Obama Drifting?

We are now a half year into the Obama presidency. The high emotion brought on by the global credit collapse has somewhat abated and perhaps the banking system is getting a decent handle on present business conditions and their own portfolio. In the meantime, they have used government funds to slowly bring their capital requirements back into line. Several of the largest have also given hack bailout funds making them independent.

We have posted on the scariest parts of the ongoing credit restructuring and just how big it could become.

Assume that the worst case scenario can be avoided and that a chastened banking system will limp back into business.

The long term problem is that their customers have been severely hurt. A real percentage of the customers has been actually put to the wall. Everyone who financed a house using excessive leverage has likely lost all their capital if not their job. Assets like stocks and cars are always sold to support the house before one throws in the towel. Once lost, a citizen is starting over completely with incremental savings and a really bad attitude to banks and other financial institutions who encourage such imprudent behavior in the first place.

Since we are doing this the hard way, it is certain that a number of years must pass before these customers are back and strong.

My problem is that so far Obama produced reassurance and little else that convinces anyone that positive steps are underway, unless you think that the defacto nationalization of GM is actually going to work at all. He has been also less than insightful in terms of preserving the integrity of bilateral agreements, but that is because his supporters are not above pushing through a fast one or two. The point is that he and his staff can be had, which is not unusual for a rookie president.

So while he is riding along, he is also trying to ignore the big domestic government finance disaster rushing down the rail toward him. California is screaming for help and others can not be far behind. The cities must be facing huge contractions in their budgets. In the end it will become visible and congress will be forced to react again in a panic. All this is foreseeable and plans can be made.

And while the financial punditry inventories the credit balloon and takes fearful conclusions from it, I do want to make one observation. The mere fact that the larger banks chose to pay back their bailout funds is very encouraging. They felt no need to hang on to the government lifeline. This suggests that the subprime collapse was actually isolated in terms of making losses and that the remaining portfolios are intact and operating normally. If true, this is good news because it means that everything else will slowly get back to work from the present base.

We still have not resolved the housing problem, but without doing as I posted, the market will continue to grind out a solution while brutally slashing household wealth. Everyone with a good job gets to pay of their credit cards for a couple of years.

It would be wonderful if in fact the only problem Obama faced in the financial realm is the subprime portfolio.

Outlaw the Shadow Banking System

I am hesitant to discuss this subject because I know that only a very few people have a sophisticated understanding of the background and history of the global banking system that is now so broken.

In fact, in the absence of a proper popular history we have instead a slew of alternate badly flawed explanations supported by enthusiastic adherents.

We get here though that the two major political forces that are cast in the center of this maelstrom are now working toward clawing back some semblance of control over this bloated monster.

Let us get it right. The offshore monster did not create the subprime disaster, but their hunger for product created a ready market for poorly engineered financial garbage. If they were not feeding, Wall Street would never have had a market for securitized crap and everyone would have continued to make an honest living doing what they do best.

The money was so free and easy, that they went out and financed the fence posts. Yes, they all knew better, and they knew that they were damaging their countries’ credit system like they were some South American dictator, and most took early retirement just as fast as they could get away and left the pending train wreck to the rookies. And yes, it is appropriate to charge them with treason.

The result is that each country has to restructure their banking system to bail themselves out. What are going to be saved are the domestic banking systems. The rest is hanging and very likely massive offshore failures are going to sweep away billions in private wealth. Perhaps as it should.

The two major financial powers are now getting ready to clean up the offshore banking game with all the power of the state at their control.

Imagine you are a personal banker in the Bahamas or say Switzerland with a largish portfolio of private investors who have placed money with you for decades for shady reasons.

Imagine you are invited for coffee with a fine gentleman who informs you that he is a CIA operative and that he has some instructions for you and he really does not care what laws you think are protecting you. After all your clients believe in the law of the jungle, so why should not you?

Suppose those instructions include a complete disgorgement of client data. What recourse do you have? Or your clients for that matter.

This game has been protected because the clients could influence the game in their home countries to prevent any form of pursuit. That may have just ended.

