Monday, December 1, 2008

US Banking Industry: Ship of Fools

It's not surprising that after spending most of my day dealing with a consumer credit transaction in a courtroom that I would return to the cyber world and see this Reuters headline: Credit-card industry may cut $2 trillion lines: analyst.

My point - iterated over and over and over again in previous blog postings - is that the credit and banking industry is run by either idiots or thieves, or a dreadful combination of the two. My particular circumstance offers but a glimpse of the absurdity that is banking in the US today. Five years ago, the geniuses who allowed me to run up credit card debt to a mind-boggling $1200, decided that the 14.9% interest rate they were drilling me with was insufficient, and even though I had always made payments on time and had never missed payment, that hiking it to 29.9% and tripling my annual fee would be in their best interests (and, I suppose, somehow, mine).

It was at that time that I picked up the phone and revealed to my creditors that such an arrangement would result in my defaulting on the credit already established unless they would agree to go back to the original terms.

"No deal," said they, and that is what they got. I never paid back a single cent, and, even though I told them that they would end up with nothing repeatedly, over many months, they, nor I, never relented. The bright bankers did get something for their effort, having sold the debt to what is known as a "debt farm" for somewhere in the range of .05 to .20 cents on the dollar and taken their write-off with the government. So, it is the debt farm and their ravenous attorney from whom my legal challenge comes. They too, are finding out how difficult it will be to squeeze a penny out of yours truly.

Regardless of my circumstances, the banking system in the US and beyond is broken beyond repair. I explained to my father yesterday, and now to you, that there is nothing the government can do to prevent the economy from collapsing at this point. Plainly, the bankers see a similar picture and are reigning in their horns, calling in their loans.

This is what we are bailing out, folks. a merciless, belligerent, corrupt system of tribute financing that threatens to overthrow the entire nation's credit, from mortgages, to credit cards, to lines of credit to business to auto financing. The entire concept is as bellicose as would be a Spencerian melodrama: The bankers create credit devices to entice the unsuspecting hoard, then, through their own devious and clever devices, change terms, increase rates, cut off lines and generally self-implode the entire system.

Sadly, it is exactly what has happened.

Word of the looming catastrophe reached Wall Street some time ago, but today's trading indicates that the finality of it all seems to have at last reached all corners. Stocks, after a bright half-session Friday, christened December with another in a spectacular series of sell-offs, this one to the tune of nearly 680 points on the Dow.

Dow 8,149.09 -679.95 (7.70%)
NASDAQ 1,398.07 -137.50 (8.95%)
S&P 500 816.21 - 80.03 (8.93%)
NYSE Composite 5,092.6602 -506.6396 (9.05%)

Those holding to the belief that the bottom was reached on November 20, when the Dow sank to 7552.29 at the close, are surely kidding themselves. The idea that there will be an escape from this malaise by Main Street, which to this point has held together remarkably well, misses the thrust of the bankers' intents. They wish to own all through foreclosure and deceit, to reduce America to a land of indentured servants (we're almost there now). The legal system has glibly played along to this point. How much further strain a flood of new debt collections can be sustained by the courts remains to be seen.

Stocks are headed much lower.

On the day, declining issues pummeled advancers, 5774-968. The ratio of new lows to new highs was rather tame, 251-19, though the number of new lows will almost certainly swell before year's end. The real kicker will be in late January and early February, when companies report 4th quarter earnings. They are almost certain to be negative over a broad swath of industries.

Over the long haul, the joke is on the bankers. They will eventually be removed and replaced by more efficient, honest and reliable means of financing. The transitory time between the self-inflicted, planned collapse of the financial system will be painful for many, misery for some, and instructive to all.

In the interim, expect deflation to be the word du jour for many days through the next 18-24 months, just as they were in the commodity pits on Monday.

Oil slipped once again, lower by $5.15, to $49.28. Gold gave back nearly all of its recent gains, sliding $42.20, to $776.80. Silver declined 85 cents to $9.38. expect more ragged trade in the metals and a false floor around $40 for oil, which will almost surely not hold that level come spring.

NYSE Volume 1,625,792,000
NASDAQ Volume 1,936,715,000

For the foreseeable future, however, there's money in cash.

No comments: