Posted on 03/19/2009 9:51:59 AM PDT by mojito
A reporter contacted me recently with the following question:
"I am a reporter, and I am doing a story on Bernard Madoff's life after pleading guilty. As part of this, I was wondering if you could comment on what significance he will have in the history of this period. Will he represent more than a scamster who stole a lot of money from a lot of people? As Bernie Ebbers and Ken Lay came to embody corporate greed and deceit, what will Madoff symbolize?"
Americans lived in a "Made-off" and Ponzi bubble economy for a decade or even longer. Madoff is the mirror of the American economy and of its over-leveraged agents: a house of cards of leverage over leverage by households, financial firms and corporations that has now collapsed in a heap.
When you put zero down on your home, and you thus have no equity in your home, your leverage is literally infinite and you are playing a Ponzi game.
And the bank that lent you, with zero down, a NINJA (no income, no jobs and assets) liar loan that was interest-only for a while, with negative amortization and an initial teaser rate, was also playing a Ponzi game.
And private equity firms that did over a $1 trillion of leveraged buyouts (LBOs) in the last few years with a debt-to-earnings ratio of 10 or above were also Ponzi firms playing a Ponzi game.
A government that will issue trillions of dollars of new debt to pay for this severe recession and socialize private losses may risk becoming a Ponzi government if--in the medium term--it does not return to fiscal discipline and debt sustainability.
(Excerpt) Read more at forbes.com ...
Roubini, a Clinton admin economist, is making good money as a consultant, and hates it when the market recovers since he is the gloomster of the hour.
“U.S. Stocks Retreat on Skepticism Over Bernanke’s ‘Shell Game’”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aGB4yJpq4GR4&refer=home
If you think Roubini is predicting doom, what do you think the Fed’s actions of yesterday are saying?
Especially after Bernanke was on “60 Minutes” only this past weekend, saying that the recession would be over by late this year?
You might not like it, but Roubini has been right. If you go back and read his predictions since 2006, you’ll see that things have gotten worse than what he has predicted at ever step along the way.
Yes, he’s making good money as a consultant and speaker. The reason why is because he has proven himself to be more right than most prognosticators and economists - he’s not entirely correct, but he’s been closer to the mark than others. In business, people will pay handsomely for that kind of skill.
Right on the button, Dave.
Deciding to spend another 1.2 Trillion smackers yesterday on T-Bonds and mortgage backed securities was the biggest Hail Mary Pass I’ve ever witnessed.
If Mr. Bernanke knows when the recession is going to end, I’m Mr. Greenjeans.
Our government needs to also ask “Who was in this with Madoff?” This scheme was to big for one person. I would bet that it goes back to some in our Congress. Maybe that is the reason why a full trial was never held. (or is one coming?)
The last bubble before everything comes tumbling down would be the US.
I’d take Roubini for SecTreas over Turbotax Timmy, or Hank Paulson, in a split second. Absolutely no question about it.
Indeed, it's virtually the equivalent of taking your life savings and putting it on red. Clearly we've decided to ignore to ignore China's warnings from a few days ago, and have opened up the throttle and are going full steam ahead.
It will be fascinating to see what the consequences are. We're going to either reach safe harbor, or ram full speed into the iceberg.
Collectively the American people seem to know where this will end...gun and ammo sales are soaring.
There is no chance of hitting red on this wheel of misfortune.
Treasury and the Fed trading paper (QE/Monitization/Printing Paper) has zero chance of being successful unless it is ended immediately. It is fascinating and frightening.
Good point about Bernanke’s prediction.
Three days after “60 Minutes” he creates $1.15 trillion to prop up the bid for Treasury debt.
Even more bizarre was the reaction on stock prices and interest rates.
The Ten Year yield dropped from 3.00% to 2.25% at exactly the same moment the USDollar dropped 4% against the Euro.
What the.....!
Our currency loses value, but interest rates crash?
And, even though USA government spending may now pass 30% of GDP, the private sector responded instantly, buying equities, and pushing the Dow into a 250 point turnaround.
Never thought I'd turn into a gold bug, but really, where does a rational investor send his money these days?
btt
“Ponzi government”
That’s a keeper.
The federal government created this system by enabling banks to engage in an ever greater degree engage in fractional reserve lending.
As a direct result anytime a bank gives out a lone in excess of its assets such as is fractional reserve banking is, that Bank is creating defacto inflation in the medium of the lone which it has given out(the Dollar). Meaning: There are more dollars out there chasing the same objects.
So because Wall Street like an increasingly large number of our business deal with theses Banks in stocks and otherwise their growth can be traced and built upon the expansion of the currency the same banks create with their factional reserve lending.
However the same expansion also forces investment growth because other people are forced/encouraged to play ball or lose the money to inflation anyway.
So now we have a recursive system where we got an investment economy that thou fractional reserve banking causes inflation, and the same inflation forces/encourages even more investment by everyone else in the real(producing) economy of remaining assets.
This whole recursive system will continue to play out until people either:
1: Run out of money to thou into it. (the banks hit their limit and stop lending)
or
2: The inherit risk-based losses of the Bank's lending overwhelms the actual capital held by the Banks.
or
3: The people panic and for whatever reason run on the bank reviling the whole fraud, and causing economic loss of the now nonrefundable (but really nonexistent) bank assets
No matter what happens mathematically as long as the REAL assets in an economy are finite or growing at a rate slower than the bank/government induced currency inflation. One of theses things will happen its just a question which happens first. It's like playing Russian Roulette with 3 different bullets in an otherwise empty gun once a day every day, whether one of the bullet is in the first chamber or all are in the last 3 you will get to one of them eventually, its not anymore avoidable than our actual assets are infinity.
Believe it or not frequent occurrences of #3 is preferable while the scale and spread of the investment is still small as so that it never gets large causing a system wide failure which leaves almost no one unaffected to buy up the foolish assets and effect economic recovery. While fractional reserve banking fraud may be dated back to the roman days and before when government did this with gold debasement of their currency. The actual practices on the individual level goes as far as anyone can get away with it.
But insolently when the government doesn't back it with the currency and “national banks” it tends to be a lot more isolated and small scale.
This is in fact what uses too happen in the United States before we and our significant trading parters had national banks manipulating the currency. In fact the local/ state banks that engaged in fractional reserved lending typical didn't last long and their notes were general valued less than the stated value.
This is because the economy realized in most all cases rather quickly all of them like the current national banking system as I described could be compared to the same Ponzi Scheme, due to the nature of the way they invest and inevitably collapse. There is a significant risk factor in the reliability of a bank note which detracts from its stated value.
People forget that when the bank note becomes so large that the risk is mute or its backed by the government, which will in effect make the risk to the individually mute.
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