Saturday, December 27, 2008

[ponzi schemists] make good financial advisers

The Madoff Ponzi scheme was one thing and he was well and truly exposed. Another had a different fate:

Director Rubin and ousted CEO Prince - and their lieutenants over the past five years - are named in a federal lawsuit for an alleged complex cover-up of toxic securities that spread across the globe, wiping out trillions of dollars in their destructive paths. Investor-plaintiffs in the suit accuse Citi management of overseeing the repackaging of unmarketable collateralized debt obligations (CDOs) that no one wanted - and then reselling them to Citi and hiding the poisonous exposure off the books in shell entities.

The lawsuit said that when the bottom fell out of the shaky assets in the past year, Citi's stock collapsed, wiping out more than $122 billion of shareholder value. However, Rubin and other top insiders were able to keep Citi shares afloat until they could cash out more than $150 million for themselves in "suspicious" stock sales "calculated to maximize the personal benefits from undisclosed inside information," the lawsuit said.

Non-President Obama would therefore avoid financial advisers in that interconnected group like the plague, right? No, here they are:

Robert Rubin, Lawrence Summers
, Jamie Rubin, Timothy Geithner, Peter Orszag

Obama is utilizing each and every one of them. No one is accusing the bulk of these of the ponzi scam itself but rather it is an indicator of whom Obama goes to for advice. The country is in really good hands.

Now, via Politeia, a different view of economics:


Sackerson said...

Think I'll just pop down the road the the schemist's.

Gracchi said...

James, two points:

a. you admitted earlier that if the Supreme Court were satisfied by Obama's credentials, they probably knew more than you did about US law and you would have to have good reason that they were wrong.

b. neither Tim Geithner nor Larry Summers have served on the board of Citi Group- how are they involved in this alleged fraud.

James Higham said...

You like that one, Sackers? I tried to differentiate from schemer, as in collusion. :)

I admitted nothing of the kind, Tiberius. This was about him having an order on him; he did not comply. He has not proved his citizenship but he could at any moment if he chose to. Or not, which is more likely.

I can't believe you tried this old one on: "they probably knew more than you did about US law".

Do you know more than Livy about the ancient Rome of his time? Well then - that makes you ineligible to write anything on ancient Rome, doesn't it, according to your rule? Does Sackerson know more about economics than Greenspan? Well then, Sackers is ineligible to write anything on economics then, isn't he?

Do I know more about sailing than the great Paul Elvstrom? Well then, how can I possibly write on sailing with any authority? :)

Your second paragraph. I wrote: "No one is accusing the bulk of these of the ponzi scam itself but rather it is an indicator of whom Obama goes to for advice."

Dear me, Tiberius.

James Higham said...

I've edited out only the ad hominem, which will infuriate Anon but the comment was too good to delete overall:

Anonymous said...

Gracchi: Re geithner, summers.

Those two are complicite in, and the fulcrums in, so many fraudulent/extra-legal/failure of oversight, activities: along with Chris Cox and a few others. I know it, you know it, most of the world with a pulse knows it!

Why do you want to pick bones in everything? Someone straying into your sector of perceived expertise?

Anonymous said...

From the ever eloquent Jesse's cafe.

"Christopher Cox recently admitted that the SEC has willfully overlooked significant abuses in the equity markets. One thing on which we agreed with John McCain was that his tenure at the SEC is a national disgrace and he should have been dismissed. Given the US stock market bubbles over the past eight years one can hardly disagree.

It is becoming obvious that there is significant price manipulation in the commodity markets, to the point where they have become nothing more than Ponzi schemes in which the object of the investment will never be delivered, and a market roiling default will occur.

Below is one example in the oil markets. Silver is an even better example. Ted Butler who writes here has documented the abuse on numerous occasions, and has been ignored in the same way those exposing the Madoff Ponzi scheme to the SEC were also willfully and repeatedly ignored.

The problem with commodities price manipulation is even worse than the manipulation of stock prices since it involves the capital formation of the means of production with significant lead times. Not only does this manipulation cheat investors and small speculators, but it causes significant, damaging misalignments in supply and demand in the real economy. The example of the electricity markets in California and the Enron fraud was the wake up call that was ignored.

