Posted tagged ‘hedge funds’

BAILING OUT AILING BANKS IS IMMORAL/CRIMINAL

June 17, 2010

Erle Frayne D. Argonza

Good afternoon, fellows!

Bailing out ailing banks with people’s money (taxes) is immoral and criminal. I have already stated this contention in previous articles, and I’d re-echo it again in light of the financial fiasco going on in Europe right now.

We’ve had more than enough bad experiences in past crises that point out to massive speculative engagements by banks that have contributed to economic downturns and crash. Japan started the ball rolling by salving big banks with taxpayers’ money in the 1990s, and this practice is awefully wrong and immoral.

Fast forward to the year 2007, when we saw big banks implode as the bubble economy of the USA burst. The same ‘Japanese solution’ at salving ailing banks with taxpayers’ money was again repeated, this time in the USA.

Taxpayers’ money is hard earned revenue for the state for purposes of advancing the general welfare. The priorities for revenues should be infrastructures, social services, pump priming, and ensuring ‘safety nets’ for the marginal classes and groups against the impacts of financial volatilities on the productive sectors.

The solution to ailing banks lies in strengthening regulatory mechanisms. The first agenda on the line is to ban banks from engaging in speculative engagements notably those hedge funds operations. Another agenda is to institute good corporate governance and instilling public accountability by the banking sector.

Bailing out ailing banks in Europe, through taxpayers’ money, can only mitigate the systemic crisis for a while. Also, it will push more folks down grinding poverty due to austerity measures. It is part of the ‘rule of madness’ that now governs ‘late’ capitalism as a whole.

[Philippines, 07 June 2010]

[See: IKONOKLAST: http://erleargonza.blogspot.com,

UNLADTAU: https://unladtau.wordpress.com,

COSMICBUHAY: http://cosmicbuhay.blogspot.com,

BRIGHTWORLD: http://erlefraynebrightworld.wordpress.com, ARTBLOG: http://erleargonza.wordpress.com,

ARGONZAPOEM: http://argonzapoem.blogspot.com]

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EUROPE’S BURNING!

May 25, 2010

Erle Frayne D. Argonza

Europe is on fire. Save for those who choose to be blind, the Union is going through an incendiary economic burn. How far will the economic burning go, whether it will spread to a larger continental inferno, no one can tell for now.

Before the EU’s creation, welfare policies were prevalent from east to west of the continent. Liberal reforms then arose, commencing with the Tory’s (Thatcher era) wholesale adoption and social marketing of the same, and copied by the conservatives and liberals of the continent alike.

By the turn of the century, upon the commencement of the Euro, liberal reforms already saw the uncontrollable ascent of predatory finance worldwide. Liberalized financial-capital markets paved the way for their immanence.

Among those instruments created by the predators was financial derivatives. To recall, a decade back the derivatives markets were already awash with exposures totaling over $150 Trillion, with 36% of these in the hands of British financiers while 15% were in Americans’ hands.

By 2001, the alarming projection was leaked out that derivatives will be inflated to exceed $350 Trillions within the new decade. At a time when the global economy was producing past the $40 Trillion in Gross World Product or GWP, it was sheer madness to consider debt papers of past $350 that could meltdown the globe in case of a gigantic bubble burst.

Europe was already flat on its back for a straight two (2) decades since after the collapse of the Soviet Union. Periodic stagflations and recessions have seen the rise of poverty incidence and, consequently, the re-emergence of neo-fascist movements.

Being strongly tied up to the U.S. economy, it was not surprising to realize that a contagion of the U.S. recession will surely hit Europe, which did happen. The ugly side of the formula was the aiding of ailing banks that were badly affected by the crisis, an intervention that was flawed and immoral as it entails using taxpayers’ money to aid criminal bank speculators.

Barely out of the U.S. contagion effect, Brussels was shocked to see that a new fire had started within the Eurozone— Greece to be exact. As this was happening, Spain also began to sneeze & cough, as some of its own banks (notably Santander) spiraled down bankruptcy scale. Other member-economies were also having their own financial crucifixions going by the early part of this current year.

If we diagnose what’s going on in the financial sectors of member states, we can easily pinpoint banks as hotspot fire sources. They were heavily into speculative pursuits, with enormous exposures to derivative operations.

Just exactly how that happened can be traceable to certain acts in the North by the mid-80s. Commodities markets have sprung up on that decade, even as a global recession took place then, threatening OECD economies. Liberal reforms were already permeating diverse sectors, and within the backdrop of liberalization, financial derivatives and equivalent portfolios were launched in mass scales.

