“I want these f**kers to collapse and their CEOs thrown into a Mexican jail for having borrowed in dollars. I want shareholders and bondholders to pay the price, not the people. Let them eat their dollar-bonds.”
By Nick Corbishley, for WOLF STREET:
Mexico’s economy, like just about every national economy on the planet, is going through the grinder. Its currency has lost 26% of its value against the dollar in little over two months. In the past week alone, it tumbled 5.7%. One of its most important exports, oil, is trading at historic lows. Its state-owned oil company Pemex has been slashed to junk. Other key commodities are also plunging in value. Most of its car assembly plants are closed and remittance payments from migrant workers in the U.S., another major source of income, are falling as many of those workers lose their jobs.
Yet as the economy grinds to a halt and Covid-19 cases rise, something strange is happening. Mexico’s president, Andrés Manuel Lopez Obrador (AMLO for short), refuses to use Mexico’s limited fiscal firepower to bail out the country’s biggest companies, banks and investors, many of which have only themselves to blame for the predicament they’re in. And that is a definite no-no.
So the Bank of Mexico, known locally as Banxico, stepped into the breech last week, unleashing a $31 billion bailout package — $31 billion in USD of Banxico’s scarce dollar exchange reserves. In addition, it slashed the benchmark interest rate by 50 points to 6.0%. The interest rate had been kept high to keep the peso from plunging further.
One of the pretexts Banxico’s governor, Alejandro Díaz de Léon, cited to justify the bailout package was that foreign investors had pulled some €10 billion worth of funds out of Mexico’s debt markets since the virus crisis began. In other words, foreign investors that had bought the bonds, largely U.S.-denominated, of Mexican companies that earn most of their money in pesos were now getting cold feet after those bonds had plunged in value. Once again, capital is fleeing northward.
Last night, I proposed this unfolding saga as a possible article topic to Wolf. The response I got was an expletive-riddled, heavily capitalized tirade that took even me by surprise, and I’ve been working with Wolf for seven years. Here’s the sublime rant in all its glory:
“Why the heck did these Mexican companies borrow in dollars if they sell most of their product in pesos? Every single company that borrows in dollars and sells in pesos should be allowed to go bankrupt. They borrowed in dollars because it was a lot cheaper than borrowing in pesos, and they all know they take a HUGE risk every time they do it, and it’s the same frigging thing at every crisis. They can’t service and roll over their dollar debts. WHEN WILL COMPANIES THAT DO THIS FINALLY BE ALLOWED TO GO BANKRUPT?
“I’m sick of this. It’s always the same. And shareholders and bondholders always get bailed out. I want these f**kers to collapse and their CEOs thrown into a Mexican jail for having borrowed in dollars. I want the bondholders to pay the price, not the people. WHY THE F**K DID THEY LEND DOLLARS TO THESE MEXICAN COMPANIES THAT SELL IN PESOS???? GREED!! Let them eat their dollar-bonds.”
Mexican corporations with unpayable dollar-denominated debt and the investors that bought that debt are not the only ones being rescued by this bailout package. Another predictable beneficiary is Mexico’s banking sector, which mainly consists of subsidiaries of foreign behemoths like BBVA, Citi, Santander, Scotiabank and HSBC. In classic QE-fashion, Banxico is now offering to repurchase securities from them, at longer terms than those of regular open market operations. To take those securities off the banks’ balance sheets Banxico, will pay 1.02 times the average overnight interbank interest rate during the term of the transaction.
Taking a leaf out of the Fed’s book, Banxico has also widened the eligibility of debt securities for its emergency liquidity facility to include securities rated BB+ (the first rung of junk grade). Those non-investment grade securities can also now be used as collateral for foreign exchange hedges settled by differences in MXN, and for USD credit auctions.
This mini-QE program will provide Mexican banks with 100 billion pesos ($4 billion) of extra liquidity, Banxico says. But that amount can be expanded at any time. There’s one condition: the banks must use at least some of their newfound liquidity to lend to companies that are rated at least “BB+”. These probably include some of the same companies that are about to have their unpayable dollar-denominated debt bought up by the central bank. In total, Banxico has pledged to splash out 100 billion pesos (another $4 billion) on corporate debt, though that amount may also be expanded, “depending on the conditions prevailing in financial markets.”
To lend the bailout package the flimsiest veneer of fairness and equity, Banxico did what most other central banks have done over the past few weeks. It pledged to provide “resources” to banking institutions so that they can channel credit to micro, small and medium-sized companies and to individuals affected by the pandemic. But as we’ve already seen in many countries, including the U.S. and the UK, it’s up to the banks themselves whether they choose to lend that money out. Many of them don’t…
As for the size of Mexico’s bailout, $31 billion is a drop in the ocean compared to the amount of money the central banks of richer economies have splurged in their respective bailouts of big banks, hedge funds, private equity funds, REITs and corporations. It’s the equivalent of just 3.3% of Mexico’s 2019 GDP. But the bailout is in USD, and it’s the equivalent of almost a fifth of Mexico’s total foreign exchange reserves.
It’s unlikely to be the last bailout. But the next time round, Banxico could find itself on collision course with AMLO, a vocal critic of the last mega-bailout of Mexico’s banks, in 1995, which Mexico’s taxpayers are still paying off to this day. Last week, while acknowledging Banxico’s so-called “independence”, AMLO did appear to fire off an ominous warning shot by reminding Díaz de Léon that “Mexico’s currency reserves belong to the nation, not the Bank of Mexico.”
To what extent this amounts to political theater, purely for the consumption of AMLO’s populist base, it is too early to tell. But as Wolf says, if AMLO’s opposition to the bailout is genuine, “he may be onto something.” By Nick Corbishley, for WOLF STREET.
Due to “the interconnectedness of the financial system” fund gatings can trigger “contagion risk” with “the potential to become a systemic issue,” warns Fitch. Read… Market Mayhem Meets Liquidity Mismatch: “At Least” 76 Mutual Funds in Europe Were “Gated” in March
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Well, they took their cue from our awesome Federal Reserve. Since the US is the country with the cleanest dirty shirt in the world, then by definition what it’s doing must be the right thing to do. Best thing is with the swap lines open is that we get paid with worthless Pesos later on.
