Sunday, November 04, 2007
US Money Center Banks Bankrupt?
Legally maybe not, but for all practical purposes, probably yes. Legally, now a days, does not mean too much since there is so much fraud and rotteness in the financial system.
Heck, Ben said "The banking system is healthy" on October 15. Why is he even bothering to make a statement like this? Does he see that others see that the banking system is anything but? Why did he preside over 2 Fed Funds Rate and Discount Window rate cuts? Is he getting us ready for a banking crash? In any event, if the banking system was healthy, nobody would be making statements like that. Making a statement like that is like screaming that the banking system is not healthy.
Did Ben simply panick?
"The last duty of a central banker is to tell the public the truth." - Alan Blinder, Vice Chairman of the Federal Reserve … stated years ago on PBS's Nightly Business Report
Anyways, the US financial/banking sytem is the opposite of healthy:
Hundreds of lenders have borrowed a record $US 163 Billion from the 12 Federal Home Loan Banks in August and September. What comes after a liquidity crises is insolvency. Looks like more bank runs to come. Countrywide's was just the first in the US.
The CEO of Merrill Lynch is gone.
The CEO of Citi might be after this Sunday's "emergency meeting".
Central bank reservers:
EU - $trillions
China - $1.43 trillion
Japan - $923 billion
Russia - $400+ billion
Tiawan - $263 billion
South Korea - $257 billion
India - $249 billion
Ready for it? -> US - $44 billion
Bear Sterns attempted to auction off otc derivatives. It called the auction off when bids went to $.30 or so on the dollar. To have finished the auction would have established real world prices for some of these otc derivatives, toxic waste. The BIS (Bank for International Settlement), the central bank for nation central banks, has a world total of notional (contract) value for these things at well over $400 trillion dollars worth. What would a completed auction have done for the value of the other otc derivatives out there in the world?
These derivatives are zero sum games like futures and options. If someone looses a dollar, someone has to gain a dollar. They are interest rate sensitive. Interest rates are going up because of the world wide devaluation of government fiat tokens. At some point someone is going to attempt to exorcise their contract, along with a whole lot of others. There are not enough legitimate entities in the world with enough real wealth to pay up on 1/2 of well over $400 trillion dollars worth of these contracts it seems.
How are they valued if there is no real world active market with real bids and asks for them?
A computer geek working for the owner of one side of the contract has a "model" he developed which he uses to value his bosses contracts. A computer geek working for the owner of the other side of the contract has a "model" he developed which he uses to value his bosses contracts. It is possible because of this for both sides of the contract to be showing a profit on their books despite this being a zero sum game. Not much integrity left in the world's financial system anymore.
Recent estimates of toxic waste value on books from http://www.occ.treas.gov/ftp/deriv/dq107.pdf:
MARCH 31, 2007, $ MILLIONS
The first column is Assets. The second column is derivatives.
1 JPMORGAN CHASE BANK NA ------------ 1,224,104 ---- 70,817,340
2 CITIBANK NATIONAL ASSN ------------ 1,076,949 ---- 30,069,982
3 BANK OF AMERICA NA ---------------- 1,204,472 ---- 28,535,873
4 HSBC BANK USA NATIONAL ASSN --------- 169,010 ----- 5,649,176
5 WACHOVIA BANK NATIONAL ASSN --------- 518,753 ----- 5,454,856
6 BANK OF NEW YORK --------------------- 83,608 ------- 959,681
7 WELLS FARGO BANK NA ----------------- 396,847 ------- 879,779
8 STATE STREET BANK&TRUST CO ----------- 97,978 ------- 588,222
9 PNC BANK NATIONAL ASSN --------------- 90,405 ------- 244,870
10 SUNTRUST BANK ---------------------- 184,810 ------- 204,160
“The gap between future US receipts and future US government obligations now totals $65.9 trillion, a sum that is impossible for the US to reconcile, which means the US is now technically bankrupt.” - St Louis Federal Reserve Review July/August issue 2006
"The coin is a delicate meter of civil, social, and moral changes...
It is the finest barometer of social storms, and announces revolutions."
