The goal

Man's ultimate quest for knowledge is found in simplification. Anything more is a waste of time. --jomama

Credit Crisis II...A World Financial Armageddon?

This is the conclusion we came to here at PrudentSquirrel, trying to ascertain where we are in the big picture on the Credit Crisis now. It is that the Central Banks are desperately trying to stave off Credit Crisis II, and they are losing, and probably knowing this, they will at some point confer together and pick a time to let the credit system implode, and try to weather the stock/financial crashes that will occur at that time. Likely, some currencies can collapse as well, and a great deal of FX (foreign exchange) chaos and restrictions will ensue for several years after the fatal date.

If it is true, as we suspect, that we are at the peak of a credit/financial bubble that started right after WW2 ended, and it is at a parabolic peak and cannot be sustained, then the world's central banks already know this too. They probably are trying to decide when to let go...They all don't have to agree, it only will take one major Central Bank to let go, then the others will be forced to follow.

The central banks in question would be the BOJ, the US Fed and the ECB, and likely the BOC. The Russian central bank is an odd man out and is a wild card, but not as central to the equation. Either all the major central banks listed keep up the same rate of infusions, or the end of the world credit system comes in a week or two after one 'lets go'.

Highly recommended.

The Federal Reserve Bank is not your friend

The impending global recession has nothing to do with crafty mortgage lenders, opportunistic loan applicants, dodgy rating agencies, or crooked home appraisers. That's like blaming Lindy England for Abu Ghraib. The source of the troubles is the Federal Reserve and monetary policies that are designed to rob people of their life savings.

Abolish the Fed.

Read.

The Fact: Lehman, Treasury, Fed Have Lost Control Of The Game

The reality, if one thinks about it closely, is the Fed and the Treasury never had control of anything in the first place. It was all an illusion that has now been unmasked.

Here comes The Big Buyout!

Do I hear a nickel on the dollar? (Limited time offer)

The whole article.

Delusion, the cure

"Reality is that which, when you stop believing in it, doesn't go away." --Philip Dick

A savvy politician

"A savvy politician looks for a parade already
in progress, runs to the front and pretends to
lead it." --Six term Arizona Congressman Sam Steiger

At Risk of Foreclosure Rise 55%, Bank Seizures Reach High

Original headline of this article doesn't match
what it states in the first paragraph.

I changed the headline to reflect that.

Nevertheless, it's still grim.

Bank seizures rose 184 percent to 77,295, the steepest increase since reporting began in January 2005, RealtyTrac Inc., an Irvine, California-based seller of foreclosure data, said today in a statement. More than 272,000 properties, or one in 464 U.S. households, got a default notice, were warned of a pending auction or foreclosed on.

``It's getting worse,'' Rick Sharga, RealtyTrac's executive vice president for marketing, said in an interview. ``The number of properties that have been foreclosed on by the banks and still haven't sold is the highest we've ever seen.''

Full article.

10¢ on the dollar anyone?

Not a bailout, a buy out.

(Links fixed)

Is this Sovereign Wealth Fund(SWF) action?

Look at these two charts, side by side:(Cash commodities
traded in dollars)

Obviously massive shift from commodities to dollars.

The Results?

Where will these dollars go?

(I don't believe central banks have this much
clout nor can they get together to act in concert
to prop the dollar...why I think it's SWF action
primarily. If I'm right, that means a wooden
stake was just driven into the heart of central
banking. Is there a new vampire in town? Well, at
least he's market-driven, not offering 'frebbies'
like the Fed, to be paid for by the all-suffering
taxpayer.)

Which SWF? Why?

Isn't this action a giant prop to the US
Economy...dollar up, commodity prices down...probably
minimal recession instead of Great Depression
and foreigners happy getting more for the
dollars they hold? Where will these dollars go?
US banks.

To see if that be true, probably best to watch this:

Where else (for now) would this cash go?

Who would benefit primarily?

Interesting that this coincides with the Chinese
Olympics, isn't it.

What I'd do if I was a Chinese SWF (a wag):

I'd make calls to banks offering to buy their
foreclosed properties at 10-20¢ on the dollar with
my US Treasury holdings (I've got a ton of them,
losing about 40% with the fall of the dollar last
year)...with an option to buy them back later
after the currency has increased in value. Banks
will eat them up. (This is assuming the Fed has
run out of money to trade T-bills for worthless
mortgages. I think we can count on that.)

Done...in some form.

I'd then refurbish these houses. Cost: 10-
20¢ more on the dollar, then sell them or
rent them for 50-60¢.

Good return on investment all around.

In the process the dollar probably gains at least
some of what I lost holding Treasuries.

Then I'd buy them back and dump them before they
go to junk.

Am I propping the currency so I can later sell those
tons of T-bills I have with aplomb, my ass intact
and keep my economy churning by pumping cash
into my best customers' pockets, the American
consumer?

That's my plan. But talk is cheap.

Now listen to the howls about 'furreners' buying
up America.

Been going on since the first white man bought
Manhattan from the Indians for a few trinkets,
the currency of the realm then.

What's changed?

Your mileage may vary...

In any case, watch for the next market to
whipsaw.

More on The End of Debt

If Bridgewater is anywhere near correct, governments alone have the wherewithal to rescue the system. This would mean the de facto nationalisation of the banking systems in the US, Britain and Europe.

