Monday, March 12, 2012

337 Soros: It's not a currency or sovereign debt crisis, but a banking crisis. Banks buy fewer bonds because of damaged balance-sheets

*Soros: It's not a currency or sovereign debt crisis*, *but a banking
crisis. Banks buy fewer bonds because of damaged balance-sheets*

* *

*(1) Soros: It's not a currency or sovereign debt crisis*, *but a
banking crisis. Banks buy fewer bonds because of damaged balance-sheets*

*(2) ECB denies Anglo-Saxon conspiracy the cause of falling Euro *

*(3) The Criminal Case Against Goldman Sachs*

*(4) Seize and Liquidate Goldman Sachs*

*(5) China, Japan & "UK" holdings of US Treasuries go exponential*

*(6) Australian and British housing markets are the last two bubbles -
Jeremy Grantham*

* *

*(1) Soros: It's not a currency or sovereign debt crisis*, *but a
banking crisis. Banks buy fewer bonds because of damaged balance-sheets*

From: lenczner <> Date: 24.06.2010 09:10 AM

Soros tells Germany to step up to its responsibilities, or leave EMU

Legendary investor George Soros has called on Germany to leave the euro
unless it willing to embrace a growth strategy, describing Berlin’s
austerity doctrine as a threat to democracy and political stability in

By Ambrose Evans-Pritchard, International Business Editor

Published: 6:31PM BST 23 Jun 2010

"German policy is becoming a danger that could destroy the European
Project. A collapse of the euro cannot be excluded," he told the German
weekly Die Zeit.

"Unless Germany changes policy, its withdrawal from the currency union
would be helpful for the rest of Europe. At the moment Germany is
pushing its neighbours into deflation: this threatens a long phase of
stagnation, leading to nationalism, social unrest, and zenophobia. It
endangers democracy," he said.

Mr *Soros saw the political effects of wage cuts first-hand during the
Great Depression*, and narrowly survived the Holocaust as a Jewish boy
in Nazi-controlled Budapest. He has since dedicated much of his wealth
to philanthropic works promoting freedom and pluralism across the globe,
mostly through Open Society institutes.

His comments reflect growing *alarm in influential circles* on both
sides of the Atlantic *over the 1930s-style policies of wage cuts and
debt-deflation* being imposed up the Club Med bloc, Ireland, and parts
of Eastern Europe by the EU authorities, at the behest of Berlin.

President Barack Obama clearly had Germany in mind when he wrote a
letter to fellow leaders before the G20 summit in Canada this week that
surplus countries should do more to shore up global demand. "Our highest
priority must be to safeguard and strengthen the recovery: we cannot let
it falter or lose strength now. Should confidence in the strength of our
recoveries diminish, we should be prepared to respond again as quickly
and as forcefully as needed," he wrote.

China has deflected G20 criticism by starting to free the yuan, leaving
Germany facing the full wrath of Washington. While the German economy is
not in itself large enough to shape global events, US officials fear
that Berlin’s dominant influence over the European Central Bank and the
fiscal machinery of monetary union is dragging most of Europe into an
economic swamp. Germany has raised the bar for every eurozone country by
announcing ?80bn of belt-tightening from next year.

Nobel laureate Paul Krugman told the German press earlier this week that
the country was committing the same error as the United States in
1936-1937, or Japan in the 1990s, by withdrawing stimulus before
recovery has taken root.

"I don’t have a problem with trying to balance the budget in five or 10
years. The question is whether one should start when the economy is at 7
or 8 percent below its normal capacity and interest rates are at zero.
Now is not the time to be worried about deficits."

Professor Krugman said there was a risk of a "domino effect" reaching
Spain and Italy if Bundesbank chief Axel Weber takes over as head of the
ECB and fails to offer enough monetary stimulus to keep these countries

One analyst said that Mr Weber faces an impossible task. "Either they do
more QE (quantitative easing), in which case it will set off inflation
in Germany and cause Germany to leave EMU: or they don’t do more QE, in
which case it will lead to deflation in Southern Europe and force them
out of EMU," he said.