Banks shed off their previous stance of inhibiting themselves from speculative pursuits. Soon they’d find themselves investing into every speculative games they could lay their hands into, inclusive of hedge funds operations.

Now, to fast track to the present, economists estimate that EU’s aggregate derivatives are within the range of $180-$200 Trillions, estimates that seem conservative. Measure this against the gross domestic product of EU at $13 Trillions, and you would be driven to ask: just exactly where will Europe get the funds to pay the hedged financials in case of bursts and massive bankruptcies?

If all of the hedge funds investors would ask for a forced payment of their total of, say, $200 Trillions more or less, who would pay for such debts? Where will the money come from? Is it morally right to extract taxes from European workers to pay up for the dirty debt papers in case? Is it likewise morally right to impose wage cuts on workers who were not the culprits in the virtual economy game in the first place?

Concerned Europeans should better rethink the Euro and ask whether the new currency really worked for their welfare. It is now clearer that the Euro was a sell-out idea and project, that it was launched to satiate the insatiable pockets of greedy financiers represented by the top financial houses there.

And Europeans better see how silly it is to allocate taxpayers’ money worth $1 Trillion to bail out ailing banks and industries hit by the rising meltdown. For measured against total debt papers of $180-200 Trillions, $1 Trillion would be ridiculously paltry.

Yet another ridiculous intervention is the austerity measure imposed by the IMF on Greece. We’ve had so many precedents of the deleterious effects of such measures on developing economies that aimed at eventually graduating from IMF programs as a salvation measure in the short run. While emerging markets are getting out of a burning house (IMF & austerity measures), Greece voluntarily entered this house. Unbelievable!

As per reports reaching my focals, Germany had the greatest exposures to Greece’s banking sector, with exposures running to hundreds of billions of euros. British financiers, on the other hand, have their hands full in Spain’s banks.

It isn’t difficult to forecast that the fire in Greece could spread to other eurozone economies. Not even the UK, which decided to stay out of the eurozone, will be spared from the bonfire. Spain is almost there now, and who knows what country will be next.

If banks and industrial conglomerates will simultaneously burn in all of the member-states of the eurozone, with total aid claims of past the GDP of $13 Trillions, then Europe will be on the brink of a continental inferno.

Concerned readers better think for yourself whether Brussels and the bureaucrats do have the right answers to the raging problems of Europe. Poverty incidences are now hitting past the 20% mark in member countries, while massive lootings of the financial and currency markets by predatory financiers take place every day in the continent.

Well, let’s all wait and see for what happens. Let us hope that a mad Nero bureaucrat wouldn’t appear to orchestrate the burning farther to infernal scale. That would bring a new nightmare to the whole planet if it happens.

[Philippines, 20 May 2010]

[See: IKONOKLAST: http://erleargonza.blogspot.com,

UNLADTAU: https://unladtau.wordpress.com,

COSMICBUHAY: http://cosmicbuhay.blogspot.com,

BRIGHTWORLD: http://erlefraynebrightworld.wordpress.com, ARTBLOG: http://erleargonza.wordpress.com,

ARGONZAPOEM: http://argonzapoem.blogspot.com]

ANOTHER GREAT DEPRESSION COMING AS FINANCIAL SYSTEM ENDS

August 18, 2008

Erle Frayne Argonza

Is the global economy moving downward towards a devastating collapse?

If we employ a long-term Kondratieff cycle to model the world economy, we can see that the period beginning in 1935 approximately (when the big market economies US-UK-Germany moved towards another cycle of growth approximately after the Great Depression, should have ended around 1995 approximately, after which comes another great depression.

As early as 1989, ramblings of a global collapse began to murmur in the US economy. Mexico, Japan, Argentina, and other economies followed in the 1990s, while Europe went through a general low-growth trend that was the most sustainable for the continent as a whole. Then came the Asian meltdown of 1997. Then the USA again went through a recession in 2001, a pattern that has been repeated again from 2008 to the present. It seems that the pillars of the world economy couldn’t get out of a short-term crisis without having to crash back to another episode of short-term crisis altogether.

Is it really a ‘short-term’ crisis in the first place? Or is it in fact a ‘systemic crisis’, and that the financial downspin the Northern economic pillars are going through could very well be the terminal phase of a very long cycle of growth that began after the end yet of the Treaty of Westphalia (1648)? That in fact, several long-wave Kondratieff cycles have already passed over since that time, and that finally the system is DEAD in the wood?

Well, not only the financial system but the whole of CAPITALISM is already on its death throes. Those oligarchs behind the systems now dying won’t see the systems they built die down just that without “bringing down the other houses” with them, it seems. Which means that, right after the terminal phase of the system, another huge, catastrophic war will come, which will later see another Westphalian-type treaty or so that will re-carve the contours of polities into a Post-Westphalian totalitarian technotronic global order.