We are going to now get a global financial regulatory system that will generally work and the USA will not be standing aloof as has been their want for all the usual reasons. The complete failure of the system is a direct result of American political folly, and as mentioned before, the blame is shared. In fact it is offensive to see politicians stand up and point fingers across the aisle when a simple read of their record can easily make them the greater culprit. Few today look good.

"Outlaw the Shadow Banking System!"

Guess Who Said It?

By Matthias Chang

URL of this article:

www.globalresearch.ca/index.php?context=va&aid=12584

Global Research, March 7, 2009
FutureFastForward.com

When I read the remarks of President Obama and Prime Minister Gordon Brown after their meeting at the Oval Office on March 3, 2009 and the speech of the latter to the Joint Session of Congress on March 4, 2009, I realized that a growing antagonism has emerged between certain factions of the ruling elites in the City of London and in Washington DC.

The first warning of the acute differences was sounded by President Obama himself and it was most surprising that the mass media paid hardly attention to it. In his weekly address on February 28, 2009, President Obama said:

“I realize that passing this budget won't be easy. Because it represents real and dramatic change, it also represents a threat to the status quo in Washington. I know that the insurance industry won't like the idea that they'll have to bid competitively to continue offering Medicare coverage, but that's how we'll help preserve and protect Medicare and lower health care costs for American families. I know that banks and big student lenders won't like the idea that we're ending their huge taxpayer subsidies, but that's how we'll save taxpayers nearly $50 billion and make college more affordable. I know that oil and gas companies won't like us ending nearly $30 billion in tax breaks, but that's how we'll help fund a renewable energy economy that will create new jobs and new industries. In other words, I know these steps won't sit well with the special interests and lobbyists who are invested in the old way of doing business, and I know they're gearing up for a fight as we speak. My message to them is this:

“So am I.”

Read the underlined words again.

It is clear something is definitely amiss within the ruling elites and President Obama has thrown the gauntlet to his adversaries. The skeptics may say that we should not read too much into this above quoted paragraph, as it could be mere spin to rally the troops in times of crisis. Time will tell.

I take the view that it is inevitable that the members of the ruling elites would go for each other's throats because those who were given the charge to ensure that the money-machine keeps running have screwed up big time. Someone must answer for the fiasco.

The Blame Game

It would be naïve to assume that the status quo would remain, when the Global Trillion Dollar Casino is for all intents and purposes broken down beyond repair.

Confirmation that the blame game has started in earnest can be found in the aforesaid remarks of President Obama and Prime Minister Gordon Brown on March 3, 2009 given after their meeting at the Oval Office and Brown's speech to Congress on March 4, 2009.

Let us come back to the issue of the money-lenders. For some strange reason, many people are put off by the term “money-lenders” but are ever so comfortable with bankers.

But are not bankers, money-lenders?

In fact I would say that money-lenders are more honourable than your high street bankers, as they can only rob you in the millions. The global bankers, they rape and plunder in the trillions!

Is it any wonder that Gordon Brown and President Obama, the political representatives of the Power Elites have decided that it is about time that these financial harlots are to be brought under control before they wreck the entire global power structure?

Let us have no illusions about Obama and Gordon Brown. They are going after these financial harlots not because they want to protect us from these criminals, but because for too long the political faction had to play second fiddle to the financial faction in the overall scheme of global one world government.

Until lately, money power triumphed over political power. However, when the entire financial system broke into pieces, it was time to settle scores!
Read for yourself:

Prime Minister Gordon Brown's remarks at the White House, March 3, 2009

“Well, there's got to be deep regulatory change. We've just been talking, Barack and I, about the need for proper supervision of shadow banking systems, of areas where there was bank practices that were unacceptable, where remuneration policies got out of hand and weren't based on long-term success, but on short-term deals. And these are the changes that we've already announced that we are going to make.”

“We've had a global banking failure, and it's happened in every part of the world. It's almost like a power cut that went right across the financial system. And we have got to rebuild that financial system. We've got to isolate the bad assets.”