Perhaps that’s when the Fed will meet its comeuppance. Probably not though, because then it’s the IMF swooping in and using Mexico as a conduit to funnel dollars back to the Fed.
The notion of responsibility fled most of the world a long time ago.
Crony capitalism is also practiced in Mexico. I wish that I was surprised. Since many similar companies or the same companies do business there and in the USA, and have traditionally bribed officials (including in the USA but by indirect bribery), this is not a surprise.
The only surprise I get is when people in the US tell me that Mexico’ (and other countries’) governments are corrupt but the USA’s is clean. It is hard not to laugh, since I know about current, extant, US organized crime (now supposedly evaporated into thin air), unbelievably massive corruption in courts and government agencies, and long standing, massive use of foreign, shell companies even by the “non-corrupt” rich to evade taxes — while the US government carefully looks away and pretends not to see.
Probably, someone formerly from Enron or the Fed got over to Mexico and became a teacher of corruption to them. We have the best corruption “teachers” anywhere right here: the “Federal” Reserve, banking-cartel banksters.
M
I get a kick out of somebody claiming EVERYTHING is corrupt and government officials take bribes (some corruption somewhere = yes; everything corrupted everywhere = no).
Then I ask the esteemed individual who wrote the claim to name the companies & government officials engaged in bribes.
So, M, name the companies and US government officials you KNOW are engaged in bribes (links as opposed to ad hominem attacks would be good, too).
…I’m waiting…
I am actually more interested in the proving aspect of your statement. Please tell us the name of companies and US Government officials that you know are NOT engaged in bribes.
No, you can’t say because there’s no indictment, because those people doing the indictment can be corrupt as well, and you first need to prove that they are NOT corrupt.
… I am waiting …
Monkey Business
M first made the claim, so M has the obligation to credibly prove the claim. I feel like I’m explaining this to a 5 year-old, but You don’t get to demand I prove a negative (which even you might know is impossible) to validate M’s foolish claim.
Nice try; no banana.
Virtue signaling dystopian claims make great bumper stickers because, well, there’s really not much else to them (ie: no real truth or evidence).
The naivete or willful ignorance to assume EVERYTHING is corrupt (or otherwise ) stems from a mix of naïveté, ideology, and inexperience. The absurdity is compounded when the claimant’s intellectual process is so incomplete/deficient that he cannot provide reasonable credible proof.
Arguing with cute rhetorical flourishes like “…Oh yea? Well prove everybody did nothing…” don’t generate much credibility. It’s like saying “your ma wears combat boots” – this is grade school playground stuff.
However, I anticipate this will generate a couple ad hominems.
As I said, I am only interested in the proving aspect, which YOU demanded, which implies you can prove the opposite.
Name calling is proof who is operating at a 5 years old. I don’t engage with people who do that.
Javert Chip:
“Bribery” comes in many forms and disguises….for example here in the US “bribery” can be represented by the tens of thousands of lobbyists that occupy Washington DC…….I would call too many “blackmailers.”
I would consider u an astute user of the internet:
Type: “Financial Bribery in the US”; “FBI Investigations Into Financial Bribery in the US”….into your browser. That of course is only a start……
Either you are being sarcastic or u are just living on Mars.
Sierr7
I never claimed bribery didn’t exist in the US; for the 3rd time, my comment was “…some corruption somewhere = yes; everything corrupted everywhere = no….”.
No credible source claims the US has anywhere near the same level of corruption as Mexico. M even declines to cite specific examples.
Just because M has circumstances (real or imagined) that aren’t to his(?) liking, that doesn’t make it corrupt.
M
I’m still waiting…
Javert your waiting is over ….
Ex-CIA director Pompeo: ‘We lied, we cheated, we stole’
The United States is by far the most corrupt country in the world. The Ukraines, the Venezuelas, the Congos of the world are rank amateurs compared to us, because the United States legalizes bribery and corruption and makes it a core aspect of mainstream political legitimacy.
Private financing of elections is corruption. Every single instance of companies that pay politicians to enact policies that benefit them directly, and then hire them and theirs to work at their company, is corruption.
The military-industrial complex. Defense contractors pay to elect politicians that then enact military budgets and procurement programs out of all proportion to the national security needs of the American homeland. Then, in order to justify this budget, the United States engages in wars of choice that massacre millions of civilians throughout the world without actually ever winning military conflicts. Mexican drug cartels blanch at the levels of innocent civilians killed by our bloated, ineffective, inefficient military.
The prison-industrial complex. Private prisons pay politicians to enact harsh sentencing guidelines and guarantee minimum occupancy rates. They will also pay judges to sentence people to go to their jails. The criminal code expands exponentially in order to accommodate the political demands of police and prison guard unions, backed by manufacturers contracted to supply overpriced goods and services to the prisons, such as telecoms, food, and toiletries. Research “School-to-prison pipeline” and read “The New Jim Crow” by Michelle Alexander.
The agricultural-industrial complex. In order to win the Iowa caucuses and purple Midwestern states during the general election, politicians subsidize large agri-businesses that then produce vast amounts of food at below market prices. Once such foodstuff is corn, which allows the production of corn ethanol (less energy efficient than sugar ethanal) and corn syrup. Because corn syrup is manufactured so cheaply, thousands of products are made with it – increasing the rate of diabetes and other life-shortening diseases and ailments.
The healthcare industry. All of it. People are allowed to die in this country because they cannot afford access to healthcare. Live-saving pills are treated like an optional good such as sneakers or record players. Because the demand to live is immeasurable, drug companies are allowed to charge whatever they want in order to finance expensive executive bonuses. There is no price-elasticity. In fact, the government will grant these companies a monopoly that prevents price competition in this space.
The finance industry. All of it. The relationship between the government and banks is so close that people do not know whether or not the Federal Reserve is a private company or a part of the government. The Treasury and the Fed will make the assets held by banks and large corporations whole to the tune of literally trillions of dollars of taxpayer money and future liabilities. They will debase the purchasing power of the entire country to prevent politically connected companies from failing. For this honor, some Americans may receive $1,200.
