Overview

As the author of three books on mortgage finance and related derivative securities, and speaking as someone who first turned mortgages into rated securities in 1983, I’m going to let you in on an unfortunate little secret – the real subprime mortgage securitization crisis may not have even started yet. But, there is a good chance the real crisis will arrive soon.

This assertion that the crisis could just be getting started may seem absurd and extraordinarily out of touch. What about the approximately 45,000 homeowners losing their homes to foreclosure in the United States every month? What about the 8.9% plunge in nominal housing prices in 2007, the largest decline in over 20 years? What about Bear Stearns losing 94% of the value of its stock in 2 days, with even the remaining 6% in value being ]]>The Globalizer Who Came In From the Cold

JOE STIGLITZ: TODAY'S WINNER OF THE NOBEL PRIZE IN ECONOMICS

by Greg Palast

The World Bank's former Chief Economist's accusations are eye-popping - including how the IMF and US Treasury fixed the Russian elections

"It has condemned people to death," the former apparatchik told me. This was like a scene out of Le Carre. The brilliant old agent comes in from the cold, crosses to our side, and in hours of debriefing, empties his memory of horrors committed in the name of a political ideology he now realizes has gone rotten.

And here before me was a far bigger catch than some used Cold War spy. Joseph Stiglitz was Chief Economist of the World Bank. To a great extent, the new world economic order was his theory come to life.

I "debriefed" Stigltiz over several days, at Cambridge University, in a London hotel and final]]>Colossal Collateral Damage

The multi-trillion dollar US-centered securitization debacle began to unravel in June 2007 with the liquidity crisis in two hedge funds owned by Bear Stearns, one of the world's largest and most successful investment banks. The funds were heavily invested in sub-prime mortgage securities. The damage soon spread across the Atlantic to a little-known German state-owned bank, IKB. In July 2007, IKB's wholly-owned conduit, Rhineland Funding, had approximately ¤20 billion of Asset Backed Commercial Paper (ABCP). In mid-July, investors refused to rollover part of Rhineland Funding's ABCP. That forced the European Central Bank to inject record volumes of liquidity into the market to keep the banking system liquid.

Rhineland Funding asked IKB to provide a credit line. IKB revealed it didn't have enough cash or liquid assets to meet the request of its conduit, and was only saved by an emergency ¤]]>11/02/08 "ICH" --- — Low interest credit and “financial innovation” are a deadly-combo. They've knocked the banking system for a loop, clogged the credit markets with billions of dollars of subprime sludge, and left the real estate market sprawling on the canvas. Still---even though $2 trillion of capitalization has been wiped-out from falling home prices; and even though the financial system is in a terminal state of paralysis---no one has been held accountable. In fact, not one trader, mortgage lender, rating's-agency official, fund manager, or investment banker has been indicted or charged with criminal wrongdoing.


NOT ONE. The system operates without rules or guard rails. It's the Wild West!

The system is so thoroughly marinated in corruption, that every trace of regulatory-oversight has been removed. The SEC is little more than a public relations sham loaded with business-friendly sycophants who]]>By PAUL CRAIG ROBERTS

On December 8, Chinese and French news services reported that Iran had stopped billing its oil exports in dollars.
Americans might never hear this news as the independence of the US media was destroyed in the 1990s when Rupert Murdoch persuaded the Clinton administration and the quislings in Congress to allow the US media to be monopolized by a few mega-corporations.
Iran's oil minister, Gholam Hossein Nozari, declared: "The dollar is an unreliable currency in regards to its devaluation and the loss oil exporters have endured from this trend." Iran has proposed to OPEC that the US dollar no longer be used by any oil exporting countries. As the oil emirates and the Saudis have already decided to reduce their holdings of US dollars, the US might actually find itself having to pay for its energy imports in euros or yen.
Venezuela's Chavez, survivor of a US-led coup against him and a likely ]]>By Henry C K Liu

(See also PART 1: Fed helpless in its own crisis)

It has been forgotten by many that before 1913, there was no central bank in the United States to bail out troubled commercial and associated financial institutions or to keep inflation in check by trading employment for price stability. Few want inflation but fewer still would trade their jobs for price stability.