Done in US...and supporting Standard & Poor's projection of government junk bond status.

I predict government alone doesn't have the capacity to
rescue the system. It's estimated by some investment gurus
that it will take some $2 trillion to do so. More on that
in the next post.

Full report.

With the Senate's passage of the Fannie Mae/Freddie Mac bailout last Saturday (July 26), the United States of America has now become the world's first full-service kleptocracy

We are supposed to pretend to believe that the Senate, so great was its anxiety over the nation's economically distressed homeowners, met in a rare Saturday session for the sole purpose of administering the balm of Gilead on hardworking families who confront the bleak prospect of foreclosure.

There may be people who believe such a thing, or at least profess to do so. They are pretty much the kind of people who believe that peace, prosperity, and progress will magically ensue after next January 20, when the Holy One, Barack Obama (peace be upon him) ascends to the presidency, not astride a White Horse, but rather mounted upon a flying unicorn that emits healing rainbows from its butt.
...

Let us disambiguate the key issue right now. This is a measure to nationalize Fannie and Freddie, plundering the population at large -- through direct taxation, the more insidious tax called inflation, or both -- to bail out two fascist entities that have been used to enrich the politically connected super-rich through the most corrupt means imaginable.

The full rant.

Good Money

Good Money not only examines the crucial role of private coinage in fueling Great Britain’s Industrial Revolution, but it also challenges beliefs upon which all modern government-currency monopolies rest. It thereby sheds light on contemporary private-sector alternatives to government-issued money, such as digital monies, cash cards, electronic funds transfer, and (outside of the United States) spontaneous "dollarization."

Read.

Gasoline as Money in Zimbabwe.

The current state of The Theory of Everything

A large change of topic now...

"Until we have a sensible theory that can explain the natural spiral shape of galaxies without invoking unseen matter and strange forces, we have no right to claim we have the ability to deduce a 'theory of everything.' "

Glad someone finally said it.

Why do you think I have a pic of the Spiral Galaxy on this blog?

It appears to be the most chaotic form of order in the Universe...and the most common.

Maybe neither words nor mathematics will ever suffice to describe it.

An artist would say so.

I say, wait and see.

I predict an astoundingly simple explanation will be found.

We "Complexity Generators" don't do that well.

I think I know why.

Do you?

The rest of this fine scientific rant...

The Dead Donkey

Young Chuck, moved to Texas and bought a donkey from a farmer for 100.00.

The farmer agreed to deliver the donkey the next day.

The next day he drove up and said, "Sorry son, but I have some bad news, the donkey died."

Chuck replied, "Well, then,just give me my money back."

The farmer said, "Can't do that. I went and spent it already."

Chuck said, "Ok, then, just bring me the dead donkey."

The farmer asked, "What ya gonna do with him?

Chuck said, "I'm going to raffle him off."

The farmer said, "You can't raffle off a dead donkey!"

Chuck said, "Sure I can. Watch me. I just won't tell anybody he's dead."

A month later, the farmer met up with Chuck and asked,
"What happened with that dead donkey?"

Chuck said, "I raffled him off. I sold 500 tickets at two dollars a piece and made a profit of $898.00."

The farmer said, "Didn't anyone complain?"

Chuck said, " Just the guy who won. So I gave him his two dollars back."

Chuck went on to work for CitiGroup.

Politics as usual...

There is a choice to be made: Either we regulate the Banks, or leave it to the vagaries of the free markets to punish those who trade with, or place their assets in the wrong institutions. But for God's sake, do not give us the worst of both worlds -- do not allow banks the freedom to make horrific but preventable mistakes (i.e., only lending money to those who can pay it back), but then expect the taxpayers to foot the trillion dollar bill.

That's not capitalism, its not socialism, its not regulation, and its sure as hell isn't what free markets are. Our language is insufficient to describe this hodge-podge system, other than to call it a random patchwork of quasi-capitalism, quadrennial-socialism, and politics as usual. Ideological idiocy is the only phrase I can muster that has any resonance with the daily insanity.

We have entered into a fit of Orwellian madness: The American Capitalists, long the globe's leading advocates for free markets, have become near Socialists. Halfway around the world, the Chinese Communists have picked up the baton, and are moving rapidly towards a form of Capitalism. Ironically, it is the once largest communist nations -- the Chinese and the Russians -- who holds much of Fannie and Freddie's paper.

Hey comrades, who's selling the rope to whom?

Full essay.

Going junk fast

As was predicted here...I also said it was going to
happen sooner that projected. Looks like it'll happen
even sooner that I thought then...maybe this year?



Click to enlarge.

Perhaps it is no surprise that traders in the credit-default swaps market have recently made bets on the unthinkable: that America may default on its debt.

Full story

The Internet: Killer Virus of the State

Al Gore knows it. Newt Gingrich knows it. The talk radio junkies can smell it, at least the ones who can read and write.

Our civic fabric is unraveling. And as it does, uncontrolled, undigested and unmanaged information is spewing out. Free reign is being given to a wild cornucopia of ideas and opinions that would never have passed into broad circulation filtered through the conformity of the old media.

Watch carefully as the various organs of state waken to the threat and fire up their immune systems.

Full essay.

The Stew

"Society is like a stew. If you don't keep it stirred up, you get a lot of scum on top.” --Edward Abbey