Real Wealth Society

Saturday, May 13, 2006

Debt-Based Hedonism By SB Kayser

From the rant and observation series or summary of what truly happens in the global economy.

As Fannie May recently discovered new accounting errors, its CEO frets about adjustable mortgages, he said the following: underwriting standards still vary widely among lenders, with some maintaining their share of a shrinking mortgage market as they tighten standards while others are still applying "exuberance" to credit risk. Products such as interest-only adjustable rate mortgages, payment-option mortgages and loans that require no property appraisals create multiple layers of risk that are difficult to model and predict... Meanwhile some in the mainstream media notice the harsh reality: Bubble's bursting on all fronts (see: 05/08)

From bad to worst: the internet famous economist - friendly named - Mish resembles much of a prophet these days: according to him, rats are abandoning the ship. Charles Hugh is definitely gloomier when saying that the housing bubble bust will take down the Global Economy . So what is the conclusion would you ask? The strict bottom is cristal clear, by now the new road to Serfdom is the mortgage industry in the so-called rich nations. Just imagine, in slow motion, a freight train that cannot be stopped. The situation is beyond dramatic. Call me senstive but at the end of Mr Dow 1000's audio, I had tears in my eyes: my American dream as a (legal) immigrant turned into a nightmare, completely shattered.

Yet the drama contains some comical elements, listen to this: Bank of Japan Keeps 0 Percent Rate Policy, a bloomberg headline said April 28. Now the "pundits of the rising sun" fear an inflation pick up. Of course they have sustained the zero interest rate policiy for more than 10 years, thinking they would beat the boom-bust cycle. All the liquidity they have flushed the system with is coming back home to roost... with a vengeance. Outsmarting Mother Nature will never work out, when wealth is "manufactured" with debts there is no other way out than (massive) liquidation. The severity of the bust will forever equal the size of the boom. So guess what now?

Yes, that's right, you're about to figure out the mess we are in worldwide.

There is currently a buzz that keeps growing and about the new book of Gary Weiss. According to "Wall Street Wealth Managers" this book that pillories the brokerage industry should have started at page 75... Don't let customers read this book, they rumor. I already told you about that book earlier but this is obviously the best feedback ever if you were hesitating to buy it.

April 25, Stephan Roach's article entitled Globalization's new underclass in China and America appeared in the Asia Times online and which gives anyone reading it another icy shower. Let me quote 3 sentences of his: both countries have extreme disparities in the internal mix of their respective income distributions....While the US and China suffer from similar degrees of income inequality, they have arrived at this point through very different means.... The rich are, indeed, getting richer but the rest of the workforce is not. This spells mounting disparities in the distribution of income - for developed and developing countries, alike. (!!!)

What many call the American Dream is about to be erased through executive fiat. Worst yet, Jane and John Doe truly believe Washington Elites blaming "evil" China for manipulating its currency. There are other news more or less ignored in order to dupe the American Public even further, such as a Russian minister acknowledging that the Dollar is now too unstable to be reliable; and a Chinese central banker recommeding to be more worried about the dollar than the yuan.

To tell you how this criminal debt based system has gone out of hand, in the so-called booming India, the market rally sees bank loans landing in stocks. Using debts to boost the economy, that's right: (quote) "We don't ask the customer to give us a bill as a proof of purchase. There is a genuine limitation when it comes to demanding bills for personal loans granted for marriage as there would be many expenses which may not be billed, "he added. (end quote)Not to mention that in China the level of bad loans amounted to nearly 900 billions of dollars at the end of April 2006. Let's be serious here: these 900bn represent what is known but anyone understanding how debtomania works can easily assme that the official numbers hide an awful truth... somewhere.

Meanwhile more working Americans go without health-care coverage (rose to 41% in 2005), a USAToday headline revealed the 27th of April. But the most terrifying news of the month is the derivatives neutron bomb which could get off at any moment the
IMF warned in its "global financial stability" report. A stability report!? Who do they think we are? These guys are managing our destinies. Amid all those threats, remember that early this month European banking institutions were simulating a financial meltdown. All this makes me think of the "yen" which needs a strong dollar to not resemble the Titanic. The economic runes are getting aligned slowly on but surely. China said that economic imbalances were deepening and Tanigaki told that Japan's fiscal situation is "severe".

And there is more: the new dreaded deadline: the Iran Oil Bourse set to open in July. Although this remains to be seen because of the geopolical tensions, I'd advise you to keep an eye on the ball. Should Iran' s move be confirmed, the war cartel will strike even before you've realized what has happened. If God answers prayers, America is doomed. Just as Justin Raimondo puts it: A war with Iran would mean the end of our Republic .

Funnily US lenders continue their predatory tactics legally and have launched the
50 year mortgage in California. They already prepare themselves to apply the formula nationwide for when the country will go under water. Many people will choose this option when threatened with a foreclosure, I am afraid. It rather seems better than losing one's house/condo, doesn't it? All they will do is strengthening their pacts with the devil: 'The Grip of Death' is a literal translation of 'mortgage'. Cynically in Japan they already have the 90 year mortgage. Alas it isn't a joke at all. Here is what you could read in the Herald Tribune in 1992: Japan, like the United States, faces a social crisis of its own making... Some mortgages now run 90 years, meaning it takes the work of three generations ... I feel sorry for the people who are going to lose their shirts. If you have bought your home/condo in the past 5 years, sell it while there is still a little chance out there. Ironically here in Manhattan where I live Mayor Bloomberg gave the rent stabilization status another and very last 3 years... but who cares now. In 3 years will be in full motion collapse anyway.

Depressed? Bear in mind that you're not alone: around mid-May, Zimbabwe's prices had risen 900%, turning staples into luxuries... and what will happen do you think when a country like America deals with
87TN dollar debt - all liabilities included? Do the math for yourself. Let me give one advice, stop believing in "free will astrology" today.

I came across a 1999 issue of giving a shot to J.K. Galbraith and his "The Economics of Innocent Fraud" ... the verdict is utterly appalling, you/we are being conned legally. The problem is that no one is going to rescue you, just know that the high ranked hypocrites won't stop lauding "Master Galbraith" for many decades to come. Does Oblivion has a rock-bottom? What is the price of the Empire would you ask?

America's borrower-industrial complex is a bouncing dead cat aimed at nuking your own wallet. Please hold your breath no matter what - as long as you can - and get prepared to help yourself/ves. Reinventing *brotherhood* should be an immediate objective of y/ours.

Luckily there is some light at the end of the tunnel though: a film titled “In Debt We Trust” is being made. Yes, it is being made. Thanks to Danny Schechter for helping save the world despite itself.

previous: Hypno$i$ , A Short Story About Billions and Trillions , Invariable Rules


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