This edition of The Ticker will be dedicated to the mistruths, half-truths, or, for the less-charitable, lies that we seem to be increasingly tolerant of as Americans when it comes to the most pressing issue of all - our wallets.

Let's start with one Alan Greenspan. He has long claimed that he could "not have forseen" the housing bubble, and there was nothing to do about it anyway once it started to occur.

Oh really? Alan, did you forget your PhD thesis from 1977?

"There is no perpetual motion machine which generates an ever-rising path for the prices of homes."

You could have fooled us Alan.

Oh, never mind that Greenspan has tried like hell to keep that document "hidden."

May I ask why any University would accede to such a request? Are not research papers - including a doctoral thesis - items that should be available to the public? Especially when written by someone in a public position like Mr. Greenspan? I think so.

Of course now, with some of the contents coming to light, there may be some (belated) understanding of why Alan doesn't want them out in the open where people can see it.

But more to the point, given that the NAR's Lereah pontificated for years about how, indeed, there was such a perpetual-motion machine, and in fact he was the "mouthpiece" for the National Association of Realtors, whose members made a tidy profit flipping all those houses, don't you think that your actual views, as you articulated in 1977, might have been something appropriate to mention? Say, in a speech? Say, during your testimony on The Hill?

Is not the truth that you knew precisely what you and the rest of these monkeys on Wall Street were doing? Is it not true that you knew and were aware that this sort of destructive asset bubble would financially destroy millions of Americans, but you simply didn't care? Just like the blowoff speculative frenzy in the Nasdaq in 1999, you knew full well what would happen the second time around, and that it would be far more destructive to the real economy.

But it was far more important that there wasn't a "real recession" while you were in office, right? You thought you could cheat Kondratieff Winter? With what? Excessively loose monetary policy? So you extended "autumn", but we all know what happens when you put more air into a balloon and it reaches its overpressure failure point, right?

Bernanke seems to be from the same school of selective memory as one Mr. Greenspan. This makes him far more dangerous, however, as one serial-bubble-blower after another into an overly-extended Kondratieff cycle merely sets up the potential for disaster on a scale far worse than the 1930s.

Despite the crooning to the contrary, we do seem to have a roughly 7-year business cycle. It is amusing to watch all these people on television wave their arms and dismiss it - my father, who was a lowly CPA with a Bachelor's Degree - certainly no "educational great shakes" next to Bernanke and Greenspan, imparted that knowledge to me when I was a young boy of no more than ten.

Yet not-so-amusingly, I have in fact seen this very same cycle play out time and time again in my adult life. 1993 to 2000, roughly. 2000 to 2007, roughly.

Indeed, think back even further. 1995 was about when the tech "boom" really took hold. 2001 was when it went bust. Bust-to-bust cycles are about 7 years in duration, give or take a year or two.

Yet do you hear this on CNBC? Of course not. Yet one lowly CPA imparted that knowledge to me when I was not yet in the double digits on this earth.

Hmmmm.

Now for a "double-hmmmm" I could count the number of times I heard discussion of the business and economy cycles when I was in school - from elementary through college - on my fingers and toes - if I was a quadriplegic.

Why is that, when they are one of the fundamental realities of our economic lives?

Entire chapters are spent talking about gravity and Newton's Laws in physics class, polar and covalent bonds in chemistry class, the chlorophyll cycle in biology class and the structure of DNA, yet not one hour of lecture and not one page of a textbook is spent on the business cycle.

Worse, we spend exactly zero time in our educational system dealing with compound growth - whether it be of prices, interest payments or investments. I have, in my years as an adult, spent an hour or so with high school students I've been acquainted with over the years going over this fundamental detail - the fact that one $10 Pizza bought when you're 20 is $662 worth of foregone gains when you turn 65, assuming you had invested that $10 and earned just 10% annually.

To an individual they choke when they realize that Pizza really cost them $600 - not $10.

Not one of the students I've explained this to knew about that principle or how it really works until I showed them using nothing more complicated than a calculator.

Do you really need that Pizza?

Over on Ml-Implode's forums I seem to have ignited somewhat of a flamefest by the broker community when I posted my chart on house price appreciation as referenced in The Ticker from Friday morning. The astounding reality?