These are obvious, general examples easily researchable with but cursory Google and Wikipedia searches. If you want particulars, hit me up. I have those too.
Hi Chip,
This reply is actually for Harvey Cotton a little further down in your thread.
Harvey Cotton,
What a wonderful expository you just posted. Absolutely made my week. Obviously, I concur with you strongly on all your points. Just envious of the eloquence with which you stated it. Well done Sir.
My understanding is that the Fed’s Swap-line loans have to be repaid in $USD. Is this not correct? Reference please.
Swap lines don’t work that way. The Fed gives dollars and Banxico gives pesos based on the current exchange rate. When the swap is over, the Fed gives back the same amount of pesos and Banxico gives back the same amount of dollars. Hence the term swap :)
I’m not sure, but there may be an interest rate to be paid as part of the arrangement, but either way, there is no currency exchange rate risk in the swap itself.
1982 Mexican Financial Crisis by Donald J. Mabry
critical importance to the financial crisis is that Mexico borrows extensively from US citizens.
Equally, if not more, important for US policy is the fact that the nine largest banks, in the United States had the equivalent of 40% of their capital and reserves loaned to Mexico.
October 13, 1998 edition of the Wall Street Journal by Milton Friedman entitled: ‘‘Markets to the Rescue’’.
The Mexican crisis in 1994-95 produced a quantum jump in the scale of the IMF’s activity. Mexico, it is said, was “bailed out” by a $50 billion financial aid package from a consortium including the IMF, the United States, other countries, and other international agencies.
In reality Mexico was not bailed out. Foreign entities — banks and other financial institutions — that had made dollar loans to Mexico that Mexico could not repay were bailed out.
Same story is with Argentina or Greece bailouts — banks and financial institution get bailed out.
Crony Capitalism start with Central banks and fiat money
I doubt you can borrow a lot of dollars without an American bank lurking somewhere in the picture. Even indirectly.
American bondholders too :-]
Fed dropped interest rates to zero and doubled the deficit, while they tossed Wall St a bailout package, and the Corporate Tax cuts. So everyone row wants more? This is egregiously bad policy. At least US bondholders won’t be left holding the bag on a defunct currency.
They won’t? So you think the dollar supply can go to infinity and people will still want them, even though we produce no export goods that anyone would want? I think you might be wrong.
America produces plenty of exports, the problem is outsourcing of the labor used to produce our exports, combined with importing too much and being generally wasteful and buying unneeded junk that leads to those excessive imports.
If America was fiscally responsible and didn’t let China steal our tech, because of us dollar status as the one true global currency, the excessive imports wouldn’t have a negative impact.
The triffin dilemma first purposed in the 60s said this would happen, but no-one probably expected America to have a booming tech and software exports which would offset the loss of general manufacturing, which we would later just give away to China.
Paul Easton
Your comment: “even though [USA] produce no export goods that anyone would want?…”
2019 US exported $2.5 Trillion (over half of it capital & industrial goods; link: https://www.thebalance.com/u-s-imports-and-exports-components-and-statistics-3306270).
Globally, US is the third largest exporter, behind the EU (with UK) and China.
Before making idiotic claims, the least you could do is Google the subject. For your edification, I Googled “what percent of 2019 us economy due to exports” (took about 10 seconds).
If you follow certain customs (like knowing what you’re talking about), you too can converse with adults.
Hey JC,,, guys (OK, folks) just gotta have fun, eh?
And, BTW, though I don’t have names and links right off, suggest you might want to take a look at the man hatting contrarian website or blog or whatever it’s called… guy seems to have a TON of links and does a fairly good job IMO of ”calling out” many of the worse bribers, corrupt folks, etc… even to the point that it gets a bit like, ”deja vu all over again.”
Having said that, it reminds me of some serious bribery indictments that came down a while ago, by USA folks, for USA folks and against USA folks, though, again, don’t remember details.
Others on this site probably can come up with details of prosecutions against more than a few USA folks/corps (AKA people we are now told,) ,, LOL, as if??
And that reminds me of the first time I went to the bullfights just south of the border, luckily on a ”first date” with an older and much more experienced lady who insisted I park my ’56 TR-3 north of the border and walk across, etc… and then she instructed me in the art of ”mordida” (as well as, later,,, other arts, ahem) thanks Kitten, for that memory!!
VintageVNvet:
I din’t understand your “…man hatter[sic]..” web reference. Even assuming you meant “man hater”, it didn’t ring any bells.
I never claimed the US was free of bribes (my up-thread comment was “some corruption somewhere = yes; everything corrupted everywhere = no”). As a 73 year-old geezer & retired CFO, I certainly understand bribes and other similar crap happen throughout the world (even in the good ‘ole USofA).
I’m really not understanding the point with your comment, but I do have a proverbial “Mexico” story to share:
Over 50 years ago, I took my much younger teenage brother on a Florida-to-New Mexico road trip. Along the way, we diverted to Tijuana so I could buy him his first “legal” beer.
As luck would have it, the first bar we saw ended up being in a…ummm…house of ill-repute. While my kid brother was falling in love with the waitress, I got the (inflation adjusted) $50 bar bill for two beers. Thus endith his first pub-crawl.
As luck continued to have it, this was Mothers Day & when we called home that evening to wish mom well, little brother couldn’t wait to share a rather detailed discussion of his drinking experience.
the Fed likely has open swap lines with Mex. This is going to feed back to the US taxpayer, b/c with oil prices cratering, Mexican fields depleting rapidly with increasing Capex, who wouldn’t want to loan to Mex and upside-down Mexican companies? One of these times, the building moral hazard and inverted debt pyramid will implode. If Income Statements and Balance Sheets in US are suspect, the ones in Mex are pure fantasy?
It’s just amazing to me how everything is reversed through Alice’s looking-glass. . I worked on the IMF post-mortem on the Mexican tequila crisis, then on the Korean bailout that followed the Asian financial crisis. The issue in both cases (Asia writ large in the second one) is that FX reserves had been secretly pledged or swapped away—they weren’t what the governments said they were, and not nearly enough to cover accumulated dollar debts. That realization prompted a massive crisis of confidence, currency devaluation and debt default.
