Saturday, March 28, 2009

Zombie Banks and Fiat Currencies

Important: Watch The Obama Deception and pass it on to your friends. Quit thinking about politics in terms of Left-Right. We have a one-party system, the Demopublicans, controlled by the same owners. Start developing the Big Picture. Time is short!

The Federal Reserve has chosen to try to save the economy and the Big Banks at the cost of destroying the value of the dollar. On March 18 the Fed announced it would monetize $300 billion of Treasury Bonds by printing up the money to purchase them. Hyperinflation is on the way. With buyers of soon to be worth-less dollar-denominated debt dwindling, the Fed has chosen the "Weimar Solution" to deal with our sky-rocketing debt load.

Germany's decision to debauch its currency to pay its World War I reparations wiped out the middle class and led to the rise of Hitler. History repeats itself. "The best way to destroy the capitalist system is to debauch the currency," said Lord Keynes, the guiding light the politicians in the District of Corruption. We have our charismatic leader and are moving rapidly into Moussolini-style fascism.

As Gary North put it, we are now on the road to a never-ending series of bailouts until the dollar evaporates, like the German Mark of the 1920's, or more recently, the Zimbabwe dollar. Whatever debt remains, our grandchildren get to pay.

"The response of the FED and the Treasury has been to increase the national debt, increase the issuing of fiat money, and swapping toxic assets for AAA-rated T-bills at face value. All of this has put at risk the solvency of the government, the stability of the dollar, and the economic futures of most Americans. . . . Bailouts always come at the expense of the majority of taxpaying citizens. The FED and the Treasury can and do subsidize big banks. The biggest banks will be protected from bankruptcy by the existing political structure. But these narrow subsidies must be paid for. They will be paid for by four groups: those who buy and hold Treasury debt; those who buy and hold dollar-denominated assets; those who are dependent on fixed dollar income; and taxpayers in the higher brackets.

If you are a member of one or more of these groups, your future is at risk. Your dreams are being sacrificed by the money managers who enjoy operating in a nice cartel. They have gained the support of the senior decision-makers in the U.S. Treasury, which is staffed by representatives of the cartel."

You can subscribe to Gary's free, twice-weekly newsletter here. You also get the free Daily Reckoning at the same time.

George Soros, who made billions on international currency devaluations, recently predicted a 30% drop in the value of commercial real estate along with hyper inflation. The LA Times calls the collapse of retail stores in New York City a "second, silent 9-11." We're headed for systemic failure. Gerald Celente predicts unemployment of at least 25%, food riots, and economic Armageddon by 2012. Along the same lines, another writer predicts "the end of America." He moved to Ecuador to experience "stability."

The Federal Reserve, and its money-creation scam, is at the heart of the problem. It is the source of our boom-bust cycle and monetary inflation that has a $20 gold piece selling for almost $1,000 Federal Reserve Notes (FRNs) today. It is imperative that you understand the system. We must all understand it, and work to abolish the Fed and return to sound money. Freedom to Fascism and Money as Debt help explain the system. This article article also explains how the Fed operates, and how its actions today are like trying to put out a house fire by pouring gasoline on it.

Yet, SecTreas Timothy Geithner is moving ahead to implement the Treasury reorganization plan proposed by Hank Paulson last October which would put almost all non-bank financial institutions directly under the Fed. This is absolute madness. Yet, most Americans are largely silent while our nation is being destroyed! They squawk about the about the AIG bonuses, but that's small potatoes to the biggest heist in history occurring before our very eyes. Leave it to Rolling Stone to point out how "Wall Street insiders are using the bailouts to stage a revolution." "It's over — we're officially, royally f****d," says the author.

Rep. Dennis Kucinich recommends nationalizing the Fed. Ron Paul says abolish it.

The "end game is approaching." Even as the Fed is now creating FRNs out of thin air to buy US Bonds to store them in their vaults, market action this week indicates that strong (i.e, foreign holders) are selling their T-bonds into the market. This can't keep up. I've reported predictions by reputable sources of US debt default by summer or fall.

Yet I talk to people daily with blind faith, really blind faith, that everything will somehow work out. One of them even bought stocks last week on "inside information." I know people who have their money in dollar-denominated assets, so they can get dividends or interest. Never mind that the purchasing power of the dollar will be dropping by double-digits annually very soon. They would rather have a 3% return in depreciating dollars than preserve the purchasing power of their life savings!

Yet, market old-time Richard Russell says the BIG money will be made in gold. (Actually, the amount of gold will stay the same. It will just make more and more depreciating dollars to buy the same amount.)

Our generation is moving into a crisis like we've never experienced. Our character will be tested as never before. Yet, as a nation, our character is not what it used to be. Just as fiat currency has debased the value of money with price inflation, so has the chasing of materialism and the flaunting of Judeo-Christian values debased our character. So we have to start making repairs to our ethics along with fixing our money.

