Tuesday, April 30, 2013

CANADA CRASH ALERT: Toronto Condo Sales plunge 47 percent

CANADA CRASH ALERT: Toronto Condo Sales plunge 47 percent

Truth is, Mike Whitney's article here gives crucial information as to the state of the Canadian housing market and prospects for the future. It is not a pretty sight.

And his conclusion is just as powerful:

Keep in mind, that the Canadian government guarantees 100% of roughly $640 billion in mortgages under the Canada Mortgage and Housing Corporation (CMHC). (which is another lamebrain idea by the shifty Finance Minister Flaherty) Eventually, a large percentage of these mortgages will default, which will send foreclosures skyrocketing, boost unemployment, push down prices, widen the deficits and set the stage for the kind of vicious "reforms" that right-wing budget hawks and austerity nutjobs love.
It's all part of the "social counterrevolution" that journalist Patrick Martin speaks of in a recent piece titled “Obama Spearheads Social Counterrevolution”. Martin says:
“In every country, the representatives of finance capital, having plundered national treasuries to bail out the banks and speculators, are now demanding that the working people pay the price…. Under conditions of deepening economic crisis, the ruling class is seeking to defend its wealth through a historic retrogression in the living conditions of the vast majority of the people.”
Well put, Patrick. Bravo.
While I am less a fan of the Republicans, Obama is constrained by the wealthy and does not have the power to fight back in any meaningful way. About the only thing he is doing is trying to limit speculation. But as long as QE goes to the wealthy and not to main street, Obama or any other president will be powerless to help main street in any meaningful way. 

Las Vegas Real Estate Driven By Greed Not Fundamentals

Here is an example of a house sale that is being driven by greed. The house was purchased here in Las Vegas for $142,000 in April of this year and is being flipped for $239,000 as we observed driving by a few days ago. It is still April!

This is just a blowout of everything we know about historical house appreciation and is a bubble price based upon the Zestimate found here. 

That Zestimate is $162,00. That is a bit of a bubble itself but is blown away by the asking price.

The folks living here are not going to buy this house, most likely, unless they think this bubble can be sustained. There are empty houses in this complex. They are sitting there not available for sale.

The comps are being busted by flippers. And if a Wall Street guy wants to raise the comps on the slew of houses he already owns he just has to offer this price on this house to do so.

It is a scam. Not saying the seller is scamming. But a buyer offering cash for this house would blow the comps out of the water and that is a massive and hurtful scam against main street.

Thanks to the Fed this speculation is occurring. This does not help main street. If there were laws against this sort of thing, perhaps QE would work for the people. But Bernanke has pretty much forgotten about the people and only cares about his rich cronies.

He is a bad man. He needs to put a stop to this madness.

UPDATE: In this crazy market, the house was dropped to 219k and went pending although I am not sure about the price. It is pure Bernanke and it is purely speculation. I hope this new buyer gets seriously burned. 

Monday, April 29, 2013

1st female Iraq war resister to be court martialed - Yahoo! News

1st female Iraq war resister to be court martialed - Yahoo! News

This is why you don't join the military if you understand America's wars have not been noble, like WW2 was, lately. 

Here's The Positive Spin On The Recent Crash In Commodities - Business Insider

Here's The Positive Spin On The Recent Crash In Commodities - Business Insider

Is Joe Weisenthal admitting that commodity inflation is a bad thing, therefore, speculation is a bad thing and the high cost of living is killing recovery? I think he is close. This is a sea change for Joe, who was wanting nominal GDP and even more speculation. Or maybe Joe throws stuff against the wall and hope things stick. I don't know, I just don't know.

Here were my responses: 

(URL) on Apr 29, 3:16 PM said:
OMG, Joe, you admit that speculation in commodities markets and the subsequent rise in the cost of living all over the world is a bad thing. I am proud of you Joe. Now, keep it up. I noticed you linked to another article about the evils of speculation here: http://www.project-syndicate.org/commentary/the-federal-reserve-s-policy-dilemma-by-nouriel-roubini
But realize that this will have to crash the housing market as the value of the commodities in all the houses no one but speculators want, is less. The commodity value of those houses is less. So, the fact that prices have doubled on some properties in the west is really bad.

This is how I interpret Cramer, Joe. Thee is always speculation in some market somewhere in the world and I will help you find it.


But this I do know, commodity inflation is killing main street.  


Saturday, April 27, 2013

2901 Crystal Bay Dr, Las Vegas, NV 89117 - Zillow Bullcrap Ben at Work

2901 Crystal Bay Dr, Las Vegas, NV 89117 - Zillow

This house price is a joke. Even Zillow puffed up estimate is 274k. They want 344k for a house that needs a pool that was resurfaced! And the house needs work!