For the first 137 years of its history, the US did not have a central bank. The nation then was plagued with recurring business cycles of boom and bust. For the past 94 years the Federal Reserve, the US central bank, has assumed the role of monetary guardian for the nation, yet recurring business cycles of boom and bust have continued, often with the accommodating participation of the Fed. Central banking has failed in its fundamental functions of stabilizing financial markets with monetary policy, succeeding nei]]>January 20, 2008
Bush To Abandon Supply-Side Economics?

By Paul Craig Roberts

With his tax rebate policy, President Bush has put economic policy back on a Keynesian basis. Will it work?

During the two decades it was in effect, supply-side economics had restorative effects on the American economy. Its predecessor, Keynesian demand management, stimulated demand more than supply. Consequently, over time the trade-offs between employment and inflation worsened, and for a while it appeared that inflation and unemployment would rise together. The breakdown of the Keynesian policy opened the door for the Reagan administration’s supply-side approach.

By following Nobel economist Robert Mundell’s advice to "reverse the policy mix," the supply-side policy allowed the US economy to grow without paying for the growth with rising rates of inflation. However, the new mac]]>10/01/08 "ICH" — -- We are about to see how much George Bush really believes the “supply side” mumbo-jumbo he's been spouting for the last 7 years. Last week's Labor Department report confirmed that unemployment is on the rise (5%) and that corrective action will be required to avoid a long and painful recession. There's a good chance that the Chameleon in Chief will jettison his “trickle down” doctrine for more conventional Keynesian remedies like slashing interest rates, government programs, and tax relief to middle and low income people. On Monday Bush announced that his team of economic advisors was patching together an “Economic Stimulus Package” that will be unveiled later this month in the State of the Union Speech. The goal is to rev-up sagging consumer spending and slow down business contraction. Ironically, the UK Telegraph dubbed the stimulus plan Bush's “New Deal”. It's a shocking about-face ]]>di Paolo Leon

1. Introduzione
Sono gli stessi vincoli posti dalla globalizzazione e dal Trattato Europeo che suggeriscono quali politiche economiche che la sinistra italiana debba seguire nel medio-lungo periodo.
Intanto, è nel medio e nel lungo periodo che la sinistra deve guardare se vuole porre basi solide per la propria presenza e per il proprio messaggio: sono giganteschi gli spazi d’azione a sinistra per le masse da conquistare, per la riduzione delle differenze tra individui, gruppi, territori, per la tutela dell’ambiente e della cultura. Soprattutto, adesso che sembra si stiano formando due grandi formazioni politiche che, come predicano alcune teorie americane, si basano sul consenso dell’elettore mediano, e tornano ad affidarsi alla geografia politica dei due terzi, è imperativo rafforzare in termini economici le ragioni della sinistra.

By Henry C K Liu


The long-range consequence of the Carter deregulation policies and practices that had begun during 1978-1982 was magnified during the Reagan period of 1980-88, with greater emphasis on changing the tax regime to favor the rich, industry deregulation to lower prices by lowering quality, and a shift of power from unions to management.

Carter took the first steps towards dismantling the post-World War II social safety net and retirement/pension system, and encouraging job market restructuring in the name of freedom and efficiency. Reagan's conservatism was merely skin-deep and rhetorical, being the president with the largest federal deficit in history, whose policies were outright antagonistic towards the interests of the poor whose rank was constantly enlarged by the steady decline of the middle class. Reagan's rhetoric labeled government as the enemy, not the protector of the people. Ironically, his pol]]>By Henry C K Liu

Robert B Reich, former US Secretary of Labor and resident neo-liberal in the Clinton administration from 1993 to 1997, wrote in the September 14, 2007 edition of The Wall Street Journal an opinion piece, "CEOs Deserve Their Pay", as part of an orchestrated campaign to promote his new book: Supercapitalism: The Transformation of Business, Democracy, and Everyday Life (Afred A Knopf).