Mr Soros said Germany was treating the deeply-flawed Maastricht Treaty
as it were a "sacred text", warning that* monetary union cannot endure
for long as a narrow construct based on debt and deficit ceilings*. He
said wage rises in Germany are imperative to help lift the whole
eurozone, allowing peripheral economies to claw their way out of trouble
without fighting the extra headwinds of deflation.

"The truth is that what we have in Europe is *not a currency or
sovereign debt crisis* as many people think, *but a banking crisis*," he
said. Mr Soros argued that the weaker states cannot easily fund their
deficits any longer because *some banks are purchasing fewer bonds as a
result of damaged balance-sheets*.

Investors are likely to pay close attention to the views of Mr Soros,
whose Quantum fund played a key role in the crisis of the Exchange Rate
Mechanism in 1992. He famously pounced on sterling and the Italian lira
after a top Bundesbank official described both currencies as
over-valued, an invitation for a speculative attack.

The crisis proved a blessing in disguise for Britain, which was
liberated early from a destructive policy of job wastage. Mr Soros yet
to receive a a knighthood for his services. /

*(2) ECB denies Anglo-Saxon conspiracy the cause of falling Euro *

From: chris lenczner <> Date: 17.06.2010 10:43 PM

Trichet denies Anglo-Saxon attack on euro - MarketWatch

By Steve Goldstein, MarketWatch

Last Update: 5:19 AM ET May 31, 2010

European Central Bank President Jean-Claude Trichet on Monday denied
that an *Anglo-Saxon conspiracy was to blame for the rapidly falling
euro* as he sidestepped questions over a clash with his potential
successor and over Spanish bank health.

In an interview with Le Monde and translated into English on the ECB web
site, Trichet said investors have a difficult time understanding
European institutions, as the euro trades at the $1.23 level from above
$1.50 at the end of 2009.

"One should be wary of any conspiracy theories," Trichet said. "I simply
believe that some international investors struggle to understand Europe
and its decision-making mechanisms. They have difficulty in gauging the
historical size of the European construction and in anticipating the
capacity of Europeans to take decisions that are just as important as
those taken a few days ago."

He said the markets will need time to adjust to the nearly $1 trillion
European Union-International Monetary Fund support package reached
earlier this month.

"The measures are so significant in terms of both their nature and their
scale that there is no doubt that they will have a positive effect on
the markets," the central bank chief asserted.

Trichet called the euro a "very credible currency" which keeps its
value, noting that average consumer prices have been below its target
during its 11-and-a-half year existence. "The issue is that of financial
stability within the euro area on account of bad fiscal policy in
certain countries, in particular Greece. It is imperative that this be

He also said there was no "plan B" for Greece and said he doesn't
anticipate a restructuring of the troubled country's debts. "Greece must
and will honor its commitments. The European Commission, together with
the ECB on the one hand and the IMF on the other, is following
developments in the recovery program very closely," he said.

Trichet said austerity packages -- announced throughout the euro zone,
from Germany to Greece -- were needed in spite of the possibility they
may derail growth.

"When a household systematically spends more than it earns, so that its
debt rises exponentially, its situation is clearly untenable. Correcting
this situation demonstrates both wise and sound judgment," he said.

Trichet also dodged a question on the clash with current Bundesbank
president, and possible successor, Axel Weber over the purchase of
government bonds, noting he doesn't comment on what ECB colleagues say.
He reiterated that unlike similar programs of the U.S. Federal Reserve
and the Bank of England, the ECB bond buys are not quantitative easing
programs because they are sterilized.

The central bank chief added that he took a "very cautious view" on bank
taxes that are being proposed across the globe, noting the lessons of
the prudential regulation still need to be learned.

