Moon of Alabama Brecht quote
Back to Main

June 5, 2008
Credit Crunch Continues

The next round of the credit crunch has started in earnest.

The rating agencies are downgrading the bond insurers MBIA and Ambac. This should have happened months ago. There triple-A rating was ridiculous. With the downgrading of the insurers, the bonds insured by these companies will also be downgraded immediately and thereby lose value.

That means another round of losses for the financial industry. The Lehman Brothers brokerage firm is in big trouble too. It is now looking for some white knight to infuse capital. More capital may help Lehman for a few weeks, but I would not bet one dollar on the company’s long term survival.

Meanwhile the regulators are waking up a bit. There is a move by the Financial Accounting Standards Board (FASB) to change the rules for ‘Special Purpose Vehicles’. Those are highly leveraged entities set up by banks to borrow short term money to buy long term bonds.

Today these entities do not show up on the balance sheets of the banks. They thereby do not count as risk and do not require additional reserve holdings. The total amount of money in such vehicles is estimated as $5,000 billion. If these have to be brought onto the books, the banks will either need much more capital or they will have to reduce their lending to others.

There is international political pressure for these rule changes and the banking lobby will not able to stop the issue. While a rule change would only be implemented in mid 2009, the effect on availability of credit will be immediate as the banks will have to prepare for the change.

The credit crunch is far from being over.

Without credit real econommy investment will continue to slow down.

Posted by b on June 5, 2008 at 15:19 UTC | Permalink
Comments

The credit crunch is the primary symptom of the planned dissolution and destruction of the dollar as the world’s reserve currency.
Along with the dollar’s debasement, the irredeemable national debt of the United States is equally debased and diluted, and it will vanish in the end with some sleight of hand and a fountain pen. Eventually, nine trillion dollars — or ninety trillion — won’t be worth carting over to the Chinese Embassy.
Maybe we’ll just send them a curt note — “Come over here and get your money off our lawn!”
Fiat currency is not wealth. Wealth is land, buildings, tools, vehicles, commodities, weapons, organized and functioning clans, tribes, and societies which can be taxed and harvested and driven to conquest on behalf of its rulers. You don’t need dollars to own and operate America, you just need the assets, plus control of what passes for government at any given moment. That’s property plus the force to protect it, and that is what wealth is.
What’s happening in America during this decade is the destruction of the dollar, the reneging on the entire national debt no matter how high it gets run up to, and the fire sale of the nation’s assets to the highest bidders, be they national or international.
When the smoke clears, and we have a new fiat currency (you’ll get one Amero for every 20 or 30 Reserve Notes), be sure to look around and see who owns the land, the buildings, the banks, the factories, farms, and who runs the government.
You will see the same names, same families, same faces as now populate the top 1% of the American economy.
The country is already theirs, in deed and in title, and becoming more and more so every day. The credit crunch, inflation, and hyperinflation is just them restructuring debt — defaulting on many trillions of dollars of loans made to the American taxpayer, to John Q. Public.
By 2020, the national debt will disappear into paperwork and a new currency, while the same people will still own everything of value in America, and John Q. Public will be working for the company store more profoundly mired in a closed circle of debt than he already is.
What’s coming down the pike is not subject to softening or amelioration. Any more than the national debt is subject to being repaid. It can’t be repaid, not by fifteen generations, so it will be reneged on, and it is being reneged on. Relax, the paper work is all in place.
Take care of yourself, and your people. Oscar Schindler had to ride out some difficult years, some awkward business arrangements, some risky investment environments. If he could do it, so can you.
Take care of yourself, and your people. Once a roller coaster goes over the edge, you aren’t in a position to do much more than hold on.

Posted by: Antifa | Jun 5 2008 16:06 utc | 1

So interest rates are at an all-time low, but still there is a shortage of credit? In other words, Skanky Bernanke did not lower interest rates have to make more money available to borrowers, but to make it more available for lenders to patch up the holes in their books.

