America's Financial Crisis

[Armenian]

Re: America's Financial Crisis

Out of all the "conspiracy theory" videos, I have seen, this one actually scares me.

What surprised me about the video is that the new money that is said to replace the US Dollar, the Amero, is 'already' being minted and information about it is all over the internet... This is astonishing for me! I knew of the talk about the North American Union. I knew of the talk about creating the Amero. But I had no idea that this new currency was already being produced, albeit in small quantities. Is the current financial turmoil a prelude, a way to prepare the field for the introduction of the Amero? When will this occur? What will our assets in US Dollars be worth in the aftermath of this? I don't know who to believe anymore. I don't know what is the truth. I don't know what's going on... This whole situation has me very worried.

The Amero

Website dedicated to the Amero: http://www.amerocurrency.com/index.html

The Amero - North American Currency: http://www.youtube.com/watch?v=6hiPrsc9g98

NORTH AMERICAN UNION: http://www.youtube.com/watch?v=T74VA...eature=related

Vicente Fox hints about a North American Union: http://www.youtube.com/watch?v=gYGrn...eature=related

[skhara]

Re: America's Financial Crisis

I am not sure what to do here to prepare.

At work we had an interesting presentation by a lady calling herself "futurist". Anyway she covered scenarios for 2009-2010.

Her scenarios were a fictional analysis. Anyway, she presented that governments around the world blame the American version capitalism. She presented that the IMF, the WTO, the G7 collapse and instead a new world body rises who monitors financial activity. The US is not invited to lead this organization, instead it is the east that takes the lead.

In the US people hunker down, move away from a culture of consumerism and move more towards family, religion, personal well-being. Birth rates decline as people delay their life advances like moving away from the parents, getting married, having kids, etc....

Funding for research drys up but alternative energy sources makes major gains.

[gmd]

Re: America's Financial Crisis

Bernanke's last reel
By Julian Delasantellis

Think of the great concluding scenes of some of the most memorable movies of all time.

"There's no place like home," Judy Garland wistfully exclaims at the end of The Wizard of Oz; "Rosebud" in Citizen Kane; the camp doctor crying out "madness" as Alec Guinness gives his life to destroy the bridge he built in The Bridge on the River Kwai;

Now, after the Federal Reserve interest rate cuts on Wednesday, the conclusion for a new story is being written. As it happens, we're essentially watching the end of The Ben Bernanke Story.

For the 11th time in 14 months, more importantly, for the second time in three weeks, the United States Federal Reserve Bank's Open Markets Committee has engineered a set of interest rate cuts, this time twin 50 basis point reductions to 1% on the Federal Funds Target Rate and 1.25% on the Discount Rate.

There is every reason to believe that the Fed made this month's cuts with the greatest reluctance. After nine rapid-fire reductions that took the Target Rate to 2% from 5.25% in just eight months, the Fed had been holding pat from late April to this month's first cut, the emergency interest rate reduction of October 8.

Federal Funds at 1% have an enormous historical significance. That was where former Fed chairman Alan Greenspan took the rate down to for more than a year, from mid-2003 to June 2004. With the desire by Americans to always find simple causes and ready scapegoats for complex problems, much blame has been placed on Greenspan's 1% interest rates of that period in kindling and stoking the real estate boom and bubble that engendered the current subprime mortgage crisis a few years later.

As simple explanations go, this one possesses more than a few grains of truth, and it is infinitely superior to many of the other explanations now bobbing about in the thick fetid swamp of the punditocracy, such as that which posits that the whole crisis is the result of American liberals foolishly trying to put minorities in their own houses.

When Greenspan left office to mostly wide public acclaim and adoration in early 2006, just a few months before the real estate bubble was finally stretched so thin that it cracked and burst open, one criticism he generally received was that rates had been kept too low, for too long. Nobody took much notice of it then, for, at that time, criticizing the huge scads of money being generated by the real estate bubble was seen as a lot like being the guy who keeps his coat on at the orgy. Still, many observers opined that, for the future health of the financial system, rates should never be driven that low again.

