http://www.humpjones.com/rear/entry/the_sky_is_still_falling_after_all_these_years/

I thought what I’d do was, I’d pretend I was one of those deaf-mutes.

You summed my thoughts up really well with this article. Ever since I learned about our debt-based economy I’ve been telling people I know that our economy is going to crash someday worse than the Great Depression. Needless to say no-one really believed me, especially since I was giving time-tables for it to happen. I’ve learned to not go down that road. It’s really unbelievable, if you continue the analogy of yours about our monetary system/economy; it went over the edge sometime around the 70’s/80’s and at that point it was going so fast it actually got some air on take off. Basically after everyone decided that paying with plastic was a nifty advancement in human ingenuity. It made it seem as if instead of entering a point of no-return we were entering an unending age of prosperity. Then it culminated in the fall of the Russian Empire, which we got to take full advantage of by shipping billions of dollars into their economy to stop it from crashing. The constant acceleration now is just going to make the crash all the harder.

So what I propose is that we ride this bitch as hard as we can. What’s the point in letting up now? With a little hope we can crash it so hard that not even the wealthy folks will be able to make money on reviving it.

We need to get out of this cyclical bullshit somehow anyways. Is it just me or does it seem like humanity has been here before?

On a lighter note, I just can’t stay worried about it listening to hendrix while drunk. Seems like that’s the state I find myself in more and more these days.

Here’s an email I sent to someone one day. I was clearing out my inbox when I reread it.

Anyways, I figured it was about time to put it out on the internets. Or at least give it a better home than my email archives.

We have been outside of monarchy for only a short time, but already in the collective mind people seem to think that royalty are merely celebrated figure-heads. In reality Monarchs and their families/plutocracies have ruled most of the world and only started giving up absolute rule after the World Wars. But just because they gave up Absolute rule, doesn’t mean they don’t still rule. We in our new society feel as distant from them as if they were out of the stone-age and give them no credence. We are in an ultra-progressive stage where ideas have become fads. Progressives latch on to every new ideal as if it is the world’s only saving grace that will bring us out of these neon ages.

These neon ages are different from the dark ages only in that there are some very excited atoms (people) giving off bright ideas that are suffocated by the dark that surrounds them. It’s a false brightness. One that lacks the true power to brighten everyone’s life. It only gives dim light to the pimps and thieves of this Brave New World.

Yea, I typed that earlier today when I was sitting around thinking. It’s mostly shit, but I think there are a few good points to it. Also I like the name I coined for our time period. We are living in the Neon Ages. I know my alliterations and analogies are amateurish and basically shit(most notably the fact that I put (people) next to atoms since I felt that was the only way others would pick up on my meaning), but I think the overall view is still there. Mostly. And it’s kind of hard to boil this whole world down to two paragraphs. It’s not really the whole world though. Just a section I felt like giving words too. A critique on societies misgivings and gross ignorance when it comes to certain topics.

I surprise myself sometimes. Even if all that is wrong, it’s still a lot better cognation than I thought was capable from me.

The one thought that really jumped out at me was this sentence:

We are in an ultra-progressive stage where ideas have become fads.

Where do I come up with these things? Well at least I got all this out on one thread, even though it has less and less to do with the original article, which seems fair; after all it was suppose to be about sex.

^^Yeah, this is one reason I take “Bob Dobbs”—not the SubGenius one, the Canadian dickhead—more seriously than most people.  Sure, he’s just channeling McLuhan through his own self-promoting lens, but he’s a reliable source of very interesting bullshit.  And, more to the point, he predicted this exact problem—when the public appetite for ideas would vastly outstrip the public’s capacity to understand those ideas—“Ideas become fads” as you put it.

Now, I’m not sure why our current situation is so much different from any other time period.  My early morning guess would be information technology that’s faster and more powerful than the minds of the people who use it.  And of course, who can escape McLuhan’s curse—“faced with information overload, the dominant form of mental illness in the 21st century will be pattern recognition.”

On Friday Jim Cramer freaked out about the stock market. I guess tomorrow depending on what the Fed does it could be nice in New York City or it could be raining men. And I should add that it doesn’t take much to freak out Cramer but he was reporting what big stock/bond/fund chumps were telling him.

