The Market Ticker

Admission Of Dollar Carry!

nospam@example.com (Karl Denninger) — 2009-11-20T19:17:00Z

The kitty is having a good day today....

LONDON (MarketWatch) -- The Intercontinental Exchange is probing trades in U.S. dollar index futures that briefly showed a massive 9% jump on Friday morning.

.....

The move briefly had an impact on other markets, as futures on the Dow Jones Industrial Average fell as much as 99 points.

Oops... so much for the "official denials" (in the media and elsewhere) of a dollar carry trade.....

CAUTION: Carry Correlation Update

nospam@example.com (Karl Denninger) — 2009-11-20T17:14:00Z

Be very cautious of any thesis you have on continued advancement of the market based on "dollar depreciation."

This is the correlation chart from today thus far:

This may be a one-day anomaly. But it is the most-serious break of the correlation that has been deteriorating for the last two days.

If it breaks entirely the reaction in the market is likely to be extremely violent.

Carry-based asset "appreciation" is inherently unstable, much as is juggling bottles of nitroglycerine.

All is well provided you don't drop one.

Forewarned is forearmed.

"Global Warming" SCAM - Hack/Leak FLASH

nospam@example.com (Karl Denninger) — 2009-11-20T17:01:00Z

Apparently a "Global Climate Center" was hacked and the contents have been posted to the Internet. A ZIP file exceeding 60MB and containing a huge number of emails and other documents has been posted worldwide.

Original speculation as to whether the files posted were legitimate or some sort of spoof appears to now be confirmed as legitimate:

“It was a hacker. We were aware of this about three or four days ago that someone had hacked into our system and taken and copied loads of data files and emails.”

I have not had time to read all of the material yet (there are over a thousand files involved!) but what I have skimmed looks VERY damning. Contained within the documents are what appear to be admissions of intentional tampering with data as well as intentional falsification of results to "show" man-made global warming.

One of the emails says:

"I’ve just completed Mike’s Nature trick of adding in the real temps to each series for the last 20 years (ie from 1981 onwards) and from 1961 for Keith’s to hide the decline."

That is, to hide a decline in global temperatures.

It gets better. Another message, this one allegedly from 2000:

It was good to see you again yesterday - if briefly. One particular thing you said - and we agreed - was about the IPCC reports and the broader climate negotiations were working to the globalisation agenda driven by organisations like the WTO. So my first question is do you have anything written or published, or know of anything particularly on this subject, which talks about this in more detail?

Oh, so it's not about the planet getting warmer, but rather is a convenient means of advancing an agenda that has already been pre-determined?

Then there's this:

In my (perhaps too
> > harsh)
> > view, there have been a number of dishonest presentations of model
> > results by individual authors and by IPCC. This is why I still use
> > results from MAGICC to compare with observed temperatures. At least
> > here I can assess how sensitive matches are to sensitivity and
> > forcing assumptions/uncertainties.

(Pardon the formatting, it's text-mode email 'yanno.)

Guess who that was addressed to? Michael Mann. You know, the (infamous and now discredited) "Mann Hockey Stick"?

Guess where that email originated? NASA.

Yes, I have the file. So do a few million other people.

There's enough evidence in there, in my opinion, of outrageously fraudulent conduct to make this the scandal of the 20th and 21st century.

Sorry folks, there's no science here - this is, from what I see, a massive and outrageous fraud, and now that the documents have been confirmed as authentic it is time to pull the curtain down on this crap and start locking up all of the proponents - starting with AL GORE.

Here are some interesting "meta statistics" on the documents, and the number of times the words referenced appear:

Fraud: 79
Falsify: 6
Inflate: 14
Conceal: 5
Hide: 19

Just for starters.

If you think that's bad, you might like this - from the file "ipcc-tar-master.rtf":

General Comments

The idea that climate without human intervention can only undergo “natural variability”, and that “climate change” can only result from human activity is false and fallacious. It is in conflict with all that we know of evolution and geology. It is simply wrong to assume that “ climate change” automatically implies human influence on the climate.

This fallacy is embraced by the Framework Convention on Climate Change, but the IPCC (Footnote to “Summary for Policymakers. Page 1) claim that they are prepared to accept “natural variability” as “climate change”. They are, however, unwilling to accept the truth, which is that climate can change without human intervention.

....

47 out of 91 models listed in Chapter 9 assume that carbon dioxide in the atmosphere is increasing at the rate of 1% a year when the measured rate of increase, for the past 33 years, has been 0.4% a year. The assumption of false figures in models in order to boost future projections is fraudulent. What other figures are falsely exaggerated in the same way?

Update 12:58 - Oh oh.... From Phil Jones... and its recent:

From: Phil Jones <p.jones@uea.ac.uk>
To: "Michael E. Mann" <mann@meteo.psu.edu>, "raymond s. bradley" <rbradley@geo.umass.edu>
Subject: A couple of things
Date: Fri May 9 09:53:41 2008
Cc: "Caspar Ammann" <ammann@ucar.edu>

....

2. You can delete this attachment if you want. Keep this quiet also, but this is the person who is putting in FOI requests for all emails Keith and Tim have written and received re Ch 6 of AR4. We think we've found a way around this.

And then there's this...