I don't like writing about this stuff. But folks, we've got to wake up, not just individually, but as a whole. It is time to realize that we're being screwed, to put it mildly. The politicians will not fix it. Wall Street and the Global Elite own them, just like they own the media that should be holding them accountable and shouting warnings from the house tops.

I know everyone is busy trying just to keep a roof over our heads and food on the tables. It has been planned that way. But if you think times are hard now, just wait until we travel farther down this path. What the Global Elite have in store for us is not pretty. So even as I take the time to post this instead of working on my business, I'm asking you to take the time to bring yourself up to speed and help awaken your friends and neighbors. And make preparations for hard times.

There is much more happening than I can hardly keep up with and relate in special reports. You've got to start digging out the news for yourself. Visit the links on the right side of my site regularly to help you stay up with what's important, and not just what the controlled Mainstream Media wants you to know.

The Global Elite and their political representatives are gearing up for social breakdown all over the globe, including here in the US. Total surveillance measures, FEMA concentration camps, militarization of the police and martial law are all in preparation. This summer still promises to be the "summer from hell."

Joel Skousen, in his excellent weekly newsletter (subscribe here) , included a good analysis of the irreparable damage already inflicted on the economy. Notice that the corruption of the Obama administration runs just as deep as in the Bush administration. I offer it as further proof below.

Despite the wishful thinking of investors and manipulators pushing up stock indices, the Geithner-Bernanke duo is scrambling to avert a complete meltdown of public confidence in their saving powers. Treasury Secretary Geithner is looking more and more like a youthful amateur in his pronouncements and Fed Chairman Ben Bernanke can no longer give a straight or honest answer. New proposals, all without details, are emerging faster than the pundits can praise and absorb them--acting more like cheer leaders than honest analysts, so anxious are they to join with government in turning this pig's ear of a bailout into a recovery purse. Timothy Geithner sought wide regulatory powers to control hedge funds and derivatives, but it's a bit late now that all the cows are out of the barn and aren't coming back. You can't regulate lost trillions back into existence, and badly needed reserve requirements-huge reserves-would take the profitability out of these dangerous derivative hedges.

Treasury Secretary Timothy F. Geithner wants the feds to have power not only to seize banks but also private businesses and insurance companies like AIG. William Branigin and Binyamin Appelbaum of the Washington Post write in typical socialist fashion, "Time is running out on the Obama administration to take control of the banks - and the crisis. 'If this plan fails - as it almost surely will - it's unlikely that he'll be able to persuade Congress to come up with more funds to do what he should have done in the first place." Geithner knows the public is losing patience.

"Mr. Geithner asked Congress today for new regulatory authority for non-bank financial institutions such as insurance giant American International Group in order to 'eliminate gaps in supervision' and avoid potentially catastrophic threats to the nation's financial system. Geithner said such authority would have allowed the government to bail out AIG last year at a far lower cost to taxpayers, a position backed by Federal Reserve Chairman Ben S. Bernanke. The government currently has the authority to seize only banks." The "we need more authority to supervise" is a false excuse. No amount of supervision is going to alter the fact that the derivative markets are never going to be able to pay out what they owe. The money collected in premiums is gone and no reserves were required or kept. This was a ponzi scheme and should be prosecuted as such. The call for the power to seize private firms is the real meat of this proposal and it smacks of nationalization powers.

Geithner has good reason to worry about how all this is going down with the public. After the AIG bonuses, Congress and the public has soured on more bailouts. David Lightman of McClatchy Newspapers said, "Forget about any more bailouts anytime soon. Any Obama administration bid to seek more taxpayer money for failing banks will face stiff resistance in Congress, where Treasury Department credibility is ebbing fast and lawmakers are bowing before a constituent revolt. Its credibility has been badly damaged, with Geithner under withering scrutiny in Congress even as lawmakers' constituents are boiling mad and Republicans are increasingly united in opposing more bailouts."

Despite their ongoing efforts on several different fronts, the PTB weren't able to silence the outcry about AIG bonuses, and worse bonuses were revealed at Merrill Lynch and many other insider institutions getting bailout funds. As Bloomberg News noted, bonuses are just the tip of the iceberg. "The U.S. Treasury Departmentpreserved a payday for five banks that was worth almost 200 times the bonuses handed out at American International Group Inc. through a government rescue." That is right. The largest portion of these bailout funds are not going to increase loanable funds, but are simply preserving administrative load and salaries at institutions that will eventually have to be liquidated.

The most understated bonus horror story of the week was the secret bonuses awarded by Merrill Lynch just before year end. Why the secrecy? Because Merrill Lynch misled Congress in understating its compensation packages for 2008 so as to get Congress to not include 2008 compensation bonuses in the new executive pay restrictions for companies receiving taxpayer bailouts. The defunct investment brokerage turned around and awarded $3.6B in bonuses just days before Bank of America completed acquisition and days before the Jan 1 cutoff allowed by Congress--courtesy of pressure applied by Obama Chief of Staff Rahm Emmanuel on an all-too-willing accomplice in the Senate, Chris Dodd (D-Connecticut). Goldman Sachs has now been forced to reveal that its under-the-deadline bonus and salary payments exceeded $10B ($5B in bonuses!).

