system had $54 billion less than it needed to meet future obligations, one of the biggest such deficits in the country, and experts have said the state could run out of money within a decade. The fund for retiree health care is even further behind.

Year after year, lawmakers have failed to contribute what actuarial rules said was required to make the systems whole, increasing the size of the payment that the rules required the following year. In 2010, Mr. Christie’s first year as governor, the state was supposed to put $3 billion into the pension system, but in grappling with a large budget deficit, it contributed nothing.

The governor, a Republican, has said the state needs to curb government employee pensions and benefits to remain solvent, and at a public forum in Union City on Wednesday, he said the Democrats, who control the Legislature, had compared him to Chicken Little. “The sky started to fall in today,” he said, referring to the Standard & Poor’s action.

Such talk brought the governor criticism last month, when he mused publicly about the prospect, however distant, of a state bankruptcy — at a time when the state was marketing a new bond issue. Some bankers said he had spooked the market and possibly raised the state’s cost of borrowing by saying what chief executives usually refused to acknowledge.

Democrats said Wednesday that the governor was responsible for the downgrade, for failing to put money into pensions last year. They noted that last year they agreed to pension and benefit reductions for newly hired employees.

“It’s time the governor took responsibility for his own actions and stopped trying to blame others,” said Assemblyman Louis D. Greenwald, chairman of the budget committee.

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American Meltdown: 3AM or 8PM—Emergency vs Urgency

Posted on May 5, 2008 by Neil Garfield

Thomas Friedman, in Michael Moore -like frankness, doesn’t make a case, create a sound bite, or try to get elected. Here he simply tells the facts. 

If all Americans could compare Berlin’s luxurious central train station today with the grimy, decrepit Penn Station in New York City, they would swear we were the ones who lost World War II.

People want to do nation-building. They really do. But they want to do nation-building in America.

Any one of the candidates can answer the Red Phone at 3 a.m. in the White House bedroom. I’m voting for the one who can talk straight to the American people on national TV — at 8 p.m. — from the White House East Room.

millions of Americans are dying to be enlisted — enlisted to fix education, enlisted to research renewable energy, enlisted to repair our infrastructure, enlisted to help others. Look at the kids lining up to join Teach for America. They want our country to matter again. 

MOST OF ALL WE NEED TO STOP VOTING BECAUSE SOMEONE SCARED THE CRAP OUT OF US OR APPEALS TO BASE PREJUDICE. WHEN WE DO THAT WE ARE VOTING AGAINST OURSELVES, OUR CHILDREN AND OUR GRANDCHILDREN.

The emergency is that the fiscal fiasco of the last 7 years is frightening larger than any public figure has stated. Who will tell the people? The reason why you hear scattered comments about this period being comparable to the great depression is that we have dug a real hole for ourselves, so big, so deep, that we can’t see the bottom anymore.

  • Buffett and others are admitting it — economists are slyly predicting it without being accused of starting riots and panic. There is general agreement that the housing market could have another 20% correction from current levels.
  • 20-30 million American homes will have greater mortgage indebtedness than they are worth within 12-14 months.  The same people are mired in credit card debt carrying interest and fees that assures( or at least threatens) the virtual permanent enslavement of a significant portion the American people. Americans spend more money on debt service (interest payments and principal) than many countries do on EVERYTHING. 
  • We have locked ourselves into an energy policy that allows both domestic and foreign enemies of freedom almost unfettered control over our property, our food, our lives and our civil liberties. We have done this while having the technology and knowledge to reduce our oil and gas consumption to a negligible amount, forever abandoning foreign policy based upon foreign fuel supplies. 
  • Inflation is already five times higher than the manipulative government statistics reported and it is increasing. 
  • Joblessness is five time higher as well. 
  • The Iraq war will take at least 7 years — our longest war.
  • Our healthcare system is in the death grip of a few people who have turned our vulnerability into an excuse to rob the public treasury and the private finance of every individual.
  • 1929? — we already there and headed downward, burdened in more debt than any country or its people have acquired in the world history.
  • And in world opinion our stock of confidence has never been lower and is clearly declining every other day, as the dollar goes lower and lower and the world’s central bankers look for alternatives for their currency reserves — anything other than the plummeting dollar. They know we caused, allowed and promoted the worst outbreak of financial fraud in history and that the measurement of the scope of the fraud keeps growing every day by trillions of dollars.

So there is the emergency. The urgency is that there is hope.

The Mortgage Meltdown was the trigger, the wake-up call that the fundamentals of our policy, our society and our economy were all wrong. The people know it, with 4 out of people asserting we are headed in the wrong direction.

We emerged from the Great Depression and we can emerge from this too, perhaps a little battered and wiser but still standing tall. The way we can do that is through ruthless truth, a tolerance for ambiguity, transcending our fears, acceptance of failure, determination to succeed, and persistent pursuit of the core values expressed, although unevenly lived, in our Declaration of Independence and our U.S. Constitution. 

MOST OF ALL WE NEED TO STOP VOTING BECAUSE SOMEONE SCARED THE CRAP OUT OF US OR APPEALS TO BASE PREJUDICE. WHEN WE DO THAT WE ARE VOTING AGAINST OURSELVES, OUR CHILDREN AND OUR GRANDCHILDREN.

May 4, 2008
OP-ED COLUMNIST

Who Will Tell the People?

By THOMAS L. FRIEDMAN

Traveling the country these past five months while writing a book, I’ve had my own opportunity to take the pulse, far from the campaign crowds. My own totally unscientific polling has left me feeling that if there is one overwhelming hunger in our country today it’s this: People want to do nation-building. They really do. But they want to do nation-building in America.

They are not only tired of nation-building in Iraq and in Afghanistan, with so little to show for it. They sense something deeper — that we’re just not that strong anymore. We’re borrowing money to shore up our banks from city-states called Dubai and Singapore. Our generals regularly tell us that Iran is subverting our efforts in Iraq, but they do nothing about it because we have no leverage — as long as our forces are pinned down in Baghdad and our economy is pinned to Middle East oil.

Our president’s latest energy initiative was to go to Saudi Arabia and beg King Abdullah to give us a little relief on gasoline prices. I guess there was some justice in that. When you, the president, after 9/11, tell the country to go shopping instead of buckling down to break our addiction to oil, it ends with you, the president, shopping the world for discount gasoline.

We are not as powerful as we used to be because over the past three decades, the Asian values of our parents’ generation — work hard, study, save, invest, live within your means — have given way to subprime values: “You can have the American dream — a house — with no money down and no payments for two years.”

That’s why Donald Rumsfeld’s infamous defense of why he did not originally send more troops to Iraq is the mantra of our times: “You go to war with the army you have.” Hey, you march into the future with the country you have — not the one that you need, not the one you want, not the best you could have.

A few weeks ago, my wife and I flew from New York’s Kennedy Airport to Singapore. In J.F.K.’s waiting lounge we could barely find a place to sit. Eighteen hours later, we landed at Singapore’s ultramodern airport, with free Internet portals and children’s play zones throughout. We felt, as we have before, like we had just flown from the Flintstones to the Jetsons. If all Americans could compare Berlin’s luxurious central train station today with the grimy, decrepit Penn Station in New York City, they would swear we were the ones who lost World War II.

