1. Yes, I saw that Corzine was “charged” by the CFTC. This is essentially meaningless. First, it is a purely civil action. These oligarch psychopaths LAUGH at the whole “civil action” paradigm. Second, the $100 million fine that the CFTC is going after comes NOT from Corzine, but from whatever is left of the MF Global Holdings estate, IF there is anything left at all. Not one red cent would come from Corzine, who was worth at least $600 million at the time of the collapse in the fall of 2011. Third, even if Corzine gets the dreaded “registration ban” (eyeroll), he will just jump right back into the markets as a silent partner.
The whole farce is a total nothingburger. With cheese.
Meanwhile, let me share a note that I received from an old floor trader buddy, and let me show you what the human toll is not just on the MF Global clients directly, but also on all of the thousands and thousands of decent people who can no longer make a living in the now-destroyed markets:
Ann,
I have been unable to find gainful employment in the industry I loved and was so very passionate about. As a result I have taken a job as a cook at the *City* Airport Hilton. While humbling, my hands get cut and burned constantly, it is honest work and I work hard.
All the best to you, bless you, J
This chap used to help hedge the price risk on the food you eat, thus helping to keep food prices and production stable. Now he is a short-order cook. I, personally, aspire to janitorial work someday.
The smart people still exist. But we aren’t playing any longer. We’re just watching. If you want to be ruled by imbeciles and psychopaths, and you insist upon destroying and running off every genuinely talented, decent, competent person, then so be it. We’ll just be sitting in the back, watching.
2. On the topic of the markets, let me share some insights I have picked up over the last several weeks from various sources and see if this sheds light on this for all of you out there who haven’t spent your life hip-deep in this stuff so you can understand what is going on. Maybe.
First, the people who actually know what is going on view the equities (stocks) and bond markets as utterly worthless trash that is only being marketed to two classes because these are the only classes of investors left who are dumb enough to still not recognize any of this: Pension plans and individual investors. Yes, that’s right. Pension plans are just slightly more “astute” than Joe Schmoe trading his $100k account through Edward Jones.
Understand that the entire stock market is nothing more than a massive facade and bubble, being blown every single day by the Federal Reserve to the tune of $4 billion per day. Yes, the Fed “prints” money out of thin air, and then pumps it directly into the stock market. Why is the Dow at 15000 while the U.S. and global economies are being intentionally strangled to death by the neo-Stalinists in Washington and Europe? Because almost all of the money flowing into it is coming from the Fed, which is conjuring it out of thin air. Again, to the tune of $4 billion PER DAY. If the Fed was removed or stopped, the Dow would collapse to 5000 – maybe lower – very quickly.
And the bond markets are the same. Prices are being propped up (and thus yields suppressed) because of this fake, Fed-bubble money being the only real player in town. Anyone with a lick of sense is long, long since out of the stock and bond markets.
Here’s a little anecdote I have been meaning to publish for a while. The day Obama was inaugurated in January 2009, super-prime farmground in south-central Illinois was selling at an all-time high of $5500 per acre, which everyone in the ag world thought was crazy-insane high. That same ground 4 1/2 years later is now selling for over $20,000 per acre. If you’re wondering where all of the super-rich are going with their wealth, there’s your answer. They are buying up productive farmground, leasing it back to the farmers who stay on as renter-caretakers or glorified sharecroppers, and everyone’s happy. The farmers aren’t leaving, they’re just restructuring their businesses from owning to renting.
So who are these people who are “in-the-know” in the financial markets? As I have said, it is all down to the High Frequency Trading guys. Now here is where it all comes together and gets incestuous. The HFT guys are the same guys who are developing and writing the code and algorithms for massive data (“cloud”) mining and surveillance. They have exhausted the profit potential in the High Frequency Trading itself, because they have run off all of the non-HFT liquidity and thus they were all just trying to poach off of each other, which makes basically no money. So, what they are now doing is developing code that processes ALL news data on the planet, and then the algorithms look for micro-trends, and then attempt to generate volatility and then poach the volatility in sectors or commodities that these micro-trends are indentified in. So yes, all of this “data cloud” and surveillance algorithm stuff that the government is involved in is being developed by the government’s operational arm on Wall Street. Or is the government the operational arm of Wall Street? Discuss.
