Wednesday, December 24, 2008

The Other Madoffs

One ingredient was financial intelligence. Madoff had buckets of it. Early in his career, he was the real deal, an actual innovator. He combined this with an amazing lack of conscience, for his scam was rooted most fundamentally in lying and stealing. The difference between him and all who came before was his grand scale, the grandest scale imaginable.The puzzle is not to explain business failures. Those are part of the normal course of life, and the sign of a healthy economy. The puzzle is to explain the “cluster of errors” that appears at the beginning of a recession. How could so many have been so wrong about so much at the same time? The business cycle is a system-wide failure, not merely the mistaken judgment of a few.So it is with Modoff’s scheme. The mystery isn’t how one person was able to fool a few. The scheme in which yesterday’s “investors” are paid off with the money of today’s victims is known in all places and probably all times – and it always goes belly up to the originator’s complete disgrace. It is a classic example of how moral laws are self-enforcing in the world of economics.The critical difference this time is that Madoff ran his scheme during an economic boom, a time when people’s normal sense of incredulity is put on the shelf. This is part of the grave cultural distortion introduced by funny money.
Money is the most widely demanded good in society, and the Fed is making new quantities of it not as a reflection of new real wealth, but purely as an administrative decree.There is a sense in which funny money literally drives everyone crazy, leading to what is sometimes called the “madness of crowds.With artificial stimulation from the credit machine, multitudes are willing to believe in something that cannot possibly be true. In Madoff’s case, it was that he could, even in falling markets, earn 15-20% a year without risk.Why not? Most everyone believed in some version of the myth. We believed that house prices would go up and up despite the reality that houses are physical things that deteriorate from the instant they are finished, just like cars or computers or anything else. Why did we believe this about houses? Again, you have to look to the fraudulent money system to see why.And we believed that we could all become millionaires by putting our money in the stocks of companies that weren’t actually earning money or paying dividends, companies whose wealth was entirely based on infusions of cash from the stock market which in turn were based on the belief that others would buy the stocks and so on. In other words, we believed that something out of nothing was possible, and anyone who didn’t believe it was a chump. It’s exactly what people believed during the other great inflations of history.What’s more, we believed that buying these stocks constituted not consumption, but savings for the future. In fact, people routinely attacked official savings data on grounds that they did not include what people were “saving” in terms of their stock market accounts. In a similar way, people were measuring our national wealth not in terms of accumulated capital, but rather through consumption data, as if granite kitchen counters in bigger houses were a measure of wealth instead of the opposite: the depletion of wealth.The left is big on attacking the salaries of investment bankers, and they were indeed outlandish. But these too represented not a unique problem, but more evidence of inflationary finance.
In a bubble economy, the money chases what is most fashionable, and financial services qualified. So the salaries were market. What was wildly distorted was the market itself.Now let’s talk about government finance during these years. The market tried to correct itself from 1999-2001, but the U.S. government wouldn’t tolerate it. Instead, it used every sign of downturn as an excuse to keep the illusion going, creating billions and billions in new dollars. The Fed drove interest rates lower and lower despite the non-existence of savings available to back them up.(Low interest rates in a sound money system are a reflection of accumulated capital and deferred consumption. When you see the Fed pushing them down during a boom, it is creating a dangerous mirage.)Did anyone stop and wonder where the government was getting all this money to pump up the system?
We are talking about human nature: the desire to believe in things that do not exist. The government was happy to fuel this sense because it gave the Fed, its connected industries, and the state more power and more money in the short term.
Madoff’s scheme played into the belief that wealth was not something to work for, but something to scheme for. It could be generated by playing your cards right, hooking into the right networks, and finding the right “investments.” The people with whom he dealt had, it turns out, some internal sense that there was something a little bit shady about the whole operation. But they dispensed with this sense when the fat checks arrived, and concluded that whatever was making this perpetual motion machine operate, it did work.But listen: the government right now is using the same tactic to convince you that it is saving you from the recession. The whole scheme partakes of the same sense of denying reality that characterized Madoff’s scheme. And I’m not just talking about Social Security, which is almost an exact replica of the Ponzi version, except that at least Charles Ponzi didn’t force people to give him money. I’m speaking of something broader. The entire financial system that is propped up by the Treasury and the Fed is based on the same idea: that something out of nothing is possible.
So they will jail Madoff. Wall Street would flog him if it could. He is disgraced for all of history. But meanwhile, the likes of Bush, Bernanke, Paulson, Obama, and all the rest are still riding high, even though their scheme is far larger and more egregious.Most of us like to believe that we wouldn’t have been tricked by Madoff. But are you being tricked by the elites who claim that they can conjure up a trillion dollars to stabilize our economy by clicking a few buttons on a computer screen? Most people are. Certainly the press seems to have bought it. Many people were outwitted by Madoff. Many more people are today being outwitted by the government and its central bank. And it will all end in disgrace and disaster, only on a far, far grander scale.