Posted by: ralphieboy | Jun 5 2008 17:18 utc | 2

In view of the above post about US finances, I don’t understand how Obama will be able to continue “business as usual,” in the US corporate corner office, and maintain the US empire. I am also considering that the US educational system has been deteriorating, and the US physical infrastructure needs serious money for maintenance to avoid catastrophic failures.
What happens when the US dollar goes down vs. other currencies?
– food imports go down
– cheap Chinese manufactured imports go down, unless the Chinese decide to give them away
– illegal immigration from South and Central America will go down
– legal migration of scientific and technical workers will go down.
There will be other consequences, some intangible ones like increased dissing from uppity South American leaders.
In view of this, and other consequences of the US $ dropping, I fail to see how Obama will be able to continue business as usual, maintain the US empire, maintain all the aid to Israel.
And other countries will have some influence too — a couple of years ago, an academic in China wrote that the problem for the rest of the world was going to be, how to manage things as the US went down, how to keep the US from doing anything really stupid (my paraphrase) …

Posted by: Anonymous | Jun 5 2008 20:37 utc | 3

Above two bits worth was posted by me, Owl.

Posted by: Owl | Jun 5 2008 20:39 utc | 4

Owl brings up a good point. Israel seems pleased as punch for us to wage intractible wars on their behalf in Iraq and Iran. However these wars are weakening our military, draining the treasury and helping sink our economy. We may still want supply them with mountains of cash, however that cash is worth less and less every day. Eventually, out of sheer necessity, the money spigot may dry up.
Shouldn’t the Israeli leadership be more concerned with the economic health of the US? What good is a bankrupt sugar daddy? This seems like a more serious existential problem for Israel than a nuclear-armed Iran.

Posted by: Growth Factor | Jun 5 2008 20:59 utc | 5

The downfall of the US economy and empire will not be managed by anybody, it will become more and more brittle and fascistic, and then it will break in a matter of weeks.
A great many minds can see the disaster that is coming. The problem is that no one will turn the steering wheel in another direction. No one who would actually steer the nation in another direction is allowed anywhere near the steering wheel. The mob of profit-takers has control of the bridge.
The criminal organizations feeding on the spoils of the American Empire will continue to drink of its treasure unto its death, and then will crow upon the dung heap their bloodsucking makes of it.

Posted by: Antifa | Jun 5 2008 22:51 utc | 6

Expecting those economists in capitalist society whose opinions are held in regard by the elites to suddenly wake up and cry; “We’ve been doing it all wrong, blind freddy can see that making inflation the number one bogey man was all wrong. After all what does inflation matter if no one has a job?” or “There are major flaws in the edifice we constructed to explain and expedite the flow of resources, assets and income through society, this isn’t going to work for the best.” is the modern equivalent of expecting Rome’s priests and priestess’s to shout out;
“We better give up this entrail reading gig, boss. Nothing I’ve been taught is working the way it was meant to.”
In both cases humans have tried to construct a science, that is a rational evidence based commentary, on subjective observations of incompletely understood data, then extrapolated the result onto human behaviour. In both cases the priests or leading economists have warped their predictions to suit their political masters.
Capitalist economics is just as ‘rigged’ as fortune telling and it will come unstuck in the same way. Eventually the modern day clairvoyants will be caught out making predictions based solely on self interest.
That won’t happen until the foundations of society are on the verge of collapse, too late to be any use.
Even buying land or other fixed assets won’t provide permanent protection, those living in densely populated communities will only be able to keep what they can fight to hold on to.
In our lifetime? I dunno I would say Lizard is going to experience the final meltdown, but those of us much older will get to witness some obscenely stupid and violent attempts by western capitalist communities to keep reality at bay, but prolly miss the final denouement.

Posted by: Debs is dead | Jun 6 2008 7:03 utc | 7

Unemployment rate jumps to 5.5 percent in May

The nation’s unemployment rate jumped to 5.5 percent in May — the biggest monthly rise since 1986 — as nervous employers cut 49,000 jobs.

If this would be measured as European country measure unemployment the U.S. number would some 12-13%.

Posted by: b | Jun 6 2008 14:19 utc | 8

Don’t say that Debs i d. I’m old too but am hanging on for long enough to finally see what this meltdown crap is really all about. Give us a few more years.
A lot lot lot has come out in just the last couple of years; it won’t be that long now.
Antifa, I like your last paragraph in no.6 – it brings up a familiar image for me, of some vultures sitting around cackling over a new (now barren) planet they have conquered.
BTW I am not truly so pessimistic as that. There are savior angels out there somewhere, alternative timelines, etc. For more on this visit Project Camelot.

Posted by: rapt | Jun 6 2008 15:27 utc | 9

Meanwhile…

While western banking institutions continue to reel from the credit crunch, Islamic banking, with assets approaching one trillion dollars, is growing at roughly 20% pa by offering Sharia compliant – and only Sharia compliant – financial products. But compliance to Sharia law in matters financial is not easy.

Anybody else always get the feelings that we are obtaining the continuously exact opposite of the sunshine and lollipops America was promised, in this war on turrah?
It’s as if they wanted these things so as to further justify the continued chaos… and thereby their continued power and all the opportunities that brings.
Excuse the mottled wording above, I’m a little wheezy from
doing laps at the local pool… Just thought it of note.

Posted by: Uncle $cam | Jun 6 2008 21:31 utc | 10

“It’s as if they wanted these things so as to further justify the continued chaos… and thereby their continued power and all the opportunities that brings.”
once again, we say “uncle”. Bingo, bango, bongo.
As in Jon Ronson’s “Men Who stare at Goats”, (soon to be G. Clooney movie, but not soon enough) incompetence/futility is their resume for further employment, with raises and perks to improve their supposed inabilities.

Posted by: plushtown | Jun 6 2008 21:46 utc | 11

No Pool. No Pets.
No Checks. No Debit Cards. No Savings.
No Mortgage Payment. No Car Payment. Dead Busted Flat Broke.
Your Bank Just Went Belly Up!
by Erika Nolan,
Founding Publisher and Managing Director of The Sovereign Society.
Imagine waking up on a sunny Saturday morning to find you can’t use your debit card to buy groceries or pay for gas any longer? You can’t withdraw a single dollar from the ATM. And your bank froze your credit cards.
Then you discover that every check you wrote in the past week has bounced. And, you receive a call saying that your retirement assets are frozen. The kicker is that you had over US$1 million dollars in your brokerage account.
You try to call your broker for answers, but they won’t help you.
I know this story sounds like I’ve pulled it right out of the Great Depression.
I’ve got news for you…this story is very real. It all happened last month to a US$2.1 BILLION bank in a little community in Bentonville, Arkansas.
It was a very organized attack. On May 9th, the accountants snuck in the back door that Friday night after 5:00pm once the bank’s doors had closed. Little did anyone know the doors were closing for good…
And under the cover of darkness, over a hundred FDIC accountants began to systematically dismantle ANB financial headquarters – the venerable US$2.1 Billion institution that had been in business just hours before.
In short, FDIC officials were there to pick up the pieces because ANB was about to become the third bank to FAIL here in the United States in just the last six months. The fourth-largest bank in Arkansas was about to become yet another sub-prime casualty that choked on their own bad loans and investments.
The unlucky customers of ANB received nothing more than a letter that stated nothing of the bank failure, but rather introduced the “new” bank – Pulaski Bank.
Get it? Pulaski, as in clear-cut?
….
As we’ve often said over the last 10 years in this business, you can protect yourself from such massive faults in the U.S. banking system. And one of the easiest ways to do that is to spread out your wealth across several accounts – just in case a bank goes insolvent like ANB did.
Another valuable option is to diversify by moving a portion of your wealth offshore. By banking offshore, you gain an extra layer of protection because historically, offshore private banks have a higher liquidity than domestic banks. And in places like Switzerland and Austria, banks have stayed solvent for hundreds of years.
—
“Wake up! Time to die!!” (Watch Bladerunner again, in light of this week’s $5T bank accounting charade re-writedown…$5,000B. You just lost $15,650 in your share.)

Posted by: Toulous LeGeld | Jun 7 2008 3:32 utc | 12

Notice that Paulson was in the UAE last week, trying to drum up support for US investment and pretending that the administration is pursuing ‘strong dollar’ policies. It was a hilarious performance, only matched in comic value by the reception of Gulf investors. I hesitate to call this racket, as I see it more like co-dependency where it is impossible to tell the junkies from the pushers.

Posted by: d | Jun 7 2008 13:22 utc | 13

Not that anyone noticed, but here the missing kink in my #10…
maybe someone took a Pulaski to it…lol
Islamic Banking – a compelling mix of religion and finance

Posted by: Uncle $cam | Jun 7 2008 13:51 utc | 14

Back to Main