Reich is a former Harvard professor and the former Maurice B Hexter Professor of Social and Economic Policy at the Heller School for Social Policy and Management at Brandeis University. He is currently a professor at the Goldman School of Public Policy at the University of California (Berkley) and a regular liberal gadfly in the unabashed supply-side Larry Kudlow TV show that celebrates the merits of capitalism.

Reich's Supercapitalism brings to mind Michael Hudson's Super Imperialism: The Economic Strateg]]>10/04/07 "ICH" — -- An era ended November 16, 2006 when economist Milton Friedman died. A torrent of eulogies followed. The Wall Street Journal mourned his loss with the same tribute he credulously used when Ronald Reagan died saying "few people in human history have contributed more to the achievement of human freedom." Economist and former Treasury Secretary Lawrence Summers called him a hero and "The Great Liberator" in a New York Times op-ed; the UK Financial Times called him "the last of the great economists;" Terence Corcoran, editor of Canada's National Post, mourned the "free markets" loss of "their last lion;" and Business Week magazine noted the "Death of a Giant" and praised his doctrine that "the best thing government can do is supply the economy with the money it needs and stand aside."

Rarely had so much praise been given anyone so undeserving in light ]]>by Heather Coffin
December 9, 2003

This is not a case of narcissistic personality disorder; this is how George Soros exercises the authority of United States hegemony in the world today. Soros foundations and financial machinations are partly responsible for the destruction of socialism in Eastern Europe and the former USSR. He has set his sights on China. He was part of the full court press that dismantled Yugoslavia. Calling himself a philanthropist, billionaire George Soros' role is to tighten the ideological stranglehold of globalization and the New World Order while promoting his own financial gain. Soros' commercial and "philanthropic" operations are clandestine, contradictory and coactive. And as far as his economic activities are concerned, by his own admission, he is without conscience; a capitalist who functions with absolute amorality.

Master-bu]]>THE REAL AGENDA BEHIND THE FEAR
By Joan Veon

The ruse that has been played out in the stock, bond, and credit markets for the last two months is one of the biggest scams of the century, after the crash of the NASDAQ. At stake is the cementing together of a global economic structure that will not be able to be dismantled.

At the core of the trumped up credit crunch were a handful of international bankers that helped create a big enough deception which will ultimately lead to Congress exchanging our national regulatory laws for standardized international regulatory laws. Sadly, I have seen the pattern of creating a problem so you can solve it according to your hidden agenda, over and over again in the 27 years I have spent in the investment business. For those who think it is about a new low in the value of the dollar, they are wrong—the dollar has been dropping ever since the twin 1973 currency crises which sent t]]>FYI - the Euro is now worth about 1.4 US Dollars.

Secretary of State Rice has acknowledged a communique from Israeli foreign minister Tzipi Levni which requests that all foreign aid payments and loans from the United States be made in Euros rather than in Dollars. Foreign Minister Levni cited the rapidly declining dollar and it's disfavor as a world currency as reasons for the request.

"In the spirit of Yom Kippur, the United States will not hold Israel to any agreements obligating them to accept Dollars as payment for their foreigh aid. We will translate our obligations into Euros or whatever currency that best fits Israel's needs" Secretary RIce said in the Friday, Sept 21 announcement.

"We need to place our Israeli obligations at the top of our national prioriy list. Israel should not suffer any inconvenience due to currency fluctuations" said Rice before heading off to Camp David.
]]>Public announcement GEAB N°17 (September 16, 2007)


As explained many times since the beginning of 2006 by LEAP/E2020's team of researchers, the main cause to the current systemic crisis is in the United States. This “end of the Western world as we've known it since 1945 ” anticipated by LEAP/E2020 in February 2006, is the collapse in all its dimensions (economic, monetary, financial, diplomatic, intellectual and strategic) of the central pillar of the 20th century world incarnated by the US. It is indeed in this country that is to be found the centre of the financial and banking crisis that has been affecting the whole planet since the middle of last summer. The pillar now lies on quick sands, and this of course implies that the global architecture is altogether subsiding, and then will collapse piece by piece.