Tuesday, December 23, 2008

اسطورة الحذاء

مت إن أردت فلن يموت إباء مادام في وجه الظلوم حذاءُماذا تفيدك أمة مسلوبـة أفعالها يوم الوغــى آراءلحِّن أغاني النصر في الزمن الـذي هزَّ الخصورَ المائساتِ غنــاءُواصنع قرارك واترك القوم الأُلــى لا تدري ما صنعت بهم هيفـــــاءُ
هذا العدوُ أمام بيتكَ واقــفٌوبراحتيهِ الموتُ والأشـلاءُفاضرب بنعلكَ كل وجهِ منافق'فالمالكيّ' ونعل بوش سـواءُ
ماذا تفيدكَ حكمةٌ في عالـم قد قال: إن يهوده حكمـاءُفابدأ بما بدأ الإلهُ ولا تكـن متهيباً، فالخائفون بـلاءُواكتب على تلك الوجوهِ مذلـة فرجالُ ذاك البرلمانِ نسـاءُصوِّب مسدسك الحذائيّ الـذي جعل القرار يصوغه الشرفاءُ
إن أصبح الرؤساء ذيلَ عدونـاخاض الحروبَ مع العدى الدهماءُعبِّر، فأصعب حكمةٍ مملـوءةبالمكرمات يقولها البسطـاءُلله أنت، أكادُ أقسم أنهلجلال فعلك ثارت الجوزاءُ
كيف استطعت وحولك الجيش الذي بنفاقه قد ضجّت الغبــراءُ؟كيف استطعت وخلفك القلب الـذي ملأت جميع عروقه البغضـاءُ؟كيف استطعت وفوقك السيف الـذي ضُربت بحد حديده الدهماءُ؟
سبحان من أحياك حتى تنتشـيمما فعلت الشمس والأنواءُلك في الفداء قصيدة أبياتهــاموزونة ما قالها الشعـراءُ
في وجهك الشرقيُّ ألف مقالـةٍ وعلى جبينك خطبةٌ عصماءُولقد كتبتُ بحبر نعلك قصة في وجه 'بوش' فصولها سـوداءُولقد عرفتَ طريق من راموا العلا فهو الذي في جانبيه دماءُفسلكته والخائنون تربصوا ماذا ستبصر مقلةٌ عمياءُ؟
جاءتك أصواتُ النفاق بخيلهـاوبرجلها، يشدو بها الجبنـاءُلا يعلمون بأن صوتك آيـةللعالمين، وأنهم أوبـاءُلو صَحْتَ لاهتز البلاطُ بأسرهوتصدّعت جدرانه الملسـاءُأوَما رأيت الراية السوداء فيظهر الجبان تهزها النكباءُ؟أو ما لمحت يد الدعيّ تصدهـاشلت يمينك أيها الحرباءُلما وقفتَ كأن بحراً هـادراًفي ساعديك وفي جبينك ماءُلما نطقتَ كأن رعدا هائـلاًفوق الحروف وتحتهن سمـاءُلما رميتَ كأن من قد عُذبـواأحياهم الله القدير، فجاءواشيء تحطم في ضميرٍ مظلـمٍكبِّر فقد تتفتت الظلمـاءُ
علّمت دجلة أن فيها موسمـاً للموت تفنى عنده الأشيــــــاءُعاهد حذاءك لن يخونك عهده واتركهمُ ليعاهدوا من شاءواإن صار لون الحقد فينا أحمـراً ماذا تفيد دوائرٌ خضـراءُ؟لا لون في وجه العدو فروِّه بدمائه، فدماؤه حمراءقد كنت غضاً أيها النمر الـذي جعل المروءة تصطفيك الباءُ
ما خفت حولك ألف وغد نـاعموالناعمات تخيفها الأسمـــاءُ
لو ضُخّ بعض دماك في أوصالنا ما كان فوق عروشنا عمـــلاءُيا سيدا عبث الزمان بتاجـه اعتق خصومك، إنهن إمـــاءُ
واصنع حذاء النصر وارمِ به الذيتلهو به وبقلبه الأهــــــــــواءُلما انحنى ظهر الظلوم تنكّسـتمليون نفس باعها الأعــــداءُوسمعت تصفيق السماء كأنمافوق السماء تجمّع الشهـــداءُقف أنت في وجه الظلوم بفـردةٍبنية، فالقاذفات هـراءُوارشق بها وبخيطها الوجه الذيغلبت عليه ملامح بلهــاءُ
أفديك من رجل تقزّم عنـده الرؤساء والكبراء والأمـــراءُأفتَيْتَ بالنعل الشريف فلم نعــد نصغي لما قد قاله العلمــاءُأحييت خالد في النفوس فصار في أعماقنا تتحرّك الهيجـاءُما كنت قبل اليوم أعلم موقنـا أن الحذاء لمن أســـــــاء دواءُ
وبأن في جوف الحذاء مسدسـاًوبأن كل رصاصنا ضوضاءُ
ما كنت أعرف للحذاء فوائـداًحتى تصدّى للذين أسـاءوا

