41 IMF Bailouts And Counting – How Long Before The Entire System Collapses?

http://www.activistpost.com/2013/07/41-imf-bailouts-and-counting-how-long.html

41 IMF Bailouts And Counting – How Long Before The Entire System Collapses?

The broke are bailing out the broke.

http://theeconomiccollapseblog.com/archives/41-imf-bailouts-and-counting-how-long-before-the-entire-system-collapses

Ron Paul on Financial Reform, Europe, Greece, Currency Swaps, and Bailouts

http://youtu.be/ckQdawLjRGY

Ireland bailout: fears mount that eurozone fund is too small

It's hypocritical for European finance ministers to  bash the Fed for applying quantitative easing several weeks ago, and then turn around and announce bailouts of Ireland, with Portugal and Spain waiting in the wings.  Printing money is printing money, and central banks from both sides of the Atlantic will do whatever it takes to save their respective economies from collapsing.

http://www.guardian.co.uk/business/2010/nov/25/eu-ireland-bailout-fund-increase

Banking analyst Meredith Whitney

“You have to look at the states and the risk that the states pose, because the crisis with the states will result in an attempt at least for the third near-trillion-dollar bailout. That has consequences on the dollar that has consequences on just about everything. It certainly has consequences on the US recovery.”

Bonuses for Wall Street Bankers are going to be “really, really bad at year end.”

The financial con

http://www.zerohedge.com/article/financial-con-decade-explained-so-simply-even-congressman-will-get-it

Of course, to those familiar with the work of Austrian economists, none of this will come as a surprise.

1. Enable trillions of dollars in mortgages guaranteed to default by packaging unlimited quantities of them into mortgage-backed securities (MBS), creating umlimited demand for fraudulently originated loans.

2. Sell these MBS as "safe" to credulous investors, institutions, town councils in Norway, etc., i.e. "the bezzle" on a global scale.

3. Make huge "side bets" against these doomed mortgages so when they default then the short-side bets generate billions in profits.

4. Leverage each $1 of actual capital into $100 of high-risk bets.

5. Hide the utterly fraudulent bets offshore and/or off-balance sheet (not that the regulators you had muzzled would have noticed anyway).

6. When the longside bets go bad, transfer hundreds of billions of dollars in Federal guarantees, bailouts and backstops into the private hands which made the risky bets, either via direct payments or via proxies like AIG. Enable these private Power Elites to borrow hundreds of billions more from the Treasury/Fed at zero interest.

7. Deposit these funds at the Federal Reserve, where they earn 3-4%. Reap billions in guaranteed income by borrowing Federal money for free and getting paid interest by the Fed.

8. As profits pile up, start buying boatloads of short-term U.S. Treasuries. Now the taxpayers who absorbed the trillions in private losses and who transferred trillions in subsidies, backstops, guarantees, bailouts and loans to private banks and corporations, are now paying interest on the Treasuries their own money purchased for the banks/corporations.

9. Slowly acquire trillions of dollars in Treasuries--not difficult to do as the Federal government is borrowing $1.5 trillion a year.

10. Stop buying Treasuries and dump a boatload onto the market, forcing interest rates to rise as supply of new T-Bills exceeds demand (at least temporarily). Repeat as necessary to double and then triple interest rates paid on Treasuries.

11. Buy hundreds of billions in long-term Treasuries at high rates of interest. As interest rates rise, interest payments dwarf all other Federal spending, forcing extreme cuts in all other government spending.

12. Enjoy the hundreds of billions of dollars in interest payments being paid by taxpayers on Treasuries that were purchased with their money but which are safely in private hands.

Cities and States need bailouts

http://www.latimes.com/news/nationworld/nation/la-na-cities-20100425,0,3466570.story

Crank up the printing presses again. At least readers of this blog know what to do to protect their purchasing power.

Bail out of other PIIG countries imminent

http://www.businessweek.com/news/2010-04-26/rogoff-says-greece-may-not-be-europe-s-last-bailout-update1-.html

NYC looking at major cuts

Unless the state of New York receives bail outs, New York City will have to undergo major cuts in public services, including laying off thousands of cops, firemen, and teachers.

http://wcbstv.com/local/nyc.budget.cuts.2.1583545.html

Lies and omissions

http://usawatchdog.com/real-deficit-numbers-and-real-consequences/

The reason why I ask is the government uses accounting gimmicks to make just about every number it puts out look better than what it really is. For example, the most recent Consumer Price Index for inflation was officially 2.7%; but if you compute inflation the way Bureau of Labor Statistics did it in 1980, the inflation rate would be 9.7%. The same goes for unemployment. Officially, it stands at 10%; but if computed the way BLS did it prior to 1994, it would come out to 21.9%. (source: shadowstats.com)

I asked economist John Williams of shadowstats.com to weigh in on last year’s record $1.4 trillion of red ink for the “real” deficit number. Williams told me, “It was closer to $2 trillion because they knocked off $500 billion with accounting gimmicks.”

