Documentary “Overdose – The Next Financial Crisis”

I just noticed that the documentary about the next financial crisis (sovereign debt + fiscal and monetary policy) was picked-up by Journeyman Pictures and the production company removed it from YouTube (Facebook). Just wanted to let you know that you still can watch it *for free* as some people have made their copies already …

This 46-minute documentary is a fast-paced look at how we got into the financial crisis and how our way of dealing with it is setting the stage for the next crisis. It is co-written and narrated by Cato senior fellow Johan Norberg, author of In Defense of Global Capitalism and Financial Fiasco: How America’s Infatuation with Home Ownership and Easy Money Created the Economic Crisis.

History doesn’t repeat itself, but it rhymes. *Mark Twain

Official Trailer – [What happens when Countries or Currencies fail?]

ReasonTV – Overdose Director Martin Borgs on the Next Financial Disaster

A short comment to the intro (President Barack Obama and his words that ‘the worst of the storm has passed’)

The mainstream economists and analysts currently define ‘the worst time during this first global recession’ was autumn 2008 into the spring of 2009 because of the intensity (increasing speed of single failures) and short time frame. But that is short-sightedness and a fallacy. Failure was and is a reactions to the underlying problems of the system. Like organ failure after your kidneys and liver shut down. Symptoms were patched over (home buyers tax credit, cash for clunkers, bailouts, stimulus package aka pork barrel and ear marks, wars in the middle east as abstract energy and economic policy). The patient is still sick, chronically sick. And it is not only the USA any more, the disease got airborne during the 70′s.

US Government alienated rights of citizen again

It is well beyond 3am CET, and I already napped in, but reading this makes me so angry. US government violated rights given its citizens in a modern democracy. Using scare tactics, they achieved what they wanted. Making the headlines, sending signals. Citizens, bloggers, journalists, reporters have to be treated equally. It is a civic duty to be part of the checks and balances of a modern transparent democratic government. It’s beyond my believe that the US government served again somebody a subpoena because he was an active citizen.

TSA Threatens Blogger Who Posted New Screening Directive

[YouTube] Joseph Stiglitz Talks About US Economy, Dollar, And Rescue Efforts

The part in the Q&A where he mentions ‘giving out the insurance money for a burned down house which didn’t burn down’ is here (I think).

A.I.G.’s insurance commitment stood at “only” $302 billion in part because the government has already voided $62 billion of the protection A.I.G. had written on pools of especially toxic securities. The underlying collateral on those contracts, valued at about $32 billion or so, now sits in a facility that the Federal Reserve Bank of New York oversees and which we, the taxpayers, own.

In order to rip up those contracts, the taxpayers had to make A.I.G.’s counterparties whole by buying the debt that A.I.G. had insured and paying out — in cash — the remaining amount owed to the counterparties.

Of the $302 billion in insurance outstanding at A.I.G., about $235 billion was sold to foreign banks and covers prime home mortgages and corporate loans. The banks that bought this insurance did so to reduce the money they must set aside for regulatory capital requirements.

Here is more (ForaTV) of Joseph Stiglitz at the beginning of 2008, and on ForaTV at the end of 2008 and here again. Here @Google Talks in 2006 with his book ‘Making Globalization Work’. Here @Google Talks with his more recent book ‘The 3 Trillion Dollar War’.

• Joseph Stiglitz and his works (Econlib.org)
• Joseph Stiglitz bio (Econlib.org)

RE: Regulation Of Executive Compensation Schemes

Nobel Prize Economist of 1992, and receiver of a Presidential Medal of Freedom, Gary S. Becker wrote yesterday again about the recent discussions, historic perspectives, and possible implications of regulated compensation schemes for Bank Executives who are employed by a bank who receive any form of government aid. He made some very important historic notes and reasoning of why compensation didn’t really cause the financial crisis; (Bold my emphasis)

One irony is that, as pointed out by Yale’s Jonathan Macey in a recent Wall Street Journal op-ed piece, Congress in a 1992 Act prevented corporations from deducting as a normal business expense any salaries that exceeded $1 million. As a result, corporations were encouraged to shift their pay to stock options, which received more favorable tax treatment.

I have not seen convincing evidence that either the level or structure of the pay of top financial executives were important causes of this worldwide financial crash. These executives bought large quantities of mortgage-backed securities and other securitized assets because they expected this to increase the average return on their assets without taking on much additional risk through the better risk management offered by derivatives, credit default swaps, and other newer types of securities. They turned out to be badly wrong, but so too were the many financial economists who had no sizable financial stake in these assets, but supported this approach to risk management.

