By Karl W. B. Schwarz
7-1-14
7-1-14
During
my professional career I have done three tours of duty with Wall Street
firms helping to sort out the huge market crashes that have hit the USA
in the past. I have often equated the boom and bust cycle in the USA to
being one of color blindness in that Wall Street and DC cannot tell the
difference in the three lights on a traffic light; green is ‘go’, yellow
does not mean ‘go faster’, and red means ‘stop’ but they keep going in
spite of warnings or sanity, and yes, big wrecks happen.
The reason
I am sharing that with complete strangers is I know the warning signs
of when an economy is about to go into a flat spin, the plane will go
out of control and crash and few if any will get out alive. Such warning
signs are everywhere that the USA economy is headed for a major crash
that may well be many times worse than the 2008 crash of Lehman Brothers.
Instead
of stop and think about what they are doing wrong, they are pushing ahead
and that will cause the biggest economic collapse in the history of the
world.
In the early
1980’s I sort of did it out of necessity when my home state had a constitutional
limit on interest rates of 10% and US Prime Interest Rate during the Reagan
Administration hit 21% and US Treasury bonds were yielding 11% to 14%.
The sucking sound we heard in Arkansas was the capital flying out of state
and drying up the economy in ways that sort of resembled Zimbabwe. Things
were dire and only the smart, strong and creative survived.
My alma
mater architectural school could not fathom why my focus was outside of
a black hole state and I was doing well when others were crashing. My
banker said it best, cannot borrow at 15% from the Fed, loan at 10% maximum
due to Arkansas constitutional law, and make up the difference in volume.
The only home state projects we were designing, developing and building
were ‘all cash’ and pre-leased to credit national tenants due to the mortgage
problem in Arkansas.
However,
that is what DC has been doing for a long time [more volume of nonsense
than they can pay for even when that light is ‘red’]. The hole is now
so deep it will destroy the US economy and standard of living. The rot
and the cancer are already in progress and are visible in every direction.
That period
during the early 1980’s of high interest rates happened for two reasons
that have not been written about much. First, President Carter devalued
the US dollar and that caused major unrest about the intentions of the
USA regarding its credit rating and paying its debts, which were miniscule
compared to now. That devaluation was sort of a USA kick to the balls
to those foreign investors holding US Treasury bonds and during the 1980’s
they kicked back.
The US government
has continued to devalue the dollar through economic and fiscal policies
that are now seen for what they are… bordering on insane. The USA credit
rating was downgraded and another probably looms in the near future because
they keep doing the stupid things that devalue the true worth of the US
dollar. Low dollar means high energy prices and is sucking the life out
of most nations.
The second
reason was the world was sending a clear message that the US policies
towards the Russian Afghan War from 1980 to 1988, the US armed and supported
Iraq - Iran War also from 1980 to 1988, and then surfaced the incredible
amount of US government sleaze during the Iran Contra scandal.
For all
of the talk by the Far Right about what a great leader Reagan was, I knew
better. It was during that administration that the moral fabric of America
started becoming frayed and unglued due to the demands of the elite few
and the military industrial complex forcing American policy in directions
that have been disastrous for the United States.
Reagan was
inspirational in speeches and his focus on defeating communism had a valid
mission. However behind the scenes were some very sleazy things going
on, especially Iran Contra, BCCI and other things that should have never
happened. I have known for years that one of the biggest problems in the
Reagan Administration was making George H W Bush the Vice President ‘CIA
choice’.
It was during
this same period that gave rise to the likes of Michael Milken predatory
practices and capital markets fraud that have grown worse with each passing
year for the past 30 years. Fraud rarely rears up its head in Europe;
it does almost daily in the USA so… so much for ‘rule of law’ for that
phrase is now pretty much meaningless in the USA except when being applied
to political enemies of DC.
It was during
the period 1980 to 1988 that the entire world knew the USA was a direct
sponsor of terrorism as part of its business plan to achieve its objectives.
