Perspectives on the global economic meltdown- (Nov 28 2010)

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ramana
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby ramana » 11 Oct 2011 21:01

A bank failure in EU makes it to Nightwatch :( !!!

Nightwatch, 6 Oct 2011

Belgium: Special comment. The Luxemburg- Belgian-French bank Dexia Banque Internationale a Luxembourg has collapsed and begun negotiations for its disposal, according to a press release posted on its home page. This bank is primarily a holder of sovereign debt, including Belgian, Spanish and Italian bonds. It helped finance the Belgian government. Agence France-Presse described it as the first casualty in the eurozone debt crisis.

A few months ago it successfully passed two stress tests administered by European Union banking regulators and was judged stable. In 2008 France and Belgium helped bailout the bank for its poor investments, including in the US subprime debacle. Belgium, Luxembourg and France are taking action to protect their national interests, as part of the break up

The commentaries on the implications of this bank failure are diametrically opposite. One set of views is that Dexia is the domino that will eventually cause other European banks to fall. The Economic Intelligence Unit (EIU) judges that this is a unique, exceptional case that should not be seen as a portent of imminent collapse of other troubled European banks. The EIU commentary does not explain why.

News service reports during this Watch indicate Dexia has a buyer and the three concerned governments are using a variety of measures to rescue the bank or at least its national branches. The EIU's main lesson is that European Union bank stress tests are not reliable indicators of bank stability. A major weakness of stress tests is that they assess risk, not threat. :?: {Isnt risk assessment based on threat?}

The speed and apparent success with which Luxembourg, France and Belgium responded to the bank's crisis this week support the EIU view that this bank failure is not the start of a systemic banking collapse in Europe. However, that is what the national authorities intend to convey so as to avoid a massive crisis of confidence.

The news accounts have tended to not dwell on the triggers that precipitated the banks collapse, such as a down grade by Standard and Poors resulting in a large drop in the value of stock. A living systems analysis of the danger for other European banks warns of the lemming effect. :oops:


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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby sumishi » 11 Oct 2011 21:32

ramana wrote:A bank failure in EU makes it to Nightwatch :( !!!
Nightwatch, 6 Oct 2011
... ... The EIU's main lesson is that European Union bank stress tests are not reliable indicators of bank stability. A major weakness of stress tests is that they assess risk, not threat. :?: {Isnt risk assessment based on threat?}... ...

Like the "fraudulent" credit rating agencies, another fraud, that of "stress testing," stands exposed!
How can we have a reliable test-track for vehicles (even if the concept is right) built on a land underlain with quicksand?

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby VikramS » 12 Oct 2011 03:41

Neshant:

You have a certain notion of "recovery" which you have been unable to articulate. When called upon to be more specific, you say it is obvious.

Your inability to define "recovery" is the fundamental issue. When asked for clarification, you claim that others are acting like bankers, Bernanke and what not.

For a change why don't you define what you mean by "recovery" instead of dissing others because their view do not fit in your definition of recovery.

Our focus as individuals here is asset prices and how they react to different things. Last week when I said a near term bottom is in, and you made fun of me. The SPX has moved more than 10% in a week. Today it was time to take some off the table.

It easy to call others names and cut and past stuff from Gold Bug sites.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Hari Seldon » 12 Oct 2011 06:42



Interesting even if well-known. More interestingly, the East is using imitation, innovation, frugality and adaptation to develop its own set of products that'll damage the current cash-cow product-pipelines of the bhestern MNC types which is why moving yeast is an imperative, not some magnanimous favor the massa complexed are doing on us boor SDREs.

When a Wipro announces innovative medical device products like the wearable ECG necklace that's simple, robust and cheap for everyday use in trying Yindian conditions, when a Godrej does a chotu-kool and a IITM startup does a simple-cheap biometric (fingerprint) based ATM for our rural areas, these inventions are far-reaching in both export potential and undercutting of existing gold-plated bhestern wares. I haven't purposedly mentioned the overused tata nano example. BUt fact remains that for frugal engineering type thingies, even the MNCs have to setup R&D centers here in Asia coz their TFTA engineers have little appreciation for ground SDRE realities.

The low-hanging fruit of pent-up demand for higher living standards is so high in the east that it'll take a few decades to satiate within existing resource constraints. I hope our gubmints have the sense and sensibility to ensure that local firms have the first right to our home markets before deep-pocketed phoren rivals try to buy out a slice of future demand. There is no substitute to having one's own people know how to make things and thereby to make money. The recent g\GOI moves to curb excess phoren acquisitions in our pharma generics sector is welcome, from that POV.

Anyway, like everybody else pontificating on here, I too amcontent to wait and watch where this is going. Not that we can do much about it anyway...

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby sumishi » 12 Oct 2011 07:30

[OT] Hari Seldon saab, your psychohistory in the wings :P : 'Data eye in sky' to help predict social instability

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby ramana » 12 Oct 2011 09:37

sumishi, SDRE have built in data eye to comprehend the data flow even when kept out.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Singha » 12 Oct 2011 10:17

> coz their TFTA engineers have little appreciation for ground SDRE realities.

thats a good point. people who are brought up at a lifestyle=A have no real clue of what it is like 3 levels down at lifestyle=B.

even urban indians who have little to no contact with village life have no clue as to the real problems there in things we take for granted (like having a ATM within 3 km anywhere, access to 24x7 hospitals etc)

often the most creative ideas will come from rural kids who get a good education and work for some company.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Hari Seldon » 12 Oct 2011 17:21

sumishi wrote:[OT] Hari Seldon saab, your psychohistory in the wings :P : 'Data eye in sky' to help predict social instability


Haha. Tks sumishi garu. Whuddathunkit, eh?

