Archive for the ‘Finance’ Category

…in other words the perfect day to invest in poetry. We at Loewak will soon open a special section of this site where you, stockholder or investor, can invest into one of the few clean and interesting markets left: the market of poetry. Expect impossible returns, expect a dead cat bouncing, if you waste your money anyway why not waste it on something with dignity? Poetry is the answer.

That’s exactly what I did today. I bought these poetry volumes:

New and Collected Poems: 1931-2001 – by Cseslaw Milosz

The Collected Poems of Octavio Paz, 1957-1987: Bilingual Edition

The Poetry of Jaroslav Seifert

Selected Poems of Sandor Csoori

A Longing for the Light: Selected Poems of Vicente Aleixandre

Perched on Nothing’s Branch – The poetry of Josef Attila

That should get me through this winter. Granted, these are rather ‘safe’ choices, but that’s what
we need in these times. Guaranteed investments. No surprises. World class poetry.

Another day of reckoning on the markets, with drops of almost 10% in a single day. Nothing seems to help: the 700 billion dollars plan had little effect, the global lowering of interest rates had little effect, the IMF’s announcing it opens a special department had little effect. It’s not so strange if you think what lies ahead on the markets. The fall of Lehman Brothers alone might lead to 400 billion dollars of insurance claims, which will press heavily on the markets. If these claims will prove to be not payable then it will result not in a win-lose situation but a lose-lose: the claimant wont get any money and the insurance company gets broke.

Compared to the infamous 700 billion dollar rescue plan, which now looks rather meagre if anything, if a single company can produce such giant debt claims, what will happen if other big banks or investment companies start to fall? That’s probably what will happen and it will result in massive amounts of debt the 700 Billion dollars, which would already be used on bad mortgage assets and not on claims anyway, is not an answer to.

These are strange times. There’s the Iceland situation, where the government simply announced it wouldn’t pay back the savings of over 600.000 people in England and the Netherlands. Absurd, but let’s remember that Iceland probably sees itself as the victim here: they invested heavily in the US market and had to take huge losses they could’t afford. However, if things go on like this I wouldn’t be surprised to see the English fleet end up on Icelands shores one day, and maybe they even should. If these were my saving I’d be pretty pissed, I can tell you.

There is more about the 400 billion dollars lehman insurance claim on Robert Peston’s site

M.H.Benders – Dutch writer and Freelance Economist

The US government’s debts have ballooned so badly the National Debt Clock in New York has run out of digits to record the spiralling figure.

The digital counter marks the national debt level, but when that passed the $10 trillion point last month, the sign could not display the full amount.

The board was erected to highlight the $2.7 trillion level of debt in 1989.

The clock’s owners say two more zeros will be added, allowing the clock to record a quadrillion dollars of debt.

Source: BBC website

There is lots of people out there who do not understand what this crisis is all about. They have no idea what fractal reserve banking is, why banks can make billions of profits and all of a sudden be bankrupt one year later. Well, fractal reserve banking means the bank is not obliged to keep your money when you bring it to them but they can spend it. This usually means they will lend it out to someone else against a higher interest rate than they give you, and the difference is their profit.

However, when stuff got deregulated banks could not just lend out your money to someone else, they could also start to gamble with it on the stock markets. This is where things went wrong. Banks bought giant amounts of mortgage-packages that were promised to be good and they turned out to be bad mortgages that do not return any profit, at least not yet. They’re problematic. So they have spend lots and lots of our money on bad investments. This means that
the profit figures they have flaunted last years, based partly on these investments, were fake. They made it look like they were growing and growing, just to be able to cash in more money at the stock counter.

So now they’ve got called on, they have a huge cash flow problem. These bad debts are made of your money, and when too many people start asking their money back: euh, its just not there. In fractal reserve banking the bank keeps just a small amount of money inside to be able to pay direct transactions. For that reason they have put caps on daily withdrawal amounts too, too high caps would bring them into trouble.

That’s one side of the story: they wasted your money on bad loans and don’t know how to pay it back. But there is more to this crisis. The whole American economy and partly European economies and other economies are debt-based. The American national debt has risen in the last eight years from 5 trillion dollars to 10 trillion dollars. So it has doubled under the Bush administration. This is all borrowed money. It has to be paid back. And every time the amount gets higher, it gets harder to pay back because of the interest issue. So what we see here is a debt figure that has risen to such an astronomic amount it has become virtually impossible to pay it back, or maybe even to stop it from growing. This is the core phenomenon we are dealing with at the moment: Crisis which will return at accelerating speeds, like this debt money is accelerating in size all the time. The effect of this in the long term is an economy in perpetual crisis. There will no longer be good times, bad times, depressions or recessions. People who believe this is a returning pattern in our economies are right, but they forget that we already had a major crisis in this decade: this is the second one. The crisis is a circular pattern but its exponential: it will keep coming back at a faster and faster pace, because debt is an exponential phenomenon.

The American author Gore Vidal wrote a book called ‘Perpetual War for Perpetual Peace’. In it he suggests that America has to stay in a state of Perpetual war to afford their lifestyle – there is much true about that, and what we will now see is that the economy more and more will follow a Perpetual Crisis model: faster and faster will these Crisis return. Either that, or there will be a total collapse. I’m not sure which option is the worst one. In the long term a collapse might be much, much more healthy. The 700 dollar bailout plan is of course ridiculous: more debt, to keep ‘things running’.

There is no quick fix, this time around. It’s pretty hilarious to see McCain and Obama talk of nothing but tax cuts.

Martijn Benders, Dutch writer and Freelance Economist

One news item that strangely hasn’t been covered widely today: new mortgage funds showed a 98% decline in freshly closed mortgages in the US in August 2008. That is a massive decline that points to a total crash of the housing market in the US. I don’t think there has ever been such a sharp decline in the history of the mortgage market before: its certainly interesting but also devastating news since such decline in interests in buying houses will certainly mean the property prises will plummet.

It’s not strange, of course, that no one wants to buy a house at the moment. You must be somewhat insane if you buy a house now, with the prospect of seeing you money vaporize before your eyes. Since housing prices will almost certainly take a fall people wait to see when they will hit rock bottom. For the mortgage industry this is, however, more bad news on top of the bad mortgage assets problem and it’s a good example of the domino effect a crisis can have.

That said, I have always thought there is so much beauty in crisis. Artists should be painting these domino movements of the crashing markets, poets should write poetry that reads like massive inflation. To live in a challenge is the only life worth living – it is exactly when things get rough that the beauty of it all also surfaces.

If there are any artists, poets or musicians out there who want to collaborate on a project evolved around crashing markets, Loewak would gladly hear from you.

So, Congress is now going to vote over the 700 billion dollar bailout plan that is doomed to fail. Why is it doomed to fail? I will explain. It’s quite simple really: Bush and consorts claim that these ‘bad mortgage assets’ can be bought now and sold at a higher price later on. I don’t think he has paid much attention: these are BAD mortgage assets. This means they are mortgages from people who can’t repay their houses. NO ONE SANE will ever want to buy these mortgages from you, it’s like offering a shipload of fake golden watches. So we have the US government buying a shipload of fake golden watches for 700 Billion dollar, claiming to the tax payers that they will be able to sell those at a higher price later even if everyone knows those watches are fake.

This is insane! What’s also insane is to see Bush address the nation telling everyone they are bailing out Wall Street so they can borrow more money, to send kids to school, for example. Borrow more money! Has this guy totally lost it, or what? He wants to borrow 700 Billion dollars to buy a shitload of fake golden watches, and why, oh because then you, the taxpayer, can keep borrowing money and put yourself into more debt!

I dont think I have ever seen a more insane line of logic. We borrow your money, buy fake shit with it, so you can keep borrowing more money too. Oh, and we will lower your taxes too while we’re at it. Let’s borrow, for there ain’t no tomorrow!

It seems like ‘borrow’ is some sort of Financial mantra in the States. You want a soul? Just borrow one. You want to have a plan? Just borrow someone’s brain. You want your life back? Some day you will be able to borrow it from the only bank left, the Federal Reserve.

M.H.Benders, 29 September 2008

Today the US congress approved a 700 billion dollar rescue package for the US financial markets.
The package will raise the National debt from $10.6 trillion to $11.3 trillion dollars.

That means that, if there are 250 million Americans, this package puts each of them 2.334 dollars further in debt. Debt per person is now: 45200 dollars.

Of course, this money will be printed extra, meaning inflation will rise sharply and consumers costs will rise extensively, so on top of the 45000 dollar debt you own the Feds thanks to Bush you will also have to deal with that.

Sooner or later they are going to pull the rabbit out of their hat: the Amero. Conspiracy theory? We will see. What’s clear is that debt based economies are greatly in favour of the ultrawealthy: the Federal Bank is owned by a few families. That is the largest mistake in American history, to have a Federal Bank that is not state owned. Now, all the financial institutions are state-owned except the one that matters, the Federal Bank. This basically means everyone has to work his ass off to repay debts to a few families in charge of the money flow. A mistake made in the end of the 20′s and I am sure we will see some new ‘mistakes’ rising during this New Depression.

The Lehman Bank, one of the biggest investment banks in America, files for bankruptcy today. That is a very symbolic development with huge implications. Today the biggest ensurance company of the States, AIG, lost over 60% of its value on the stock markets. I picked up an interesting comment from the BBC website’s have your say department:

The banking industry fought for 65 years to have the Glass-Steagall Act repealed (kept stock market and banking industries separate)…they won a few years ago, and major US banks immediately started buying buying brokerage houses and selling questionnable mortgages and securities at astounding profit levels. Banks did this in the 1920s and caused the Great Depression. Senate vote was 90-8…Biden voted for repeal, McCain didn’t bother to show up for the vote.

This is priceless. The ‘big Democrat’ Biden votes in favor of the corporate greed of Banks, and McCain didn’t even bother to show up for the vote. What a mess! This has ‘Great depression’ written all over it and, unfortunately, like in the 20′s it seems to be deliberately *caused* – anyone could have known that repealing the Glass-Steagall Act would have this sort of result. That Act came into place to prevent something like a new great Depression! A quote from Wikipedia:

In the nineteenth and early twentieth centuries, bankers and brokers were sometimes indistinguishable. Then, in the Great Depression after 1929, Congress examined the mixing of the “commercial” and “investment” banking industries that occurred in the 1920s. Hearings revealed conflicts of interest and fraud in some banking institutions’ securities activities. A formidable barrier to the mixing of these activities was then set up by the Glass Steagall Act.

So, let’s see: we have the Democrat Vice-president voting in favour of abolishing this act, and this vote took place in 1999 so it wasn’t taken in a time of great economic prosperity but rather in the perspective of decline. This just shows what huge powers American bankers have over politics, Democrats or Republicans alike. And thanks to them, there’s this crisis now. Please, do not vote for these morons.