Part 2 - THE EVER-GROWING PIE-IN-THE-FACE

The current crisis in Europe is a direct harmonic of the American derivatives meltdown.    The thinking in the big boardrooms and at The Fed, is that a corresponding meltdown in Europe would reverberate back here and deliver the coup de grace to our already gravely ill banking system.

Our current economic models are built around the assumption that there will always be more and more humans clamoring for less and less available and more and more valuable real estate.  The moment that any part of that assumption becomes untrue, the entire structure begins destroying itself by cutting the flow of the short-term loans banks take from each other to fund the long-term loans they make to consumers.

There will be more and more humans each year, 75 million more, to be exact, but what almost all of them will be are clamoring for is not overpriced real estate.  It's food, water and medicine.

The idea of the ever-growing-pie (perpetually expanding economies and infrastructures that will accommodate a perpetually expanding population) has been a boondoggle from the start.  Perhaps a global meltdown of the very institutions that have benefitted from it most is what needs to happen to get the G7 talking about leveling off their populations, and achieving what John Stuart Mill postulated in 1848 would be a "Stationary State".

But, let's stay with the current situation for now.  We'll have plenty of time to talk about reorganizing the economy after the apocalypse.

Increasing the leverage at which citizens could purchase property came to fruition under Ronald Reagan's deregulation of the financial industry in America, which was continued to a lesser extent by Bill Clinton, and then taken to the extreme under George W. Bush.  This created a generation and a half of folks who, unwittingly, were as vulnerable as big banks to price reversals in the housing market.

Home "ownership" peaked in America at 69% of families in 2004 - the top of the housing bubble.  At that point, the banks were literally pulling people off the street and giving them mortgages.  One hairdresser in Las Vegas bought 19 homes.  The main reason banks didn't see any downside to the sub prime mortgages they were hawking was that they thought that they had it written off.

Mortgage-backed Securities (Derivatives) are a "risk-management" tool that amalgamate risky loans, dampening the exposure to a few defaults by bundling them together by the thousands and writing securities against them.  Ironically these "securities" actually magnified big banking's exposure to massive mortgage defaults. Still, they became globally accepted by banks and their regulatory agencies world-wide as justification for leveraging into more and more risky loans.

The special quality of leveraged instruments is that they require less capitalization to create a scenario in which, when you win using them, you win big, BUT THERE IS NO SUCH THING AS A TIE.  By going "all in" on the leveraged sub-prime mortgage market, all the big U.S. investment banks created a situation whereby they were vulnerable not only to a downturn in housing prices, but where a simple leveling off was enough to break them.

Take a look at this chart.  The blue line is the National Home Price Index. It's easy to see why they thought this would be a good idea.

From 1980 to 2005, a mere 25 years, with a slight leveling off in the Clinton years due to his decision to focus on adding more low-income transactions to the mix, which dampened the curve, the average US home went from a value of $75K to a value of over $500K, eerily, a 666% increase.  1900-1980 = 300%, 1980-2005 = 666%.  It was a housing market on steroids and crack and EVERYBODY was making money.  Until they werent.

The housing market indeed leveled off, and the brutal kiss of the derivatives killed Lehman Brothers (apparently not dead enough that they wouldn't receive $183 billion from The Fed during QE1, though) and put the rest of the banks in such a wringer that credit evaporated almost overnight.  This caused the credit-fueled housing market to nose over and dive.  The National Home Price index lost 30% of it's value by November 2008.  If somebody didn't stop it, all the big banks would go down in flames in very short order.

Now check out the consolidation in the blue line at the extreme right.  That is arguably the effect of QE1, then there was a big dip, then QE2 came on line in November 2008 and it's bottomed out for a minute.  The conventional thinking says that the $16 Trillion the Fed splattered around actually caused banks worldwide to start loaning money again, and that liquidity is all that is currently standing between the international banking world and the abyss.

The current world-wide exposure of banks and governments to credit-swap derivatives is estimated at $1.5 QUADRILLION!  That, boys and girls, is $1500 Trillion.  Should another 30% blow off the top of the housing market that exposure is going to become a black hole for big banking and the highly-leveraged generation of homeowners who bought into the price explosion in housing over the last 30 years. At that point, Occupy Wall Street will morph suddenly into Occupy Your House.

