The carefully designed disaster at Fannie and Freddie

The situation at the mortgage giants of Fannie Mae and Freddie Mac continue to get worse. The news yesterday is that Fannie Mae lost another $25.2 Billion last quarter and has requested another $15.2 Billion bailout just to stay afloat.

“We expect the market conditions that contributed to our net loss for each quarter of 2008 to continue and possibly worsen in 2009, which is likely to cause further reductions in our net worth,” Fannie Mae said in a statement.

The other player here, Freddie Mac, is watching defaults on its mortgage debts accelerate to record highs. Freddie will need another bailout as well.

The Great Waterfront Strike

Around 8 o'clock in the morning on July 5, 1934, shop owners in the mission district of San Francisco were opening for business. Bankers and stock brokers were already at work in the financial district. Construction workers were busy building the new Oakland Bay Bridge.

Meanwhile, down near the waterfront, a Belt Line locomotive began nudging two refrigerator cars towards Matson Line docks on Pier 30. 1,000 police prepared to square off against 5,000 striking longshoremen in a pitched battle that would last all day long.
It was the first of two climatic episodes that would forever change the shape of labor unions on the west coast.

Prelude

When the economic barrier of color was broken down

Nothing scares the ruling elites more than when working men and women join together and refuse to allow themselves to be divided over petty concepts like race and ethnicity.
The election of Obama to the presidency is merely a milestone in a very long and well-traveled road.

"Never in the history of the world was such an exhibition, where with all the prejudices existing against the black man, when the white wage-earners of New Orleans would sacrifice their means of livelihood to defend and protect their colored fellow workers. With one fell swoop the economic barrier of color was broken down."
- AFL leader Samuel Gompers

We are running out of time

There is a limited window of opportunity, when an economic crisis evolves from a manageable event to an out-of-control monster. The current economic crisis is getting rather long in the tooth, and yet the global political and economic leaders still show no ability to fully grasp the depth and complexity of the situation.

As of this moment there are two evolving problems that are only a few months away from being out of anyone's control. One of the problems is domestic, the other lies on the other side of the Atlantic. Both of them have the potential for catastrophic consequences.

The Wall Street Criminal Syndicate

"Banking was conceived in iniquity and was born in sin. The bankers own the earth."
- Sir Josiah Stamp, 1927

It was a news story that didn't get much traction. Yet it is a reflection of all that is wrong with the world of finance today.

The United Nations' crime and drug watchdog has indications that money made in illicit drug trade has been used to keep banks afloat in the global financial crisis, its head was quoted as saying on Sunday.
...

The Monster that the bailout has become

I believe that this news article sums up what is wrong with the government bailing out the economy.

SAO PAULO -- General Motors plans to invest $1 billion in Brazil to avoid the kind of problems the U.S. automaker is facing in its home market, said the beleaguered car maker.

According to the president of GM Brazil-Mercosur, Jaime Ardila, the funding will come from the package of financial aid that the manufacturer will receive from the U.S. government and will be used to "complete the renovation of the line of products up to 2012."

A GM spokesman has denied using bailout funds to export American jobs, but that appears to be nothing more than a bookkeeping matter. This is bad enough as it is, but it doesn't stop there by any means.

California is officially flat broke

Today was the day when California's budget problems went from bad to worse.

Since legislators have yet to produce a solution to California's $42 billion dollar budget deficit, state money has now completely stopped flowing outward.

Declaring itself officially broke, the state government will begin issuing IOU's instead of check for grants, schools and any other organization or program which was previously receiving funding. Additionally, your California income tax refund check this year will not be sent out until after a balanced budget is passed. Those who have already filed their taxes will get an announcement noting the delay.

Social unrest spreads in Europe

By now we are all familiar with the fact that Iceland's government has collapsed amidst a financial failure and popular protests.
What isn't as well-known is that this appears to be merely the start of a tsunami of street protests, general strikes, and riots that will rock Europe for months (and maybe years) to come.

The problem is especially troublesome in eastern Europe, where it is likely that governments will topple before the economic crisis is over.

Odious debt, Jubilee, and the cost of ignoring history

It seems like all commentary on the situation of America today is put into the context of post-WWII. That's like studying the history of Rome, but ignoring the 500 years of history that happened before Ceasar's armies crossed the Rubicon. If you intentionally limit your vision of the world then you will eventually be caught off-guard by larger trends.
This problem is especially true in the field of economics.

The fact is that the financial system, as it was structured in 1944, was an experiment. No one knew if it was sustainable, and it certainly wasn't intended to last forever.
That world has been slowly, and increasingly, breaking down for the last several decades, but because no one looks more than 65 years into the past no one can imagine a different world. Everyone is terrified of the "unknown", when in fact is isn't unknown at all. It's just different.

Here comes the next banking crisis

First it was Bear Stearns. Then it was the Countrywide and the mortgage lenders. Then it was Lehman and AIG.
Now we have another banking crisis brewing, but this one is different because it's not from America. This one is from the other side of the Pond.

Jim Rogers, chairman of Singapore-based Rogers Holdings, said the “U.K. is finished” and investors should sell the currency.
...
“I would urge you to sell any sterling you might have,” said Rogers. “It’s finished. I hate to say it, but I would not put any money in the U.K.”

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