Investment Rarities Incorporated
History |  Q & A  |  Endorsements  |  Portfolios  | Flatware | Gold Coins  |  Silver Coins  |  Contact |  Home

Products

Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

..Read More »

The Best of Jim Cook Archive

 
Best of Bill Buckler
September 7, 2011
archive print

We’ve Done It All For You:

Here is a classic quote from Henry Paulson, President Bush’s Secretary of the Treasury at the time of the Lehman crisis in late 2008: “I was never able to explain to the American people in a way in which they understood it why these rescues were for them and for their benefit, not for Wall Street.”

There was, of course, a very good reason why neither Mr Paulson nor his successor Mr Geithner has been able to convince the American people that they have done it all for them. The reason, to put it politely, is that his claim is sheer bunkum. It was clear that the bailouts choreographed by the Treasury and the Fed were specifically aimed at the financial system at the time they were happening in late 2008. It is clear to many more Americans now after three years of watching the US economy go precisely nowhere.

Even so, all the financial practices which led to the credit freeze of late 2008 are still going strong. Fresh from their downgrade of US sovereign debt less than a month ago, S&P is reverting to form by handing out AAA credit ratings to exactly the same kind of “toxic sludge” that brought on the first crisis. In one example cited by Bloomberg on August 31, so far in 2011, S&P has bestowed their AAA rating on $US 36 Billion “worth” of Collateralised Debt Obligations (CDOs) composed of all the usual suspects. These include mortgages granted to “sub prime” borrowers, commercial real estate loans and car and student loans. As before, the originators of these CDOs have all paid S&P to rate their latest offerings.
Without such exalted ratings, this paper could not be sold to most of the institutions now buying it. The US banking system must continue to sell debt paper. The only alternative is another - and worse - 2008.

THE FACADE IS GETTING RATHER THREADBARE

On August 2, 2011, President Obama signed into law a $US 400 Billion increase in the debt limit of the US Treasury, raising it from $US 14.294 to 14.694 TRILLION. A month later on September 1, the Treasury’s official debt to the penny hit $US 14.697 TRILLION. The official debt subject to limit still has another $US 44 Billion in “leeway” as of September 1, but that will be made up very quickly. Clearly, one of the first tasks of the US Congress when it reconvenes next week will be to pass the second $US 500 Billion “tranche” of debt limit increase resolved during the recent deficit debate fiasco.

Compare the pace of accelerating Treasury debts to the last time that the US government raised the Treasury’s debt limit in two stages. On December 24, 2009, Mr Obama signed a $US 290 Billion increase. That lasted seven weeks - until February 12, 2010. This time, a debt limit increase which was 38 percent higher than the one enacted on December 24, 2009 has lasted for just over four weeks.

Oh Lord, give us “austerity”, but don’t give it yet.

Such is the fiscal state of the nation which provides the world with its “reserve currency”. The final “deal” worked out in the Congressional fiasco leading up to the latest debt limit deal contained within it the establishment of what is now called a “Super Congress”. One of the “mandates” of this group of six Republicans and six Democrats is to come up with a plan to cut between $US 1.2 and $US 1.5 TRILLION off forward spending estimates over the next TEN YEARS. Treasury debt has just increased by $US 400 Billion - in ONE MONTH! To borrow the immortal words of Jim Lovell aboard Apollo 13 in a slightly different context - “Washington DC - we have a problem!”.

There Are “Mitigating Circumstances”!:

In law, a “mitigating circumstance” is an aspect of the commission of a crime which does not exonerate the perpetrator but can be considered by the court in reducing the penalty imposed. Usually, it is a highfalutin legal version of giving credence to a variation of the “dog ate my homework!” excuse. It can be and will be argued that the speed of the rise in Treasury debt over the last month was because the debt was “frozen” while the Congress was debating whether and how much to allow the Treasury to raise it. That is true, but it has also been true of pretty well every Treasury debt limit rise for at least the past decade. The point is that the debt is inexorably rising and that the pace of this increase is inexorably accelerating. The only difference between US government debt paper and Greek government debt paper is that nobody has (yet) demanded “collateral” from the US government before they will lend to it.

In relation to US Treasury debt, there are “mitigating circumstances”. For example, many creditors to the US Treasury are still content with the fact that the US can indeed print money. So can most other “sovereign” nations, of course, but the US central bank prints a special kind of money. It is used as the reserve for the global system so there is a vested interest everywhere in its continued viability as a medium of exchange. Besides, big foreign holders of US sovereign debt are trapped. They cannot repudiate Treasury debt paper without devastating their own finances.

The final “mitigating circumstance” is the one most tightly held by almost every big participant in financial markets everywhere. This is the argument that the only place they can go to be “safe” from the ever more volatile gyrations of almost all market sectors is into US government debt paper. To a greater extent than is the case with any other government in the world, the POWER of the US government over its people is being relied upon. No more damning indictment of the entire jury rigged global system could be imagined. But according to the financial world, we’re stuck with it. There is no alternative.

This is the context in which the US government is now turning on the pillars of its OWN system.

 

.Ó 2009 – The Privateer

http://www.the-privateer.com

capt@the-privateer.com

(reproduced with permission)

SUBSCRIPTIONS:

Delivery via email

Trial: 5 issues (once only)

Six-Month: 12 issues

Annual: 25 issues

Two-Year: 50 issues

Subscribe at www.the-privateer.com/sub.html