On the bright side, If big banking is kaput, who will foreclose on the mortgages?  If the recent $16 trillion dole from the Fed is an indicator, the first American corporations that'll lie bloating in the street like drowned Saints fans will be Citigroup, Morgan Stanley, Merrill Lynch, Bank of America, Bear Sterns, Goldman Sachs, JP Morgan Chase, and that zombie bank, still staggering through the streets of New York and Tokyo oozing toxic "assets" three years after it's death, Lehman Brothers. 

The basis of the problem is simple.  Countries around the world and their people, with very few exceptions have been spending more money than they are making for a very long time, and they have no way to pay back what they've borrowed in a slowing world economy.

The keystone event is also very simple.  Some banks or some countries that very few imagined could, will go under, and the default of their credit swap derivatives will be triggered.

There are billions of these contracts on the books, but nobody seems to have a way to estimate how to value them for sale or trade, let alone what will happen if they're defaulted upon. The worst of it it is that all the banks worldwide have tangled themselves up together in these toxic assets, and can't figure out how to unwind them.  This has accomplished the exact opposite of the risk diversification that was their "as advertised" reason for coming into being.

Here's a very illuminating video on the scope of the problem by Chris Martenson, who suggests transitioning into "tangible assets" like precious metals. It's possible to use his capitalization on these themes to color one's evaluation of what he says but you'll find him very sincere and immensely knowledgeable.

Next - SINGING BACKUP TO THE SUPREMES

Part 1 - PANIC IN THE BOARDROOMS

What a week in the news, or BETWEEN the news, as it were.  Tired of everyone railing on the corporate media.  Old story.  If you want straight skinny, search the internet.  It's the most open, unrestricted channel for information that has ever existed in the history of the world.  There is literally no excuse any more for being uniformed on any issue simply because you depended on the mainstream media and they let you down.  C'mon man, we're better than that, aren't we?  Search and destroy ignorance, people!

Anyhoo.. .

Here's what stuck out for us this week here at the Poo Palace.  We apologize in advance for this being a fairly dry, fairly academic piece of writing.  Lotta facts to lay out.  Here's what we got:

1. The Fed's Euros for Dollars Swap meet
2. Mortgage-based derivatives and other risks of modern capitalism's basis in the "Ever-expanding" human occupation of Earth
3. Obama's continuing failure to stand up to the Supreme Court
4. Obama's amazing health care Trojan Horse
5. The oceans of "dark money" floating around offshore revealed when Google, Apple, et. al. offered to repatriate $1.2 TRILLION in overseas profit, so long as they could get an 85% discount on the taxes they'd owe if they did.
6. Newt Gingrich is the frontrunner for the GOP nomination for President.  ...of the United States.  ...Seriously.

EUROS FOR DOLLARS

The Fed announced this week that they were expanding their policy of letting troubled European banks trade their Euros for dollars, bumping the scope of the program to "unlimited". Most commentators pegged this move to the European Economic Summit coming up this week where many predicted the "death of the Euro" would occur.

What does this mean?  Well, imagine you're England or France or Germany or The Netherlands, or Luxemborg, or any of the other "strong" economies in Europe. Your fortunes are tied to the Italy and Greece and the other European countries nearing default primarily because you share a currency with them.  It's like revenue sharing in American sports without the benefit of being able to kick the shit out of the revenue receiving "franchises" every couple of months.  Eventually, as with n'er do well relatives hitting you up at holidays, you're going to say, "That's it! Not another dime."  That's what a lot of smart people were saying was going to happen this week at the European Economic Summitt.

A couple things stand out about this Fed Action.

First, the obvious question is; if nobody in Europe wants to borrow Euros, isn't the Fed taking a HUGE huge risk by letting European banks back up the dump trucks at the US taxpayers' collective loading dock, offload them and drive off filled with freshly printed greenbacks?  The answer is "possibly".  These swaps have been in place for a while and have thus far been profitable for the The Fed.  The deals commit the Eurobanks to buy their Euros back in dollars, plus some vig.  If, however, the Euro does vaporize, it's difficult to imagine exactly how and when, and with what they will do it.  More on that doomsday scenario below.