Yeah, Cramer is an interesting guy.  On December 22nd, 2006, he also said this, on a show called “Wall Street Confidential”:

AARON TASK: Again today we have a misdirection from the futures. Is this just because of the holiday season?

JAMES J. CRAMER: When I was short at my hedge fund-meaning I needed the market down-I would create a level of activity beforehand that could drive the futures. It doesn’t take much money. Or if I were long, and I would want to make things a little bit rosy, I would go in and take a bunch of stocks and make sure they were higher, maybe commit five million in capital to do it, and I could affect the market. That’s a strategy very worth doing. I would encourage anyone who is in the hedge-fund business to do it, because it’s legal, and it’s a very quick way to make money, and very satisfying. It’s a fun game, and it’s a lucrative game. By the way, no one else in the world would ever admit that, but I don’t care.
TASK: That’s right, and you can say it here.

CRAMER: I can. I’m not going to say it on TV.

I learned about that from Harpers, who provided a transcript in their June 2007 issue, titled “The Invisible Hand.”

You can catch Wall Street Confidential at their site:
http://thestreet.com

Cramer shows up three times on their front page.  He doesn’t own the site, though, here’s the personell:
http://www.thestreet.com/tsc/about/whoswho.html

And in this light, considering he said that on a Friday, this next quote is pretty eyebrow raising:

CRAMER: You just create an image that there’s going to be news next week that’s going to frighten everybody. This is what’s really going on under the market that you don’t see.

TASK: And that nobody else talks about except you.

CRAMER: Right, but what’s important when you’re in hedge-fund mode is to not do anything remotely truthful, because the truth is so against your view that it’s important to create a new truth, to develop a fiction.

TASK: SO you’re talking about the mechanics of the market-

CRAMER: Well, the mechanics are much more important than the fundamentals.

TASK: Well, okay, but in terms of the fundamentals-

CRAMER: Who cares about the fundamentals? Look at what people can do. The great thing about the market is that it has nothing to do with the actual stocks. Now look, maybe two weeks from now buyers will come to their senses and realize everything they heard was a lie but then again Fannie Mae lied about their earnings for six billion dollars, so you know-

TASK: Right, and Bristol-Myers lied.

CRAMER: It’s just fiction and fiction and fiction. I think it’s important that people recognize that the way the market really works is to have that nexus: hit the brokerage houses with a series of orders that can push it down, then leak it to the press, and then get it on CNBC-that’s also very important. Then you have sort of a vicious cycle down. It’s a pretty good game, and it can pay for a percent or two.

I think I pay too much attention to doomsayers. From now on I will only listen to financial celebrities. In the same vein as the Cramer quotes, Ben Stein called out the stock market.

Here’s a fact: The speculators and hedge fund managers who run today’s stock market need market volatility in order to make money.

They can’t make enough money if the market stays flat or moves only a bit, so they like extreme and unexpected price movements. They especially like sudden, surprise movements down, when they can make money off stocks they borrow and sell—or, as they say, “sell short.”

That’s what’s been happening the past couple of weeks. But it’s not interesting to say that the speculators are whipping the market around to satisfy their money lust. So the speculators themselves make up reasons for why the market is fluctuating, flog those reasons to the media, and then profit if some other speculators believe the jive reasons and jump in the way the manipulators want them to.

He goes on to list some reasons why “the sky isn’t falling.” They sound good enough to me.

http://www.skilluminati.com/research/entry/the_truth_behind_jim_cramers_mega_market_meltdown/

It grew into a whole Skilluminati piece.  I still like Jim Cramer a lot despite what I found out—I liked G. Gordon Liddy a lot, too.

Paul Krugman has a piece in the New York Times. He is a pretty sober analyst of the economy.

What’s been happening in financial markets over the past few days is something that truly scares monetary economists: liquidity has dried up. That is, markets in stuff that is normally traded all the time—in particular, financial instruments backed by home mortgages—have shut down because there are no buyers.

This could turn out to be nothing more than a brief scare. At worst, however, it could cause a chain reaction of debt defaults.

I’m not an economist but it seems that he suggests the answer is to start printing money like crazy.

And they are printing money like crazy. “Helicopter” Bernacke let out 38 Billion dollars today in liquidity.

Central banks in the U.S., Europe, Japan, Australia and Canada added about $136 billion to the banking system in an attempt to avert a crisis of confidence in global credit markets.