With all the talk about bonuses, the public is continually fed the excuse that "we need these bright people to stay so that the taxpayers can get their money back." The money is never coming back and these people know it. On 60 MINUTES on Sunday March 15th, during questioning on the bonus issue, AIG Chairman Edward Liddy stated, under oath, that the bonuses were needed to retain key personnel to "dismantle the company." I think it is obvious they have no intention of paying taxpayers back. Worse, when the company is dissolved, who is going to still have to pay for all the city and county pension funds invested with AIG--that is gone? If you think the government is going to be able to turn them away, you don't know political outrage. So, the taxpayers will pay once again.

Then there is the issue of the insider loans, just emerging, that makes this banking scandal take on aspects of the Savings and Loan scandals of the 1980 and early 1990s. During those times S&L executives went to jail for giving themselves big loans which contributed to the insolvency of the institutions they ran. Stella M. Hopkins of the Charlotte Observer broke the story. "Banks nationwide hold $41 billion in loans to directors, top executives and other insiders, a portfolio that experts say should be stripped of secrecy [another regulatory loophole put into place years ago].

"Insider lending to directors is particularly troublesome because it could cloud the judgment of people charged with protecting shareholders and overseeing bank management, the experts say. At Charlotte-based Bank of America, those loans more than doubled last year, to $624.2 million -- the biggest dollar jump in the country. The largest of them likely went to three directors of their companies. The surge came during the third quarter as credit markets froze, the government prepared to infuse banks with billions in tax dollars and the board approved the purchase of troubled Merrill Lynch.

"Bank of America ranked fourth on the list of biggest insider lenders. At the top was JPMorgan of New York, which held $1.48 billion in insider loans, mostly by directors or their companies. At No. 2, Charlotte-based Wachovia, which was sold to Wells Fargo of San Francisco at the end of 2008, finished the year with $747 million in insider loans. All of the loans were held by the bank's directors or their companies, with just five holding the largest.

"Insider loans, ranging from home mortgages to multimillion-dollar lines of credit for big companies, are legal but are largely shrouded from public scrutiny. Bank of America's insider loans zoomed in 2008, but no one will say why. Bank of America [one of the most corrupt of the insider banks] vaulted into the top 10 banks for insider lending last year with an increase of more than $358 million, much of it coming as credit markets froze and mounting financial calamity threatened the industry's survival. The bulk of the gain came in the third quarter, when the financial sector entered its meltdown." This means that the big shots where siphoning off available funds, knowing that the coming bailout would replenish them.

Then there is the incestuous relationship between Fannie Mae and Freddie Mac and several of the Congressional banking and finance leaders in both the House and Senate. Rep. Barney Frank claims to be outraged about the financial shenanigans of both AIG and Fannie and Freddie and yet the openly gay Congressman had a multiple year relationship with Herb Moses, an executive for the now-government controlled Fannie Mae. During the same time that Frank had regulatory oversight over Fannie and Freddie, he received over $40,000 in campaign contributions from Fannie Mae and Freddie Mac.

Sen. Chris Dodd (D-CT) of the Senate Finance committee received the most at $134,000. Sen. John Kerry (D-MA) received $111,000, and Sen. Barack Obama received about $106,000. Then Senator Hillary Clinton received $75,500 in campaign contributions from the two semi-government agencies.

Obama's Chief of Staff, Rahm Emmanuel was made a wealthy man by being placed on the Board of Directors of Fannie Mae by his boss, Bill Clinton. According to the Chicago Tribune, "He was named to the Freddie Mac board in February 2000 by Clinton, whom Emanuel had served as White House political director and vocal defender during the Whitewater and Monica Lewinsky scandals.

"The board met no more than six times a year. Unlike most fellow directors, Emanuel was not assigned to any of the board's working committees, according to company proxy statements. Immediately upon joining the board, Emanuel and other new directors qualified for $380,000 in stock and options plus a $20,000 annual fee, records indicate.

"On Emanuel's watch, the board was told by executives of a plan to use accounting tricks to mislead shareholders about outside profits the government-chartered firm was then reaping from risky investments. The goal was to push earnings onto the books in future years, ensuring that Freddie Mac would appear profitable on paper for years to come and help maximize annual bonuses for company brass.

"The accounting scandal wasn't the only one that brewed during Emanuel's tenure. During his brief time on the board, the company hatched a plan to enhance its political muscle. That scheme, also reviewed by the board, led to a record $3.8 million fine from the Federal Election Commission for illegally using corporate resources to host fundraisers for politicians. Emanuel was the beneficiary of one of those parties after he left the board and ran in 2002 for a seat in Congress from the North Side of Chicago [where he continued to receive political contributions from Fannie and Freddie]."

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