“You don't want shadow banking systems. You don't want regulatory tax havens. So we've got to act as a world together to deal with that. And that's one of the things we'll be talking about in April in London.”

President Obama's response at the White House, March 3, 2009

“Now, having said that, the banking system has been dealt a heavy blow. It has to do with many of the things that Prime Minister Brown alluded to: lax regulation, massive over-leverage, huge systemic risks taken by unregulated institutions, as well as regulated institutions. And so there are a lot of losses that are working their way through the system. And it's not surprising that the market is hurting as a consequence. In fact, I think what we're seeing is that as people absorb the depths of the problem that existed in the banking system, as well as the international ramifications of it, that there's going to be a natural reaction.”

“We are cleaning up that mess. It's going to be sort of full of fits and starts in terms of getting the mess cleaned up, but it's going to get cleaned up.”

Prime Minister Gordon Brown's Speech to Congress, March 4, 2009

“And we need to understand what went wrong in this crisis, that the very financial instruments that were designed to diversify risk across the banking system instead spread contagion across the globe. And today's financial institutions are so interwoven that a bad bank anywhere is a threat to good banks everywhere.”

“And you are also restructuring your banks. So are we. But how much safer would everybody's savings be if the whole world finally came together to outlaw shadow banking systems and offshore tax havens?”

Blink and read again the underlined words. You have just read that Prime Minister Gordon Brown has made the call to “outlaw the shadow banking system and offshore tax havens!”

Wow!

Even if you are a skeptic and holds the view that the quotes are mere spin to delude the people, you cannot deny that Prime Minister Brown has let the genie out of the bottle!

Whether there are any follow through actions by President Obama and Prime Minister Brown, the global citizens must take action independently, if they want to save their children, and their children's children from decades of impoverishment and extreme hardship.

The most powerful leader of the Western world and his side-kick has openly and unreservedly acknowledged that we are having a global financial melt-down. And that the cause for this catastrophe is the shadow banking system!

There is now an open warfare between the political factions and the financial factions of the global power elites. This will be ugly. And as President Obama warned, “they are gearing for a fight ” He has also responded to the challenge: “So am I.”

Given the above scenario, we must first take out the financial elites, and thereafter the political faction, failing which we will all plunge into the black hole of financial Armageddon!Matthias Chang is a prominent barrister, author and analyst of the New World Order based in Malaysia.
His website: www.FutureFastForward.com

Financial Panic Ends and Peak Oil

With the market turmoil settling down and the global credit contraction now essentially stabilized, we can now address the more important long term ramifications of what is happening out there. The global banking system is now going to face a uniform regulatory regime that will be organized and regulated to prevent the system ever been gamed again out of sight from the political masters as it should be. It will take this coming year to put the systems in place to assure that this is so. The result will be a recovery of global confidence in the financial system over the succeeding years.

The current credit contraction induced by banks not lending to banks will take another six months to fully unwind but it will as the banks become more comfortable that the losses have been realized and paid for. Business will struggle to loosen their lending lines during this period and consumers will be paying down credit card debt.

We can expect the actual business expansion to get under way in the late spring and be in full swing for the Christmas season. There should be lots of good news developing in the financial sector and continuing into the next year.

In other words, the good news is that the financial panic is now over and the restoration of business as usual will quickly heal a lot of wounds. The market mavens can expect anticipatory market activity beginning in the new year a few months ahead of tangible news. There will still be plenty of business failures to absorb but that is already factored in.

The bad news is that Peak Oil has not gone away. I am sure that you have all forgot about that. Over the next four years the globe is set to lose millions of barrels per day of production. In fact we should lose about 35,000,000 barrels per day over the next fifteen years and achieve a real plateau around 50,000,000 barrels per day thereafter supplied a third from Canada, a third from the Middle East and a third from everyone else.

This is an emergency that the oil industry cannot fix by adding more production from non existent sources. The best that it can do is to accelerate the rollout of THAI/CAPRI production in the Athabasca tar sand to match that of Saudi Arabia. This at least means that North America will be able to fully internalize its oil industry over the next decade and not be subject to beggar my neighbor behavior around the globe.