How few of those so-called mortgage "professionals" actually understood the foundation of all such ponzi-like projections. So-called professionals who can't be bothered to use a calculator? Exactly what are the qualifications to be a mortgage broker?

We have all sorts of lies coming out of our Investment Banks. Virtually all of them have said with their earnings releases that they did not need more capital. Mr. Thain even went so far as to repeat that during a trip to Asia recently. Yet almost to an individual firm they have then, within a week or two, gone out and raised more capital immediately after saying they didn't need to, on onerous terms that nobody who didn't really need it would have partaken in.

Does CNBC talk about that? Of course not. Does the SEC prosecute these sorts of apparently-false statements, when it is obvious to anyone with more than two firing neurons in their head that they are intended to prop up these firms' stock prices? Of course not.

Last week it was claimed on Bubble TV that Merrill Lynch thought that "things would be ok" in the American Economy. Really? That's not what David Rosenberg, their chief North American economist, had to say in a note to clients:

"'Contrary to popular opinion, the incoming data are, on net, getting worse, not better,' Merrill's Chief North American Economist David Rosenberg said in an April 24 note to clients."

Why wasn't that reported? Oh by the way, I have a copy of that entire report, which was sent to me through a "stealth channel" (see, I'm not a Merrill customer.) Its downright bearish. But if you watched Bubble TV, you heard how Merrill was "bullish" on the markets and the economy.

Huh?

Let me put this in a form that you, Dear Reader, will likely understand - if you're an ordinary investor, and not a Merrill client, what do you hear from "Bubble TV"?

That the economy is somewhat soft but will be fine, according to Merrill, with the implication that its a great time to buy stocks.

But if you're a Merrill customer and get their reports, what do you actually read in their reports?

That the economy stinks like 5-day old fish, and is getting worse, according to the very same Merrill Lynch.

You don't think that these "Wall Street Folks" would be trying to get you, Joe Sixpack, to buy stocks so their clients (and the brokerages themselves!) can sell their portfolios off to you before it all blows up in your face, do you?

Why that would be dishonest!

Yet did Bubble TV report on that research report? Not a word.

Ben Stein has finally stopped drinking the Kool Aid. I was wondering how long it would take. An article in the NY Times April 27th edition makes it quite clear:

"'The owners, employees and creditors of these institutions are rewarded when they succeed, but it is all of us, the taxpayers, who are left on the hook if they fail. This is called private profits and socialized risk. Heads, I win. Tails you lose. It is a reverse-Robin Hood system.'

And when it all went kaput during the Bear Stearns debacle, the likable chairman of the S.E.C., Christopher Cox, said that the system was fine and needed no immediate repairs. Of course, Henry M. Paulson Jr., the Treasury secretary, is calling for merging the S.E.C. with the easygoing Commodity Futures Trading Commission, in the financial equivalent of setting off a Doomsday Device."

Doomsday Device?

Who did Paulson work for before becoming Secretary of the Treasury again?

I feel compelled to take a detour into the realm of the truly sleazy, which is exactly where Wachovia (NYSE: WB) seems to have landed. The WSJ is reporting that the bank got involved in the "remittance" trade into Mexico, and that drug money laundering is alleged. The word "prosecution" has been mentioned a few times. Hmmm.

But folks, let's cut the crap eh? The "remittance trade" is all about illegality in the first instance. Even when drugs are not involved, illegal immigrants who are dodging tax liabilities, along with the employers who are unlawfully paying them under the table, are breaking the law.

The latter - explicitly profiting from illegal employment - seems to be just fine with the folks at the Justice Department. Its only when drugs are involved that people get upset, even though in terms of economic damage illegal employment is far worse. Those victims are unwilling; the dope heads choose to consume the drugs.

Lest you think this is an isolated incident, that article points out that it is far from it. In the last three years over $100 million in fines and forfeiture have been assessed against four banking institutions in the US, including Bank Atlantic and American Express!

Never mind that this is Round #2 for Wachovia in the last few days, with the first one being a $144 million (!) settlement in a telemarketing case. See, Wachovia apparently let telemarketers and payment processors effectively steal from their customers.

Now there's a bank you can trust!