Defeating communism was a worthy goal up to a point depending on the methods
and means, but since 1991 for the USA to exchange the standoff with communism
to directly engaging in more terrorism was a stupid business plan.
One cannot
claim to be on the moral high ground when they are neck deep in the sewer
they created.
The objective
my team was charged with was develop putable trading strategies that could
beat that 21% prime rate by 500 to 700 basis points so certain key and
strategic projects could be financed. We focused mainly on hospitals,
power plants and refineries with some very creative ways to take advantage
of the interest rate differentials between the US Treasuries and much
lower interest rates in Germany and Switzerland. It worked but took the
focus of a major NY investment bank to lead the way.
Then along
comes Reagan again with the 1984 TEFRA Act [Tax Equalization and Fairness
Reduction Act] that had the unintended consequence of wiping out many
of the Savings & Loans and some banks. That one was due to the rampant
amount of fraud that was going on in falsified inflated appraisals, people
borrowing more than projects were worth, and out the back door a lot of
money went for mansions and personal play toys. This travesty happened
because too many were living on OPM and sucking all they could get out
of the system.
When the
house of cards collapsed many of the projects could not even be justified
to complete them. The falsified appraisals were being used to distort
loan to value ratios and people were getting more than 100% financing
on projects of questionable value, often no money in the project personally.
That is banking fraud.
Many were
fined or sent to prison, many more deserved to go to prison. That was
the same scandal that should have landed Neil Bush in prison along with
Charles Keating of Lincoln Savings and then the Silverado S&L scandal.
This was
also the same period of time that the savings rates in the US started
to plummet, and that is always a bad sign for things ahead. There was
a complete disconnect between growth, incomes, disposable income, US policies,
and the real prices. That all led to lower retirement savings and less
stability in the banks, S&L’s and real growth of the US economy and
wellbeing.
As a design-build
executive I could easily tell if projects had been victimized by fraud
and whether or not a project that claimed to be say 50% complete it was
actually so. The reason that was important is when the FSLIC [later the
RTC, Resolution Trust Corporation] would take over an S&L the loans
were treated as LIP [Loans in Progress] and construction was brought to
a halt while matters were reviewed during federal receivership. Of course,
they were still collecting interest on the loans while not moving the
projects to completion.
It was during
this time that the concept of “Good Bank” and “Bad Bank” arose to where
the taxpayers ate the fraud and the new buyers got the good bank assets.
After the 2008 collapse of Lehman Brothers the huge bailouts should have
never happened. There is no such thing as ‘too big to fail’ and the US
government is proving that right now.
That interest
expense and no progress towards completion of the project put a lot of
people out of business that had nothing to do with the fraud that caused
the problem but they sure did suffer because of it.
Many projects
were literally bulldozed because the fraud had been so rampant because
completing them would have increased the losses to the taxpayers. During
the years 1985 to 1989 the amount of new construction was way down and
I helped to sort out the huge amount of overbuilding and loan fraud that
was part of the underlying problem.
That was
mainly in the states of Arkansas, Oklahoma and Texas. Then the tsunami
reached the East Coast in what everyone thought was the recession proof
Washington DC area. Thanks to George H W Bush he crashed the US economy
and sure enough the bank and S&L failures in the metropolitan DC area
were colossal. I did many workouts there from 1989 to 1992 on banks and
S&L’s that no longer exist such as Sovereign Bank, Perpetual Mutual
S&L, etc.
Then we
see today and the collapse is in every direction.
The top
25 big box retailers suffered huge losses in the first quarter of 2014.
Many are closing stores even in the regional malls. Even the American
icon Sears is struggling to survive and the recession buffer Wal-Mart
has taken a big nose dive.
The big
Wall Street banks that got the bailouts would rather play with the money
in the stock market for their own account than make loans that would create
new jobs and real growth. Buffett, Paulsen and Soros have dumped their
holdings of US bank stocks.