It is beyond simple fraud. This has disproportionate and severely damaging effects on other countries in the global economy.

The perfect solution, the complete market restructuring is complex, and is detailed below. Expect the market manipulators to wallow in the complexity and create loopholes for future exploitation.

However, there is an 80% effective solution that is simple. Transparency of positions is a first step. The second step is to impose strict position limits for those who are not hedging actual and verifiable inventory and production.

The position limits for the 'naked shorting' is appropriate for those who believe that the market price is incorrect. But there comes a time when the naked shorting becomes so large that it IS the market, and the consequences of such outrageous manipulation are real and significant.

Constantly tinkering with regulations and making them more complex is not the answer. The root of the problem has been the lack of enforcement and the bad actions of a handful of banks that have become serial market manipuators since the overturn of Glass-Steagall. There really are no new financial products or frauds. There are just variations on familiar themes.

It is not clear that the solution can come from within the US. Violence never works, and writing our Congress and voting for a reform candidate have now been done, although we should continue this.

A practical solution may be ultimately imposed on the US by the rest of the world, and that is a less attractive prospect than an internal solution.

Anon here.
And yet more.
Seems every commenter is thinking on the same lines.
When will politicians catch on??
They won't, they are bought and paid for!
Again, from Jesse.

Its interesting to read this essay from early 2006 today in the light of what we have seen in the intervening period. A number of people who might have dismissed this out of hand back then might see a little more truth behind the rhetoric today.

So, how can the political system reform itself? How can we reestablish checks, balances, countervailing power, and a sense of public purpose? How can we get modern economic predation back under control, restoring the possibilities not only for progressive social action but also—just as important—for honest private economic activity? Until we can answer those questions, the predators will run wild.

It is something to think about for the New Year, for all parties involved. FDR was denounced as a 'traitor to his class' at the time, but in reality he was one of the most insightful of leaders. If one views outcomes in other contemporary governments from 1916 to 1940, and considers what a Huey Long administration might have been as an example, the New Deal seems like a wise and appropriate political move for all involved.

Why are people so reluctant to believe that sociopaths and narcissists can use the power of the pen to prey on people? Because they are well spoken and organized? We would contend that these are the most dangerous of the emotionally warped with a need to acquire, dominate and control, because they are smarter and more calculating than the impulse murderers, burglars, rapists, thieves, and pedophiles.

There is a need for economic law and enforcement as there is a need for the less cerebral, hairy knuckled criminal law and enforcement. The notion that people become naturally good, rational and well-adjusted because they are wearing a suit is ludicrous, especially to anyone who has worked with many of those who move in the upper echelons of money and power.

Some of the scariest people we have ever met were articulate and pathologically driven borderline psychopaths with a need to acquire political and economic power. It is the focus of their illness that makes them powerful. They are not distracted by the diffusion of emotional responses that color most people's actions. They have a need, and the will to satisfy it, no matter what it takes.

As an aside, we have met many kind and gentle and thoughtful people in all walks of life, rich and poor. It is not the office that makes the person; it is their character. Class prejudice is mistaken and unjust, and there is always someone less fortunate than you who might view you as the object of their anger, no matter who you might be. The hypocrisy and injustice of prejudice and 'class warfare' knows few limits.

There will always be those at the extremes who need to 'take it to the limit,' with a well stocked foreign retreat in case things get ugly. But for most of us, restoring a sense of justice and order and putting the nation back into some kind of working balance will be high on the priority list, if not for ourselves, then for our families. Violence does not work, ever. The Constitution is a restraint that works both ways, against the predations of the powerful, but also as a shield against would-be Robespierres with their reigns of terror.

It is going to take a lot of hard work, and time. Its been a long time coming, it will be a long time gone. But it has been done before by those who created this nation, and it can be done to restore it again.

We are not doomed. Our situation is not hopeless. But the system is badly out of balance, and will have to be restored by meaningful reform. There will be inflation and selective defaults, real justice and show trials, innovation and false starts, disproportionate suffering, uncertainty and even some level of conflict. But eventually the accounts will be squared and we will gather ourselves together an move forward. The sooner we start, the sooner it will be over".