Don't worry about oil prices say Bubble TV. We'll be just fine. The fact that oil has basically doubled in price in the last year is not a problem for the economy. Yeah, ok - tell that to Joe Sixpack who burns an average of two tanks a week getting to and from work. What was a $50 weekly expense just turned into a $100 one. That's an extra $200 a month out of his pocket. "Stimulus checks" will offset this? For how long? If his wife works the answer is "about a month", and we haven't even tallied up the additions in the food bill yet. Then what?

Never mind that this weekend we have both a strike in Great Britain to deal with, along with another one in Nigeria, both of which have literally shut down production of the affected facilities. It will be interesting to see where oil trades today. Betcha that price won't be "deflating."

I have long argued that we need to exploit our natural resources. All of them. The environmentalists scream from the rafters about this, but how many of them are riding around in 40ft yachts or flying in private jets? Al Gore, for one. Appropriate? You tell me.

This much I do know - Joe Sixpack doesn't have an extra $200 or $400 a month for gas bills. He's trying to get through this by charging up his gasoline on his credit card, with the last vestiges of the final HELOC draw off his deflating house. The banks, alarmed at this trend, are cutting these lines off as fast as they can manage to show some sort of impairment, but they're behind the curve and will get creamed, and it won't take long.

Now let's talk about ABS CDOs. We keep being told that "the worst is behind us." Really?

According to a research note from April 25th out of Wachovia 17% of all CDOs that are open are in default (by volume) - and of 2007-vintage deals, an astounding sixty three percent are in default.

"The worst is behind us"? Have you seen these CDOs written down? Hell no. Nor are you seeing Bubble TV talk about thus (much) although CNBC did mention it the other day. This is a multi-hundred-billion dollar problem, and only the super-senior tranches are protected (by the trustee) when these events of default occur. Everyone else gets "the pipe", and I'm sure you can figure out where.

Over in sunny England it is now reported that the banks that take advantage of their bail-out facilities will be kept secret.

Forever.

Heh Brits - are you going to stand for this, or are you going to decide instead that all banks over there are insolvent and act accordingly?

"Ferocious and unprecedented secrecy means taxpayers will never know the names of the banks that have been supported through the special liquidity scheme, which was unveiled by Bank Governor Mervyn King last week.

Requests under the Freedom of Information Act are to be denied. Details will be kept secret even after 30 years - the period after which all but the most sensitive state documents are released.

Any Bank of England employee leaking the names of institutions involved will face court action for breach of contract."

Nice.

Oh, and don't bother with the size of that issue either, eh?

"The £50bn or more of Treasury bills involved will dwarf the £17.6bn currently in issue, but the authorities are adamant this will not destabilise the Government debt market."

Uh huh.

Let me guess - this is a good time to buy stocks when the government is afraid you might learn that some number of banks - perhaps a very large number - are insolvent?

Do 'ya own longer-term Gilts? That may be one of the stupidest things you can do right now. Just about as dumb as owning longer-term US Treasuries, and for the same reason.

Oh, this sort of destabilization is exactly what happened in 1931. Betting your economy for the next 10 years, and a potential repeat of "The Slump" that it won't happen again, are 'ya Mssrs. King and Darling?

Our banking systems "Non-borrowed Reserves" are deeply negative, implying that the banking system in the United States has no reserves at all, essentially gaining all their operating funds from The Fed after having burned through all their ACTUAL reserves!



That graph, by the way, although the latest available from The Fed directly, is out of date - the current number is $90 billion, or more than twice the total amount of required reserves in the banking system.

Banks are supposed to hold reserves in actual money against deposits, you see. That's because there is a chance you might show up and want the money you let them borrow, like your direct-deposited paycheck, and they have to be able to pay you in that event.

The amount required, in aggregate, is $40 billion as of the present time. The total shown "in reserve" is claimed to be $42 billion, again, as of the 23rd of April.

However, the "non-borrowed" amount, that is, the amount of reserves that are represented by actual deposits from customers, is negative $90 billion dollars.

In other words United States banks, instead of having $40 billion worth of deposits from people like you and me on reserve (not loaned out) instead have burned through all of that, then borrowed $90 billion more, in order to meet their reserve "requirements."

$130 billion dollars, in the hole, all-in.