I recently
reported that in the 2005 Bankruptcy Reform Law pushed through by the
Bush Administration, they allowed those same banks to monetize their huge
exposures on derivatives with bank depositor money. Many of those derivatives
are worthless, but if the end beneficial user of those derivatives files
for bankruptcy the domestic and foreign holders (owners) of those derivatives
have standing in the bankruptcy as creditors and you as a depositor do
not.
Said another
way, the US government has allowed the banks to use your money to save
their butts and they have left you as a depositor with no recourse in
any bankruptcy involving these derivatives. Yes, that was a knife in your
back in case you read that and are wondering. The foreign derivative holders
will wind up owning the bank, not the US depositors that will have paid
for their own demise by being unwitting depositors.
The US economic
growth report was adjusted downward to reflect reality and shows a drop
of 2.9% in the First Quarter rather than the projected growth and rosy
reports from Washington DC. That was the biggest drop in 5 years but other
factors are serious warning signs.
That First
Quarter adjustment to reality is bigger than the US economy was projected
to grow during all of 2014.
Odds are very high that during the 2Q, 3Q and 4Q the real growth for this year will be negative and further contraction of the US economy. If things were not bad enough, they are headed to worse.
Even the
IMF is telling the USA is must increase the minimum wage before the damage
is irreversible. Actually, it is too late to increase the minimum wage
because the gaping holes in the ship are too large and its sinking is
inevitable.
Increasing the minimum wage right now would be akin to putting a band aid on a .357 magnum chest wound. The patient is probably not going to make it without major surgery.
There is
one metric that is impossible to measure but is a factor in the decline
of the USA. How much are US companies suffering on production and exports
due to despicable foreign policies of Washington DC? It is a huge
number and is also having a big negative impact on all of the USA except
the defense and security industry.
US Exports showed a huge decrease in the 1Q 2014 and is a major element of why the 2.9% decrease has happened.
What the
US government has done since September 11, 2001 has turned much of the
world against the USA.
People outside of the USA clearly see that the Global War on Terror is a fabricated lie, and this endless warmongering, funding of terrorism and creation of chaos around the world is not productive except for those inside the USA that want it that way.
Hostile
actions towards Russia and China are having huge blowbacks against the
dollar and more and more nations are starting to trade in their own currencies
and distancing from the US dollar and the warmongering terrorism driven
insanity of Washington DC.
The US dollar
is no longer viewed as a desired reserve currency and losing that status
will be like an economic nuke to the US economy as currency collapse and
real inflation set in fast. The backside effect of that will be hyper-inflation
and then a deep devaluation of the US dollar and that alone will severely
impact the net worth of everything and everyone in America. That is when
USA joins Zimbabwe and Argentina in the bread lines.
Regardless
of the rhetoric coming out of Washington DC, this colossal damage to the
US dollar and its economy is not due to any act of any foreign nation.
The problem lies within Washington DC and its fascist drive at global
domination. The pigs at the DC Hog Trough Diner have sucked the life out
of the USA and yet they incessantly squeal begging for more.
The time
is rapidly approaching that the Central Banks of nations will decrease
or divest their US dollar holdings. That may well be in the form of taking
over US assets, US corporations, land, etc. The idiots in DC seem to not
know what ‘margin call’ means and no, they are not immune from it.
The lust
for American Empire and over 700 military bases, plus funding terrorism
and regime change, is one of those karma things that like a boomerang
it is now hitting the USA in the back of the head while they myopically
focus on the wrong things.
The USA
can blow billions on regime change and financing terrorism in foreign
lands yet not focus on getting what is wrong in America fixed.
I saw this
coming in 2005 and is why I moved to Europe on June 1, 2006 and completely
got out of the way of the tsunami of economic disaster that these idiots
in Washington DC have created. The land I was born in has turned into
the Fascist United States of America with complete lunatics running the
insane asylum in DC.