Second, as difficult as this may be to believe, the Euro is currently stronger than the dollar relative to other world currencies.

Notwithstanding the more disturbing implications of that revelation, the folks at the Fed don't seem quite so stupid now do they?

It's even deeper than that. The "QE 1" on the chart above represents the first "Quantative Easing" announced by the fed.  "Quantatative Easing" is analagous to the way Hippopotumi defecate, breaking up huge chunks of poo with the violent "high-speed winshield-wiper" action of their tails (this action, in addition to marking the hippo's territory also creates food for plankton and worms and therefore, by TRICKLING UP the food chain, fish!), only in The Fed's case it's huge chunks of money, the worms and plankton wear suits and fly in private jets, and the fish have armies and air corps as well as navies.

Documents recently made public have revealed that The Fed's QE 1 represented over $16 TRILLION DOLLARS splattered out to foreign governments and foreign and domestic corporations and banks.  Theoretically, it would keep the credit flowing.  It hasn't worked real well apparently, hence QE 2, which kicked off in November of 2010.

For those of you scoring at home, $16 TRILLION is over $1 TRILLION more than the entire US national debt at this time.  It's 7 times all the tax revenue collected by the IRS in 2010. and about a TRILLION more than the U.S. Gross National Product (as declared - more on that later) for 2010. Fox News has estimated the cost of providing Universal Health Care to all US citizens over the next 10 years at $1.2 TRILLION, less than half what Citigroup got in QE 1.

Here is a list of the recipients these 0% loans, none of which have been repaid and which, incidentally, were over and above the bailout money provided by the Bush and Obama administrations:

1. Citigroup: $2.5 trillion ($2,500,000,000,000) 
2. Morgan Stanley: $2.04 trillion ($2,040,000,000,000) 
3. Merrill Lynch: $1.949 trillion ($1,949,000,000,000) 
4. Bank of America: $1.344 trillion ($1,344,000,000,000) 
5. Barclays PLC (United Kingdom): $868 billion ($868,000,000,000) 
6. Bear Sterns: $853 billion ($853,000,000,000) 
7. Goldman Sachs: $814 billion ($814,000,000,000) 
8. Royal Bank of Scotland (UK): $541 billion ($541,000,000,000) 
9. JP Morgan Chase: $391 billion ($391,000,000,000) 
10. Deutsche Bank (Germany): $354 billion ($354,000,000,000) 
11. UBS (Switzerland): $287 billion ($287,000,000,000) 
12. Credit Suisse (Switzerland): $262 billion ($262,000,000,000) 
13. Lehman Brothers: $183 billion ($183,000,000,000) 
14. Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000) 
15. BNP Paribas (France): $175 billion ($175,000,000,000)

~~Source: The first EVER(!) GAO Audit of the Federal Reserve - page 131


Yeah, Lehman Brothers got $183 billion.  What do you think are the chances we'll see any of that back?  That payment alone is 366 times what we lost on Solyndra, by the way.

Some of those few of you not in a coma by now may be wondering "Why further jeopardize the already historically weak dollar in order to inject liquidity into companies and banking systems overseas?"

Glad you asked.

(...next) THE EVER-GROWING PIE-IN-THE-FACE

Congress And The Theory of Knots

Any dry fly fisherman who has learned to fish "wet" can tell you that when you add extra flies and sinkers and indicators to the end of a leader, you encounter levels of "tangled" that you had never before imagined possible. Experienced wet fly hands use a "two-minute rule" for these situations. If the knotted condition of your leader, or your leader and rod, or your leader, rod, creel, hat, arms and legs is such that it can't be untangled in two minutes, simply cut the line and start over with new gear.

One day on the upper Sacramento river, in the time before I knew of the two minute rule, it occurred to me that with a knotted leader, as with many other situations in life, no problem is ever as simple again as it is the moment before the first solution is applied.

Looking down on a tangle, it is often easy to see the progression of moves that will undo it. "Three wraps of the sinkers around the rod, push the indicator between the leader and the fly line, two twists of the fly around the right side of that loop and we're outta here!" Once one's fingers become part of the system however, it almost invariably becomes an unrecognizable mess after the first two seconds.

I find myself today looking for a way to apply some knot theory to Congress.