History of Unemployment, Gov Debt, Fed Funds Rate

Civilian Unemployment 1948-2009 (USA)

National Debts as % of GDP (from the Great Depression till 2009)

Effective federal funds rate (Source Wikipedia)

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Recognise The Problems

Who thinks that unemployment will drop, when the USA is out of their recession (academically proven, no guesses), is wrong. The last two showed that this economy is and was always kind of restructuring in some ways. In some good and some bad ways. Lots of manufacturing was last during the rise of China and other Asian countries, replaced by service jobs who are now gone. An economy overheated by cheap credit (federal funds rate) and other places elsewhere too. Some were earlier to react, some too late. Looking at the second chart, I think that this economy is chin deep in shit. They are spoon fed by Chinese and other foreign investors. To get on a diet is the most utmost important thing for them in the near-term.

Interesting to note is, that under Clinton’s Presidential time, interest rates were ‘alright’, unemployment shrank considerably, and government debt was reduced. Under Bush’s recovery path – debt kept growing again and unemployment was reduced while interest rates were very low over a long period of time (Greenspan Put).

ZIRP – Zero Interest Rate Policy

But the patterns here (consider the years ofter the oil crisis and Volcker era)are so remarkably – that we can’t ignore them. The zero interest rate policy (ZIRP) – will have implications in the near-term. They were necessary in the short-term worldwide. But they are a burden for the decision when to rise interest rates and combat excess liquidity to prevent another bubble from happening. If there is not already one so to speak – Dow 10.000. How to coordinate an ending of ZIRP with fellow G8/G20 members will be difficult because when we move not together – the one who moves first will get hurt first. Because of outflows to markets of lower interest rates. So everybody is reluctant to move first because it could hurt the domestic economy of your country and delay recovery. There is no best timing possible – economist were always wrong about the timing.

Use Of Monetary And Fiscal Tools

As long as the USA is in ‘recession mode’, the government is willing to continue stimulus spending and willing to continue to pay unemployment benefits for an extended period of time. The longer we have to stimulate the economy, the longer a ZIRP will prevail because of the Fed’s interest and that of the of the government to issue new debt more cheaply. Debt monetization. With this instrument, government debt dissapears and inflation appears instead because of the increase of money supply. But in this recession regiem where deflation was ‘nearly’ the case (and liquidity-trap), deflationary pressures ate inflationary pressures away. Plus households don’t spend their money during this time, they save and pay down debt, 129% of disposable income (& revolving debt is down too).

Is There A Bright Future?

Obviously that this monetary and fiscal policy has serious implications; dollar value down, a stock market rally world wide, credibility problem of government to resolve current and future debt problems (critics domestic and foreign kind), outflows of capital and talent because of the uncertainty of a then empire, build by extremist’s and neoconservative’s. All undermine the future of America, for the country, for the economy, and the future of its citizens.

You are not supposed to know what you do not need to know.

Under this pattern, You are not supposed to know what you do not need to know, ran several Dictatorships and Communistic countries their apparatus (the government) in history and present. In secrecy. I think the same applies for North Korea, Venezuela, and in parts China today (among others). I do not usually pick up those things because what history has told us is that it will resolve itself in time. Like The Third Reich, like East-Germany, like the Soviet Union and several cases around the USA. All at a high toll of human lives and destruction of economic prosperity. But there are things as the coming of age of a world police and constant surveillance. The ‘System’, the ‘Apparatus’ behind corrupted governments. The North American Union. The Central Banks. And the people who are striving for the truth of 9/11.

But, I believe that there are patterns, everywhere . Because we write modern history. Here and now. The moment you read this. And we all have read the same story somewhere else some other time.

I want you to sit down for 2 times 2 hours to watch the following documentaries and then ask your self in what you believe in and who you trust. Your ‘elected’ government, your mass media which is corrupted by its international owners, your newspaper (N.Y Times) which apologizes after years for not being critical enough in its coverage of ‘The War Against Terror’, or your own consciously aware mind (to a grater or smaller extend)?

ZEITGEIST, The Movie

Terror Storm – Alex Jones

Don’t believe, think long and hard.

“To strive, to seek, to find, and not to yield.”

Ulysses, Alfred Tennyson