In this new world, we have the Fed providing those swaps, openly, and there is only one emperor now—who is barely clothed at that. Is the Fed set to “nationalize” the whole global financial system? It’s mind-boggling.
When someone who worked on the brakes, suspension and CV joints says the Fed is leading us onto a tightrope, I worry.
But if everyone falls at once, what does gravity mean?
Thanks Karen,
if for no other reason than supporting my decision, a few decades ago to stop trying to ”invest” in the stock market as a way to make money, when I figured out the only way I had made money since the 1950s era when my ”god father” took me to the local office to ”watch the big board.” (He was very good at it, and had been making a living at it since getting out of Uof IL with engineering degree at height of the depression FKA greatest,) but other than then, only when I had ”insider information” that may have been illegal then, but was apparently more acceptable for us peeons to get, unlike today when only senators, etc., are able to have that info.
(Outside of ”financial economy folks”, of course, the norm today.)
When, in the 80s, I had just begun to realize the extent of corruption and out right lying going on in almost every ”metric” measuring every aspect of the SM, I began to look elsewhere, and although I did find local folks in SM and commodities markets that were honest, at the same time, I quickly realized/ began to realize they very likely were even more poorly informed than I was, and stopped all investments except RE.
Like stacey said on Max keiser only half the world gets bailed out because the other half has to pay for it. In the end it gets reduced to masters and slaves the masters always get bailed out. i wont get bailed out but i might try to opt out as best i can.
Usually, taxpayers end up bailing out the bank because it’s the lender to the defaulting loans. Bailing out companies who will end up firing employees is commonplace.
“i wont get bailed out but i might try to opt out as best i can.”
Me, too.
Can we also take the U.S. bankers who loaded up their balance sheets with Leveraged Loans and Derivatives etc. and send them to Mexican Prisons? That could be a new cottage industry for Mexico ,providing horrific prison accommodations for U.S. financial criminals at a price. I figure with the number that will deserve punishment by the end of this Corona-Collapse Mexico could balance its budget with only a modest per head charges,if we include private equity crooks and congressional inside traders.
How many banksters and Wall Street cons were held to account after 2008-09? None. They were bailed out; they paid off the loans, with interest; and barely missed an annual bonus.
I LIKE IT Senca,,,
and about damn time at least some of the ”heads to roll” include at least some significant portion of those who have profited SO disproportionately from the various and sundry and very very extensive pillage,,, eh?
Exactly how to do that, with regard to various ”rights, ” other than the pitchforks and ”street poles” crowd, but to satisfy all such, might be THE best question for all of us in the non partisan but always voting crowd,,,
including those here who have been ”in the streets” for various causes/reasons and seen no great progress, mostly due to the very clear work to ”bring in” us protestors, etc… at this point, I can only hope WE the PEEONS” will actually be able to actually make some progress.
The global billionaire class is unified in amassing power. A Chinese communist billionaire and an American capitalist billionaire have more in common with each other than they do with the middle class of their own nation. Nation-states are fables for the middle class to believe in. The global billionaire class knows they all belong to a super-nation.
And that super-nation has a super-government called central banks. The central banks of the USA, Mexico, Japan, China, and the ECB all work together because they don’t work for their nation – they work for the billionaires.
In the good times the central banks figure out how to get more wealth, more assets, more real estate into the hands of their constituents; the billionaires. And in the tough times they work hard to figure out how to prevent them from feeling any pain. And if the middle class in the United States, the middle class in Mexico, the middle class in china needs to be collateral damage so that the global billionaires don’t feel pain – then that’s just too bad.
Amen.
A, don’t forget to mention that there have never been more humans peacefully living in relative wealth than since globalization began. People love to fan the flames of anger, but we need to stay focused on the big picture.
“…that there have never been more humans peacefully living in relative wealth than since globalization began.”
There have never been more humans.
Of course, this is what no one wants to talk about: the cost benefits of a million people dying worldwide.
Hey Don, call me. ‘Heck’, I’ve got a quote for you next time. Sort of a thinning of the herd theme. Pity the herd in this context probably does not include bankers, Mexican or otherwise.
I agree with the previous comment. For example, in India or China, there was always (proportionately) higher number of people than UK or USA. Total number is irrelevant.
There are now more poor people in India than there were 50 years ago. There are also more middle-class people in India that there were 50 years ago. You see what I’m saying?
Both the absolute number and the percentage of people living in extreme poverty (defined by the World Bank in 2018 as less than 1.90$ a day in income) have plummeted in the last 50 years. A simple Wikipedia search proves this. The percentage of world population living in extreme poverty is 1/3 of what it was in 1995.
The last 50 years have been very unkind to the US middle class, as work has been transferred to the very poor.
What do you define as relative wealth? The inability to access $500 in savings? The lowest employment participation rate in decades? The lowest home ownership rate in decades? The astronomical high personal and corporate debt?
We do not have relative wealth, what we do have is the appearance of wealth. Most of what people have purchased, they do not really own. The banks own nearly everything from peoples homes, to cars, to furniture, and appliances. Most people cannot buy anything without having to finance it.
They think they have equity in their homes, and they think they have money in their 401K’s but in reality they do not. Everything they think they have is an illusion based on the grossly inflated perceived value of assets. That perceived value is a lie, and will evaporate as this depression takes hold.
Globalism has robbed from both sides of the economic equation by stealing the jobs from Americans and exploiting the labor of poor countries. Not only has America lost its job base, they have made themselves dependent upon foreign entities. All to make profits for the least deserving among us.
To hell with the corporations, and to hell with the unproductive shareholders who have profited from the decline of our country.
May they all rot in hell.
@jdog
The Victorian measures. Poor spend more than a third of income on rent + heating.
The rich spend less than a fifth on rent.
In 1950 25% of Americans were independent and self-employed. Now its 8%
The American dream used to be the liberty to own your own farm or business and keep 100% of what you earned from the sweat you put in. Now the American dream is to win the rat race to get the coveted position of being a cog in the machine of a monopolist FAANG company where your shareholders get rich and pay you a big salary for helping them get even richer.
It’s never been a better time to get the world’s best toaster at an incredibly cheap price. But life expectancy is declining and it’s getting harder to literally stay alive as long as previous generations.