How could this be? We are a great power. How could we be borrowing money from Singapore? Maybe it’s because Singapore is investing billions of dollars, from its own savings, into infrastructure and scientific research to attract the world’s best talent — including Americans.

And us? Harvard’s president, Drew Faust, just told a Senate hearing that cutbacks in government research funds were resulting in “downsized labs, layoffs of post docs, slipping morale and more conservative science that shies away from the big research questions.” Today, she added, “China, India, Singapore … have adopted biomedical research and the building of biotechnology clusters as national goals. Suddenly, those who train in America have significant options elsewhere.”

Much nonsense has been written about how Hillary Clinton is “toughening up” Barack Obama so he’ll be tough enough to withstand Republican attacks. Sorry, we don’t need a president who is tough enough to withstand the lies of his opponents. We need a president who is tough enough to tell the truth to the American people. Any one of the candidates can answer the Red Phone at 3 a.m. in the White House bedroom. I’m voting for the one who can talk straight to the American people on national TV — at 8 p.m. — from the White House East Room.

Who will tell the people? We are not who we think we are. We are living on borrowed time and borrowed dimes. We still have all the potential for greatness, but only if we get back to work on our country.

I don’t know if Barack Obama can lead that, but the notion that the idealism he has inspired in so many young people doesn’t matter is dead wrong. “Of course, hope alone is not enough,” says Tim Shriver, chairman of Special Olympics, “but it’s not trivial. It’s not trivial to inspire people to want to get up and do something with someone else.”

It is especially not trivial now, because millions of Americans are dying to be enlisted — enlisted to fix education, enlisted to research renewable energy, enlisted to repair our infrastructure, enlisted to help others. Look at the kids lining up to join Teach for America. They want our country to matter again. They want it to be about building wealth and dignity — big profits and big purposes. When we just do one, we are less than the sum of our parts. When we do both, said Shriver, “no one can touch us.”

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Mortgage Meltdown + Inflation + Dollar Devaluation

Posted on April 8, 2008 by Neil Garfield

Trouble for American Consumer is building and the perfect storm threatens our tenuous economy. 

DEEP RECESSION LOOMS WITHOUT FUNDAMENTAL CHANGE IN OUR POLITICS AND ECONOMIC POLICIES

 

The inevitable outcome was always the same: eventually we would hit the the top, like in any Ponzi scheme. 

Consumers, who maxed out their credit cards, and maxed out their borrowing on their homes, and maxed out on their purchasing power which has declined significantly over the same 25 year period, and who are vastly unemployed or underemployed (further decreasing their wages and purchasing power), and maxed out their borrowing from consumer finance, and even maxed out their short-term borrowing through pay day lending and overdraft privileges and eliminated their savings plans, have reached the point where (1) they can’t buy anymore “stuff” and (2) they don’t want to. 

 

The end result is that we have spent ourselves and our country into a hole, diminished our standing in the world, and we continue to insult the world by asserting a dominance that was once real, but isn’t anymore. And the world is telling us as politely as possible to shove it. 

The strength of the Euro, the movement amongst the oil producing countries to create a unitary currency for the Gulf countries and other trends around the globe all spell the same thing: everyone is looking for an alternative to the U.S. dollar and an alternative to the U.S. altogether. We have brought ourselves and the world to neither peace nor prosperity, and neither security nor safety. 

 

Asian inflation which is gearing up to be as bad as we have seen in any emerging economy is starting to hit wholesale prices. Rising costs due to rampant and growing inflation in countries that had before been “cheap” producers is hitting hard on products purchased here in the U.S. 

 

Add to that the more or less daily devaluation of the dollar and the effect is multiplied. Add to that mixture the further devaluation of the dollar caused by the mortgage meltdown where central bankers are converting their dollar reserves to Euros and the effect is further increased.

 

The headlines in most papers is the end of the free ride we had for a long time where the dollar was king and we could purchase imports more cheaply because dollars were in great demand. 

Our headline here is that we are headed for the deepest recession since the greatest depression. 

 

The reasons are many but all fairly simple. The United States converted from being a nation of production to a nation of consumption. The final nail in the coffin of this unfortunate conversion was the advent of credit cards — not at their inception — and the high interest rates that were institutionalized during the double digit prime rate days 25 years ago. The theory was that the credit card companies were under hardship because it cost them more to get capital to lend than they could get under usury laws, once you factored in defaults and the extremely high interest rates that the issuers had to pay. But when rates went back down to modest figures of around 7% prime rate from highs of 22% credit card companies were allowed to keep their rates at 21-22% and eventually raised those rates to as high as 35%. Adding insult, the issuers now have fee schedules that add to the absurd payments. 

 

This “free money” craze coupled with stupendous profits earned by credit card issuers caused a huge but temporary surge in consumer sending encouraged by government, business and lenders. Everyone liked it because for consumers they were getting more “stuff”, for government they could claim better economic performance, and for credit card companies, they had a stranglehold on an economy that was now addicted to credit card and home equity loan consumer spending. As with the mortgage meltdown, nobody thought it through. 

 

Our economy became addicted to, dependent on and under the control of consumer spending, which up till now has accounted for around 70% of our entire economy.

 

The inevitable outcome was always the same: eventually we would hit the the top, like in any Ponzi scheme. Consumers, who maxed out their credit cards, and maxed out their borrowing on their homes, and maxed out on their purchasing power which has declined significantly over the same 25 year period, and who are vastly unemployed or underemployed further decreasing their wages and purchasing power, and maxed out their borrowing from consumer finance, and even maxed out their short-term borrowing through pay day lending and overdraft privileges and eliminated their savings plans, have reached the point where (1) they can’t buy anymore “stuff” and (2) they don’t want to.

 

Alan Greenspan is now defending his record of relying on the marketplace to work things out. Free market ideologies, like the one Greenspan relied on, are like all other theories in economics. They seem to work for a while and then they don’t. Ideology does not govern how people act. People act as they choose to and the way they choose is based upon mostly subjective factors at the time of their decision. That is a lot messier than the neat and clean theories and policies, indexes and measurements that have been used in determining economic policy, foreign policy, and domestic agendas for decades. 

The underlying flaw in all currently used economic theory is that people are not theoretical. They are real and they are complex. 

This is not a new observation. Plenty of brilliant analysts and thinkers have known this for thousands of years. Just look at some of the most recent contributions from Rothbard and von Mises and you’ll see that the idea that human motivation and human thought process as the real issue has been around for a very long time, well understood, and pointing toward policy mechanisms that were based in reality rather than the mythical world where everyone behaves according to the “plan.” 

 

The problem is that economics and politics are inseparable — like time and space. You cannot define one without reference to the other. And in politics, the goal is to get elected and stay in power. You are playing to an audience with precious little time to get the finer points of economics, personal finance and monetary policy. 

 

People are too busy trying to make ends meet, getting the kids off to school and after-school activities, and working a two-income family schedule with increasingly longer working hours. Up until now, buying “stuff” has been a recreational outlet and they had the “free money” to do it. Now they can’t even pay the “minimum payment” without borrowing more and they can’t borrow more.

