More bailouts ahead

This time it's not Wall Street necessarily, but countries, with Greece apparently being first in line for a bailout. Writes John Rubino:

With a bail-out of Greece apparently immanent and everyone drawing parallels between the PIGS countries [Portugal, Ireland, Greece, and Spain] and the Wall Street firms that nearly cratered the global economy in 2008, this might be a good time to ask why each year seems to bring a new set of financial basket cases requiring taxpayer cash.

The answer, of course, is easy money. When governments create too much credit, borrowing gets easier at the margins and the less intelligent, moral, and wise end up borrowing far more than they would normally be able to. When they inevitably implode, the world gets another chance to behave rationally by letting them go, accepting the resulting short-term pain, and learning the relevant lessons. But beginning in the 1990s with the Mexican and Russian defaults and the self-destruction of Long Term Capital Management, the strong economies have chosen to avoid the pain and bail out the losers.

He concludes his article this way:

When the bond or currency markets say no more, the party will end. Then we’ll see who’s really too big to fail.

Secret summit of top bankers

This posting is late, but the importance of the event has not diminished. As reported by George Lekakis and Fleur Leyden on February 6, 2010:

THE world's top central bankers began arriving in Australia yesterday as renewed fears about the strength of the global economic recovery gripped world share markets.

Representatives from 24 central banks and monetary authorities including the US Federal Reserve and European Central Bank landed in Sydney to meet tomorrow at a secret location, the Herald Sun reports.

Organised by the Bank for International Settlements last year, the two-day talks are shrouded in secrecy with high-level security believed to have been invoked by law enforcement agencies. . . .

The arrival of the high-powered gathering coincided with a fresh meltdown on world sharemarkets, sparked by renewed concerns about global growth and sovereign debt.

A commentator named Temjin had this astute comment:

MOST of the bad debt has NOT been written off yet. They have only been carried off to an off-balance sheet. If all these bad debts were marked to market, you can be sure the global financial system would be technically insolvent. I support the "shut down the RBA" movement going on in Sydney right now. The central bankers are nothing but master money manipulators who steal wealth from the public. (and no, it's not a conspiracy theory, action speaks louder than words and there have been lots of actions lately)

Is this a sign that Ron Paul's movement to end the Fed is catching on globally? Another reader, Glen, had this to say:

The problems that caused this disaster in the first place never went away. They were only masked by massive government bailouts and changes to accounting standards that favoured masking the value of these toxic assets. What passes as analysis in Australia and globally for that matter is nothing more than a bunch of cheer squads applauding dodgy figures and while turning a blind eye to the realities of the situation. A truly appalling situation that was totally avoidable.

Do we have a Master Class?

Stewart Dougherty argues that we do. Not only that, he has grounds for believing they are putting the rest of us out of business.

Recent American events paint an ominous picture of a Master Class that is now in total control.

When 90% of the American people vehemently rejected the $700,000,000,000.00 ($700 billion) TARP bailout plan, the Master Class put it on a fast track and approved it anyway.

When a clear majority of the American people said no to a government takeover of Chrysler and GM, the Master Class poured billions of taxpayer dollars into those corporate sinkholes and took them over anyway.

When the people said no to multi-trillion dollar crony bailouts for the bankers and insurers whose corruption had caused global financial mayhem, the government pledged to those elite insiders more than $13,000,000,000,000.00 ($13 trillion) of the people’s money anyway.

When the people expressed astonishment and anger that Wall Street planned to pay itself record 2009 bonuses, in the midst of America’s worst-ever fiscal and financial crisis caused by them, Wall Street stuffed its pockets with taxpayer-supported bonus money anyway.

When the people said no to a proposed $40,000,000,000.00 ($40 billion) bailout of AIG and its elite trading partners such as Goldman Sachs (an amount that subsequently exploded to $180,000,000,000.00+ ($180+ billion)), the Master Class went underground, covertly misappropriated taxpayer money and made the payoffs anyway.

When Fannie Mae and Freddie Mac were nationalized at enormous taxpayer expense, the government approved $6,000,000.00 individual pay packages in 2009 (150 times the average American wage) for the CEOs of both failed companies anyway.