The term that has been coined for this monstrosity is “Big Data”, and make no mistake, “Big Data” is Wall Street, Facebook, Apple, Amazon, Google and the FEDGOV all together. In terms of the markets, the only way for firms to make money is in developing and selling “Big Data”, poaching derivatives with HFT, and commissions from suckers like you, both personally and through your pension and retirement products.
Now for you wonky trading people. Let’s talk about derivatives. The bid-ask spreads are now totally absent from first, second and even third level derivatives. Even HFT algorithms can’t make a self-sustaining return if the bid-ask spread is a half-cent. In order to find any spread margins and thus make trading viable, these companies have to keep drilling ever lower and creating new levels of derivatives. Every time they drill down and bundle a set of derivatives on, say the seventh level removed from the actual commodity or product (the underlier), to create the new eighth derivative level, inefficient liquidity re-emerges in the new eighth level AND AND AND they evade regulation, because each new derivative level is the “wild west” until such time as an entire regulatory regime is created. The lag on that is massive, so each new derivative level buys time for Big Data.
With each new level of derivatives created, the foundations of the market in total become ever more porous and weak. We are now basically digging an eighth or ninth sub-basement underneath this skyscraper, and using styrofoam packing peanuts as the foundation material.
When the HFT stops, and when the Fed stops pumping billions upon billions of dollars PER DAY into the markets, the structure will instantly collapse because the foundations have been underdug and undermined multiple times, and we are now teetering on foam. In my 2.5 hour YouTube economics lecture (with the epic pink tie) I referred to this as “going no-bid”.
I’ve said it before and I’ll say it again. Anyone who is still in these markets is either stupid or on drugs.
† Our Father, who art in heaven, hallowed be thy Name. Thy kingdom come. THY WILL BE DONE, on earth as it is in heaven. Give us this day our daily bread. And FORGIVE US OUR TRESPASSES, as we forgive those who trespass against us. And lead us not into temptation, but DELIVER US FROM EVIL. †
Evil never stops. It never relents. It never loses zeal or enthusiasm. It never gets tired. It cannot be reasoned with. If you “dialog” with evil, it will win every time because it will only drag you down to its level through the lie of “compromise”. Evil cannot be “encountered” in any constructive way other than on the field of battle, at which point total victory achieved as quickly as possible is the only goal, the only acceptable outcome, and all tactics must serve that goal.
Anything less is a massive failure in charity; towards God, towards one’s fellow man (including the human enemy), and towards one’s self.
Unless and until the men of the apostasized Christian world (that’s YOU) relearn this and accept the curse of war as a chastisement for their sickening, horrific sins and cowardice, you will be destroyed by the forces of evil so that men who love God can eventually inherit your patrimony. Justice demands this. You cannot continue as the moral degenerates and cowards that you are and expect to keep your property and freedom, much less to be “blessed”.
You can start by canceling your cable or satellite feed.
Yeah, it is pretty sad that the Pope has to be rhetorically frontrun, but, as I have been saying since literally day one of the Franciscan pontificate, a South American Jesuit who isn’t terribly intelligent and who is also in love with the idea of his own dazzling, dazzling “humility” is a disaster, and when one sees a disaster coming, one prepares as much as one can.
Hence this repost about the First Beatitude, which Pope Francis clearly does not understand but is using as the foundation of his whole schtick as the “Leader of the Diocesan Community of Rome”.
If I’m not mistaken, he has already said that his first Encyclical will be titled “Blessed Are the Poor”, which in and of itself is problematic. The First Beatitude is NOT “Blessed are the poor” full stop. The First Beatitude is “Blessed are the poor IN SPIRIT.” Big, big, big, enormous, hugantic difference. Oh, but you know that a not-too-bright South American Jesuit with Liberation Theology / Marxist leanings would conveniently leave off the modifying prepositional phrase “in spirit”. Well, let’s frontrun that and really get our heads around the First Beatitude and the true poverty that Our Blessed Lord is referencing therein.