Below is a briefer from the Executive Intelligence Review that summarizes the issue at hand.   

[18 August 2008, Quezon City, MetroManila. Thanks to Executive Intelligence Review database news.]

End of the Line for Financial System; Bankruptcy Issue Raised

Aug. 10, 2008 (EIRNS)—The death of the financial system was the implicit subject of several articles in the financial press over the weekend, reflecting the way reality is setting in and attitudes are changing.

  • “Investment banking is dying,” was the blunt statement by William Cohan, in a op-ed in today’s Washington Post entitled “The End of the Masters of the Universe?” Cohan says that the revenue streams of the investment banks are drying up, and that there is genuine fear in the corridors of power on Wall Street.
  • “We have a banking crisis and an agency crisis and a mortgage crisis and a coming credit card crisis. We’ve never seen anything like that before. And it all seems to be coming home to roost at the same time. That’s never happened either,” Charles Geisst, a professor of finance at Manhattan University, told yesterday’s Washington Post. He said the Great Depression was the last time the financial markets were hammered by such a variety of factors, adding: “But we did not even have credit cards in the 1930s; there was no such thing as student loans.”
  • The specter of generalized bankruptcy was raised by Yale finance professor Robert J. Shiller in an op-ed in the New York Times. Citing the failure of Bear Stearns and the government measures to bail out Fannie Mae and Freddie Mac, Shiller asks, “What if the next case is worse? No one in government seems to feel a responsibility for warning about such possibilities and formulating a detailed policy for dealing with them.” Shiller says that “Bankruptcy law is a good place to start. After all, the dreaded financial meltdown would amount to a wave of bankruptcies…. What would happen to the economy if hedge funds had to liquidate, one after another, in a financial crisis? We need to rethink the theory and practice of bankruptcy, given the new complexities.”

Shiller points to the inherent limitations in current bankruptcy laws, which were largely drawn to protect narrow financial interests, and are poorly suited to deal with systemic problems, when a “subsidized system of triage would be needed to identify which companies should be saved, with the main criterion being the possible economic impact of their liquidation.”

These comments, taken as a whole, represent the way discussions of the “unthinkable” are beginning to percolate, and converge upon the outlook of Lyndon LaRouche. Shiller’s mention of triage by bankruptcy echoes the emergency measures proposed by LaRouche, of putting the financial system itself through bankruptcy, protecting the population with a firewall, and freezing the financial paper while we determine what debts will, and won’t, be honored. Whatever Shiller may think about LaRouche’s proposals, he is implicitly admitting that the system is finished, and that we must prepare for its demise, making decisions on the basis of the interests of society, and not merely the narrow interests of financial institutions. Reality is setting in, and reality leads inexorably to the policies outlined by LaRouche. 

OIL PRICES GOING DOWN FOR GOOD? TOO EARLY TO SAY!

July 25, 2008

Erle Frayne Argonza y Delago

Good evening from Manila!

We Manilans were met this morning with the seemingly good news that oil price nose dived to $125 per barrel. As this news was released, we have just three (3) days before Her Excellency, President Gloria Macapagal Arroyo or GMA, will deliver her State-of-the-Nation Address or SONA.

With due respect to a fellow economist, the eminent world woman leader GM Arroyo should better not say lies comes Monday SONA that her actions on oil tax in Manila are responsible for bringing down global oil. Rather, her regime’s actions on state imports of rice immensely led to more speculation on the global commodities markets that indeed contributed in no small measure to raising the price of rice world-wide, actions that added pressures on oil prices to go up too.

Fellow Earthans, please look at the backyard of the Kingdom of Saudi Arabia, where the honorable King pledged before the UN Secretary General last month that the oil wells will pump out more stocks of the commodity so as to shore up the supplies by the month of July. It is now the tail end of July, and so it seems that the Midas touch of the KSA King has been creating sure-fire effects on gas prices.

The question worth asking is, will the latest decline in the price of oil be for good? Remember that the soaring prices of oil were largely caused by massive speculations in the spot markets, conducted by diverse financier groups. To a certain extent, the inflationary patterns in the grains prices also contributed to inflationary patterns in the oil sector.

There was the demand side that was cited as possible cause of the oil price decrease. The observed decline in the usage of oil by American consumers had accordingly factored into the equation, thus reducing oil price in global spot markets.