From: Phil Jones <p.jones@uea.ac.uk>
To: "Michael E. Mann" <mann@meteo.psu.edu>
Subject: IPCC & FOI
Date: Thu May 29 11:04:11 2008

Mike,

Can you delete any emails you may have had with Keith re AR4? Keith will do likewise. He's not in at the moment - minor family crisis.

Can you also email Gene and get him to do the same? I don't have his new email address.

We will be getting Caspar to do likewise.

I see that CA claim they discovered the 1945 problem in the Nature paper!!
Cheers
Phil

One has to wonder: was the "way around it" (the FOI) mentioned in the first correspondence to intentionally destroy the emails requested?

WHERE ARE THE DAMNED INDICTMENTS?

nospam@example.com (Karl Denninger) — 2009-11-20T16:18:00Z

It really doesn't get much more damning than this.

Specifically, read starting at Page 20 of the PDF (Page 14 of the document) in which the profile of these "loans" is outlined:

More than half are cash-out refinances.
The AVERAGE FICO is 626. Nearly 1/3rd have a FICO below 600, and only 16.7% have a FICO over 660.
The pool's DTI is 41.78%.

It gets worse.

Only 8.98% of the loans are 30 year conventional fixed-rate mortgages. 88.2% of the loans are 3/27 and 2/28 "teaser-rate" ARMs.
The majority of the loans amortize over 40 years but are for a 30 year term. This adds even more risk because the borrower will either have to refinance or face a balloon at maturity.
The typical loan (72.5%) also contains a prepayment penalty. In many cases the penalty period either matches or exceeds the "teaser" period, preventing a refinance at reasonable prices until that period has expired.
EXPECTED payment resets raise the DTIs to anywhere from 50-58%! This is clearly impossible for essentially all borrowers to carry - that is, either the borrower will have to refinance prior to this happening or they will default.

As if that's not enough it gets better!

As the table in the prospectus shows, by dollar value:

72.21% were taken for cash-out refinances and 12.28% were to refinance existing loans. Only 15.52% of the principal balance was taken out to BUY a house.
Of that 72.21% balance, the AVERAGE FICO of the person taking the cash-out refinance was 604 (!) - the lowest average of all categories. (If that isn't special I don't know what it is - people with severely-impaired credit attempting to keep their head above water by cashing out alleged "equity" in their homes at usurious interest rates!)
The vast majority of the loans had a lifetime maximum rate of 15% or higher, with 26% having a cap OVER 16%. This in a time when "conventional" financing was at half that interest rate. If that's not hard evidence of predatory behavior, what is?
46.85% of the principal balance was stated documentation. That is, no verification of income or assets.

Yet if I'm reading the prospectus correctly the entire set of tranches was rated investment grade (the worst being "BBB-"), with most of it being rated "AAA."

Yeah, right.

Loans that were on the basics of sound credit impossible to pay as agreed to term, where the majority of the borrowers were distressed at the time of origination and took the loan for cash-out purposes - that is, to support their current income requirements, and where half of the principal balance was supported not by documentation but by STATED income and assets.

Yes, I know this was disclosed in the prospectus - if you read it.

Here's a simple question: Would Ford have been perfectly ok in selling the Pinto with exploding gas tanks if buried in the owner's manual was the statement that if involved in a rear-end collision the fuel tank would be punctured and thus lead to a high probability of fire and/or explosion?

No?

Then how did these BANKSTERS get away with pedding this TRASH, not to mention selling these "loans" to people in the first place when they knew full well there was not a snowball's chance in hell the alleged "borrower" was going to be able to make the payments?

EVERYONE INVOLVED IN THIS CRAP SHOULD BE ROTTING IN FEDERAL PRISON.

WHERE ARE THE DAMNED INDICTMENTS?

IF OUR PROSECUTORS - INCLUDING HOLDER AND THE 50 STATE AGs - DON'T START ISSUING THEM SOON THE PEOPLE MAY START BUYING - AND CONTEMPLATING THE USE OF - THESE:

Paul/Grayson Amendment Passes In Committee

nospam@example.com (Karl Denninger) — 2009-11-20T13:17:00Z

It's about damn time.

Yes, it's a first step - but an important first step, and it happened yesterday. Here's what Representative Grayson said at the time of debate:

Bloomberg wasted no time giving the "loyal opposition" to transparency all the digital ink they desired:

“It’s going to be seen as weakening the independence of monetary policy with consequent negative implications,” Frank told reporters after the vote. “People are going to be worried about the impact on the dollar, on the interest rate.”

Go listen to Mr. Grayson's statement again. Now tell me how The Fed's move to dilute our currency literally by half isn't going to "raise inflation expectations" and "have an impact on the dollar."

Never mind the impact that has already occurred. Is Barney Frank freaking blind? What say you to this, Mr. Frank, considering that all of this dollar damage has occurred since The Fed decided to start monetizing Treasury and MBS debt:

Exactly what sort of "damage" are you worried about Mr. Frank? Is not this enough for you? This damage - a roughly 20% devaluation since March - occurred since The Fed announced its "purchase" programs, specifically the purchase of MBS paper for which it appears to have absolutely no legal authority.

How does an audit - determining if The Fed intentionally overpaid, if the transactions were commercially reasonable, if they were designed to help some people and screw others, if The Fed is hiding losses and if the transactions performed even comport with the law - hurt the dollar and inflation expectations? Have you seen the price of GOLD lately Mr. Frank? The gold traders clearly believe The Fed has every intention of re-creating Weimar Germany!