This post was originally from December 22, ARSH 2011. I had shut down Barnhardt Capital Management a month before and was interviewed by Peter Schiff on his radio show. That video is below. By the way, this was the first interview in which I publicly stated that Jon Corzine had committed a capital crime that merited execution. That is at the 15:05 mark. Mr. Schiff’s physical response in the video pretty much sums up where we are as a civilization. Anyway, that’s the backstory. Off we go:
Bravo to the many folks who picked up on exactly the remark by Mr. Schiff that will be the subject of tonight†s essay. You all will TOTALLY get this † you†re already most of the way there. We just need to flesh it out a bit.
And seeing the multitudes, He went up into a mountain, and when He was set down, His disciples came unto Him. And opening His mouth, He taught them, saying: Blessed are the poor in spirit; for theirs is the kingdom of heaven. Matthew 5: 1-3
The First Beatitude is another grossly misread and misunderstood verse, with the misunderstanding being a recent phenomenon, spurred by a conscientious perversion of the meaning of the verse by Marxist infiltrators beginning in the 20th century.
Most people read this verse and see the words †blessed† and †poor† and think that Jesus is saying that poor people are morally superior to rich people. You can see why Marxists jumped all over this verse. They have twisted it into a class warfare battle cry. Other people see the words †blessed† and †poor† and also the prepositional modifier †in spirit†, have no idea what to make of it, glaze over, start thinking about football or Zumba class, and just smile and nod like the Stepford Christo-zombies that they are.
I†m a huge fan of punctuation. Especially properly-utilized apostrophes. But I†m also a fan of ellipses and the humble comma.
I think that we can understand the First Beatitude with far more ease if we slip a set of ellipses in between the subject, †the poor†, and the prepositional phrase, †in spirit.† Thus:
Blessed are the poor . . . in spirit.
Does that help? Our Lord isn†t saying that poor people are by definition morally superior to rich people. Not at all. What He is saying is that a person who is detached from their wealth and is willing to †push their chips all-in†, to use a poker metaphor, is truly blessed. So, given this, ANYONE within the wealth spectrum, rich or poor, can possess this virtue. This also means that anyone within the wealth spectrum can LACK this virtue. There are two separate classifications that we need to address and combine in order to understand this dynamic: poor in spirit and poor in fact, and their antipodes, rich in spirit and rich in fact. If we form a matrix of these characteristics, there are four possible output combinations. Let†s go through each.
Poor in spirit and poor in fact:
This is a person who does not have any great wealth, but is also content and still maintains a spirit of generosity and gratitude. This condition is exemplified by the parable of the Widow†s mite in Mark 12: 41-44. The poor widow gave the smallest tithe, but it was greater than the tithes of the rich because, †she of her want cast in all she had, even her whole living.† The widow was detached even from what little she had, even though on a percentage basis it far, far exceeded what the rich tithed. The widow was both poor in fact, and poor in spirit.
Rich in spirit and poor in fact:
This is the person who lives beyond their means and is preoccupied with the APPEARANCE and ACQUISITION of wealth. (Cough, cough. Ring any bells? Ahem.) This is the person who leverages himself out the gazoo so that he can have the 4000 square foot house and the luxury car . . . even though he only makes $65k per year. This would also be the welfare denizen who scoffs at honest work and lives off of the government, but has a 55† LCD TV and PlayStation, and has multi-thousand dollar hair extensions and intricately manicured fingernails. No. Way. Girl. I did NOT just go there. Oh yes I did.
This is the rich person who is very much attached to their wealth, and places the preservation of their wealth as their top priority. And as so many of you picked up on in the Peter Schiff interview below, this is Mr. Schiff†s failing. If you scroll down and fast-forward the video to the 15:43 mark, here is the exchange that utterly exemplifies this condition:
Schiff: Let me ask you, your call for a strike, what exactly does that entail? If people wanted to follow what you†re saying, how would we have a strike? What would people do?
Ann: Close all of your securities accounts, bring all of your money home and stop trading all markets: futures, stocks, everything. Man up, act like you†ve got a pair and shut it down.
Schiff: Well, that would put me out of business. I mean, if all of my customers would close down their . . . .
And there you have it. Peter Schiff, like almost everyone else in our culture, can†t fully acknowledge the objective reality of what is happening, and thus can not respond in a fully virtuous way because he is, first and foremost, attached to his wealth and simply can not bring himself to push his wealth †all-in† in service to justice and truth. If we take him at his word in the video clip above, he will not tell his clients that they are at risk, recommend that they liquidate, or shut down his firm because he is attached to and has defined himself by his firm and the wealth that it generates for him.