Thursday, December 18, 2008

Madoff The American Hero

The press...investors...regulators...they’re all howling for Bernie Madoff’s head. Of course, I wouldn’t mind if they lynched him. Still, he’s a hero to me. He’s the Rod Blogojevich of money – showing us how the system really works. He’s opened a window on the financial us all a remarkable and vivid pyramid the markets...and in Wall Street.
As a result of such eye-opening instruction, Bernie Madoff will save more investors more money than the SEC ever will. They’ll think twice before giving money to friends to invest for them... They raise their eyebrows and their doubts when someone promises them consistent high rates of returns.The feds are charging Madoff with running a $50 billion Ponzi scheme. Charles Ponzi took money from investors and then used their money to pay out profits to earlier investors. As long as the new money kept coming into the system, it worked like a charm. So what’s the difference between Madoff’s Ponzi scheme and the scheme run by Wall which all the investment houses, the rating agencies, the mortgage companies, Fannie Mae, Freddie Mac and the regulators themselves were complicit? As long as new money was coming into the system, who complained?
First, let’s look at what is happening on Wall Street now. Yesterday, the markets had a chance to connect the think more about what Ben Bernanke is up to...and what it will mean.You’ll recall that the Fed cut rates down to zero – effectively firing off all its monetary ammunition in one big salvo. Now, favored financial institutions – namely, the member banks of the Federal Reserve system – can borrow without paying any interest.That should get things moving, right? Well, not necessarily. Credit is frozen, not because it is too expensive...but merely because lenders are afraid they won’t get their money back. Asset prices are falling. So, the collateral that banks lent against is going down in price. Loans that looked solid six months seem dangerously leveraged today. It makes more sense just to hold onto the least it won’t declare bankruptcy or defraud you. And think about the people scammed by Bernie Madoff. How much are their loans worth? There are big names and little names on the list – including Japan’s Nomura Bank and France’s BNP Paribas. The big banks may be able to repay their debts. But what about the little fellows...the guys who put their entire net worth...perhaps a few million...with Madoff, in order to get his promised returns? That’s the problem with leverage. It works both coming and going. When an economy is acts like hot gas. Even a small amount quickly expands. But when a bubble springs a leak, the gas disappears. One man’s loss hits the balance sheets of businesses and bankers all over town. The whole system contracts. Suddenly, the whole thing is coming down like the Hindenburg. Which is exactly what is happening. Bloomberg reports that there is no sign of credit easing – despite the Fed’s efforts to give money away. Instead, everything is slowing down...shrinking...deflating:People aren’t buying new cars. So Chrysler says it will shut down its factories for a month. What began as a sleek Le Mans auto race becomes a demolition derby. Property prices in Detroit are getting wrecked. Suppliers to the auto-industry are being banged up. Unemployment in Michigan is rising to depression levels. People can’t even afford to buy the paper any more. The Detroit newspaper says that it will deliver only three times per week. There’s hardly a business or a household in the Detroit area that hasn’t been dented by the calamity. Meanwhile, California announced that it will put $3.8 billion worth of projects on hold. Goldman Sachs reports that its bonuses this year will be 80% lower than the year before. Bristol Myers says it will lay off 10% of its workforce; Yales’ endowment is down 25% and Mexico’s Cemex – one of the biggest suppliers of cement products in the world – says sales in this quarter are down 23%.And so it after day. Cutting back...reducing...downsizing....And you can imagine what this does to markets. Stocks shot up Tuesday on news of the rate cut. Wednesday, investors had time to reconsider; the Dow fell 100 points.