Just read Article 1 Section 8 of the Constitution. Congress is charged with some really important stuff besides providing the pathetic tragi-comedy that rabbit punches us in the face from the morning paper each day. Today, it's the debt ceiling "supercommittee" FAILING to agree on a way to pull our collective chestnuts out of the towering inferno of public money that is US fiscal policy in the post-Reagan era, but every day it's something, and the ironic part is that the central issues preventing Congress from getting ANYTHING done are no mystery. In fact, they're common knowledge.

Let's break it down:

1. These people have to fund their campaigns every 2 or 4 years while building connections for their post-Congress gravy trains should those campaigns be unsuccessful, and the campaign funding and the post-Congressional careers are provided largely by the same large-money lobbying interests.

2. There is no number two.

Strangely, the simple solution to this knotty problem (scissors please!) is broadly acknowledged by luminaries on all sides of the American political cheesescape. John McCain co-sponsored a campaign finance reform bill with Democrat Russ Feingold which was signed into law by George W. Bush. Sarah Palin and Ron Paul have weighed in as vociferously as Barack Obama, Bill Bradley and Ralph Nader on the subject. Pretty much everyone seems to agree that it's time to cut the leader above this money/access/influence tangle and start fresh with a new rig.

So what's the holdup?

It's that gift that won't stop giving, the Reagan/Bush "conservative" Supreme Court bloc. Misters Justice Roberts, Scalia, Thomas, Alito and Kennedy have either struck down or removed the teeth from every significant piece of campaign funding and lobbying legislation to come before them, ruling that they either don't meet the criteria for corruption or political inequality or, in the most tortured piece of prime-time judicial advocacy since Mr. Justice Scalia slithered out of his coffin on a Saturday(!) and stopped the counting of Florida Presidential ballots, that they violate the free speech rights of corporate entities, which must enjoy the same constitutional rights and protections afforded to human citizens. "Hey," you may say, "judgment call, they ruled as they saw it based solely on legal grounds. Whaddya gonna do?"

You'd be heckamuch wrong.

In an stunningly bald-faced acknowledgement last year that, in the Supreme Court at least, Lady Justice sees 20/20 or better, Mr. Justice Kennedy told friends and relatives that he will serve through the first Obama term and will only retire should a Republican win the win the White House in 2012. So much for trusting the "Rule of Law", eh Tony?

Only one Supreme Court Justice, Samuel Chase (one of the signatories to the Declaration of Independence), has ever been impeached. In 1803 Chase got into trouble with the Jeffersonian Democratic-Republicans when he severely criticized their policies in front of a Baltimore Grand Jury. Chase explained that he objected to recent changes in Maryland law that gave more men the privilege of voting. Such changes as these advanced by Democratic-Republicans, Chase exclaimed, "would rapidly destroy all protection to property, and all security to personal liberty, and our Republican Constitution, [would] sink into mobocracy, the worst of all possible governments.… The modern doctrines by our late reformers, that all men in a state of society are entitled to enjoy equal liberty and equal rights, have brought this mighty mischief upon us, and I fear that it will rapidly destroy progress, until peace and order, freedom and property shall be destroyed."

"Mobocracy", good one, Sammy!

This little rant so angered Jefferson and other Democratic-Republicans that in 1804 the U.S. House of Representatives voted to impeach Chase on charges of misconduct and bias and of seditious criticism of Jefferson in the 1803 Baltimore grand jury charge. In 1805, the Democratic-Republican–controlled U.S. Senate moved to impeach Chase. Democratic-Republican senators charged that Chase had been guilty of judicial misconduct and that his partisan acts showed that he lacked judicial objectivity. Federalists defending Chase argued that he had committed no crime and that he could not be convicted under the constitutional definition of High Crimes and Misdemeanors. The Senate failed to achieve the two-thirds majority necessary to impeach Chase and he remained on the Court until his death.

Chase's acquittal is commonly acknowledged to have set an important precedent for the Court: That no Supreme Court justice could be removed simply because of his or her political beliefs. The failure to impeach Chase allowed Chief Justice Marshall to assert and define the powers of the Court in future decisions with more confidence. It was thus a step in the process of defining the independence of the Supreme Court as one of the three primary branches of U.S. government.

Huh?