On Spanish banks -- one regional lender was rescued last week, and
several others are now being pushed into merger talks -- Trichet said he
had "no particular comments."

Steve Goldstein is MarketWatch's London bureau chief

*(3) The Criminal Case Against Goldman Sachs*

May 4, 2010

What Was Fab's Job Description

Why a *Criminal Case Against Goldman Sachs* Matters and Why Charges
Could Stick


Goldman Sachs used to be the firm that pursued top government posts; now
government is in hot pursuit of it, and not in a good way. The SEC has
charged the firm and an employee, *Fabrice Tourre*, with securities
fraud and the Justice Department has commenced a criminal investigation,
according to news reports.

Change appears to be swallowing Goldman Sachs. It began quietly moving
out of its *storied and staid headquarters *at 85 Broad last Fall *to
flashy new multi-billion dollar digs* at 200 West Street, including a
54,000 square foot gym (roughly the size of 20 homes for average
Americans; those who can still afford one after the Wall Street
pillage). And after the release of internal emails by the SEC and
Senate, Goldman looks more like a sleazy boiler room pump and dump
operation in drag than an investment bank (in drag as a bank holding
company). Comedy talk show hosts are having a field day (Jon Stewart
calls them "those f*!*!ing guys") and Goldmanfreude (pleasure in
watching Goldman shamed for the pain it inflicted on others) is in full

It all sounds eerily familiar to the *wealth transfer maneuver by
Goldman Sachs Trading Company in the asset bubble of 1928*. The Trading
Company was a closed end fund (called a trust in those days) that
Goldman Sachs created and offered to the public at $104 a share,
*stuffed with conflicted investments while paying Goldman a hefty
management fee*, only to end up a few years after the 1929 crash trading
at a buck and change. On May 20, 1932, Walter Sachs, President of the
Goldman Sachs Trading Company, was grilled by the Senate Committee on
Banking and Currency. The implication was the same as the current round
of Senate hearings: Goldman royally fleeced its customers to line its
own pockets.

Security lawyers who watched the Senate Permanent Subcommittee on
Investigations grill Goldman Sachs employees on April 27, 2010 hopefully
were more eagle-eyed than investment guru *Warren Buffet, who is now
echoing the same refrain as Goldman CEO Lloyd Blankfein, that the firm
has done nothing wrong *and is being unfairly pummeled. Never mind that
Mr. Buffet has $5 bilsky invested in Goldman on which he is earning 10
percent. (Goldman employees like to refer to $1 billion in their emails
as a bilsky when bored of characterizing what they're selling to clients
as crap or sh---y deals.)

The first Goldman Sachs panel to line up before Senator Carl Levin's
subcommittee on April 27 consisted of Daniel Sparks, Joshua Birnbaum,
Michael Swenson and Fabrice Tourre. Mr. Sparks headed the Mortgage
Department and supervised the other three who worked in the Structured
Product Group at the time the SEC has alleged the securities fraud

To hear these four tell it, their jobs included trading for Goldman's
benefit (proprietary trading), originating investment products, selling
the products to customers once they were created (distribution), and, in
Mr. Tourre's case, even speaking with the rating agency that would
transform these subprime bets into AAA derivatives. And how did they sum
up all of this as a job description? They testified, under oath I might
add, that they were "market-makers." In a sane world, a market maker is
an entity that matches buyers with sellers and profits from capturing a
portion of the spread (bid and ask) on the buy and sell price of securities.

To a lay jury, this might fly as legitimate conduct; something akin to a
short order cook who shops for the groceries, whips up the omelets,
throws a little parsley garnish on the plates, serves the diners, and
tallies up his P&L at the end of the day. If he overbought on ground
beef, he might have to have three days of specials like Shepherd's Pie,
Hungarian Goulash, and Spaghetti with Meat Sauce to "flatten" his
position and "get closer to home." Nothing criminal going on here; just
good ole American know-how and innovative workouts.