This is Anon, now.
The truth is that the US financial model (fiat system) is nearing its conclusion.
The willingness of the rest of the world to finance US military aggression and financial hegemony is reaching its end. While in the past that militarism, that hegemony, was perceived, not so much a benign, but perhaps as limited in scope, and inescapable, as in the US deliberate creation of the S E Asia collapse, nation by nation, in the late @90s, or the systematic demolition of the economies of S. America in the 70s,80's 90s, this latest attack, toxic financial paper, is aimed at the entire planet.
True, the pursuit of strictly mercantilistic agendas particularly by China and Japan, and also Germany, was deliberate, this was done with knowing US collaboration. (and one must reflect on the NWO planning in this respect) It could not have happened without this consent. China and Japan, while erecting "Cultural" and other barriers to imports (even US rice in the case of Japan) have both been heavy manipulators of their own currencies in order to increase their own exports. Similarly, and I would include Germany in this statement, they have suppressed national wage levels to also aid in this respect. The Gap between rich and poor in Japan is extraordinarily high.

This had to be.

The long term plans of Japan and China, while antagonistic to each other, are definitely planned to operate NOT in the favour of the US.
Given that the Japanese economy has resided in recession for years, despite an extremely positive balance of payments, they have been given an easy ride in the "currency manipulation" debate, (unlike China) This should not be so, the deflationary/recession of the Japanese economy is part of the deliberate planning, and results from a basically corrupt 2 party political system, where one party is a party in name! The issue of the Yen carry trade has for years maintained the yen, and yen interest rates at abnormally low rates, all part of the mercantilistic approach, and it is only finally that the sheer enormity of global gearing, resulting from a plethora of gearing sources, (Basle accords, Glass Steagl)has the recent massive inflation of commodity prices become evident, and raised political eyebrows around the globe.
It was fine when real estate was bubbling, and equity withdrawal was funding both further levered investments, and retail purchases, and it was fine when financial Co profits were growing, despite their fraudulent nature, but when food prices caused starvation and threatened riots, when oil prices threatened the standard of living of living in the west and ethanol madness threatened food prices and availability in the west, the plug had to be pulled.
The last-summer-simultaneous-recall of-debt-extended-to-over-levered-hedge-funds-by western-banks, naturally pricked all bubbles simultaneously. The hedge funds had to liquidate to meet increased margin calls by the banks.
Simultaneous to this leverage was the use of "derivatives", of various sorts to spread the losses on overvalued real estate, and millions of fraudulent loans, issued by fraudulent fonis and fraudis, secured by fraudulent credit rating agencies, TOTALLY IGNORED by EVERY OVERSIGHT committee, all around the world.
It is this blatant fraudulent sale of toxic paper that will draw endless litigation down the years, and will create the global demand for regulation.

These derivatives now sit on bank balance sheets, and have no logical, easily calculated market value, hence banks don't trust each others balance sheets, as they don't trust their own.
They will not lend.
Credit (more DEBT) is frozen.
Letters of Credit from western banks are not being acknowledged as worth anything by foreign exporters. Shipping stops.
Digital supply chain management control systems mean a supermarket chain cancels a product today, and a factory in China, or Thailand closes tomorrow.

So let's return to the beginning, the state of the US fiat system, (and the UK, since we are UK).
All fiat systems have a life cycle.
Towards the end the system exhibits symptoms of death. In the case of the US, because the $ has been the de facto world reserve currency, the death, and symptoms thereof have been delay, pushed to one side, and because it is a global currency, it is not until the world is affected by the death of the US fiat, that the symptoms are noticeable.
This pushing to one side has been aided and abetted by the mercantilism of Japan, and China, and recently Germany. It was hidden for approx 5 more years.
Since the late 80's the US gov issued inflation data has been grossly distorted, understated,(as has the UK data), similarly with the true rate of unemployment, understated, in both countries.
In the case of US interest rates and $ value, these have been manipulated by the US authorities (inc Fed), and notably by their trading partners purchase of US T bills, re-cycling their trade balances.

The net result of these and other manipulations has been the publication of GDP for both countries that is in turn grossly overstated, with inflation and unemployment understated.
Those charged with oversight responsibilities claim they did not realise that this fraudulent issue of statistics, was an even greater stretch than their methods would suggest, in that it was matched by a corresponding increase in gov., corporate, and private debt.
There has been NO GROWTH in the US and UK economies, absent all this manipulation and vast increase in DEBT, since the late '90s.