Now please understand the distinction here: Mr. Schiff†s firm and the wealth it has amassed Mr. Schiff is not necessarily a bad thing in and of itself † no more so than my firm and the wealth that it generated for me over the years was †bad†. Not only are these things not necessarily bad, they actually have the potential to be good! What IS bad is the inordinate ATTACHMENT and unwillingness to LAY DOWN that †good thing† in service to a GREATER GOOD, which in this case is justice and truth. I was willing to lay my †good thing† down because I understood the First Beatitude and the promise of Christ that in laying down my †good thing† I might later inherit a far better thing, namely a wee little corner of the Kingdom of Heaven. As a trained arbitrageur, I recognize a good swap when I see it. Wink.
This is what Christ meant when He said, †And again I say to you: It is easier for a camel to pass through the eye of a needle, than for a rich man to enter into the kingdom of heaven. And when they had heard this, the disciples wondered very much, saying: Who then can be saved? And Jesus beholding, said to them: With men this is impossible: but with God all things are possible.† Matthew 19: 24-27
Our Lord isn†t saying that the rich are intrinsically evil purely because they are rich. That is what the Marxists want you to believe. He is saying that it is EXTREMELY difficult for wealthy people to maintain DETACHMENT from their wealth, and the richer people become, the more attached they tend to be to their wealth. But He goes on to say that there is hope! All things are possible through Him! Let†s all pray that Peter Schiff, and all wealthy people of good will, by the power of the Holy Spirit, are able to detach themselves from their wealth and shove that camel through that needle, because IT CAN BE DONE.
Poor in spirit, rich in fact:
Very simply, this is a person who is at any level of financial comfort above †poor† who is willing to push their wealth †all-in† if that is what is required to follow Christ fully. (The truly blessed then learn that The Van Down By The River not only isn’t so bad, it can be the best thing ever. But that requires a huge leap of faith. Trust me, I know.)
And that, ladies and gents, is how Peter Schiff, with an assist by the Holy Spirit, taught you all about the First Beatitude. The Lord truly does move and work in mysterious ways.
(I think maybe Mr. Schiff is the guy in the lower-left with his head down in his hand. “Oh, what He’s saying is HAAAAARD.”)
† Our Father, who art in heaven, hallowed be thy Name. Thy kingdom come. THY WILL BE DONE, on earth as it is in heaven. Give us this day our daily bread. And FORGIVE US OUR TRESPASSES, as we forgive those who trespass against us. And lead us not into temptation, but DELIVER US FROM EVIL. †
Our Lady, bedecked in helmet and chainmail, holding Our Lord. Suited and booted. Ready for battle. Ooh-rah.
We need to cover a concept relating to Pope Francis and economics. Pope Francis stuck his papal foot in his papal mouth YET again last week when he basically mocked people who had sent him what is referred to as a “spiritual bouquet”. Spiritual bouquets, for those of you who may have never heard the term, are when a group of people pray for another person and then send some sort of indication of the quantity of the prayers. For example, if a group of 100 people all commit to saying five rosaries each for a certain person, then the recipient would receive a “spiritual bouquet” of 500 rosaries – as opposed to a bouquet of 500 flowers.
Here is where the economics comes in. If you have seen my 8-part economics presentation on YouTube, you remember that I discussed the nature of money and how it is a proxy for a person’s capacity to labor, produce and create. In order for a person to do any of those things, the person must pass through time, which is why wages are quoted as a function of time, either per hour or per year. Then we went through the exercise of converting the GDP and debt of the U.S. into man-hours, thus driving home the point that inflating a currency does NOT remove or dilute debt, because the underlying instrument, namely man-hours, is unchanging, no matter how many zeroes you put on the number designating the wage per hour.
A group of conservative Catholics in Argentina sent Pope Francis a spiritual bouquet after his election that consisted of 3525 rosaries, probably because Pope Francis specifically asked for people to pray for him. In remarks last week to a group of South American nuns, he cited this as an example of heresy (Pelagianism, which it isn’t – Bergoglio clearly doesn’t grasp what Pelagianism even is), and then cattily dismissed the people who offered him the spiritual bouquet and their prayers for him with the words, “Please, don’t laugh.” For those of you who claim that Pope Bergoglio has a robust Marian devotion, and a devotion to Fatima, you need to wake up. He laughed dismissively at the Rosary being said for him.