 

You don’t get elected giving people bad news — especially the news that things will get worse before they get better. So politicians create agencies to give them reports, indexes, median incomes, and unemployment data that provides them a reference point from which to pontificate about things these “leaders” actually know nothing about. They create slogans and “programs” that will never happen to give the potential voter a reason for putting them or keeping them in office. 

 

The end result is that we have spent ourselves and our country into a hole, diminished our standing in the world, and we continue to insult the world by asserting a dominance that was once real, but isn’t anymore. And the world is telling us as politely as possible to shove it. The strength of the Euro, the movement amongst the oil producing countries to create a unitary currency for the Gulf countries and other trends around the globe all spell the same thing: everyone is looking for an alternative to the U.S. dollar and an alternative to the U.S. altogether. We have brought ourselves and the world to neither peace nor prosperity, and neither security nor safety. 

WHAT DO WE DO? BITE THE BULLET, GIVE UP IDEOLOGY AND GET REAL

If you want to stop the mortgage and credit crisis, go with Barney Frank’s plan which takes blame out of the equation and simply stops the worst from happening. It gives everyone an opportunity to recover and it is the only way to do it — taking everyone’s interest into account rather than one group over another. 

 

If you want to stop foreclosures and evictions, change the rules of civil procedure in each state and in federal bankruptcy court that enables cram-down procedures and mediated results that allow for the same outcome as Barney Frank’s plan. Home values were inflated far beyond fair market value. Everyone should share in the loss and everyone should share in the potential recovery. 

 

If you want to stop the health care crisis and the economic nightmare created for our citizens, take insurance out of the equation, wind down the current system and move relentlessly toward a single payer system that pays medical service providers well, does not subject them to liability for bad results, and gives them incentives to get their patients healthier. That is what other countries do and what we should do here. 

 

Eliminate the restrictions on so-called “alternative care.” Those protocols have been around a lot longer than allopathic medicine. End the hegemony of allopathic medicine, provide incentives for preventative lifestyles and care, and the costs of health care will drop like a stone while the prospects for a longer, productive, happier life will rise. Reinstate the basic pledge “First do no harm.”

 

If you want to create a country with solid economic foundation, we need savings. To create savings, people must have the financial resources to cover their expenses and set aside money for the future. Take credit card debt and other forms of predatory lending off the table. Change the “no end in sight” vision to a light at the end of the tunnel. Stop telling people to spend money when you know they don’t have it. All you are doing is making things worse when you could be leading them out of the darkness.

 

If you want an economy that has solid prospects and good earnings potential for its citizens and the country as a whole, change the direction of innovation from getting our own people to part with their money to buy “Stuff” and make innovation work to produce things the rest of the world values. In other words shift back from the consumer driven economy to production. The products might be the same, similar or entirely different as before. 

 

BRING BACK UNIONS: Stop trying to minimize costs and start working to maximize revenues. Anyone can eliminate their costs by simply going out of business. A business is worthless without growth and strength in the marketplace. By eliminating our production capacity, we have effectively relinquished our sovereignty. Have government intervene wherever necessary to prevent dominance that results in imbalance — encourage the start-up of new small businesses and create a level playing field for them to compete. 

 

If you want to reassert America’s place in the world give the world a reason to respect and honor us besides our military power. Raw power is a transient commodity. Eventually it ends. If you want to retain sovereignty over our economic affairs and avoid becoming a satellite of China or a junior member of the European Union then demonstrate the power of the American worker and the attractiveness of living and working here. 

 

If you want communities to prosper allow community banks and credit unions the same access to providing financial services as the megabanks, where centralization has shifted local deposits into faraway investments of dubious value to anyone. State and Federal programs should be deposited into local banks rather than national or international combines. The infrastructure already exists without any changes required to enable this to happen. What is necessary is for State regulatory authority to become more active and more focussed on their own State’s economy.

 

As the song goes, these are a few of my favorite things. What are yours?

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Mortgage Meltdown: Ignoring the Obvious=Avoiding the Solution

Posted on March 26, 2008 by Neil Garfield

McCain’s Folly

The solution to the liquidity crisis continues to be a political agreement between government, business, borrowers and investors in which the obvious factors are directly addressed — overvaluation of home values, overvaluation of creditworthiness, and overvaluation of CMOs. Any plan which does not address those factors will merely be an attempt to sweep this one under a rug that isn’t big enough to hide the dust. All current plans are partial swings at a moving target, based upon the political points the author or speaker wishes to score rather than being based on the health, safety and welfare of the citizens of the United States of America.

 

The plain fact is that is the practically nobody in government anywhere knows, understands, or has developed any proficiency in developing an understanding of the economic world of their constituents. Upon cross-examination they would fold like a house of cards. 

Yet in an odd irony (redundant, I know) it is true that all economics is actually political and that all political decisions result in economic consequences. Hence we have put ourselves in the hands of a bunch of people, most of whom lack either the intelligence or the motivation to know what they are doing, and who are responding to the “information” given to them by their staff which gets most of its information from lobbyists, and the resulting legislation is passed without ANYONE ever reading it. 

Senator McCain is unfortunately one of the offenders for lack of actually reading the printed word. He reads nothing. He gets summaries orally on the run, and that is why he makes so many mistakes in his speeches. He spends no time in analysis or contemplation, not that he isn’t capable of it. He just doesn’t do it. And in our political world he has proven by getting the Republican nomination, that you don’t actually need actual policies in mind that serve as stepping stones to a better future — you just need votes, endorsements and money (not necessarily in that order).

In an effort to score political points, John McCain, presumably with the advice and counsel of prehistoric economic advisers, hawks the idiotic notion that government regulation is a bad thing in and of itself. Economists from all sides of the political spectrum admit that is wrong. Without a referee in the “free market place” we would all return to slavery or the dark ages of serfdom. We have recently gone too far in that direction, a fact which is obvious to about 80% of the American citizenry and even to young adults who ordinarily don’t even think of such things. The necessity of a referee (i.e., government) is completely unknown to McCain either in concept or reality. John McCain is decidedly not an idiot — but like most of his colleagues, he acts like one.

He said yesterday which much fanfare that it is not government’s job to bail out people, big or small. True enough — and it certainly plays well to those who blame the victims, as long as they are small victims rather than big companies whose stock is publicly held. 

According to the founding documents of this country, which are the Supreme Law of the land, it is government’s business to protect the health, safety and welfare of its citizens; and that means doing something to stop the current financial bleeding and slowing the American and worldwide tailspin that is destroying the paycheck of most American citizens increasingly each day, as the U.S. dollar reaches lower into the abyss and the price of gas now approaches 25% of the net paycheck of many workers. 

Bailout is one of the tools on the table and it is a good short-term and very small part of a total solution. The actual solution to the present crisis can only be reached through political consensus which thus far has not been the subject, much the less the focal point of discussions in the current emergency. To that end only Obama (and recently endorsed by Clinton) has proposed establishing an emergency commission not unlike the 911 Commission. 

