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America’s Economic Jeremiah Calls For Repentance

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I don’t call Karl Denninger’s blog “The Four Horsemen of the Economic Apocalypse” for nothing--he goes absolutely ballistic here. It’s a long damn post, so I’d encourage the readers here to click on it and read through it if you can (it’s full of OUTRAGE and I admittedly had a lot of trouble reading through it myself), but here’s a couple of highlights which I think are rather relevant, given some of the recent events on the healthcare debate, Cash 4 Clunkers, and the stock market upswing:

The worst part is that it didn’t end with payment of the ransom.  No, the banks didn’t come clean, they didn’t clear their balance sheets, they didn’t take their losses using the backstop they had managed to secure through threat of imminent economic doom. 

On the contrary: They lied some more!  They in fact lobbied Congress and had them bring pressure on FASB, threatening to legislate legalization of accounting fraud, and twisted FASB’s arm into issuing what amounted to an executive order making legal any and all lies about asset valuation!  We now know this happened because in point of fact the amount of loss that has been seen in the form of write-downs when banks fail has roughly doubled from last year to this, and these are not small numbers: we’re talking about going from roughly 15% to roughly 35!

Who eats that?  You do.

Note: Denninger mentions the “overdraft fees” and other annoying things that the banks do to nickel and dime our accounts, but I think the bigger issue here is the $23.7 trillion dollar line of credit the banks, particularly the “too big to fail” banks that were stress-tested, have on taxpayers via TARP.  Even if this is a worst-case scenario, it’s unconscionable that Americans should be on the hook to companies that are now in a position where they can threaten to blow up the economy if taxpayers and their descendants don’t cover up for their schemes, and nobody in Congress is calling them out on it.  Obama’s comment about “standing between you and the pitchforks” now doesn’t make him look like a protector, it makes him look like a collaborator.

You might think that all these bailouts and handouts would have produced a stable banking system.  You’d have thought wrong.  Chris Whalen of Institutional Risk Analytics has updated his bank ratings for the second quarter: they now rate 1,882 banks as “failing” (or just “F” if you prefer) which is up a whopping 16.5% from the end of March - just three months ago.  The number of banks with “A” or “A+” ratings fell by 21% during the same time.

When banks are allowed to hide bad debt off of their sheets--the same games Enron played, by the way, before they imploded--this is the result.  And the evidence shows it’s not getting any better.

And then there’s this bit of hackery by MSNBC, which Karl cites:

Meanwhile, in the United States, the Federal Reserve said the world’s largest economy appeared to be “leveling out” and many economists see a second-half rebound.

It all adds up to an improving picture ahead of an economic summit next month in Pittsburgh of the world’s top 20 industrial and developing economies.

Really?  May I politely ask “how”?

The entire cusp of this rests here:

But until American consumers begin spending again, and so long as jobs are still being lost, the durability of any recovery is questionable. Major retailers reported this week that U.S. consumers are continuing to rein in spending on all but basics.

Despite slight recent improvements in many U.S. economic statistics, many consumers have not seen a change in their lives.

This is when it gets into “The End is Nigh!” territory--

Not a damn thing has changed, except that we are lurching closer and closer to the cliff of national insolvency and both economic and political failure as a nation.  The inability to fund the operating expenses of our government is quite possible.  Social Security and Medicare have gone into deficit years earlier than expected and these programs have no money - they have only “IOUs” and to turn them back into money Treasury will have to sell more bonds.

But who will buy them?  The Chinese?  Why?  Bernanke is lying about monetizing the debt - in fact he lied under oath - but the currency markets are not fooled.

The dollar is in the toilet and threatening to break all support levels.  If it does, it may collapse to as low as 40, which will in turn rocket oil north to $300 or more and gasoline to $10!

If that happens it is too late to stop it and too late to reverse course.  What we now know as a middle class will be reduced to sheer destitution - literal destitution.

Is this out of the realm of possibility?  Of course not--but what kind of event would it take for it to reach that critical mass level?  Hell, we found out last year that $4-5 a gallon gas was pretty much the limit of what Americans are willing to pay for fuel; double that level could conceivably finish the country’s economy as we know it, because it affects damn near everything we consume.

He ends with this:

It is time for Americans to demand that our government do the right thing, and it is time for Congress and The Administration to shut up and listen instead of prattling on about this or that add-on to the scam of the day.

Health Care “reform” is a laudable goal, but we cannot waste our time on that or indeed any other priority until we truly stabilize this nation’s currency and economic system.

If you can get past the apocalyptic, pitchfork-wielding rhetoric, I can’t see anything wrong about this basic point.  Obama is really showing that he’s not up for the job by trying to “wee-wee” the country into getting worked up over his pet issues.  A real President, and Congress for that matter, would be tackling this head-on and getting the nation’s banks to stop embezzling taxpayers, and to start being honest about the state of the nation’s finances so a real point of improvement could be established.  Of course, when they have been complicit in the embezzlement, they are certainly in no place to be lecturing anyone about corruption except how to practice it.

Comments

Posted by HARLEY on 08/24/09 at 08:12 PM from

But who will buy them?  The Chinese?  Why?  Bernanke is lying about monetizing the debt - in fact he lied under oath - but the currency markets are not fooled.

The dollar is in the toilet and threatening to break all support levels.  If it does, it may collapse to as low as 40, which will in turn rocket oil north to $300 or more and gasoline to $10!

If that happens it is too late to stop it and too late to reverse course.  What we now know as a middle class will be reduced to sheer destitution - literal destitution.

Wars have started over less..............

Posted by on 08/25/09 at 03:45 AM from

first thanks for the mentioning this informative stuff, This do happens but the picture become grim just due to the current recession, I think as it ends thing will be normalize. debt help to fix you worries.

Posted by AlexinCT on 08/25/09 at 07:58 AM from

What kills me is that democrats won the last election on the blatant lie that they are better for the economy. People cited the Clinton years as proof of that. I always am left wondering how so many people do not understand that spending and regulation come not from the president, but from congress. Oh sure, presidents can set direction. Some have even occasionally made congress do what they wanted. But Clinton was dragged kicking and screaming, right after a mid term election but 2 years into his presidency, which we should point out was not heading south either as fast or as deep as Obama’s is, by the new republican congress into doing the right thing. Those were the days republicans actually believed in being fiscally responsible, a lesson they better relearn fast. For all our sakes!

Anyway, now these democrats that demonized Bush for his deficit spending – mind you that most of that deficit spending happened after the 2006 elections that put the democrats in control of congress and spending (Bush never saw a bill he would veto) – are spending America into a banana republic. And that’s after their meddling in the housing, financial, and security trading sectors caused the worst economic implosion since the great depression. Spending is completely out of control and they want to spend even more, and all while also doing everything in their power to prevent the economy from rebounding in any significant way. They are either power hungry ideologues who do not realize the havoc they are wreaking, or doing this on purpose. Neither is a good thing. I hope Americans never again fall for this idiotic lie that democrats are better for the economy.

Posted by FrankPolenose on 10/12/09 at 01:42 AM from

Unfortunately power - such as oil or gas - will start wars again in the future.
Frank @ Debt Advice

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