Justified or not, those are the current "expectations" that secrecy has brought us.

How much worse than Weimar could expectations get Barney? Are you now splitting hairs between Weimar and Zimbabwe?

“Everybody would like to beat up on the Fed and call them the bad guys,” Watt said during debate on the measures. “So if we make this decision on a political basis, I know what the result will be.”

“This committee is called upon to transcend the politics of the moment and do what is in the interest of the country,” Watt said.

Really Mr. Watt?

Are you advocating the "best interest of the country" or are you advocating for the best interest of Bank of America, with their corporate headquarters in your district - a firm that has been the beneficiary of unprecedented Federal Reserve largess along with a healthy dose of arm-twisting?

Let's face the facts here. There are many people (myself included) who believe The Fed is "the bad guy." They have behaved as a dictator, they have in my opinion ignored black-letter law and they have intentionally debased the currency of this nation for the explicit benefit of their bankster buddies while screwing the middle class. The Fed's intentional bubble-blowing and now its "zero interest rate" policy has fostered a dollar carry trade now estimated to be over $500 billion - a carry trade that like all others through history will unwind in an uncontrolled and disastrous manner, trashing our economy and markets.

If all this was an "emergency response" that could not have been avoided I might even overlook it - after all, this has been a time of crisis.

But it was and is not.

No, The Fed is why we're in this mess in the first place! They have been responsible for every asset bubble of the last 20 years - intentionally so. Greenspan's foibles over the last 20 years, and now Bernanke's, have guaranteed a complete "hands off" approach to risk by financial institutions and regulators, with both being comfortable in the knowledge that the Fed both could and would simply print up more "funny money" and shower it from helicopters if anything went wrong.

Indeed, Bernanke was dubbed "Helicopter Ben" years ago for suggesting exactly that response to a monetary crisis - that is, he propounded an intent to intentionally destroy every saver's wealth, with the same effect on the victims - in this case the prudent in this nation - as if they were all subjected to armed robbery.

The Fed has intentionally ignored banks buying hundreds of billions of dollars worth of so-called "hedges" (CDS) from AIG, even though it knew or should have known AIG had no money to pay off on those instruments. It has permitted banks under its direct supervision to create and trade hundreds of trillions of dollars in notional value of derivatives ($605 trillion according to the BIS as of June 2009) traded with zero transparency over the counter - an amount so staggering that if these banks' net exposure is even one percent of their notional value it is sufficient to bankrupt every large banking institution in the country several times over and if it is just two percent the net exposure to loss approximates US GDP!

It looked the other way on purpose while the large banks and other financial institutions put together garbage securitizations chock full of liar loans and other exotic products that the producers knew would never be paid as agreed - securitizations they were so sure would default that they were shorting them while selling them to their "marks", er, "customers."

The Fed sat back and supported, rather than speaking against, Hank Paulson's entreaty to have the leverage limits removed from Investment Banks in 2004 - the very feature that was directly responsible for the failure of Bear Stearns and Lehman Brothers.

The Fed has not only allowed banks to circumvent leverage limits and reserve requirements through the abuse of off-balance-sheet vehicles and sweep accounts, it lobbied for and received from Congress the right to set the required reserve ratio for banks TO ZERO in the EESA/TARP legislation - a change buried in the law that received almost no attention (except by myself and a few other bloggers!)

When the crisis began The Fed responded by loosening leverage limits further through the issue of literally dozens of "23A" exemptions to Fed Regulations - including institutions that later failed. The damage done to the financial system was thus dramatically increased by allowing these firms to increase their exposure when they got in trouble rather than strictly limiting it as regulations allegedly required.

The Fed refused to crack down on predatory mortgage, credit card and consumer lending until literally forced by Congress, which passed the credit card bill over its objections. Until threatened with same, the very same Fed refused to intervene in the practice of automatically "opting in" customers for "overdraft protection" on ATM and point-of-sale charges, going so far as to permit banks to display ATM balances that included uncleared funds so as to encourage customers to generate overdraft charges by deception!

The public is well-justified in viewing The Fed as a "villain" because it is. Whether through active malfeasance or simple idiocy The Fed has been and is directly responsible for the impoverishment of millions of Americans who were punished for their imprudent borrowing while the imprudent lenders, who should have also gone bankrupt, were protected with money extracted by force from the very same people the lenders screwed!

Here's the list of Representatives that voted against stopping the daily violations of America. They voted to allow The Fed to have their way in secret, to debase the dollar and destroy Americans' purchasing power, to double the price of oil and essential energy products, to fund chicanery and even protect those who commit fraud. Worse, they violated their oath of office to uphold and defend The Constitution, which says on this matter:

Section 8. The Congress shall have power to.....

To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;

The Federal Reserve does not have the power of currency debasement (or the lack thereof) - Congress does, and with good reason. Congress is accountable to you, the people.

The Fed is, at present, accountable to nobody.