The major problem with this analogy, and most others in defense of
Goldman, is that the short order cook wasn't trying to pass off E. coli
beef for prime rib. Another problem for Goldman is that embedded in the
heart of every securities law is the principle that the customer must be
treated honestly and fairly and any mechanism or device to deceive,
manipulate or defraud is patently illegal. Remember, securities laws
grew out of the ingrained Wall Street corruption exposed in two years of
Senate hearings in 1932 and 1933.

It is difficult to see how one can be engaging in proprietary trading
for the benefit of the firm at one moment, acting in an agent capacity
for the benefit of the customer the next moment, and creating investment
products designed to fail on a latte break. Sparks, Birnbaum and Swenson
all had principal licenses to engage in investment banking activities
like underwriting as well as the Series 7 license to trade securities.
Mr. Tourre had only the Series 7 and Series 63 licenses to trade
securities. He had no principal license according to his regulatory file
available online. That could be a big legal issue for Goldman as a firm,
for Mr. Sparks who supervised him, and for the controlled-demolition
investment product he assisted in creating without a principal license.
Failure to supervise is one of the first areas security lawyers review
in assessing a firm's liability.

According to the SEC complaint, Mr. Tourre knowingly assisted in*
creating and then peddled an investment product designed to fail* that
had been handpicked for that purpose by a hedge fund manager to
facilitate his profiting from a short position. (John Paulson, the hedge
fund manager, made approximately $1 billion while those on the other
side of the trade lost about $1 billion while never being advised of the
hedge fund manager's role.) According to the Senate, Goldman was itself
shorting (betting on subprime derivative products to fail) while
actively promoting these products to clients. The Senate hearings raised
a practice and pattern of deceit by Goldman against its own clients. And
let's not forget that the approximately $12.9 billion of taxpayer
bailout funds that went in the front door of AIG and came out the
backdoor into Goldman's coffers was a result of Goldman's well-placed
subprime bets offloaded onto AIG.

Clearly, *Goldman's defense is being structured around the idea that
anything goes if you call yourself a market maker*. That seems like a
fairly lame defense when your shareholders have lost $20 billion in
market cap despite your top tier law firms playing hardball and the
Oracle of Omaha waving pompoms. (This Buffet gesture is reminiscent of
Prince Alwaleed bin Talal cheering on Citigroup as its share price
plummeted to earth along with tens of billions of off balance sheet debt
derivatives. He also owned a boatload of the stock.)

My advice to Goldman is to throw yourself on your sword. Come clean on
everything and clean house. Put a modest gym in the basement of your new
digs and donate the 54,000 square foot space to charities for the
struggling folks you ripped off in their pensions and 401(k)s. And maybe
it's time to apologize for what you did in 1928 and 1929 as well.

Then have a sit down with Warren Buffett and start co-authoring OpEds on
why the Glass-Steagall Act separating investment banks from insured mom
and pop funds at commercial banks must be restored. If you have any
trouble finding an argument for this, just lay all those recently
disclosed internal emails end to end and observe the narcissistic,
sociopathic culture you've created out of the uber-testosterone Wharton
School boys.

Pam Martens worked on Wall Street for 21 years; she has no security
position, long or short, in any company mentioned in this article. She
writes on public interest issues from New Hampshire. She can be reached

* *

*(4) Seize and Liquidate Goldman Sachs*

From: lenczner <> Date: 24.06.2010 09:10 AM

Webster G. Tarpley

April 27, 2010

Today’s Senate hearings, carried on CNBC, Bloomberg, and C-SPAN,
represent the first major exposure of the American people to the
scandalous frauds of the derivatives casino, including synthetic
collateralized debt obligations (synthetic CDOs or CDO?). These are
things most people have heard very little about. They begin to open up
the shocking reality behind such shopworn euphemisms like “toxic
assets,” “exotic instruments,” and “troubled assets.” Reactionaries in
general and Republicans in particular have done everything possible to
hide the role of derivatives, which must be considered the main cause of
the financial panic of September 2008 which brought down Lehman
Brothers, Merrill Lynch, and AIG, after felling Bear Stearns in March of
the same year. The reactionary legend, repeated yesterday on the Senate
floor by financier minion GOP Sen. Gregg of New Hampshire, is that the
crisis was caused by poor people taking out subprime mortgages and then
defaulting, bringing down the entire Anglo-American banking system and
triggering the bailouts. Either that, or too much government spending
was too blame.