But now we're here again, four years after we left these rates, back down at 1%. There is perhaps no other data set more indicative of the failure of the Greenspan/Bernanke ideology of debt-driven macroeconomic administration, indeed, of the entire free-market, laissez-faire consensus that has recently so dominated the ideology of economic management, than this fact.

That ideology only a few years ago proclaimed such an overwhelming practical superiority at generating prosperity that it represented "the end of history"; it now proves itself so poor at consistently maintaining prosperity that it seems that every few years or so it must drive rates down so low that it, in effect, involuntarily seizes the assets of savers and devalues them through even modest inflation.

Amazingly enough, we come out of this FOMC meeting with reports of even more possible interest rate cuts. A good number of Fed watchers had predicted more for Wednesday, forecasting 75 basis point cuts that would have brought the target rate down below 1%, to 0.75%. These predictions are being brought forward to the Fed's next meeting, on December 16.

The Fed, in the statement that accompanied Wednesday's cuts, gave every possible indication that it's not done yet.
The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures. Business equipment spending and industrial production have weakened in recent months, and slowing economic activity in many foreign economies is damping the prospects for US exports. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit. …downside risks to growth remain. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.
As if he had decided to prove the point that, in the words of philosopher George Santayana, "A fanatic is someone who redoubles his efforts as he loses sight of his goals," former Fed governor Laurence Meyer says that it won't be enough to lower the rate to 0.75% or 0.50%, it has to be, and will be, cut to 0.0% next year.

I suppose after that would come punitive interest rates. Maybe the Fed will subsidize a new program to let the air out of the tires of people who come in to make a deposit.

The basic problem here is that, at its core, capitalism is a system that wants, and is supposed to reward, the behavior that these rate cuts are punishing - thrift, savings and delayed gratification. I very well remember teaching an economics class in 2003, when depositor interest rates were low. I tried to impress on the youngsters the importance of savings and thrift, to avoid running up big credit card bills, to regularly deposit money in the bank.

One raised a hand. "If I deposit $100 in the bank today, when will it double?"

I explained the rule of 72, the economic formula that describes how long it takes an investment to double with compound interest. The formula is 72 divided by the interest rate. With interest rates then at 1%, the answer then was "2075".

The class laughed the laugh of college students who think they know more than their professor. Maybe they were right.

Of course, dropping rates to 0.75% brings the doubling date up to 2104; 0.50% rates brings it to 2152. Bring interest rates to zero, and it will take longer to double an investment than the universe has time remaining.

Japan attempted very low interest rates for about a decade from the mid-90s. It worked better with them, for, with government pension support still a newer concept there than in the United States, the savings ethic was much more firmly established in Japan than in the West. Still, although the low rates might not have led to a disaster in Japan on the level of a fire breathing Godzilla, there is little evidence indicating that they did much in the way of spurring growth.

Once you're under 2% or so, if you haven't spurred growth by then, more cuts after that probably aren't going to do it either.

Whatever the problems bedeviling the American and world economy today, high short-term interest rates aren't all that prominent on the list. Today's core current problem is the wave of deleveraging caused by the credit crisis, as banks and other financial institutions initiate round after round of shrinking their loan balance sheets.

The US$250 billion initiative by Treasury Secretary Henry Paulson to take equity positions in banks and other financial institutions placed no mandates on the banks to actually make new loans with the government largesse, and the $500 billion program to buy toxic mortgage securities out of the banks' portfolios just can't seem to get out of the starting gate.

Every day, reports emerge that everybody who can get to the "lobbyists" page of the phone book, be it insurance companies, banks that are privately owned, or auto companies, are lining up to get their snouts in the trough of the bailout bill's munificence, and the Paulson Treasury is beginning to look foolish as it just can't seem to decide who to say yes to next.

But the really important thing to remember is not whether bringing the Federal Funds Target Rate down near zero works to spur growth. It's the failure of the economic policies so long dominant in America to bring long-term prosperity that is really seen here.

As the American presidential election of 2008 winds towards its ignominious denouement, those outside the United States might be amazed, indeed, they may even think a joke is being played on them, when they hear that the campaign is now centered on the issue of whether an unlicensed Ohio plumber, who can't or won't pay his current taxes, will be required to pay extra taxes should his fantasy of buying his employer's business for well more than it's worth comes true.

