Wednesday, January 20, 2010

A little bit of normalcy

Fox News told the faithful if they got out the vote Tuesday that their 401k’s would go up. Stocks went down today instead. It didn’t have anything to do with the insurance companies (who stand to lose that 30 million of new suckers in captive market that the “insurance reform” bill was giving them) but rather a hiccup in the economy of the super power we are vassals to. China is having a real-estate bubble and has put the brakes on home mortgage lending, requiring banks to hold 16% of their deposits in reserve.

What a novel idea, Clinton and the Republicans did away entirely with bank reserve requirements for large banks here and some Wall Street Banks were operating 95 to 1 before the crash (that‘s about 1% reserves). The big banks are now operating on trillions they got free from the Fed, so the whole concept of reserve capital is right out the window. Compared to a couple of trillion, the 145 billion they are giving themselves in bonuses is chicken feed.

So with China watchers getting nervous, the markets worldwide are down and the USD is up. Since the markets have been pumped up by the Wall Street banks throwing around their new found trillions the USD has been way down. This makes it look like they are showing a record profits so they can give themselves record bonuses. You can’t give yourself a huge bonus if you are showing record losses which they would be if not for the market bubble creating all these profits. Profits that only exist on a computer screen and no where in the real world.

If the USD starts to strengthen too fast then all the markets worldwide will suddenly have major liquidity problem as investors will need to make margin calls on their loans. The Fed’s response to this so far is to keep interest rates at zero. China made a token increase in rates and has let it be known interest will go up. The question is when will this dance with the devil end? China is trying to cool things off but this will expose Wall Streets Ponzi scheme. But, the longer it goes on the worse the bust will be.

In good news, the USN finally has a hospital ship within helicopter range of Haiti. One of the USN reservist doctors brought along 1500 stuffed animals for the children he will be doing amputations on. It will be a little bit of normalcy for the kids, just like being back at work where they get 28 cents an hour making the toys for Disney.


Ronmac said...

It will be interesting to see what happens to all that aid pouring into Haiti. There are reports the Haitian people don't trust their government as far as they can throw it and that much of this aid will end up on the black market.

Of course, the last time a quake happened in that part of the world with large loss of life (the Dec, 72 quake in Managua, Nicaragua) most of the relief supplies were stolen by the Somozas who ran the country like their own private country club.

The Nicaraguan people had the last laugh though several years later when they ran Somoza and his gang out of town.

One bit of trivia. Roberto Clemente, one of the great baseball superstars of the day, became personally involved in the relief efforts for Nicargua. He was on a plane filled with supplies that crashed and was lost at sea.

If he only knew his efforts were only enriching the pockets of the Somozas maybe he would have turned around and spend the money on hookers in Vegas. The world would have been a much better place.