Bloodbath

If you are not scared of what’s happening in Wall Street then you are either broke or have your head up your ass. I’m afraid. I long for the days when my mom gave me a nighttime chocolate chip cookie and warm milk and then tucked me in and I didn’t have wealth that could be destroyed because of corrupt bankers and politicians.

All because of houses!

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I have dollars in three banks insured by FDIC, which has a $53 billion fund to cover $6.84 trillion in bank deposits. Another way to put it: it has $0.053 trillion to cover $6.840 trillion in deposits. But when banks gives money to FDIC, it gets sent to the Treasury which spends that and then gives the FDIC an IOU. There is no FDIC fund. Now when banks go bust, guess where the money comes from? The taxpayer. We, along with our children and children’s children, get the bill. In effect you will bail yourself out.

The Fed has blown through at least $900 billion this year, but I’m not sure if it includes “loans” swept under the rug like $138 billion to Lehman this week. Who knows how much will be paid back. If you assume like I do that mere human beings who make decisions are not aware of unintended consequences, there is no reason to have faith in Bernanke and Paulson and what they’re doing. Like pro wrestling they are making it up as they go along. This is a simulation not unlike SimCity and no one can say with certainty that it will all work out in the end.

Your bank deposits are insured but all you have to do is look how other governments bought time to prevent a systemic banking crisis. They set up “bank holidays” where you are not allowed to withdraw more than a small amount for days, weeks, or longer. The announcement will sound something like this:

“The bank holiday was declared to preserve the stability of markets… In the past few days, there has been a great deal of speculative activity and we wanted to calm the market down.”

If it’s a short holiday then who cares but if it’s long then during that time the central bank prints prints prints and all you do is helplessly watch as the purchasing power of your savings diminish. If you’re unlucky a new currency is introduced with depressing exchange rates and in effect you’re tossed halfway down the mountain and told to start up again. Don’t believe it will happen here? I wish I had your optimism. Even now if you want to withdraw more than a few thousand from a weak bank like WaMu or Wachovia, good luck.

To get away from the upcoming FDIC boondoggle that doesn’t involve your crusty mattress, an option is to plug your money directly into the US Treasury with their TreasuryDirect program. You won’t earn any interest (unless you purchase a treasury) but at least you don’t have to worry about dealing with banks. Your money is safe with the government!

Or is it? What happens if China or Petrol nations that are purchasing up dollars every day decides that they no longer what currency from a sick country? Either outright default or we’ll get the United States of Zimbabwe. The reason China is purchasing dollars instead of investing on its own infrastructure is to limit the standard of living for their citizens (easier to control the populace, read 1984) and to control inflation. But if the American economy tanks and lawn chairs and plastic doohickeys stop selling at Walmart then there is little incentive for them return that money back here in the form or treasury purchases to sustain mind-boggling current account deficits for our wars and shopping. That’s one thing I admire about the Chinese: while all we have to show the past five years is plasma televisions and sunglasses (consumption), they have factories (production). Assuming they can get their environmental problems under control, who do you think will see more economic growth in the next 20 years?

What the Fed doing is trying to preserve the system, and I’m sure they will at least partially succeed with printers running full steam, but mathematically something has to suffer from this. It will be the dollar, and it’s already struggling.

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Bank executives cried deregulation on the way up but now their hands are in our pockets to fix their frauds. Yet they will keep their house in the Hamptons and fancy cars (and even severance packages irregardless of the smoldering ruin they left behind), while you are I are rewarded with a worthless currency. You better believe that every struggling bank worth a damn is in private meetings right now trying to figure out the best way to present to the Fed that their failure will lead to the collapse of the world so they also get a bailout. Or they will merge with another bank so they are now “too big to fail.” Wages have been on the decline for years (but productivity is up!) and keep in mind that every time you read a rosy news article about bike ridership increasing or frugality being the new hot trend it’s just proof that our living standards are decreasing. Do you think bicycle ridership is increasing today in a place like Brazil or China?

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For savers who have worked hard and been prudent, there are a couple options. Accumulate gold and silver from coin dealers (easier said that done), stick them in a bolted safe in your basement and leave them there. If the currency collapses you don’t have to line up at a soup kitchen, otherwise you can sell, possibly for a profit.

My solution has been foreign currencies. Slowly I’ve been moving my money into Swiss Francs, Japanese Yen, Norwegian Krohne, and Australian Dollar via an FDIC insured bank that does the exchange. With currencies it’s all relative so even if there will be a worldwide depression, which currency will do the worst? Unfortunately I think it’s my own. I did something because it’s no one’s responsibility but my own to protect my savings. (Currency trading has huge risks—do your own research.)

There’s a few commentators that I trust to lay it out there straight without any bullshit. Of course I read everything with my brain turned on.

