Thursday, October 23, 2008

Disaster Capitalism for Dummies

We are no longer waiting for The Perfect Storm to come, it is here. The outer bands are sweeping the beaches, the storm surge is lapping at the sea walls and breaches are occurring. But it's not just the economy, stupid. Keep in mind energy prices were the pin that popped the housing bubble. Keep in mind energy prices and environmental disasters drove the costs of food and fertilizer higher. This is a Perfect Storm of converging storms, large and small.

We have energy prices (at current "low" prices, they are still 3 - 4x prices in 2003) driving food, fertilizer, pesticide prices, bio-fuels creating havoc with food production, impacting funding for alternative energies, and slowing the economy.

We have weather disasters driven by Climate Change causing destruction we cannot seem to recover from (Katrina, Galveston) and reducing harvests in a number of areas, notably the US, Australia and Bangladesh.

We have the economic disaster (We *might* be in a recession? Freaking liars and/or idiots.) literally resulting in the nationalization of economies all over the globe. We have sold our nations to the bankers. All of this compounded by the wars in Iraq and Afghanistan, which had already been used as excuse to strip away our rights and freedoms, draining the coffers and dragging on the economy. Our ability to adapt to Climate Change, rebuilding as a sustainable society is deeply impacted. Global Warming is likely unstoppable simply because we will likely not be able to afford the transition.

We are in deep poop, people. The longer this goes without the We the Sheeple standing up and telling our leaders what to do, rather than being led to our own slaughter, the more likely there will be nothing but the ultra wealthy and powerful buying their custom built oases, fully staffed by Blackwater, and the rest of us baking in the sun scratching about for a few weeds to nibble on.

With regard to the Economic Storm, I don't think it can be said any better than this:

Wall Street's 'Disaster Capitalism for Dummies'

14 reasons Main Street loses big while Wall Street sabotages democracy

ARROYO GRANDE, Calif. (MarketWatch) -- Yes, we're dummies. You. Me. All 300 million of us. Clueless. We should be ashamed. We're obsessed about the slogans and rituals of "democracy," distracted by the campaign, polls, debates, rhetoric, half-truths and outright lies. McCain? Obama? Sorry to pop your bubble folks, but it no longer matters who's president.

Why? The real "game changer" already happened. Democracy has been replaced by Wall Street's new "disaster capitalism." That's the big game-changer historians will remember about 2008, masterminded by Wall Street's ultimate "Trojan Horse," Hank Paulson. Imagine: Greed, arrogance and incompetence create a massive bubble, cost trillions, and still Wall Street comes out smelling like roses, richer and more powerful!

Yes, we're idiots: While distracted by the "illusion of democracy" in the endless campaign, Congress surrendered the powers we entrusted to it with very little fight. Congress simply handed over voting power and the keys to trillions in the Treasury to Wall Street's new "Disaster Capitalists" who now control "democracy."

Why did this happen? We're in denial, clueless wimps, that's why. We let it happen. In one generation America has been transformed from a democracy into a strange new form of government, "Disaster Capitalism."

Here's how it happened:
  • Three decades of influence peddling in Washington has built an army of 42,000 special-interest lobbyists representing corporations and the wealthy. Today these lobbyists manipulate America's 537 elected officials with massive campaign contributions that fund candidates who vote their agenda.
  • This historic buildup accelerated under Reaganomics and went into hyperspeed under Bushonomics, both totally committed to a new disaster capitalism run privately by Wall Street and Corporate America. No-bid contracts in wars and hurricanes. A housing-credit bubble -- while secretly planning for a meltdown.
  • Finally, the coup de grace: Along came the housing-credit crisis, as planned. Press and public saw a negative, a crisis. Disaster capitalists saw a huge opportunity. Yes, opportunity for big bucks and control of America. Millions of homeowners and marginal banks suffered huge losses. Taxpayers stuck with trillions in debt. But giant banks emerge intact, stronger, with virtual control over government and the power to use taxpayers' funds. They're laughing at us idiots!
Amazing isn't it, Wall Street's Disaster Capitalists screwed up, likely planned or let happen this meltdown and recession. Yet America's clueless taxpayers just reward them by giving the screw-ups massive bailouts, control over more than $2 trillion of tax money, and the power to clean up the mess they made. Oh yes, we are dummies!