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Prem » 13 Oct 2011 07:49

SAO PAULO (MarketWatch) -- Securities exchanges from Brazil, Russia, India, China and South Africa will unveil an "alliance" later Wednesday, Brazil's BM&F Bovespa said in a statement. "The exchanges of the BRICS block of emerging economies will shortly announce another joint initiative to offer investors access to these dynamic economies," BM&F said in a statement. The plans will be unveiled later in the day during the 51st annual meeting of the World Federation of Exchanges in Johannesburg, South Africa, it said. A press conference will be held at 1530 GMT. BM&F said executives from the Hong Kong Stock Exchanges and Clearing Limited, Russia's MICEX, Johannesburg Stock Exchange, and India's BSE Ltd. (India) and the National Stock Exchange of India, as well as BM&F, will attend

BRIC, South Africa exchanges to unveil alliance
http://www.marketwatch.com/story/bric-s ... 2011-10-12

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby skumar » 13 Oct 2011 11:26

http://www.businessinsider.com/the-seven-biggest-economic-lies-the-presidents-jobs-bill-2011-10
One simple measure for the US is to raise taxes for the rich. From above, "From the end of World War II until 1981, the richest Americans faced a top marginal tax rate of 70 percent or above. Under Dwight Eisenhower it was 91 percent. Even after all deductions and credits, the top taxes on the very rich were far higher than they’ve been since. Yet the economy grew faster during those years than it has since." But why are the court economists behaving as if the Wall Street protestors are also protesting against higher taxes for the rich? Why is it a difficult to choose between raising taxes against cutting SS, healthcare?

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby ramana » 13 Oct 2011 19:17

In those days there was something called tax shelters which allowed money in dubious investments and take paper losses. Reagan removed those tax shelters in 1981 and reduced the top rate.

The scam was one could buy a $100K share in a venture whihc would make a loss and one would get a share of that loss much more than the $100K sunk.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby ramana » 13 Oct 2011 19:20

Also to avoid Volcker reporting, Goldman and Morgan Stanley to shed bank status. Looks like they can become banks(during the 2008 meltdown to recive bailouts) or unbanks(to avoid Volcker regualtions) as they need to get ahead.

The only ones cheated in this swindle is common public which paid the taxes used for bailout.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby ramana » 13 Oct 2011 22:13

Rajaratnam gets 11 years for insider trading.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Singha » 13 Oct 2011 22:26

will rajat gupta get any time?

there is even a co specialized in helping people have a easier time in jail
http://www.executiveprisonconsultants.com/id5.html

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Purush » 14 Oct 2011 01:51

This is the kind of socio-economic situation that leads to revolutions in the turdworld; how come amreeka is immune?
Very efficient brainwashing of the populace by the robber-barons, media vultures and gobarmound?

http://www.businessinsider.com/what-wal ... 11-10?op=1
CHARTS: Here's What The Wall Street Protesters Are So Angry About...

Lots of graphs at the link.
A summary of a interesting points (need to hit the link to view the detailed graphic data)

  • Let's start with the obvious: Unemployment. Three years after the financial crisis, the unemployment rate is still at the highest level since the Great Depression (except for a brief blip in the early 1980s)
  • Jobs are scarce, so many adults have given up looking for them. Thus, a sharp decline in the "participation ratio."
  • And it's not like unemployment these days is a quick, painful jolt: A record percentage of unemployed people have been unemployed for longer than 6 months.
  • And it's not just construction workers who can't find jobs. The median duration of all unemployment is also near an all-time high.
  • That 9% rate, by the way, equates to 14 million Americans—people who want to work but can't find a job.
  • And that's just people who meet the strict criteria for "unemployed." Include people working part-time who want to work full-time, plus some people who haven't looked for a job in a while, and unemployment's at 17%
  • Put differently, this is the lowest percentage of Americans with jobs since the early 1980s (And the boom prior to that, by the way, was from women entering the workforce).

    And now we turn to the other side of this issue... the Americans for whom life has never been better. The OWNERS.
  • Corporate profits just hit another all-time high.
  • Corporate profits as a percent of the economy are near a record all-time high. With the exception of a brief happy period in 2007 (just before the crash), profits are higher than they've been since the 1950s. And they are VASTLY higher than they've been for most of the intervening half-century.
  • CEO pay is now 350X the average worker's, up from 50X from 1960-1985. :evil:
  • CEO pay has skyrocketed 300% since 1990. Corporate profits have doubled. Average "production worker" pay has increased 4%. The minimum wage has dropped. (All numbers adjusted for inflation).
  • After adjusting for inflation, average hourly earnings haven't increased in 50 years.
  • In short... while CEOs and shareholders have been cashing in, wages as a percent of the economy have dropped to an all-time low.
  • In other words, in the struggle between "labor" and "capital," capital has basically won
  • Of course, life is great if you're in the top 1% of American wage earners. You're hauling in a bigger percentage of the country's total pre-tax income than you have at any time since the late 1920s. Your share of the national income, in fact, is almost 2X the long-term average!
  • And the top 0.1% in America are doing way better than the top 0.1% in other first-world countries.
  • In fact, income inequality has gotten so extreme here that the US now ranks 93rd in the world in "income equality." China's ahead of us. So is India. So is Iran. :eek:
  • And, by the way, few people would have a problem with inequality if the American Dream were still fully intact—if it were easy to work your way into that top 1%. But, unfortunately, social mobility in this country is also near an all-time low.
  • So what does all this mean in terms of net worth? Well, for starters, it means that the top 1% of Americans own 42% of the financial wealth in this country. The top 5%, meanwhile, own nearly 70%. :eek: :eek:
  • That's about 60% of the net worth of the country held by the top 5% (left chart).
  • And remember that huge debt problem we have—with hundreds of millions of Americans indebted up to their eyeballs? Well, the top 1% doesn't have that problem. They only own 5% of the country's debt. :mrgreen:
  • And then there are taxes... It's a great time to make a boatload of money in America, because taxes on the nation's highest-earners are close to the lowest they've ever been.
  • The aggregate tax rate for the top 1% is lower than for the next 9%—and not much higher than it is for pretty much everyone else.
  • As the nation's richest people often point out, they do pay the lion's share of taxes in the country: The richest 20% pay 64% of the total taxes. (Lower bar). Of course, that's because they also make most of the money. (Top bar).

