Friday, 19 September 2008

The Unitary Federal Reserve - Crisis Choreography

Along with much of the world, I have watched with increasing disquiet as the United States of America morphed under President Bush into a lawless soft dictatorship more like the USSR than the USA.  Under his theory of the "unitary executive" the laws that Congress enacted were disapplied by signing statements and secret legal opinions.  The protections of the Constitution were eroded and marginalized by police powers and warrantless surveillance.  International treaties governing the protection of sovereignty, rules of war and the universal rights of man were distorted by unilateral interpretation and willfully hidden misconduct.  Court rulings and judicial review were avoided, and where forced, were ignored or overridden or negated by executive pardon.  Transparency and audit became a joke with refusals to cooperate with tribunals or to comply with supeonas or produce evidence.  This lawlessness has not made the world or the United States or its allies safer in the age of terrorism as it has degraded and confused what we might have hoped to defend.

Just as we here in the rest of the world hoped we might breathe easy with the end of the Bush administration in sight, and several creditable candidates for president coming forward, the lawless unitary executive has expanded to embrace the Treasury and the Federal Reserve, debasing and contaminating the financial markets globally with its spread to our own central banks and market authorities and destabilizing our banks and investment markets.  Once again in the name of crisis and expediency the laws are ignored, decisions are taken in secret, extra-judicial reapportionment of property and contract is mandated by executive fiat, and legislative review and judicial intervention are impossible. Over the past year every financial crisis has been met with lawless and Enron-esque innovation by the Federal Reserve and Treasury, and this week was arguably more extreme.

After this week's secret and unaccountable and extra-legal moves by the US financial authorities, I will not be holding any assets in the United States.  I do not understand the rules.  I doubt any rules will be applied fairly to all the players.  I cannot be sure who the umpire works for, or what principles the umpire thinks they should uphold.  I will not play the game.*

Let's look at a timeline of some of the decisions I would class as extra-legal or Enron-esque:

The (Selectively Leaked) Discount Rate Cut (August 2008)

Super SIV (October 2007)

Term Auction Facility (December 2007)

Bear Stearns/JP Morgan bailout and subsidy (March 2008)

Primary Dealer Credit Facility (March 2008)

Reverse MBS Swaps (April 2008)

Equity investment and collateral (September 2008)

Administrative Repeal of 23A (September 2008)

AIG nationalisation (September 2008)

Expansion of the Fed Balance Sheet through unprecedented Treasury refinance without appropriation by Congress (September 2008)

Central bank dollar liquidity draws (September 2008)

Resolution Trust Company/Super SIV Redux (next)

And that's just the list of actions we know about.  Much may have been orchestrated and influenced behind the scenes in  credit markets and traded equities and commodities.

At no stage have any of these significant enhancements to the prerogatives of the Federal Reserve, these derogations of explicit statutory limits, these stark departures from past authority and conduct, been the subject of democratic legislative proposal or review, or even public consultation and comment.  In the name of exigency, they have all been sprung as fait accompli on a shocked financial community, and since been treated as unquestionable and unreviewable.  Every initiative introduced as a temporary measure has become a permanent fixture.

The unitary executive of the Bush presidency eroded and disregarded the civil rights of Americans and others.  The unitary Federal Reserve disregards the property and contract rights of Americans and others.  Arguably the actions of the Federal Reserve over the past year represent the largest state confiscation of wealth in the history of man, dispossessing currency investors, equity investors, bond investors and taxpayers of literally trillions of dollars of current and future wealth by executive fiat.

The hypocrisy of the Bush administration criticizing Chavez while defending Paulson and Bernanke should be the stuff of late night stand up comedy.

And the answer to the crisis so created, according to those in authority in Washington and Wall Street, is to give more concentrated power with less review and less oversight to the Federal Reserve.  The reforms now being discussed in Washington are aimed at (1) gutting the SEC so that it can no longer challenge the Fed's primacy in investment bank and financial conglomerate prudential supervision, oversight of clearing and settlement systems, market integrity and stability and introducing “principles based” regulation so that no one well connected need ever worry about prosecution or conviction ever again; (2) gutting the FDIC so that it can no longer challenge the Fed's determination of capital adequacy or prudential supervision at insured banks or restrain cross-affiliate financing or excessively risky activity within bank holding company groups; (3) gutting the CFTC so that the Fed has primacy to oversee risk management in all OTC and exchange-traded derivatives clearing and margin; and (4) providing explicit powers to the Federal Reserve to promote "market stability" by means which shall be secret, unreviewable, and above challenge in the courts; and (5) making the Federal Reserve the prime global regulator for review of the regulatory and prudential supervision arrangements everywhere else in the world through mandated “harmonization” of global standards as a quid pro quo for foreign market recognition and access.