Zillow lists the house as sold in 2001 for 235k. It probably went for near 400k at the peak of the bubble. Since there is no record of sale during the bubble the owners may have taken helocs and become seriously underwaters.

Now we have an investor driven new bubble that is unsustainable.

No sane regular person will buy this house for this price. There are empty houses her all over the place. I live in this neighborhood!

This is all because Fannie and Freddie don't require appraisals for Homepath homes and are quasi government agencies helping to jack up the price of houses. But if an investor buys this house he is risking a big takedown.

Debt, Growth and the Austerity Debate - NYTimes.com

Debt, Growth and the Austerity Debate - NYTimes.com

The cost of borrowing does not increase in Japan where debt is 200 percent of GDP. The only time borrowing increases is if countries are tied to the Euro. The PIIGS nations should get out of the Euro or Germany, who benefits from all this until her customers are impoverished, should get out. 

Thursday, April 25, 2013

Henry Blodget Is Wrong. It is Illegal for a Bank to Lend Themselves into Financial Danger

U.S. seizes on ruling to boost Wells Fargo mortgage fraud case - Yahoo! Finance

I will never forget the day that Henry Blodget, owner of Business Insider financial website posted in the comment section that the banks did nothing criminal in the financial crisis. Of course, it is pretty obvious that the banks did illegal deeds in distributing fraudulent AAA mortgage backed securities throughout the world.

But now we have a law enacted in 1989 to punish the Savings and Loans in the S & L scandal. Of course, because fraud on Wall Street is not criminal even though the same fraud would be criminal anywhere else, there is only the ability to file a civil lawsuit against the bankers. So I guess Blodget is technically right, even though it should be a crime to commit these massive financial frauds.

And it would be anywhere else but on Wall Street.

Anyway, the law says that banks cannot seek out mortgage insurance from the GSEs or any government agency like the FHA if they have not made loans that they prove can be paid back. The banks made lots of loans that they knew could never be paid back, on the old payday loan model. And they collected fees that made them flush with cash.

But it is illegal. It is not litigated in criminal court, but it is illegal for banks to make these kind of loans. So I guess thanks to legislators being in the pockets of the big banks, Henry Blodget is half right.  

Two Proofs that Business Insider Has Sold Out to Big Money

While I always knew Business Insider would eventually be brought back into the fold, after allowing me and others to attack the banks for their evil deeds, they have completely sold out to big finance and big power in these two articles. I cannot aggregate these articles in the title of this post because it is simply too nauseating.

In a word, Henry Blodget, you make me sick.

The first article takes the view that hedge funds take it as a badge of honor that teachers unions are fighting back. But the truth is, it is a badge of shame and dishonor. The hedge funds are heavily invested in charter schools and are paying a lot of money to kill teachers' unions.

This is simply another attack on the middle class. This is just chipping away so that big finance has even more power and greed. It is nauseating. The title of Julia's work tells it all.

I posted this at the article:

Hey Greg, this is all about Charter Schools and this is all about greed. Wall Street did the same thing to pensions because they want the fees. They have backed off that since they know pensions have the money to take crap collateral off their balance sheets. No such luck for the teachers.

Julia, this title is wrong. BI is wrong on so many fronts these days. You have sold out and although I know you personally have sold out, Henry has completely sold out to the financial mob. It is sick. Grace's piece on George Bush is just sickening.
That brings me to the second article by Grace Wyler. I don't know if George Bush gave exclusive pictures, or if BI was paid, although it is clear that with the new W Bush presidential library these pieces are popping up all over the internet. So maybe BI could tell us some  day what was in it for them to publish such a disgusting article.

And who are the "everyone" who miss George Bush? The title is sickening and it is a lie. It is a bold faced lie. BI has no shame. I wrote this at the article:

War criminals and a boatload of evidence they were behind 911. I can't believe Grace would do this. This is terrible. I realize that W is paying to get his image restored but this is blood money BI. Henry, shame on you.
Again, I don't know if Henry was paid for this, but I know Bush is paying to have his image changed and if Henry took money that would just be disgusting. Maybe he could tell us?
But it really doesn't matter as the title is just plain nauseating.

Wednesday, April 24, 2013

Noahpinion: KrugTron the Invincible

Noahpinion: KrugTron the Invincible

Paul Krugman is full of crap. He understands some symptoms of problems, and has some solutions. But what he wants is inflation and that has not worked so well lately. This blog post is a very interesting read. But there are chinks in the Krugman armor as well.

Here is where I agree and disagree with Krugman:

1. We do have massively tight money on main street. We have people not buying jewelry, etc.

2. I agree that stimulus should go to main street.

But this is where I disagree, that inflation in wages should be the goal. That seems to me to be a problem.

Remember, in 2002 Krugman called for a housing bubble. So that is a problem. His solutions are very dangerous. 

If you look at these charts, especially the second one, you can see that the price of housing, and therefore the commodities that go to making houses including land and materials, is massively overpriced.

