Friday, May 29, 2009

Bad Is Good, Less is More, Failure is Success

My Orwellian title for today's post stems from a belief that our national economy has gone fully bust, bankrupted by policies which favored financial manipulation and "wealth creation" over actual financial profit in a more traditional sense: by labor, production and industry.

The US economy is on its death bed. Actually, it has been lying there on life support for nearly two years now, since the initial failure of two obscure Bear Stearns hedge funds sent shock waves through the world financial system. (I should note, without any pleasure, that the US financial system is locked into the larger, global system to some degree, though far less than 100%, so that when the US fails, other countries will also take a hit, some more than others.)

Since that time in July of 2007, when Bears' High-Grade Structured Credit Strategies Enhanced Leverage Fund and High-Grade Structured Credit Strategies Fund imploded, leaving investors with nothing and freezing credit markets worldwide, the US economy has suffered its worst decline since the Great Depression of the 1930s.

Rescue efforts by former Treasury Secretary Hank Paulson, current Secretary Tim Geithner and Fed Chairman Ben Bernanke have succeeded only in stopping the bleeding temporarily. These doctors of finance have yet to address the real cause of the malady: the toxic assets in collateralized debt obligations (CDOs), credit default swaps (CDS) without sufficient capital to underwrite them and various frauds in commercial banking from the "miracle" fractional reserves" to interest rate manipulation.

Worse yet, these government pretenders have been completely bought off by the criminal syndicate at the root of the financial crisis: the largest banks and brokerages populating the canyons of Wall Street, headed by Goldman Sachs, JP Morgan Chase, Bank of America, Citigroup, Wells Fargo and, of course, AIG.

These companies are essentially insolvent and bankrupt, brought down by the very derivative trading by which they enriched themselves for many years. The same securitization markets which underpinned - and eventually undercut - the US financial system remains in place, and, in an odd bit of alchemy, the surgeons are attempting to revive the patient by administering an unhealthy dose of the same medicine while felled it: more debt, more credit, more exotic, intractable, indiscernible financial instruments. With this kind of financial witchcraft at hand, the actual death of the US financial system will come in due course, most likely within the next two to three years, if not by the end of this one.

It was reported yesterday that 12% of all mortgages nationally were in some stage of trouble in the first quarter, either in foreclosure or past due by at least one payment, a record high. Unemployment is largely cited at 9%, though the real figure is likely closer to 12 or 15% when people who have exhausted their unemployment insurance are included in the calculations.

These numbers point out that the economy - despite mainstream media's contentions - is continuing to contract, decline, or, to put it into realistically stark terms: fail. Look up and down your street and there's probably one or more homes in which the occupants either have recently lost their job or have fallen behind on mortgage payments. And those numbers are more likely going to increase over the next 6, 12, 18 months. At some point - and remember, these people are also not going to be paying income and property taxes any time soon - you have to face reality. Am I going to be the only person on this block paying my mortgage and taxes? And why should I when the government is bailing out those who cannot meet their obligations with borrowed tax dollars?

Which brings us to the Orwellian part of this discussion: the sooner everybody defaults on either mortgage or tax obligations, the sooner the corrupt bankers and politicians can be uprooted, disposed of, dethroned, defrocked and demolished and a new economy can supplant the bad one. We are getting closer to that reality daily. When unemployment reaches beyond 20% and foreclosures are running at a rate similar, we'll be on our way to destruction, resolution and resurrection.

Regular people outnumber politicians and bankers in this country by a level of probably 1000-1. Surely we can muster the will to put an end to their borrow-tax-spend-lend tyranny? Or can we? Bad, defaulting on your mortgage, is good. Less, as in debt, is more, as in freedom. Failure of the financial system as currently structured will result in Success of the American experience.

The stock market today did what the economy has been doing for the past year: nothing... at least until 3:30, that is. Now, the fraud and deceit of such blatant manipulation can be seen first-hand. Stocks vacillated along the unchanged mark all day long until the final half hour of trading. Did everyone suddenly find reason to buy stocks with both hands shortly before the weekend commenced? Or did insiders decide it would be practical to end the week on a high note, knowing that the insipid media would carry only the final numbers and ignore the fact that ALL OF THE GAINS WERE IN THE FINAL HALF HOUR OF TRADING? The major dealers who did all this buying will no doubt be unloading the very same shares early next week to unsuspecting, sheep-like, retail investors.

You be the judge. Our economy is dying, if not already dead. Wall Street is an absolute Ponzi scheme on steroids, boosted by the bankers and winked at by government regulators and politicians. Until these scoundrels are unearthed, tried and imprisoned, we are their slaves.

Dow 8,500.33, +96.53 (1.15%)
NASDAQ 1,774.33, +22.54 (1.29%)
S&P 500 919.14, +12.31 (1.36%)
NYSE Composite 6,004.07, +87.01 (1.47%)

On the day, advancers beat decliners by an obvious margin, 3652-1837, though new lows maintained their advantage over new highs, 84-77. As close as that margin has gotten this week, it has yet to roll over, and, unless there is some kind of miracle cure for the economy - as GM heads to bankruptcy - it won't. Volume was slightly higher than the depressed levels which predominated the week, though that alone is without meaning.

NYSE Volume 1,854,219,000
NASDAQ Volume 2,524,330,000

The commodity rally continued apace, with oil shooting up another $1.23, to $66.31; gold rising $17.10, to $980.30, and silver gaining 45 cents, to $15.61.

Everything's going up, which really shouldn't happen in a balanced economy, but it is. George Orwell, wherever he is finally resting, is having a good laugh at our expense.

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