That's the way it's been in America these past few years, under Republicans such as Ronald Reagan and the Bushes, as well as Democrat Bill Clinton. The rich are looked after first, through tax, regulatory and consumer protection policies, and if the middle classes benefit, fine; if not, well, nothing much can be done about it, for that would be equivalent to the establishment of an American gulag.

The middle class saw the lifestyles of the rich and famous rapidly accelerating away from them, and they tried to keep up. That was attempted by leverage, borrowing their way to the good life, with dot-com stocks at the turn of the millennium, and real estate these past few years. Both bubbles spectacularly burst, and, as America looks for a new road to prosperity that might not necessarily involve more "extraordinary popular delusions" and "madness of crowds", the saver class must apparently be once more raped while the country waits.

In recent testimony before Congress, economist Mark Zandi (who, surprisingly, is an economic advisor to Senator John McCain; the Republican presidential candidate, apparently does not know he has a flaming Trotskyite on staff) listed the prospective economic benefits to be accrued from the different possible policy alternatives to be included in the new fiscal stimulus package that will be considered after the election; apparently, a repeat of the spring initiative, which merely sent out big government checks, otherwise known as the Chinese Pearl River Delta factory employment plan, will not be considered.

What did Zandi say would provide the most assistance to the economy? Enhanced government food assistance, called "food stamps", after that, more and longer assistance to unemployed workers. The least-productive initiatives would be exactly what has most been produced by the Congress and the government, and what is most advocated and debated in the campaign - dividend and capital gains tax cuts, corporate tax cuts, and accelerated depreciation for corporate investment.

Maybe, if government policies had been along these lines in the first place, people would not have had to borrow their destinies into crazy bubbles just to live the American dream.

But whatever happens from the latest rate cuts, it certainly means the approach of the effective end of the Bernanke story. Whether or not he cuts once more in December, he has, at the very most, two more 50 basis point cuts in him; after that, all he'll be doing is standing up there behind the podium as either McCain or Barack Obama's Treasury secretary (which very well may still be Paulson) assumes the initiative in policy advocacy.

I can see the last scene as the curtain falls on the Ben Bernanke Story, otherwise know as Gone With the Write Down.

A frantic saver confronts Bernanke. "Oh, Ben, if you lower rates to zero, where should I go, what shall I do? "
"Frankly, my dear, I don't give a damn."

Julian Delasantellis is a management consultant, private investor and educator in international business in the US state of Washington. He can be reached at [email protected].

http://www.atimes.com/atimes/Global_Economy/JJ31Dj03.html

[Armenian]

Re: America's Financial Crisis

China, Russia renounce the dollar?