    And now we come to the type of American corporation that gets—and deserves—a big share of the blame: The banks. Willie Sutton once explained that the reason he robbed banks was because "that's where the money is." The man knew what he was talking about.
  • Remember when we bailed out the banks? Yes, and remember the REASON we were told we had to bail out the banks? We had to bail out the banks, we were told, so that the banks could keep lending to American businesses. Without that lending, we were told, society would collapse...
  • So, did the banks keep lending? Um, no. Bank lending dropped sharply, and it has yet to recover.
  • So, what have banks been doing since 2007 if not lending money to American companies? Lending money to America's government! By buying risk-free Treasury bonds and other government-guaranteed securities.
  • And, remarkably, they've also been collecting interest on money they are NOT lending—the "excess reserves" they have at the Fed. Back in the financial crisis, the Fed decided to help bail out the banks by paying them interest on this money that they're not lending. :eek: And they're happily still collecting it. (It's AWESOME to be a bank.)
  • Meanwhile, of course, the banks are able to borrow money FOR FREE. Because the Fed has slashed rates to basically zero. And the banks have slashed the rates they pay on deposits to basically zero. So they can have all the money they want—for nearly free!
  • When you can borrow money for nothing, and lend it back to the government risk-free for a few percentage points, you can COIN MONEY. And the banks are doing that. According to IRA, the "net interest margin" made by US banks in the first six months of this year is $211 Billion. Nice!
  • And that has helped produce $58 billion of profit in the first six months of the year.
  • And it has helped generate near-record financial sector profits—while the rest of the country struggles with its 9% unemployment rate.
  • And these profits are getting back toward a record as a percentage of all corporate profits.
  • And those profits, of course, are AFTER the banks have paid their bankers. And it's still great to be a banker. The average banker in New York City made $361,330 in 2010. Not bad!
  • This average Wall Street salary was 6X the average private-sector salary (which, in turn, is actually lower than the average government salary, but that's a different issue).
  • So it REALLY doesn't suck to be a banker. :mrgreen:
  • And so, in conclusion, we'll end with another look at the "money shot"—the one overarching reason the Wall Street protesters are so upset: Wages as a percent of the economy. Again, it's basically the lowest it has ever been.
  • So now you know what the protesters are upset about! :!:


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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby sumishi » 14 Oct 2011 08:26

A great article in the Ludwing von Mises Institute website, linked to by a poster in IF:
Why the State Demands Control of Money -- Hans-Hermann Hoppe, Mises Daily: Thursday, October 13, 2011

Imagine you are in command of the state, defined as an institution that possesses a territorial monopoly of ultimate decision making in every case of conflict, including conflicts involving the state and its agents itself, and, by implication, the right to tax, i.e., to unilaterally determine the price that your subjects must pay you to perform the task of ultimate decision making.

To act under these constraints — or rather, lack of constraints — is what constitutes politics and political action, and it should be clear from the outset that politics, then, by its very nature, always means mischief. Not from your point of view, of course, but mischief from the point of view of those subject to your rule as ultimate judge. Predictably, you will use your position to enrich yourself at other people's expense.

More specifically, we can predict in particular what your attitude and policy vis-à-vis money and banking will be.

Assume that you rule over a territory that has developed beyond the stage of a primitive barter economy and where a common medium of exchange, i.e., a money, is in use. First off, it is easy to see why you would be particularly interested in money and monetary affairs. As state ruler, you can in principle confiscate whatever you want and provide yourself with an unearned income. But rather than confiscating various producer or consumer goods, you will naturally prefer to confiscate money. Because money, as the most easily and widely saleable and acceptable good of all, allows you the greatest freedom to spend your income as you like, on the greatest variety of goods. First and foremost, then, the taxes you impose on society will be money taxes, whether on property or income. You will want to maximize your money-tax revenues.

In this attempt, however, you will quickly encounter some rather intractable difficulties. Eventually, your attempts to further increase your tax income will encounter resistance in that higher tax rates will not lead to higher but to lower tax revenue. Your income — your spending money — declines, because producers, burdened with increasingly higher tax rates, simply produce less.

In this situation, you only have one other option to further increase or at least maintain your current level of spending: by borrowing such funds. And for that you must go to banks — and hence your special interest also in banks and the banking industry. If you borrow money from banks, these banks will automatically take an active interest in your future well-being. They will want you to stay in business, i.e., they want the state to go on in its exploitation business. And since banks tend to be major players in society, such support is certainly beneficial to you. On the other hand, as a negative, if you borrow money from banks you are not only expected to pay your loan back, but to pay interest on top.

The question, then, that arises for you as the ruler is, How can I free myself of these two constraints, i.e., of tax-resistance in the form of falling tax revenue and of the need to borrow from and pay interest to banks?