Each and every one of the Representatives listed below, by voting "NAY" today, has violated his or her oath of office, has committed an act of violence against The Constitution of The United States, is unfit for their office, and must resign:

NAY - Rep. Barney Frank, MA
NAY - Rep. Paul E. Kanjorski, PA
NAY - Rep. Maxine Waters, CA
NAY - Rep. Carolyn B. Maloney, NY
NAY - Rep. Luis V. Gutierrez, IL
NAY - Rep. Nydia M. Velázquez, NY
NAY - Rep. Melvin L. Watt, NC
NAY - Rep. Gary L. Ackerman, NY
NAY - Rep. Gregory W. Meeks, NY
NAY - Rep. Dennis Moore, KS
NAY - Rep. Michael E. Capuano, MA
NAY - Rep. Joe Baca, CA
NAY - Rep. Stephen F. Lynch, MA
NAY - Rep. Brad Miller, NC
NAY - Rep. Al Green, TX
NAY - Rep. Emanuel Cleaver, MO
NAY - Rep. Melissa L. Bean, IL
NAY - Rep. Gwen Moore, WI
NAY - Rep. Keith Ellison, MN
NAY - Rep. Ron Klein, FL
NAY - Rep. Charles Wilson, OH
NAY - Rep. Joe Donnelly, IN
NAY - Rep. Bill Foster, IL
NAY - Rep. Andre Carson, IN
NAY - Rep. Mary Jo Kilroy, OH
NAY - Rep. Jim Himes, CT

Why don't you give 'em a call and tell 'em what you think of 'em.

I'm sure they'd love to hear from you - you can find their phone and fax numbers at http://www.house.gov.

Oh Oh - Here Comes Cummings (Fed Audit)

nospam@example.com (Karl Denninger) — 2009-11-19T14:42:00Z

This one is definitely worth a read folks.

It appears that Representative Cummings, along with a half-dozen other Representatives, have had enough of The Fed's games.

They are now calling for a FULL CONGRESSIONAL REVIEW of THE ENTIRE FEDERAL RESERVE SYSTEM, including A FULL PUBLIC AUDIT.

To this I say:

It's about damn time.

(click for larger images)

GET ON THE PHONE NOW TO YOUR REP AND RAISE HELL. MOMENTUM ON THIS IS BUILDING, AND IT IS UP TO **US** TO MAKE A DIFFERENCE.

SUPPORT REP SPEIER!

nospam@example.com (Karl Denninger) — 2009-11-19T14:23:55Z

An amendment offered by Representative Speier to the FSIA bill currently under markup:

Page 28, after line 8, insert the following new paragraph:

1 (4) LEVERAGE LIMITATION.—The Board shall require each identified holding company to maintain a debt to equity ratio of no more than 15 to 1, and the Board shall issue regulations containing procedures and timelines for how an identified holding company with a debt to equity ratio of more than 15 to 1 at the time such company becomes an identified holding company shall reduce such ratio.

Oh my God, she gets it.

GET ON THE PHONE FOLKS!

Washington D.C. Office
211 Cannon House Office Building
Washington, DC 20515
Phone: (202) 225-3531
Fax: (202) 226-4183

Where Are The INDICTMENTS?

nospam@example.com (Karl Denninger) — 2009-11-19T13:30:00Z

Jerry Brown is crowing about the most-recent "Auction Rate" security settlement:

"Wells Fargo convinced thousands of investors to purchase auction-rate securities with promises of robust returns and liquidity, but when the market collapsed, investors were left out in the cold," Brown said. "Based on misleading advice, investors bought these risky securities. Now, retail investors and small businesses are finally getting their money back."

Uh huh. That's the good part.

Now here's the bad part:

The lawsuit contended that Wells Fargo ignored clear industry and internal warnings about risk and previous auction failure. In March 2005, the Securities and Exchange Commission (SEC), the "Big 4" accounting firms, and the Financial Accounting Standards Board all determined that auction-rate securities should not be considered "cash equivalents."

Despite these warnings, Wells Fargo continued to aggressively sell and falsely market auction-rate securities as safe, liquid, cash-like investments until the nationwide auction markets froze in early 2008.

In marketing and selling these investments, Wells Fargo failed to inform investors about how auction-rate securities or the auction process worked, as well as the risks and consequences of auction failure.

Fraud defined:

A false representation of a matter of fact—whether by words or by conduct, by false or misleading allegations, or by concealment of what should have been disclosed—that deceives and is intended to deceive another so that the individual will act upon it to her or his legal injury.

Racketeering defined:

(n) Racketeering is defined as the process of forming or running an organization to operate or commit or otherwise execute ongoing criminal activities.

Perhaps the question we should be asking is why we keep seeing "settlements" instead of prosecutions.

"Liberal" Consensus On Dumping Geithner?

nospam@example.com (Karl Denninger) — 2009-11-19T13:06:00Z

From The Hill....

Rep. Peter DeFazio (D-Ore.) said Wednesday that he and other liberal House members are becoming increasingly tired of Obama administration economic policies that they say are too focused on maintaining the stability of Wall Street firms and largely ignore "Main Street."

"A growing consensus in the caucus [believe that Geithner should be removed]," DeFazio said on MSNBC this evening, adding that some lawmakers are "considering questions regarding him and other economic advisers."

No, really?

What was your first hint Peter?

Was it that Timmy couldn't be bothered to pay his taxes? Was it that he was the Wall Street stooge who handed out billions of taxpayer money to the big banks through AIG via what I'd argue was a fraudulent scheme to pay off those CDS at par? Or is it Timmy's incessant prattling on about a "strong dollar"?