A major bailout to everyone will only put the dollar, and thus the purchasing power of each citizen in further jeopardy. That is why Obama is right about limiting the resources applied to the bailout part of the equation. Stopping the foreclosures and evictions through political consensus is also a urgent requirement. Again Obama is right on the approach of consensus but probably wrong in his opposition to the 90 day freeze on foreclosures and evictions proposed by Clinton. 

We need some breathing space to show the world we are still in control here and that we understand the root problem — which is that prices became artificially inflated by high pressure sales tactics getting people to sign mortgage documents that could be sold to satisfy the last group of deals that were sold on terms that were impossible to sustain on their own. 

No bailout at all is government failing to do what it is there for — to referee between competing groups and interests and intervene when it gets out of hand.  

McCain is advocating (or more specifically parroting) the economics and the politics that got us into this mess. We had a Federal Reserve with no power to monitor or regulate the creation of money supply by the private sector. Paulson announced today he wants to change that and expand the Fed’s authority to acknowledge the obvious fact that investment banks have been creating more money supply than all the central banks put together. As a result, worldwide money supply from derivative security sales skyrocketed beyond the imaginable, with some estimates putting it at as much as $500 trillion.

 

That is why we keep saying here that the answer to the crisis lies in political consensus — as Obama preaches, and not in ideological fixed constructs like McCain and Clinton promote for political points. Paulson’s proposals will be helpful 30 years from now. Partisan solutions produce partisan fights resulting in gridlock. Americans need action now. Obama’s proposals should be looked at far more closely, and used as a point of discussion. We need help today, this minute.

 

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Euro Dominance And American Policy

Posted on March 14, 2008 by Neil Garfield

Get with the Program: Challenge for the Obama Presidency. Fundamentals vs. Brute Force

American policy should be changed to reflect the paradigm shift — to determine ways in which we would be an acceptable member of the European Union and gradually shift to the Euro as the currency of choice. In order to accomplish this, U.S. leaders must guide the country back on track toward production, rather than perceived “productivity” and purchasing power rather than perceived “corporate earnings.” Rather than the old methods of brute force, Obama’s message of consensus will do more to stabilize our economy and foreign affairs than any of the proposals of his opponents or prospective opponents. Far from being in the clouds, Barack Obama, reflecting his experience at ground level on the streets of Chicago, understands the true dynamics of achievement, especially when it comes to peace and prosperity.

The European Union and the creation and adoption of the Euro as a competitive currency to the U.S. dollar was an inevitable bi-product of the Bretton Woods agreement and an American policy that pursued brute force and meddling in the affairs of other nations rather than the rather simple logic employed by such countries as Ireland, Brazil and Venezuela who have all achieved status by investing in their greatest resource — their own people. As nations join the European Union and the Euro gains increasing market share, the perceived safety of the judgment of a council of nations rather than dominance of a single nation is becoming apparent.

Things change. While the definition of “money” has not generically changed, the character of money has fundamentally shifted in every conceivable way. Agreement, acceptance and faith are elements of human interaction and society. They are also the cornerstone of “money,” by which we measure the value of things, store value and exchange goods. 

It is common theme that the perceived dominant world player has had its currency adopted by most of the commercial world and the governments of other sovereign nations. 

Prior to the dollar, it was the pound sterling. Over centuries the main currency of world commerce has shifted from the fiat money of one country to another depending upon world perception of the strength of their economy and their political and military strength to maintain their position. 

Everyone has their “fifteen minutes” and then it is up — but nobody gives up their position without a fight. Sometimes the fight is world war, extended regional wars or other military confrontations. Other times it is a diplomatic and commercial battle in the marketplace of ideas and the relative strength and weakness of competing treasuries. 

In the end, for better or worse, a new consensus arises and the currency of the dominant country shifts along with the enormous economic, political and social power and influence that commercial dominance endows the creator of the most favored currency.

In 1944, world leaders, prompted by “economists” and pure commercial interests came up with the forerunner of the new world order emerging today. It was the Bretton Woods conference. It was a formal meeting of sovereign nations and a negotiated agreement as opposed to “market forces” or competing unilateral sovereign agendas coming into balance. It was consensus of the kind that Barack Obama proposes and which even our enemies embraced as they have ever since scurried to enhance their holdings of U.S. dollars.

This event marked the beginning of a process that would pacify the U.S. and its ever-expanding ambitions, but ultimately end up with a shared unity that was NOT tied to whims of a single government. It was a relinquishment of sovereignty that could not and would not become undone. It would grow and evolve causing pervasive changes in business, banking and relations between countries.

The Bretton Woods Agreement did two things — set a gold standard, which was a temporary measure that only the the most forward thinkers understood, and set the currency for international (world) commerce as the U.S. dollar which was tied to Gold at $35.00 per ounce. 

Using gold is a standard that was hardly new. Yet the process of formal agreement was new and that process would emerge as the only lasting impact impact of the conference. 

Gold was valued because of its scarcity, its beauty and mythic reverence that was in the minds of believers from the dawn of commerce. It worked because of two factors — on the one hand a subjective set of factors including agreement, acceptance and faith and on the other, a scarcity that was somewhat controllable by additional mining. Periodically, gold strikes wreaked havoc with the price of gold but on the average it has been a relatively stable influence on commerce. 

The weakness of Gold was in its relative scarcity to population growth and related growth of commercial activity on the one hand and in the meteoric changes in the nature of money which has become increasingly symbolic tot he point where now most of it merely exists in electronic data files that nobody can touch, feel or roll around in their hand. There is no slight of hand coin trick to display for amusement because there is no coin.

Putting these factors together brings us to the inescapable conclusion that the supply of gold could not possibly keep up with the growth of human society. Indeed that was the precisely the issue when Nixon and Volcker, in 1971 decided to withdraw from the Bretton Woods agreement, and NOT promise to back every dollar with gold valued at $35 per ounce. 

While viewers of the popular show Bonanza were doubly disturbed that their favorite program was interrupted by the President on a lazy Sunday evening and that their currency was suddenly in free fall, the Nixon-Volcker decision was merely a statement of the obvious — the U.S. already was out of balance three to one (gold on hand versus dollars issued) and the situation was clearly permanent and getting worse. We had in fact passed the point of no return very soon after the Bretton Woods agreement was signed.

This decision eventually brought the U.S. back to dominance of the the perceived leader on world affairs. But lurking underneath was the positive knowledge of other world leaders and people who would become world leaders that an agreement was not only possible but inevitable. As long as the dollar was useful it would remain the currency of choice. Now the dollar’s usefulness is in doubt — the result of “creative schemes” from wall Street, overspending, failures to invest in itself and the inevitable downfall of the two engines of any economy — production of goods and services that people want, and the ability of people to pay for them. 

The European Union and the creation and adoption of the Euro as a competitive currency to the U.S. dollar was an inevitable bi-product of the Bretton Woods agreement and an American policy that pursued brute force and meddling in the affairs of other nations rather than the rather simple logic employed by such countries as Ireland, Brazil and Venezuela who have all achieved status by investing in their greatest resource — their own people. As nations join the European Union and the Euro gains increasing market share, the perceived safety of the judgment of a council of nations rather than dominance of a single nation is becoming apparent. It is proof positive that Obama’s perception of the world is right and that the other candidates are clueless as to the realities.