It's Official: Paul Krugman Is Right (But He Has Not Won)

It's Official: Paul Krugman Is Right - Business Insider

Henry Blodget at Business Insider has said Krugman has won the argument against austerity. Krugman has not won. Here is the deal. Austerity is useless. So in that sense, Krugman is right. He is right about austerity

But he has not won and here is why: Stimulus if applied incorrectly makes things worse. Stimulus in an age of little regulation of commodity futures speculation will raise, not lower, the cost of living.

Keynesianism worked in the Great Depression because there were regulations limiting commodity speculation. That does not exist today. 

Tuesday, April 23, 2013

Justice says Armstrong was 'unjustly enriched' - Yahoo! News

Justice says Armstrong was 'unjustly enriched' - Yahoo! News

While it may be true that there is a case against Lance Armstrong for being unjustly enriched, to bring this case while the bankers were unjustly enriched beyond Armstrong's wildest fantasies is just pathetic. The Justice Department is just pathetic.

I am ashamed to be an American because their is no justice against the bankers for unjustly enriching themselves by way of the ponzi housing bubble. It was premeditated and wrong. It was RICO fraud and yet no one was prosecuted for unjustly enriching themselves. What a joke of a government we have.

See my article proving the housing bubble was a fraud.

Factory activity at six-month low in April: Markit - Yahoo! Finance

Factory activity at six-month low in April: Markit - Yahoo! Finance

Flash PMI dropped in the US down to 52 in April, from 54.6 in March. China dropped to 50 by the way, so that with Europe not growing, the world economies are slowing down. Too much deregulation in commodity speculation is forcing QE into the wrong place, away from helping main street and toward helping the investment banks and their cronies.

March New Home Sales - Business Insider

March New Home Sales - Business Insider

Turns out February new home sales were revised and dropped a whopping 7.6 percent instead of the 4.6 percent drop previously reported. So this little blip up is a not significant. RE sales are slowing.

Monday, April 22, 2013

Wall Street Moves To Single Family Homes - Business Insider

Wall Street Moves To Single Family Homes - Business Insider

Here is just another article with good links, showing that the investor driven house buying binge is Wall Street driven, which means it is a scam. Thanks Bernanke for the scam. NOT. 

Sunday, April 21, 2013

Mass. gov: Video shows bomb suspect dodging blast - Yahoo! News

Mass. gov: Video shows bomb suspect dodging blast - Yahoo! News

Now here is an article about one suspect dropping his backpack and a video that proves it. Only problem is that there is no video in that article!

Show us the video. 

Report: Russian Officials Warned FBI Alleged Boston Marathon Bomber Was a "Radical"

Report: Russian Officials Warned FBI Alleged Boston Marathon Bomber Was a "Radical" - Yahoo! TV

According to a congressional aide with ties to the Boston Marathon,  he seemed to not be happy with the FBI.

It looks like the FBI interviewed the older brother and family in 2011. But then, he went to Russia in 2012 and the FBI was warned in 2012, and did nothing. 

So, when the FBI looked into the case and closed it in 2011, the agency cannot just say that absolved them of responsibility. 

Saturday, April 20, 2013

Most EU bank union work can be done without law change: Eurogroup head - Yahoo! Finance

Most EU bank union work can be done without law change: Eurogroup head - Yahoo! Finance

All this means is that the Eurozone will have the power to shut down all Eurozone banks except the German banks. Germany will rule the Eurozone. The Germans finally are winning WW2.

The Germans have decided, I think, to defeat the surrounding lackeys by the rule of law, or at least the rule of their will, without making war. I suppose that is an improvement, but I wonder how long France and Italy can bow down to this manifestation of German power. 

Friday, April 19, 2013

Tsarnaev Brothers' Mother Suggests Son Was Contacted By FBI - Business Insider

Tsarnaev Brothers' Mother Suggests Son Was Contacted By FBI - Business Insider

Update: Henry Blodget of Business Insider did step up and question why the FBI dropped the ball now that revelations of their interviews of the family are public. Looks like mom was not so crazy after all. And if mom is telling the truth, she was interviewed 5 years ago. Something is fishy. The FBI dropped the ball, but was it negligence or on purpose? Anyway, here is the article from Blodget.

Update: It has been brought to my attention that some of the statements of the mother seemed to be a bit nutty.  At some point, after this is all over, the FBI will have to produce the photo showing one of the boys dumping his backpack into the trash. Supposedly they have that picture. Perhaps it is evidence now, but in the future it must be released. We are still waiting for the Pentagon tapes to be released regarding 911.


This is a troubling development. It is not yet at the stage of the 911 interference by Cheney. However, the FBI could have talked to these kids a long time ago and told them they were being tracked. Then innocent people may be alive. today.