One has to wonder, given that there's really nothing different about any of Geithner's views and actions than Paulson's - except for the blatant tax cheating (that we know of.) Then again, being a tax cheat seems to be a requirement to be a Democrat official - shall we toll up the list both in the Obama Administration and Congress?

(The Dishonorable Chuck Rangel anyone?)

I find the faux populism of the Democratic Party particularly offensive. There is absolutely nothing in the Obama Administration's record to indicate that they have ever intended to proceed from any such viewpoint - not now, not ever.

The veteran congressman specifically mentioned last year's bank bailouts and the Geithner's handling of the collapse of insurance giant AIG. At the time, Geithner was head of the New York Fed in the Bush administration.

"We may have to sacrifice just two more jobs to get millions back for Americans," the congressman added.

This, of course, is why The Democrats were all for Geithner last winter. Remember that Peter? Where was your outrage at his appointment then?

Here's one of the articles I wrote at the time - just post-election.

How about you Tim (Geithner, at the NY Fed)? Is everything on the up-and-up over there in NY? If so, why don't you "bare all" and let us have a look-see?

Since it's our money you're playing with, in that we the taxpayer are the source of the wealth you shuffle around, we have every right to know what the hell you're doing with it and so does Congress.

If you refuse then I believe Congress should revoke your charter and subpoena everyone involved, including the Treasury Secretary's and both Bernanke's and Geithner's notes, phone records and meeting minutes, along with the details of every transaction taken by any of the above since August of 2007. Publish it all in The Federal Register and online via the web.

Funny how only now, after the looting has taken place, after the banks have rate-jacked Americans' credit cards to 29.9%, after Timmy funneled over $100 billion of taxpayer money through AIG to banks both foreign and domestic, and after Timmy has repeatedly refused to put a limit on what authority he wants to keep under TARP, now you bleat.

Here's reality:

This Administration, just as with the Bush Administration, is kneeling before Zod - the banksters that infest Wall Street - and selling out Americans.

Washington may be starting to panic about jobs - as well they should be. They should be in panic about the budget too - it has grown 30% in the last couple of years, and the claimed "5% reduction" that is being whispered around on The Hill will do exactly nothing.

Politically the reduction of government spending has simply never happened. We call it a "cut" when the rate of increase declines - and the lapdog American Public, most of whom failed 3rd Grade Math, nod in agreement. We then ladle on more public entitlement program spending, as was done with Medicare Part "D", which was sold as a sop to Seniors but which was really a sop to drug companies like Pfizer - who, I remind you, has pled guilty twice in the last few years to criminal felony charges for off-label marketing practices. Oh, and their putative head at the time then got a Federal Reserve Bank of NY Board seat. You Democrats wrote that bill (yes, I know, Bush signed it, fool that he was) but in fact it was not intended to benefit the public - it was simply (another) rip-off of Americans for the benefit of a handful of big pharmaceutical companies, who are one step (and only one step!) behind the banks when it comes to how badly they've screwed ordinary Americans.

Sacking Geithner would be a good first step, but only a first step. We also have to sack the entire OCC and OTS staff and tell Sheila Bair that the next bank she seizes - after a short grace period to go in and close ALL of the bankrupt banks NOW - that has more than a 5% loss on assets to the deposit fund better be accompanied by her resignation or she will be sacked as well.

The entire operation of The Fed needs to be examined by Congress and all of it peeled back in the open for all of America. Foreign exchange swaps, lending, improper buying of non-full-faith-and-credit "assets", circumvention of the rules through setting up LLCs like Maiden Lane(s), all of it.

Every financial firm that has lied to investors, regulators and buyers of their trash over the last decade must be investigated and, when appropriate, indicted. If convicted their charters must be revoked.

We need to either ban securitization entirely, impose strict liability for every transaction enclosed in a securitized loan package, or set a federal usury limit at some reasonable level over Fed Funds - not more than 10%. If you can't loan profitably at a 10% interest rate over Fed Funds, you're cheating - you're making loans you have every expectation will not be paid.

ALL off-balance sheet games must be stopped. Period. Hiding things off balance sheet should get you 20 years in "pound-me-in-the-butt" Federal Prison, not a fat bonus.

ALL lending in excess of collateral value (that is, "unsecured") must be backed by one dollar of capital for each dollar of loan outstanding. Oh, and it's a loan when you write a "credit default swap" (whether on interest rates or anything else) where you do not have hard reserves behind your commitment. The writing of CDS by AIGFP with no reserves was not one illegitimate act, it was two - first by AIGFP in claiming these policies were "good", and again by the banks who bought them and claimed to be "hedged" when their counterparty had no ability to pay.

The ugly reality is that we've wasted more than two years on trash "programs" and "fixes" that have done nothing more than blow over a trillion dollars of taxpayer money, enriching Wall Street (again) while millions of Americans lost their homes and jobs. Only the American consumer has been forced to eat the bad loans they took out - the lenders have been protected at taxpayer expense. The disincentive to make a loan you know or have reason to know won't be paid back only exists if making bad loans bankrupts BOTH the lender AND borrower.

Talk will no longer cut it.

Americans are a patient people, but it is my sense that the collective patience of this nation is nearing exhaustion.