The immediate fix must come from a swift conversion of the global transportation industry, and by this I mean trucking in particular and certainly the rail industry, to a LNG fuel system. It is still fossil fuel but we can tolerate that form for a long time and supplies will remain ample for more than enough time to transition to many other alternatives. The USA alone will release about half of its oil demand back into the market and I suspect that the rest of the globe can do exactly the same. That alone can take global oil demand down to the 50,000,000 barrel per day mark. This means that we actually have a good temporary fix that could be used unwisely for a few decades and backed up with one hundred years of viable reserves.

Simultaneously it behooves us to strongly support the establishment of a large and cost competitive ethanol industry based on alternative organic sources and to support any other promising initiatives. There are a lot of surprises out there trying to happen that need mainly a fair and responsive regulatory environment from all levels of government.

The demand for personal transportation is going to increase globally ten fold over the next two generations and it will need to have a convenient fuel source that is unlikely ever to be satisfied outside of short haul travel by electric storage. Ethanol is certainly the next best option in terms of the chemical fuels.

Shifting Economic Winds

We are heading into the last four months of the year, a time which usually sees an increase in investment activity and generally improving economic strength. That means we can expect a rebirth in investor optimism to offset the barrage of negative press we have been subjected to this past year. It is truly necessary this time around.

The subprime disaster has shrunk the capital base of our banking system both here and globally. The huge amount of excess liquidity pumped into the economy has been sponged up through direct losses. We now have a chastened financial sector that has perhaps caught the religion of financial prudence.

That leaves one pending problem. A massive wave of bad paper has worked its way through the system almost choking it. Various newsletters have reported that a much greater wave of refinance paper will be coming due over the next eighteen months. Accepting this as true, we face the most serious financial crisis since the Great Depression that could handily reduce the value of assets to dimes on the dollar and collapse the money supply. If true, the only escape will be my prescription of refinancing by a mark to market strategy. And I doubt if anyone is listening.

The true question is how true is this? I am skeptical. The fact is that Cleveland and those developer paradises in the west were the sweet spot for debt promotion. They loaded up fast and rather quickly ran out of participants. Those chickens came home to roost and have now been handled the hard way.

A lot of asset debt was then put out to folks who had a creditable plan for paying it back as is still happening. That is actually business as usual. The only difficulty is that their assets are now priced at a level that forces them to pay of those loans the old fashioned way and most will.

The equity markets have been reduced by twenty percent over the past year while this scary news was absorbed. It is now absorbing the impact of expensive energy which will take most of the next twelve months. This may squeeze another ten percent out of the market.

That will then be followed by an explosive bull market in equities driven by the rapid conversion of industry to low cost alternative energy regimes. The solutions already exist and the tooling up has begun.

For those who like predictions, I expect static power to soon drop below $1.00 per watt and I expect us to vacate the oil trade causing that price regime to drop well below $50.00 a barrel. In ten years I expect oil to be under $10.00 a barrel because we will have quit using it as a fuel and static power to be at the price equivalent of pennies per watt. That is were we are going.

We just have a little turmoil to go through in lieu of good planning. The conversion is totally feasible now and direct action can make it all very quick. The problem, if any, is the efforts of special interests to push their doubtful solution into the regulatory environment. This is the history of the corn ethanol mess. It never made any sense, but that never stopped anyone.

As I have discovered, wetland cattail starch production can bury us in ethanol at a rate that is likely ten times more productive than any dry land crop. And we have unlimited wetlands to work with that actually need the attention. Then we can enter the boreal forest if we ever need more land. If ethanol can be produced from corn at $1.00 to $2.00 per liter from corn, it is a cinch to produce it a lot cheaper from cattail starch while producing unlimited supplies of cattle fodder from the non starch component.

And then we have our modified alga that just cranks out sugar and easily convertible cellulose.

The point is that we can already bury the world in ethanol without using any food production land and do it at a low cost with modern farm technology and equipment.

The global conversion to the use of ethanol can soon be in full swing.