Sunday, December 26, 2010

Calling All Wisemen

Gold, frankincense and myrrh… and a vulture in a pear tree.

Looking out the window at the 5 inches of fluffy snow hanging on lifeless tree limbs, I took the time to compare Treasury Secretary Tim Geithner’s testimony to Congress with the December 9, 2010 Federal Reserve Flow of Funds data which I’ve encouraged you all to read regularly. I guess I was looking forward to some glimmer of holiday cheer which would suggest that, at some point, now that the Treasury and the Fed are co-conspirators in their Ponzi scheme to undermine the US economy for the largest expropriation of sovereign wealth in modern history, they’d at least agree on each other’s chimera. Alas, I was disappointed. You see, if you’re printing money supported by uncollateralized debt purchases, it’s nice to know that you’re at least lying consistently. Wishful thinking!

In his report card of the TARP, TALF, HAMP, HOPE, 11 pipers piping, 10 lords a leaping, a bunch of damn birds swimming and pointlessly sitting in trees, and a red-nosed reindeer, the Grinchner decided to perjure himself before Congress. In keeping with the on-going desperation to manufacture the illusion of economic recovery to anesthetize the American consumer against confrontation with the reality that we’re now in a Depression, he painted a picture that has more hallucination than a fat, red-suited man dropping down nonexistent chimneys could ever muster aided by all the egg-nog in the world. And worst of all, the indicting data is published by the Federal Reserve and is in print for all to see.

Since the government intervention in 2008, the rate of access to credit available through mortgages worsened by 100% in 2010 (when compared to 2009); consumer credit continued to shrink an additional yearly rate of -2.9%; and, that great hallmark of “job creation fantasy” – corporate credit – barely nudged 5% growth. All the while, the Federal Government continued to borrow at an expanding rate of over 20% year-on-year growth. The cold facts are that the Federal Government’s programs have been less effective at rebuilding the economy than had they simply borrowed from the Gulf and Asian countries, handed out per capita distribution of cash, and switched the lights off in D.C. In fact, we’ve actually failed to return one quarter of the economic return that would be required simply to support our debt.

What I find most puzzling about all of this is that we sit idly by as the corporate borrowing – the only positive inflection in the on-going Depression period credit collapse – is being used, among other things, to pay DIVIDENDS to Microsoft shareholders. That’s right, it’s cheaper to pay Goldman bonuses and Microsoft dividends with subsidized DEBT than actually take cash out of international growth market investment funds. By the way, this is what I mean when I talk about the expropriation of sovereign wealth. Using nonsensical debt and currency policy, the government (courtesy of Secretary Grinchner and his elf Ben) has made it possible for subsidized debt to incentivize U.S. domiciled corporations to deploy their capital in the international markets while riding cheap debt to pay domestic shareholders and employees their dividends and bonuses. Bottom line… the system is working provided that you’re riding the dividend / bonus wave of subsidized incentives.

When we look back on 2010, one thing is certain. While pensions were hollowed out, entitlement programs were cannibalized for short-term liquidity, and EVERY national government guaranty program (aka “insurance” programs like PBGC and FDIC) were mismanaged into official insolvency, the alphabet soup of capital intervention has provided a few banking and corporate interests the opportunity to leverage the country’s credit future for their own immediate benefit. Conveniently, they’ve set up pathways for capital flow and hording far beyond the reach of an incompetent IRS and the theft of country is nearly complete.

And not surprisingly, their bets with your taxpayer-subsidized special drawing rights (because the dollar is even too risky for the World Bank now) are in markets like China, Brazil, Southeast and Central Asia. And just for fun, China has decided to plop a lump of coal in the Christmas stocking by decoupling the renminbi from the dollar 25 basis points more. Occidental economists should puzzle – going into the New Year – over the century-in-coming William Jennings Bryan populist revenge… yuan in Chinese means “lump of silver.” It looks like the “cross of gold” speech may, at long last, be vindicated!

All we really needed for Christmas this year was a little bit of Truth and Accountability. It looks like we’ll have to wait for next year to see if that’s possible. So, if you’re out there Wisemen, be warned… take a different way home. You’ll probably want to find a bunch of tax havens along the way because you’ll need to store your gold, frankincense and myrrh well out of reach of Americans who, when they wake up from their long winter’s nap and see that their country has been stolen, will be a bit more disgruntled than King Herod. Silent night… bah humbug!

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Thank you for your comment. I look forward to considering this in the expanding dialogue. Dave