Trust me on this Mr. DeFazio - if you and your ilk don't cut the theatrics and BS games you're going to eventually piss off the American public to a sufficient degree that they will spend their last $20 on this:

That day may be a lot closer than you think.

Pollution in China - A Must Read

nospam@example.com (Karl Denninger) — 2009-11-18T15:45:17Z

America used to mistreat her land and water like this.

This sort of thing, by the way, is how you manage to produce things with a wage of $1 or $2/day and undercut first-world producers.

When we have "free trade" with China, this is what we are supporting. This is what we're serving up on their people. This is what our government and corporations all say is ok - so long as it is hidden from us, and happens "over there."

Make all the excuses you want America, this is what you're supporting every time you buy anything made in China or containing Chinese componets.

Go walk around your house and pick up 10 random items. Look for the "made in" tag on the back or bottom. What's it say? Now consider this - it is virtually impossible today to buy a piece of consumer electronics, a toy, an automobile or even a toaster without some part of it coming from China.

YOU are why this is happening.

These are not old photos, or someone's Photoshop experiment.

They're real, they're current, and they are what our hedonism, demand for $20 DVD players and "cheaper and faster" from everyone has resulted in, all so our "corporations" can report "record profits."

Those "great earnings" the last two quarters were in fact generated by firing Americans and shifting yet more production over to China, where they poison their air, water and ground with wild abandon, all so we can have a "strong" stock market and our banksters can loot us some more.

This is just one example.... head to the original article to read and see the rest.

You lost your job so she can bathe in industrial waste, and you are not only consenting to all of it, you're actively supporting it.

Any questions?

MUST WATCH: Glenn Beck And The Dollar Carry

nospam@example.com (Karl Denninger) — 2009-11-18T14:58:38Z

Love him or hate him, he got this one almost competely right, and explained it in terms anyone can understand.

TAKE THE TIME TO VIEW THIS EVEN IF YOU HATE GLENN BECK AND FOX NEWS. IT'S IMPORTANT.

Open Letter To President Obama

nospam@example.com (Karl Denninger) — 2009-11-18T14:23:00Z

Yesterday you undoubtedly saw my letter to The Chinese Premier. Today, it's your turn.

You could have made quite a splash over there in China - and made a difference for all Americans. But instead, you did nothing of the sort - you simply continued the sell-out that has been going on for the last two decades in the so-called "strong relationship" between China and America.

That "strength" has included selling China advanced radar technology allowing them to shortcut 20 years of development time off their ICBM targeting, making their nuclear weapons far more lethal to potential targets - including targets in the United States. It has included turning a blind eye to the blatant and outrageous technology rip-offs that go on over in that nation every day. You won't see them because your Presidential Motorcade will never be allowed in the street markets found all over the nation, but if you were, you'd see literal millions of unlawfully-made copies of US-created software and music sold openly while the cops stand by to protect the vendors instead of enforcing internationally-agreed to laws that the Chinese pay only lip service to. And it has included granting virtually tariff-free "trading" status to a nation that forces poor farmers off their land and into sweatshop factories, away from their families where they are paid a buck a day in US equivalent wages, turning out products for sale in the US.

And let's not forget who these companies are. They're the WalMarts, Apples and Nikes of the world - many of them huge American firms. Oh not directly - that would bring these firms under US labor and regulatory stricture. No, they're "independent companies" owned by Chinese slave-drivers who instruct their employees to lie when the "auditors" from WalMart and Apple show up, telling them to a single employee that they're "complying" with reasonable wage and hour laws under penalty of losing their job, being blacklisted forever and literally starving to death. Since there are no whistleblower protections in China (it is, after all, a Communist government) the big US companies can claim to be "responsible" while in the background you hear the slave-driver's whip crack - and everyone smiles (except the Chinese worker who is being outrageously exploited.)

You ought to know something about this, given your heritage. Kenya featured prominently in the global slave trade until the British put a stop to it. There's nothing like a bit of history to screw up the revisionism that finds its way into American Politics, is there?

You ran on a populist platform and won on the basis of "hope and change." But hope and change is not working at WalMart while offshoring the production of our various consumer goods to China where the replacement for our US workers are paid a buck a day. Indeed, many of the 8 million American jobs lost since the top of the employment market in mid-2007 will never come back, simply because the small and mid-sized businesses that once dotted the landscape have been destroyed by this "offshoring" activity. It is clearly not possible for a US supplier or vendor to compete with $1/day wages or anything approaching it, yet this is the "competitive supplier" environment over in China and elsewhere.

The Truth is that America and China are locked in a deadly embrace. They're not buying our Treasury Debt to be nice or "support" us. They're buying because we have exported our inflation to them for more than two decades, and they're desperately trying to prevent it from destroying them. See, when you make $1/day (or $2/day) inflation is the difference between eating and not eating, and hungry people have a habit of reaching for pitchforks. Since there are about 1 billion of them (ordinary Chinese) and a much smaller number of military and leadership, well.... you do the math.

But that "buying" of our Treasury Debt has fueled your (and your Republican cronies) desire to spend beyond all reason. This distortion has allowed the government to blow money it does not have for more than a decade without watching interest rates ratchet inexorably upward, as happened to Bill Clinton and those before him.