A mass of kited derivatives blew up in September 2008

This Big Lie has come from such propaganda sources as the Limbaugh
Institute of Retarded Reactionary Ranting. But the *$1.5 trillion in
subprime mortgages were dwarfed by the $15 trillion US residential real
estate market*, to say nothing of the $1.5 thousand trillion world
derivatives bubble. But, starting with Bush-Goldman Sachs Treasury
Secretary Henry Paulson, the talk has been of a “housing correction,”
not a derivatives panic. It must be pointed out that *derivatives are
*nothing but wagers, *bets *placed from a distance *on securities which
themselves are often not mortgages, but rather other derivatives*. The
bettor buying a synthetic CDO or CDO? does not own the underlying
mortgages or mortgage-backed securities, any more than someone who bets
on a racehorse owns part of the horse. Blankfein and others tried to
portray derivatives as a service to hedgers and end-users, but it’s
clear that the vast majority of derivatives involve neither hedgers nor
users, but only bettors on both side of the transaction. It is in any
case this mass of* kited derivatives which blew up in 2008, bringing on
the present world economic depression*.

Goldman Sachs executives are babbling cretins

The mystique of Goldman Sachs is based in large part on their reputation
as the smartest financiers on Wall Street. After today’s hearings, this
mystique has permanently dissipated. The Goldman executives babbled.
They sounded dumb. They stalled and stammered and went into contortions
to avoid giving straight answers to simple questions. They were
mendacious and evasive when they did speak. Financial powers around the
world will note carefully the refusal of three out of four Goldman
executives on one panel to state that they had a duty to defend the
interests of their clients. Who will want to do business with such a
gang? Goldman Sachs got $10 billion of taxpayer money in low-interest
loans under the Bush-Paulson TARP. Part of that money went to pay for
obscene bonuses for Goldman executives like the ones on display today.
The argument for bonuses is that they must be paid to retain the highly
talented personnel, virtual geniuses, who are indispensable for Wall
Street speculative success. But these are no geniuses, they are
imbeciles. No more bonuses should be paid by banks saved through public

Don’t buy any used cars from Lloyd Blankfein

Sleaziest of all was Goldman’s risk-monger in chief, Lloyd Blankfein,
who pretended not to know that derivatives are often kept hidden off
balance sheet. The morally insane Blankfein testified that his role was
to provide the firm’s clients with “the risk they wanted.” Other GS
witnesses represented the firm’s role as “distributing risk.” But it
turned out that they were manufacturing risk through the very existence
and activities of Goldman Sachs, which had the result of pyramiding the
total risk of the US financial system into intergalactic space. It is
time to regulate much of that unbearable risk out of existence with
appropriate regulatory legislation. In the meantime, no sane person
would buy a used car from Blankfein. Nor should they believe his
assurance that the “recession” has ended.

But when at the end of the day Blankfein finally suggested to Sen.
Tester that synthetic CDOs might be outlawed, we should accept his
proposal immediately.

Today’s hearings reveal the Goldman Sachs gunslingers and whiz kids as
ignorant gangsters and con artists, notable only for their ability to
practice massive fraud with impudence. These sleazy mediocrities do not
deserve bonuses paid for by taxpayers. Rather, it is time to shut them
down and put them in the dock.

