Watching the River flow?

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What happens when the House of Cards…..meets the House of Mirrors meets the House of Wax?  Vincent Price would probably introduce Ben Bernanke and Hank Paulson to all the 3-D viewers….giving free to all – those green and red cardboard glasses!

The concept that “if” the Government gave banks and Institutional banking interests “liquidity”….or “cash” directly….then the banks could then start lending money to small businesses, home owners and individuals again was pure speculation at its best.  Today, that FED money is going directly into private funds, banking reserves and acting as a backstop so that they can borrow more money based on the FED cash given.  They are not lending money to anyone!  Well, except continuing to pay top executives and brokers their big annual salaries and bonus programs!

AIG, Inc. has borrowed $98 Billion from the FED of the $123 Billion that has been allocated.  They have taken that money and now have borrowed back bunches on Long and Short Term Commerical Paper… pay back the FED…based on the reserve they have accumulated from borrowing the FED money to begin with.  The concept is simple:  Borrow a $1 Billion dollars from your mom and then borrow $2 Billion from an Institutional Banking facility based on your $1 Billion dollars reserve in the bank.  The kicker is that you cannot lend either the original $1 Billion dollars….which needs to remain intact as Reserve….or the $2 Billion dollars which is newly borrowed, because you pay back $1 Billion to mom and pay salaries and commissions with the other $1 Billion.  Using other people’s money is a fun game…unless you get caught as AIG did….having Company parties and excessive salaries.

In the meantime, the US FED is having a tough time explaining why the if the original intent of the $840 Billion dollar Bail-Out was to relieve the “Credit and Liquidity Crisis”….why….nothing seems to be happening!  The recent reset to 1% for most frequent borrowers to the Treasury is another big “iffy” due to the fact that the Europeans have 4.75% Interest for the same stuff.  One of two things could happen here which are not good.  There could be a rush to the British Pound to stash cash at a higher interest rate…..or the Europeans could rush over to the US dollar….to borrow again on the cheap!

Secondarily, housing prices in the US are not reaching any semblance of stabilization.  The continuing fall down due to high frequency foreclosures and devaluation of property values….creates a circular whirlpool of descent into the depths.  Those $500,000 homes in 2004…are not worth $225,000 and falling.  Unless the owners can afford the “cash flow” and want to stay in those homes…..more foreclosures and walk-aways will be seen.  How this impacts the big Pension and Retirement Funds…basically deeply invested in urban Real Estate holdings….will be telling.  CALPERS has already lost upwards of 25% of its total worth….since the crisis began.

Finally, Consumer Spending and Job losses are really going to put a deep fork into this Thanksgiving Turkey!  Should the continuing fall in Consumer Spending continue…..big Job Losses will follow in earnest!

The good news is that World Markets all are having the same problems.  The concept that China is “just fine”… truly Holographic Hopefulness!  What is China going to buy from the good old USA?  Maybe some grapes from the Central Valley?  Tomatoes maybe!  China is not going to buy any Financial Services, any Investment Programs or Autos!  In fact, bunches of those GM and Ford Plants in China will probably be closing fast!  That will affect the China employment picture as well.

States, Counties and Cities are soon to feel the brunt of the so-called FED Bail-Out plan!  Unless we allow those that invested in the phony instruments that killed the Golden Goose…to fail…there may be no end to the suffering!

One last thought: “Obamanos muchachos!”

About Ron & Anna Winship

Independent News Producers/Writers and Directors for Parker-Longbow Productions. Independent Programming which includes a broad variety of Political, Entertainment and Professional Personalities. Cutting Edge - a talk the flagship of over 30 URL websites developed or under development. The Winships have been blogging for the Orange Juice since back when nickels had buffalos on them, and men wore onions attached to their belts, because it was the fashion back then.