I’ve been a fan of David Stockman ever since he got in trouble for speaking the truth as Budget Director under President Reagan. But his new book, The Great Deformation: The Corruption of Capitalism in America—what an awesome romp through the economic, financial, and monetary shenanigans of our times!
The craziness on Wall Street, the reckless for-the-moment-only behavior that led to the Financial Crisis, is back. This time it’s Citigroup that is once again concocting “synthetic” securities, like those that had wreaked havoc five years ago. And once again, it’s using them to shuffle off risks through the filters of Wall Street to people who might never know.
We have seen it for several years: foreclosure sales have become the hunting grounds for investors with two goals: hanging on to these homes until the Fed’s flood of money drives up their value; and renting them out. Thousands of smaller investors have piled into the game. And so have the giants. But now the second half of the equation is collapsing.
At the CPAC, as Republicans struggled with the future, some speakers drew crowds of over 1,000 people. But Dallas Fed President Richard Fisher was shuffled off to “an out-of-the-way ballroom” with barely two dozen people showing up; yet he’d talk about “the injustice of operating our economy under the thumb” of too-big-to-fail banks.
By the irony of timing, the Dow hit an all-time high as markets opened. Exuberance wafted through the air. Hype was flowing thickly. Happy days were back. New highs beget new highs. And everyone knew why: the Fed’s money-printing and asset-purchase operations. By the irony of timing… because 30 minutes later, kitchen-table reality polluted the scene.
Now that the “sequester” is in effect, horrid budget cuts would hit the US. 750,000 people would lose their jobs, planes would stop flying, children would go hungry, the Navy would no longer be able to operate its ships, according to the media. Fear-mongering that the White House drove to shameless heights. But suddenly, furious backpedalling has commenced.
Contributed by Lee Adler, The Wall Street Examiner. The Fed is growing deposits far faster than banks can deploy them, or than the economy can use them. It is growing them far faster than anybody wants or needs. And so, there are “hundreds of billions of dollars of potential fuel unused.” Therein lies the potential for big problems.
Friday evening when no one was supposed to pay attention, Google announced that Executive Chairman Eric Schmidt would sell 3.2 million of his shares in 2013, after having already sold 1.8 million in 2012—suddenly dumping 53% of his Google shares, though he’d sold practically nothing from 2008 through 2011. And Google’s reasons don’t make sense.
Hasbro, second largest toymaker in the US, confessed it would miss revenue estimates. Christmas wasn’t kind. Despite “double digit growth” in emerging markets, revenues fell by 2% for 2012 and by 3.8% for the quarter. Other corporations are in a similar predicament. But substantive inflation would have covered it up—not that the Fed hasn’t been trying.
Japan’s LDP went all out last year to re-grab power. Its platform: print and borrow with utter abandon to create asset bubbles and inflation, and to demolish the yen. Phenomenally successful! So far. But now, US automakers are squealing; they want President Obama to fight back—though the US has been printing and borrowing with utter abandon for years.