The recent meeting between Russian Prime Minister Vladimir Putin and his Chinese counterpart, Wen Jiabao, created a financial sensation. Wen said that the two nations could withstand the global financial crisis if they joined forces; Putin urged him to go farther and stop using U.S. dollars in Russian-Chinese settlements. This idea is nothing new. Russia and China reached a "framework" agreement in November 2007, which was followed by China's similar agreement with Belarus. Earlier this year, Iranian President Mahmoud Ahmadinejad and Venezuelan leader Hugo Chavez turned against the dollar as well when they asked their OPEC partners to stop using the dollar for oil settlements. They argued that the "green" currency was no longer reliable and it was high time they look for a more stable and predictable alternative. Curiously, unlike the Ahmadinejad and Chavez appeal, Putin's proposal came as the dollar was on the rebound and even began pushing the euro. Economists even started talking in terms of a reversal of the global currency trends, rather than the temporary appreciation of the dollar. Analysts predict that the dollar will regain its value in the next few months. They do not see anything which could hinder its steady growth. Yet, Putin proposed that Russia and China stop using it as a settlement instrument. What is it - lack of confidence in the dollar's prospects or a political move? Experts differ on this count. Igor Nikolayev, chief strategic analyst at FBK private auditing firm, sounded skeptical: "I think it was a political statement rather than an economic decision. There is a dominant public sentiment that the United States is the source of all evil, so let's stop using the dollar," he explained. One has to bear in mind, though, that some other currency will need to be found to replace the dollar for international settlements. China is unlikely to use the ruble, and Russia would be equally reluctant to accept the yuan. "They could opt for the euro, but its future is uncertain, especially considering current developments on global financial markets. It is also unclear whether China would be happy to start using the euro while most of its international reserves are held in dollars," he added. There are more questions than answers here, Nikolayev concluded. To be objective, one has to admit that other analysts are not as skeptical about the possibility of using other currency units between Russian and Chinese companies. Andrei Marinchenko, director general of the Kalita-Finance company, said the idea was quite realistic. Moreover, he thinks that the ruble stands a good chance of being selected as a reserve currency, primarily because the Chinese are disappointed in the dollar but aren't yet accustomed to the euro. Only time will show who is right. But to stop using the dollar in Russian-Chinese settlements is too important a decision to make for purely political reasons - that much is obvious. Suppose we do it; what will be the implications for Russian businesses, how will the new financial and political reality affect their incomes and savings? Marinchenko is convinced of a beneficial impact. According to Marinchenko, once the ruble is recognized as a settlement unit, it will enjoy growing demand with Chinese companies and individuals. The Russian currency will consequently grow stronger and more influential globally. Russia will also become immune to many shocks from stock market meltdowns and won't have to fear future devaluation or revaluation of the ruble. It will happen because the role of the U.S. dollar, which has earned a reputation as an unstable and unreliable currency lately, will be much less important.

Source: http://en.rian.ru/analysis/20081030/118047851.html

Russia Seeks to Trade Oil for Loans From China

As credit streams from troubled Western banks dry up in the financial crisis, Russian oil companies are negotiating multibillion-dollar loans from a more reliable source: the cash-rich Chinese government. Under a proposed loans-for-oil deal, reported by Reuters on Monday, Russian oil companies would borrow $20 billion to $30 billion from Beijing. In return, they would export about two billion barrels of oil to China over the next 20 years. The Chinese prime minister, Wen Jiabao, was in Moscow on Tuesday for talks with Prime Minister Vladimir V. Putin, but there was no indication that the deal had been signed. The agreement would commit Russian companies to redirect some of their energy exports to the East at a time when Russian and Chinese leaders have been saying they would like to see greater integration of their economies, and Russia’s relations with the West are at a low point. It would also offer a prime example of the way the financial crisis is realigning global commerce, directing it away from reliance on Wall Street lending and toward China and Japan, with their enormous cash reserves. It was unclear how close Russia and China were to an agreement. A planned pipeline to China, a spur of a trans-Siberian pipeline that is under construction, would be capable of carrying about 300,000 barrels of oil a day. On Tuesday, the countries agreed only to build the spur, from the Russian town of Skovorodino to the Chinese border, at a cost of about $800 million. How much oil will flow through the pipeline, and at what cost per barrel, have been matters of contention for some time and have yet to be resolved. There is little doubt that the crushing cash needs of the Russian oil companies helped narrow the differences. Much of the companies’ revenue during the recent spike in oil prices went to taxes. As a result, the state oil company Rosneft owes about $21 billion to Western banks and has already been confronted with demands from creditors for early repayment. China, after years of piling up trade surpluses with the United States, is awash in cash, with currency reserves of $1.9 trillion, the largest in the world. The Russian government, which also has a healthy cash reserve, has pledged $9 billion in loans to its country’s oil companies, but that does not begin to cover their cash needs, which include the enormous sums needed to expand into the more expensive and remote fields in Siberia. Mr. Wen and Mr. Putin also discussed relying on rubles and yuan in bilateral trade, rather than on dollars. Mr. Putin is an advocate of reducing the dollar’s role in international commerce. “At the moment the world, which is based on the dollar, is suffering serious problems,” he said.

Source: http://www.nytimes.com/2008/10/29/wo...=worldbusiness

[Mos]

Re: America's Financial Crisis

This is what America needs:











just kidding

[Anonymouse]

Re: America's Financial Crisis

This is what America needs:











just kidding

That's exactly what got America into this mess. The socialistic policies of big government bureaucracies and regulations and greedy politicians and Wall Street corporate interests colluding together eventually creates this mess.