Let’s assume that the Rosaries in this 3525 spiritual bouquet were all fifteen decades. It takes right at an hour to pray all 15 decades of the Rosary. That means that the spiritual bouquet represented just over 1.75 man-years. I use 2000 hours as the standard work-year.
Think about that. A group of people laid down a total of 1.75 man-years that could have been spent working and earning a wage or producing a commodity, and instead sacrificed that time in prayer for the pope – AT HIS SPECIFIC REQUEST. And then he laughed at them and called them heretics.
At every Mass lately I shudder at the following prayer after the consecration:
O Lord Jesus Christ, who saidst to Thine Apostles: Peace I leave with you, My peace I give unto you; look not upon my sins, but upon the faith of Thy Church; and deign to grant her that peace and unity which is in accord with Thy will: who livest and reignest God, world without end. Amen.
God is angry. Pope Francis is indeed the Pope of our Punishment.
† Our Father, who art in heaven, hallowed be thy Name. Thy kingdom come. THY WILL BE DONE, on earth as it is in heaven. Give us this day our daily bread. And FORGIVE US OUR TRESPASSES, as we forgive those who trespass against us. And lead us not into temptation, but DELIVER US FROM EVIL. †
King St. Olaf of Norway. Manly wielder of battle axes and other ASSAULT WEAPONS. And a SAINT.
St. Olaf, evangelizer of pagan Scandinavia, pray for us!
Originally penned and posted on February 29, ARSH 2012
If you know how bad the situation is and don†t feel the need to subject yourself to any more of my patented Barnhardt Phillipic and Funeral Dirge for Civilization, take your leave now, because I honestly think that this is the the saddest, most profoundly depressing post I have yet written.
And I†ve written a few.
A few thousand.
The topic is the US Dollar, and currency in general. The Federal Reserve has been willfully and systematically debasing the US dollar for a century by claiming that 2% inflation is the benchmark of a healthy economy. Since the universities and media have been overrun by Marxists, there is hardly anyone alive who A.) is in possession of the capacity to independently think and reason their way through such a question and B.) anyone who cares in the first place.
In addition to the slow grinding debasement by the Fed, the Marxists have finally fully usurped and overthrown the government of the United States, and thus have now executed the coup de grace: wild, flagrant money †printing†, and by †printing†, please understand that we are not talking about the fabrication of paper bills. We are talking about computerized entries into the Federal Reserve†s ledger. The Fed literally types in an addition of x billion or y trillion dollars into its balance sheet † creating dollars out of thin air that exist as zeroes and ones on a computer server † and then use those new dollars to purchase US Treasury bonds. In this way, the Obama regime and its puppetmasters have debased the US dollar by roughly one half the total GDP in less than four years. This iteration of both the United States and the US Dollar are over. There is no way to walk back the damage that the Obama regime has done. They have accomplished their mission, no matter what happens from this day forward.
After reading and reviewing my texts on monetary theory from Mises, Hayek, Friedman and contemporary economists including Denninger, I have come to a profound realization about money and the fiat vs commodity money (i.e. gold-backed currency) debate † and it bodes very, very poorly for us.
First, a few preliminary points.
1. Going to a gold standard will solve nothing. This is not to say that I don†t think that gold and silver are good wealth storage vehicles in this situation. To the contrary, I think they are excellent for these times. BUT, simply reverting to the gold standard, in and of itself, will not turn us around. We will, at some point, be FORCED to revert to the primordial commodity currency paradigm simply because our government and society will collapse, and thus our currency with it. If and when our culture rebuilds itself, if we remain as we are, the exact same problems that have arisen under the fiat money system will emerge again, even under a gold-backed currency.
