Wednesday, October 6, 2010

The Big Lies* exposed...excuse me *the whole story has not been told

Important Note: * The word "lies, lied" are used for brevity when in some or all instances the phrase "did not tell part or the whole story" may apply.

Much time, effort and hope has been poured into debate about "the economic recovery."

Growth by definition, zero based, needs to FIRST examine the baseline against which we expect "growth". If we finally agree that so-called "growth" during the hockey stick era 2004-2007 cash out refis. Cash out refi's were fed by securitizations of pools of mortgages, then derivatives, upon new classes of derivatives, fed by borrowed short term money leveraged 20, 30, 40 or 50 to $1 enabling the creation of ever more NEW derivatives then we can see clearly that debt-induced growth occurred NOT real economic growth. That will take YEARS to recover from. Why? Debt has a due date, both principal and interest need to be paid back. Because certain policy makers /actors placed self or narrow interests above the whole truth, some were lied to, some didn't know any better and perpetuated the lie and a certain coterie refused to let certain entities fail.

So yes economic RECOVERY but not growth - as many hope; that's not how it works, nor should it. To do so would be deny who and what caused the unsound growth.

Therein begins the BIG LIE*.
Lie #1 - the undisputed financial experts AT certain banks, over a period of years, did not tell the whole story to the Federal Reserve and US Treasury as to 1) their comprehensive safety and soundness and 2) the potential repercussions of future investment bank failures in the summer of 2008. These banks (commercial and/or investment) through, subject to proof, potential collusion, insured they would survive AFTER certain others were allowed to fail. Why?
Certain banks, in a Federal Reserve District east of the Hudson (supposedly supervised by Mr Geithner from 2003 to 2008), many of whom were primary dealers. Primary dealers are required to BID on new US Treasury debt. Certain banks may have gently "intimated" to the Fed that if the Fed and/or the US Treasury wanted to play hard ball (like get real marks or identities of counter parties) then the failure of just ONE more primary dealer (after the less popular Lehman and Bear Stearns) would cause disastrous consequences for existing US Debt and on the run issues; that of NO BID.
Lie #2 - The financial experts at the US Treasury lied* to other officials in the Bush White House.
Lie #3 - The Bush White House lied* to the public; as to the people, not systems, responsible and the dollar amount of the problem.
Lie #4 - The Obama Treasury officials - namely one BORN out of the scandal - continued the lie* to the White House and to the public.
Lie #5 - The Fed paid Taxpayers' Cash 100 cents on the dollar for so-called AAA rated paper. Why? And to whom? Near $2T of this paper sits on the Fed balance sheet today.
Lie #6 - The Federal Reserve hoped that artificial 0% interest would help certain banks REliquify their balance sheets back to life.
Lie #7 - Certain banks, upon receipt of US Treasury cash could NOT testify specifically what uses the money was put to - IN FRONT OF CONGRESS. Despite a few awarding $5B in CASH retention awards to their stock brokers in 2009. True.
Lie #8 - To this day - no one - not the Fed, US Treasury, the White House has revealed the names and amounts of indirect and direct support to certain banks, and other entities; especially the names of NON FDIC insured affiliates getting over $240B of loan guarantees by the FDIC.
Yes, your eyes did not deceive you - Non FDIC insured entities GOT and continue to GET FDIC backed loan guarantees. See line #3 in the table in this link
Lie #9 - NO, I repeat NO amount of MONETARY stimulus - will generate sustainable economic growth. Why? Because everyone SEES it for what it is - temporary money, that will disappear faster than the half life of an atom.
Lie #10 - The White House leaders must tell the truth - from the beginning or they will rightly be replaced or rendered useless. ONLY then will taxpayers (and foreign creditors) know and understand who and what caused the current spate of problems. Then the financial experts (private and public) will be exposed for what they did. Fiscal, structural solutions are called for: Reasonable medium to long term tax incentives for 1) future real estate investments in existing properties, 2) tax incentives for any green improvements in existing real estate 3) future income from NEW self employment and 4) NEW training and education. And the most important 5) Get the FED out of the securities markets STD's will continue until they're gone. STDs are Securities transmitted diseases.
Lie #10 - continuing to expect the culprits at certain banks and Wall St entities to cause economic growth exposes the LIE - they generally and simply leach OFF growth - as any middleman, trader will do. It's totally legal but needs to be seen for what it is and what it is not.

Lie #11 - holding up the "stock market" as the barometer for economic growth completely misrepresents reality, although an overwhelming amount of attention is devoted to "TV and media coverage" of DAILY trading. This represents ONE thing - it shows investors' relative appetite for financial PAPER speculation; NOT real on-the-ground economic growth.

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