Saturday, September 20, 2008

It's a Kleptocracy Komrades!

The newsflow coming out the financial sector has clearly overwhelmed my ability to post any kind of coherent summary, much less analysis of it.

However, let's address the most recent in a recent string of atrocities being contemplated.

The Treasury Secretary and the Federal Reserve Chairman briefed some high ranking members of congress. In that meeting, they basically said that he financial system (as they know it) was getting ready to have a major dislocation. The congressional leaders are reported to have been very scared coming out of that meeting.

Mission Accomplished!

Be Afraid! Be VERY Afraid! Because that's how we get you to make stupid decisions without thinking, much less discussing the ramifications -- that benefit "us" -- you see?

Is the US Congress so stupid that they forget how they rammed the Iraq war down their throat? (don't answer that - it was rhetorical)

Interestingly, it wasn't really a *danger* until Goldman Sachs (the company that the Treasury Secretary used to head up) came under the attack of the short sellers...People betting that their balance sheet was full of falsehoods and misrepresentations which would preclude their ability to raise additional capital or merely buy back their own now "undervalued" stock (yeah right).

You see, Goldman (ball)Sachs used to be private. During the last boom (1999) they foisted that turd off on the public.

In return they got some capital to allow them to "expand" (read: liquify their principals).

So, in theory, if the stock ever got down to their original price, it's no problem right? They've been using the money they got to expand operations into profitable lines of business for the now owners (the stockholders) and the corporate entity is now worth far more than in 1999, right?

What's that? They've been spending 10's of Billions in MASSIVE bonuses to management and corporate insiders and they haven't really been keeping that value in the institution to benefit the owners?


Guys, this fear mongering by Hank and Ben are nothing more than utter b.s. YES, there is a massive dislocation in the financial markets. However, in this case the suggested medicine is worse than the disease.

And, it's, once again, just more socialism for the rich. It's a way for them to get their assets out of the fire while pensioners, taxpayer and the other bag holders get ready to "swing".

Don't believe me?

In addition to this little bit of treason being foisting onto the public, they (temporarily) made it illegal to short a stock -- illegal to bet that a stock will go down in price (temporarily). However, not just any stock. Just financial stocks.

Some misguided people think that a stock goes up the company gets more money....WRONG. They got their money the day they sold a tranche to the underwriters. After that, stock price moves only enable secondary offerings and stock options -- both of which dilute existing "investors".

I've already given the "speech" that anyone who is buying a stock with the intent on selling it later for a higher price is really "speculating" -- even if they think they are investing. An investor intends to hold the stock forever and collect money from the dividends only.

Ever bought a stock with no dividend?
Ever bought a stock with the intent on selling it for more money later?

If so, you're a speculator.

What makes speculating long vs. speculating short more righteous? I'll tell you. Because it keeps the monied elite in their positions at these overleverage financial firms in a position to continue to leech from you....long enough to push this crap debt they benefited from selling over the years, onto the national debt for you and your kids to pay for in the form of higher taxes, lower levels of services, and a less valuable dollar.

"But spending 700 Billion now on a hasty plan giving Hank Paulson carte blanche to do what he wants with the funds and no oversight is better than the alternative."


Why are we so afraid of a "downturn" in the business cycle?

I know some people's lives and livelihoods are tied to models that demand constant growth. But a ponzi scheme by mathematical definition is doomed to failure.

Is it really better that we "put a floor under home prices" when salaries in many areas don't allow people to afford the homes at the price they sell for?

I'll grant you that this has been a rambling, incoherent, message at best. But I wanted to say this in summary:

There is no "magic money machine". No "free energy device". No "free lunch". Someone pays for it. In this case, they are suggesting it should be you rather than the wall street elite.

Wake up.

This does NOT stop a crash from happening.

Illegalizing shorts does NOT stop a market crash from happening. It does NOT suddenly make these firms solvent. It does NOT suddenly raise the value of shaky assets.

I predict this will be pushed through congress quickly (like all the other bailouts). Once again, they will realize they've solved nothing. I'm guessing that by then, they hope, the election will be decided already and all their wall street piglet friends will have already gotten their affairs in order.

My suggestion is to vote out each and every congress person who votes for this and prepare yourself for an even Greater Depression.

Uruguay Guy

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