Stalin couldn’t have drafted a better plan for central control of the global economy after wreaking such havoc and devastation.

Up until this week I thought the gold bugs a bit mad.  I couldn't see the sense of holding something that couldn't be spent but could be seized (as gold was seized in the 1940s).  I still think they are a bit mad, but I am actively looking for any alternative to currency and market investments as a medium of exchange and store of value.  Given the very public concerns now being expressed in China and Russia, I am keeping company I would have once thought very surprising indeed.

For now the ECB, Bank of England and others are content to cooperate with the Fed, but as the chaos deepens and it becomes clear that the losses are to be allocated principally outside the US borders to those foolish enough to hold assets the Fed’s policies degrade and debase, they will begin to question and to look to each other for common interest and alignment.

The loss of 1200 lives on the Lusitania was deliberately allowed to justify US entry into World War I.  The attacks on Pearl Harbour were known in the White House three days before the bombs fell, but were ignored to justify entry into World War II.  Tonkin Gulf was a fraud.  WTC hijackers were financed by US allies and WTC 7 was . . . whatever.  Saddam’s weapons of mass destruction were fabricated in the forgery shop of Ahmad Chalabi’s Iraqi National Congress.  You get the idea.

Not all catastrophic events were willful or anticipated, but all were used to force through an agenda that was pre-agreed by a powerful elite that stood to profit from a preferred course of policies that could only be pursued in the undemocratic atmosphere of crisis.  Crisis prevents objective determination of the public interest.  Crisis undermines both markets and democracy.

I no longer believe that every financial collapse is unanticipated or without behind the scenes orchestration of effects.  I no longer trust the authorities to act fairly, honestly, in the public interest.

In the past year and just this past week, trillions of dollars of wealth have been allocated or misallocated, preserved, appropriated or destroyed by central bank fiat.  If we really have nations of laws and not men, capitalist markets and not command economies, then it’s essential we peek behind the curtain to ask by whom and why and hold them accountable.

Lawlessness has not enhanced our security as citizens, and lawlessness will not enhance our security as investors or depositors either. Banks and markets require regulation in the public interest, and determination of the public interest requires transparency, accountability and the rule of law.

_____________________________

* For those cynics out there, let me remind you I gave up trading in January this year. I had a small amount of cash in a US dollar account. That account is now closed.

Hat tip to Joe Mason, for expressing similar views here on RGE Finance and Banking yesterday: Crisis Policy is Redrawing the Boundaries of our Financial System - and not necessarily in productive ways

And, as ever, thanks to the courageous Professor Roubini for providing a forum for views challenging the orthodoxy.

40 comments:

fredbo said...

I appreciate your commentary.

As someone born in Texas and still living in the states, I now hold a majority of my wealth outside the US. I really can't believe that things I feared would happen have come true in the last few years.

I've watched something terrible happen to the country of my birth. Some others are aware, but the largest majority still have no idea - "Shouldn't I buy a house now? It must be the bottom... the president would never lie."

It is difficult to describe to a first generation immigrant father-in-law why I would like European citizenship, but it seems like the prudent thing to do. I have family and many friends here so leaving here would be very hard.

Still not buying guns and ammo yet, but gardening has been a interesting pastime going into fall.

Jacqui said...

I love your blog - don't understand all of it but I do get the general gist. I work in the City so its particularly interesting.

Am recommending it to all and sundry.

Jacqui
jdpstokie@blogspot.com

John said...

Excellent.

Dubai Accountant said...

I entirely agree with your comments.But as per the Amercian constitution the Presiedent is not all powerfull.The Congress and the Judiciary are co-equals.

Whatever Bush has done during the past 8 years were done with the active connivance of the other two branches of the Government.As such I hold them equally guilty.

The new democractic Congress (including Sen.Obama) elected to power in 2006 has never challenged Bush when they had the power to do so.I have never seen such a spineless Speaker like Nancy.

tb said...