And what did they post as collateral? To a large degree, dodgy mortgage-backed securities and even, in some cases, perhaps CDOs!

That's fantastic isn't it?

Is this talked about on Bubble TV? Oh hell no. Its just a good time to buy financial stocks, never mind the fact that our banks appear to be in as fine a financial condition from this report as is a subprime borrower in California who was handed an eviction notice as his house was foreclosed upon this morning!

When did this foolishness start?

At the same time the "Term Auction Facility" did.

Now you know why the "TAF" was "needed", eh? Gotta pay that light bill, plus those bonuses and dividends, since we lost all of our customer's deposited money gambling on bum mortgages written against a $500,000 house that we gave to a hairdresser making $8/hour at SuperCuts.

Never mind the other borrowings from The Fed to prop up the system. Oh no, let's not talk about the other $30 billion or so through primary (discount window) and PDCF credit. Naw, nothing to see here with the banks $130 billion in the hole .vs. what are supposed to be reserved deposits from customers, move right on along.

Are there any reserves at all? Well, from that table it certainly appears not, eh? Negative $130 billion in aggregate (from "required" level) eh?

Exactly how foolish are Americans, not to mention foreign and domestic Treasury Bond holders on the long end of the curve? Rather foolish, it would seem, or simply walking around with eyes wide shut, and now the Brits appear hellbent and determined on following us down the chute.

Heh wait. That makes two - Bernanke and King - both with the same sort of insanity. Did these gents both eat beef infected with BSE, otherwise known as "Mad Cow"? I wonder if their brains have assumed the consistency of a sponge, or if their intent is simply to hide the dead fishy and hope it doesn't start to stink.

What's that smell?

Didn't something like this happen in 1931? Why I think it did! The trigger then was a gold-standard decouple (in Britain), but wasn't loss of confidence the real problem?

Gee, let's have a look:



I have been warning about this possibility, haven't I?

Don't look at the TNX (you have to turn it upside down, as the TNX is yield, not price) as it puts us pretty much at the end of the "flight to quality" phase.....

Heh Bernanke and King - I hope you realize that once this happens - if it does - there isn't jack you can do about the consequences.

Got tin cup?

There are a few people who are picking up on this, like the guy over at Macro Man who put it quite succinctly - "No Mr. Bond, I expect you to die!"

Then we have people who are trying to maintain their bloated standard of living (and house) by tapping their 401k and IRA money. That's the stupidest thing you can ever do, bar none, because 401k and IRA money is protected in a bankruptcy. If you spend it and then go bust, you're screwed at least twice. Oh, and if you're under 50, don't bank on Social Security being there in its present form either. It won't be.

Yet many people are doing exactly this. What the media should be telling people is that this is outright stupid and financially suicidal - take the hit, go bankrupt if you have to, but do not touch your 401k, 403b or IRA money. Ever.

You won't hear that on Bubble TV. You will read it here on The Ticker though, because The Ticker is about the truth - not "bubblevision."

Not everyone is willing to play in America. A small group of people (the originator being a Tickerforum user) has set up a site called "The Great American Cash Out." As the name implies, it is cataloguing (in aggregate) the amount of money that people have intentionally removed from the banking system (stuffed in the mattress, if you will) so banks can't loan against it as an act of protest.

This is distinct from a "bank run" in that it is a refusal to allow the amount you earn to sit in a bank account and earn near-zero interest and form the base for making loans. In effect it is a declaration of your refusal to lend financial support to the financial book-cooking and games. Instead, you remove your cash from their grasp, thereby denying them gasoline to throw on the credit bonfire. After all, they're not paying you anything for your loan to them in the first place, are they?

I like it, although of course I have no idea if the amounts "reported" are real. Good old-fashioned American pushback.

Perhaps there is hope for this nation yet.

http://financialpetition.org/ - "The White Paper Edition"

PS: Warren - you know, the "Oracle of Omaha" was on CNBC this morning (Monday.) Despite being prodded multiple times to try to put a positive spin on the economy, what he said was exactly the opposite - he expects the recession to be neither short or shallow. Gee, 'ya think? He also noted that the stock market is often irrational in how it reacts to reality. Naw, 'ya think?