I read this
article [link below] just before starting this and it reads like a Steven
King horror novel but it is the statement of fact on why things suck in
America except for the elite. Imagine 50% of all Americans earning less
than $27,520 per year. Folks, you could not begin to live in Western Europe
on such a paltry amount of income.
That is not the American Dream unless that phrase now fits The American Delusion.
In spite
of the chest thumping about how great America is, the EU economy is $2
trillion bigger per year than the US economy. The two world leaders in
production output and exports are China and Germany. The USA lost that
leading role a long time ago.
Minimum
wage in the USA is $7.65 an hour, about one-third what people make in
Switzerland where there is no minimum wage. The Swiss economy works, the
US economy is a self-enriching aberration mostly for the elite few and
crushing everyone else to death financially. Unless one is a doctor, dentist
or other type professional, things are not good in the American economy.
If a person is not employed directly by Big Defense, Big Security, Big
Oil, Big Banks and Big Pharma, or Big Lobbyists, their plight in life
is one of struggling to survive. The signs that it is true are everywhere
and clear to see.
I have jokingly
said for years that the reason we have so many misfits running for Congress
is they cannot cut it out in the real world but even after 1 two year
term in the US House they have a pension for life. What a retirement
plan for misfits!!!!! After about 20 years of watching that phenomenon
it is sad to say it is true more often than not. Many in Congress are
the worst among us and leading the USA to an early grave.
Major retail
chains are shutting down a large portion or all of their stores. The economic
cancer has become terminal. The ‘shop ‘til you drop’ mantra has taken
its toll. I have watched over the years as DC and Wall Street have pushed
towards a consumer based economy with little in the way of real durable
goods production, while at the same time taking one stupid step after
another to kill the consumer.
It is a
simple reality that it cannot be had both ways. To have a production economy
means to support and grow production for domestic consumption and exports.
To have a consumer based economy the overall system has to promote that,
not kill it. Actually it has to be both running parallel because endless
debts of DC are not a viable business plan. Endless massive trade deficits
are not a sustainable business model.
Add in on
top of the trade deficits the debts they are racking up for in an endless
thirst for war, financing of mayhem and terrorism, these derelicts in
DC are digging the hole fast. It would be different if they were spending
cash assets, but they are not. They are leveraging and making debt bubble
so big it will implode and when it does it will be very fast.
If you take
the time to read the following article and pay attention, you will understand
why almost 59% of Americans no longer believe the American Dream is achievable.
That is a recent CNN poll, and reading on down the article is like reading
an obituary. Those facts and figures are the requiem for the stupidity
of the failed leadership from Washington DC.
Actually
the American Dream is achievable but first Americans need to clean house
in Washington DC and get rid of what is killing America. The real need
for ‘regime change’ is get these idiots out of DC and away from the US
purse strings and decision making process.
The figures
in that article are real and are why the Middle Class, the literal backbone
of the US economic engine is becoming virtually extinct. Each day the
‘haves’ and ‘have not’s’ gap widens and being crushed in the process is
the Middle Class that once made up the largest sector of the US economy.
The economic engine of America was driven by the Middle Class workforce.
That so
many are underpaid, prices rising, or have no job at all are each and
every one Warning Signs that something is terribly amiss and disaster
is inbound.
You Americans
living in those 50 states need to come to grips with the reality that
your voting habits and laziness as citizens is in part what has led to
the demise of America. These idiots in DC cannot lead starving animals
to food and water. While America partied, stayed distracted, surfed the
Internet and TV channels, and did not engage in putting a stop to the
insanity in DC has led to the failure of a nation.
Worst of
all is the lock-step of vote Republican or Democrat because that is the
only personal identity you have. This lunacy of “Bush RNC Person” or “Obama
DNC Person” is sheer stupidity when both are flying the USA into the side
of the mountain; big crash ahead, no survivors.