"I no longer trust the authorities to act fairly, honestly, in the public interest."

Thanks for making me laugh.

OkieLawyer said...

LB:

What you are describing is called the "Shock Doctrine."

Shock Doctrine movie (YouTube)

The short film is based on the book by Naomi Klein. You can find out more about it at this website:

Shock Doctine

Dave said...

Always a pleasure to read your posts, LB. I fear that the coming mega bail-out (detaiils apparently being worked out over the weekend) will faciliate the single greatest socialisation of losses from private sector to taxpayer in US history.

I just don't understand how it's "nationalisation" when Chavez siezes a telco or an oil-field, but it's "economic security" and "conservatorship" when the US Treasury and Fed take the rap for years of excess and imprudent financial decision-making by the Street's leading IB firms.

Gold Bug said...

I'm a gold bug. For what it's worth...

I'm not much in the way of an investor. But about 4 years ago, I could very clearly see the wheels were going to come off the USA bus. Housing prices were out of control. People were spending waaay beyond their means. There was too much focus on wealth and the appearance of wealth. I didn't know where it was all headed but I knew it wouldn't end well. And I knew I had to do something to try to protect some of the value of what little I have. So I bought gold because it was the only asset that made any sense. I bought it as an insurance policy not as an investment.

WidowsofAshur said...

@LB
While before I gave my opinion that you were a good man. I revise it today. You are becoming a very great man. To be able to study through all the misinformation and toxic propaganda and see clearly the stifling corruption of the USA and world system; AND to share that clear view with others, is revolutionary. The language and content could be held alongside other heroic revolutionaries straining against tyranny and hoping to establish a place and time where men had equitable rules and could rise by merit. That time has gone away; but if a renewal is to be somehow found, it must be profoundly led by the weighty minds in men of action like yourself.

Anonymous said...

The Unitary Federal Reserve - Crisis Choreography or UnFRoCCk for short. I say we go with their acronym and unfrock the cankerous priest who are defiling the temple, preying upon the substance of the people, and corrupting the institutions of liberty.

John East said...

So you have finally put a tin hat on your head.

Welcome to the club.

Anonymous said...

I also had thoughts of the Shock Doctrine while reading this good essay by LB.

And this morning, reading Paulson's statement, I heard echoes of the post-9/11 propaganda...the "do as I say, or be doomed" B.S.

gordon said...

You have to add the complicit and controlled "press", or main-stream media, to the to the list of charlatans. Many on the internet knew that these problems were coming as, most assuredly, did the money men in Wall Street. But not a word to the general public that only watches FOX.

And now we have the greatest scam in the history of the world going ahead quite blatantly with barely a word of criticism. The ultimate for me - showing utter contempt for the public - was the suggestion made that Al Queda might be behind the short selling.

Great blog. I used to enjoy reading your comments at Roubini's site & am pleased that you have started your own.

t said...

There are many talented people who have just refused to play along. Lead and we will follow.

Otherwise, see you in Guantanamo. Am mixing the Molotov cocktail to wind down of a Friday night...

Mencius Moldbug said...

Welcome to Camp Tinfoil! If you're looking for actual mysteries to investigate, I'd say this is definitely the most mysterious.

Which doesn't mean there's anything to it, of course. But the reappearance of the ESF is certainly interesting.

Also, if you only read one book from 1928 this year, try Mises' Theory of Money and Credit - available free on line. Mises had more or less Paulson's job in 1920s Austria, so he was certainly no newb...

Denni said...

OkieLawyer, thank you for this link.

As a trader stunned to "child-ness" by this week's events, I am finally understanding what happened to me...

Toronto real estate agent said...

As a Canadian I think your government is not better or worse than any other democratic (yes, I believe you can still call it democratic) government. I think just your point of view has changed a bit, so now you see government steps in a different light. The problem of democracy is in people's nature. People are concerned why gas costs $4.00 and not $3.26 and they don't care about deeper things...it's like that in the USA, Canada, UK - just anywhere. But nothing better has been invented till now :)
Elli Davis

Anonymous said...

Great language...Clear and concise...Well said!

yoyomo said...

Gordon,
What convinced me that 9/11 was an inside job were:

A) The immense amount of speculation in the MSM about the anthrax being from Iraq and then the sudden disappearance of the story once the FBI traced the anthrax back to a US Army weapons lab. If anything, Pentagon involvement was 10X the story of Iraqi involvement but it was buried in the memory hole.

