classical economics
for analysis,  forecasting
and policy design

Wall Street Creatures

Trump Picks Mitt, Threatens Split
By Wayne Jett © February 14, 2012
    The U. S. economy is collapsing, not recovering. Gasoline use has dropped off a cliff, and is presently lower than in 1983 – the year the nation emerged from its worst recession since the Great Depression, and U. S. population was only 73% of the current level. Do not believe Pollyanna’s numbers on unemployment or GDP growth. The ruling elite will not allow economic recovery in 2012, not even for a presidential election.
   Gasoline delivered by refiners to retailers dropped 27.3% in two months from about 42 million gallons per day in September to less than 31 MGD in November, 2011.

Despite this drastic drop in demand, gasoline prices declined only temporarily a maximum of 8% from $3.57 at the end of September to $3.51 per gallon at October 31, $3.37 at November 28, $3.32 at December 26, and then rose to $3.50 at January 30. Perhaps gasoline demand will shoot back up, but don’t bet the ranch on it. A lot of city dwellers may need a ranch (or something a little smaller) to call home before this is over.
Wall Street’s Republican Candidate
    Mitt Romney might be able to close the deal on the Republican Party nomination for president were it not for those pesky disclosure expectations regarding campaign contributions. Mitt’s biggest supporters are essentially the same gang of investment banks, hedge funds and financial sector players who nominated John McCain in 2008, but then opted for their other candidate, Barack Obama, when Sarah Palin joined the McCain ticket.
    For years, Donald Trump borrowed billions through the financial sector to erect ego dysfunction monuments. On February 2, after months of populist posturing with mercantilist slogans such as “getting tough” with China, Trump let us be sure what it is all about. He is the stalking horse for Wall Street’s candidate for the Republican Party nomination: Mitt Romney. Meanwhile, back at hedge fund central, George Soros declared he (and, we presume, other ruling elite) is comfortable with either Obama or Romney as president.
    Trump shed his cocoon as everyman’s champion when he threatened to run for president as a third-party candidate if Republicans refuse to nominate Romney. Trump may have to make good on his threat to run, since Romney’s odds-on favorite position comes and goes with each state contest for delegates to the party convention.
    Can Trump get by with an on-again, off-again routine as fellow billionaire Ross Perot did in 1992, when Perot provided just enough voter distraction to get Bill Clinton across the finish line first? Or will we see something akin to the more concerted Perot campaign of 1996, which again assisted a Clinton victory?
   The latter scenario fits with the “Americans Elect 2012” nomination platform being set up by – guess who? – hedge fund guys and financial sector hang-abouts. Trump could be shuttled into the nomination slots reserved in each state just in the nick of time, if Republicans choose someone other than Wall Street’s choice.
Fannie Mae and Other Shell Games
    From the weeds behind President Obama’s foreclosure fraud settlement press conference, Fannie Mae’s government handlers made a long- anticipated announcement. Fannie Mae’s mammoth holdings of foreclosed homes will be sold in giant packages – assuring only oligarchs as bidders – so they can be managed as “rentals.”
   With few bidders, selling prices will be rock bottom and sales will occur before the November elections, just to be certain newly elected officials do not have different friends who wish to bid. Down the line a few years, expect the lucky buyers (the same people who sold short and made billions in busting the mortgage and banking firms) will spin their “rental” properties into newly formed real estate investment trusts and sell shares to the public, reaping additional billions. By that time, both Fannie Mae and Freddie Mac may no longer exist, with Treasury assisting Wall Street’s agenda to absorb the real estate mortgage industry, as long anticipated here
    In today’s U. S. financial sector, Fannie Mae can pretend even the semblance of a public bidding process places its conduct above reproach. The Federal Reserve Bank of New York, by contrast, recently sold to three big banks, secretly selected, “debt securities” taken by regulators in the 2008 seizure of American International Group. The three selected bidders were Goldman Sachs, Credit Suisse and Barclays. With such secrecy preventing clarity, the Fed may have sold the assets in three separate lots for single bids, or the three bidders may have agreed surreptitiously to parcel the assets among themselves proportionately while keeping the bid price low.  