It’s never been easier to be able to rent entertainment for a month with a streaming service. But it’s getting more impossible to actually own real estate free-and-clear of a bank.
So yeah, it’s never been a better time to get that cheap toaster, win the rat race for a seat in a multinational corporations, or rent entertainment that expires the second the terms and conditions change. But it’s getting harder to own something, have the liberty to be successful in your own business, or just not die earlier than your parent did. I guess it’s just about what you prefer.
And none of this is happening by accident.
There was a time in this country when most people were farmers, and the average farm was 160 acres. They were self sufficient and secure. That is true wealth.
@A & Jdog
If the 1950’s were so great why not try living a 1950’s lifestyle? I’ll be impressed if you can cut back to a 1950’s style. Are you ready to give up: thousands of medical treatments your family may need, internet, air conditioning, transistor devices, safe jet air travel, Cars that last more than 40,000 miles, nice dishwashers, more than 2 or 3 channels on TV, cheap stainless steel, long lasting siding on your house . . .
You’re gonna need a big stack of comic books when the 1950’s boredom sets in
jdog alludes to the days of 160 acre farms- better go back and read little house on the prairie- even with the homestead act providing cheap land, most farms failed. Most farmers were in debt. People froze to death INSIDE their homes. Laura Ingalls recorded getting one or two pieces of candy a YEAR for most of her childhood.
If those farmers(who made up most of that 25%) were so secure and self-sufficient, why are they not still?
At what time, and in what mystical land did they keep 100% of what they earned?
Pro establishment.
I do not have to read a book because I have lived it and I can tell you flat out you do not have a clue what you are talking about.
You think your lifestyle is great because you have a TV and internet? You do not have a clue.
How about a lifestyle when no one locked their doors, or worried about their kids playing out in the neighborhood?
How about a lifestyle, when in the suburbs, people left their keys in their car because they did not have to worry about them being stolen. When you pulled into the gas station and put a dollars worth of gas in your car, the attendant that was pumping the gas, cleaned your windshield, checked all your fluids under the hood, and checked the air pressure in your tires… for free. He also patched your kids bicycle tires for free. Candy? really? When I was kid you could literally fill a grocery bag full of candy for a buck. That is about what you made mowing the neighbors lawn. The grocery clerks would always throw some free candy in for the kids when your mom did the shopping. Your doctor was on call 24 /7 and came to your house.
Cars? Cars were cheap and you bought a new one every 2 years for under $2K. High school kids could buy a used car for $50. Most people paid off their house in less than 10 yrs, and many had a cabin or vacation house.
A man with a regular blue collar job could buy a house and support his family on one income. No problem. No one went in debt for college, if you were poor, a part time job paid for tuition and living expenses. There was no such thing as homeless, or gangs.
If you think these are the good times in America, then you don’t know shit. I would go back to the 50’s in a heartbeat. There is no comparison.
I get a kick out of people like jdog.
He don’t need to read no stinking books – HE JUST KNOWS IT!
Yea; there’s a credible comment.
Javert Chip
Do you have a reading comprehension problem? I don’t just know it, I lived through it. I was there.
Perhaps in 30 or 40 years some wet behind the ears punk will be telling you that you do not know what happened now, during the pandemic, because his history book tells him a “politically correct” bullshit version of the truth.
jdog
No I don’t have a reading comprehension problem.
You just simply don’t have the credibility to convince me of your unsupported claims.
Sorry.
Said the billionaire to the commoner. Don’t look at my hand as I pull your wallet. Just keep looking at the bright shiny objects in your garage and telling yourself ‘Your middle class.’
1950’s were great. Minorities knew to get back to their side of the tracks before nightfall, Joe McCarthy terrorized the country with the Red Scare, discrimination against minorities, gays was rampant. Women beaten and abused. Voting suppressed. Living with duck and cover possibility every day. Yeah, things were great for some people, but I’m not sure I’d want to re-live The Life of Riley. Jews like me weren’t liked very much then either.
Gangsters abounded then too, just on a different scale and weren’t dressed in pinstripe suits. The entire elected government since then have been great and honest politicians. Once bought, they stay bought. Ironic that The Greatest generation returned from WWII and proceeded to start the ruination of the country and the sociopaths who succeeded them in office did so as well.
The entire economy has become financialized and people are making billions for doing -0- in the real economy, while the corporate executives loot their companies like airlines using 95% of free cash flow in the past 5 years and buying back $50 billion in stock, CEOs of United, AA, Delta and SWA made $367 million in stock based compensation. Instead of saving that or upgrading the fleet they demanded $10 billion in loans and $10 billion in bailouts with no equity participation while Munchkin says the $1200 checks that may end up the hands of the people should last 10 weeks. hell, his wife spends that in an hour at her day spa. Like Ben Hunt says, #BITFD
You are absolutely correct. And as usual they are overplaying their hand.
@Jdog
They all had higher (and raising wages). Check you income then against an inflation calculator for now.
Communism V2.0 is here and is global
Pinto- Not so fast my friend, not at all. Crony capitalism in a Plutocracy.
EXCELLENT Summary A, and I can only add that somewhere and some when, the oligarchy that owns the current class of mighty rich folks, as their puppets, etc., will come to understand that it is ABSOLUTELY in their, the oligarchs, best interests to just go ahead and shove the billionaires, millionaires, etc., overboard,,, and then do what needs to be done to increase the equality metrics of all actual working folks every where, if for no other reason than to continue and increase the availability of good service…
That alone should go a long way to solving SO many of the current ”issues” FKA problems of the entire over populated Earth, eh?
To be sure, lots of folks do not understand that the oligarchy are the folks that have been owning the world for many many centuries, and, so far, have pushed out various groups from Europe a thousand or more years ago,,, and are now playing ”the long game” in many other, ”new” parts of the world to recover their investments stolen centuries past.
If you don’t ”get it” as happening so clearly in areas of USA formerly owned by these oligarch folks, please study up… And, to be very clear, based on many metrics, I think they are right to do their latest gambits.
There is only one word to describe the central bankers and corporate executives. Scoundrels. Is it legal to spit on their faces ?