So why has civilization, up until just within the last few decades, operated on commodity money systems, and why is it plausible to think that any fiat currency could ever have any legitimacy? The reason why civilization has used commodity money, namely gold and silver, up until just recently is because up until just recently, there was no way to instantly verify money held on deposit, or the existence of a line of credit. With computers and the internet, such instant checks are as common as breathing, blinking and walking. We don†t even think about it anymore. We go to the sandwich shop, get our sandwich, and in less than three seconds, the vendor has confirmed that we have funds, and then transferred those funds into his account. In the centuries and millennia past, people would load chests filled with gold coinage and jewels onto sailing ships and set out for distant lands. Why did they take their gold and jewels with them and risk losing that money to shipwreck or piracy? Because they had to take it with them. The only way to confirm your wealth to others was to physically possess it. Physical possession and spot exchange was also the only way to execute mercantile transactions. If we lose telecommunications and computing ability due to the successful detonation of an Electromagnetic Pulse weapon, or simply due to the total breakdown of society and the ability to maintain and power such systems, then indeed, this argument will become moot. BUT, so long as there is near-instant data transmission, commodity money will be theoretically optional (*with a qualifier to be addressed later in Part 3).
While we are looking at history, it bears mentioning that metals-backed currencies have not prevented other economic calamities. Just in the United States, the Great Depression of the 1930†s and the post-Civil War depression of 1873-1879, now called the Long Depression, which was actually caused by the manipulation of silver demand by the German Empire, were not magically prevented by metals-backed currency. Returning to a gold standard would not prevent recessions from happening. In fact, recessions are a necessary fact of economies, and serve to deflate bubbles and restore equilibrium. The only people who promise to eliminate economic recessions are Marxists, and that is because Marxists are liars. Just as all respiring beings on earth must both inhale and exhale, so too must economies. A person who perpetually inhaled would eventually burst their lungs and die. Conversely, a person who could only exhale would asphyxiate and die. But both actions, in a balanced, moderate cycle, are the definition of health. It is the same with economies: periods of expansion followed by a healthy, normal contraction that deflated any bubbles and restored equilibrium, thus setting up the next expansion phase.
2. Metals-backed currencies can be corrupted, too. There are two ways to corrupt a metals-backed currency, and it has happened many, many times throughout history. The first means pertains to coinage, and is to corrupt the metal itself with cheaper metals, such as zinc. The Roman denarius was debased from 4.5 grams of pure silver to less than one tenth of a gram of silver. Hyperinflation was the inevitable result, and the currency had to eventually be totally replaced.
The second means, which pertains to paper and electronic currency, is for the government to lie about the reserve quantity. This could either be done by explicitly lying about the number of ounces in storage, OR could be done by clandestinely issuing dollars to cronies of the oligarchy, which were NOT actually backed by any metal, and thus would be a de facto lie as to the supply. Since the people would be unable to demand a daily audit and reconciliation, the ability to police and reconcile the supply of metal and dollars would be impossible, and exactly the same things that are going on today, namely government looting of the Treasury and debasement of the currency, would continue apace.
The problem lies in our overtly criminal government, obviously, but also in the banking paradigm itself. Fractional reserve banking with unsecured lending has got to go. In the current banking paradigm, banks are required to keep from zero percent to ten percent (yes, that†s right, ZERO PERCENT) of customer deposits on hand as reserves, and loan the rest of the money out. If a customer deposits $100 in Bank A, $90 is lent out and $10 remains as reserve (and this is the CONSERVATIVE version). Whoever borrowed the $90 then deposits it in Bank B. Bank B then lends out $81 and keeps $9 in reserve. And so on, and so on. If you go through ten cycles this way, you end up with the original $100 being leveraged into $686.19 of deposits backed by only the original $100. This is what they call †money creation.† For you math buffs, this is a limit function. With a 10% reserve requirement on a $100 initial deposit sum, the limit terminates at $1000. With a 5% reserve requirement on $100, the limit terminates at $2000. With a zero percent reserve requirement, the limit is obviously infinite. A reasonable, non-zero reserve ratio is workable, but only so long as banks are required to carry one dollar of reserves for every one dollar they lend out. These reserves can be either in the form of the bank†s own capital, OR in the form of FAIRLY VALUED booking of the assets purchased with the loan. All unsecured lending must stop. This means that all home mortgages must be marked-to-market every single day, and if the home is worth less than the loan outstanding, the bank must post its own capital against the shortfall. This also means that credit cards, which are totally unsecured because they are used to purchase mostly non-assets, such as meals, gasoline, vacations and pure service commodities, must be backed by bank capital dollar-for-dollar. The bank could sell bonds to raise capital if it wants to make unsecured loans and then would be arbitraging the spread between the interest rate it must pay on the bonds and the interest rate plus default risk on the credit cards. In this way, the worst that could possibly happen, namely every unsecured credit line totally defaulting, would result in the bank owners and investors losing their money † but the customer deposits would be safe because all of the loans against hard assets, which would be properly valued and marked-to-market, could be sold to other banks in the market, and that revenue would fully cover all customer deposits.