A simple multivariate analysis would show us that a combination of (a) supply side actions (KSA King’s ‘pump more oil’ policy) and (b) demand side behavior (Americans consume less oil) have (c) dampened speculative pressures and eased oil prices a bit. In other words, the predatory financiers were caught flat-footed by the double-whammy, even as some losing speculators are now hurting badly over the latest developments.

But do mark this: the financiers will strike back. The cyclone season is around, one can muse safely that cyclone devastations will induce short-term shocks on food, oil, and some non-durable commodities. Such eventualities could then induce pressures on cyclone-related or force majeure-coverage insurance, possibly impelling prices of the said commodities to go up from this month till November.

There also is the US federal campaign period coming, which will see inflationary spending from both parties as well as from the federal government as part of pump-priming measures. Such eventualities will altogether lead to new rounds of oil consumption in America, which will continue till the winter months.

No, definitely not, we are not at the tail end yet of oil hyper-inflation. This is the least that I can forecast for the moment.

[Writ 25 July 2008, Manila, Quezon City]

US WATCH: TRANSPORT U.S. BACK TO PROSPERITY

July 24, 2008

Erle Frayne  Argonza y Delago

The final feature of the US ‘real economy’ worth featuring is transportation & communications. This is among the most productive sectors that produce real wealth, contrasted to the ‘casino economy’ of predatory finance that produces wealth from out of wealth itself, producing really nothing worth our value. Broad as it is, let me focus on the transport sector.

 

Time was when the railway industry took off, inducing growth as soon as the railways hit the West. The continental divide among the US states was bridged quickly, intra-trade exponentially increased. Soon enough, foreign trade also increased in leaps and bounds as maritime shipping grew and matured quickly, making US articles of trade be exported to all corners of the planet.

 

Trains, ships, airplanes, automotives, trucks, heavy equipment, tractors, and other state-of-the art prototypes came out of America’s workshops to propel growth not only in the US but in other countries as well. “Made in the USA” products became household words everywhere, including my Wild Wild West province of Cagayan in Northern Philippines, precisely due to the miracle of the transport sector that was broadly a facet of the ‘real economy’ of America. I was a child in the 1960s and early 70s when the “Made in the USA” was chic and almost a cult-level cliché.

 

That era now is now consigned to the dustbins of a remote past. Sure, America still produces state-of-the art transport prototypes. But look, railways have stagnated (is there a mag-lev there now?), automotives are shrinking by the day (laying off and displacing thousands of top quality industrial technicians), while the cutting edge technology for almost all prototypes, save for military transport, have already been surpassed by Asia.

 

McCain and Obama should better do their homework and understand the catastrophic future that awaits America if the transport sector remains neglected and ceaselessly ravaged inch-by-inch by the infernal fires of predatory finance. The policy makers there better salve the ailing sector quickly, and get back those laid-off topnotch industrial technicians to work before they lose every iota of motivation to even get involved in the sector they grew up with but which rejected them (how traumatic!).

 

If there’s any sector to begin with, it’s railways. Better renovate the railways, and establish maglevs in all the major continental routes of the US. And quickly take the initiative to establish cross-border maglevs with Canada and Mexico. Later, establish maglevs connecting Alaska with Russia via Siberia, thus connecting US to the Asian land mass.

 

Sorry for sounding ‘interventionist’, fellows in America. We Asians are as concerned with your economy as you are, and we would want your economic leadership to again rise to the fore. If America does that, other nations will then move on, propelled by growth in the ‘real economy’ because America is doing so. Failing to do that, the economic baton will transfer to Asia, and it will crash our hearts to see our fellow Earthans of America sinking in esteem by the day, because of their collapsing prosperity.

 

We are all siblings on Earth, this is certain, that’s why we share words of wisdom about your economic conditions. May you finally have a reform-oriented President comes this coming electoral contest.

 

[Writ 07 June 2008, Quezon City, MetroManila]

US WATCH: INFRASTRUCTURE DECAY, NEEDS MASSIVE REDEVELOPMENT

July 19, 2008

Erle Frayne  Argonza

A bridge has fallen, the Mississipi river flooded Orleans like some pathetic third world city, airports are too cramped up as they are incapable of containing the surge in passenger & cargo levels, the East Coast experienced the emergency shut down due to grid overload (causing massive blackout), railway tracks are thinning out and overall capacity is on downward trend, and more.

They seem to be unrelated, but for economists and sociologists the trends all tell the same story. Pieced up together, they indicate crumbling infrastructures. Not because the structural engineers of America are sloppy, and definitely not that the heavy equipment sector couldn’t provide quality machines to reinforce the burgeoning infrastructure need of the juggernaut US economy.

