BIZARRO ELECTION OF 2008 CONTINUES

What a strange and interesting world we live in. Liberals back giving hundreds of billions to a few companies, Republicans go socialist, socialists are against the bailout and I think I heard on the weather report that hell has frozen over!

One of the problems with being a Democrat now is that it is difficult to tow the party line- and ignore the fact that Obama did nothing to stop this bill, in fact, he spoke for it. McCain supporters can't say McCain broke from the pack on this one either. In fact, its fair to say that BOTH candidates failed on this bill and helped in the swindle. So Democrats are obliged to attack Palin and "Bush's bailout" while avoiding the Democrats joining in on the pile up of "extras" on the bill that took it from 3 pages to over 400! All while claiming we are broke, and that printing money is the solution, even as it makes what we have worth less.

The other tactic to use is declare that this was a by-product of the libertarian take- over of our financial system. I can assure you no such take over took place, these same people would have screamed "Jewish or Masonic conspiracy" not too long ago and they only say it because no one actually knows any libertarians.

They have in fact been speaking out on the subject of the finnancial system for decades, and it is fair to say since the bills went through that helped spark the idea of making money off fees and not caring if the dealers were paid or not, they have been opposed to the direction we are in. Take for example, this article:

The Keynesian Fallacy: The Paulson Plan Won't Create Wealth
In very simple terms, the Paulson Plan is a straight-up transfer of $700 billion — and counting! — from the taxpayers to a few big financial institutions. (Some smaller banks are complaining that they don't own the exotic mortgage-backed derivatives, but rather simple mortgages. They do not believe they will see a dime of the Paulson money.) It's easy to get all twisted around, but just remind yourself of this: the Paulson Plan has the federal government borrow $700 billion (through issuing Treasury debt) in order to buy assets from Wall Street banks. (We are neglecting the time delay in the program; the entire $700 billion wouldn't be spent all at once.)
Some analysts think that the price paid for these "toxic" assets is important. No it isn't. The government officials running this operation will dole out the favors on both ends, when the mortgage-backed securities are coming and when they are going. Neglecting this insight, some people want to say that if the government pays $700 billion for a portfolio of assets that is really only worth $400 billion, then the taxpayers really only lost $300 billion, not the full $700 billion.

Yet this thinking is naïve. The taxpayers are not going to be treated as equivalent to shareholders of a firm that just acquired $400 billion in assets. The taxpayers are not going to get a cut of the monthly mortgage payments (less the servicing costs on the $700 billion in new debt) tied to the government's massive portfolio. Instead, the government will simply bump up its annual spending by a few billion dollars. Maybe it will have to spend the money on homeownership programs, or homebuilder job retraining, but the net income from those government-owned assets certainly won't translate into a dollar-for-dollar tax cut.
"Some very sharp academic economists are in a tizzy trying to treat this as an extra-credit question, rather than a crime scene."

And then at some point — during a future Republican administration, no doubt — there will be a push to "privatize" the secondary mortgage market, and the government's portfolio at that time will be auctioned off at very generous prices to politically connected institutions. For example, maybe the $400 billion portfolio is auctioned off for $250 billion. (Perhaps the big banks have to set up subsidiaries owned by minorities and women who get preferential treatment in the bidding process. But whatever the ruse, they will find a way to justify the low prices.) When all is said and done, the government will have played hot potato with the MBS, and the national debt — borne by taxpayers — would be $450 (=$700-$250) billion higher. The favored financial institutions would be "up" roughly the same amount, collectively. (Throughout, we are ignoring the timings of the payoffs and the effect on present discounted value.)

It is the crudest Keynesianism to view the Paulson Plan as an injection of capital or "liquidity." That money has to come from somewhere. If it is taxed or borrowed, then it is just a shell game; the liquidity is drained from elsewhere, to be injected into Wall Street.