America is passed the point of no return. Unfortunately, there is no easy fall for empires as the bigger they are, the more noise they make.

Woe is us, because the world economy is dependent very much on America.

[Anonymouse]

Re: America's Financial Crisis

Death of the American Empire
America is self-destructing & bringing the rest of the world down with it

by Tanya Cariina Hsu

I believe that banking institutions are more dangerous to our liberties than standing armies. (Thomas Jefferson, US President; 1743 - 1826)

America is dying. It is self-destructing and bringing the rest of the world down with it.

Often referred to as a sub-prime mortgage collapse, this obfuscates the real reason. By associating tangible useless failed mortgages, at least something 'real' can be blamed for the carnage. The problem is, this is myth. The magnitude of this fiscal collapse happened because it was all based on hot air.

The banking industry renamed insurance betting guarantees as 'credit default swaps' and risky gambling wagers were called 'derivatives'. Financial managers and banking executives were selling the ultimate con to the entire world, akin to the snake-oil salesmen from the 18th century but this time in suits and ties. And by October 2009 it was a quadrillion-dollar (that's $1,000 trillion) industry that few could understand.

Propped up by false hope, America is now falling like a house of cards.

It all began in the early part of the 20th century. In 1907 J.P. Morgan, a private New York banker, published a rumour that a competing unnamed large bank was about to fail. It was a false charge but customers nonetheless raced to their banks to withdraw their money, in case it was their bank. As they pulled out their funds the banks lost their cash deposits and were forced to call in their loans. People now therefore had to pay back their mortgages to fill the banks with income, going bankrupt in the process. The 1907 panic resulted in a crash that prompted the creation of the Federal Reserve, a private banking cartel with the veneer of an independent government organisation. Effectively, it was a coup by elite bankers in order to control the industry.

When signed into law in 1913, the Federal Reserve would loan and supply the nation's money, but with interest. The more money it was able to print, the more 'income' for itself it generated. By its very nature the Federal Reserve would forever keep producing debt to stay alive. It was able to print America's monetary supply at will, regulating its value. To control valuation however, inflation had to be kept in check.

The Federal Reserve then doubled America's money supply within five years, and in 1920 it called in a mass percentage of loans. Over five thousand banks collapsed overnight. One year later the Federal Reserve again increased the money supply by 62%, but in 1929 it again called the loans back in, en masse. This time, the crash of 1929 caused over sixteen thousand banks to fail and an 89% plunge on the stock market. The private and well-protected banks within the Federal Reserve system were able to snap up the failed banks at pennies on the dollar.

The nation fell into the Great Depression and in April 1933 President Roosevelt issued an executive order that confiscated all gold bullion from the public. Those who refused to turn in their gold would be imprisoned for ten years, and by the end of the year the gold standard was abolished. What had been redeemable for gold became paper 'legal tender', and gold could no longer be exchanged for cash as it had once been.

Later, in 1971, President Nixon removed the dollar from the gold standard altogether, therefore no longer trading at the internationally fixed price of $35. The US dollar was now worth whatever the US decided it was worth because it was 'as good as gold'. It had no standard of measure, and became the universal currency. Treasury bills (short-term notes) and bonds (long-term notes) replaced gold as value, promissory notes of the US government and paid for by the taxpayer. Additionally, because gold was exempt from currency reporting requirements it could not be traced, unlike the fiduciary (i.e. that based upon trust) monetary systems of the West. That was not in America's best interest.

After the Great Depression private banks remained afraid to make home loans, so Roosevelt created Fannie Mae. A state supported mortgage bank, it provided federal funding to finance home mortgages for affordable housing. In 1968 President Johnson privatised Fannie Mae, and in 1970, Freddie Mac was created to compete with Fannie Mae. Both of them bought mortgages from banks and other lenders, and sold them onto new investors.

The post World War II boom had created an America flush with cash and assets. As a military industrial complex, war exponentially profited the US and, unlike any empire in history, it shot to superpower status. But it failed to remember that, historically, whenever empires rose they fell in direct proportion.