Common people will never get anywhere near their faces.
Only from 6 feet away.
The one word I would choose is “Greed”.
I include all, if all, companies that when things go wrong the state rescues them
Maybe if Salvation Army, Good Will, Churches, community services organizations, city and state governments, incorporate and buy peso hedge funds and apply for dollars to fix funding shortages, the Fed’s SPV’s will give it to them.
But the internets say the state and local governments need to apply for bankruptcy first, because it’s their fault.
So maybe they can have someone like OmniProducts in the Robocop movies buy their governments so their problems can be fixed, and that is how they can get free money from the Fed like Wall Street and rich people do.
Then Robocop can enforce social distancing and shoot anyone who is closer than 6 ft and not wearing a mask.
One thing that blows my mind is the push for recycling and yet all these empty buildings are not taken apart and reused until the building become unsafe or slapped a historic sign on it.
Billions of Dollars wasting and rusting away and in many cases, they are public property that you can’t be on, see or use.
Just let it rust and decay back into the ground.
From old missile silos to old industries that could be recycled.
I have had two hazardous waste remediations that cost 300 k. in the private. Guess how public government handles there hazardous waste problems board up the building and let it sit for fifteen years and let natural aeration take care of it.
That would be every building, and I mean every building built before 1980 would have at least one government classed hazard.
If it’s free, I’d take the chance. The majority of hazardous materials is lead paint or asbestos insulation. The very old wall paper was quite hazardous. We never had this protective wear or knowledge before.
The people building and owning buildings are not the ones pushing for recycling, and it would cost more money to tear down the building than the recyclable material is worth so of course they don’t do it. Besides, if there were truly so many empty buildings someone would go bankrupt very quickly, unless the ones you’re referencing were already very old and in depressed areas. Have you seen commodity prices lately? There is no economic impetus for recycling. Environmentalists don’t seem to realize that eventually we’ll be mining up and processing landfills anyway if everything else runs low enough. Price is the key here.
I would love to have a 10,000 – 15,000 sqft building to do a computer museum, arcade/pinball museum and live music/performance stage in.
I am sure other creatives could put some of it to use and make their communities better. But not likely to happen.
Joe:
“Externalities”….that’s’ what that’s all about…..small change, the destruction of the environment….In the long term who’s gonna clean up all this crap left behind by crony capitalism????
This kind of capitalism will eventually destroy humanity and will attempt to do so to the world but thank you very much, Mother Nature will eventually shrug our scum off.
There is hope.
Those silos have all been sold and are being repurposed as bug-outs for the wealthy, sold for pennies, re-habbed and now go for a million+++ https://www.vice.com/en_us/article/3a84nk/rich-people-are-buying-survival-condos-in-abandoned-nuclear-missile-silos
De-linking traditional money (pesos) and labor continues across the world. ” Employed but not working” is the new financial reality. Government sponsored scams with new names like jobkeeper, payroll protection program, income protection program, and universal credit. MMT at its finest. The Great Recovery continues unabated in an immutable V shape.
We currently seem to have a currency not linked to people working.
Unfortunately, I have to look at Mexico as a failed state, a narco state, a bankrupt state…all rolled into one. The Western banking system has been complicit in the plundering of Mexico, its people and its resources for time out of time. I could go on, but it is just too sad.
Same thing applies to Argentina. On the verge of another default with Covid-19 thrown in as a bonus. Sad to see
Argentina problem is consistently spending more money than they raise in taxes, and voting for morons who promise more of same. That and a petrified heavily unionized economy. Once one of the wealthiest countries, now a perpetual basket case.
– The reason why those companies borrowed in USD is quite simple.
– Borrowing in USD meant that (mexican, brazilian, argetinian, any country with higher interest rates than the US) companies could borrow at a lower rate than in the local currency (BRL, MXN, ….. etc.) AND that (US) investors could get a higher rate than when they bought e.g. US T-bonds. A.k.a. (the infamous) “reach for yield” (at any price).
– We saw happening something similar in Eastern Europe. There companies AND households (think: mortgages) borrowed in CHF, EUR or JPY because then rates were so much lower. It all went OK until the financial crisis of 2008. Then the EUR, CHF & JPY went Up against the currencies of eastern Europe.
– And the EUR, CHF went down against the USD in 2008.
– Bailing out the bondholders ? No way !! Let the investors eat the losses !!! They had – at least – 3 warnings before. I.e. in the early 1980s, in 1994 and 2008 something similar happened.
If the unfairness of the bailouts has now become blatant and obvious, this just means that regulatory capture is complete. There is no fear of being held accountable. There is no fear of retribution.
We may as well get used to a world where you have the lick the boots of the person above you on the ladder in order to preserve what little wealth and power you thought you had. Because that’s the world we live in now.
“We’re all in this together” takes on a new meaning, eh?
– Question: Was the Bank Of Mexico involved in the curreny swap with the FED ?
– If so then the FED should also get worried. think: Banxico selling t-bonds to their hands on USDs.
Willy2,
The Fed currently has $6.6 billion in swaps with Mexico.
Hey, that’s not even pocket lint for the Feds. Bring on more swaps.
Not sure what they are… but bring on more.
“Bailouts? We ain’t got no bailouts. We don’t need no bailouts. I don’t have to show you no stinkin’ bailouts!”
The vital function of capital markets is to allocate capital to those projects that best meet people’s needs at the least cost in resources. That’s what produces profits, and that’s what’s produced some of the highest living standards in history.
But what if capital investment is artificially made to produce profit and avoid loss regardless of merit? This vital function is lost and you may as well kiss those living standards goodbye. We’ve already seen the early results in the lackluster recovery from the financial crisis, and if we keep this up the next couple of decades look even less promising.
Wolf’s reaction is more than justified.
Right. Glad to see Wolf getting fired up on what is actually the root cause underlying the issues discussed on this site. I try to stay polite here and go to ZH to blow off steam.
@ Finster –
Very true Finster. When capital is saved and non-distorted, in a free market economy, your first paragraph holds; but as soon as you have a FED (or other central banks) that can create dollars and in effect counterfeit capital, as has been happening for some time now, then it’s all out the window.
