The whirlwind is in the thorn tree
Tuesday, November 25, 2008
The financial Armageddon is near. The U.S. government announced today another massive bailout. This one's worth 800 billion. Where does the money come from? Some of it's printed. Some of it's leverage.
The Federal Reserve takes $20 billion from the TARP fund and magically levers it up to 200 billion.
The 200 bn supposedly goes to shore up auto loans, student loans, etc. The other 600 billion is going to Freddie and Fannie, which are spurting out of the jugulars.
It's all so stunning. Here, a lame-duck administration plunders the nation for its wealth and drives it toward absolute ruin. This is the stuff of Illuminati nightmare scenarios, and it's happening in the open air and the sunshine.
Three Cheers for Geithner, Citi at Three Dollars
Friday, November 21, 2008
The DOW had a tidy and sensational rally at the end of the session. There's some disagreement on what caused it. Some say short-covering; others say it was breaking news about Obama's pick for Treasury Secretary. Timothy Geithner's the name, he's the president of the Federal Reserve of New York.
Bloomberg News says he's eminently qualified: a bona fide internationalist who studied Japanese and Chinese and lived all over the world. Of course, he has the qualifications of a full-blown player: involvement with the IMF, the Council on Foreign Relations, and connections to Clintonites and former Treasury and Fed bigwigs.
CNBC says he was kingpin of the TARP, and what a worthless money-laundering Ponzi scheme that is. Nonetheless, I'll grant this Johns-Hopkins and Dartmouth-educated mind the benefit of the doubt, if only because I'm tired of my own cynicism. Three cheers for him. And 500 points.
But then there's Citibank, which plunged to below 4 dollars a share. This is the largest bank in the world. It might be sold on the weekend to Goldman, which is in freefall itself - Goldman's only advantage is that it's well-connected (read: Hanky) and unsaddled by mergers. Or Citibank's maligned CEO could resign as a confidence-building measure; CEO resignations are classic at this stage in a bank failure.
Whatever happens with Citi, it's serious. Again, this is the largest bank in the world. It's not an American problem, but a really terrific global problem. If the U.S. can't bail out Citi or marry it to another bank, this is going to be like an atom bomb exploding in the core of the financial system.
And there's still more than a month of Bush to go.
NATO's Looking Like the Warsaw Pact
Thursday, November 20, 2008
The Taliban briefly cut off a supply line to Afghanistan - NATO's one and only route into the land-locked country. The Taliban crazies stole 15 trucks and forced a shutdown of traffic. It was reopened today with fanfare
The supply line runs through the ports of Karachi, up the Khyber Pass, into Afghanistan. If this supply line is lost, the war in Afghanistan will be lost. More than a dozen thousand NATO troops will be stranded.
In other Central Asian news: Today a U.S. drone launched a missile strike deep into Pakistan territory, the first strike outside the tribal regions. A report from the Wall Street Journal shows the Taliban gaining strength and overshadowing the Karzai government in Afghanistan.
Wednesday, November 19, 2008
Well, the news is talking about it
It's going to be so bad.
Polygon strip malls,
across the States
drying up like beached starfish.
3 trillion in three months,
Bernanke says America is AAA-OK.
Collapse of the NATO block,
like the Warsaw Pact before it.
Inexorable liquidation of the system,
Monday, November 17, 2008
'As the private sector deleverages, the Fed levers up.'
These were the happy words of some PIMCO official on CNBC, many weeks ago.
The U.S. government's leverage is breathtaking. Hundred billion dollar credit lines extended in zigzags across the economy. 2 or 3 trillion dollars disbursed to banks and insurers in about a month. If even one major bank fails (read: Citibank), I suspect the Treasury won't get back its CRAP loans - then you'll really see a crisis of confidence.
The tragedy in all this is that the real economy, as opposed to the virtual or fictional economy, is quite sound. Think of all the paintbrush manufacturers, the makers of picture frames, PEZ candy dispensers, coffee mugs, guitars, optometrist equipment and parking meters. The real economy has never been so manifold. Now this precious latticework is threatened by monsters out of fiction, like leverage.
Saturday, November 15, 2008
Got the poetry itch
but dunno what to write
I could talk about LA's electric lines
threatened altogether by today's wild fires
Or I could take up Citibank Goldman and GM
but I'd really like to write poetry
about love and its many frivolities
about some particular boy
you know I could fill a book about them
the way one looked at a cigarette
the way one yielded cautiously on a bed
or the way one impersonated my mirror reflection.
Got the poetry itch
but can't spin that web.
I Love You, George Soros
I loved that George Soros kept it real in Congress and said, flat-out, the hedge funds will be decimated.
At one point, he called for stricter margin requirements. Right before the Great Crash in 1929, margin requirements were headed toward 50%. In fact, economists cite this as an indication that brokers were beginning to panic as the crash neared.