I am not accusing the FBI of actively encouraging these kids, and we certainly hope that is not the case. But the FBI could have spoken to these kids, or at least the older one, a long, long time ago. All they would have had to say was that the  politics of these boys not lead to violence. I bet this could have been nipped in the bud a long time ago. 

IBM Shares Crushed After Earnings - Business Insider

IBM Shares Crushed After Earnings - Business Insider

It is amazing that our big corporations do not rebel against the big banks and condemn the speculation that drives up prices for goods like food and gasoline. These corporations have a lot to lose because of the bad behavior of the bankers. And this revenue miss is an example of financial weakness caused by the speculating bankers and their cronies. 

Thursday, April 18, 2013

UK economy Disaster - Business Insider

UK economy Disaster - Business Insider

The AAA credit rating was important. While it will be unlikely that it will decline further, if it does, UK bonds for pristine collateral in the swaps markets will be limited. The governments in this bind have 4 choices:

1. Continue with austerity and hope things turn around.

2. Do more QE type money printing and let it all go to the wealthy in commodity speculation.

3. Pass regulation that would require regulation of speculation so that the banks would invest more in the nation.

4. Just give money to the people, as the money in the financial system is not helping main street. Eventually that kills an economy.

I would like to see a little of 3 and 4, before 2 is attempted again.

Keynesian stimulus only really works in an atmosphere of regulation of speculation. Deregulation is something that has existed in the UK for a long time. They never had Swaps rules, or Glass-Steagall, and that caused Thatcherism to allow all kinds of bad speculation and lending, and it came to the US in the form of interest rate swaps contracts where the banks took the low and floating side of the bet. And it came to the US in the form of the very destructive housing bubble last decade.  

Wednesday, April 17, 2013

Banks Could Return a Favor to Governments - Fair Game - NYTimes.com

Banks Could Return a Favor to Governments - Fair Game - NYTimes.com

Bankers have embedded interest rate swaps into municipal bond contracts. Isn't that great America? Not!!

These swaps were a scam, and in the UK the banksters are forced to settle but in the US no such thing is permitted. What a scam!

Here also is my article about the settlements in the UK. 

BTW, this is the only NY Times columnist with balls, and it is a woman! Step up you cowardly men like Sorkin and the rest.

Tuesday, April 16, 2013

More CRA Idiocy | The Big Picture

More CRA Idiocy | The Big Picture

Barry says, and I agree, that the bulk of the subprime loans were written by non CRA banks. That is, of course true. He points out an interesting point: No CRA banks imploded with the financial meltdown.

Of course you can't forget the chart I used as further proof. I came to my conclusions based upon the chart, and Ritholtz came to the same conclusion, that the CRA was not the catalyst for the housing bubble. While there was a CRA mini bubble, by itself it would have gone nowhere. 

Monday, April 15, 2013

Pension-law proposal would hit some retirees - MarketWatch

Pension-law proposal would hit some retirees - MarketWatch

Massive cuts to retirees on private pension plans would be a bad idea. It is one thing to change things for new hires, but they want to massively cut current pensions to folks who need the money.

If the stock market crashes again, and it very well could, this problem could get much worse. Companies and workers must contribute more to the pension plans. That seems like a no brainer to me. 

Saturday, April 13, 2013

Howes Percival - News & Events

Howes Percival - News & Events: Failure to ascertain customers understanding of risk;

Notice, that the banks in the UK failed to evaluate customers understanding of risk. That could apply to our housing bubble and swaps here. Why aren't the regulators doing the right thing here.

Failing to evaluate customers understanding of risk should be RICO fraud and should be a crime. 

The Great UK #interestrateswaps Scam and What About the USA?

The interest rate swaps scam relates to this chart that I pulled from FRED:

Interest rate swaps at issue, were written between 2002 and 2010, and the banks took the low interest side of the swap, knowing that Bernanke and the swap market needing collateral would both force interest rates down. This, of course has killed corporations and governments that were forced, or sometimes volunteered to take the higher, fixed rate of the swap. As rates went down, the fixed rate that was supposed to protect against higher rates killed the counterparties.

Governments are paying this tribute to the TBTF banks, and so are corporations. One of the reasons the large corporations are hoarding cash is to avoid these swaps!

Now that interest rates are rock bottom, there is less risk to the counterparties, but it is still tribute, as companies must succumb to this swap if they want the loan. The swaps actually create a demand for pristine collateral, as I wrote on Seeking Alpha under my author name, Gary A, and that is the goal of the Fed and the banks, to create demand for US treasuries.

That demand for collateral has the effect of keeping interest rates low. That demand protects the banks who take the low, floating side of the bet.

Well, as the hashtag says, #interestrateswaps, it turns out that the tweets that are connected to this hashtag reveal that in the UK, companies are trying to get some relief from this swap scam that has seen their hedge blow up in their faces. The UK has ruled that companies have the ability to seek justice, but no such finding has been determined for Wall Street as of the writing of this article.

