Witnessing the Biggest Transfer of Wealth in History 25 comments
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Nemo stated in the Discourse Thursday evening: "Higher oil prices will be taken as a distinct negative by traders, but this too could be part of a plan by certain vested interests to force the Administration to save Fannie (FNM) and Freddie (FRE). O.K Bill, I give up. Could you give me a scenario?"
I responded:
Lower interest rates in the US at this point would serve those shareholders and bondholders hoping to save Fannie, Freddie, Lehman (LEH) and other weak financial companies. But those financial companies will be "saved" for others who are standing by ready to pounce. By goosing the oil price, and crashing the $USD by -1.1% today, soon before Bernanke is going to speak at the Fed's annual symposium at Jackson Hole, Wyoming, it puts the Fed into a position where the prospect of lower rates must be ruled out. In fact, the language being used by the media at this point is that the Fed will wait until post-election to start raising rates from 2% to 3% through 2009. I believe these stories have been carefully crafted. In the absence of lower rates, I believe Fannie, Freddie and Lehman are toast and the Fed and the Treasury Secretary will be required to save them like they "saved" Bear Stearns. In other words, this is feeding time for other banks and friends of Paulson, and at the end of the day the taxpayer once again will assume all the liabilities while the new owners will take all the assets. I believe that people like Bernanke, Geithner, Dimon and Paulson and the people pulling their strings know how this is being played out and are facilitating it. The scripts are being written and practiced today for public consumption. We are witnessing the biggest transfer of wealth in the history of the world.
These are my views. We are all entitled to our own here. Mine may or may not be the most helpful. I am merely encouraging discussion.
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This article has 25 comments:
I was only five years old but I do remember my father complaining about wage and price controls back in 1973. Have we come back to that era again? Will we ever learn???
It may still happen.
For example, almost ever media entity, including this one, has been stating with almost absolute certainty that the GSEs (Fannie and Freddie)
will be privatized. They have contributed greatly to the crashing prices of FNM and FRE and almost everyone is now afraid to buy them at bargain basement prices. Members of the Wall Street, news media, and Washington club (i.e., Buffet, Paulson, Goldman Sachs, etc) are in my opinion the buyers of these shares being literally thrown out the window. Has anyone done any real homework here? There is no current liquidity issue at Freddie or Fannie. Not even close yet.
This bombardment of BS about nationalization of GSEs is one of the biggest scams I have ever seen.
My opinions:
The Fed is walking a tightrope on interest, not necessarily because of the best interest of FRE or FNM shareholders and bondholders, but because of the balancing act between throwing the entire economy into a deep recession, igniting serious inflation, supporting the dollar and trying to keep energy costs contained.
At this point in the cycle, I think the following is true:
Lower interest= weak dollar=higher oil
Lower interest=higher inflation
Lower interest=higher home ownership rate
Lower interest=better propects of avoiding a deep recession
Higher interest=recession=hig... unemployment
Higher interest=stronger dollar=lower oil prices
Higher interest=reduced homeownership
The Fed created this mess because they raised interest rates to fight demand based commodity inflation. Wages where never an issue. The process of raising interest rates caused the collaspe of the mortgage market and nearly the entire financial system due to derivitives and leveraging because they didn't understand the consequences of their actions.
One way or the other the tax payer is going to pay for all of it. It's just what pocket it comes out of, whether a few pay for all or whether everyone pays a little. Keeping as many employed as possible seems like a better choice to me. Even no growth is better than a major contraction. Having a job to pay for higher gas is better than no job and gas at a lower price.
Who owns the Federal Reserve?
For the "Party Line", see:
www.federalreserve.gov...
and i quote...
"..... the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year...."
Now consider this and ponder:
J.P. Morgan is a "member" (stockholder) of the Federal Reserve.
Interesting that J.P. Morgan became the owner of Bear Sterns assets courtesy of the B.S. (no pun intended) bailout?
Now consider Fanny, Freddie, Lehman et al., watch and be amazed as the Fed magic act continues. Presidential or Congressional oversight? None.
