The Consumer Confidence Index came down unexpectedly in September. Everything is getting better, right? Why wouldn’t consumers see it that way? Maybe because for every four people who have a job there is one who hasn’t been able to find work for months or years. Maybe because nearly a million people retired early in the past year for lack of work or health insurance. Anybody looking for work has the odds increasingly stacked against them with six times as many people now looking for jobs as there are jobs available, a new high.
Some people are doing all right though, US banks are expected to show higher third quarter earnings this week. They are doing this by revaluing about a trillion dollars in toxic assets they are holding. This move is based on market trading in these instruments that they claim has driven up the value more than 30%. The problem is that the trading in these worthless bundles of paper has been described as "thin". In other words there is no real market for this crap but as long as they can pretend that there is, it’s money in the bank.
It will be difficult to even tell which banks are doing this or how much, since the accounting procedures that they use rely on the Gordian Knot principle. With this tangled mess, you can’t really tell what’s going on until the checks start to bounce. A good rule of thumb is: the bigger the bank and bigger the profits then the bigger the lies. By modern corporate thinking, the only thing Enron did wrong was that they couldn’t convince the right people that they were too big to fail.
Meanwhile, the US money supply is shrinking and bank credit is contracting at a pace not seen since the worst days of the last Great Depression. This has been going on for about three months and appears to be tied to the Federal Reserve not buying as many bonds as it had been planning to. It’s believed that the Fed gave into pressure from China that has fears that the US is trying to devalue the Dollar and make worthless the trillions of dollars that China holds by increasing the money supply.
The risk from this rapid debt reduction is that this could plunge an already shaky US economy, if not the entire world economy into a full blown deflation collapse. The so called Experts that work for rich people are predicting that by next year the Fed will have to start the outright monetizing of government debt. This a fancy way of printing money in which the "new" money is put into the hands of people who are already rich by issuing Treasury bonds and then have the Fed buy them back at a premium for cash (instant profits for the privileged class). But of course, you wouldn’t want to put the money in the hands of the lower classes, that would be so Keynesian. What do you think this is? The New Deal? ----- Submit your recipes for eating the rich at www.prairie2.com