The LIBOR scandal has brought this interest rate swaps scam to the public view, but the scam, in my opinion, is the swaps themselves, sold as inflation and interest rise protection when the central banks determined the direction of rates, oh, and the swaps themselves increased demand for the treasuries, further insuring low interest rates. It is like a circular game the banks are destined to win!

Of course, like the MBS settlement in the US, it is unlikely that the UK barristers will succeed in getting full justice. This may trim bank profits a little bit.

But a little justice is better than no justice. Here are a list of websites that I gleaned from the hashtags #interestrateswaps and #swaps that are involved in trying to get justice for these swaps:

Demystifying Interest Rate Swaps 

Interest Rate Swaps Being Mis-sold to SME's

GP Practices Among Hardest Hit by Interest Rate Swaps Scandal

Berg Linkedin Interest Rate Swaps Discussion Group

Berg: Do You Have a Dispute Over Mis-Sold Interest Rate Swaps?

Interest Rate Hedging Product Mis-Selling

LexLaw Interest Rate Mis-Selling

Clearly, the help for companies in the USA has been put on hold. Wall Street is even more intransigent than the Square Mile in the UK! Maybe we are poorer here. We do know that JP Morgan is the leader in this Swaps Market that makes the MBS market look like child's play. Our companies should get some sort of relief if the UK, the center of financial skulduggery can see that a huge injustice was done.

But we know that the robosigning scandal gave 80 percent of the victims less than $1000 in the banking settlement. So if we are looking for justice in the USA as regarding banks, don't hold your collective breaths.

Friday, April 12, 2013

Profits At High, Wages At Low - Business Insider

Profits At High, Wages At Low - Business Insider

It hasn't dawned on Henry Blodget that the reason corporations are so reluctant to pay more or get rid of their cash is because they are forced to be their own banks. They can't trust the banks to help them if the economy turns down. The banks will just stop lending like before. So this is the problem with the banks, who engage in speculation in commodities futures, stocks and housing, cause bubbles and then pull back on lending. It doesn't have to be this way.

But the laws of the nation encourage speculation by Goldman Sachs and others. In societies that are sound, like Japan, this sort of speculation does not happen as much as it does in the US. The investment banks are the enemies of the people, in my opinion. They force companies to hold back on wages because the investment banks, who have a commercial arm as well, simply cannot be trusted to lend when things go bad. 

Unlike Fed, BOJ's QE Won't Unleash Hot Money - Yahoo! Finance

Unlike Fed, BOJ's QE Won't Unleash Hot Money - Yahoo! Finance

I have been saying for many years that the Fed releases hot money, that goes into commodities and into housing appreciation. This ultimately hurts the young and the commodity inflation hurts everyone in the grocery store, at the gas pump, etc. The stock market can be a bubble in this scenario.

With the Fed issuing money, QE spawned "risk on", which is a Fed euphemism for speculation. This article says that the Japanese will invest in safer ways, but we will see if they do, to help the nation or if they will be greedy like US private equity firms, hedge funds and investment banks like Goldman Sachs and JP Morgan.

Guess we will have to wait and see.

Thursday, April 11, 2013

Thanks To Japan We Know How Central Banks Can Control Inflation - Seeking Alpha

Thanks To Japan We Know How Central Banks Can Control Inflation - Seeking Alpha: This is a passage from my article on Seeking Alpha. I think gold bugs and others may find it interesting:

So, if we use the Japanese model to show what would happen in the U.S., I don't think that Ben Bernanke worries about inflation. I don't think he will allow MainStreet to be flooded with money. And certainly, while this will hurt the people, it will keep the system going for a long, long time. American debt is denominated in dollars, so that the appreciation or depreciation of other currencies has no effect on U.S. debt.

Japan is like the U.S., in that Japan won't run out of money. And those who fear hyperinflation in the U.S. can look at Japan and think no hyperinflation.

Buying gold to hedge against inflation is almost a scam under this scenario. Gold is pretty. Gold is collateral, not quite perfect. But as a hedge against inflation, it isn't needed!

Am I saying the people in the nations should be happy with this scenario? We have the BOJ forcing insurance companies and pension funds to buy bonds, and we have pension funds and insurance companies here, in the U.S., taking bad collateral off the books of the banks.

Wednesday, April 10, 2013

Winner Takes All: The Super-Priority Status of Derivatives

Winner Takes All: The Super-Priority Status of Derivatives

Based upon this article, governments should pull their money out of the TBTF banks immediately, because those banks could go under and depositors would have to pay. It could wipe out pensions, all government budgets and at that point the govenment should have to kill the bankers, but they won't. 

