Wednesday, January 14, 2009

David Smick: Right But Missed The Point

David Smick, the author of The World Is Curved, was interviewed by George Noory Monday night on the nationwide Coast To Coast Am radio show. What he said stunned his interviewer and the audience. But the man did not understand the meaning of our present financial crisis.

The author said the sub-prime mortgage at 1.5 trillion dollars is probably the smallest bubble we are facing. He mentioned eight bubbles from emerging markets to Credit Default Swaps. The total figure is 200 trillion dollars. The total world Gross Domestic Product (GDP) is only 50 trillion dollars.

Before proceeding I would like to point out that Mr Smick missed the ninth bubble which just happens to be the one most likely to burst in 2009. Smick told Mr Noory how difficult it is for an investor to buy US Treasuries. The 90 day T-bill is paying a near zero interest rate. The ten year Treasury bond is mow 2.4%. But PIMCO, the world's top bond fund, has warned investors to get out of bonds. If interest rates go up, the value of existing bonds will plummet because bond values vary inversely with interest rates. A massive sell off in long term Treasury bonds would cause the dollar to collapse and force the Federal Reserve to raise interest rates even further to persuade foreigners to finance our deficits and Bailouts. And higher interest rates would crash our economy making taxing collections go down and our deficits go up.

George asked Mr Smick how we just happened to develop eight bubbles totaling 200 trillion dollars in risk. This is where David Smick missed the point. He said the bank regulators fell asleep. I say the same thing Catherine Austin Fitts said about Bernard Madoff and his 50 billion dollar swindle. He stole 50 billion dollars and is still living at home in his Manhattan penthouse. Ms. Fitts said Madoff could not have done what he did without his banks, brokers, the IRS and the federal regulators knowing what he was doing. They do not care about us.

This same observed behavior we saw in the Madoff scandal can explain that 200 trillion dollar bubble which was seen by bank regulators in several nations, by the SEC, the CFTC, the IRS, the media and professional traders. The obvious answer is that they wanted to create a 200 trillion dollar bubble so that when it collapses all real wealth is transferred from the people who work for a living to Wall Street.

There are 435 men and women in the House and 100 in the Senate. Which one of the 535 has condemned Credit Default Swaps even after having voted to bail out AIG for 150 billion dollars?

We just had a Presidential campaign and both men voted for a 750 billion dollar Bailout and neither candidate bothered to ask that Credit Default Swaps be regulated as derivatives and insurance are.

Nor am I aware of any journalist who has asked even one politician when they plan to regulate Credit Default Swaps which have exposed the taxpayers to tens of trillions of dollars in potential losses.

I have spoken before of what I call The Glorious Day. That is the day when all assets and all real wealth belong to the bankers and we who toil for a living are left out in the cold without a vote.

There is no other reason for the bank regulators, the auditors, the IRS, the SEC and the CFTC to have allowed a 200 trillion dollar bubble than to fulfill the dream that all wealth would one day belong to Wall Street.

As I have said in previous essays, the human spirit will rebel as we near the day Wall Street has been dreaming of for the past hundred years. It is beyond my abilities to predict what will be after the coming rebellion of the spirit. I am merely outlining Wall Street's methods and motives so the world will be prepared for their adversaries next couple of moves.


To read an excerpt from David Smick's book please go to his website here:

To read about the perils of the bond market collapsing please go here:

Or to Bloomberg's article here:

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Anonymous Anonymous said...

The policies and activities that have caused the current economic meltdown were initiated about a decade or so ago and "perfected" by the Republicans and their corporate, super-rich overlords. Trade deficits, outsourcing, offshore tax havens, deregulation (or no regulation), crippling deficits bankrolled by foreigners, etc. have brought us to the brink of the economic abyss and may push us over the edge.

When the neocons seized power, I said in anger that I hoped everyone who supported them got EXACTLY what they voted for, because they were too ignorant to know what horrors they were actually supporting. But that was then and this is now. I see now that those who caused the mess will not be held accountable, and those voters who helped create the mess still don't get it. The situation is too complex for most voters (including myself) to understand and therefore to know what to do about it.

I almost feel sorry for Obama. Things are going to get much worse economically in his first term, and the very people who caused the economic crisis will be screaming that he caused all the problems. The average American voter, who has the attention span of a 2 year old, will happily accept the idea and never understand that the problems were years in the making. Obama is heir to a family "fortune" of debt and economic disease. (If I were in charge of his inauguration, I would have a reading of a will that details all the mess that's being handed to him.) I wish him well, and I try to be optimistic, but when I look at the economy and the "stimulus" and "recovery" plans being advanced, I become afraid, very afraid.

Nice blog. I wish I understood economics as well as you do.


2:05 PM  

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