Now that Bernanke has run out of conventional weapons, investors are beginning to guess what happens next. In short: he’s gonna drop the big one. He’s going to go nuclear. He’s not going to stick with Keynes and Freidman, in other words; he’s gonna go Crazy.Yes, the Fed says it will now use “alternative” means of getting some juice in the economy. It will buy Treasury debt itself. This is what is known as “monetizing the debt,” or turning an increase in U.S. debt into an increase in the amount of currency in circulation. It’s a swell trick. If it works, Bernanke will be able to keep the rate of consumer price inflation above zero. He will probably try to get it well above zero – so as to encourage people to spend their money now, rather than wait for lower prices. The spending is supposed to be the magic that gets the consumer economy going again. We can look ahead and see that the Fed’s policy of going Crazy – effectively printing money – will be disastrous. I can guess, too, that gold will probably be the main – perhaps the only – beneficiary. The price of an ounce of gold rose $25 yesterday...putting it solidly in positive territory for the year. It could easily go over $2,000 before this crisis is over. But I don’t know exactly how...or will happen. Right now, day after day, the dirty laundry from La Bubble Epoque is being unfolded...we never know what awful surprises we will find.
The latest reports say Madoff promised investors steady 13% returns. How could he do that? Of course, he couldn’t. Stocks have gone nowhere for the last 10 years. The average rate of return? Zero. Promising 13% was clearly a flim flam. But investors must have guessed that he was swindling his retail trading customers in order to deliver steady, above-market returns to his investment accounts. They may not have understood how it worked, but maybe they didn’t want to.
Nobody is as easy to scam as a scammer...and Madoff scammed them all. Bravo!Of course, Madoff should get the gallows; I don’t dispute it. But, often, there’s not a lot of distance between the hanged man and mob that is lynching him. The people who most want to see Bernie swing are the people who invested money with him. Most were very sophisticated investors. They knew perfectly well that there is no magic way to transform a zero-return market into a 13% return market. If they were to get 13%, they knew they had to take a big risk. In this case, the risk was that Bernie Madoff was lying. And what about the bubble economy itself? Wasn’t it nothing more than a giant pyramid scheme with a huge, huge risk attached? It promised speculators enormous profits, but how could it deliver? It paid out money from new participants to the old participants. Without new money and credit the thing would implode. As former Citigroup CEO, Chuck Prince, put it: as long as the music was playing, they had to dance. But didn’t they know the music would stop...leaving them in an awkward and embarrassing position? Wasn’t it as obvious to them as it was to us?And what about the investors? Weren’t they trying to get something for nothing out of the whole bubble economy? And the rating agencies? They must have known that sub-prime debt was dangerous. Even we knew it. Why did they give it Triple A ratings? And what about the SEC? It has thousands of smart analysts, accountants and investigators. How could they all be so stupid as to miss the biggest investment bubble in all history...right under their noses? And what about Alan Greenspan, who actually encouraged households to take out sub-prime mortgage loans?Weren’t they all in on the scam? Weren’t they all complicit? Bernie Madoff should hang. But SEC chairman Christopher Cox and former Fed chief Alan Greenspan should hang with him.