B) The immense amount of speculation in the MSM about the elevated put volume taken out on the airline companies involved in the 9/11 attacks and the sudden disappearance of those stories when it turned out not to be Al-Qa'ida or Saddam Hussein who bought those puts. To this day no attempt has been made to identify who bought those puts even though the brokerages that handled those trades must have the records of who was behind them and who cashed them in.

C) The immense amount of hype surrounding the five "Arabs" who were arrested after being seen celebrating and photographing the WTC attacks from Liberty State Park and the sudden disappearance of that story when those "Arabs" turned out to be Israeli Mossad agents of Mizrahi descent.

D) The unanimous mendacity surrounding the number of Israelis killed in the WTC attacks. Every single time anyone tried to bring that up he was hysterically accused of being an anti-semite and then dismissed with the retort that hundreds of Jews died. Yes, hundreds of American Jews did die but they weren't Israeli. You will be hard pressed to find any mention of how many Israelis worked in the WTC and how many of them died. The assertion is that only 2 or 3 died, an impossibly low number considering how many worked there, but no one in the media or administration will either confirm or deny those figures nor provide an alternate figure.

Whatever TPTB are up to, the media has been thoroughly co-opted and enlisted in the effort. No reliance can be placed on the media to provide any information to the public that the elites don't want disseminated.

ajw said...

This week in the States felt exactly like the lead-up to the Iraq war, that same "this can't be happening!" feeling of disbelief and dread. Exactly the same. And they will get away with it for exactly the same reasons they did in 2003 - supine "opposition", cheerleading media, and a deliberately mis-informed populace.

Independent Accountant said...

Mencius:
I endorse the Mises book.

Anonymous said...

It figures. You have a bunch of Austrians, Faux Miseans and goldbugs commenting.

tb said...

"I no longer trust the authorities to act fairly, honestly, in the public interest."

Thanks for making me laugh.


Me too!

The loss of 1200 lives on the Lusitania was deliberately allowed to justify US entry into World War I.

It was the unrestricted submarine warfare. I hate to be the one to pop your cherry but then, as now, it's the commerce and property that takes precedence over the people. But the people will always be the pretext. If Jefferson would go to war with the Barbary pirates for much less, he'd have gone to war with the Kaiser in WWI and so would most of the Founders if they had been in the WH at the time, including John Adams. Silly drivel that really ruins an otherwise decent post. This is what happens when you read Lew Crockpot, Dennis Raimondo and other sycophants of the Rotbard cult and become infected with their fetish for revisionist and junk history indulged in by crackpots.

The attacks on Pearl Harbour were known in the White House three days before the bombs fell, but were ignored to justify entry into World War II.

If FDR had wanted war with Japan he had more than enough of a legitimate reason to declare war on Japan after the intentional bombing of the USS Gunboat Panay just over 4 years earlier. It was even filmed by a newsreel film crew.

http://www.usspanay.org/

We now know pretty much for certain it was intentional and designed to provoke war. Hardliners on both sides wanted war, mostly the Japanese. Not FDR. You know nothing about history or the way this works but that's because you vacillate between being an innocent naif and full blown tin hat wearing nutbar. After Pearl Harbor, Germany declared war on us first. We needed no excuse to declare war on them. Stick to the stuff you know something about.

Tonkin Gulf was a fraud.

Not exactly. It was a bunch of real world stupidity and confusion that the hardliners took advantage of. We know that now. I won't get into the fact that it is pretty clear now that JFK was about to get out of Vietnam. I still don't think his assassination had anything to do with that.

Exit Strategy

In 1963, JFK ordered a complete withdrawal from Vietnam

James K. Galbraith

http://www.bostonreview.net/BR28.5/galbraith.html


WTC hijackers were financed by US allies and WTC 7 was . . . whatever.

With the exception of the one link between the Paki ISI colonel and some money he wired to Atta, this isn't accurate. A rogue general in the ISI who was later removed from his post is not exactly "US allies". Let's leave WTC7 alone.


Saddam’s weapons of mass destruction were fabricated in the forgery shop of Ahmad Chalabi’s Iraqi National Congress. You get the idea.