The true story is that, as the economy shifted to the ‘virtual economy’, there was the systematic abandonment of infrastructure as a priority for fiscal and budgetary allocations. “Leave that to the private sector!” was the slogan for infrastructure. Even the famed fast lanes of America are already being sold out one after the other to the highest bidders, financial speculators all led by the likes of Felix Rohatyn & partners, thanks to deregulation and liberalization.

The thing is, most of America’s major infrastructures—airports, wharfs, roads, bridges, dikes, dams, power distribution, and more public works—were built in the 50s and 60s yet, at the height of the post-war boom under the aegis of the New Deal. Such infrastructures now require massive renovation, with entire replacement for those decaying beyond salvaging.

Did the civil engineers of America speak about the matter clearly? They did, and they have been saying alarming things since the 1990s yet. At the height of the ‘bridge over troubled water’ fiasco, they came out with the report that ¼ of America’s roads and bridges needed major repairs and replacements as soon as possible.

The other sectors’ experts have spoken as well. In the airlines industry, no less than state officials have forewarned that if no renovations (toward expansion) will be done on airports in 10 years’ time, there will be major crisis in the airlines sector. The possibility of emerging markets overshooting the USA’s cutting edge in air transport delivery also looms ahead in the short run.

With no reversal of policies in sight, chances are that, in 20 years’ time, the USA will be an apocalyptic landscape of fallen bridges, impassable roads, rotten wharfs, fallen dikes and inoperable dams, rotten buildings left to nature, and forest cover claiming back once bustling cities.

Only a timely policy reversal can nip the apocalyptic future in the bud. That is, if the political bigwigs in the coming election—McCain and Obama—do their homework well, comprehend the problem deeply, and begin large-scale strategic solutions to colossal problems in infrastructures.

[Writ 06 June 2008, Quezon City, MetroManila.]  

GLOBAL OLIGARCHS AND THE FOOD & ENERGY PRICE HIKES

July 4, 2008

Erle Frayne Argonza

Good afternoon, Fellows on Earth!

 

As already presented by this writer/analyst in my previous notes and articles, the current state of affairs of the global economy—which featured the inflationary upswings in the food and energy sectors—have a great deal to do with the machinations of the global financiers or oligarchy.

 

Across the ideological and paradigm streams, there has been the preponderance for speculations by the same financiers and subalterns that have been the main upward driver of prices in oil and food. The very same operators were also responsible for the temporary upswing in the price of the US dollar which remains as the chief legal tender for exchanging oil.

 

Below is an article from the Executive Intelligence Review that authenticates to a large degree the positions I took so far regarding oil and food.

 

[Writ 01 July 2008, Quezon City, Manila]

LaRouche: British Are Behind Food and Energy Hyperinflation

June 22, 2008–This release was issued on June 22 by the Lyndon Larouche Political Action Committee (LPAC).

Lyndon LaRouche today forcefully denounced Prince Philip and his fellow genocidalists in the Anglo-Dutch oligarchy, for willfully promoting the food and energy hyperinflation, which threatens to kill billions of people around the globe. “You cannot understand the current hyperinflationary crisis,” LaRouche charged, “without first considering Prince Philip and the late Prince Bernhard’s stated committment to wipe out 80% of the human population, through a combination of wars, diseases and famine. If Prince Philip, and his slavish followers like Al Gore were to succeed, the population of the planet would be reduced, in the next several generations, to well-under two billion people.”

LaRouche was responding to news reports, in the past 24 hours, that the combined food and energy hyperinflation, has created a global national security crisis, threatening the survival of such leading nations as China, India, Indonesia, Malaysia, Pakistan, Zimbabwe, Morocco, and Egypt. “I warned, months ago, that the food crisis would soon emerge as the number one issue facing every government in the world,” LaRouche commented. “The combined shock of $140 a barrel oil and food hyperinflation and shortages, willfully promoted by Anglo-Dutch speculators and their oligarchical backers, has thrown the world into an immediate crisis.”

On Sunday, June 22, representatives of the world’s leading oil producing and oil consuming countries will meet in Jeddah, Saudi Arabia, to consider actions to deal with the crisis. Over 40 nations around the globe have been rocked by food riots and other protests over the hyperinflationary crisis, and the worst shocks, LaRouche warned, are coming during the immediate summer months ahead. “By the time we reach October,” LaRouche warned, “the situation will be catastrophic.”

“There are remedies, even at this late date, to deal with the energy and food hyperinflation,” LaRouche continued, “but nothing is going to work unless and until we crush the power of the British oligarchy.” LaRouche asked: “Do you really think that Saudi Arabia is going to cooperate, so long as their BAE ties to London remain intact—even if the very survival of the Saudi Royal Family is at stake?”