I’m going to ramp up my own printing press to help avert this disaster. I suggest you all do the same.

http://cryptogon.com/?p=1165

Wall Street opened higher Monday after the Federal Reserve and other central banks added more cash to their banking systems, helping investors set aside some concerns about credit tightness.

The Fed said minutes after the opening bell that it would add $2 billion in liquidity in a one-day repurchase. That follows a move by the Bank of Japan to put $5 billion into the markets and an addition by the European Central Bank of $65.3 billion; the ECB added more than $200 billion last week. The moves, following similar injections by the Fed last week, placated Wall Street for now and allowed it to look ahead to a week of fresh economic data.

How long can they throw money at it?

I guess, for as long as they can hire people to run the printing presses.

I suppose they will have to start paying them in something other than paper if they want to keep them. Money is mostly just digits in computers these days.

Here’s a pretty good overview article from globalresearch

On Friday, the Dow Jones clawed its way back from a 200 point deficit to a mere 31 point loss after the Federal Reserve injected $38 billion into the banking system. The Fed had already pumped $24 billion into the system a day earlier after the Dow plummeted 387 points. That brings the Fed’s total commitment to a whopping $62 billion.

By some estimates, $326.3 billion has now been added to the G-7 Nations’ intra-banking system to prevent a breakdown. That amount will rise considerably in the weeks ahead as the situation continues to deteriorate. Some readers may remember that on Tuesday, August 7, the Fed announced that it was NOT planning to bail out the market.

My, how quickly things change.

So far, economic pundits and CEOs have applauded the Fed’s intervention as a “constructive” way of staving off an impending credit crisis.

Are these same “experts” who always sing the praises of unregulated “free markets” while condemning any government intervention?

Yes.

The investment banks and fund mangers love “free markets” when it means eliminating the rules that prevent them to “gaming the system”. But they don’t like it so much when their shabby Ponzi-rackets start to unravel. Then they’re the first in line to beg for a bailout.

That’s what’s happening right now. The Fed is keeping the stock market afloat by increasing liquidity at the banks. If it wasn’t for Bernanke’s billions of dollars of low interest credit---the banking system and stock market would collapse in a heap. The Fed’s “not-so-invisible hand” is the only thing holding the whole dilapidated system in place.

Is that the way it’s supposed to work in a free market system---with the Fed acting as the nation’s Economic Central Planner intervening whenever it suits the interests of its wealthiest constituents?

Sounds more like a Financial Politburo, doesn’t it?

In truth, the “free market” means nothing to the men who run the system. It’s just a public relations scam designed to dupe investors into plunking their money into a system that’s rigged for the carnivores at the top of the economic food-chain.

Does anyone really believe that the market-commissars would allow the system to operate according to the arbitrary swings in investor confidence and random speculation?

This is THEIR SYSTEM and they run it THEIR WAY. The only time that changes is when their twisted schemes go haywire and they need a handout from the taxpayer. In the present case, they are asking Big Brother Bernanke to bail them out on trillions of dollars of non-performing subprime garbage-loans which masquerade as securities in the secondary market. The Fed has already indicated that it is only-too-willing to help.

But what good will it do?

The banks are currently holding (roughly) $300 billion in collateralized debt obligations (CDOs) and another $225 billion in collateralized loan obligations (CLOs) More than one-half trillion dollars in debt which is essentially “illiquid” and has no clear market value. They could be worthless for all we know.

That hasn’t stopped the Fed riding to the rescue, buying up many of these toxic CDOs and increasing banking reserves so the great fractional banking con-game can continue unabated. This is what one astute observer called “alchemy finance”.

Central banks around the world have opened up the liquidity spigots to avoid a global credit meltdown. But their efforts are bound to fail. The banks are sitting on huge losses from assets that they can’t move through the pipeline and which have gobbled up their reserves. Bloomberg News summed it up like this: “The $2 trillion market for mortgages not backed by government-sponsored agencies is at a standstill”.