Mish Shedlock

Noriel Roubini (register to view full posts—it’s worth it)

Karl Denninger

Charles Hugh Smith

Jim Sinclair

Ultimately we are at fault for this. During the housing boom no one wanted to stop and question the fraud of big business and even with these bailouts I don’t hear much concern among my peers. I’ve not protested, sent faxes, emails, letters, or organized in any way. I’ve been silent just like everyone else, and only when my savings is threatened do my ears perk up. Too little too late. Now it’s a salvage operation to cover my ass because of the colossal failure of the U.S. Government to protect its currency and financial system. I would no longer count on them to guard what you have earned. If you don’t take the steps yourself then you deserve what happens.

Postscript: You know what… I’ll step up to lead you all. Is a Sunday afternoon good?

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Kyle
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Kyle
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Wages are down. Compensation (Wages + Benefits) is not down. Also, with the increasing divorce rate and number of people who stay single well into their 30s, a lot of the “Wages Are Down!” studies purposely rig the deck by using households as the denominator instead of wage earners.

Any study that uses households or raw wages should trip your BS alarm. With the way the tax codes are set up, more and more insurance and savings runs through employers where folks used to take care of that stuff on their own. That money obviously comes out of peoples wages.

Anonymous
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Anonymous
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Those sites you listed are all good, but the hands-down best is clearly itulip.com

Generate
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Generate
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Having spent considerable years in the banking industry I can tell you that this is all part of a down cycle. The worst I have ever seen, yes, but a cycle. Every 4 or 5 years we see the same old movie reel repeat itself, and every 4 or 5 years the media and the pundits cause mass hysteria. It is a continuous loop and a few years from now everyone will be touting U.S. prosperity and the strength of the markets to overcome such a disaster.

Arjewtino
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All my money is Under My Mattress-insured.

Arjewtino’s last blog post: Cranium physics, funny stares, and Hitler jokes: the yarmukle social experiment goes to my head.

Anonymous
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Anonymous
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you lost me at “irregardless”…

DF
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DF
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As a finance professional it is absolutely frustrating how poorly this country has managed its economic & financial health. The corruption within investment banking is so blatant they regularly dangle their balls in investors faces. Its a miracle people didn’t lose confidence in these institutions ages ago but because they feed into American greed with the illusion that you’re not gambling, no one wants to show their no-confidence vote by pulling out their money. Until now. The government has already set the precedent of intervention with the S&L crisis and now AIG so banks have little incentive to change behavior. The corruption will continue. Working within quantitative research, we’ve estimated significant credit events to occur every 7 years.

Todd H
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Todd H
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what bank do you use to that by the way (buy foreign currencies)?

M.
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M.
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How much truth is there to this:
http://www.ibdeditorials.com/IBDArticles.aspx?id=306370789279709

“But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street’s most revered institutions.

Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties.

The untold story in this whole national crisis is that President Clinton put on steroids the Community Redevelopment Act, a well-intended Carter-era law designed to encourage minority homeownership. And in so doing, he helped create the market for the risky subprime loans that he and Democrats now decry as not only greedy but “predatory.”

Yes, the market was fueled by greed and overleveraging in the secondary market for subprimes, vis-a-vis mortgaged-backed securities traded on Wall Street. But the seed was planted in the ’90s by Clinton and his social engineers. They were the political catalyst behind this slow-motion financial train wreck.”

?

rougue
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smile Guess cause I was betting against the house and all my stuff is looking up i’m one of the lucky ones. Anyone body got a house they need to sell cheap cause i’m buying them up???

Peregrine John
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Ah, someone mentioned the Community Redevelopment Act before I could. The Law of Unintended Consequences (a.k.a. Road To Hell paving machine) strikes again! Seemed like a good idea at the time.

There were actually a few politicians who tried to raise awareness and sound an alarm on the whole burgeoning fiasco, a few years ago; but I have a sneaking suspicion few here want that list. You can find who they are pretty easily yourself, if you like.

Hope
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Hope
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Accumulate gold and silver from coin dealers (easier said that done)

Ron Paul advocated this a year ago.

And yes. Easier said than done. Also, during the Great Depression, it was made illegal to own gold. The cops literally knocked on people’s doors and confiscated any gold people had.

LoralLikeFloral
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Wow, I’ve been way busy with class work and work that all i’ve had time to do is just hear bits and pieces of this.

i guess i could be reading the NEWS news but usually they just tend to spotlight crap and the truth is only slightly there.

Generate: My mother said the same thing.

History repeats itself, and if it wasn’t for peoples historical “amnesia’ then maybe things could be done.

ughhhh.

bh
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bh
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It wasn’t just the subprime regs, it was also the fed keeping interest rates way too low for way too long. Money became so cheap to loan that bankers would literally lose their jobs if they didn’t get the money out the door fast enough. On the way up, everyone was getting rich and now body wanted to take the punch bowl away. By the time they did, everyone was drunk, so to speak, and mayhem ensued.

