It is almost three years since this was published, just as the financial and political crisis was becoming public knowledge. It is even more true in 2011, as the EU and US stumble towards their own default crises. Nothing that the banks or politicians have done has changed this blunt analysis.
Only the numbers are different. They're now much bigger. Politicians are finally using the default word. And it's not just corporations at risk, but whole countries.
The $700 Bln bailout is not about US cash. The U.S. is a
debtor nation. The cash for the bailout has to be borrowed, primarily
from the Japanese and Chinese.
According to one person
I've spoken to who knows the top Japan and China banking regulators,
they are not happy about the U.S. p***ing their money up the wall.
The better informed congressmen have lines of communication to the Chinese & Japanese and know they can't sell it.
Bush in Tuesday's speech insisted the toxic assets could, if held for some years, be sold at a profit.
plain rubbish. If that was the case, there would be no need for a
bailout. Banks could just sit on their assets until they recover in
value. The problem is, they were so wildly overvalued, they are not
going to recover in value.
How were they so wildly overvalued. You won't read it in the FT or hear it on the BBC but clearly the answer is lies and fraud.
A default crisis
is not a liquidity crisis. On Tuesday night, European banks deposited
well over 100 Billion euros at the ECB. The banks were not prepared to
leave their money for one night in a retail bank. Perhaps, they know
something we don't?
If the banks deposited E100 Bln
there is no shortage of cash. The point is they won't lend it. Not to
each other, not to companies, not to home buyers, except at rates which
make a mockery of the word 'lending'.
This is a default crisis. Banks and large corporations are going to default. The banks know that. The public do not yet.
Paulson, the dour looking ex-Goldman Sachs trader worth $500 Mln, says
there is no alternative to buying the banks failed betting slips.
are several alternatives. One is to let the Japanese and Chinese buy
the US's failed investment banks. They already own large chunks but
politically the US cannot stomach Asia buying the Ivy League banks.
their assets. In 1998 the IMF told Russia that it should not bail out
its banks. Ten years later the IMF is encouraging the US to do just
that. One rule for the emerging markets, another for the Masters of the
Russia dealt with illiquid banks by knocking
their heads together and forcing them to swap assets at knockdown
prices. Washington does not have the balls for that. It proposes using
taxpayers money to buy assets the banks don't want. It is a
recapitalisation of the banks by stealth and lie.
God help us.