Special Report: How the Fed Fueled an Explosion in Subprime Auto Loans - Yahoo! Finance

Special Report: How the Fed Fueled an Explosion in Subprime Auto Loans - Yahoo! Finance

This is a must read article. It proves that the banks and the big companies like Blackstone are in business to make subprime loans and cause lots of problems in society. These loans have a difficulty for the borrowers to pay back. The interest rate are too high, coupled with a small down payment that makes the payments higher as well.

This easy money is similar to, but smaller in scale than the easy money that fueled the housing bubble. 

Tuesday, April 9, 2013

Monday, April 8, 2013

Margaret Thatcher Died Today and I Am Not Sorry

Margaret Thatcher deregulated banking in England. There was no Glass-Steagall. There was nothing to stop the derivatives that resulted, the housing bubbles and bank fraud that happened in the UK and in the USA. Thatcherism was a blueprint to overturn all that was gained in the Great Depression.

Thanks to Thatcherism, interest rate swaps rule the world and keep the people from experiencing true prosperity. Thanks to Thatcherism, the banks can force borrowers to buy protection, the high fixed interest rate swap to battle the interest rate rise that will never come.

Here is how it works, and remember, I am on the outside looking in. Either the banks, in this environment of derivative weapons of mass destruction, can keep interest rates low forever, or they can sell enough toxic easy money loans to offset interest rate swap losses as interest rates rise.

But since interest rate swaps are now estimated to be a 700 trillion dollar market, I doubt if a housing bubble can sustain losses in the swaps. The chart in this article about austerity shows exactly where the crisis occurred when the losses in swaps started. Those losses threatened the entire banking system.

In the days of a strong middle class, the derivatives did not exist. The banks made loans to people in the real society based on sound underwriting. They speculated on commodities less. They allowed the middle class to prosper.

Now banks want to force companies to take interest rate swaps, as I wrote on Seeking Alpha. This creates demand for treasury bonds, which keeps interest rates low. That business, being forced upon companies by the TBTF predatory banks, is not likely to go away anytime soon.

Perhaps Thatcher, in her libertarian zeal, didn't see that coming. But surely she understood that regulation happened because the banks did bad things in the Roaring Twenties leading up to the Great Depression. She knew that this deregulation would cause bad things. Derivatives are very bad things.

From Wikipedia we get this telling information:

In 1982, Congress passed the Alternative Mortgage Transactions Parity Act (AMTPA), which allowed non-federally chartered housing creditors to write adjustable-rate mortgages. This bi-partisan legislation was, according to the Urban Institute, intended to "increase the volume of loan products that reduced the up-front costs to borrowers in order to make homeownership more affordable."[128] Among the new mortgage loan types created and gaining in popularity in the early 1980s were adjustable-rate, option adjustable-rate, balloon-payment and interest-only mortgages. Subsequent widespread abuses of predatory lending occurred with the use of adjustable-rate mortgages.[49][129] Approximately 90% of subprime mortgages issued in 2006 were adjustable-rate mortgages.[4]
This was Ronald Reagan's answer to Thatcherism, and Reagan was influenced by Thatcher who got her marching papers from the Square Mile, which I view as being the very seat of modern banking oppression, ie, the new world financial order. Reagan established the deregulation for the future housing bubble in 1982, and he was the cause of the bubble here.

But Thatcherism was the foundation for this Reaganism. The banks had the ears of these two politicians who were tied at the hip. The adjustable rate versus fixed rate dilemma, which lead to interest rate swaps and toxic home mortgages has been in the works for some time.

And as I said, there was no Glass-Steagall in the UK to stop this from going on there. To make easy money really easy took the repeal of Glass-Steagall here and the establishment of derivatives swaps, both interest rate and mbs, that put the financial system on the brink.

We had liar loans thanks to Reagan. The UK had self certified loans, which is a nice way of saying liar loans, there, thanks to Thatcher.

The regulations that came out of the Great Depression that limited commodity speculation, easy loans, contagion between banks with bad collateral on their books, and that forced derivatives regulation, were good rules. They were necessary rules.

Now look at what has happened precisely because these rules were brushed aside so that the phony invisible hand of selfishness and of libertarian greed could do its dirty work. 

Thatcherism was a libertarian movement. They worship the woman. But she oppressed everyone else, and Will Rogers warned about people like her. He warned about loans with a dollar down.

Will Rogers warned that everyone should look around at the guy who has the fanciest house. He is the banker. Rogers warned that freedom from bankers can only happen by not accepting their easy terms. That part of Rogers' legacy has been subdued by the main stream media on purpose, so that the bankers could take advantage once again.

Will Rogers was the most popular man in America, and with FDR, taught the greatest generation a lesson with regard to bankers, avoid their loans, and especially easy terms, at all cost.

So, Margaret Thatcher died today. I am not sorry.