Tuesday, December 16, 2008

The Biggest Fraud Of All : U.S.Treasuries

In fact, given the hundreds of billions that Wall Street has fleeced investors for in cases of fraud that are astounding not only in dollar size, but in the duration they run for before they collapse under the weight of their bloated treasuries.
Enron, Tyco, and Worldcom are certainly the household corporate words for fraud on Wall Street. Combined, the estimated take from those three scams was a total of $121 billion in total damages.
But hedge funds are collapsing so fast that they number in the dozens every week, and fully one third of the $1.5 trillion asset class is expected to go up in smoke within the next 24 months, dwarfing the carnage of corporate fraud.
Now along comes Bernie Madoff.
Madoff's take of $50 billion demonstrates unequivocally that the entire investment industry is essentially one big confidence game, where appearances mean everything and substance is hard to come by. Listening to the petulant indignation emanating from the victims of that fraud who were "professional" investors elicits little sympathy from a public who watches helplessly as the Fed continues to pump taxpayer-backed dollars into the accounts of the biggest financial institutions. That wouldn't be so bad if we saw some of that cash making its way down into the broad economy, but so far there is absolutely zero evidence of that happening.
Madoff's fraud, improbable as it may seem, brings to mind another massive financial institution that, if the same standards of evaluation were to be applied as to Madoff, would most likely reveal another Ponzi scheme in progress.
A "Ponzi Scheme" is one where early investors are paid non-existent "profits" with the money brought in by new investors. Ponzi schemes always collapse when no more investors can be enticed into the scheme, and payouts stop. This is exactly what happened in the Madoff case, and unless I am very much mistaken, this is what is happening at the United States Treasury right now, with its accomplice, the United States Federal Reserve.
Technically, the Fed prints money when the Treasury issues it a check that it back with the sale of T-Bills. The treasury bills theoretically attract buyers because the revenue generated from taxes as a percentage of GDP are sufficient to justify the number of T-Bills in circulation. If the U.S. Economy was a corporation, T-Bills would be shares in the company, and all of the infrastructure and profit-generating businesses in the United States would be its assets, and the taxes generated across the whole operation would theoretically comprise the corporation's revenue.
In Bernie Madoff's case, the fan was hit with the proverbial excrement when he ran out of new investors, and some old investors wanted to withdraw $7 billion of their money. Bernie ran around Wall Street for a couple of weeks before he realized the jig was up, and he and his two sons concocted a strategy whereby they would turn him in, hopefully thwarting the boys being swept up in the inevitable incarcerations just on the horizon.
Now if Bernie was the United States Treasury, and his sons were the U.S. Federal Reserve, he could have simply called his boys and said, "Look boys…send over $7 billion right away, will ya?" The boys, being family, would have certainly wired the funds over to Bernie, and Bernie could go on his merry way, attracting a growing crowd of innocent (hah!) investors, and paying them off with his sons' printing press. In this case, investors would continue to pile in, and Bernie could keep writing checks to his sons and issuing shares to his victims, because at no point was anybody going to say "Whoa boys! Lets take a look at them books!"
And that's because if Bernie was the U.S. Treasury, and his sons the Fed, everybody who might want to take a peak at the balance sheets already pretty much knows what they'd find there: the ashes of the U.S. economy. Baffed out and beaten, repackaged and resold in a trillion different ways, such that there is no way the entire productivity and asset base of the United States now and for decades to come, could ever justify the trillions upon trillions of dollars worth of shares the massive Ponzi scheme that is the United States has put into circulation.
Nobody wants the illusion to end. Especially not its biggest shareholders - Japan, China and the U.K. For if their own treasuries are based substantially on the fragrant paper originated by the United States government, well then what does that say about the value of the bonds they issue to justify the quantity of their own currency in circulation?
When considered in this light, its no wonder the world's central banks act on a concerted basis to suppress the price of precious metals. For it the metals were allowed to trade freely against these currencies of falsely inflated value, then the market would quite likely demonstrate what it thinks about those currencies by trading them in for gold - a process now underway on the fringe where wise men looking through the fog of deception that is the media, are moving as nonchalantly as possible for the exits of U.S. investment

Monday, December 15, 2008

اضربه بالحذاء

اضربه اكرمت العراق بضربه.حتى الحذاء ابى يقبل خدهارجعتني للعز من بعد الغيابورفعت رأسي عاليا فوق السحاب.اضربه يا ابن الفرات،،اضربه يا ابن العرب.اضربه حتى نستريح.اضربه قد طال التعباضربه حتى يستفيق ابن البغيضهذا المغولي الشعوبي المريضهذا الذي بجنوده قتل النساءهذا الذي تلعنه اديان السماءهذا الذي لايستحق سوى الحذاء