Written by Jeff Nielson Wednesday, 06 February 2013 13:23
On February 5th, 2013; we learned something. We learned precisely how long of a memory-span that the U.S. government believes Market Sheep to possess: 18 months. How do we know this? Because 18 months to the day after credit-rating agency Standard & Poors announced it had “downgraded” the U.S. government’s (fraudulent) “AAA” credit rating, the U.S. government has announced its revenge.
It is “suing” S&P for “inflated credit ratings” which, according to U.S. Attorney General Eric Holder were “central to the worst financial crisis since the Great Depression.” Fans of either the ironic or absurd are warned at this point that reading further carries a direct risk of becoming dangerously over-stimulated.
Those at all familiar with our markets or general economic reporting know there are three behemoths who currently dominate the credit ratings business (Moody’s and Fitch being the other two), and at the time when S&P committed its alleged transgressions they were essentially the exclusive sources for credit-rating data in the U.S. economy and its markets.
Today, only one of those three corporations is being sued; the one which (by remarkable coincidence) happened to downgrade the credit rating of the U.S. government exactly 18 months earlier. For the many readers out there who are believers in “remarkable coincidences” (and who thus disregarded the previous sentence); undoubtedly you are all telling yourselves the same thing: S&P was doing something different/more nefarious than the other credit ratings agencies.
Let’s see what the lawyers representing S&P have to say about precisely that point:
“We will vigorously defend S&P against these unwarranted claims…The fact is that S&P’s ratings were based on the same subprime mortgage data available to the rest of the market – including U.S. government officials who in 2007 publicly stated that problems in the subprime market appeared to be contained…”
Let me expand upon that statement, because truly S&P could have said much more. When the S&P spokesperson stated that “S&P’s ratings were based on the same subprime data”, she could have easily added that the ratings themselves were virtually identical to those of the other two ratings agencies; and their “analysis” of market conditions was so similar it was if all three were reading off the same Script.
So we have three trusted institutions all reading off of the same “don’t worry, be happy” Script, yet only one of the three is being attacked as a Villain. Who wrote the Script for the ratings agency Choir? Why, the U.S. government, of course – now playing the role of the Aggrieved Victim.
However, the U.S. government rarely speaks for itself any more when it comes to its own economy. When your lead talking-head on the economy is the mumbly, absurdly under-qualified tax-cheat, Tim Geithner; this is no great surprise.
So where was the Script printed for the benefit of the ratings agency Choir, and the Wall Street Vampires; who used all that happy-talk to scam the world for $trillions? On the same Federal Reserve printing press which was/is cranking-out infinite quantities of U.S. greenbacks.
Written by Jeff Nielson Saturday, 02 February 2013 13:29
The United States housing market – and real estate system – is a very efficient machine. What it is not “efficient” at doing is providing affordable housing to the broadest number of Americans (the stated agenda). What it is efficient at doing is blowing-up massive asset-bubbles, and burying Americans under mountains of unpayable debt (the real agenda).
We can establish the true agenda of the U.S. government in the housing market (and the banksters who pull its strings) by simply examining any/all “innovations” in this market which banksters and political shills alike agree make the U.S. housing market “better” than that of other Western nations.
The obvious starting point is the mortgage-interest tax deduction. Here, the Big Lie is that mortgage-interest deductibility makes U.S. housing “more affordable” – by slightly reducing the financial burden of the debt. This is more of the infamous “static analysis” in which the propaganda machine specializes. To illustrate this requires defining that concept for readers not familiar with this term.
Analysis comes in two forms: “static” and “dynamic”. The difference between static and dynamic analysis is literally as stark/extreme as the difference between a two- and three-dimensional image. Exactly as with the two-dimensional image, static analysis lacks depth – the “depth” of time.
In an ever-changing world, static analysis is a still-photograph. It (attempts to) “analyze” some phenomenon with the unstated (but ever-present) premise that nothing changes in the world around us. Remarkably, even the direct change taking place (over time) in the phenomenon being examined is ignored.
It is analysis which is simplistic by definition, and as with most simplistic thinking it is usually seriously flawed. The ultimate example of (simplistic) static analysis is Keynesian economics, otherwise known as our credit-based economic system. The premise of Keynesian economics is the epitome of simplicity.
There are economic advantages (in terms of a “stimulus effect”) from introducing debt/credit into any economic system. Thus Keynes (and his modern-day Disciples) tell us that since taking on debt once (and only in a small amount) is advantageous, that we should do it all the time; forever. It is the ‘logic’ of the cocaine-addict.
It is an “economic theory” (to be magnanimous) which states simply that “maxing-out our credit card is great”; but is utterly silent on how the credit-card debt can ever be repaid – once our “credit limit” is hit. The closest these Zealots come to ever even considering “sustainability” is to tell us that as long as the growth of debt is at or below the level of economic growth that everything is fine. Translation? As long as we can make payments on this debt (as the debt is growing) then “everything is fine.”
The Debt Zealots have no answers/guidance to offer once debt-levels inevitably exceed sustainable levels, thanks to an arithmetic process which is apparently too complex for the Debt Zealots to understand: compound interest. (Un)fortunately, we no longer need any “theory” from them on what happens once debt is no longer sustainable; as we have plenty of economic fact around us from which we can answer this question.
What happens when the cumulative interest payments on debt become unsustainable? The Deadbeat Debtor begins to borrow additional money just to pay interest on debt. This has the direct mathematical effect of transforming the speed at which debt (insolvency) rises from a ‘mere’ geometric rate (compound interest) to an exponential rate (“compounding” the compound interest).