Ari Hinkelberger
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Roosh,
Your analysis – while somewhat true, is misleading. The dollar is still the gold standard of world wealth. As long as the Government can keep inflation under check, there are plenty of people who are willing to buy short term tsys at 4-6%. The real gut checker in this whole deal is not dollars but numbers. The Fed can pick and choose who they want to bail out as long as inflation stays under 7-8%. It was at 6.1% last month. With energy prices plummenting because of falling demand, the fed will simply ask the government to just print more money. Its a beautiful thing. WHile all the conspiracy theoriest talk about how the banks can meet IOU’s through FDIC funds because them money is not on the balance sheet, there has ever since the creation of the FDIC been a depoist under 100k dollars that hasn’t been paid. If America has to sell off the HUD and Dept of Ed building, they will honor those deposits.

ITs rampant specualtion and rumors by idiots that try to convince American’s that the FDIC is not solvent that sends people on a mad rush to the bank. The S&L crisis of 1980 was pretty damn bad, and through all of that, nobody lost a penny in a deposit at a commercial bank.

Simmmer down good buddy. Everything is going to be alright. WE might not have an investment bank standing when this is all over, but in a sense, that is the greatness about a free market. Make bad choices, finance shit bonds, buy dog crap products to maximize returns, and you will end up broke as f-ing hell.

And another thing, the Credit unions have little to no exposure to these sub-prime bond packages. SO if you are worried about your deposit at Bank of America, go put it in your local credit union. ITs insured up to 100k there too.

Ari Hinkelberger
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And while it is concerning to see institutions fail, remember the asshole fees they charged you. Remember the time they turned down your request for credit. These guys are businesses. They make choices. And over the last 10 years everyone in this country has bought – hook line and sinker — into the dumb ass theory that housing doesn’t fall in value over a 5-7 year period. That theory has been virtually destroyed in the last 16 months. I laugh at people who sit in ARM mortgages that are only 2 years into payments and think that there house is going to be in positive equity when the ARM expires.

Those ARM Mortgages are utter total shit. They are a gimmick that allows an individual to purchase something they can not afford. Housing credits and tax structure was not designed as a short investment. The idea behind creating tax benefits for purchasing homes was to allow people to not only buy homes, but to eventually OWN a home. WHen you are only paying interest on the loan, you are not BUYING the house, you are renting the house from the bank. Its like buying a put option Oil. YOu better hope it goes up, because if it doesn’t, you are going to be in a shit heap of trouble. I am sorry, a 900K dollar townhome on Lincoln Park far exceeds what 99.99% of this city can afford.

Triumph
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Scandal financial disaster 1
Scandal financial disaster 2
Scandal financial disaster 3
Scandal financial disaster 4
Scandal financial disaster 5
Scandal financial disaster 6

Wait for it ….

“off budget spending”

NEXT!

Triumph
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As a revolutionary – I would suggest hoarding hoards.

sk3ptic
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I think we just need to trust Ben Bernanke, he knows more about economics than all the bloggers on blogspot combined.

namaste
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namaste
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Thank you for this.

namaste’s last blog post: Please Stay on the Path.

Peregrine John
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Triumph:
How many boards could the Mongols hoard if the Mongol hordes got bored?

(Ok, that does it. Time to go home…)

will
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I sure wish the gov’t and the federal reserve would have stayed completely out of this. For several years now housing prices have been artificially inflated by speculators (same thing applies to energy and agricultural commodities). Point is, the only way to fix it is to let the market fix itself and if that means a long term downturn in housing markets then so be it. As an example, let’s look at the gov’t bailout of Chrysler in 1979 – Lee Iacoca(sp?) got gov. loans and the gov restricted Japanese imports. In the short term Chrysler flourished and Iacoca came out looking like a hero….but in the end, the market did what the market did and today unemployment in Michigan is at a staggering 8.5%…so, for our 1979 tax dollar we got a failed automobile industry that hasn’t provided jobs or revenue that an investment of that magnitude should have yielded.

On a positive note, with McCain’s choice of VPILF the Republican ticket (sadly) looks like it has a chance of winning the upcoming election (Florida should be no contest this time with a geezer and some trailer trash, Floridians gotta love this ticket!) – this could actually turn out to be a good thing from an economic stimulus POV – with all those wal-mart shoppers energized surely the money will start flowing again…

will’s last blog post: Unusual Hotels of the World – Ewok Style Ecosphere.

Sweatpants
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I pulled my money out of Wachovia a while back because I suspected it may collapse (I had other reasons as well). Most of the people I told thought I was overreacting because FDIC was there to save the day. Except the FDIC has already paid out a huge chunk of its available funds this year, and it’s not going to take m but moreover, how much faith do you have in your government right now? To be competent, to not fuck things up? For me, the answer is not very much.