This end game was planned for years in secret war rooms on Wall Street, in Corporate America, in Washington and the Forbes 400. Democracy is too cumbersome. It had to be marginalized for Disaster Capitalism to take over. Reagan, Bush and Paulson were Wall Street's "Trojan Horses."
Naomi Klein summarizes the game in "Shock Doctrine: the Rise of Disaster Capitalism." This "new economy" generates enormous profits feeding off other peoples' misery: Wars, terror attacks, natural catastrophes, poverty, trade sanctions, subprime housing meltdowns and all kinds of economic, financial and political disasters. Natural (Katrina) or manmade (Iraq), either way "disaster capitalism" creates fortunes.

So you, me and the other 300 million better get out of denial. America is no longer a democracy. Voting is irrelevant. Best case scenario: We're a plutocracy, a government ruled by the wealthy, the richest 1%, the Forbes 400, the influential wealthy elite, while the other 99% are their "servants." Meanwhile, the inflation-adjusted income of wage-earners has declined for three decades.

Worst case scenario: America's no democracy and as a result of the meltdown and the surrender of our power to Wall Street's new Disaster Capitalism we are morphing into what one WWII dictator called "corporatism," a "merger of state and corporate power," kind of like what's going on now with Goldman Sachs' ex-boss as de facto president.
Wolves in sheep's clothing

Yes, a strong charge. But like a lot of our readers, I don't like what's happening to America. I'm a patriot. I volunteered for the Marines. Served four years. Volunteered for Korea. I don't like how our freedoms, rights and value system are being subverted in the name of greed, arrogance, self-righteous intolerance and other false gods.

We know for the last eight years disaster capitalists ignored obvious warnings of a coming meltdown. They apparently planned it. They road the bull, got very rich. Now they have the ultimate disaster capitalist weapons, trillions in tax money, virtual control of government.

That's why I fear we're on the edge of a dangerous line between Wall Street's version of disaster capitalism and a toxic "merger of state and corporate power." The wolf is in sheep's clothing. Wall Street pretends we're a democracy. Yet America more closely resembles the kind of "corporatism" that Laurence W. Britt wrote about five years ago in Free Inquiry magazine.

We adapted his historical analysis of 14 key traits for today's discussion. Notice how they have a huge impact your investments and retirement:

1. Wall Street rich get first priority
Think "bailout." Wall Street's greedy con game spins out of control globally. Millions of homeowners misled, lose. Who gets hundreds of billions first? Wall Street's con men.
2. National security obsession
Think of the expansion of executive powers in the name of national security: Preemptive wars, wiretapping private citizens, Gitmo, torture; driven by a dark wealthy neocon elite.
3. Superpower with massive military
Think of our $3 trillion Iraq/Afghan War. Disaster capitalists love the thrill of military power. We outspend all nations, over half the federal budget to strut before the world.
4. Extreme nationalism
Signs are everywhere: Flags, lapel pins, "support the troops" slogans, all to get huge military budgets passed. Challenge them and you're un-American and unpatriotic.
5. Rally the masses by scapegoating enemies
Think "axis of evil," mushroom clouds, "Islamofascists," more terrorist attacks on the homeland. Propaganda creates "enemies" in the public's mind and distracts from real issues.
6. Corruption and cronyism
Think earmarks, no-bid defense contracts, paid mercenaries outnumbering military in Iraq, superlobbyist Jack Abramoff, biofuels, bridge to nowhere, millions donated to campaigns.
7. Obsession with crime
Think of prison-building as just another investment opportunity, rather than focusing on reforming our criminal justice system. Stoke irrational fear of criminals and extremists.
8. Labor and low wages
Think corporate earnings versus the wages paid to workers. No "trickling down," leaves more for tricklers: Rich insiders, stockholders. Wages dropping as CEO salaries skyrocket.
9. Contempt for human rights
Think of abuses of habeas corpus, loss of right to trial, bogus charges, plus "demonizing" the victims, all in the name of national defense and homeland security.
10. Mass media manipulation
Think of leaking false information, Joseph Wilson, Valerie Plame, Scooter Libby, Colin Powell's United Nation's testimony, Condoleezza Rice's mushroom clouds, WMDs, all to suppress the truth.
11. Obsession with sexism
Think of paternalism, antigays, antiabortion, subordinate women -- then codify the system as the law of the land reinforcing a male-dominated society, punish violators.
12. Disdain for intellectuals
Think of conservative intellectuals Francis Fukuyama and Bill Buckley. Contrast them to Sarah Palin and Joe Sixpack conservatism, Bush's funding cuts for arts and science education.
13. Religion in government
Think of all the faith-based programs versus antiscience in drug approvals, creationism vs. evolution, Ten Commandments enshrined in public buildings, public money to churches.
14. Fraudulent elections
Think of police and prosecutorial intimidation and threats to voters, challenging minority voters, ballots disappearing, party election officials committing outright fraud.