Investing in Bonds Europe: Interest Rate Swaps

Investing in Bonds Europe: Interest Rate Swaps

This is a good primer on interest rate swaps, with the understanding that now banks force counterparties to take a swap. All the banks have taken the low interest bets and take the floating rates and give the counterparties the fixed, higher rate.

This is "protection" sold to the counterparties desperate for loans. Without the loans they can't make payroll or whatever. So they are forced to take the swaps. 

So the banks are on one side of the trade, and Bernanke will follow a slow growth policy, and Europe will follow a no growth policy, to keep this game going. And it could continue for a long, long time, unless some unforseen risk, a black swan, gets in the way. It is unlikely though.

Instead of banks making loans to people, they buy AAA bonds, and take them in as collateral on the interest rate swap bets. They want good collateral in case the counterparties default. The banks generally win and the counterparties pay tribute, the higher rate, if they want the loan in the first place.

The system sucks. But there is no liklihood it will change any time soon.

Europe could find problems with her banks since there may be a shortage of good collateral for these swap trades there even more than in the USA.

Friday, April 5, 2013

Austerity Is Placed on America in Three Crucial Ways

Austerity is put upon the citizens of the United States in three ways:

First, the low interest rate regime started by Alan Greenspan is here to stay. So, savers are affected as they invest but get no return unless they take massive risk in the stock market. The interest rate paid to savers is not fair. But the banks would go under if they had to pay much more.

This cannot change because the banks have so many bets that the interest rates will not go up that they would be wiped out if the rates went up. It is a casino, but at the level of the interest rate swap, it is a rigged casino.

The Fed does not, at this point, have to steal depositors money like in Cyprus. However this could happen in the future and Bernanke said it was "unlikely'. That means it could happen. But for now only fair interest rate returns are being stolen.

By the Way, as Ellen Brown has pointed out, the deposits made to the bank are the property of the bank until the customer withdraws them. So, the bank has the right to keep the money if insolvent. It is a loan to the bank gone bad! 

Second, the rising cost of commodities is made possible by QE from the Fed. The rising cost of commodities pushes up the price of housing, gasoline, food, etc. The QE could be used for the real economy, but that would heal the real economy and interest rates would go up. The Fed does not really want the real economy to heal for long, if at all.

QE is used for speculation since it is not permitted to be used for loaning to main street. The banks view main street as a cancer, but the banks are the real cancer.

Frugality and multigenerational living may be the only answers for many as we slip into economic decay. How much decay can we stand? Well, we know other great nations have withstood decay, as in the 1997 meltdown of the Russian economy and the 2001 meltdown of the Argentine economy.

The 30 year loan will be out of reach for most, because the banks don't want to really tie up money that long anyway. They do make money by exotic easy no-money-down loans. And those may come back as they can be pawned off to investors by the guarantee made by Bernanke to give government backing to most loans going forward.

Interest rates can go up a bit for the small time the bubble is in place, The banks make so much money on toxic loans that it could make the banks profitable for a time. But, as people start to default en masse, the hot, speculative, money will be withdrawn and interest rates must plunge downward fast.

The method of operation is a diabolical one, and an attack upon main street. The cancerous To Big to Fail banks will stop at nothing to make a profit off the backs of everyone else, through low or slightly higher interest rates. 

The weak link to this austerity regime is the collateral that is used to back bank loans. If the collateral is backed by the government, there won't be a run on money market funds and banks. But all that backstop could put the government at risk of losing pristine credit ratings. Too many phony booms and busts with no real economic growth saddle the government with too much debt.

Since good collateral is scarce, the failure of the United States to provide good collateral in her treasury bonds, and an abundance of loans gone bad that must have a government bailout, could ultimately prove to be the weak link in this banker dominated world financial system.

But that could be years, even decades, away. Remember the last crash in 2008 was based on Mortgage Backed Securities (MBSs) being very bad collateral and the money market was spooked. There was a run on the money markets.

That brings us to the third way that austerity is placed on America, through loans companies are forced to swallow:

Third, the low interest rate regime causes banks to win on the swaps. For example, the LIBOR rate in Euros, (I could not find a Fred graph with LIBOR in dollars but this will do), can be overlaid with the swap rate on fixed interest. The red line is the bank floating bet, ie LIBOR, and the blue line is the fixed rate taken by counterparties to the bank.

You can see that except for right after the housing crash, the banks were making more on the swaps than the counterparties. And they lose the bet once interest rates rise and their floating rates rise, which would cause LIBOR and interbank lending to go haywire. So, the banks became unstable both from floating rates exceeding fixed rates and from banks knowing that their bank buddies were screwed as well. My analysis agrees pretty much with this PIMCO analysis: http://europe.pimco.com/EN/Education/Pages/InterestRateSwapsBasics1-08.aspx

That bumping of the LIBOR rate was the crisis for the banks.