If Goldman Sachs had cared about is clients, it would have urgently
warned them to unload their subprime risk by late 2006 or thereabouts.
Instead, Goldman was busily increasing its clients’ risk by selling them
more toxic CDOs out of its own inventory warehouse.

Goldman Sachs: *bookies who stack the deck and fix the games*

As the philandering Sen. Ensign pointed out, comparing Wall Street to
Las Vegas is a slander on the croupiers of Las Vegas, where everyone
knows or should know that the game is rigged so that the house always
wins. To use the comparison introduced by Sen. McCaskill, Goldman Sachs
was operating as the gambling house, or the bookie. At the same time,
Goldman was betting for their own account. But much worse was the fact
that Goldman was stacking the decks, loading the dice, fixing the games
on which the bets were placed, and bribing the umpires.

As Ensign put it in a rare moment of lucidity, the subprime mortgage was
bad. But the collapse of subprime would not have had anything like its
actual destructive effect on the US economy if it had not been
compounded by the mass of synthetic derivatives that were piled on top
of subprime.

No national or social purpose served by Goldman Sachs and toxic
derivatives bets

The broader issue raised by today’s hearing is: what human purpose is
served by the existence of Goldman Sachs, which concocts toxic synthetic
CDOs for the purpose of allowing speculators, who are often lied to and
duped, to bet for or against them. Goldman Sachs can only be described
as a speculative parasite which promotes the activities of other
speculative parasites, such as the John Paulson hedge fund at the
expense of the public and of its other clients. It was a crime to inject
$10 billion of Treasury money into Goldman Sachs. It was another crime
for the Fed to lend Goldman untold billions (just how many billions
Bernanke still refuses to disclose) to keep them afloat and enable more
predatory profits. These crimes must stop, and the public money must be
clawed back. Most important, it is time to shut down the derivatives

Goldman got $12.5 billion from taxpayers for AIG credit default swaps

Useful questions from GOP Sen. Coburn pointed to another kind of
derivative: the infamous credit default swap (CDS). These CDS are what
brought down AIG, whose London hedge fund had issues $3 trillion in
derivatives. When the government bailed out AIG, part of that $180
billion of taxpayer money was used for payouts to the CDS counterparties
of AIG, biggest among them Goldman, which got $12.5 billion from the US
taxpayer. That was 100 cents on the dollar on a mass of toxic CDS.
Coburn wanted to know why Goldman got all their money back, while GM
bondholders took a bath as GM went bankrupt. That was, of course, a
matter of Goldman’s political clout through GS alum Henry Paulson and
Obama Car Czar Steve “The Rat” Rattner, backed up by the historic
preponderance of finance capital over industrial capital in this country
since Andrew Carnegie sold out to JP Morgan over a century ago.

Derivatives and zombie banks: the toll

Thanks to Goldman Sachs, the other Wall Street zombie banks, and their
derivatives, the financial panic of 2008 has turned into a world
economic depression of unimaginable proportions. The unemployed and
underemployed in the US alone are surely in excess of 20 million. Five
to six million home foreclosures are already done or in the pipeline,
throwing tens of millions of Americans out of their homes. World trade
has been seriously impacted. The budgets of California, New York,
Illinois, and many other states are in crisis, with massive layoffs of
teachers and other state employees. An entire generation is being
destroyed. Now, Greek bonds are trading at junk levels under the attack
of speculative predators including Soros, Greenlight Capital, SAC, and
the protagonists of today’s hearings – Paulson and Co and Goldman Sachs
itself. The attack on Greece and the euro represents the leading edge of
the second wave of the depression, which is now arriving in much the
same way that the second wave of the 1930s depression was unleashed by
the Vienna Kreditanstalt bankruptcy in May of 1931, about 79 years ago
and just a year and a half into that depression.