Yes, officially America is still a democracy. We have enough signs and rituals to support that illusion. But the truth is America has become a plutocracy run by and for the wealthy. And since Wall Street's Disaster Capitalism coup de grace, we are rapidly morphing into a dangerous new government.

For more, read Britt's original article, then add comments here: Was the meltdown planned by Wall Street's Disaster Capitalists?

"America has become a plutocracy run by and for the wealthy."


And you are not invited to partake.

More info on "Shock Doctrine" from Naomi Klein:

The Shock Doctrine, the book.

The Shock Doctrine, Short Video

The Shock Doctrine, Long Video

Friday, October 3, 2008

Of Crashes, Failures and Bailouts - Round III

Should the Senate pass its revised version of the $700 billion bailout bill?

Yes - No
35% - 65%


Representative Sherman's remarks on the House floor at 8:07 PM EST, Thursday, Oct. 2nd:

The only way they can pass this bill is by creating and maintaining a panic atmosphere. That atmosphere is not justified. Many of us were told in private conversations that if we voted against this bill on Monday... the markets would fall 2 or 3,000 points the first day, another couple thousand the second day, and a few members were even told that there would be Martial Law in America if we voted no.
This is what is driving the debate, the vote: Fear. It is what we have seen for the last 7+ years. Are you not tired of the lies?

UPDATE: Rep. Sherman also spoke again at 8:23 AM Friday morning. He points out again the pork and the fact the "oversight" is B.S.: the Congress has no power to enforce. He says again: let's stay here a week and develop a GOOD bill.

Let's review:

Claim by Paulson, Bernanke, Bush, McCain, et a.: The economy is fundamentally strong. Paulson: It's contained.

Reality: Obviously false.


Claim: Paulson, Bernanke, Bush, et al.: We must act now. We don't have weeks. There will be financial disaster and Martial Law.

Reality: Obviously false.
  1. It's been more than a week.
  2. Secret conference call assures Wall Street first funds won't be used for a couple weeks while they decide who lives and who dies. Also, provisions have no teeth; all 700 billion will be available immediately.
Here's some more on that secret conference call. (Hat tip to Leanan at The Oil Drum.):

Financial Eugenics: The Paulson Plan for Survivor Bias

As I write this... I suspect that Congress will force the passage of the bill in some form because the media and political narrative on the necessity of the measure is unremitting and so horribly biased.

No alternatives will be considered.

No constraints on the unilateral executive authority of Hank Paulson will be considered.

No assurances that funds will be used to unlock credit markets or promote lending to the real economy (as opposed to the financial robber barons) will be considered.

...Having listened to all 42 minutes of the late night Treasury briefing of investment banks on Sunday, there is no doubt in my mind that this legislation represents the sort of federal largesse for Goldman Sachs, Morgan Stanley, Citibank and JPMorgan Chase that the Iraq war provided for Halliburton and Blackwater.

The most cynical moment in the call is when the Treasury official confirms, ”our preference would be to help the healthy banks become even healthier” rather than helping troubled banks or illiquid banks.

America is now a centrally planned economy where the Treasury will determine which firms survive and prosper...

Clearly what is going on here has nothing to do with kick starting the credit markets or stabilising the equity markets or restoring depositor confidence in banks. (Treasury official: “No provision in the legislation that mandates re-lending.”) What is going on here is a blatant attempt to provide government funds to a select cadre of firms (not all banks) which are chosen to be the survivors feasting off the carcasses of their less fortunate and less well-connected brethren as the downturn intensifies in the years to come.