The problem is whatever can't continue forever won't, and if you've been induced to borrow "interest only" (as our government always has) and the interest rates start to rise you can be bankrupted even if you stop borrowing. Your refusal to recognize that nobody can survive for long when you take in only half of what you spend, borrowing the rest, is an outrage and insult to anyone with an IQ larger than their shoe size.

Speaking of outrages, let's go down the list of current ones. We can start with the SIGTARP report on AIG and their counterparties. While AIG might have been free (under the law) to sell "insurance-like contracts" with no capital behind them, there is nothing that forced The NY Fed (and The Federal Reserve generally) to allow regulated bank-like entities to purchase those swaps and count them as "money good hedges." Yet the very boob who apparently did that, along with intentionally overpaying counterparties, was appointed by you to head the Treasury. I suppose none of us should be surprised at this revelation by Mr. Barofsky, given that one of Timmy's qualifications to head the Internal Revenue Service was that he didn't even bother paying his own taxes. You do realize the example this set for other Americans, right? Is that wise, given that the government is undoubtedly going to try to extract more and more tax money from the rest of us in the years to come?

Then there are people like Lloyd Blankfein, who yesterday "apologized" for "participating in things that were clearly wrong." I know you created a "government-wide task force" as of yesterday to "fight financial fraud", but somehow I doubt we'll see the person who made a public admission yesterday of "participating in things that were clearly wrong" in the dock. Indeed, yesterday we were treated to a revelation that Sacramento is suing a bunch of banks for bid-rigging and kickbacks - suspiciously similar to what apparently happened in Jefferson County Alabama, in which JP Morgan/Chase agreed to a fine and "foregone profits" of nearly three quarters of a billion dollars - while "not admitting guilt." Pardon my cynicism, but I've yet to see anyone willingly hand over nearly 3/4 of a billion dollars unless they're concerned that they might lose a lawsuit or worse, be found guilty in a criminal trial. It would seem to me that this "task force", if it really is intended to do something productive, would start at the top - with Racketeering prosecutions aimed at our largest financial firms. But that's not going to happen, is it?

Speaking of "OCCE" (operating a continuing criminal enterprise), what about drug companies? There's a bit of a problem there too, no? Are not the drug companies one of the beneficiaries of your alleged "Health Care Reform"? After all, you're not going to strip them of their re-importation protection, are you? Why not?

Far more important however is where a "gentlemen" (Kindler) wound up after not one but two criminal guilty pleas by Pfizer for the same crime. He was elected to the board of the NY Fed. Are you as proud of Pfizer's record as is Mr. Kindler is as their former CEO and General Counsel? It appears so - not only does your "health care" proposal not bar deals with drug companies that have twice pled guilty to the same felony, not only is Pfizer still operating as a corporation (where any "natural person" who did the same sort of thing would be sitting in the hoosegow) but in addition you've sat back silently while their CEO is appointed to one of the chief banking regulatory positions in The United States!

Here's the problem at the end of the day Mr. President.

You were elected on a platform of "Hope and Change." In point of fact the only change we got is the change at the bottom of our pockets - all the rest of our money has been siphoned off by the very same robber barons and banksters that have corrupted our nation for decades. You've done exactly nothing to prosecute them for their previous actions or prevent them from doing the same things in the future. Nearly a year after your election Citibank served upon the American people a 29.9% "rate jack" on their credit cards - an "atomic bird" served up by one of the largest financial firms in The United States, and one that the government now owns a large stake in. This was a slap in the face of Americans by THE GOVERNMENT - that is, YOUR ADMINISTRATION.

You claim to be for the working class people in this country, yet you bow down to China paying people $1/day to assemble junk products, from capacitors that explode (found in literally millions of pieces of electronics) to melamine-laced "food products" to poisonous toothpaste to corrosive drywall that destroys wiring, plumbing, and, allegedly, the lungs of US Citizens.

We continue to hear that we "must reform health care" yet just recently Pfizer pled guilty to a criminal felony that it previously, years ago, pled guilty to before. Nobody went to prison, and the fine levied was less than 1% of the firm's market capitalization. A mere cost of doing business. These are the "engines" of Americans' health you wish to protect with laws that force we the people to pay for the development of drugs and medical devices that are then used worldwide - without the rest of the world paying "their fair share" for the developments that save their lives. We're a generous people but don't you think such charity should be by choice rather than extracted at gunpoint?

You refuse to step in and force The Fed to be audited, even though you could get behind Representative Paul and demand it happen. Why? Is it because you're protecting the very people who ripped us all off? There are those who believe the true purpose of your Chinese trip is to find a way to pry open the doors in China so our Banksters can loot them, since the blood all seems to be gone from Americans - the vampires simply drank too much and killed us all. There's one small problem with that plan, if indeed it is your intention - in China they shoot people for the sorts of things that the banksters did over here. Call it a "feature" of Communism if you'd like.

Let's face it: America may need some protectionism. Americans can't be expected to compete with $1/day - or $2/day - in wages. While this "looks good" for a little while as prices come down just as business profits look good when you fire people in the quarter you do it (witness the last two quarters of "earnings") those employees who lost their jobs can't buy anything in the future, as their income has evaporated! They wind up on the dole, and this drives our budget deficit from 20% of our Federal Budget to roughly 50%. The pegs and forced buying of Treasuries that have allowed this to happen won't last forever, and when (not if) they snap they will force a Federal Government default. Thus, my statement in the open letter to China's Premier - we're not going to pay you.

