Wednesday, November 28, 2007

A Broken American Economy

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A Broken American Economy

NOTE: Join me in supporting the HOMEOWNERS AND BANK PROTECTION ACT see below;

Two fixes for a broken financial system
Nov 25, 2007

"If I were to as simply and generally as possible, describe what is happening, I would state that the Federal Reserve and United States Treasury are in effect using two band-aids to prop up a struggling stock market that is only the symptom or effect of a larger problem: a broken American economy. The economy is largely broken as a result of two problems 1) a collapsing housing and mortgage market and 2) a falling dollar. The Federal Reserve's response to fix problem number one is making problem number two worse. By cutting interest rates and supplying more dollars to the American economy than are being demanded, the dollar is being devalued and inflating, which is causing commodity prices to rise dramatically. After commodities (gold, silver, copper, cotton, sugar, oil, wheat etc…) rise, the trend will soon spread into other aspects of the American economy.

"All of this primarily started as the result of greed and a regulatory problem whereby too many mortgages originated – not only because people demanded homes, but because Wall St. wanted more and more mortgages that it could bundle together and package to wealthy investors, who would then use these bundles to get even larger loans to finance mergers and back corporate debt. The process was very sophisticated but it boils down to the fact that each time one of `us' got a mortgage (sometimes too easily), one of `them'—international investment banks—had the opportunity to make tens, hundreds, and even thousands of times the size of the mortgage, by packaging it with other mortgages (sometimes as many as 4,000 others) and re-selling them or using them as collateral in leveraging transactions.

The November 8th Wall Street Journal wrote: `The dollar and oil are pushing to opposite extremes, one to record lows and the other near record highs. Gold, an age-old refuge in times of financial turmoil, is once again above $800 an ounce. The combination of economic worries and market movements is reminiscent of the chaotic 1970s, when the U.S. was beset by inflation, recession and a stock market going nowhere.'

http://www.finalcall.com/artman/publish/article_4114.shtml

HOMEOWNERS AND BANK PROTECTION ACT

Whereas, the onrushing financial crisis engulfing home mortgages, debt instruments of all types, and the banking system of the United States threatens to set off an economic depression worse than the 1930s; and

Whereas, millions of American citizens are threatened with foreclosure and loss of their homes over the upcoming months.

Whereas, this financial crisis is now threatening the integrity of both state and federally chartered banks

Whereas, in a similar financial crisis in the 1930s, President Franklin D. Roosevelt intervened to protect banks and homeowners; for example in April, 1933 he introduced legislation as a declaration of national policythat the broad interests of the Nation require that special safeguards should be thrown around home ownership as a guarantee of social and economic stability, and therefore,

Be it Resolved, this crisis is such that it requires emergency action that only the United States Congress has the capability to enact. Congress must move quickly to keep people in their homes and avert social chaos. This act includes the following provisions:

1. Congress must establish a Federal agency to place the Federal and state chartered banks under protection, freezing all existing home mortgages for a period of how ever many months or years are required to adjust the values to fair prices, and restructure existing mortgages at appropriate interest rates.
2. During the transitional period, all foreclosures shall be frozen, allowing American families to retain their homes. Monthly payments, the equivalent of rental payments, shall be made to designated banks, which can use the funds as collateral for normal lending practices, thus recapitalizing the banking systems. These affordable monthly payments will be factored into new mortgages, reflecting the deflating of the housing bubble, and the establishment of appropriate property valuations, and reduced fixed mortgage interest rates. This shakeout will take several years to achieve. In the interim period no homeowner shall be evicted from his or her property, and the Federal and state chartered banks shall be protected, so they can resume their traditional functions, serving local communities, and facilitating credit for investment in productive industries, agriculture, infrastructure, etc.
3. State governors shall assume the administrative responsibilities for implementing the program, including the rental assessments to designated banks, with the Federal government providing the necessary credits and guarantees to assure the successful transition.