Not sure how we get from a one-time failure to get a two-thirds majority to a major constitutional precedent, but that's how it came down. As a result, like a six-year-old at grandma's for the weekend, the Supremes now operate with complete impunity and without fear of consequences for biased, politically motivated rulings.

Kinda begs the question, "Who's holding the rod, and what are we fishin' for?", don't it? 

Here's an interesting read on the topic of Judicial Supremacy by Stanford Law School Dean, Larry Kramer

With the Right Kind of Eyes...

It got irrevocably sideways in America today. Today the sun came up, winked, turned left and just kept on going.
Today, Republican Senators and Representatives whined for the Democratic President to step in and tell them how to solve the debt crisis.
Today, a retired Philadelphia police captain was arrested protesting in uniform and right wing commentators denouncing him and his fellow protesters were beaten by the cops along with them and then, comforted by them in broad daylight in the streets of New York.
Today, "What the fuck?" really didn't cover it.
Today, in what was actually the weirdest, most orgasmically bizarre story of all, Newt motherfucking Gingrich polled out as the GOP frontrunner for, wait for it, President of the United States!

(we will pause here for you to finish laughing and jumping up and down and clapping)

Today, it was somehow actually possible to envision the country stirring and a TRUE 99%, made up of poor and middle class Republicans and Democrats congealing as more and more of us begin to see each other as neighbors and as complicit common victims of this vile troupe of backslapping swindlers who have been using the country as their collective ATM/Toilet for the last 30 years.

Today, it became evident that it might be time to figure out what the fuck we want.

That said, we have some thoughts. Let's call it a "jumping off place".

1. Outlaw Lobbying
2. Legalize Gay Marriage
3. Institute a Corporate Death Penalty (stock goes to zero & company operates going forward as a non-profit) and try British Petroleum & PG&E as the first corporate capital defendants. (BP trades on the NYSE)
4. Legalize Marijuana - rescue family farmers and supply the world with smoke and fiber (wood, paper, fabric)
5. End logging and the use of non-composite wood in all construction. (teach the loggers to grow weed)
6. Impose tariffs on foreign goods to counterbalance unfair labor practices abroad and bring technical and manufacturing jobs back to the US (an iPhone will cost 23% more, big whoop).
7. Adopt Universal Single Payer Healthcare. We spend twice as much as the next G7 country and have by far the worst results. 20% of the average family's income is spent on health insurance. That's obscene. Insurance is for cars. Health care is for people.
8. Tax corporations on their income. Tax people on their consumption.
9. Nationalize the offshore bank accounts of all American citizens and corporations after a discreet grace period, during which they may bring the money back into the U.S., pay taxes on it, and reinvest it in public works projects and/or bond it to school districts.
10. End all domestic oil and oil shale and oil sands exploration and outlaw the use of petroleum for terrestrial transportation of any kind after 2025. Current stocks and proven reserves will be able to handle the demand for medical and electronics plastics until a replacement is found.

That's just what we'd do and it's just a start. Nothing new about any of it really.

The new thing is that today, somehow, it feels almost possible.

Rachel Margaret

Deep longing has a new voice.

Imagine a gene lab accident. Beakers holding the DNA of Bob Mould, Elisabeth Fraser and David Lynch crash to the floor, their contents mixing and recombining as they drip down the wall toward an electrical outlet. Days after the cleanup, the technicians lean over their benches. In a corner, behind a seam in the flesh-colored linoleum baseboard where the mops couldn't reach, is a still-damp spot...

She calls it Acoustic/Synth Pop. Emo/HyperHookHop, Marge, whatever it's called, Rachel Margaret's music is supercharged with truth and mysterious beauty in ways that only the profoundly gift-twisted can bring.

How does she get such concentrated power into her work? "Sometimes I'm driving down the road and words and music just come into my head. I find the best songs come to me pretty quickly, and in weird places. I want to connect with people, but I'm kind of a geek. Music's like hooking up my heart to a microphone. It's by far the easiest way for me to communicate."

"Rachel has that crucial faculty of self-criticality that amplifies her talent and makes her material shine", says producer Bonnie Hayes. "In my experience, that's what separates the great ones from everybody else."