The producing class has been plundered by the parasites. and the band plays on ……….
Golly, were one to substitute the words in the title to Nick’s post pertaining to Mexican companies with …”U.S. Companies that Borrow To Fund Massive Stock Buybacks and Dividend Payouts and Then Get Bailed Out (by the Fed)”… the resemblance is striking. Whatever happened to application of the Federal Bankruptcy Code in the U.S.? That might go some way toward restoration of productivity, not to mention reducing moral hazard blowback of continuing on our current trajectory. Don’t recall these central bank bailout policies ever having been legislated.
Isn’t something happening in Lebanon, Turkey and Argentina ….?
Bailouts, Q.E. and Stimulus is where our time value of money goes to die along with de-basement death of our fiat currency we live on. We are Serfs. We have been polarized against ourselves politically to the point we are helpless. I just do not care anymore.
Lol, you have always been a Serf.
Everywhere its the same. These big guys either threaten the sky is falling if they are not saved, or someone on the inside just bails them out. Nothing new here folks. Unfortunately when peoples homes are seized, pensions go bankrupt and jobs are lost, these same guys will be using the law and their contacts to make even more money.
This is just the basics of capitalism. A large part of the problem since 2000 is where to go next??? In the 1920’s, the industrial revolution crested. In the 1990’s, the consumer industry crested. Where is future profit???? So all they have is debt n oil.
NOT ”capitalism” per se SN, but the very clear basics of ”crony” capitalism, as is also very true of crony socialism, of which we have now many many clear examples, and also many many example of ”crony” communism.
Dad told me of arriving in sailboat at various south Pacific ocean islands mid 1930 era, where there was actually close to communism: From each according to their ability, and to each according to their need; it worked in those circumstances because everyone was one clan/tribe, etc.
Socialism has been tried tons of times in the last century, always gave way quickly to either ”cronyism” of various types of clear corruption or worse, as is very clear in the reports from extensive ”boots on the ground.”
YES, crony type capitalism is NOT good, for everyone in the long run, and for most of us PEEONS in the short run, as has now been clearly illustrated in the last few decades.
But, as SO many well thinking and acting folks did declare just a few decades ago, WE WILL OVERCOME!!!
Mexico’s biggest problem is their underlying business culture. Their business culture is basically based on graft and bribery known as “mordita”. In Mexico, there are no business deals that do not evolve payoffs on every level.
The success of any business culture is directly linked to ethics. Unfortunately as business dealings have increased between the US and Mexico, and immigration has increased, instead of our culture rubbing off on them, it has been the other way around.
I’d say this IS our “business” culture, rubbed off on them…
Deadmeat
So, I just have to ask:
Give us some examples of US ‘…business culture is basically based on graft and bribery…”
I’m not interested in a list of snarky ad hominems, just give names, dates & places to support your claim
Check the campaign contributions at state and federal levels by corporations and business associations. Names, dates, amounts. Just because it’s legal doesn’t mean it ain’t a bribe. It is often referred to as “defining deviancy down.”
It’s more subtle in USA. You contribute to politicians and then provide them with aides to write bills in your favor. i.e prescription. drug prices. Part of obamacare was government not negotiate drug prices like every other country does. Another part was put in by google to allow collection of your health data to “improve medical care”.
Corruption in Mexico is pervasive at all levels of society, orders of magnitude above the US by all objective outside observers. Certainly are some corrupt areas in the US (Chicago, NJ, and a variety of smaller poorly governed cities), but nothing like the narco state of Sinaloa or the killing fields of Ciudad Juarez.
After 45 years of communism, E. Europe was like that too. There is still much corruption, but it is considerably better than it was in the wild wild west of the early 90s. The catalust for change was EU membership. The EU told E. Europe countries, clean up your act if you want in. And for the most part they did. It’s not totally gone by any means, but it’s exponentially better than it was post communism in the 90s.
Canada and the US should have done the same with Mexico. You want a free trade deal, you have to clean up your corruption. But they didn’t and so there is no incentive for Mexico to change.
And it just gets worse quagmire further the south. Central America has always been totally forgotten by the U.S. (except by Reagan of course.)
I think we need to accept that we are just going to grow slower in the 21st century. Business will suffer and we won’t have the supply as during the ‘age of abundance”, but that is life.
The business class with their parasitical financiers giving them the go, basically are trying to balance a permanent bubble, which is very open to ponzi collapses and outside shocks(hello the very infectious Covid 19). Not to say that hasn’t been going on since 1350. The European Aristocracy and the Ashkenazi/Sephardic bankers have been doing this game since the Black Death. Capitalism is a ponzi in general. It always has been no matter your monetary system or your function of growth. Banks give out loans that can’t be repaid physically, but repaid by growth in equity, which multiplies creating profit for the bank. Without that, the system collapses. Which we have had during the panics or recessions. The Aristocracy was smart to leave political life in the 17th century. Then allowing “new money” to buy in by the 1800’s. It made Nordic people especially feel genetically attached to capitalism, rather than be revolutionary aka what they called ‘conservative revolution'(another form of socialism that rejected modernism for traditionalism). But a liquidation and then a bourgeois state withdrawal would expose the system as a fraud it is.
If the population growth is 1.7%, then grow 1.7%. If you want more value, then order a 4 child rule in the European derived countries. But that will just be a short term fix and something long term, which won’t work.
Longterm Elliott Wave Charts for the US Dollar clearly showed it was going to get stronger. And to this day I am angered and puzzled at the stupid mistakes these “best and smartest” people make. Millionaires. Billionaires. I pay $16 per month for these charts and I shorted the Euro as it lost ( and continues to lose) value against the dollar.
Same with oil. The charts from 2017 clearly showed oil was going to hit BELOW $20 a barrel. And yet “the “best and smartest people on earth” never saw it coming. We are being led by the worst and stupidest.
The tragic part of it all? The worst is yet to come. Mark it on your calendar:
* 2025 Real Estate crash
* 2026 Stock Market Crash
Oh…I’m sorry.
Were you thinking the worst was behind us?
Think again.
Do you understand Ellliot waves? Can you give a simple explanation that provides the basis of how it works?