THEREFORE BE IT RESOLVED that the Congress of the United States to make all foreclosures frozen, allowing American families to retain their homes.

We need to Abolish the Federal Reserve Bank

Without a doubt, the measuring rod of money is broken. Indeed, money is loaned into existence by the Federal Reserve's banking cartel. Fractional-reserve banking allows it to be created out of thin air.

9 November 2007 So far this year there have been an estimated $55 billion in losses suffered by financial institutions, but this is just the tip of the iceberg. The chief credit strategist at the Royal Bank of Scotland Group issued a report Wednesday estimating that the credit crunch will cause $250 billion to $500 billion in losses at banks and brokerage houses around the world. The upper range of his estimate is equal to the combined stock market value of the three largest US banks, Citigroup, JP Morgan Chase and Bank of America.

the American International Group, the world's largest insurance company, that it had written down nearly $2 billion in investments related to mortgages in the third quarter and expected to write down an additional $550 million in the next quarter, and a warning from the savings and loan firm Washington Mutual that it faced massive credit losses. Washington Mutual stock fell more than 17 percent for the day.

The dollar slide and explosive rise in oil prices—up nearly 40 percent since early summer—portend a sharp rise in inflation and a major financial crisis in the US and internationally, with the potential for a severe and protracted recession.

Earlier this month it was announced that the US Treasury Department, with the official blessings of the Fed, had engineered a scheme to raise $80 billion-$100 billion in capital to prevent a collapse of so-called structured investment vehicles (SIVs)—off-balance-sheet entities set up by major banks to engage in highly risky investment bets. Citigroup, the largest US bank, faces the greatest exposure from the SIV crisis.

By cutting interest rates again, the Fed added further fuel to both the dollar decline and the related rise in oil and other commodity prices. Both the British pound, at $2.0788, and the euro, at $1.4485, hit new highs against the US currency.

http://www.wsws.org/articles/2007/nov2007/bern-n09.shtml

1 November 2007

The US government and the Fed are pursuing a highly risky policy of allowing the dollar to plummet in order to gain short-term advantage over America's trading rivals—in effect, conducting a trade war by dint of the dollar's devaluation. This has potentially disastrous longer-term implications for American capitalism, which is ultimately dependent on the strength of its currency.

It also encourages overseas investors and governments to disinvest from dollar-denominated holdings and shift to regions with higher interest rates and stronger currencies, such as Europe and Asia. Given that the US economy, with its massive trade and current account deficits, is dependent on huge inflows of capital from abroad, the continued decline in the dollar increases the likelihood of a withdrawal of foreign capital and a resulting worsening of the financial crisis in the US.

Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy. The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency. The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy.

In fact, Congress' constitutional mandate regarding monetary policy should only permit currency backed by stable commodities such as silver and gold to be used as legal tender. Therefore, abolishing the Federal Reserve and returning to a constitutional system will enable America to return to the type of monetary system envisioned by our nation's founders: one where the value of money is consistent because it is tied to a commodity such as gold. Such a monetary system is the basis of a true free-market economy.
http://www.wsws.org/articles/2007/nov2007/fed-n01.shtml

How to Fix our broken Economy

The only problem with this analysis is that it doesn't take into account PEAK Oil and Global Climate Change and the need to reduce the population. But Democrats need to read it anyway.

http://www.newschool.edu/cepa/publications/How%20to%20Fix%20Our%20Broken%20Economy.pdf

21 November 2007: There are 37 million people in this country who are poor; there are 57 million who are near poor, making $20,000 to $40,000 a year - one divorce, one pink slip, one illness away from a free fall.
History of the New Deal: Dozens of our most important government agencies and programs, ranging from social security (to assist the elderly and disabled) to federal deposit insurance (to eliminate banking panics) to the Securities and Exchange Commission (to regulate financial activities) were created in the 1930s, each a legacy of the Depression.
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