Plus, what happens between the time your bank shuts down and you wait in line to get your money? You’re probably completely boned if you need any cash during that time.

Todd H.
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“It helps to keep some perspective. Even if all of the $540 billion in subprime assets went bust (laughably unlikely), and even if not one cent were raised at auction of those assets (simply impossible), the U.S. economy would still only be looking at a total hit of about 3.8 percent of GDP. This is roughly the same amount that the United States had to process from the 1980s savings and loan crisis.”

“Average GDP growth since this most-recent shakeout started in the third quarter has been 1.3 percent at an annualized rate. That figure is hardly stellar, but it is not awful. For most of the 1990s, large portions of Europe — not to mention Japan — would have been thrilled to have a figure that high…”

poop_on_a_stick
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Stick to advice on chicks.

You’ll see the economic gloom and doom stories dry up after the election. Look for lots of good “news” on a recovering economy from the media if Obama wins.

Bobby Rio
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“When you got nothing… you got nothing to lose”

my motto

But if you’re going to ivest in currency I would highly suggest the REAL…. it has seen explosive growth against the dollar in the last 5 years.. and is the one currency that has sunk in the last 6 months.

Plus Brazil is probably the one economy that won’t suffer the Great Depression of 2009-2014

If you never read “The Great Boom Ahead” Harry Dent predicted all of this exactly like it unfolded to the exact year- back in 1992!!!

Bobby Rio’s last blog post: 5 Types of Men Women Go For.

monohechomierda
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While there is a smattering of superficial knowledge in the post it’s ultimately completely wrong and betrays the author’s lack of knowlege.
Just as Roosh has previously advocated that the fed use the headline CPI number to set monetary policy (once again revealing a terrible lack of even basic economic knowledge) this post is a mixture of populist ranting mixed with wrong headed views on basic economics.
Remember, if you are going to buy a farm you buy it during a drought, not during boom times. Same with stocks. Be greedy when others are fearful, be fearful when others are greedy.

Matt Savage
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The real problem is the FED! A private organization of elite bankers that is controlling our currency, thus our economy, and thus the world, is pretty scary. And it’s amazing to me how little people understand this. Just because something has the word “federal” in it, it doesn’t make it part of our government.

Our debt is huge because we (the government) borrow money from this private corporation. What’s even worse is the currency the Fed issues is backed by “debt” and not anything substantial like gold for instance. Ever look at a dollar bill, it says right on the top, “Federal Reserve Note”, “for all debts public and private.”

I’d hate to be all conspiracy like, but I’ve already written this much, so…

Right before JFK was assassinated he had just issued what was to be called the “United States Note”, as opposed to the “Federal Reserve Note.” This currency was to be circulated and used by the people as the new currency of choice as it would be controlled by the government and not the Fed. Thus being more stable and get rid of the nations debt which is owed to the Fed.

Coincidentally… after JFK’s death and LBJ took office, all of the United States Notes were destroyed and never heard from again… hmmm, coincidence?

“If the American people ever allow private banks
to control the issue of their money,
first by inflation and then by deflation,
the banks and corporations that will
grow up around them (around the banks),
will deprive the people of their property
until their children will wake up homeless
on the continent their fathers conquered.”

-Thomas Jefferson

Matt Savage’s last blog post: Overcoming Shyness Using Karaoke.

Matt Savage
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Ack, Roosh you got me all fired up with this post…

Just to comment on Bobby Rio’s comment regarding the Brazilian economy and the REAL, which I think would be a good foreign currency to own. Brazil is almost completely oil independent. Because of their mandate for flex fuel vehicles and bio fuels, the country is in great position for future prosperity. As oppossed to the U.S. who send $500 billion a year to OPEC and is %60 (and increasing) oil dependent on those oil producing countries.

Check out Robert Zubrin’s case for oil and it’s effect on our economy here:
http://www.youtube.com/watch?v=NLRuGUPkyh4

Good stuff.

Matt Savage’s last blog post: Overcoming Shyness Using Karaoke.

Nina
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@bobby rio: Real it’s being pretty safe lately, but doesn’t means that would go for too long. The economy it’s growing strongly, but Brazil still pretty vulnerably. I would wait one more year (after the next presidential election) there, to figure that Brazil it’s going or not suffer the Great Depression.
Anyways it’s fact that any Great Potency in history, any Empire, one day, goes down. USA will be down one day. I don’t know if it’s this time, I don’t know if I will able to see it. But will happen sooner or later.

Anonymous
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Anonymous
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When the democrats were in office we had a surplus. Now we’re going broke because we want to pay for wars and debts with money we don’t have. Vote for Obama I beg of you.

Perlengkapan Bayi baru lahir
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Marshall Gambone
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Kacy Dotie
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