Americans could afford all the modern conveniences, exporting its manufactured goods all over the world. After the Vietnam War, the US went into an economic decline. But people were loath to give up their elevated standard of living despite the loss of jobs, and production was increasingly sent overseas. A sense of delusion and entitlement kept Americans on the treadmill of consumer consumption.

In 1987 the US stock market plunged by 22% in one day because of high-risk futures trading, called derivatives, and in 1989 the Savings & Loan crisis resulted in President George H.W. Bush using $142 billion in taxpayer funds to rescue half of the S&L's. To do so, Freddie Mac was given the task of giving sub-prime (below prime-rate) mortgages to low-income families. In 2000, the "irrational exuberance" of the dot-com bubble burst, and 50% of high-tech firms went bankrupt wiping $5 trillion from their over-inflated market values.

After this crisis, Federal Reserve Chairman Alan Greenspan kept interest rates so low they were less than the rate of inflation. Anyone saving his or her income actually lost money, and the savings rate soon fell into negative territory.

During the 1990s, advertisers went into overdrive, marketing an ever more luxurious lifestyle, all made available with cheap easy credit. Second mortgages became commonplace, and home equity loans were used to pay credit card bills. The more Americans bought, the more they fell into debt. But as long as they had a house their false sense of security remained: their home was their equity, it would always go up in value, and they could always remortgage at lower rates if needed. The financial industry also believed that housing prices would forever climb, but should they ever fall the central bank would cut interest rates so that prices would jump back up. It was, everyone believed, a win-win situation.

Greenspan's rock-bottom interest rates let anyone afford a home. Minimum wage service workers with aspirations to buy a half million-dollar house were able to secure 100% loans, the mortgage lenders fully aware that they would not be able to keep up the payments.

So many people received these sub-prime loans that the investment houses and lenders came up with a new scheme: bundle these virtually worthless home loans and sell them as solid US investments to unsuspecting countries who would not know the difference. American lives of excess and consumer spending never suffered, and were being propped up by foreign nations none the wiser.

It has always been the case that a bank would lend out more than it actually had, because interest payments generated its income. The more the bank loaned, the more interest it collected even with no money in the vault. It was a lucrative industry of giving away money it never had in the first place. Mortgage banks and investment houses even borrowed money on international money markets to fund these 100% plus sub-prime mortgages, and began lending more than ten times their underlying assets.

After 9/11, George Bush told the nation to spend, and during a time of war, that's what the nation did. It borrowed at unprecedented levels so as to not only pay for its war on terror in the Middle East (calculated to cost $4 trillion) but also pay for tax cuts at the very time it should have increased taxes. Bush removed the reserve requirements in Fannie Mae and Freddie Mac, from 10% to 2.5%. They were free to not only lend even more at bargain basement interest rates, they only needed a fraction of reserves. Soon banks lent thirty times asset value. It was, as one economist put it, an 'orgy of excess'.

It was flagrant overspending during a time of war. At no time in history has a nation gone into conflict without sacrifice, cutbacks, tax increases, and economic conservation.

And there was a growing chance that, just like in 1929, investors would rush to claim their money all at once.

[Continued...]

[Anonymouse]

Re: America's Financial Crisis

To guarantee they would stay alive, the Federal Reserve stepped in and took over Freddie Mac and Fannie Mae. On September 7th 2008 they were put into "conservatorship": known as nationalisation to the rest of the world, but Americans have difficulty with the idea of any government run industry that required taxpayer increases.

What the government was really doing was handing out an unlimited line of credit. Done by the Federal Reserve and not US Treasury, it was able to bypass Congressional approval. The Treasury Department then auctioned off Treasury bills to raise money for the Federal Reserve's own use, but nonetheless the taxpayer would be funding the rescue. The bankers had bled tens of billions from the system by hedging and derivative gambling, and triggered the portfolio inter-bank lending freeze, which then seized up and crashed.

The takeover was presented as a government funded bailout of an arbitrary $700 billion, which does nothing to solve the problem. No economists were asked to present their views to Congress, and the loan only perpetuates the myth that the banking system is not really dead.