Chalabi was an Iranian asset. And people in our intel services knew this as far back as the 90's. Do you even get the idea? I doubt it.

http://turcopolier.typepad.com/sic_semper_tyrannis/bearden/index.html

The Iranians used him and Cheney used him. They got us to remove the one check on Iranian influence and hegemony in the region and Cheney et al got their pretext for war. Stick to banking, trading and finance. You ruin a decent post by going off on these ridiculous tangents.

London Banker said...

@ Anonymous
I think sometimes that we have different history out here in the Rest Of The World than you do in America. Rather than go point by point, I'll stick with just recent history.

Then Saudi Ambassador to the US Prince Bandar's account at Riggs Bank (a CIA front where Jonathan Bush was a director) paid over $120,000 in several payments to two of the 9-11 hijackers. Naturally these were explained as "charitable" donations by Princess Haifa. Bandar is now head of Saudi intelligence operations.

Bandar has been close to the Bushes for 30 years, since running black ops and funding errands for Bush 41 in the 1980s. He funded the Contras, Pinochet, the rigged Italian election via Vatican Bank, Palestinian terrorist operations in Beirut, etc.

Yokel said...

As a common or garden worker, well down the corporate pile in a non Investment Banking field, I had missed some of the build up that LB documents. In the light of all that, I fear that it is now too late to put the disaster machine into reverse gear. We have some very troubling times to come once all the power described in this article and observed in the UK are put to use by a Great Leader who is not benevolent. For just about every new measure on just about every subject now fails the Stalin test.

At which point I suggest that we must widen the debate a bit to include the words Bilderberg, and Davos. For it is my belief that the instigators of the present crises are to be found amongst their number. And it does not matter in my opinion whether the crisis in question is wars in foreign places, the abdication of national sovereignty against the wishes of the people to pan-national governments (such as the EU, or the North American Free Trade Area), terror attacks, financial instability, or the screw-ups to civil society occasioned by massive movements of people bringing another religion with them. All serve to bring about major instability that can be used by people who "just happen" to have a ready made and draconian solution to it. What a surprise.

Sion said...

Cripes for a while there I thought you were a genuine ex financial big wig.

No way did America let half its fleet get destroyed to find a reason to go to war.

No way was 9/11 an inside job.

No way have you suddenly changed your mind about gold.

You are a light weight try hard.

I'm killing your feed

Knute Rife said...

I have always considered the gold bugs daft because, if things were to get bad enough to make their scenarios come into play, you wouldn't want gold. You'd want dirt and lead. Of course I have a decided bias on the issue. The overwhelming bulk of my wealth is dirt, it's here in the US, and I've long since concluded that I'll have to defend it by extra-legal means.

The nasty question no one is even asking, much less discussing, is what will the rest of the world do with a kleptocratic, not terribly competent banana republic that controls the largest NBC stockpile and delivery system on the planet?

London Banker said...

@ Knute
You pose an interesting question. Actions invite reactions.

I would not be at all surprised if the Shainghai Cooperation Council were having meetings with the Gulf Cooperation Council to form a creditors' committee - a Shanghai Club to take over the management of US and UK extraordinary indebtedness where the Paris Club left off in managing Third World debt.

If so, Americans and British can expect to have to sacrifice a considerable proportion of their quality of life to meet a repayment schedule on their debts. While the elites of both countries will resist any attempts to reverse the tax cuts and loopholes extended to them over the past twenty years, it is not clear to me that our creditors will share this enthusiasm as untaxable concentrated wealth has tended to undermine growth, employment and government revenues.

Russia has already made plain that it is militarily positioning itself for future tensions with a rogue USA, positioning ships off Venezueala and Syria. China is similarly rapidly strenthening its regional capabilities. The Gulf is making record purchases of hardware while the markets remain open, but which side between USA and SCO they ultimately side with is up in the air. If they follow history, they will side with SCO as having the capital, markets and alignment with regional security most likely to serve their self-interest as America continues its economic and political decline.

Dirt and lead seem like safe investments in the current climate.

yoyomo said...

Anyone interested in Pearl Harbor should investigate the book {Day of Deceit}. I forget the name of the author but he spent 18 years researching the attack and managed to get his hands on some very compromising official documents through FOIA and by cross referencing them he was able to crack the redactions. Unfortunately the book was released right before 9/11 and got overshadowed by it and few people are aware of it.

acrumb said...