In not posting capital against unsecured loans, the banks are indeed naked short selling our currency † and it matters not whether that currency is gold-backed or not. The credit card customer is promising to pay back (deliver) a loan with money that they do not have and does not exist, and they won†t be able to borrow. So, the bank and the customer together are colluding in the naked short sale. The long on the other side is the citizen and taxpayer who will subsidize the inevitable †need† to print more dollars to †bail out† both the bank and the customer. Taxes will be raised and the currency will be further debased, causing price inflation † a one-two punch to the citizen. This is EXACTLY what is happening to us today.
Well, the reality today is that banks are both writing massive quantities of unsecured loans and doing nothing on their side to balance the ledger, AND they are failing to honestly and realistically book the values of their hard-asset loans. The big banks are still booking home values at their original purchase price † not the fair market value today. Given the housing bubble, most mortgages today are underwater and are worth far, far less than the principal balance to say nothing of interest. This is why I say, echoing others, that the major banks in this country are not just totally insolvent, they are insolvent multiple times over. If the government wasn†t criminal and the favored banks of the oligarchs actually had to comply with Sarbanes-Oxley, the entire system would implode into a singularity tomorrow.
For more info and a much better explanation of the concepts covered to this point, do purchase †Leverage† by Karl Denninger † a very easy-to-grasp, detailed explanation of the whole, stinking mess.
Sadly, that is where we are in this country. Sure, there are still good people, but as a percentage it isn†t even remotely enough to bear the burden of the massive moral degeneracy of the others. Even among those people who would never steal or loot, there is a decided lack of courage to stand up to those who do steal and loot. The MF Global confiscation proves this. People have mostly rolled over and accepted having their money stolen, shrugging their shoulders and telling themselves that there is nothing they can do † and then going back for more, continuing to patronize the very exchange that facilitated the theft and fraud. To my knowledge, only one broker has exited the field on purely moral grounds in a pre-emptive action to protect clients, and as a protest to the injustice of the system itself.
Our government is saturated with corruption, looting and outright treason and criminality, and yet most people simply cannot be bothered to care, much less to act, and are thus passively complicit. A non-trivial percentage of the population are planning and maneuvering to best †benefit† or profiteer from the criminality and fundamental dishonesty of the paradigm. Others are attempting to enter the oligarch class themselves under the guise of running for political office † and make no mistake, this encompasses both the so-called left and the so-called right on the political spectrum. The degeneracy is everywhere.
The fall of a society can happen very quickly. Our society has taken roughly 50 years to topple. If the previous example of the Russian culture is any example, we can expect it to take many multiples of 50 years to undo this damage, if and only if the pendulum has reached its maximum amplitude and now begins to swing back, which I fear has not yet happened. Morality cannot be legislated. Cultures cannot be purged of evil, selfishness and sloth overnight † even with a war. I cannot lie to you and tell you that short of Divine Intervention, this situation will resolve itself in any of our lifetimes. We had †it.† We had †it†, and we squandered †it†, and now †it† is gone, and no governmental, economic or monetary policy will get †it† back. †It† can only come from God, dwelling in the hearts of men, and God only comes to men if they specifically ask Him.
We, the people, always have been and always will be the ultimate backing commodity of our currency, because at its core, money is merely the representative device for a man†s capacity to produce and create. Dishonest men do not create or produce. They steal. Thus, the currency of a morally degenerated society is by definition degenerate itself. The currency of a degenerate society is the proxy not for a man†s ability to work and think, but rather a proxy for a man†s capacity to steal and evade work.
We used to be like gold † beautiful and warm. Now we are like pig iron † cold, brittle and good-for-nothing. And THAT is what constitutes the †full faith and credit† that backs the U.S. Dollar. So long as our culture remains degenerate, our currency can never be anything but spiraling, worthless trash.