The goal of the Republicans is to portray themselves as stern judges of
Wall Street, even as they line up in a unanimous phalanx to protect the
finance jackals from any meaningful regulation whatsoever — as seen in
yesterday’s vote to block cloture on derivatives re-regulation and
reform. The goal of the Democrats is to expose the sociopathic evil of
Goldman Sachs and the rest of Wall Street while preening themselves as
defenders of the public interest, without however banning credit default
swaps, banning synthetic CDOs, and imposing a Wall Street sales tax on
all remaining derivatives and asset transactions.

To this degree, today’s hearings are being conducted in bad faith by
both major parties. However, the dynamic of the resulting spectacle has
the result of educating and mobilizing public opinion against the
predatory practices which are the essence of Wall Street, even a year
and a half after the banking panic of September 2008 and the monster
bailout of zombie banks which soon followed. What is required is a new
edition of the anti-banker sentiment set off by the Senate Banking
Committee hearings conducted from January 1933 to May 1934 by committee
counsel Ferdinand Pecora, which unmasked the corruption of Wall Street.
Persons of good will need to get active now to push this process as far
as possible while these social dynamics are working. It is time to hit
the zombie banks, the hedge funds, and their derivatives as hard as
possible, before the second wave of the depression hits. The program
necessary to fight the depression and break the strangle-hold of Wall
Street on the US economy and political system is given on my web site.

Mitch McConnell on the bailout: “Harry, I think we need to do this, we
should try to do this, and we can do this.”

During a break the senators filed out, and the GOP reactionary lockstep
once again blocked cloture for a final debate on the Wall Street reform
bill, weak as it is. Many activists of the Tea Party naively believe
that they have been fighting for a year and a half that they have been
fighting to take back the Republican Party. If that is what they
believe, today’s second cloture vote proves that they have gotten
nowhere in their efforts. Despite their charades, the GOP are the
bodyguards of the Wall Street predators. Tea baggers who think they can
break the Wall Street grip on the Republicans are pathetic dupes, and
they need to wake up, pronto.

When Paulson went to the leaders of Congress to demand a $700 billion
bailout for Goldman and his Wall Street cronies, GOP Senate majority
leader Mitch McConnell was “deeply frightened” by the apocalyptic
briefing delivered by Paulson and Bernanke. When Democratic Majority
Leader Harry Reid started talking about how difficult it would be to get
so much money in a hurry, McConnell urged an immediate bailout, saying:
“Harry, I think we need to do this, we should try to do this, and we can
do this.” (Andrew Ross Sorkin, Too Big to Fail [New York: Viking, 2009],
p. 442) The GOP was the original party of the bailout, and they have not
repented, as best seen through the continuance of McConnell, one of the
key midwives of the bailout, as Republican Senate Majority Leader. This
is the same McConnell who went to Wall Street recently to meet with
zombie bankers and hedge fund hyenas, pledging to block derivatives
reforms in exchange for big bucks contributed to the GOP’s campaign
coffers. Tea baggers who think the GOP has changed or is moving to their
side are sadly deluded.

Today, the market fetishism of the crackpot Austrian school has taken a
severe blow. Now that Blankfein‘s public image has been soiled by
Goldman’s scurrilous and scatological emails, the time is ripe for the
radical reform of derivatives and the zombie banks. This is a matter of
national survival.

Now that Goldman Sachs is masquerading as a bank holding company, it is
subject to FDIC rules. If Goldman’s derivative hoard is marked to
market, it is bankrupt. The FDIC should therefore seize Goldman and
liquidate it under chapter 7 of the US Code. Sheila Bair should not wait
for Friday.