Maybe someday
American voters will reflect back and realize that on September 11, 2001
the USA intentionally morphed from a land to be admired to a totalitarian
fascist state. That is a date that will truly be remembered in history
as the day of infamy when the USA killed itself.
The approval
rating of Congress is down around 7%, yet inexplicably lazy voters keep
putting the same morons back in office that are clearly despised in and
outside of the USA. It does little good to grouse about lousy ineffective
leadership or pathetic results when the American voters keep them in office.
I watch the vote results in America and whether it is the US House or
the US Senate the voting electorate keeps putting their “Pet Nitwit” back
into office knowing already they suck.
It is only
a matter of time before the collapse will happen and there is nothing
anyone can do to stop it. If anyone is hoping (in the absence of any reason
to hope) that Washington DC is going to change they need to wake up and
grasp the realities for what they are.
“Change
We can Believe in?” I believe… the change was change for the worse. Just
look around you and it is clear to see. The RNC is not the answer; the
DNC is not the answer; both are dead from the neck up.
These idiots
in DC have been so out of control that if they confiscated the entire
paychecks of all US workers they still cannot afford the debt and IOU’s
they have racked up. The official national debt stands at almost $18 trillion
and rising. However, when the unfunded liabilities are factored in it
is more like $160 trillion and rising. The 2013 GDP was $15.68 trillion
so current debt is more than 10 entire years of GDP at the 2013 level.
That means they cannot fix it if they applied the entire GDP to debt reduction
for the next 10 years.
Debts are
not assets… except in the La La Land of Washington DC.
There is
no way to do a ‘work out’ that is driven solely by taxes and growth of
GDP, and meet the obligations on $18 trillion and then over time meet
the $160 trillion. If interest rates were to reflect the real inflation
rate right now the USA could not afford the interest payments alone on
the $18 trillion debt.
To add insult
to injury new manipulative laws like FATCA will bring foreign investment
into the USA to a grinding halt and could even trigger a debt default
on US Treasuries due to how stupid bureaucrats and leadership is in DC.
Add in TPP, TISA and other steps to further provoke Russia, China and even many US allies that are drowning in US debt and weakening US dollars… the stage is set for a huge backlash.
The first
step in righting the ship so it does not sink would be to slash and burn
the wasteful spending of Washington DC chasing policy objectives that
will not work and blow up in their faces every time.
We are seeing
such right now in Iraq, Libya, Syria and Ukraine. They keep throwing billions
away on unachievable objectives. Worse, they are funding terrorism and
making things much worse because their business plan in Washington DC
sucks; is bankrupt and is a failure in every way there is to define that
word.
The only
solution to the problem is to reverse course 180 degrees from the direction
the US is headed on. They are that wrong and that clueless in Washington
DC.
If you want
to learn about how fast the USA could wind up the next Yugoslavia, Argentina
or Zimbabwe take the time to listen to this video:
As one of
the parties said in the presentation, none are so blind as those who refuse
to see.
What is
glaringly apparent to me is the USA game plan on job creation and economic
development is a disaster. To add insult to injury the number living under
the poverty line has steadily increased as have the number of people dependent
on Food Stamps, welfare and unemployment benefits while they try to find
jobs that are not being created fast enough. There is no way that the
preponderance of US citizens can develop and achieve any type of long
term financial security while they work, have no additional money to put
into savings, and then will have very doubtful retirement years.
What has
slowly happened is some in America got the American Dream and most of
the rest got either poverty or slowly waking up to the reality that the
USA is now a Low Wage Labor pool due to the greed of Wall Street and the
corporations, and the pathetic leadership from Washington DC.
It is much
more than just illegal immigration. The entire system has devolved into
a low wage market and things getting worse and worse as prices keep going
up.
Enjoy those
fireworks on the 4th of July; they might be the last you can
afford for a very long time.
http://www.rense.com/general96/stormwarn.html and see also, http://www.rense.com/general96/timeforusa.html |
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