It is not too difficult to see what the ultimate solution to your problem is.

You can reach the desired independence of taxpayers and tax payments and of banks, if only you establish yourself first as a territorial monopolist of the production of money. On your territory, only you are permitted to produce money. But that is not sufficient. Because as long as money is a regular good that must be expensively produced, there is nothing in it for you except expenses. More importantly, then, you must use your monopoly position in order to lower the production cost and the quality of money as close as possible to zero. Instead of costly quality money such as gold or silver, you must see to it that worthless pieces of paper that can be produced at practically zero cost will become money. (Normally, no one would accept worthless pieces of paper as payment for anything. Pieces of paper are acceptable as payment only insofar as they are titles to something else, i.e., property titles. In other words then, you must replace pieces of paper that were titles to money with pieces of paper that are titles to nothing.)

Under competitive conditions, i.e., if everyone were free to produce money, a money that can be produced at almost zero cost would be produced up to a quantity where marginal revenue equals marginal cost, and because marginal cost is zero the marginal revenue, i.e., the purchasing power of this money, would be zero as well. Hence, the necessity to monopolize the production of paper money, so as to restrict its supply, in order to avoid hyperinflationary conditions and the disappearance of money from the market altogether (and a flight into "real values") — and the more so the cheaper the money commodity.

In a way, you have thus accomplished what all alchemists and their sponsors wanted to achieve: you have produced something valuable (money with purchasing power) out of something practically worthless. What an achievement. It costs you practically nothing and you can turn around and buy yourself something really valuable, such as a house or a Mercedes; and you can achieve these wonders not just for yourself but also for your friends and acquaintances, of which you discover that you have all of a sudden far more than you used to have (including many economists, who explain why your monopoly is really good for everyone).

What are the effects? First and foremost, more paper money does not in the slightest affect the quantity or quality of all other, nonmonetary goods. There exist just as many other goods around as before. This immediately refutes the notion — apparently held by most if not all mainstream economists — that "more" money can somehow increase "social wealth." To believe this, as everyone proposing a so-called easy-money policy as an efficient and "socially responsible" way out of economic troubles apparently does, is to believe in magic: that stones — or rather paper — can be turned into bread.

Rather, what the additional money you printed will affect is twofold. On the one hand, money prices will be higher than they would otherwise be, and the purchasing power per unit of money will be lower. In a word, the result will be inflation. More importantly, however, all the while the greater amount of money does not increase (or decrease) the total amount of presently existing social wealth (the total quantity of all goods in society), it redistributes the existing wealth in favor of you and your friends and acquaintances, i.e., those who get your money first. You and your friends are relatively enriched (own a larger part of the total social wealth) at the expense of impoverishing others (who as a result own less).

The problem, for you and your friends, with this institutional setup is not that it doesn't work. It works perfectly, always to your own (and your friends') advantage and always at the expense of others. All you have to do is to avoid hyperinflation. For in that case people would avoid using money and flee into real values, thus robbing you of your magic wand. The problem with your paper-money monopoly, if there is one at all, is only that this fact will be immediately noticed also by others and recognized as the big, criminal rip-off that it indeed is.

But this problem can be overcome, too, if, in addition to monopolizing the production of money, you also set yourself up as a banker and enter the banking business with the establishment of a central bank.

Because you can create paper money out of thin air, you can also create credit out of thin air. In fact, because you can create credit out of nothing (without any savings on your part), you can offer loans at cheaper rates than anyone else, even at an interest rate as low as zero (or even at a negative rate). With this ability, not only is your former dependency on banks and the banking industry eliminated; you can, moreover, make banks dependent on you, and you can forge a permanent alliance and complicity between banks and state. You don't even have to become involved in the business of investing the credit yourself. That task, and the risk involved in it, you can safely leave to commercial banks. What you, your central bank, need to do is only this: You create credit out of thin air and then loan this money, at below-market interest rates, to commercial banks. Instead of you paying interest to banks, banks now pay interest to you. And the banks in turn loan out your newly created easy credit to their business friends at somewhat higher but still submarket interest rates (to earn from the interest differential). In addition, to make the banks especially keen on working with you, you may permit the banks to create a certain amount of their own new credit (of checkbook money) in addition and on top of the credit that you have created (fractional-reserve banking).

What are the consequences of this monetary policy? To a large extent they are the same as with an easy money policy: First, an easy credit policy is also inflationary. More money is brought into circulation and prices will be higher, and the purchasing power of money lower, than would have been the case otherwise. Second, the credit expansion too has no effect on the quantity or quality of all goods currently in existence. It neither increases nor decreases their amount. More money is just this: more paper. It does not and cannot increase social wealth by one iota. Third, easy credit also engenders a systematic redistribution of social wealth in favor of you, the central bank, and the commercial banks within your cartel. You receive an interest return on money that you have created at practically zero cost out of thin air (instead of on money costly saved out of an existing income), and so do the banks, who earn additional interest on your costless money loans. Both you and your banker friends thereby appropriate an "unearned income." You and the banks are enriched at the expense of all "real" money savers (who receive a lower interest return than they otherwise would, i.e., without the injection of your and the banks' cheap credit into the credit market).

On the other hand, there also exists a fundamental difference between an easy, print-and-spend money policy and an easy, print-and-loan credit policy.

First off, an easy credit policy alters the production structure — what is produced and by whom — in a highly significant way.