This represents a fundamental but entirely logical shift. It is a change from the acceptance of brute strength to consensus — a somewhat democratic consensus that captures the spirit of the American experiment if not its announced policies and secret agendas. 

It logically follows that the tide is changing with such force that it is unlikely that any one nation, no matter how strong, will gain world acceptance of its currency as the currency of choice for world commerce regardless of its military or political power. In the end it is people who determine agreement, acceptance and faith in the marketplace.  

When people start making distinctions of their own as to which “band” of dollar has greater value (recently issued or older) and discounting the dollar based upon their own individual perceptions the currency is in trouble. There are places where the signature of one U.S. Treasury secretary over another results in a discount of 10% or more. 

Thus it is the either the Euro that will eventually overtake the dollar or some other emerging union that will find acceptance. The dollar is in free fall and no amount of bailouts, regulation or creative solutions will suffice. The goal post has been moved. 

American policy should be changed to reflect the paradigm shift — to determine ways in which we would be an acceptable member of the European Union and gradually shift to the Euro has the currency of choice. In order to accomplish this, U.S. leaders must guide the country back on track toward production, rather than perceived “productivity” and purchasing power rather than perceived “corporate earnings.” There are plenty of examples around the world as to how to do this — they all amount to the same thing — education of every man, woman and child, in skills, culture, knowledge and analytical ability. The words are very simple and have already been written: “The pursuit of happiness.”


Filed under: bubble, Bush, CDO, community banks, credit unions, currency, education, Eviction, foreclosure, foreign relations, GTC | Honor, inflation, interest rates, Investor, Mortgage, Obama, politics, securities fraud, Uncategorized | Tagged: , , , , , , , , , | 2 Comments »

Mortgage Meltdown: Business Plan for the Distressed Homeowner

Posted on March 10, 2008 by Neil Garfield

Here is my answer to the heart wrenching story presented by one of my readers. Perhaps it will help others as well. 

Your story is heart wrenching. You did everything right and it came out wrong. The deck is stacked. Perhaps there is a silver lining in all this. You have some extensive experience in dealing with this situation. I don’t know your level of education or training or job (and I would like to hear about that). There IS a possibility that you could turn this situation around to your advantage and I am willing to help you do it. I can’t give you money but I can give you an idea that might help you make more money than you did, and even acquire another house with real equity. If this strikes you as pure fantasy and not helpful then ignore it. But if it resonates with something inside you, then pursue it. Game the system against the financial perverts that started this. Here is the outline of a business plan that might help you heal from this trauma and give you the support, money and resources to get even.

1. Advertise and conduct seminars on the process of foreclosure from the lay perspective. You can either charge a nominal fee for the seminar and the charge for tapes or pamphlets which you can clearly write, since you are so articulate. Let me see the drafts and I will spruce them up a bit.

2. Form an alliance with a local attorney who understands the foreclosure process AND who is actively interested in taking on big money interests.

3. Go to see the Administrative Judge in your local area, and bring with you the proposed rule changes I have published.

4. Let the Press know what you are doing. Get on talk radio shows. It is easy. They are all hungry for material (of course I’d like a plug for my site).

5. Write a book and publish it digitally by email on eBay.

6. Form an association of distressed homeowners and pool what little resources you have so that defenses can be mounted in court.

7. Read up on Banking, currency, and lending and become an “expert” witness. it is easier than you think and you can charge a lot of money.

8. Go see the Sheriff who handles evictions and sound him/her out on their attitude on evictions — particularly their resources on handling the evictions from thousands of homes when they are short-staffed, and suffering cuts in budgets because of declining tax revenues.

9. Write to the consumer affairs office of your State Attorney general and file a complaint against your lender. 

10. Go see you local state legislator and ask him/her what they are doing about the future of a society that is heading toward ruin.

11. And by all means get your writing started on a blog. You can tie in through Google Ads a feature that will enable you to get paid every time there is a click on the Ads that Google places there. Google will figure out the ads to place. 

12. Be open about your problems. Maybe go into the campaign offices of candidates running in your area from Federal (President) all the way down to the most local offices. Ask for position papers and help candidates that seem like they are on board with your agenda. Disregard party affiliation — this is no time to stand on ceremony.

13. Join other associations that are being formed and find out what they are doing and how you can help. They might return the favor.

14. Finally, if you wish, you can send me copies of all relevant documents concerning your closing, your loan and your foreclosure. I can draft a letter to the lender demanding return of your property, damages etc. It might not do any good but I can tell you the lenders and all the other people in the this chain of fraud are VERY nervous about going to jail. If you want to do this, then let me know and I’ll give you the address. 

15. If you are successful in coming up with money or getting some relief from your lender, or both, then start looking for houses owned by investors and making low-ball bids with THEM carrying the paper (the mortgage). I have been through these markets before and I can tell you with certainty that if you are prudent and you look around, you will find something not only satisfactory, but surprising. You don’t need money to buy a house. You need a willing seller that is backed against a wall such that he /she must gives terms.

In any event good luck and God Speed. May your life recover and rebound with plenty and with meaning such that you and your family are healed from this tragic miscarriage of what was once called “justice.”

Filed under: bubble, CDO, community banks, Eviction, foreclosure, GTC | Honor, inflation, interest rates, Investor, Mortgage, politics | Tagged: , , , , , , , | 3 Comments »

Mortgage Meltdown Tragedy: No Checks, No Balances, No Honesty

Posted on March 10, 2008 by Neil Garfield

Reality Check

Before we go forward with who called who a monster, or Ken Starr, bringing back memories of deceit, sex, lies and and videotape, let’s do a reality check. People are hurting and the candidates are getting information from advisors who simply don’t get it: the monster here is the economy, reflecting society decisions that are having screamingly negative consequences in people’s daily lives. 

Whether some adviser made an off the cuff remark does not address the real issues. We are bleeding all over the place — housing, jobs, the dollar, earnings, wages, purchasing power, and of course the Iraq war which represents an expense that cannot be covered and will drive up inflation to incomparable levels. 

But more than anything, it is the story of people, one at a time who are trying to make it. The stories are heart wrenching as the American Dream fades away from them while the Judiciary, the legislatures, the congress and the President do nothing but argue over ideology. While I don’t agree with everything this reader says, I agree with 99% of it. As we do pause for our fallen heroes in Iraq, take a moment and read this, a story of the fallen heroes who fought for, achieved and lost the American Dream.

Neil,

I had drafted a reply to your message many days ago. In it I had waxed so eloquently in regards to our situation, the same or similar, as that so many others are finding themselves in. 

It being that which may well prove to be our ultimate destruction…

…Despite our unwavering decision to fight the good fight for all that we’re worth!

It is an overwhelming and discouraging thing, to find one and ones family the target of such an attack by predatory lucre loving vermin, disguised as lawyers, bankers and “real” human beings! 