In this 17th issue of GEAB, our team of researchers has therefore decided to focus on the ana]]>The good news is that panic scenarios about the world running out of oil anytime soon are wrong. The bad news is that the price of oil is going to continue to rise. Peak Oil is not our problem. Politics is. Big Oil wants to sustain high oil prices. Dick Cheney and friends are all too willing to assist.

On a personal note, I’ve researched questions of petroleum, since the first oil shocks of the 1970’s. I was intrigued in 2003 with something called Peak Oil theory. It seemed to explain the otherwise inexplicable decision by Washington to risk all in a military move on Iraq.

Peak Oil advocates, led by former BP geologist Colin Campbell, and Texas banker Matt Simmons, argued that the world faced a new crisis, an end to cheap oil, or Absolute Peak Oil, perhaps by 2012, perhaps by 2007. Oil was supposedly on its last drops. They pointed to our soaring gasoline and oil prices, to the declines in output of North Sea and Alaska and]]>By Mike Whitney
Online Journal Contributing Writer

Sep 10, 2007, 01:25

“The new capitalist gods must love the poor — they are making so many more of them.” Bill Bonner, “The Daily Reckoning”

“The hope of every central bank is that the real problem can be kept from public view. The truth is that the public — even professionals on Wall Street — have no clue what the real problem is. They know it has something to do with derivatives, but none of them realize that it’s more than a $20 trillion mountain of unfunded, unregulated paper that has just been discovered to not have a market and, therefore, no real value . . . When the dollar realizes the seriousness of the situation — be that now or sometime soon — the bottom will drop out.” --Jim Sinclair, Investment analyst

About a month ago, I wrote an article “Stock Ma]]>The US economy continues its slow death before our eyes, but economists, policymakers, and most of the public are blind to the tottering fabled land of opportunity.

In August jobs in goods-producing industries declined by 64,000. The US economy lost 4,000 jobs overall. The private sector created a mere 24,000 jobs, all of which could be attributed to the 24,100 new jobs for waitresses and bartenders, and the government sector lost 28,000 jobs.

In the 21st century the US economy has ceased to create jobs in export industries and in industries that compete with imports. US job growth has been confined to domestic services, principally to food services and drinking places (waitresses and bartenders), private education and health services (ambulatory health care and hospital orderlies), and construction (which now has tanked). The lack of job growth in higher productivity, higher paid occupations associated with the American middle and upp]]>By Kerry Capell

Steep housing prices and a dependence on financial services make its economy vulnerable. Some predict a blow to credit might even be worse — much worse — than in the US.


REUTERS
Britain might take a major hit if the credit crisis pinches as much as some predict.
Could any country be more exposed to the current credit crunch than the U.S.? You bet, and that place is Britain. Unlike most of its European neighbors, Britain shares many of America's financial traits-and problems. Access to cheap credit has fueled a decade of unprecedented growth, with home prices tripling over the past decade, a faster rise than in the U.S. Consumer spending has skyrocketed, now making up roughly two-thirds of the country's total outlays. And the overall economy in Britain is more dependent on financial services than it is in the States.

Add it all up, and "Britain is likely t]]>By Henry C K Liu

In a period of just weeks, the subprime time-bomb that had been ticking unnoticed for half a decade suddenly exploded into a systemwide liquidity crisis that then escalated into a credit crisis in the entire money market dominated by the non-bank financial system that threatens to do permanent damage to the global economy.

As an economist, Ben Bernanke no doubt understands that the credit market through debt securitization has in recent years escaped from the funding monopoly of the banking system into the non-bank financial system. As chairman of the US Federal Reserve, however, he must also be aware that the monetary tools at his disposal limit his ability to deal with the fast-emerging marketwide credit crisis in the non-bank financial system. The Fed can only intervene in the money market through the shrinking intermediary role of the banking system, which has been left merely as a market participant in th]]>Jim Willie CB August 23, 2007

The US financial system is experiencing a combination of a heart attack (fibrillation from absent trade recycled surpluses), a massive hairball (subprime debt securities) working through the bank arteries, and a realization (like Wiley Coyote in cartoons) that no terra firma lies beneath the economic feet as the depths below are vividly apparent. Massive money printing constitutes a heart attack, now a crescendo since the Constitutional violation on gold backed currency. The mortgage bonds simply cannot work through the banking system, with hairballs leading to constipation and unspeakable intra-bank distrust. For ten years the USEconomy has relied upon rising stocks or rising home properties to sustain an entire economy, from a structural foundation of inflating assets. For any central bankers or leading economists working as policy maker counselors, this is a purely heretical strategy.