     Speaking of hedge fund guys, John Paulson's press clippings say he made more billions on the short side than anyone else in 2008, and also that he rigged a Goldman Sachs mortgage-backed security to explode shortly after sale. Paulson busied himself recently by demonstrating how so many “opportunistic” deals may be found by private equity funds despite Wall Street’s undeserved reputation for measuring value efficiently.
    During a quarterly earnings conference call of financial analysts held February 8 by The Hartford Insurance (HIG), Paulson yelled at HIG’s CEO for five minutes urging him to do “something drastic” such as spinning off parts of the business. In rants such as Paulson's, opportunities are born for private equity firms, perhaps even for an ally of Paulson. If a CEO pays attention to advancing his career (is a pig’s snout pink?), he will consider the wishes of his company’s largest shareholder (Paulson’s hedge fund is presently HIG’s largest holder).
    Before leaving the topic of John Paulson and HIG, consider the incongruity of this infamous short seller turning up heavily on the “long” side of HIG, one of the world’s biggest financial firms. By sheer coincidence, HIG’s share price was down from $30 on February 17 to $15 on December 19, 2011. Is it possible that a bright financier (not Paulson, of course) could drive down the share price of a company like HIG, cover his short position, go long big time, and then scream at the CEO in public to drive the share price higher? HIG is up from 15 on December 19 to about 20 currently, a move of 33%, but Paulson’s tirade has produced mostly volatility, so far. Such is daily life in U. S. financial markets, where savings and retirement capital are invested, all under the watchful eyes of the Securities & Exchange Commission and self-regulatory bodies.
Capitalism and the Republic
    Federal Reserve chairman Bernanke, having nearly destroyed the dollar intentionally, has warned Congress that cutting federal spending sharply in 2013 would produce “fiscal contraction” hurtful to economic recovery. By focusing attention upon Congress’ affairs, Bernanke distracts from inspection of his historically unprecedented creation of new dollars at a rate which drains value from existing savings.  
    After nearly two decades leading mercantilism’s most powerful weapon against capitalism, the Federal Reserve, Alan Greenspan laments the on-going attack on capitalism and markets. The former “maestro” of dollar manipulation on behalf of the financial sector rightly contends capitalism enables production of wealth. He states that most of the “surplus” of capital produced in the past century in excess of the amount needed for basic human subsistence has been used “to improve the quality of life: advances in health, greater longevity and pension systems that go with it, a universal system of education and vastly improved conditions of work." This is where he is wrong.
    Positive comments about capitalism are welcome anytime, but Greenspan could have done much more while in office to advance capitalism. He conceded only after leaving the Fed that large-scale fraud is rampant in U. S. financial markets. Trading fraud in 2000-2002 alone, while he remained highly influential as Fed chairman, looted trillions from “surplus” capital of productive Americans. That loot was taken by the ruling elite, who live by guile and power, never practicing capitalism through productive endeavors.
    The Fed’s service as mercantilism’s warhorse in oppressing capitalism and productive people continues apace under Bernanke's stewardship. The Fed played a major role in precipitating the European crisis. French president Sarkozy addressed a Joint Session of Congress in November, 2007, and pleaded that the trade war being waged by currency devaluation be stopped. Instead, the Fed turned up the heat, much as FDR's devaluation of 1934 compounded the effects of Smoot-Hawley tariffs. In 2008, French companies could not compete with U. S. firms even in their own country. The same was true of Greece, Italy and other nations of the EC southern rim.
     The private central bank called the Federal Reserve did this. The Fed continues to destabilize the euro, to undermine the national governments of Europe, and to weaken and destroy the middle class of each nation. The ruling elite who own and control the Fed have the same agenda in the U. S. and are well into their end game. The Vatican, the Church of England and the World Council of Churches, all close allies of the ruling elite, already bray for a global government and a single global central bank. No doubt a global military establishment will be imperative to protect such benevolent organizations.
     The policies and actions of a government entity grow more ruthless in proportion to its geographical area and population. Twenty years after Francis Fukuyama saw proof of superiority of republican governance as the "end of history," the end of republican governance is at hand. ~