Vermin who have made it their goal to rob millions of people of billions of dollars and property, by manipulating and coercing the uninitiated public into forfeiting, not only their wealth and the fruits of their toil and tears, but also their very homes, and sense of sanctity, safety and security… 

…All in the name of “business” and “making a profit”!

It behooves us to comprehend how “making a profit” can be considered “profit”, when the “rewards” come from theft and deception?

In our obviously defective perception and understanding of the term “profit”, it has always meant the reward of gain that was received through the investment of something that one had right to, or had earned, and which had yielded fruit from being so invested.

Profit cannot, by our understanding, come from theft or guile, only the exact opposite can be claimed as being the reward for such negative and patently evil acts!

Thus, the manner in which these evil beings has contived and conspired to strip, not only us, but everyone who lives, as we all have need of shelter and sanctuary, as is offered by a “home”, and a “dwelling”, of every bit of the fruits of our labors, is completely and unspeakably reprehensible and unconscionable!

This is especially compounded when the thefts are then converted into “legal” business transactions, through the deft manipulation of the so-called judicial system by these vermin!

There once was a time when the term “legal” was synonymous with “right” and “just”. 

But that comparison is more of an exact antonym now. And it has become completely unsettling and deeply disturbing to see how wrong has become right, and that right no longer exists…

…Outside of some imaginary quality of character. and illusionary precept for a standard of personal conduct that is but a fading memory of another era, and which has died, or become extinct through lack of use, or belief.

To have watched, over the years, as the sole motivation for the peoples of a society, of which one is a member, has become the pursuit of personal enrichment for oneself, and damn the cost or expense that ones own gain of lucre may cost another, is like watching one’s own death while millions stand by, able to intercede and to stop the untimely demise, but whom remain unwilling to do so, without being compensated for doing so.

The fact of the matter is that we’ve become so acutely aware that the rampant greed which is consuming the people that were once considered fellow countrymen and women of ours, that it has resulted in our own awareness of being as aliens in a strange land! 

Not one of the multitudes of persons and businesses that we have paid out thousands to, for aid and assistance in our attempts to turn the tide of the onslaught against ourselves, and that against multitudes of others, also, has served to buy us one bit of genuine and effective help, or provided the least amount of effect in stemming or diminishing the effect or result of this attack.

On the contrary, the greed has so overcome this society and it’s more`s and morals so completely compromised, that no one seems to feel compelled to even try to live up to their promises of providing the services and/or results, for which they all demand to be paid so handsomely for, in advance!

One becomes painfully aware that the entire society, as a whole, has become nothing more than a pack of predators. All of whom, seek to devour the individual and consume all of their resources, with as much compassion and finesse as that exhibited by a feeding school of piranha’s!

We’re fought the good fight, so hard and for so long, that we’ve now been completely drained of resources, and our very spirit’s have become consumed and are nearly extinguished by the multiple manifestations of oppression and evil that have engulfed us and our lives!

It becomes easily understandable what should so motivate those poor deranged individuals, whom one hears about on the evening news, with increasing frequency, whom go into some public place, somewhere, pull out their arsenal of armament, and begin mowing down “innocent” victims, in droves!

One can easily imagine that these poor deranged individuals were once normal and compassionate person’s, also… 

…And, in fact, the true “innocent” “victims” of that self-same society, which they seek to lash out at…

… In a futile and self-destructive last dying act of self- defense!

For so long, now, we have held the belief that we would be able to overcome this onslaught against good, right and decency. 

And that, in so doing, we would be able to become members of a vanguard wave of change. 

Whereby, we could assist others in winning their own battles in this cause. Helping to guide them through the mine field, obstacle course, pitfalls, snares and booby-traps that await them, and, thereby enable many to reach that same elusive (and apparently imaginary) goal that we have fought so diligently and faithfully to attain.

Unfortunately, those opposed to us have been doing what they do for so long, that they have become far too efficient and proficient, from experience and practice, for the efforts of those like ourselves, taken in response to their greed and aggression, to be of any genuine use, or effect.

It has become impossible to continue to resist any longer and still retain sufficient strength, and barely adequate resources, to even move one’s physical presence and property to some other location… 

…Though God, alone, knows where that might possibly be, and He seems to have no concern, regarding us in this matter, any more…

We’ve exhausted far more money, and all of our time, spirit and attention, in fighting these thieves and crooks, than ever would have been required, had they not taken the initial illegal steps of wrongly declaring us in default, and then manipulating the payment history and records, thereby making it impossible to determine even who had actual possession of the note and right to initiate the foreclosure proceeding, or who, in fact, actually had begun it?

Through deception, sleight of hand, and hiding behind so many facades and fronts, the bankers have perfected the mechanism by which they do steal all of the wealth of the people, and once they have wrongfully taken that, then they take the people’s homes, also!

This country is being destroyed, even as I write this, by these evil people… 

…And, all of the wealth and fruits of our labors were, so long ago, traded off by traitors to our country…

… Those who were elected to serve and protect, and now we have all become serfs to the elite, the European banking cartel, which owns and controls the entire wealth and governments of the world, and especially America!

For three years we have fought valiantly to make our stand for what is right…

But, when faced with the unlimited resources at the disposal of our enemy, it finally becomes a matter of nothing more than defeat by attrition, in the end.

Even our faith in the Omnipotence and Omnipresence of God, has served to provide no reconciliation nor reprieve in the matter, and we feel that we are merely living out then last dying nervous twitches of a corpse that has already had it’s head detached and it’s heart removed from within it’s chest.

It is easy for one, whom has not been subjected to such evil and oppression, to encourage those whom are, to hold on and continue to fight.

But you have no idea the toll that it takes upon one, when one’s entire life becomes focused on defending oneself, and ones family, from such a relentless, heartless and continual onslaught and never ending attack, being made by far too many persons, on far too many fronts…

… Nor the depth of despair that engulfs one, when they realize that they’ve effectively wasted the last years of their life, in futile resistance to a lost cause, and an impossible to win, in their own strength, against such organized and specialized forces, battle for their rights and property, not to mention morals and ethics!

At this point in time, we’ve been reduced to having to declare an emergency bankruptcy, in order to temporarily stay the enforcement of a Writ of Restitution, and of having only approximately $3,000 worth of the Federal Reserve debt notes in our possession, which we can either exhaust by throwing them in with all of the others we’ve given in vain to save ourselves from this grievous wrong.

 Or, to finally admit defeat, and drag ourselves off into some dark corner, to hide and lick our wounds, hopefully to survive to fight another day.

Our lives have been irreparably damaged, our peace of mind destroyed, and our personal resolve and resources bankrupted.

The only thing good that has come of this, is that those behind the banking cartel that controls this country, and the entire world, for that matter, have earned themselves one more dedicated enemy, whom shall expend every possible avenue available to them to disrupt, harm, hinder or destroy anything and everything that those evil and demon controlled and inspired excuses for humans ever say, attempt to do, claim to possess, or stand for, and to encourage anyone who will listen to do the same.