In reality, the damage will not be $700 billion but closer to $5 trillion, the value of Freddie Mac and Fannie Mae's mortgages. It was nothing less than a bailout of the quadrillion dollar derivatives industry which otherwise faced payouts of over a trillion dollars on CDS mortgage-backed securities they had sold. It was necessary, said Treasury Secretary Henry Paulson, to save the country from a "housing correction". But, he added, the $700 billion taxpayer funded takeover would not prevent other banks from collapsing, in turn causing a stock market crash.

In other words Paulson was blackmailing Congress in order to lead a coup by the banking elite under the false guise of necessary legislation to stop the dyke from flooding. It merely shifted wealth from one class to another, as it had done almost a century prior. No sooner were the words were out of Paulson's mouth before other financial institutions began imploding, and with them the disintegration of the global financial system - much modelled after the lauded system of American banking.

In September the Federal Reserve, its line of credit assured, then bought the world largest insurance company, AIG, for $85 billion for an 80% stake. AIG was the largest seller of CDS, but now that it was in the position of having to pay out, from collateral it did not have, it was teetering on the edge of bankruptcy.

In October the entire country of Iceland went bankrupt, having bought American worthless sub-prime mortgages as investments. European banks began exploding, all wanting to cash in concurrently on their inflated US stocks to pay off the low interest rate debts before rates climbed higher. The year before the signs had been evident, when the largest US mortgage lender Countrywide fell. Soon after, the largest lender in the UK, Northern Rock, went under - London long having copied Wall Street creative financing. Japan and Korea's auto manufacturing nosedived by 37%, global economies contracting. Pakistan is on the edge of collapse too, with real reserves at $3 billion - enough to only buy a month's supply of food and oil and attempting to stall payments to Saudi Arabia for the 100,000 barrels of oil per day it provides to the country. Under President Musharraf, who left office in the nick of time, Pakistan's currency lost 25% of its value, its inflation running at 25%.

Meanwhile energy costs had soared, with oil reaching a peak of almost $150 per barrel in the summer. The costs were immediately passed on to the already spent homeowner, in rising heating and fuel, transport and manufacturing costs. Yet 30% of the cost of a barrel of oil was based upon Wall Street speculators, climbing to 60% as a speculative fear factor during the summer months. As soon as the financial crisis hit, suddenly oil prices slid down, slicing oil costs to $61 from a high of $147 in June and proving that the 60% speculation factor was far more accurate. This sudden decline also revealed OPEC's lack of control over spiralling prices during the past few years, almost squarely laid on the shoulders of Saudi Arabia alone. When OPEC, in September, sought to maintain higher prices by cutting production, it was Saudi Arabia who voted against such a move at the expense of its own revenue.

Europe then decided that no more would it be ruined by the excess of America. 'Olde Europe' may have had enough of being dictated to by the US, who refused to compromise on loans lent to their own broken nations after WWII. On October the 13th, the once divided EU nations unilaterally agreed to an emergency rescue plan totaling $2.3 trillion. It was more than three times greater than the US package for a catastrophe America alone had created.

By mid October, the Dow, NASDAQ and S&P 500 had erased all the gains they made over the previous decade. Greenspan's pyramid scheme of easy money from nothing resulted in a massive overextension of credit, inflated housing prices, and incredible stock valuations, achieved because investors would never withdraw their money all at once. But now it was crashing at break-neck speed and no solution in sight. President Bush said that people ought not to worry at all because "America is the most attractive destination for investors around the globe."

Those who will hurt the most are the very men and women who grew the country after WWII, and saved their pensions for retirement due now. They had built the country during the war production years, making its weapons and arms for global conflict. During the Cold War the USSR was the ever-present enemy and thus the military industrial complex continued to grow. Only when there is a war does America profit.

Russia will not tolerate a new cold war build-up of ballistic missiles. And the Middle East has seen its historical ally turn into its worst nightmare, be it militarily or economically. No longer will these nations continue to support the dollar as the world's currency. The world's economy is no longer America's to control and the US is now indebted to the rest of the world. No more will the US be able to demand its largest Middle Eastern oil supplier open up its banking books so as to be transparent and free from corruption and terrorist connections lest there be consequences - the biggest act of criminal corruption in history has just been perpetrated by the United States.