Now, farther down this blog, I highlight CNBC's highly specious Million Dollar Challenge. It attracts people to trade currencies for big prizes, like airplanes and a half-million dollars. People are invited to open a $25 account, which mysteriously, with the magic of leverage, will enable them to trade $9,000 dollars in "REAL money." And this, without people making any deposits whatever. No margin requirements here.
I suspect that margin requirements have not gone up lately, as a rational market would make them do with such risk out there. I can't find any stats on our present margin requirements ('cause I'm just too fucking lazy to do the search), but...
The Next Disaster: Currencies
Check out the fine print on the website of the CNBC Million-Dollar Portfolio Challenge
: a "Fantasy Stock Trading Game", or something like that. It's hard to tell what the Challenge is because the website's so awfully vague.
But I noticed this.
Free $25 Currency Trading Account
As a participant in the CNBC Million Dollar Challenge, you are eligible to receive a free $25 FXCM Micro trading account.
You will be able to trade currency with REAL money without depositing any additional funds. A $25 account will enable you to trade up to $9,000 of currencies.
Disclaimer: Without proper risk management, a high degree of leverage can lead to large losses as well as gains.
Click Here To Apply
Read that again. A $25 account will let you lever up to 9,000 dollars, but remember! high leverage is risky.
This is more insane than any of the leverage schemes of 1929. (1929 was all about leverage, and arbitage - both of which the U.S. government is practicing openly and profligately today).
CNBC emphasizes that people will be playing with REAL money.
No, no - this is fake money. This is where the fictional economy begins. This is the catastrophe.
CNBC is a "service" of Dow Jones and NBC (and "parent company" General Electric). In a few months, that station is off the air.
The Virtual Catastrophe
There has been much made of Wall Street, Main Street - and most of all - the "real economy".
Nobody ever talks about the fictional economy much less the virtual economy.
I heard a trader say on CNBC dismissively, "Get with real time. History is for..." he stumbled here. "For teaching."
One could argue that we're being taught history in this crisis. The financial system has made many of the same mistakes since 1929. But the ponzi scheme had been remarkably stable for dozens of years. Mutual funds were created in the 1950s. The first hedge fund is roughly dated back to the end of WWII.
But the simple Great Depression analogy is too general. Since the 1980s we've been dealing with a virtual economy. This is a computer network subject to viruses and contagion.
Last time I was in L.A., which is one of the towns I grew up, I noticed the desert air more than ever. It bathes everything in mirage and silence and transparency and timelessness. Mirrors in even the dingiest restaurant bathrooms will flatter you. This is the effect of the desert air. And the silver screen.
Out on the Santa Monica pier, with fog rolling along the coastline and the end of Western civilization. Very few people look at each other on the pier. This is the case in most of L.A., where people are usually in their cars. The utopian sidewalk network is used mostly by the immigrants and crazies.
This transparency is what lends L.A. its immediate apocalyptic charm. You get the sense that the apocalypse could explode outward from the spaces between the people at any moment. At any moment, L.A. could just vanish into the Void. Or implode under the weight of the smog.
The smog of L.A. Years and years ago, I hiked up the Glendale Hills till I was well above the city. I don't think there's a single point from where you can see all of L.A., but this one is close. I couldn't believe my eyes. The smog was a coal-black line at 4-5,000 feet. Below it was a sort of night. We were either standing above the smog line or below it. It was impossible to tell.
The myth that California will slide into the Pacific.
Wednesday, November 12, 2008
I hated the TARP program, which Wall Street and Congress (but I repeat myself) jammed down the nation's throat weeks ago. 700 billion dollars could've been spent on renewable energy, or better health-care, or even a space program. But it went to the pigs on Wall Street.
Today, Treasury Secretary Hank Paulson announced the TARP is no longer the TARP. TARP stands for 'Troubled Asset Relief Program'. The idea was to buy up the mortgage securities that are behaving like radioactive isotopes on banks' balance sheets. The government would take possession of these strange assets, the banks would be able to breathe, and we wouldn't see a Great Depression.
Well, forget all that. Paulson told us he won't be buying any securitized mortgages. Nevermind that this was the purpose of the TARP - the entire purpose. That's so over now.
The TARP was a money-laundering scheme. Paulson probably never wanted to buy mortgage-related assets in the first place. He and the Bush Administration wanted to abscond with 700 billion dollars, to direct the biggest swindle in financial history on the pretext of saving the nation. We'll never know what happened to this money, or to the 2 trillion and counting lent in separate programs; the Treasury refuses to tell us where the money has gone. But even if we do find out one day, the accounting will take up so many trillions of pages that nobody will get to the bottom of it for hundreds of years.
In any case, all government intervention has failed pathetically and the U.S. is going into Depression. I wish us well.