Alone, we may not have been able to stop them from destroying our lives and stealing our home…

But, thanks to the power of the internet we’ll be able to multiply the effectiveness of our responses to their thefts and attacks, and we are certain that we shall cause them far more harm, damage and expense than they could have incurred, if they’d not sought to steal our home by fraud and deception.

We possess one thing that they can never steal, nor rob from us….

…The absolute knowledge that ours was, and is, a noble and righteous cause, and that, in the end, we win!

Despite any appearances to the contrary in this material world, here and now.

Thank you, kind sir, for your encouragement and attempt to solicit some assistance for us. We’re afraid that it’s far too little, and far too late, to be of any good or effect.

I never thought that I’d say this….

..But, we give up!

It’s become the only choice left..

… If we are to even survive at all!

And I won’t subject my wife to the humility of being forcefully ejected by the sheriff’s from what is rightfully our home….

I’ll put the match to it as we walk out the door, before I’ll let those bastards steal it, though!

The shame of it all is that we have a winning case, but no longer possess the outrageous retainer fee that any competent counsel demands before accepting our case…

…And our window of opportunity to defend ourselves in the matter closes on April 20th of this year!

Goddamn it, all to hell!

With that, I close.

Good day, Neil,

Filed under: bubble, Bush, CDO, CORRUPTION, credit unions, currency, Eviction, foreclosure, foreign relations, GTC | Honor, inflation, interest rates, Investor, Obama, politics, securities fraud, Uncategorized | Tagged: , , , , , , , | 2 Comments »

Credit Crisis, Mortgage Meltdown, Economy Short Circuit: ACTION NOW PLEASE!

Posted on February 12, 2008 by Neil Garfield

It is as though everyone has their head stuck in the ground, which is the most polite way of putting it.

Look at the figures coming out — even PRIME borrowers are going delinquent. Lenders are struggling to regain capital requirements for lending, The Federal Reserve is essentially having no effect on the downslide, retail spending is at a forty (40) year low, and the U.S. dollar has never been worth less than it is now. Housing prices are trending lower for at least another 15% drop and inflation is on the way up each month. Real unemployment and underemployment is at an all time high, and regardless of employment status at least 2/3 of the country’s citizens can’t make it on their current standard of living. All of these indicators are still trending down in a reverse hockey stick if you want to graph it.

My point is not just that the sky is falling, my point is that this crisis must be treated as seriously as it presents itself.

Extreme measures must be put in place NOW to mitigate or prevent tens of millions of American citizens from being displaced from their homes, jobs, and way of life.

The entire foreclosure scheme must be frozen. All debt must be restructured to a level that borrowers can pay with money left over to buy consumer goods. That includes subprime, prime and all other debt. Failing loans must be restored to a status that provides relief to financial insitutions seeking to comply with capital requirements for lending. The holders of CDOs must be given some of the relief to restore some measure of confidence in the U.S. financial markets, and the players who sold these securities should be given immunity if necessary in exhange for their complete cooperation in achieving these objectives.

This issue is not “who gets the bailout”, the issue is how do we get all the players back in equilibrium. The issue is NOT who is to blame. The issue is who is needed to fix the situation. The answer is everyone.  

Fundamentally there are a number of obvious regulatory, monetary, legislative and enforcement issues that need to be visited and corrected. But let’s get serious. These corrections will fix nothing in the current crisis. The “stimulus package” represents a tiny fraction of a tiny percent of the crisis we are in. We need bold actions now not by candidates who will hold public office in the future but by those with the power and authority to do it. We need leadership by people of courage who are willing to take risks to stem the incoming tide of inflation, foreclosures, bankruptcies, delinquencies, bank failures, business failures and the further decline of the U.S. dollar.

Filed under: bubble, CDO, community banks, CORRUPTION, credit unions, currency, Eviction, foreclosure, GTC | Honor, inflation, interest rates, Investor, Mortgage, Obama, politics, securities fraud | Tagged: , , , , | Leave a comment »

Economy Meltdown: The Virus is Spreading — Remedy=TRUTH

Posted on February 11, 2008 by Neil Garfield

The bottom line is that the Federal reserve is fast becoming irrelevant for reasons described below (and foecasted by Alan Greenspan in 1996), proprietary currencies already out number fiat currencies worldwide, and a return to local government chartered bank currencies and other trusted issuers is probably the only way we can restore order to the markets. Holding onto the current assumptions and policies is like holding onto the railing of the Titanic.

It is becoming apparent that two things are true about derivatives and their current pernicious effect (actual and perceived) on the financial markets and world economies: (1) the true total of derivatives held in the marketplace actually approaches $500 trillion and (2) all $500 trillion of them are suspect now because of the unconscionable actions of a few people who used their creativity with as much concern for consequences as a three year old playing with matches.

Let’s put this in some perspective. The pendulum is swinging too far, as it always does. Yet it is pretty obvious that it has not even hit the half way point in its swing. Debt securities of all types are going to get hammered, credit is going to dry up, and equities are going to take a massive hit, along with the U.S. dollar. Eventually the market will reach some plateau (I wouldn’t call it equilibrium) and there will be a realignment of power, privilege and values.

Just using the most obvious indicators it is clear that the first order of business is to keep people in thier homes, immune from foeclosure at all costs regardless of who is to blame. The way to do that is for all players to realize that they have a dog in this hunt and that lower returns and some write-offs are better than complete write-offs and an economic depression.

The second order of business is to take on regulatory actions in the U.S. and abroad that over time will re-assert the appearance and reality of a fairly fair marketplace. Monetary policy — loosening credit, is not going to help the lenders who are already out of balance in their capital accounts.

Restoring the nomimal value of loans, even at lower levels and lower interest rates will soften the blow that we all see coming now. The only way to do that is to forget punishing anyone, and use the channels in place to restore order to the real estate, debt markets and equty markets.

The patchwork attempted every night by senior economic players in government and Wall Street cannot work except in spurts. It should be abandoned in favor of policies and regulation that reflect more concern for the integrity of the marketplace, the welfare of the constituents, and the return of honor, character and truth.

The truth is that there is not enough money in the world to bail out anyone in the current situation. It is obvious that central monetary policies are worrisome at best. It is equally obvious that power is trending back toward the states from the Federal government that is paralyzed by competing well-paid lobbyists. There is another obvious observation: power, control, and value is trending fast to other monetary centers and currencies other than the U.S. dollar.

We are now in the same place on an even trading field, as everyone else. This means our dollar must be backed by real value, real productivity, and a real economy that runs independent of impulse purchasing by buyers going deeper and deeper into debt.

What does this mean for the U.S. Citizen? Start with safety. The number of homes at risk is now around 7 million. This presents the prospect of over 20 million people displaced, seeking, finding or not finding alternative housing. The total humer of hosueholds at risk for debts other than mortgages appears to be over 35 million, which means that there are over 100 million people whose next meal is in doubt. Social “unrest” is a certainty unless an entirely new mindset is adopted by those who purport to be leaders.