The governments of the US, UK, and now certainly the EU have relentlessly, remorselessly and brazenly lied to their own electorate for many, many years, with the intent of maintaining the illusion of progress, and their hold on power.
That illusion of progress is ALL created by false accounting false statistics, and an INCREASE IN DEBT.
The current Labour gov in the UK signaled its preference for duplicity long before the 97 election, when it commenced discussions in earnest concerning PFI, off balance sheet accounting now beloved of Brown and the US gov, as they allow the maintenance and deniability of the fraud, the understatement of future balance sheet liabilities.
The Press, largely owned by insiders, has been silent, disgustingly so.

Now we are in the position of the western politicians frantic efforts to hold onto power being reflected in their efforts to reflate the bubble that was collapsed in the summer of 2008.
They have doubtless been informed that the consequences of the coming deflation cascade effect will destroy them for generations, possibly along with the respective countries!

What is the answer?

It is here we could possibly enter the world of the conspiracy theorists, for the entire concept of a fiat currency is a gigantic conspiracy by certain powerful families to defraud the entire population and operate a small financial charge on every financial debt issuance transaction globally.
The idea of fiat is fraud. A bank issues 90% more in DEBT than it has on deposit, ultimately through the system, more promises to pay (bank notes or account balances) than it has on deposit. If anyone but a bank did this, it would be fraud, but because the gov issues a banking license, it becomes legal. All govs of fiat systems are party to, and cognizant of, this fraud. That is why "runs on bank deposits" signal death to a bank.

When banks are geared on their lending at anything up to 60 to 1, as they were recently, anything more than a few %age points loss on loans will wipe out their entire asset base. They cannot legally continue business, - they cannot lend, they must find more capital, or pull-in all loans. The latter 2 are now happening, disguised as revised lending standards, non-renewal of rolling loans, - and meantime the banks tell porkies about their balance sheets!
Throughout the world, governments are now guaranteeing bank deposits, up to certain limits, in order to return confidence levels. In the case of some countries (Ireland) the liabilities of the banks exceed the GDP of the country, - (absent the EU, Ireland would be an Iceland for giving such a guarantee). European banks have heavy Eastern european commitments in economies that are imploding, the Euro will doubtless come under pressure in a short period.

As redundancies gather momentum in the next couple of months and GDP contracts in a downward spiral, what do we do?

What is the answer?

James You can throw the question open.

The stranglehold of a few families on the global economy has to be broken, and that will probably mean war, given their resources and proven historical abilities to foment war.

The issue of currency must be retained by national governments, not delegated to private, for-profits "central banks"

Fractional reserve lending (fraud) needs to be made illegal for ALL perpetrators.

Anything short of these few points will cause a recurrence of all the above at increasingly greater ferocities and shorter time-scales.

I'm going no further on this point.

I will however add one more point.

You can google to find ALL THE NAMES involved in the global banking frauds, both in industry and politics, and those mentioned in above post, plus campaigners for Glass S repeal, plus Enron loophole, plus Obama wife, plus obama appointments and advisers, and peripheral names, Sen Phil Gramm, and wife, and greenspan and round and round, exploring peripherals, and on, AND THEY ARE, TO A MAN, MEMBERS OF CFR.

On the European side, information is more scarce, but you can bet with good odds.......your field James! (smile)

Now, concerning global warming, you will be aware of the overlap of families. Do they know the possible end of fiat, or was/is the warming scam taxes additional to the fiat fraud or meant to replace it?

Colonial script.

Gracchi said...

James my only point was that Geithner and Summers cannot be associated with a Ponzi scheme in a company that they had no connection with- you could list any group of people and a scandal that they had no involvement with and then say look who Obama has connections to. I'd also point out that as yet this is alleged. You should take their names out of the list.

On the citizenship point- we've been over this James- Ruthie said it best- you argue there has been a forty year old conspiracy to get Barack Obama to the PResidency involving the FBI, the Illinois Attorney's Office, various Hawaii newspapers and tons of other people. I think that is a little implausible and point out to you that the courts agree with me.

Anonymous said...

Going to be busy for a few days.
See you in '09
Happy new year.

James Higham said...

See ya all then.