republican or democrat...
they are all liars and crooks...
read this:
market-ticker.org (for Monday Sept. 21 2009)
Find The Difference - Why Ponzi Finance Fails
This is a Turing Test and those so-called "economists" who fail to pass should have their degrees revoked by the issuing institution of alleged "higher education."
Take a look at the following charts please.
charts are on his web page
And here's the composite:
How did we get so far out of control?
Isn't it obvious? See that nice light blue line?
There's the problem.
All the claims about "financial innovation" performing the task of "allocating risk" have been a bald-faced lie.
Economists everywhere have lauded these "innovations" - almost to an individual. They have all bought into and drunk the Kool-Aid without one instant of reflection upon these curves, none of which began yesterday. Indeed, the "Warning!" sign went up in the 1980s and was accentuated through the 1990s, yet at the end of that decade we still repealed Glass-Steagall, despite the WRITTEN WARNING in sworn testimony delivered to Congress during the debate on the bill that EXACTLY THIS WOULD OCCUR?
Does anyone wonder why the repeal of Glass-Steagall (and Paulson's much-vaunted at the time lobbying to get the IB leverage limits lifted) happened, looking at these charts?
You shouldn't.
Glass-Steagall's repeal was necessary to allow that nice light blue line to continue to advance in 1998. Paulson's leverage limit removal was necessary to allow that nice light blue line to continue to advance in 2004.
Yet we now know for a fact that the latter act in fact advanced that light blue line to the point of insolvency - that is, inability to pay interest and principal as due, for Bear Stearns, Lehman, Fannie, Freddie and AIG.
Both of those actions were sold to Congress and The SEC as "financial innovation" but in fact both of those actions were demanded as a means to prevent the natural limit of the Ponzi-based financial scheme from being realized when the hard limits to further Ponzi expansion were reached.
INSTEAD OF HITTING THE WALL THAT LEGISLATION HAD PUT IN PLACE TO PREVENT OUT-OF-CONTROL PONZI FINANCE THESE CONNIVING FINANCIERS WENT TO OUR LAWMAKERS AND DEMANDED THAT THEY MOVE THE WALL OUT OF THE WAY SO THEY COULD RUN THEIR RAW PONZI SCHEME THROUGH A FEW MORE ITERATIONS!
But that light blue line didn't only advance leverage in the financial community. It served as the "backstop" to leverage everywhere (beyond the Federal Government anyway), and now all of these areas have hit the wall.
Proof? Right here:
The only area still expanding is the Federal Government. All others are either stable or contracting; the wall has been hit.
"We never saw this coming" is a common refrain. It is a lie, as this chart shows:
What is the "Ponzi Finance" indicator? Simple - it is the arithmetic difference between the growth in GDP and the growth in debt. A positive Ponzi Finance indicator shows improving debt coverage - that is, debt is growing slower than GDP. A negative Ponzi Finance indicator shows deteriorating debt coverage - that is, debt is growing faster than GDP.
Go back to that light blue line again. When did it start to rise in a clear parabolic move?
The early to mid 1990s.
When did the Ponzi indicator fall below its LAST incursion above zero, indicating pervasive deteriorating debt coverage?
IN 1993.
The data has been and is staring economists right in their faces. It has been and is starting The Fed right in their face - this is, in fact, almost entirely their data - the FRB Z1 release!
Now look at the following spread chart of GDP .vs. Debt. I picked a 5% rise in GDP as a "baseline", but that doesn't matter - what does is the spread, which you can find in the above PONZI chart for any year from the early 1950s forward.
Both debt and GDP growth are exponential curves - that is, both are compound annualized numbers. So long as debt in the system is growing faster than GDP the outcome of this process is assured - the laws of mathematics GUARANTEE the eventual insolvency of the entire economic system as the spread will continue to widen over time at an ever-increasing rate!
ALL WE ARE ARGUING OVER IS HOW FAST IT BLOWS UP, NOT WHETHER IT WILL, SO LONG AS THE PONZI RATIO IN THE ABOVE CHART IS NEGATIVE!
This is MATHEMATICS, not Politics or Economics, two so-called professions that CONTINUALLY refuse to recognize basic, fundamental mathematical principles in their so-called "pronouncements" and "analysis."
THE ONLY WAY TO REPAIR THE FINANCIAL SYSTEM IS TO DRIVE THE PONZI INDICATOR POSITIVE AND HOLD IT THERE FOR A PERIOD OF MANY YEARS. THAT REQUIRES EITHER MASSIVE INCREASES IN GDP (IMPOSSIBLE GIVEN DEBT LOAD) OR MASSIVE DECREASES IN OUTSTANDING DEBT. SINCE WE CANNOT PAY DOWN THAT DEBT AS PROVED BY THE RAMPING DELINQUENCY AND DEFAULT RATES THE BAD DEBT THAT IS CURRENTLY BEING HIDDEN BY THE BANKS AND OTHER FINANCIAL INSTITUTIONS MUST BE FORCED INTO THE OPEN AND DEFAULTED.