You, the chief of the central bank, can create credit out of thin air. You do not have to first save money out of your money income, i.e., cut your own expenses, and thus abstain from buying certain nonmoney goods (as every normal person must, if he extends credit to someone). You only have to turn on the printing press and can thus undercut any interest rate demanded of borrowers by savers elsewhere in the market. Granting credit does not involve any sacrifice on your part (which is why this institution is so "nice"). If things then go well, you will be paid a positive-interest return on your paper investment, and if they don't go well — well, as the monopoly producer of money, you can always make up losses more easily than anyone else: by covering your losses with even more printed paper.

Without costs and no genuine, personal risk of losses, then, you can grant credit essentially indiscriminately, to everyone and for any purpose, without concern for the creditworthiness of the debtor or the soundness of his business plan. Because of your "easy" credit, certain people (in particular investment bankers) who otherwise would not be deemed sufficiently creditworthy, and certain projects (in particular of banks and their main clients) that would not be considered profitable but wasteful or too risky instead do get credit and do get funded.

Essentially, the same applies to the commercial banks within your banking cartel. Because of their special relationship to you, as the first recipients of your costless low-interest paper-money credit, the banks, too, can offer loans to prospective lenders at interest rates below market interest rates — and if things go well for them they go well; and if they don't, they can rely on you, as the monopolistic producer of money, to bail them out in the same way as you bail yourself out of any financial trouble: by more paper money. Accordingly, the banks too will be less discriminating in the selection of their clients and their business plans and more prone to funding the "wrong" people and the "wrong" projects.

And there is a second significant difference between a print-and-spend and a print-and-loan policy and this difference explains why the income and wealth redistribution in your and your banker friends' favor that is set in motion by easy credit takes the specific form of a temporal — boom-bust — cycle, i.e., of an initial phase of seeming general prosperity (of expected increases in future incomes and wealth) followed by a phase of widespread impoverishment (when the prosperity of the boom period is revealed as a widespread illusion).

This boom-bust feature is the logical — and physically necessary — consequence of credit created out of thin air, of credit unbacked by savings, of fiduciary credit (or however else you may call it) and of the fact that every investment takes time and only shows later on, at some time in the future, whether it is successful or not.

The reason for the business cycle is as elementary as it is fundamental. Robinson Crusoe can give a loan of fish (which he has not consumed) to Friday. Friday can convert these savings into a fishing net (he can eat the fish while constructing the net), and with the help of the net, then, Friday, in principle, is capable of repaying his loan to Robinson, plus interest, and still earn a profit of additional fish for himself. But this is physically impossible if Robinson's loan is only a paper note, denominated in fish, but unbacked by real-fish savings, i.e., if Robinson has no fish because he has consumed them all.

Then, and necessarily so, Friday must fail in his investment endeavor. In a simple barter economy, of course, this becomes immediately apparent. Friday will not accept Robinson's paper credit in the first place (but only real, commodity credit), and because of this, the boom-bust cycle will not get started. But in a complex monetary economy, the fact that credit was created out of thin air is not noticeable: every credit note looks like any other, and because of this the notes are accepted by the takers of credit.

This does not change the fundamental fact of reality that nothing can be produced out of nothing and that investment projects undertaken without any real funding whatsoever (by savings) must fail, but it explains why a boom — an increased level of investment accompanied by the expectation of higher future income and wealth — can get started (Friday does accept the note instead of immediately refusing it). And it explains why it then takes a while until the physical reality reasserts itself and reveals such expectations as illusory.

But what's a little crisis to you? Even if your path to riches is through repeated crises, brought about by your paper-money regime and central-bank policies, from your point of view — from the viewpoint as the head of state and chief of the central bank — this form of print-and-loan wealth redistribution in your own and your banker friends' favor, while less immediate than that achieved with a simple print-and-spend policy, is still much preferable, because it is far more difficult to see through and recognize for what it is. Rather than coming across as a plain fraud and parasite, in pursuing an easy-credit policy you can even pretend that you are engaged in the selfless task of "investing in the future" (rather than spending on present frivolities) and "healing" economic crises (rather than causing them).

What a world we live in!

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby skumar » 14 Oct 2011 08:30

Singha wrote:will rajat gupta get any time?

there is even a co specialized in helping people have a easier time in jail
http://www.executiveprisonconsultants.com/id5.html

:rotfl:

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Christopher Sidor » 14 Oct 2011 13:08

When No. 1 Financial-Strength Ranking Spells Doom: Jonathan Weil --- Bloomberg Dated 13-Oct-2011

If one goes with this article then the entire stress test conducted by European regulators was a sham and the banks of Europe are in a precarious position.
The stress-test exercise was a charade, just as it was a year earlier when Bank of Ireland Plc and Allied Irish Banks Plc passed their tests and collapsed soon after. Once again the rules were rigged so only a handful of unimportant banks would flunk.
....
....
The takeaway here is you can’t believe anything about regulatory capital benchmarks, in Europe or elsewhere, stressed or not. (Citigroup Inc. (C) was classified as “well capitalized” in late 2008 when it got its second U.S. bailout.) It’s a lesson the world should have learned long ago, yet keeps relearning.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby vishvak » 14 Oct 2011 19:48

Christopher Sidor wrote:When No. 1 Financial-Strength Ranking Spells Doom: Jonathan Weil --- Bloomberg Dated 13-Oct-2011

If one goes with this article then the entire stress test conducted by European regulators was a sham and the banks of Europe are in a precarious position.

Hopefully Indian banks take into account such lax practices of these banks while calculating 'shared risks', especially banks of first world countries where such mistakes are too costly for risk-sharing personnel as per exchange rates, etc.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby RamaY » 14 Oct 2011 20:11

^ We have had a discussion about these so-called research and financial models with SCM threadbare...