It was the best con game in town: get paid well for selling vast amounts of risk, fail, and then have governments fix the problem at the expense of the taxpayers who never saw a penny of shared wealth to begin with.

There is no easy solution to this crisis, its effects multiplying like an infectious disease.

Ironically, least affected by the crisis are Islamic banks.

They have largely been immune to the collapse because Ilamic banking prohibits the acquisition of wealth via gambling (or alcohol, tobacco, pornography, or stocks in armaments companies), and forbids the buying and selling of a debt as well as usury. Additionally, Shari'ah banking laws forbid investing in any company with debts that exceed thirty percent.

"Islamic banking institutions have not failed per se as they deal in tangible assets and assume the risk" said Dr. Mohammed Ramady, Professor of Economics at King Fahd University of Petroleum & Minerals. "Although the Islamic banking sector is also part of the global economy, the impact of direct exposure to sub-prime asset investments has been low" he continued. "The liquidity slowdown has especially affected Dubai, with its heavy international borrowing. The most negative effect has been a loss of confidence in the regional stock markets." Instead, said Dr. Ramady, oil surplus Arab nations are "reconsidering overseas investments in financial assets" and speeding up their own domestic projects.

Eight years ago, in May 2000, Saudi Islamic banker His Highness Dr. Nayef bin Fawaaz ibn Sha'alan publicly gave a series of economic lectures in Gulf states. At the time his research showed that Arab investments in the US, to the tune of $1.5 trillion, were effectively being held hostage and he recommended they be pulled out and reinvested in the tangibles of the Arab and Islamic markets. "Not in stocks however because the stock market could be manipulated remotely, as we have seen in the last couple of years in the Arab market where trillions of dollars evaporated" he said.

He warned then that it was a certainty that the US economic system was on the verge of collapse because of its cumulative debts, ever-increasing deficit and the interest on that debt. "When the debts and deficits come due, they just issue new Treasury bonds to cover the old bonds due, with their interest and the new deficit too." The cycle cannot be stopped or the debt cancelled because the US would no longer be able to borrow. The consequence of relieving this cycle would be a total collapse of their economic system as opposed to the partial, albeit massive, crash of 2008.

"Islamic banking", said Dr. Al-Sha'alan, "always protects the individuals' wealth while putting a cap on selfishness and greed. It has the best of capitalism - filtering out its negatives - and the best of socialism - filtering out its negatives too." Both systems inevitably had to fail. Additionally, Europe and Japan did not need to be held accountable and indebted to America anymore for protection against the Soviets.

"The essential difference between the Islamic economic system and the capitalist system", he continued "is that in Islam wealth belongs to God - the individual being only its manager. It is a means, not a goal. In capitalism, it is the reverse: money belongs to the individual, and is a goal in and of itself. In America especially, money is worshipped like God."

In sum, the crash of the entire global economic system is a result of America's fiscal arrogance based upon one set of rules for itself and another for the rest of the world. Its increased creative financing deluded its people into a false sense of security, and now looks like the failure of capitalism altogether.

The whole exercise in democracy by force against Arab Muslim nations has almost bankrupted the US. The Cold War is over and the US has nothing to offer: no exports, no production, few natural resources, and no service sector economy.

The very markets that resisted US economic policies the most, having curbed foreign direct investments into America, are those who will fare best and come out ahead.

But not before having paid a very high price.

http://www.globalresearch.ca/index.php?context=va&aid=10651

[jgk3]

Re: America's Financial Crisis

very nice reads Anon.

[Anonymouse]

Re: America's Financial Crisis

Would you look at that? Starbucks' profits fall by 97%! This is serious stuff folks. This is a company that expanded relentlessly during the Greenspan-Bush artificial boom. And now during the bust, it hits the wall. I wonder if they will survive the depression.

http://biz.yahoo.com/ap/081110/earns_starbucks.html?.v=6