The banks were winning the "bet" until the spike. And the run up of LIBOR in 2006 and in to a lesser extent, in 2000 were the housing and the dot com bubble, in which banks made huge money on the housing and stock market businesses to offset the swaps deficiencies.

Now that LIBOR is bumping along at zero interest rate, what is the strategy for the central banks now?

They have LIBOR where they want it, and some of it was because of manipulation, so counterparties are suing the banks.

Also, many counterparties are now forced to take the fixed rate side of the bet if they want a loan. The lender forces the company to take a variable rate loan, then offers protection in the form of an interest rate swap so that the company has a guaranteed fixed rate. The bank assumes the floating rate.

The banks want that floating rate because they know that Ben Bernanke has their backs. The chart above proves it. The banks know the casino is rigged in their favor. They have better odds than the house in a Las Vegas casino!

So then, the bank insists that the borrower take the fixed rate as was discussed at my Seeking Alpha article:  http://seekingalpha.com/article/1300741-we-face-derivative-collateral-deflation-and-ecb-banks-could-be-the-losers

This forced protection is mob-like. It makes the mob look like small potatoes. If the counterparty, either government or private corporation, seeks to terminate the swap, there is a prepayment penalty, of course. And governments in the US have had to pay that penalty, though some , like Oakland, California, did contemplate just walking away from the toxic bets.

And for LIBOR going negative, as the chart implies, even banks would have to pay for protection as is happening in Switzerland. But that is a whole other topic. That could result in more speculation, and maybe a few loans for main street. It may not be good if speculation is the result.

Thursday, April 4, 2013

Gold Takes Out Major Support: Next Stop $1,350 - Seeking Alpha

Gold Takes Out Major Support: Next Stop $1,350 - Seeking Alpha 

I warned people about gold. Now it is dropping like, well, the rock that it is. There is value in gold, but leveraged value is not true value. Gold is volatile and is good but not pristine collateral. The need for collateral is so large, in the interest rate swap trade, that there isn't enough gold in the world to back these trades.

Wednesday, April 3, 2013

The Tequila Crisis: The Prelude to Europe’s Economic Storm | Raging Bull-shit

The Tequila Crisis: The Prelude to Europe’s Economic Storm | Raging Bull-shit

The Tequila Crisis was an attack on consumers. Now consumers are being attacked in Europe. They are being attacked in the US with low paying jobs versus a cash bubble in real estate. What affect will this have on rents and will this cause mass homelessness or multigenerational living? People are postponing families and the birth rate is declining, all so the banks can make some money.

This is getting to be a very dangerous state of affairs that is an unsustainable business model. And Bernanke must know this. 

Tuesday, April 2, 2013

Bank of America: Why All the Hate? (BAC, JPM, WFC)

Bank of America: Why All the Hate? (BAC, JPM, WFC)

Bank of America is despised for its mortgage division. But savings deposits are not very safe, since derivatives are first in line for any FDIC insurance payouts. They are 65 trillion dollars leaving no money for any depositors. So, while it is unlikely that the derivatives go bust, there is always the possibility that they could.

If interest rates were to rise, and it is unlikely, the derivatives would go bust, and  the FDIC would pay the counterparties first, and those with FDIC insurance would likely lose. Those with more would likely see much of their savings wiped out. Again, the scenario is unlikely, but Bernanke treats bank depositors like crap for putting the derivatives first in line for the insurance.

Just remember, when you deposit money in the bank, you are loaning the bank money, and technically, the money is not yours, but belongs to the bank as long as it is in the bank. Just FYI.

Kind of makes you feel warm and fuzzy all over, right?

Monday, April 1, 2013

Caruso-Cabrera Is Lying Again About Stockton

Michelle Caruso-Cabrera joins the bond holders from Wall Street in wanting pensions to take less than legally required in Stockton. The reason why is so the bondholders can get more!

This is Wall Street greedily wanting more. The law protects the pensions. The money has to come from the bondholders. The law is the law. The pensions did not send the city into bankruptcy.  

Truth is, the Wall Street creditors only want to negotiate the system if  they cities hurt the pension funds The judge said that was not right! The judge let the city enter bankruptcy because the bondholders were holding the city hostage! 

Caruso-Cabrera lies in what she refuses to say, that she is on the side of the bondholders who are not negotiating in good faith because of their vendetta against the pension funds.

The CNBC pundit does not tell you that the bondholders want to be first in line for the assets of a bankrupt city and don't like playing second fiddle to a middle class bastion, the pension funds.

Here is the deal folks, pension funds are one of the last bastions of middle class wealth. Wall Street wants that wealth reduced in their insatiable greed to gain the upper hand.

And Michelle Caruso-Cabrera knows this very well.

I am sick of the bitch. She has sold her DAMN soul to Wall Street. She is arrogant and hurtful.