Rachel is currently breaking on the "new songwriter" circuit with songs from her recent EP "Buena Vista Park", and an untitled work in progress. On the day of this writing, for example, her songs occupy the top seven places out of nearly seven thousand entries in the prestigious "Sirius Fan Choice Award" original music competition sponsored by Sirius Satellite Radio in association with Pop Montreal: http://popmontreal.com/en/popthumbs/

What does she think of this first blush of success? "I enjoy the process of working with innovative types, pushing out music in a very limited context and playing live. My concept of success is all wrapped up in that stuff. So the fact that it's a contest based on people listening to the songs and voting for what they like is really exciting. It means I'm connecting with them through this music, and that feels great." The conversation turns to labels and agents and publicity, and soon Rachel holds up her hands. "The business part of it can make my ears buzz, is that a bad sign?" She waves her arms around her head and laughs, "Swarm of bees! Swarm of bees!"

A product of the University of Texas and the Ecole Normale Superieur de Musique in Paris (the one not in Texas), Rachel works as a tech writer and a dog walker, and is currently in in graduate school in the Bay Area. "More and more, I just want to sing my songs live. Sometimes when the band's locked in, I feel almost like crying, but great at the same time. I haven't had that feeling doing anything else professionally, and I doubt I ever will."

There is a tangible element of sadness and longing to the work that is evocative of love gone wrong. Is it true to life? "Well, basically, I am pretty cynical about love at the moment, but that doesn't mean I'll stay that way. I guess maybe right now it's more fun to write about love with perspective. It's like a tightrope act. It's only interesting if it's way off the ground and there isn't a net."

Music for acrobats.


Check it out at: sonicbids.com/rachelmargaret

Blackstreet - "No Diggity"

SkankySweet

Teddy Riley's the bomb. I first heard of him when he produced "I Get the Job Done" for Big Daddy Kane. I remember he used about 50 cowbells on that track.

Queer High for the Straight Guy

*
President McCain.

Has the true ring of crusty dying about it, doesn't it?

When we die, often, our last physical act in this world is to drop a load in our pants... How is there not a name for that?... Deathicating? Departure logs? Ok, I'll stop.

I bring up that nastiness only because I think we might be about to elect another Republican President. If we can do that at this particular juncture in American political history, It'll be tough to see it as anything other than a giant national death dookie.

The California Supreme Court just validated the right of gay couples to marry, which is humane and right and overdue and has provided every gay-hating wing-nut from coast with a reason to get his ignorant ass down the polling place come November.

How are we going to contend with that, folks? We need a plan.

I am completely down with gay people and their right to do anything straight people can do. It is more than a little ironic how overrated most of them will find marriage, but there is absolutely no reason for that to be something they can't learn for themselves.

Well, actually, there might be the one reason.

The fear and hatred of gays in America is some seriously horrible and powerful stuff. There's no two ways about it, it's a practical engine driving a very big number of votes. Staying positive and believing in doing the right thing regardless of the consequences is a great way to live, but I don't want to hear about the high road right now, ok? Ralph Nader was taking the high road, wasn't he? Just trying to "open up the discourse". How'd that work out for us?

We've been through this so many times it almost doesn't bear repeating. Stupidity is additive. Mobilizing dunces, the first prerequisite to victory in American politics, is fairly easy if one has the stomach and the hate story for it. We don't, they do. Ergo, we lose.

Reactionary dimwits have trouble with arguments, no matter how rational, that contradict the platters of platitudes in their hateful little God-sopped noggins. I mean, a mind is a funny thing. You kind of have to have one that works in order for it to change, right? And for that, you have done at least some of the reading.

I'd love to be wrong about this, but from where I'm sitting, it looks like we're screwed. Redneck rage kicks the ass of the best and brightest every day of the week and twice on Sunday.

My people learned our first lesson in that dynamic in 1972 when they dropped us off at 8am to get out the vote for McGovern, and came back at 8:30 to pick us up because Tricky Dick Nixon and his band of thieves had knocked us out 2 seconds into the first round. A landslide for the greedheads at the absolute peak of national disgust with Viet Nam. We learned it again around this same issue four years ago. Of course we had good old Ralph to thank for that too, so...

Who knows? Maybe we've grown since then.

President McCain. Nice enough guy, I guess.