*(5) China, Japan & "UK" holdings of US Treasuries go exponential*
From: chris lenczner <> Date: 17.06.2010 10:43 PM

"UK" Holdings Of US Treasuries Go Exponential, As Foreigners Now Hold
$3.96 Trillion Of American Debt

"UK" Holdings Of US Treasuries Go Exponential, As Foreigners Now Hold
$3.96 Trillion Of American Debt

Submitted by Tyler Durden on 06/15/2010 08:36 -0500

According to the latest Treasury International Capital release,* total
foreign holdings of US debt in April increased to just under $4
trillion*, or $3,957 billion, a $73 billion increase. This represents
47% of total debt held by public at the end of April of $8,434 billion.
And while two of the three usual suspects increased their US debt
holdings marginally, *China buying $5 billion and Japan buying $11
billion*, the *"UK's" purchases of US debt* continue to grow at an
exponential phase: these have now hit $321 billion in April, having
tripled over the past 6 months ($108.1 billion in October 2009) , and
*increasing by a whopping $42 *billion month over month. We put the UK
in parentheses as the end purchaser in this case is anyone but an an
austerity-strapped and deficit reducing UK. Whether this is the domain
of the mysterious direct bidders, an offshore FRBNY holdco, or *just
Chinese buyers domiciled in the UK*, continues to be unknown. Yet one
look at the chart of UK holdings below demonstrates that something is
very much wrong with this series.

But much more relevantly - total UK holdings, now at $321 billion.


by Mako

on Tue, 06/15/2010 - 08:44


It will have to continue exponential by someone to keep the system
rolling. US consumer is gone, no credit expansion, without the Federal
government creation you would be living in Mad Max right now....
eventually the Federal government will be overran by the freight train
that is the equation.

Credit creation at the peak was $4.7T (annualized) 2007

Credit creation now -$808B (Q1 2010) (annualized)

The fat lady started warming up 2 years ago.

I laugh at these people that think they have found the solution, the *US
government needs to stop spending*.... hahahaha, yeah, *remove that
creation and see what happens.... instant collapse.*

* *

*(6) Australian and British housing markets are the last two bubbles -
Jeremy Grantham*

From: Tony Ryan <> Date: 23.06.2010 12:38 AM

Some unusually commonsense words on finance and housing; but possibly
predicated on faulty data.

The average family income, in terms of value ratio to average house
selling price, is not so easy to calculate, especially as official
income figures are fudged.

*Government* believes (or deceptively *purports) that the average worker
brings home $1000 per week*. On the Sunshine Coast, long regarded as of
typical Australian demography, *$380 per week *for the average worker
would come closer to the mark. However, most working families are
literally that, with mum and kids bringing in additional income, and
much of this cash-in-hand. This appears to *bring family incomes up to
around $600 per week*. Reversing Grantham's formula, all things being
equal, and in a balanced world, they should be able to afford a home at

With local *homes selling for $320,000*, this is three times more than
they can afford. What we are talking about here is 70% of Australians
off the housing market. But this picture is denounced by the real estate
industry, who present figures that prove the presence of buyers. But
these are largely foreign buyers, assisted in their colonialism by the
FIRB. As a local builder, who has been commuting to Melbourne advised
us, not one kitchen he installed was for Australian homeowners. The
homes are going to migrants and refugees.

This is not the picture that Government wants revealed to Australians.

But getting back to Grantham's observations; with *imports vastly
out-weighing exports*; and approximately 35% of Government's income tax
revenues evaporated with the real-world above-20% unemployment; and with
the retail industry hollowed out by the same cause; the Oz housing
bubble burst will precipitate collapse of a similar commercial real
estate bubble.

In other words, an Australian 'financial' meltdown will expose an even
more devastating 'economic' implosion.

Rudd's stimulus package was not needed so much to brace Australia
against the US-EU financial crisis, so much as to hide the dangerous
exposure of the Big Four banks. The credit squeeze is for the same
reason... there is no fractional reserve. Moreover, $500 billion in
public service superannuation liabilities have not been adequately
secured for at least two decades.

Government is broke and in debt; and this is the context in which the
remedial resource tax should be seen.

The black humour doing the rounds, post Wilson Tuckey, is that the rest
of the propaganda-spewing mining industry CEOs should be sent to Africa.

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