The US fi]]>By Mike Whitney

Thursday, August 9, 2007: --Alan Greenspan’s low-interest, subprime, snake-oil Caravan took another spin down Wall Street today---ripping up pavement, knocking down power-poles and sending traders scampering for safety. When the dust finally settled, “Maestro’s” wrecking ball had lopped another 387 points off the Dow Jones leaving markets reeling and investors cringing in fear. No doubt about it; the mood on the “Street” has taken a 180 overnight. A long procession of bears---marching three-abreast with arms locked—can now be seen winding through downtown Manhattan. Their sense of triumph is palpable.

Meanwhile the last wounded bull—still writhing at curbside-- is being carted off to slaughter.


MORTGAGE BLUES

No one has summed up the disaster in the mortgage lending business better than Paul Muolo of “]]>DOLLAR IMPERIALISM IN THE 21ST CENTURY
BY CHARLES H. COPPES, AUTHOR OF AMERICA’S FINANCIAL RECKONING DAY

“If a nation expects to be ignorant and free, in a state of civilization, it expects what never
was and never will be. The people cannot be safe without information.”

– Thomas Jefferson

Introduction

The term “petrodollar” is a macroeconomic term that is little understood and even less discussed in the major news media today. Exactly how a petrodollar exchange system has helped maintain the US dollar as the world’s reserve currency is a general theme in my book and will be the focus of this special report. As William Clark suggests in his book Petrodollar Warfare, the current “war on terror” has been exploited by the neocons in an effort to establish permanent US military bases in the Persian Gulf and a]]>By Paul Craig Roberts

08/08/07 "ICH" --- - Early this morning China let the idiots in Washington, and on Wall Street, know that it has them by the short hairs. Two senior spokesmen for the Chinese government observed that China’s considerable holdings of US dollars and Treasury bonds “contributes a great deal to maintaining the position of the dollar as a reserve currency.”

Should the US proceed with sanctions intended to cause the Chinese currency to appreciate, “the Chinese central bank will be forced to sell dollars, which might lead to a mass depreciation of the dollar.”

If Western financial markets are sufficiently intelligent to comprehend the message, US interest rates will rise regardless of any further action by China. At this point, China does not need to sell a single bond. In an instant, China has made it clear that US interest rates depend on China, not on th]]>By Walden Bello

Ten years after the Asian financial cataclysm of 1997, the economies of the Western Pacific Rim are growing, though not at the rates they enjoyed before the crisis. The region has been indelibly scarred: there are greater poverty, inequality and social destabilization than before the crisis. South Korea's painful labor-market reforms, for instance, have produced the quiet desperation behind one of the highest suicide rates among developed countries.

Meanwhile, despite all the talk about a "new global financial architecture", there is little in place to regulate the massive amounts of capital shooting through global financial networks at cyberspeed - one of the chief causes of the 1997 crisis. Leave-it-to-the-market enthusiasts tell us not to worry and confidently point out that there has been no major crisis since the Argentine bankruptcy in 2002.

But those who know better, like Wall S]]>From The Times, August 3, 2007

Tom Bawden in New York

The international financial system suffered fresh convulsions yesterday as it emerged that Germany’s IKB Deutsche Industriebank, one of the country’s leading small business lenders, has about £12 billion of exposure to high-risk sub-prime mortgages in the United States.

The extent of IKB’s exposure came to light three days after it issued a surprise profits warning from undisclosed losses on bonds backed by American sub-prime home loans, which only ten days earlier the lender had said posed no risk. Given the recent plunge in sub-prime bond valuations, analysts said that IKB’s exposure to high-risk home loans could easily lead to $5 billion of losses.

The German Government, fearful of the impact that such losses could have on IKB’s liquidity and credit rating, has helped to back and organise a €3.5 bil]]>