Some have claimed in comments I received that my views in that letter are some sort of jingoistic orgasm. Nothing could be further from the truth; my views are simply an expression of mathematical fact. Math is the only true science.

Speaking of the math, I'm sure you're aware that about half the nation loved you at the time of your election and the other half hated you. That's a "feature" of American politics, of course. But I would be concerned for your job security down the road if you don't change course. After all, the SEUI and UAW both were strong supporters, as were the "ordinary people" who bought into your "hope and change" mantra.

The problem is that you haven't kept any of those promises. Your "stimulus" didn't, your "Recovery Czar" has refused to certify the jobs "saved or gained" numbers (that's because they're flat lies, as is obvious from the employment situation report's household survey) and a huge stock market rally aside, there hasn't been any real turn in the economy. Instead Wall Street is feasting on the destruction of the dollar, which is a direct consequence of your policies - spending more than one makes eventually destroys confidence in the strength of your balance sheet, and the puerile acts of a Fed Chairman who you claim to support for re-appointment in his futile attempt to keep the musical chairs game going isn't helping matters. You could stop this tomorrow by demanding that Bernanke raise rates to a mere 2% immediately or you'll replace him with someone who will - after all, his reconfirmation has not yet occurred, and your nomination can be withdrawn. You could fire Timmy and direct Mr. Holder to prosecute all of the crooks on Wall Street that stole the hopes and dreams of millions of Americans, then looted their retirement accounts on top of it. While your admission of the obvious this morning - that "too much debt could lead to a double-dip" sounds good, the fact of the matter is that it is your administration that has piled on most of this debt - and continues to do so. Are you admitting - in advance - to what's to come next year?

Best of luck to you Mr. President - from where this commentator sits, given the underlying realities of the economy and exploitation of our working class and your willful blindness to the mathematical realities of our fiscal and economic situation, you're going to need it.

Watt's The Deal?

nospam@example.com (Karl Denninger) — 2009-11-18T13:05:00Z

As I noted on Blogtalk a couple of weeks ago, Representative Watt is doing his level best to derail the "Audit The Fed" bill and amendments introduced by Representatives Grayson and Paul.

Representative Watt's "alternative", however, doesn't open The Fed's books - it further snaps them shut! It not only leaves all the existing restrictions against an audit in place and refuses to mandate audits it also places four new restrictions on any such audit activity.

The most outrageous new restriction is that an audit, under Watt's proposal, may not examine the loans or liquidity arrangements that The Fed enters into or the impact of those deals on the reserves, balance sheet or financial condition of either a Fed-regulated bank or The Federal Reserve itself.

It isn't hard to figure out why Watt would want such blanket secrecy. One need only look at his heavily-gerrymandered district, which happens to contain the corporate headquarters of Bank of America.

This gives new meaning to "kneel before Zod."

The Dishonorable Representative Watt must resign - there have been ridiculous and outrageous claims made in the past, but any representation that his amendment would somehow "open the books of The Fed" is an outrageous lie, and further, it appears to be intentionally designed to protect one of the very "too big to fail" banks that likely has caused The Fed to get in trouble in the first place - Bank of America.

Gerald Celente... Audio Link

nospam@example.com (Karl Denninger) — 2009-11-17T22:06:22Z

You should be able to play directly from this Ticker; if not, click the original link, which is from Kingworld News.

Original Link is here:

Lying Sack Of Dog Squeeze: Blankfein

nospam@example.com (Karl Denninger) — 2009-11-17T20:27:00Z

Sorry Lloyd: NO SALE

“We participated in things that were clearly wrong and have reason to regret,” Blankfein, 55, said at a conference in New York hosted by the Directorship magazine. “We apologize.”

But then there's this...

Goldman Sachs, the most profitable securities firm in Wall Street history, had a record profit in the first nine months of this year and set aside $16.7 billion for compensation expenses.

No they didn't. Their "profit" was entirely ill-gotten.

About $10 billion from the government via the AIG conduit, which they had a ZERO chance of collecting had AIG filed bankruptcy.

Another $21 billion financed at RADICALLY below-market rates due to government guarantees - that is, an explicit taxpayer subsidy.

That money is not Goldman's. It is ours.

Furthermore, the standard for forgiveness among Christian faiths for sins requires certain things. Specifically one must:

Be sorry for one's sin. Lloyd professes to be. Ok.
Forswear sin in the future. To do so one must identify the specific sin(s) for which one is atoning. So far, Lloyd hasn't done that. Exactly what things did you do that were wrong Lloyd, and why are you trying to evade whatever lawful and reasonable punishment might come from making a full account of your activity?
Make penance where possible. In this case it is possible, since the sin involved money. Yet Goldman and Lloyd have made no penance whatsoever, despite the myriad people who got hosed as a direct and proximate cause of activities he now admits were wrong for Goldman to engage in.

Goldman may be the "most profitable" Wall Street firm but I will simply observe that it is trivially simple to be "profitable" when one does wrong, since it is always easier to make money by doing wrong than by acting with honor and propriety.

No Lloyd, your apology is not accepted, as it is insincere. You are simply trying to deflect attention from the well-deserved hit to your reputation - a reputation that, from my perspective, is somewhere south of Satan's.

Have a nice day Jackass and may you burn in Hell.