Has it made you a zillionaire yet?
CB, I shorted oil and made a lot of money. Check wikipedia for a basic explanation. There are a million youtube videos on how it works. Finding someone who is good at it….is a problem. Feel free to email me.
Good for you. Now can you explain how you knew you would make money, and how that elliot wave process is repeatable and what probability of success it holds of continued success going forward? Since you left no email address, and for the benefit of all wolfstreet readers, please share the information here.
CB,
I clicked on the link in his name and found his email on his blog; if you actually want to know it.
Agree that he should give a simple explanation here though.
* 2021 Real Estate crash
* 2020 Stock Market Crash
I fixed if for you.
Oh…I’m sorry.
Were you thinking the worst was years away?
Think again.
Six years to a stock market crash? Seems very generous.
That’s the problem. It’s not a stock market, just some peoples slush fund.
Nick Corbishly says: ” In classic QE-fashion, Banxico now allows those banks to exchange long-term securities (sovereign bonds) on their balance sheets for short-term securities, at just over face value.
This will provide the banks with 100 billion pesos ($4 billion) of extra liquidity, Banxico says. But that amount can be expanded at any time. There’s only one condition: the banks must use at least some of their newfound liquidity to lend to companies that are rated “BB+” (the upper rung of non-investment grade). These probably include some of the same companies that just had their unpayable dollar-denominated debt bought up by Banxico. In other words, they win twice over.”
_______________________________
Hoe does exchanging long term securities for short term securities increase liquidity? Whether long or short term, securities must be converted to cash to be liquid, and either duration can be sold for cash.
No answer???
Hi CB,
Thanks for your comment.
I went back to Banxico’s original text (this time in English) and you were right. They were repurchasing long-term securities, both sovereign and corporate, from the banks, not exchanging them for shorter term ones.
I sent Wolf the updated paragraphs, including a some extra detail, and he inserted it in the text. Thanks for flagging it.
You’re welcome, and thanks for the clarification. You have cleared my confusion.
This economic collapse in Mexico is very dangerous for the US.
We will end up having a strongly Socialist if not Communist country on our porous southern border.
The “swap line” is BS unless someone can explain it in a counter fashion.
Borrowing in another currency and being expected to repay in that currency is PURE SPECULATION. They can hedge if they choose, and apparently they choose not to.
So the central bankers, who use other peoples money, cover the currency bet? Why?
Central bankers backstop all the gunslingers out there…and they get more and more of it. No more. And no more fines in lieu of jail time.
Wait…
are not all these emergency swap lines the Fed is funding currency speculations that have blown up in the face of those who took the speculation?
Where is this all leading….to a world currency? God save us if it does.
historicus says: “This economic collapse in Mexico is very dangerous for the US.
We will end up having a strongly Socialist if not Communist country on our porous southern border.”
______________________________
How is that any worse than what Mexico is now?
1) There are more people in this world and the world was never so peaceful and stable, thanks to our great central bankers.
2) There was a period of great tranquility, when president Harrison opened Indian land and gave it to white farmers, for free, without spilling American blood.
3) In the last two weeks SPX, the Nasdaq 100 and the DOW, after a month of volatility, are resting in tranquility.
4) Today SPX bar was so tiny u need a microscope to see it. Its as small as the Jan/Feb bars that proceed Mar plunge. It was an upthrust.
5) If the Nasdaq will be cut by 50% to 70%, Chines & American billionaires will lose their snake head FANGS on the Pareto chart.
6) The Fed will not help billionaires who cannot poison the world with their IT (info tech).
7) Our gov is so traumatized by King Adam II impeachment, they blindly obey the constitution. They are so afraid, they wasted a good opportunity to grab power.
8) After showing our weakness, Zico will dominate CA politicians.
I know Mexico hedged their oil, Pemex is or was their cash cow. Big majors want no part of Mexico’s fields for what they want. A disaster for them IMO. Not sure about any other companies. Anybody?
John
My very limited understanding is Mexico’s fields need significant capital equipment and technical expertise. Few/no majors are willing to simply sell these critical assets – they want participations.
I just realised the US has the greatest industry and export business in the world it’s called the dollar. It costs next to nothing to create (actually nothing at all bar a little electricity and the use of a computer) as it is simply CONjured into existence from thin air. All other countries are also involved in this scheme to a lesser extent as the mighty dollar is still number one.
All returns are pure profit and those that can’t create it themselves or pay back what is owed lose all their physical assets. So as a wealth creation and transference scheme its pure brilliance for those that are in control or favour of this totally corrupt and immoral system.
The only problem they face is it is now becoming so blatantly obvious as to what is happening that it does indeed face the very real problem of the masses saying enough is enough and actually taking action to end it once and for all. I don’t think anyone is stupid enough to believe this will be done via the ballot box either. This is also why nearly all the Police forces of the world now resemble the military as opposed to just good old Police forces of the past. We are all going to either end living under unbelievable tyranny and control or be free and getting to either one of these outcomes is going to be really messy.
“the masses saying enough is enough and actually taking action to end it once and for all”
Simply stop paying all bills. A Debt Strike. That’s all that’s needs to be done not by 50% of the population, but probably a number closer to twenty five percent, plus the other fifty% who shortly will have no money to pay them anyway. Just think of how the Fed could create enough to give every working American the equivalent of a years pay, ‘to restart the economy’.
Foreign countries with companies that like to borrow in US dollars should legally require a covenant to all those loans going forward, capping the currency variation by 15%.
The businesses will still be able to get their crazy cheap loans because in risk-on times no one cares about covenants.
That would allow the country’s central bank to ease without blowing up their system, because if their currency devalues more than 15% the debt is effectively changed to local currency debt, becoming the foreign bond holder’s problem.
I identify as an irresponsible megalithic banking entity. Now where is my bailout?
I mean after all if a corporation can be a person, shouldn’t a person be able to identify as a corporation?
I want my multibillion dollar bailout.
It’s easy to blame the borrowers for being foolish, but one must also blame the lenders for being both foolish and predatory. The Mexican companies were Enabled to do what they did. Cui bono?
It would appear that financial and social engineering always has the same result, a few win while the majority are left holding the bag.