I am generalizing here, but my observation is that the data collection and preparation used in most of these models is hilarious at best. The variables are chosen in order to fit the conventional wisdom, instead of establishing root-cause paths. No wonder we get caught in the middle of the road when the blackswan's headlights are in front of us.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby sumishi » 15 Oct 2011 16:22


Hari Seldon
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Hari Seldon » 15 Oct 2011 18:14

The TAE team is among the finest geo-economic commentators on the scene today. Can't help but admire their every other article. This one in fact I thought fit to excerpt from. Yeah,m yeah, its about boring old oirope and all but the simplicity and clarity of analysis is striking only.
link

To begin with, a Greek hard default would trigger a credit event. That means credit default swaps on Greece will have to be "made whole". And there's no one party in the world that has a 20/20 360 overview of the total CDS out there. Wholesale chaos could ensue.

Then, banks with large Greek sovereign, let alone CDS, exposure, would face downgrades of their credit ratings, and trouble in lending markets, both interbank and bonds. Just in the past few days, we've seen Belgium nationalize Dexia, Greece nationalize its Proton bank, and Denmark (not even a Eurozone member) nationalize Max Bank. It looks like they are just the vanguard; there could be a whole lot of banks being either saved, or not: both options are expensive.
[...]
There is nobody, and that includes Sarkozy and Merkel and their ilk, who can predict what happens if Greece defaults. And as if that's not enough of a headache for them, there isn't anyone who can predict what happens if Greece doesn NOT default, either. Therein lie the crux and the conundrum. It's a guessing game and a virtually blind gamble all the way forward from here.

If Athens is allowed to continue to fester on the European body politic, contagion is the key. The rot will spread to the rest of the periphery, and from there to the core. Very much like a disease will do. The (bond) markets are predatory. They will pick the weakest bits off one by one. If Greece, however, is cut off, those same markets are free to go after any and all of the other contestants for most feeble euro member.


And a very good guess at sri saarkozy's coming mega-gamble...
If I were a betting man, I'd put my money on the option that what is going on here are the preparations for dropping Greece. The idea being that if you kick out Athens, you can spend lots of money on ringfencing the banks in the remainder of the Eurozone. Such, undoubtedly, are at least some of the calculations.

Sarkozy sees both his banks AND his sovereign credit rating under immense pressure. If he can convince Merkel to use EFSF funds to catch the -Greek- fall of Société Générale and BNP, and he can simultaneously convince Moody’s that this means France lets Europe (co-) pay for catching that fall, so France can retain its AAA rating, he will have no qualms about pushing the Acropolis into the ocean.


Oh, go on, read it all I say. Don't take moi word for it only...

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Singha » 15 Oct 2011 20:37

rush limbaugh based on some circumstantial evidence out of reuters says that occupy wall street movement is funded by george soros...now one of the 10 richest men in amirka.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Prem » 15 Oct 2011 23:19

http://www.nytimes.com/2011/10/15/busin ... .html?_r=1
In Private, Wall St. Bankers Dismiss Protesters as Unsophisticated
( Vultures Crying Culture )
Most people view it as a ragtag group looking for sex, drugs and rock ’n’ roll,” said one top hedge fund manager. “It’s not a middle-class uprising,” adds another veteran bank executive. “It’s fringe groups. It’s people who have the time to do this.” As the Occupy Wall Street demonstrations have grown and spread to other cities, an open question is: Do the bankers get it? Their different worldview speaks volumes about the wide chasms that have opened over who is to blame for the continuing economic malaise and what is best for the country. Some on Wall Street viewed the protesters with disdain, and a degree of caution, as hundreds marched through the financial district on Friday. Others say they feel their pain, but are befuddled about what they are supposed to do to ease it. A few even feel personally attacked, and say the Occupy Wall Street protesters who have been in Zuccotti Park for weeks are just bitter about their own economic fate and looking for an easy target. If anything, they say, people should show some gratitude. “Who do you think pays the taxes?” said one longtime money manager. “Financial services are one of the last things we do in this country and do it well. Let’s embrace it. If you want to keep having jobs outsourced, keep attacking financial services. This is just disgruntled people.” Generally, bankers dismiss the protesters as gullible and unsophisticated. Not many are willing to say this out loud, for fear of drawing public ire — or the masses to their doorsteps. “Anybody who dismisses them publicly is putting a bull’s-eye on their back,” the hedge fund manager said.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Prem » 15 Oct 2011 23:25

To avoid the rise of Global Reich and keep masses ignorant , Blood suckers to get the young ones.
http://www.huffingtonpost.com/2011/10/1 ... 97409.html

Goldman's Foray Into Higher Education, A Predatory Pursuit Of Students And Revenues

Education Management Corp. was already a swiftly growing player in the lucrative world of for-profit higher education, with annual revenues topping $1 billion, but it had its sights set on industry domination. So, five years ago, the Pittsburgh company's executives agreed to sell its portfolio of more than 70 colleges to a trio of investment partnerships for $3.4 billion, securing the needed capital for an aggressive national expansion.One of the new partners brought an outsized reputation for market savvy, deep pockets and a relentless pursuit of profits -- the Wall Street goliath, Goldman Sachs.After the deal closed and Goldman became a partner, employees soon noticed a drastic shift in culture. Longtime admissions managers were replaced, ushering in an era in which recruiters were endlessly hounded by supervisors about hitting weekly enrollment targets. The admissions staff nearly tripled, requiring expanded floor space to accommodate a sales force of more than 2,600 across the country.Management handed down revamped telemarketing scripts designed to prey on poor and uneducated consumers, honing in on their past mistakes in life as a ploy to convince them that college would solve all their problems, according to conversations with more than a dozen current and former Education Management Corp. employees over the past two months.
"You'd probe to find a weakness," said Brian Klein, a former admissions employee who worked for three years at Argosy University Online, one of four major colleges operated by EDMC. "You basically take all that failure and all those bad decisions, and you spin it around and put it right back in their face as guilt, to go to this shitty university and run up all of this debt."
Just as the subprime mortgage bubble was giving way to a bust that would help trigger a devastating financial crisis, Goldman Sachs, a firm that had been at the center of Wall Street's rampant mortgage speculation, found its way to a new area of explosive growth: In claiming what would eventually become a 41 percent stake in Education Management Corp., Goldman secured itself a means of tapping into the boom in for-profit higher education. The federal government was boosting aid to college students nationwide, just as a declining economy prompted millions of Americans to seek refuge in higher education, leading to dramatically expanding enrollments at many institutions.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Klaus » 16 Oct 2011 05:08

