The D Word

From The RampartsJunious Ricardo StantonThe D Word“At the root of the banks’ problems are the large losses they have undoubtedly taken on their securities and loan portfolios. But they don’t want to recognize the full extent of their losses, because that would likely expose them as insolvent. So they talk down the problem, and ask for handouts that aren’t enough to make them healthy (again, they can’t reveal the size of the handouts that would be necessary for that), but are enough to keep them upright a little longer. This behavior is corrosive: unhealthy banks either don’t lend (hoarding money to shore up reserves) or they make desperate gambles on high-risk loans and investments that could pay off big, but probably won’t pay off at all. In either case, the economy suffers further, and as it does, bank assets themselves continue to deteriorate—creating a highly destructive vicious cycle. ” The Quiet Coup By Simon Johnson / US lost over six hundred thousand jobs last month ! In 2008 twenty-three banks failed. As of April 2009, twenty-one banks have been closed or taken over by the FDIC. Yet the corporate mind control apparatus wants you to think we are in a “recession”. Not hardly. We are experiencing a depression pure and simple. The main thing that characterizes a depression in a capitalistic system is not the loss of jobs, that is merely one effect; the real cause of a depression is the contraction of credit (debt) and money by the banks. This means the banks are not lending which strangles the flow of money and credit (debt) which essentially shuts down the whole economy. It’s similar to a body in which the vital organs are shutting down, the body becomes weak, lethargic and eventually dies unless a successful intervention is attempted. Alas the monetary and fiscal interventions being tried by the Bu$h and Obama administrations won’t work for a host of reasons.“Since about 1950, return on investments in manufacturing has sharply decreased, leading to the creation of a fantasy economy of financial scams such as derivatives, swaps, futures, options, mortgage-backed securities (MBSs), collateralized debt obligations (CDOs), and structured investment vehicles (SIVs). There has been a massive migration of capital from real, productive industry to the ‘speculative sector’ run by financial giants like AIG and Lehman Brothers. All of these swindles are unreal, mere entries in digital ‘space.’ Derivatives, for example, are mere mathematical formulas in which profits are supposed to derive not from trading assets but from speculation on the expectations of the risk of underlying assets. Such speculative chimera have created a nuclear device that has now exploded, mortally wounding the ‘real economy.’” Economic Collapse speculative sector of the financial system relied on what are called “Weapons of Math Destruction” mathematical algorithms, statistical probabilities of risk (failure) and they bet on the probabilities thinking they could beat the market (house). The problem was there were elements of the speculative sector that were also manipulating the markets. To add to the fraud many speculators (betters) were placing their bets with limited cash so in effect they were taking out large policies (credit default swaps) but putting the bare minimum down. So AIG took out a policy (bet) but only demanded a small down payment on a multi-billion dollar policy (bet). If the thing the person bet on or against happened, AIG was forced to pay out in full. Unfortunately too many individuals and hedge funds were doing the same thing at the same time. This was a recipe for disaster.“In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people. But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.” The Quiet Coup By Simon Johnson a result of their massive losses, the major investment and commercial banks are now insolvent; those who aren’t are forced to hoard their cash to prevent from going under. There is a lack of trust in the whole system. The banks don’t trust each other and won’t lend to each other even overnight ! The banksters’ hoarding and insolvency are suffocating the economy, both in consumer terms (even though most AmeriKKKans are over their heads in debt) and the broader business sector. This is what is causing the current depression. This will continue for the foreseeable future. Remember the “Great Depression” lasted ten years.Now the banksters are colluding with the crooks and imbeciles in Washington to bilk US taxpayers out of our hard earned tax dollars, savings and retirement funds to save the banks and AIG. Next they will go after Social Security and the other social safety net programs supposedly to save money and prevent the US from defaulting on its obligations and eventually going belly up. Only a push by the people and the honest politicians (an oxymoron if there ever was one) will derail their plans.Unfortunately the total debt from the underpayment, under-collateralization and over borrowing by the speculators far outweighs any money the government saves or collects in taxes or the people have in savings. In effect the US is pouring money we don’t have into a bottomless hole to give the illusion it can save Wall Street, AIG, the auto industry and state and local governments. Obama and his “advisors” are perpetrating a massive fraud. They are trying to trick us into believing they are on our side, trying to save the economy. To see just how criminal it all is watch the Bill Moyers interview with William L Black on PBS online at It’s time to face the truth, Obama is on the side of Wall Street and the international bankers. Look for the current depression to worsen and the country to slide into third world living standards as Obama and Congress pour more money down the drain to benefit their bankster buddies. It’s time to wake up, rise and act out otherwise it’s all over.-30-
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