The crash in equities will still happen. The debt deflation of the economy leading to mass commercial and consumer credit defaults will still happen. The collapse of many national, regional and local financial institutions will still happen. The bankruptcy of many municipalities and shortfalls in state budgets will still happen.

This bill is about engineering survivor bias to friends of the Bush administration... and unconditional authority of the Secretary of the Treasury.

...The SEC will support the plan and survivor bias by relaxing FASB 157 on mark to market accounting...

The Federal Reserve will support the plan by relaxing the definition of “control stake” in US banks and bank holding companies to allow secretive cabals to hold through private equity and offshore hedge funds... Many foreign creditors are irate at the losses... and this plan provides a secret way to buy them off and keep them lending and investing...

I would like to believe Americans expressed the courage to change over last weekend when they 25 to 1 rejected an unconstrained and unconditional bailout of Wall Street in favour of cold turkey deleveraging of the economy. I wish I could believe that it mattered in the political calculus, but the result of the House vote on the bill will tell us that.

Fight the survivor bias. It’s not your survival they’re engineering.

Claim: $700 billion will save us.

Reality: The Fed, a.k.a. Helicopter Ben, put over 60o billion in play and it did... nothing.


Claim: This will save Main Street.

Reality: Obviously false. There are mortgage resets coming for the next two or three years. That means this problem will just grind on and on... and this bill does NOTHING about that.

In fact, foreign investors get relief. I stated earlier this is inappropriate. It is likely unconstitutional. And why threaten veto if the provision is taken out? How can it possibly be of urgent interest to Americans? Sure, the world economy is important,but the ENTIRE WORLD is going to implode if this isn't passed this week? I've got a bridge to sell ya...

And who's buying banks and insurance companies? B of A, Goldman Sachs, JP Morgan... etc.... all buying, not selling. Buying assets and leaving liabilities... to YOU:

AIG to sell as many assets as needed to pay bailout

As Big Banks Converge...
Citigroup Inc.'s decision this week to gobble up most of ailing Wachovia Corp. is the latest in a string of blockbuster acquisitions that have transformed the banking landscape. A huge chunk of consumer deposits are now consolidated in three banking behemoths -- Citigroup, Bank of America Corp. and J.P. Morgan Chase & Co. -- not known for wooing consumers with high interest rates and low fees.

Wells Fargo to acquire Wachovia for $15.1 billion in all-stock deal, ends Citigroup talks


Claim: Not acting will cause a recession.

Reality: We have been in recession since the last quarter 2007 according to some, and virtually never got past the recession of 2001 according to others. The people saying we are not in a recession are in the government or neo-con pundits.

Chart of Growth in U.S.Gross Domestic Product (GDP)

Chart of U.S. Consumer Inflation (CPI)

Chart of U.S. Unemployment

And guess when the money supply started drying up. Last week? No.... Check out M3, which Bush stopped reporting in 2006 because it was "too expensive" to report and not important:

Chart of U.S. Money Supply Growth


Ex-Treasury secretary O'Neill says Bailout Plan 'crazy,' 'lunacy'
Former U.S. Treasury Secretary Paul O'Neill said the $700 billion bank-rescue proposal under negotiation in Washington is "crazy," with potentially "awful" consequences for the world's largest economy.

"Doesn't this seem like lunacy to you?" said O'Neill, who was President George W. Bush's first Treasury chief, from 2001 to 2002, in a telephone interview Wednesday. "The consequences of it are unbelievably bad in terms of public intrusion into the private sector."

O'Neill's objections mirror those of Republicans in the House of Representatives who rejected the plan in a Sept. 29 vote. The former Treasury chief said he lobbied for an alternative solution that would offer guarantees for troubled assets, stopping short of purchasing the debt.

"Is anybody thinking there?" asked O'Neill, who also served as deputy budget director in the Ford administration. "It's too late, it's not going to make any difference and it's aggravating as hell when there's a better idea and you can't even get it in play," he said.