Occupy Wall Street protests turn into riots in Rome.

Hundreds of hooded, masked demonstrators rampaged in some of the worst violence seen in the Italian capital in years, setting cars ablaze, breaking bank and shop windows and destroying traffic lights and signposts.

Police fired volleys of tear gas and used water cannon to try to disperse militant protesters who were hurling rocks, bottles and fireworks, but clashes went on into the evening.

Smoke bombs set off by protesters cast a pall over a sea of red flags and banners bearing slogans denouncing economic policies the protesters say are hurting the poor.

The violence sent many peaceful demonstrators and local residents near the Colosseum and St John's Basilica running into hotels and churches for safety.

The Rome protesters, who called themselves "the indignant ones," included unemployed, students and pensioners.

"I am here to show support for those don't have enough money to make it to the next pay check while the ECB (European Central Bank) keeps feeding the banks and killing workers and families," said Danila Cucunia, a 43-year-old teacher.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby SwamyG » 16 Oct 2011 20:46

Image

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Neshant » 17 Oct 2011 03:02

In case you missed it, a fantastic interview of Cathernie Austin-Fitts on the useless middleman industry.

This woman knows what she's talking about.

Protecting your hard earned savings & wealth is going to be a full time job with banking crooks running around. Lots of gambling losses need to be offloaded onto the backs of vast numbers of suckers by these shysters. A steady supply of suckers willing to work their lives away, save money and then watch helplessly as they get ripped off by the useless middleman industry is in HIGH demand. The need for suckers has never been higher.



The rest of the parts :
http://www.silverbearcafe.com/private/1 ... oting.html

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Neshant » 17 Oct 2011 03:52

1) The IMF "loans" money to bankrupt European countries.
2) The bankrupt country repays their loans to European banks.
3) Later the country defaults on the IMF loans.
4) You end up holding the bag!

Thus the losses of european banks get transferred onto the world via the IMF. Now you know why Europe was eager to put their stooge Lagarde as head of the IMF.

Good thing India did not massively increase its contribution to the IMF as China did. That trick of "greater participation in the IMF for developing countries" was a con to increase developing countries' exposure to bad european debt via the IMF.

--------------------------
PARIS (AP) -- The finance chiefs of the world's leading economies opened the door Saturday for the International Monetary Fund to play a bigger role in fighting the eurozone's escalating debt troubles.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Airavat » 18 Oct 2011 09:07

Europe is protecting the shareholders of French banks

One reason that European decision makers have been so reluctant to allow a serious restructuring in Greece is because major French (and to a lesser extent German) banks have large holdings of Greek bonds, and those banks stand to suffer if the bonds are written down. In effect, Europe is protecting the shareholders of French banks at the expense of a generation of Greek youth who will have little hope of finding meaningful jobs until Greece undergoes a serious restructuring and the economy begins to grow again. By any ordinary standard of fairness, protecting bank investors at the expense of Greek workers is deeply unfair.

If the European Union continues to treat rescue as the principal option for Greece, and to treat "default" like a dirty word, it is headed down the same path the U.S. took in 2008. As bad as that sounds, the consequences of going the bailout route will be far worse than they were in the U.S. It is no secret that the next crisis on the European horizon will involve Italy. Even if the EU wanted to bail out Italy, it almost certainly couldn't. With €1.9 trillion of debt, Italy is too big to save.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Arjun » 18 Oct 2011 12:16

ramana wrote:Also to avoid Volcker reporting, Goldman and Morgan Stanley to shed bank status. Looks like they can become banks(during the 2008 meltdown to recive bailouts) or unbanks(to avoid Volcker regualtions) as they need to get ahead.

The only ones cheated in this swindle is common public which paid the taxes used for bailout.

On the contrary, taxpayers made decent money with these two banks specifically.....TARP was paid back completely and TARP warrants bought back from the government.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Neshant » 18 Oct 2011 14:52

On the contrary, taxpayers made decent money with these two banks specifically.....TARP was paid back completely and TARP warrants bought back from the government.


Nonsense, the "recovery" has been nothing more than money printing, stock market rigging, scamming and offloading losses onto taxpayers. Its been a transfer of wealth from savers, wage earners (both present and future) and the elderly on fixed incomes to banking goons who've given themselves bonuses for offloading their GAMBLING losses onto the backs of suckers.

But its amazing if one keeps repeating lies like "banks paid back TARP" (even while their leveraged bets on the underlying real estate has been going down hill), it fools the clueless people easily. Its kind of like the bullsh&tting Bernanke engages in when he lies in front of Congress saying his money printing for banking cronies is "not costing the taxpayer anything".