Do you now recognize WHY Bernanke and the other so-called "economists" who have said (some of them under oath!) that "they never saw it coming", "subprime is contained", "housing prices represent fundamental strength in our economy" and other outrageous falsehoods?
Do you now understand why they're still spewing absolutely FALSE prognostications related to our economic outlook?
Go ahead and tell me we can do "more of the same" folks. We can pump yet more credit into a system that is now showing clear evidence that it cannot absorb any more debt service as a means of trying to address slackening final demand.
Consumers, businesses, banks - all can "lever up" (after all, that's what taking more debt on IS!) when Fannie, Freddie and AIG all levered up at 80:1 or more (and blew up) while Lehman and Bear (at 30+:1) all detonated as well.
Come tell me how given these facts it is wise to allow consumers to lever up 30:1 on houses (which is what a 3% down payment represents) in a flat-to-declining market, when that precise same formula blew up Bear, Lehman, AIG, Fannie and Freddie. Oh, and according to the FHA's latest statistics, its blowing them up too (more than a 20% delinquency and foreclosure rate.) Surprised? I'm not - five former failures, now on our way to six, doing the same damn thing that blew up the other five.
Come tell me how given these facts along with The Fed buying fully half of all new Treasury issuance through direct monetization in the second quarter we can claim to have a "healthy" Treasury market, when in fact half of all new issuance has been gamed by a circle-jerk. I believe the Fed is engaged in this game because BERNANKE KNOWS that the above graphs are immutable mathematic FACTS that he is furiously attempting to prevent becoming realized in the mortgage and Treasury markets - as they have in ALL OTHER SECTORS OF DEBT. The important point here folks is that HE WILL FAIL - it is merely a matter of WHEN, NOT IF.
Come tell me how the stock market rally is all a matter of "green shoots" when The Fed buys $4 billion of mostly 5-year notes, and nearly 90% of them were issued in 2009 - that is, more direct monetization. Oh, and almost to the minute (11:15 AM ET) when that transaction closed Goldman and others "magically appeared" on the bid in the S&P 500 pit buying equity futures (along with individual stocks) and the dollar tanked.
We have a Fed Chairman who is intentionally damaging the value of the dollar (that is, the money every American has in his or her pocket) so as to "pump stocks" as a matter of Federal Reserve policy - and Congress thinks this is just fine. After all, we've yet to hear Congress demand that he stop it - or better, proffer a bill to make that sort of manipulation (without authorization of Congress) a criminal offense. Who is it that The Constitution says has the power to fix the value of our currency again?
There are those in the "economics profession" who think that such games can lead us to improved final demand and therefore everything will be ok.
They are wrong, not because it hasn't worked in the past over the short term (it has) but because every such effort in doing so encourages ever-more malinvestment and ever-more ponzi-based debt-fueled consumption.
Such games (which always appear whenever the cost of borrowing is, in real terms, negative - after all, wouldn't YOU borrow as much as you could if someone was paying you to do so?) serve to destroy the critical safety margin between the current debt-service ratio and the maximum affordable debt-service ratio.
When that spread reaches zero cannot be determined in advance because the affordability of debt depends on the interest rate charged, and that in turn is dependent on three variables: The perceived risk of purchasing power devaluation, the perceived risk of default, and the demanded profit on the loan, all discounted over the negotiated term.
Notice that two of those three variables change literally on a daily basis. The Fed's game of monetization is driving the first the wrong way and that interrelates with the second (default risk) as non-discretionary purchases (e.g. food and energy in particular, the latter of which is strongly comprised of imports) has a component in the first item and that feeds back directly into default risk.
While some loans (fixed-rate mortgages) are negotiated and then fixed for an extended term of years a huge percentage of loans are in fact floating in one form or another. Most commercial real-estate deals are effectively interest-only with a relatively short term (e.g. 5 years) after which they must be rolled. Credit card rates and limits can change monthly. HELOCs are often tied to some benchmark as are commercial lines of credit (many to LIBOR or OIS.)
The problem we face today is that after thirty years of operating with a negative "Ponzi Ratio" we have exhausted the margin between debt service actually required and debt service that is possible. Proof of this is no more difficult to find than is found in the ramping default rates across all sectors of loans; debt is not being decreased by voluntary pay-downs, it is being decreased through default and the impossibility of new issuance into the securitization market given the present debt load.
The Ponzi-style "debt accumulation" game has hit its natural limit and yet The Fed refuses to admit to the facts and allow outstanding debt to default, instead conspiring with Treasury to transfer as much of the default risk as possible to The Federal Government itself! By purchasing nearly a trillion dollars of "agency" paper The Fed is essentially attempting to force Treasury to issue a full-faith-and-credit guarantee against securities where such a guarantee is explicitly disavowed.
I fully expect in the not-distant future an explicit threat that should The Fed be audited or worse, should that demanded guarantee be refused "The End Of The World" will ensue - yet another threat of martial law and similar "end times" prophecy, coming directly as a consequence of the intentional actions of The Federal Reserve and Treasury themselves.
There is no avoiding the math folks. |