For people with money, there are options that must be considered immediately. Holding U.S. dollars or assets that can only be valued in U.S. dollar denominations, presents a far greater risk than holding even a bad investment in some other currency. Diversification has never been more important because of the uncertainties. But the probability of a U.S. dollar recovery of any meaningful proportion is dim at best. Holding non-U.S. dollar denominated assets is probably the best route even if it means taking some losses now. But remember that real esatate can be sold for any currency. It will decline another 20% or more in many places but it will also recover.

Inflation is starting to take on a hockey stick trajectory if you look at a basket of goods purchased by the bottom 2/3 of the population.  The divide between those who have investments and can take protective measures outside U.S. currency, and those who do not have that luxury will be ever widening.  The average working stiff is going to continue to get paid in U.S. dollars that are worth less and less each month, while the number of dollars he or she receives remains constant.

My radical suggestion is that states and state banks go back to issuing proprietary currency. Deals should be made with holders of precious metals and financail isnitutions to give credibility and integrity to the new currencies and a new common exchange medium other than the U.S. dollar should emerge as the balancing mechanism.

Here is a little secret for you: most of the governors sitting on the Federal Reserve Open Market committee are well aware of the probability that new currencies will emerge.

Here is another secret, the use of derivatives has created “money” in volumes far in excess of all the fiat currencies in the world — so we have alrady gone private with currency when nobody was watching.

The Federal Reserve has been reduced to an inefficient bookkeeper when the transactions happen to flow through as ACH and wire transfers.

The state governments are on the right track — taking matters into their own hands. They should get support of the people — if they do not adopt the corporatocracy rules of Washington. In some states it is too late.  But we can always hope…..

Filed under: ATM, bubble, CDO, community banks, credit unions, currency, Eviction, foreclosure, GTC | Honor, interest rates, Investor, Mortgage, Obama, politics, securities fraud | Tagged: , , , , , , | Leave a comment »

Mortgage Meltdown Hurts Small Norwegian Towns: What’s Next?

Posted on December 2, 2007 by Neil Garfield

And this is still the tip of the iceberg. It is happening all over the world. 

Public officials are hiding it in the hope that a bailout might save the investments. They can’t stop the disclosure. The party is over. This time the intended and known consequences are being dwarfed by unintended and unknown consequences. Too many people know or are getting to know what really happened. And too many people know how to ask the right questions. 

Besides avoiding U.S. source investment products, people will be throwing out the babies with the bath water. All derivative products will be suspect, which while a good thing, will slow down capital infusions even where the investment should be made. All U.S. investment products will have to be disguised, which is probably a good thing because it will require approval of private and government people in other countries, where the lock on fraudulent behavior is not so calmly accepted. Very bad news here though for U.S. equity markets. 

The Fed can only print money so long before the value of the dollar even in this country is seen as suspect or even zero. It has happened before right here, in this republic of ours also during wartime in the revolutionary war and the civil war. We are teetering here in inflation unknown to most AMerican citizens because it hasn’t happened in their lifetimes and the history they learned in school didn’t include this vital piece of information. Paper currency is based on faith. It is faith based money. And we have lost faith with the holders of our currency here and abroad. 

But the most disturbing outcome is backlash. All Americans might be considered targets for retribution. Unless our housing market DOES completely tank and stay in the doghouse, foreign investors and governments will see the fraud as being shared by everyone in the United States — a perception of vast conspiracy that will undermine faith in the stability and integrity of our government and our society. Reports of catastrophic consequences to homeowners and renters will be dismissed as PR to distract the world from seeing America as a whole and not a few bankers as the cause of this unspeakable economic horror. It is unlikely that the housing market will slump to that degree, and some of the reason will be foreign purchases of our real estate, cheap now because of a near worthless dollar. In the end, the perception of our culpability will be felt down to the citizen level.

And so, prosecution of the people in each country will lead to prosecution and indictments of people in other countries and eventually all lead back to the U.S. All roads will lead back to us. The legal mess created by a legal war against the U.S. will spill-over into all our foreign relations. And like the rock that starts falling down the hill, it gathers up and disturbs other rocks and debris that were better left undisturbed. The value of the dollar, supported in fact (as opposed to economic theory) by world view of the power of America will be replaced with suspicion and unwillingness to accept the dollar as the common denominator in commerce.

We don’t have time for this. Action must be taken now. Candidates must realize that this debacle is actually more important and significant in foreign relations and world peace than Iraq or even oil dependence. If we want to save ourselves we will demonstrate convincingly to the world that we are a nation of laws and principle. Our leaders and/or candidates must recognize the significance of this. We must make heads role, prosecutions happen, strengthen and enforce regulation on derivatives in particular, and put people, big people in jail. 

This was a natural outgrowth of the excesses that arose with Enron, WorldCom and many other companies that got caught up in “creative” accounting and plausible deniability. while we did raise our statute somewhat, everyone remembers that we let it happen, and that people all over the world, their families, their friends, their vendors, their governments and everyone else who depended upon them and upon whom they depended were either destroyed or hurt badly by the corporate corruption scandal. The culprit of course is greed and those incredibly high CEO salaries and the lack of culture or accountability for real results. Appearances do matter, but when they become everything, then at some point the mirror cracks, the lights go out and all that’s left is vapor.

And if you want to see all this predicted and described 35 years ago in a book, and 40 years ago in articles, find a copy Unaccountable Accounting: Games Accountants Play (Hardcover) Publisher: Harper Collins; [1st ed.] edition (January 1972) Language: English ISBN-10: 0060104716 by Abraham J. Briloff .

Filed under: CDO, CORRUPTION, currency, Eviction, foreclosure, foreign relations, Investor, politics, securities fraud | Tagged: , , , , | 3 Comments »

Stupinomics

Posted on October 10, 2007 by Neil Garfield

So here is the issue. The Dollar has lost 30% against the Euro. So Europe is grumbling that US Exports are getting too cheap and hurting their producers. Good for US producers and bad for Euro producers. The free trade people point to this to show how trade is to the comparative advantage of the US and the value of the dollar must find its own level. That is true . But what is also true is that the displacement of both capital and labor is now entering a domino phase across the world. We still have the problem that the European community is starting to feel — because of China, but we will never have the same advantage as China unless we are willing to drop all restriction and regulation on the quality of goods sold. So if we are prepared to export e-coli or lead, we’ll do just fine. In a theoretical sense free trade is unquestionably the best road, except for emerging industries that need help getting started. But free trade is neither right all the time nor is it the whole story. We always seek the simple answers. The whole story includes the fact that while the long-term view favors free trade, we might never get to the long-term goals without paying attention to short-term effects — like massive unemployment and underemployment, massive inequalities of wealth and income, and disproportionate burden of taxes of all types. The third leg of this stool is that free trade is not free if the government steps in and favors the companies that have a death grip on the throat of the politicians who make and enforce the laws. That is how we end up in a tacit tyrrany (see Benjamin Rush, circa 1845) in the medical-industrial-insurance complex with ever-increasing costs and fees while keeping the dirty little secrets away from the busy consumer who foots the bill but he is not quite sure how. It is also how the predatory credit industries with credit cards, payday loans and other devices have institutionalized enslavement of the middle class — by diverting purchasing power from goods and services into wealth accumulation for the few — using interest rates that were always known and generally accepted as being beyond reason.

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