LB you might want to read this article published at the CEPS:
http://shop.ceps.eu/BookDetail.php?item_id=1712
The beginning of the end game

Looks like European banks are worse off. So If Denninger expects upheaval in US politics what about Europe where the local citizens expect more benefits from their governments?

acrumb said...

LB, CEPS website article was missing full text.
Here is where the full text can be found:
http://www.voxeu.org/index.php?q=node/1669
The beginning of the end game…
Daniel Gros Stefano Micossi
20 September 2008

The radical moves in the US have direct implications for European banks and indirect implications for European governments. This column discusses the likely channels and notes that several European banks are both too big to fail and may be too big to be saved by their national governments alone.

Above artilce is worth reading in full and also mentions how AIG bailouts saved European banks.
But here is some very pertinent text:
Too big to fail and too big to save?

The key problem on this side of the Atlantic is that the largest European banks have become not only too big to fail but also too big to be saved. For example, the total liabilities of Deutsche Bank (leverage ratio over 50!) amount to around 2,000 billion euro, (more than Fannie Mai) or over 80 % of the GDP of Germany. This is simply too much for the Bundesbank or even the German state to contemplate, given that the German budget is bound by the rules of the Stability pact and the German government cannot order (unlike the US Treasury) its central bank to issue more currency. The total liabilities of Barclays of around 1,300 billion pounds (leverage ratio over 60!) surpasses Britain’s GDP. Fortis bank, which has been in the news recently, has a leverage ratio of "only" 33, but its liabilities are several times larger than the GDP of its home country (Belgium).

Knute Rife said...

The New Cold War threatens to be worse than the original. The US can no longer afford proxies to fight for it, and it has already effectively wrecked its conventional forces for easily a generation. That leaves NBC. Russia is likely to find itself in a similar position soon. Single-weapon superpowers are the most dangerous thing ever created. When your only tool is a hammer, every problem becomes a nail.

London Banker said...

@ acrumb
Here in Europe we are accustomed to socialism and to poverty when necessary. We have political systems that are used to making hard choices about the allocation of scarce resources - such as rationing of medical care under the National Health Service in favour of younger people and those with higher quality of life.

We will experience political upheaval with the economic downdraught, but it will not be as extreme as in the US and other states with high income/taxation inequalities.

The other thing we have going for us is continued development and growth in Eastern Europe (despite financial market set backs) and very strong ties via emigrants to Asia, the Middle East and Africa.

@ Knute
When Bush was re-elected in 2004 I bought a supply of potassium iodate. You just made me go check it to make sure I know where it is if needed.

acrumb said...

LB you might be a tad optimistic about the development and growth in Eastern Europe.
But why did European central banks and the ECB permit such high leverage by European banks that exceeds US banks is an answer you might be able to provide.
I also think think the demographic bomb expected to detonate in 7 years not decades hence is going to be an issue for aging Europeans expecting a relatively protected old age. Not on the cards if European banks detonate.
See:
http://www.theglobeandmail.com/servlet/story/LAC.20080906.DOUG06/TPStory/
Europe comes home to the shock of a demographic bombshell

It seems also the young immigrants that Europe has kept as ill educated as America due to bias has its minorities soon to be majorities by 2040.

London Banker said...

@ acrumb
The Europe depicted in America is one I don't recognise from travelling the breadth of the continent here. We have plenty of young people, plenty of immigrants, a high standard of public education, and many social advantages. Yes, we have problems, but I don't think they compare to some of the issues I see in the poorer neighborhoods of the richer cities of the USA.

The Poles and Slavs now working in Britain are so well educated and so productive that local youth has trouble competing. That is just fine with me. It raises the standard in a very healthy way.

And while you may fear Africans and Muslims (and even African Muslims), I don't. But then I work with them every day and find them as smart, diligent and capable as anyone else.

I sometimes think that the aging, unproductive, debt laden Europe depicted in the US media is another fear-mongering creation of the US elites to convince the proletariat that they are better off behind the Saran Wrap Curtain.

I'll take my chances on retirement this side of the Atlantic, thank you very much.

yoyomo said...

To anyone interested here is the link to the book on Pearl Harbor:

http://www.amazon.com/Day-Deceit-Truth-About-Harbor/dp/0743201299

London Banker said...