In its latest budget, the White House is projecting $1.56 trillion in red ink, and that is another new record! What will the “real” deficit be when the year is over? Williams says, “With a weaker than expected economy, the 2010 deficit likely will top $2 trillion…”

No matter how the government does its accounting, the actual deficit will have to be financed. America will have 3 choices: (1) raise taxes to the moon in a very bad economy, (2) get foreigners to buy more debt, and (3) monetize the debt. (print money to pay the bills) Williams chooses what’s behind door #3. In his latest report he says, “…worse-than-projected borrowing needs for the U.S. Treasury likely will trigger increasing flight from the U.S. dollar. At such time as that moves to a panicked level, and U.S. Treasuries increasingly are dumped or otherwise shunned, the Fed will have little choice but to monetize the Treasury debt, becoming the buyer of last resort for Treasuries. Those circumstances should lead to mounting inflation woes and flight-to-safety outside the U.S. dollar, particularly to hard assets such as gold and silver…”

There is another possible consequence to record deficits–higher interest rates! Countries around the globe with high deficits are starting to see interest rates rise. For example, Greece is facing a huge debt load and interest rates there are skyrocketing. In a recent article from “Money and Markets,” analyst Mike Larson put it this way, “Imagine what would happen if Uncle Sam’s borrowing costs shot up like they have in Greece — by 60 percent! Imagine what that would mean for the cost of car loans, mortgages, and other products whose rates track Treasury yields! And imagine the impact on an economy still struggling to recover from the Great Recession! This is the next big story that few people are talking about.”

The founder of “Money and Markets,” Dr. Martin D. Weiss, went on to say, “…unless the Obama administration and Congress can somehow ax the budget or find a new gusher of revenues — both extremely unlikely anytime soon — collapsing U.S. bond prices and sharply higher long-term interest rates are unavoidable.”

The most recent record breaking budget does not take into account what we will spend in the continued bailout of failed mortgage giants Fannie and Freddie. The two were nationalized last year and, on Christmas Eve, the Treasury decided to give them both unlimited bailout funds for the next three years! There is a total of $8 trillion in liability.

So, it looks like higher inflation or higher interest rates or both are coming.

A foreign perspective of the global credit crisis

It includes opinions on bail outs, currency debasement, and central bank intervention.

FDIC bailing out banks--er, or the other way around

In an interesting yet practical twist of fate, healthy banks may provide funding for the FDIC, whose charter is to insure bank deposits when insolvent banks go into receivorship.

http://www.nytimes.com/2009/09/22/business/22bailout.html?_r=2

See my recent blog on funding concerns regarding the FDIC:

http://gregnguyen.blogspot.com/2009/09/fdic-insolvency.html

I guess that's what happens when the back stop needs a back stop.

Commentary from Peter Schiff in the Wall Street Journal

There's No Pain-Free Cure for Recession: Peter Schiff's Editorial in The Wall Street Journal


As recession fears cause the nation to embrace greater state control of the economy and unimaginable federal deficits, one searches in vain for debate worthy of the moment. Where there should be an historic clash of ideas, there is only blind resignation and an amorphous queasiness that we are simply sweeping the slouching beast under the rug.

With faith in the free markets now taking a back seat to fear and expediency, nearly the entire political spectrum agrees that the federal government must spend whatever amount is necessary to stabilize the housing market, bail out financial firms, liquefy the credit markets, create jobs and make the recession as shallow and brief as possible. The few who maintain free-market views have been largely marginalized.

Taking the theories of economist John Maynard Keynes as gospel, our most highly respected contemporary economists imagine a complex world in which economics at the personal, corporate and municipal levels are governed by laws far different from those in effect at the national level.

Individuals, companies or cities with heavy debt and shrinking revenues instinctively know that they must reduce spending, tighten their belts, pay down debt and live within their means. But it is axiomatic in Keynesianism that national governments can create and sustain economic activity by injecting printed money into the financial system. In their view, absent the stimuli of the New Deal and World War II, the Depression would never have ended.

On a gut level, we have a hard time with this concept. There is a vague sense of smoke and mirrors, of something being magically created out of nothing. But economics, we are told, is complicated.

It would be irresponsible in the extreme for an individual to forestall a personal recession by taking out newer, bigger loans when the old loans can't be repaid. However, this is precisely what we are planning on a national level.

I believe these ideas hold sway largely because they promise happy, pain-free solutions. They are the economic equivalent of miracle weight-loss programs that require no dieting or exercise. The theories permit economists to claim mystic wisdom, governments to pretend that they have the power to dispel hardship with the whir of a printing press, and voters to believe that they can have recovery without sacrifice.

As a follower of the Austrian School of economics I believe that market forces apply equally to people and nations. The problems we face collectively are no different from those we face individually. Belt tightening is required by all, including government.

Governments cannot create but merely redirect. When the government spends, the money has to come from somewhere. If the government doesn't have a surplus, then it must come from taxes. If taxes don't go up, then it must come from increased borrowing. If lenders won't lend, then it must come from the printing press, which is where all these bailouts are headed. But each additional dollar printed diminishes the value those already in circulation. Something cannot be effortlessly created from nothing.

Similarly, any jobs or other economic activity created by public-sector expansion merely comes at the expense of jobs lost in the private sector. And if the government chooses to save inefficient jobs in select private industries, more efficient jobs will be lost in others. As more factors of production come under government control, the more inefficient our entire economy becomes. Inefficiency lowers productivity, stifles competitiveness and lowers living standards.

If we look at government market interventions through this pragmatic lens, what can we expect from the coming avalanche of federal activism?

By borrowing more than it can ever pay back, the government will guarantee higher inflation for years to come, thereby diminishing the value of all that Americans have saved and acquired. For now the inflationary tide is being held back by the countervailing pressures of bursting asset bubbles in real estate and stocks, forced liquidations in commodities, and troubled retailers slashing prices to unload excess inventory. But when the dust settles, trillions of new dollars will remain, chasing a diminished supply of goods. We will be left with 1970s-style stagflation, only with a much sharper contraction and significantly higher inflation.

The good news is that economics is not all that complicated. The bad news is that our economy is broken and there is nothing the government can do to fix it. However, the free market does have a cure: it's called a recession, and it's not fun, easy or quick. But if we put our faith in the power of government to make the pain go away, we will live with the consequences for generations.