As a point of fact, since Woodrow Wilson's term and the subsequent formation of the Federal Reserve, one U.S. President actively considered dismantling the Fed. His name was John F. Kennedy. Eleven days after crafting a memorandum for eliminating the Federal Reserve, the Kennedy assassination was perpetrated. A coincidence? Draw your conclusions accordingly.
The backstop did nothing more than imbolden purchasers of securities. Trashing the GSE's would lead to downgrades, which in turn would drive yeilds through the roof. The effect is reduced liquidity, increased rates, and loss of buying power. This is going to quickly spread outward from the GSE's to every financial institution in the country. In effect Paulson's plan is transferring wealth away from his buddies in the financials.
At this point, any help from the government would just be bled right back out. A government takeover now would cause goverenment securities to be downgraded too which will accelerate the pending economic collapse. If the government doesn't act, downgrades will continue to Junk and we will be back to 1980 interest rates, no matter how low the Fed drops the rates to. I think I would call it check mate.
This is a Ponzi perpetrated by the financial backers of our credit addicted economy. We are all hopelessly adicted junkies and it's now time for the Credit dealers to raise their prices. Go find the backers and you'll find the masterminds. I'm sure a talk with Bill Gross and Mr. Greenspan at PIMCO would be very helpful.
Yes, there will be a major transfer of public wealth into private hands and back to the government. To protect this grand robbery, the new administration and political parties will have to abolish most of so cherished democracy principles.
Finally, the paradox is that America is moving to socialism. Socialism has nothing to do with public justice and equality. No, it is a immense power of bureaucracy.
Consider how dumb the average person is; then take note that half the people aren't even that smart!
If the 'Goldsmith' articles don't convince you, then maybe you should read :The Creature from Jekyll Island: A Second Look at the Federal Reserve' by G. Edward Griffin.
The main problem is that we are exporting jobs, which leads to wage stagnation and erosion. Demand and buying power with real money, not debt.
How can somebody who's exporting jobs, moan about a lackluster US demand ? My advice to them: go to China, and find your demand there ;-)
On the other hand, if they ever wise up and decide not to trust our currency any longer, the game will be over and our standard of living will be equal to or less than what we produce - which ain't much! The rise of their own domestic demand may for the first time give them that choice. Perhaps the countries with resources or manufacturing infrastructure/knowled... will have the last laugh when our debt and currency becomes worthless and we have nothing to trade.
GS and the hedge funds act in concert to create the oil bubble and short the financial and energy companies. Then they take the profits from these activities and buy whatever stocks and bank assets they want at a fraction of their true worth.
Meanwhile, Hammerin Hank covers their back and makes sure the scheme works.
But even more so, I am shocked at the downmarket tone of so many contributors.
1. The Federal Reserve Officials are NOT elected officials, and yet they have been given de facto control over the national debt by way of adding $5 trillion to the National Debt without so much as a wimper from the legislative, executive or judicial branches of government.
2. The Federal reserve is NOT owned by government. It is owned by stockholder "Members", who include member banks such as J.P Morgan. By definition, the Federal Reserve Board fiduciary duty is to its members (stockholders). Events of late clearly support this fact.
3. In relative proportion, the recent assignment of liabilities to the our National Debt, and contemporaneous assignment of assets to J.P. Morgan in connection with the Bear Sterns restructuring, bears witness to a huge transfer of wealth without any regulatory oversight whatsoever.
4. Finally, all of the foregoing facts are undeniable, including the facts surrounding the untimely death of John Kennedy. Murder requires no conspiracy. Big money does whatever it chooses to whomever it chooses. To think otherwise, would be naive (take note ~ punk ash).
5. Finally, having met with Jim Rogers personally a few years ago, I tend to share his views on the dollar and the fact that the United States will continue in a state of decline for the foreseeable future.
The purpose of writing is to share an alternate view of popular opinion. The herd can be a dangerous place to be when crossing a river infested with hungry crocs. A little independent thinking can be a good thing.
Best Wishes to All, Jeffrey