@ yoyomo

Warren Buffett has just described the current financial crisis as "an economic Pearl Harbour". Given what we know about official complicity in those events, and how canny Buffett is, has he just done the deal of the century in buying himself immunity from further AIG-style political prosecutions while at the same time offering a coded warning to the rest of us?

acrumb said...

LB the report I mentioned was published by a EU body, the Eurostat:
Eurostat, the European Union's statistics body, created a continent-wide frisson of alarm over the Aug. 31 weekend with a study bearing the innocuous title "Population and social conditions."
The statisticians discovered that it will be only seven years - not 20 or more years as previously thought - until a population milestone is reached, the point at which deaths will outnumber births across the continent, something that has not occurred since the disease-ridden years of the 18th century."
OECD tests have British youth testing at levels below many many nations;and studies have revealed that the education system is biased. I have found that out from reading nothing other than British media.Britain as the Automatic Earth blogger has said had a property bubble higher than one in America. Like America it has a deminimus financial sector, so i expect the pain in financial condition will be severe. More than perhaps you expect.British pension funds are also in trouble as revealed by British press. One f the Automatic Earth blogger is a British expat.
Automatic Earth expects European Union to disband with different European countries being like "cats fighting in a sack". I should also mention that UK has a HUGe energy problem as underscored by an article in the Oil Drum;and North Sea oil profits that helped Britian out of the hole during Thatcher period, which Jim Rogers has also mentioned is not around anymore as North Sea Oil is in decline.
http://europe.theoildrum.com/node/4188#more
A State of Emergency
http://www.marketoracle.co.uk/Article5931.html

Jim Rogers Exclusive: Bigger Financial Shocks Loom Consequences to Impact for Years

London Banker said...

@ acrumb
All that you say is true.
(Non-emigrant) Europeans are aging.
British youth receive an execrable state education.
Our housing bubble and credit bubble are huge.
Our pensions are at risk.
Our energy production is in decline and our electricity grid will likely brown-out within five years.

What you miss is that we are okay with adversity. We don't like it, but we cooperate our way through it. We make hard choices and live with the results, however imperfect.

The answer to aging is emigration.
The answer to our bad state education is talented emigrants.
When our housing, credit and pensions collapse we will receive social support from the state and accept a lower quality of life in return.
When our energy runs out and our grid fails we will embrace harsh restrictions on energy conservation.

Europe isn't going to fail. Britain isn't going to divide against itself either. At heart we are socialists and believe in man's ability to subsidise his way to a better society through state action, so we can give up a bit and suffer as necessary to keep the peace.

Americans tend to forget why Europe matters. The European Union is fundamentally about the prevention of conflict through cooperation toward shared goals. Prevention of conflict tops all.

acrumb said...

LB I don't think there's going to be much social support from the state.
Other countries are aging to.
For instance, in India its well educated Southerners are aging;while there ill educated Northerners will be young. Meanwhile, India has a tiny segment to begin with has people literate in the triple RRR (rrading 'riting and'rithmatic)category.
I think youth of Eastern Europe is of the current generation. I don't know about next when mone isn't around fore this. EE is also now seeing its housing boom go bust.
By the way, Dmitri Orlov has come out with his own scenario of Collapse. perhaps what you see for Europe is what happened to Russia-taking into account what was covered by the state then and what isn't by the Govt. in the case Europe?
http://europe.theoildrum.com/node/4546#more
Back from the future collapse

http://www.theoildrum.com/node/4053
Dmitry Orlov's Book--Reinventing Collapse: The Soviet Example and American Prospects

I agree there will also be a massive reduction of quality of life;and perhaps also a die off due to energy loss?

Amnon Portugaly said...

I agree with your comments except the conspiracies theories. Most of the leaders are not so clever. It is better to assume they are greedy and stupid.

Note the hypocrisy of the Bush administration and many of the US leading papers criticizing Russian economic maneuvers while defending the reckless, irresponsible seizure of Washington Mutual.

“The seizure of Washington Mutual is the most capricious government action of this cycle and possibly the worst thing that has happened to American Capitalism this cycle…. Now what has the Government done here. It has confiscated the institution and sold everything except the liabilities marked equity, preferred, junior and senior. It confiscated the liquidation rights of the senior and junior debt, and the liquidation rights of the preferred.”

John Hempton, Bronte Capital, September 28, 2008
http://brontecapital.blogspot.com/2008/09/reckless-irresponsible-seizure-of.html