When a clear majority of the people said no to nationalized health care, even after being bombarded by a multi-million dollar, lie-drenched propaganda campaign designed to bamboozle them, the House and Senate passed nationalized health care bills anyway.

When more than seven million American workers lost their jobs and were subsisting on unemployment benefits and food stamps, federal government employees, who now earn DOUBLE what private sector workers earn, were given another round of pay and benefits increases anyway.

When private sector workers’ 401Ks and IRA retirement plans plummeted in value due to economic collapse and endemic Wall Street-orchestrated market corruption (including systemic front running, flash trading, naked short selling and other manipulations), government “defined benefit,” lifetime-cost-of-living-adjusted pension plans, despite already being underfunded by $2,000,000,000,000.00 ($2 trillion), were made richer than ever anyway.

The long, shameful litany of events signaling the total divorce between the Master Class and the people of the United States doesn’t stop there. It goes on and on.

Government stimulus failure

If the government was a doctor and you went to it with a broken arm, it would break the arm again then boast about all the good your medical spending will do for the economy.

In the case of the housing bubble, after it broke the government set about doing everything in its power to bring it back. "Rather than allow prices to fall so that the housing market returns to a sustainable level," Ron Paul writes, "the government does everything in its power to try to keep housing prices elevated."

Did underconsumption burst the housing bubble? No. The collapse was caused by "a malinvestment of resources into sectors of the economy that were unsustainable without easy credit. The rise in housing prices was not, in fact, indicative of the new normal but rather an indicator that something was seriously wrong."

Pursuing the same flawed policies in double-time will only hasten the empire's downfall. And when that happens, blame will be laid squarely on the free market, something we've never had and have been getting further away from since the Continental Congress decided to pay for the Revolution with fiat paper money.

As cynics will sometimes say, when a crisis hits, blame the innocent and promote the guilty. This is in fact what is being done.

Ben Bernanke's bubble blindness

Bernanke began denying the existence of a housing bubble at least as early as July, 2005. If he understood what caused bubbles he might have had a better understanding of what was happening. But he thinks an abundance of paper money can cure any economic problem that arises, so he's never too concerned about bubbles.

This YouTube video shows Bernanke and his paper factory in full denial.

Is that gold bar for real?

In a recent article, Doug Hornig, Senior Editor of Casey's Gold and Resource Report, discusses counterfeit gold coins and bars.

Gold is one of the heaviest metals, but also one of the softest. The old Wild West method of biting down on a gold coin to see if it is real is actually a pretty good test. "If you chomp down and shatter a tooth, it ain’t gold."

There's not enough of a profit margin for scam artists to bother counterfeiting bullion coins, Hornig says, but gold bars are a different story.

Fakes do show up in the market from time to time, and they’re hard to identify. Generally speaking, counterfeiters don’t bother with the smaller ones, which are stamped, numbered, and sealed. They concentrate on 1-kilogram or larger sizes. These are poured, rather than stamped, and can be easily adulterated or even hollowed out and filled with some other, cheaper metal.

Hornig offers some guidelines:

For coins, avoid “commemoratives.” Stick with universally recognized government bullion coins (American Eagle, Canadian Maple Leaf, Austrian Philharmonic, Australian Kangaroo, South African Krugerrand).

For small bars, purchase only those that carry the stamp of one of the known, trustworthy refiners, such as PAMP, Credit Suisse, or Johnson Matthey.

For bigger orders, 1 kilo and up, ask your dealer if he has an assay or is willing to have one done. If you want 100 ounces, insist on an assay or consider buying directly from the Comex, which means you’ll be assured of getting a good-delivery bar that has never left the circuit.

For bullion coins there are a few tests you can conduct at home, as well:

- Simply apply a magnet. Gold is non-magnetic, but if you’re unlucky enough to have gold-plated steel, it’ll stick.
- Size and weight are good measures. Get a scale calibrated to hundredths of a gram. If a bullion coin weighs light (or possibly heavy), it’s bogus.
- Since real gold has a higher specific gravity than other metals, you can test for that. Many Internet reference sites will tell you how.
- You could buy a commercial counterfeit detector. They aren’t cheap, but will quickly and easily perform the basic tests.

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