Lets get one thing straight - Banks do nothing other than transfer the fruits of other peoples' labor to themselves by hook & crook (mostly the latter) while giving themselves bonuses. Their business is largely the business of counterfeiting & fraud.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Arjun » 18 Oct 2011 15:15

Neshant wrote: the "recovery" has been nothing more than money printing, stock market rigging, scamming and offloading losses onto taxpayers. Its been a transfer of wealth from savers, wage earners (both present and future) and the elderly on fixed incomes to banking goons who've given themselves bonuses for offloading their GAMBLING losses onto the backs of suckers.

Had not visited this thread for several months now....looks like I did not miss much. Its the same old putrid nonsense that you continue to peddle.

My statement specifically relates to Goldman and Morgan Stanley. The simple question is whether the TARP money used for their bailout was returned with interest / profit or not. The figures are publicly available....Please share the mathematical calculations for the 'loss' that you believe taxpayers incurred on account of the TARP funds invested in these firms.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Arjun » 18 Oct 2011 15:38

Morgan Stanley Deal
So, We The Taxpayers received a 23% annualized return on our Goldman investment, and a 20% annualized return on our Morgan investment.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Neshant » 19 Oct 2011 03:42

The simple question is whether the TARP money used for their bailout was returned with interest / profit or not.


The simple answer is wealth ripped off from savers & producers and transferred to banking crooks via the money counterfeiting Federal Reserve back door is not money paid back. Its just money STOLEN.

Giving these useless middlemen "loans" at 0% interest and them using that money to buy govt bonds at a higher interest rate to "pay back" TARP loans does benefit the productive economy. Its just a ripoff of taxpayer (the productive economy) to sustain parasites. A monkey can earn profit on that spread.

You can't fool me with financing & high rolling jive talk. I'm just too aware its a scam. Other people are waking up to it too and nobody is falling for it anymore.

The useless middleman industry has been away from real work for too long. Its time for them to get real jobs doing productive work instead of ripping off society with paper scams & schemes, offloading losses onto suckers, corrupting government and packing it with their ex-employees as a means of promoting crony capitalism.

Even Paul Volker said "financial innovation" was a joke. Its simply gambling games designed to enrich banking crooks who pocket the winnings and pawn off the losses on society.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby RoyG » 19 Oct 2011 05:41



:lol:

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Satya_anveshi » 19 Oct 2011 09:23

IMO any one of them will be better served as a replacement of Bernanke and they should switch all the congressional hearing with Fed chairman to primetime. Jon Stewert and the likes will be out of job overnight :rotfl:

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Hitesh » 19 Oct 2011 09:26

^^^

Neshant, the whole purpose of TARP was to get the banks to start lending again and unfreeze the credit system, hence the very favorable terms that the Federal Reserve and the government gave out. The reason why the US economy tanked in the '08 was because the credit started freezing up and drying up. All of a sudden you had healthy companies such as GE and Apple being unable to fund their day to day operations and that was directly attributable to the credit freezing up because the banks were afraid that they didn't have enough liquidity. TARP's aim was to provide liquidity to the banks and allow the banks to repay the money back without sacrificing liquidity.

TARP did a good job of restoring confidence to the banks. Yeah the banks took a while to unfreeze the credit and it is very hard to get a loan nowadays but at least, banks are lending to other banks and big companies and GE and Apple are able to fund their daily operations, preventing a system wide failure that would have brought US back to the Great Depression and even worse.

Look at this way: The economy is a wheel. It is vital that the wheel keeps turning around in order to keep the nation going. If the wheel gets stuck, the nation like a car gets stuck in its track. Hence you need to get the wheel out of the rut and that may require liberal use of grease. That grease came in the form of TARP.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby VikramS » 19 Oct 2011 09:48

Hitesh and Arjun:

You are talking about the steps taken to save the system from collapse.

Neshant is questioning the very basis and validity of the system which is controlled by bankers who suck up huge amount of wealth from the productive society.

As I have alluded to earlier, the entire TARP, changes in accounting rules, Fed policy etc. is a way for banks to build up their capital base, so that when the finally account for all the toxic stuff, they would have enough to survive. It is doing nothing but buying time.

However, on the flip side it is also true that the same bankers took out hundreds of billions out of the banks as bonuses since then. This money might as well be kept as a reserve to shore up the capital base.

So on one hand we have ZIRP, QE, Twist to repair the balance sheets of banks; on the other side we have the bankers continuing to take out huge bonuses. While at the same time savers are seeing the value of their savings getting eroded as they earn near zero interest but facing commodity inflation as the liquidity gets transferred to hard assets.

It is that oligarchy that Neshant is attacking and rightly so. But that message gets lost in all the rants.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Arjun » 19 Oct 2011 10:00

Neshant wrote:Giving these useless middlemen "loans" at 0% interest and them using that money to buy govt bonds at a higher interest rate to "pay back" TARP loans does benefit the productive economy. Its just a ripoff of taxpayer (the productive economy) to sustain parasites. A monkey can earn profit on that spread.

The TARP funds carried an interest rate of 5%, & when you include the value of warrants - effective interest rate paid by Goldman shareholders was in excess of 20%. Bottomline - don't post without knowing facts. Why do you think Goldman and Morgan were the earliest to return their funds and were actually pleading with the government to take their TARP funds back ? If it was money for jam there was no way they were going to return it so easily.
You can't fool me with financing & high rolling jive talk. I'm just too aware its a scam. Other people are waking up to it too and nobody is falling for it anymore.

The only thing you are capable of is using these phrases - 'scam', 'useless middleman', 'stock market manipulation', 'money counterfeiting' in endless, mind-numbing permutations. You and your fellow commies railing against the Street have no real solutions to offer - which is the sad part.


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