- Ralph Waldo Emerson, 1860, "Essay on Wealth"
"The best measure of the dollar is that number of dollars it requires to purchase a measure of pure wealth -- an ounce of gold. Gold is both the unit and the messenger. The government and the central bank fear the messenger. The reason why they fear the messenger is obvious -- they are frightened of the message." Richard Russell … March 12, 2007
"...There is no nation on earth powerful enough to accomplish our overthrow. ... Our destruction, should it come at all, will be from another quarter. From the inattention of the people to the concerns of their government, from their carelessness and negligence, I must confess that I do apprehend some danger. I fear that they may place too implicit a confidence in their public servants, and fail properly to scrutinize their conduct; that in this way they may be made the dupes of designing men, and become the instruments of their own undoing."
--Daniel Webster, June 1, 1837
“Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money .” - Sir Josiah Stamp, who became a director of the Bank of England in 1928
Keynes was speaking here about the ability to control money supply.
"By this means government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft."
--British Lord John Maynard Keynes (the father of 'Keynesian Economics' which our nation now endures) in his book "THE ECONOMIC CONSEQUENCES OF THE PEACE" (1920).
"The other motive is to screw up the entire perception of inflation and its conceptual understanding, a project which fully deserves the claim "Mission Accomplished" to the masses. An entire generation of indoctrinated economists fills the ranks of colleges and universities." - Jim Willie
"This [Federal Reserve Act] establishes the most gigantic trust on earth. When the President [Wilson} signs this bill, the invisible government of the monetary power will be legalized....the worst legislative crime of the ages is perpetrated by this banking and currency bill."
-- Charles A. Lindbergh, Sr. , 1913
"Neither paper currency nor deposits have value as commodities, intrinsically, a 'dollar' bill is just a piece of paper. Deposits are merely book entries."
-- Modern Money Mechanics Workbook, Federal Reserve Bank of Chicago, 1975
"Every Congressman, every Senator knows precisely what causes inflation...but can't, [won't] support the drastic reforms to stop it because it could cost him his job."
-- Robert A. Heinlein, Expanded Universe
"During Greenspan's tenure, America was transformed from the world's largest creditor to its greatest debtor, from the world's mightiest industrial power to a second-rate service provider, and from a nation of responsible savers to one of reckless spenders,"
- Peter Schiff, President, Euro Pacific Capital
John Conolly, treasury secretary in the Nixon Administration,
put it bluntly in 1971 when the US decoupled the dollar from gold:
“The dollar is our currency but their problem.”
A communique sent from the Rothschild investment house in England to its associates in New York noted, "The few who understand the system. . . will either be so interested in its profits or so dependent on its favors that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending . . will bear its burdens without complaint."
Bernanki is just a puppet. "Weimar Bernanke", the man has no business experience,
no banking experience, no financial market experience,
yet is named to the most important central bank post on earth. - Jim Willie CB
"Those who create and issue money and credit direct
the policies of government and hold in the hollow of their hands
the destiny of the people." - Reginald McKenna, Chancellor of Exchequer, England
"We have gold because we cannot trust governments…Paper money
is a great aid to politicians: it makes it possible for them to confiscate
the savings of the people by manipulation of inflation and deflation".
- President Herbert Hoover
Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation. - Ben Bernanke remarks before the National Economists Club, Washington, D.C. November 21,
"Unconstitutional or not, the individual income tax (or any other tax, for that matter) will not by itself drive this country's economy to collapse tomorrow, next month, or next year. But the monetary and banking systems will--if not tomorrow, surely someday soon. And the resulting chaos will offer the occasion and excuse for the General Government to impose a police-state tyranny beside which the worst excesses of today's tax Gestapo will resemble Jeffersonian libertarianism." - April 9, 2005, Dr. Edwin Vieira, Jr., Ph.D., J.D., author of Pieces of Eight and coauthor of Cra$hmaker with Trader Vic
"Would you believe that I used to compute M3 myself, and that the Fed will be short handed after I retire?" - Jesse's Cross Roads Cafe http://www.geocities.com/arthurcutten/jesse.html
Sure enough! The Fed hasn't published M3 in over a year now.
Here is an interesting tidbit:
From BusinessWeek Online
Intelligence Czar Can Waive SEC Rules,
“President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations. Notice of the development came in a brief entry in the Federal Register, dated May 5, 2006, that was opaque to the untrained eye.”
There goes the transparency the US markets used to be known for.
Financially/economically, the US is a shell of it self. The opposite of what it used to be. No wonder the shares (US dollar) of USA, Inc. are making new historic all time lows. Gold is the protector of private wealth for those in the US. Too bad most in the US do not realize this. They will one day when it will be too late because they will be broke therefor unable to buy gold and silver.
The object of a bank run: