I saw McCain, Obama Bin Laden, Bush, Paulson*, Bernanke et al on the news yesterday waffling on about an impending crisis and their proposed Fed bail out, which will cost trillions of dollars of taxpayers' money, I realised that this is a huge great scam.
It is exactly the same as the global warming scam where the self-same politicians ask for billions of taxpayers money to combat a non-existent threat. It's all about power and corporatism.
As I posted elsewhere:
"Banks do not trust other banks, that would appear to be true.
This is easily fixed. Just merge ALL banks into one mega-bank. There is then no net counter party risk. They can collapse and cancel all their inter-company balances**, hey presto, problem (largely) solved.
There remains the problem that even the consolidated mega bank probably has negligible or negative net assets. The next step is to come to an arrangement with long term bond holders for them to forgive 20% of the debt and swap this for new share capital. Hey presto, bank recapitalised!
Banks' long term bonds are trading at 80p in the £ anyway, so this is only crystallising a loss priced in by the markets. For sure, existing shareholders will be wiped out or diluted down to diddly squat, but again, so what? Their shareholdings have gone down 80% or 90% in value in the past year or two, is it so terrible if they lose another 90% of what's left? Bringing total losses to 98% or 99%?
And not a single penny of taxpayers' money is involved!
* Who was 'too busy' to meet The Goblin King, tee hee.
** The rate of churn is staggering. Never forget that banks are just middlemen. Total UK mortgages and loans outstanding (assets) are about £1.5 trillion and total household savings, banks' corporate bonds etc are also about £1.5 trillion (net assets negligible, but we knew that).
But if you add up the balance sheets of the big UK banks, total assets/liabilities are shown as £5 trillion. In other words, money goes round in a circle three times."
On a related, topic, how about this for a deeply gratifying search?
Diminished
2 hours ago
7 comments:
Sorry Mark I don't think you understand that the Bonds made up of the mortgages are underwritten by the US Government.
Here is it seems a good explanation.
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Super Credit Cycle Productions (Beijing) in association with Elephant in the Room Productions (Singapore) Proudly Presents
Credit Quake for Dummies
American Edition
(Progressive people are advised to consult a social scientist before and after reading, details of support groups are available on request.)
In short,
BIG GOVERNMENT (allowed and encouraged its ) Quangos (Freddie and Fannie) to sell faulty goods (Mortgage Bonds) to BIG BUSINESS (Wall St)
Unabridged,
BIG GOVERNMENT (that’s US Federal government inc all branches , President, Congress etc. which share power in the US system)
Allowed and encouraged (policy aim of boosting home ownership in lower income groups particularly ethnic groups thus lowering the lending criteria for these groups to obtain loans)
Quangos Fannnie and Freddite (these are state sponsored and “regulated” companies that in effect supply wholesale mortgages) THESE LOANS WHERE AND ARE UNDERWRITTEN BY THE US GOVERNMENT
MORTGAGE BONDS (these mortgages where bundled up in order to reduce risk with better standard mortgages, and sold as bonds, the model they used was developed by noble prize winning economists using Maths to claim that the future could be accounted for, with chance of default on the Bonds) THESE ARE THE FAULTY GOODS.
BIG BUSINESS (bought these, turned them into other products such as derivatives, raised more money to buy more as the US government was underwriting them at source, which brought more and more money into the market place (Wall St was doing its job), bringing more cheap loans to people and big profits for them, which resulted in big salaries and bonuses and BIG taxes for BIG GOVERNMENT, everyone was a winner, after all these are apparently AAA investments.)
Big Business was also using the same kind of computer models that claimed to reduce risk and spot hazards, which it tuned out was based on the last few years which is not much good with a claimed one in a hundred year event, its a bit like driving only using your rear view mirror, and you know how easy that is, especially for Nobel prize winning economists?)
So who’s to blame? I think that is easy unless you are a economist.
But look on the bright side, even with a half trillion bailout, the US Government owes for less than its European Cousins.
COMING SOON, at A BIG GOVERNMENT near you, CARBON CREDIT SHOCK. (and you will be at the end)
From award winning Straight Jacket Productions, and multi-award winning economist Sir Nicholas Stern, using the very same super computers and super mathematical models, CARBON CREDITS, start saving now its going to be an even bigger big government production, rest assured.
Note, Investments can go down as well as up, Your life, and future, Home, Happiness, and Health depend on YOU understanding what the government is doing in your name
PB, agreed on lax lending to minorities point, that is widely accepted, but that summary says the same as what I said.
The guarantors/creditors/bondholders of US banks may well be the US gummint; but they in turn borrowed all this money from China, Japan, other SWF's, i.e. China etc 'invested' its dollar surplus in US Treasuries.
But there is no need to throw more money at it; what I am talking about is tidying up the book-keeping; crystallising losses; recapitalising banks and revealing the true ownership thereof.
"Who was 'too busy' to meet The Goblin King . . ."
Unlike Brown, Paulson is a serious player: in the middle of a crisis he doesn't waste his time looking for photo opportunities or bigging himself up for domestic consumption. This episode speaks volumes about the UK's international financial influence (after 11 years of Labour rule) as well as Brown's chutzpah in pimping his non-existent "experience" and "expertise" at the HQ of world capitalism.
One mega-bank? Can anybody here spell "monopoly"?
Sure. You can. MEGA-bank would require careful supervision for the year or so that it existed (before it all gets demerged out again), that's better than another Northern Crock style bail out.
People can always shift their saving to Nationwide, Abbey or NS&I if they don't like the rates on offer. Or shift their mortgages to Nationwide or Abbey.
I've been trying to get my head around exactly what the problem is here. The news coverage is "the banks aren't lending to each other".
Rrright... but presumably those banks that aren't lending therefore have a load of money sloshing around. Leaving it sat in their reserves is not really doing them any good, is it? Surely, they'd be better to try and lend it to someone, albeit it at a higher rate? Right?
Is it really a general problem, or is it more that some banks have a problem, especially banks which had most of their lending in housing, pursued high risk lending and were dependent on the money market rather than savers?
TA, it's the scenario in your last paragraph. Hence the MEGAbank idea to eliminate counter-party risk.
This is actually different from the US problem, which is the fact that main creditor of US banks is the gummint and the main creditor of the US gummint (i.e. 10% of its borrowings) is The People's Republic of China.
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