O'Neill, 72, was fired after an almost two-year tenure marked by strains with White House officials and comments that roiled markets.
Peter Schiff and Bob O'Brien on Glenn Beck: Causes and What the Future Holds

Great comments at:
3:10: GDP top drop 10% ~ 15% over next 12 ~ 15 months (Beck)
7:40: Govt' made it easy to borrow instead of work hard (Schiff)
8:09: - Gov't atfault - For years gov't kept things artificially supported... money supply... stopped working a few months ago... now engineering price of't actions pernicious, untested (O'Brien)

This is from an e-mail I got from

The Senate's 74-25 vote for Paulson's Plunder came as no surprise, since the Senate is run by and for millionaires. So now it's back to the House of Representatives, where we shocked those millionaires on Monday by defeating their bailout bill by 228-205.

A terrified army of corporate lobbyists is working around the clock to switch 13 votes, but only 7 have switched so far - Jim Ramstad (R-MN), John Shadegg (R-AZ), Zach Wamp (R-TN), Ileana Ros-Lehtinen (R-FL), Shelley Berkley (D-NV), Emanuel Cleaver (D-MO) and John Lewis (D- GA). Other possible switches include Pat Tiberi (R-OH), Pete Hoekstra (R-MI), John Yarmouth (D-KY), Brian Bilbray (R-CA), Steve Rothman (D-NJ), Lee Terry (R-NE), Jim Gerlach (R-PA), Tim Murphy (R-PA), Jason Altmire (D-PA), and Gabrielle Giffords (D-AZ). But others may switch from Yes to No, including Ed Markey (D-MA), Charlie Melancon (D-LA), and Spencer Bachus (R-AL).

Bush's first Treasury Secretary, Paul O'Neill, called Paulson's plan "crazy" and "lunacy" with potentially "awful" consequences for the world's largest economy. Many of the best economists agree with O'Neill. Paulson's strongest supporters - including panicked CNBC hosts - now admit it will not raise stock prices or boost the economy as it falls into recession. Then why on earth should we give $700 $850 billion of our tax dollars to Wall Street??? Joe Lieberman gave away the real game when he told FOX " it will be good for John McCain."

With so much at stake, Congress should stay in session for another week (or two) to pass a much better (and cheaper!) plan proposed by Pete DeFazio (D-OR). But Congress desperately wants to go home so Friday may be our last chance to stop this $850 billion disaster .

(1) Call your Representative today!
First check how your Representative voted on Monday (and note switches above):
If (s)he voted NO, say "Thank you for helping stop the Bailout on Monday. Don't betray us now by voting YES on Friday, or I will vote NO against you on Election Day."
If (s)he voted YES, say "I'm outraged that you supported the Bailout on Monday, and I will remember on Election Day. If you want my vote on Election Day, you must vote NO on Friday."

(2) Join or organize a street protest against the bailout:


Wednesday, October 1, 2008

Bailout Alternatives

Are your reps in Congress listening to you? Scroll down the front page of to vote. (Thanks to Geckolizard at The Oil Drum.)

Should the Senate pass its revised version of the $700 billion bailout bill?

If you're going to complain about what's wrong, you should be willing to talk about what's right. So, here are the plans that might help.

Rubini's plan on CNBC Look for the video called "HARDTalk US Bailout Special."

Congressman Defazio's plan: No Bailouts Act

Karl Denninger's Genensis Plan:
The solution to the trust issues in our financial system is elegant and it will work.
1. Force all off-balance sheet "assets" back onto the balance sheet, and force the valuation models and identification of individual assets out of Level 3 and into 10Qs and 10Ks. Enact this requirement beginning with the 3Q 2008 reporting period which begins next month.

Total taxpayer cost: $0.00

2. Force all OTC derivatives onto a regulated exchange similar to that used by listed options in the equity markets. This permanently defuses the derivatives time bomb. Give market participants 90 days to get this done; any that are not listed in 90 days are declared void; let the participants sue each other if they can't prove capital adequacy.

Total taxpayer cost: $0.00

3. Force leverage by all institutions to no more than 12:1. The SEC intentionally dropped broker/dealer leverage limits in 2004; prior to that date 12:1 was the limit. Every firm that has failed had double or more the leverage of that former 12:1 limit. Enact this with a six month time limit and require 1/6th of the excess taken down monthly.

Total taxpayer cost: $0.00
And more...

If you like one of these, put it in the ear of your Rep/Senator.