The same is true of the corporate bond market. As the Wall Street Journal reported last week:

“The investment grade corporate bond market HAS GROUND TO A HALT, making it difficult for companies to access capital and hard for investors to find a place to put their money to work. ….The problems in the primary market could, if they persist, throw a wrench in the workings of corporate America, making it tougher for companies to finance, among other things, investments, buyouts and equity buybacks….For July, corporate bond issuance was down 77% from June.” (“Corporate Bond Market has come to a Standstill”, Wall Street Journal)

The mighty wheels of commerce have rusted in place. Nothing is moving. Only the sense of panic continues to grow. Trillions of dollars poisonous CDOs need to unwind, but the banks cannot put them up for bid for fear that they’ll only get pennies on the dollar. This is what a slow-motion train-wreck looks like. The Fed’s cheap credit won’t help either. At best, it’ll just buy a little time before the true value of these bonds is established and trillions of dollars in market capitalization vanish into cyber-space. Banks, equities, hedge funds, insurance companies and pension funds are all in line to suffer major losses.

The irony, of course, is that the Federal Reserve created this mess by lowering interest rates to 1% and flushing trillions of dollars into the economy. That cheap money created a series of lethal equity-bubbles in housing, credit, stocks and bonds which are quickly falling to earth. Expanding the money-supply might be a short-term fix, but it’s really just throwing more gas on the fire. Why add hyper-inflation to the long-list of existing problems?

The volatility in the stock market is a red herring. We should be paying attention to the underlying problems which are just now beginning to surface. The banks have been originating loans and bundling them off to Wall Street to avoid the normal reserve requirements. Now they’ve been “caught short” and don’t have adequate funding to cover their bets. If the Fed doesn’t help out, we’ll see at least one or two major bank closures.

This is a story that won’t appear in the media. Bank-runs are the beginning of the end---financial Armageddon.

And there’s more bad news, too. If the stock market corrects more than 10 or 15%, the massive overleveraged $1.7 trillion hedge fund industry will crash-and-burn. This may explain why the stock market has behaved so erratically recently. There have numerous late-day rallies with no good news to support the soaring equities prices. Is the market being micro-managed behind the scenes to keep it above a certain level?

Many people think so. There’s been a flood of articles about the activities of the Plunge Protection Team’s in the last two weeks. The Fed’s desperate infusions of credit into the banking system will only reinforce growing suspicions of market manipulation.

DERIVATIVES DOWNDRAFT

Banks routinely hedge against adverse moves in the market by purchasing various types of insurance in the form of derivatives contracts. Derivatives trading has skyrocketed in the last few years and the “British Bankers Association estimated last fall that by the end of 2006, the market for all credit derivatives was $20 trillion and expected to be $33 trillion by the end of 2008.”These relatively new instruments are about to be put to the test by worsening market conditions. “Hedge funds may account for as much as 30% of such credit protection” but that is little solace for the banks “because hedge funds that are losing money but also selling credit insurance may not be able to honor their commitments, rendering the protection worthless.” (“Insuring against Credit Risk can carry risks of its own” Henny Sender, Wall Street Journal)

Credit insurance in the form of credit default swaps have created a false sense of security that may prove to be unfounded. In fact, the Credit insurance business has probably encouraged lenders to make shakier and shakier loans believing that they were protected from risk. But that doesn’t appear to be the case. For example, Bear Stearns tried to soothe investor’s fears during the collapse of its two hedge funds by pointing to its derivatives coverage.

“Bear executives repeatedly referred to their dependence on hedges, including credit derivatives, to offset their losses on subprime mortgages and loans to poorly rated companies, stating that such hedges would offset losses.” (Ibid, H. Sender, Wall Street Journal)

We all know how that story ended up.

Continued

Derivatives have been celebrated as a critical part of the “new architecture of the financial markets”. Now we can see that they are poor-performers under real-life conditions and liable to trigger an even greater disaster. If the stock market stumbles, we can expect a major breakdown in credit insurance-trading with trillions of dollars in derivatives disappearing overnight.

The abstruse world of derivatives trading will suddenly explode onto the headlines of newspapers across the country.

HOUSING BRUSHFIRE SWEEPS THROUGH THE ECONOMY

The contamination from the massive real estate bubble has now infected nearly every area of the broader market. The swindle which began at the Federal Reserve--with cheap, low interest credit---has spread through the entire system and is threatening to wreak financial havoc across the planet. The Fed’s multi-billion dollar bailout will do nothing to contain the brushfire they started or avert the catastrophe that lies just ahead. Greenspan opened Pandora’s Box and we’ll all have to live with the consequences.