Besides taxing or borrowing, the government has a trump card: it can have the Federal Reserve simply create the new money out of thin air, by engaging in some "Open Market Operations." Yet even in this case, real wealth still hasn't increased. Certain nominal figures, like "aggregate asset values" might go up. But that's not very relevant, because the economy isn't really richer. After all, there aren't more tractors or office buildings just because Bernanke allows the monetary base to grow more rapidly. So what happens in this case is that prices rise; people find it harder to buy milk, bread, and gasoline. But the Wall Street fat cats are fine with the general price hikes, because they got their hands on the newly injected funny money early in the game.
But Won't the Credit Markets Collapse?

Some observers would admit the legitimacy of my analysis above. "However," they might say, "the Paulson Plan, or something like it, is necessary to avert a total meltdown of the financial system. We're not trying to boost aggregate investment, so much as clearing out a clogged pipe."

This talk of a breakdown in the financial system is a bogeyman. Steve Landsburg does such a great job of exploding this myth that I will simply quote him:
So what's special about banks [that they deserve a bailout]? According to what I keep reading, it's that without banks, nobody can borrow, and the economy grinds to a halt.

Well, let's think about that. Banks don't lend their own money; they lend other people's (their depositors' and their stockholders'). Just because the banks disappear doesn't mean the lenders will. Borrowers will still want to borrow and lenders will still want to lend. The only question is whether they'll be able to find each other.

… [A]s any user of match.com can tell you, the technology for finding partners has improved since [the 1930s]. When a firm wants to raise capital, why can't it just sell bonds over the web? Or issue new stock? Or approach one of the hedge funds that seem to be swimming in cash? Or borrow abroad?

… I'm not sure these big Wall Street banks are really necessary, and I'm not sure we'd miss them much if they were gone. Maybe there's something I'm missing, but if so, I think it should be incumbent on Messrs. Bernanke, Paulson and above all Bush to explain what it is.
Conclusion

The Paulson Plan is a heist. It is a grand scheme in which the public will end up owing hundreds of billions of dollars to holders of new debt claims issued by the US Treasury. The plan won't "prop up" asset values and it won't provide any real stimulus to the economy.

Despite the dire warnings — coming from the same folks who brought you the Iraq invasion to remove WMD — there is no threat of a financial meltdown. If Goldman Sachs failed, the sun would still rise the next morning.

Far from providing stability and confidence, the Fed, Treasury, and SEC's recent moves have ensured that US capital markets will now function with the same efficiency as public education in this country. The Paulson Plan is one more step in the socialization of America, but it is also a great bank robbery.

Al-Qaeda Outlines Its Strategy Seven Years After 9/11

On the seventh anniversary of 9/11, jihadi internet forum members posted a variety of messages recalling and celebrating al-Qaeda’s terrorist attacks in the United States, or, as the jihadis refer to it, “the victorious invasion of Manhattan.” One frequent poster and well-known member of the jihadi forums posted a protracted analysis of the situation as it exists at the moment entitled “Al-Qaeda’s Strategy on September 11, 2008, and the Onset of its Great Scheme” (alhesbahweb.net, September 12).

The posting was written by a Salafi-Jihadi using the nickname “Asad al-Jihad2.” Famous among jihadi forum chatters for his active role in the Salafi-Jihadi global movement, al-Jihad2 is believed to be the Egyptian Muhammad Khalil al-Hakaima, media coordinator for al-Qaeda (iiacome.blogspot.com, September 12; see also Terrorism Focus, October 10, 2006; October 24, 2006). Al-Hakaima was a member of Egypt’s Gama'a al-Islamiya (Islamic Group - GI) before breaking ranks with the group and joining al-Qaeda (see Terrorism Monitor, October 10, 2006). Another forum member, claiming to be a reporter for the Global Islamic Media Front (GIMF), posted the article on behalf of al-Jihad2. Beginning with a review of the battles in Afghanistan’s Tora Bora region, the post claims al-Qaeda succeeded in scattering the U.S. army all over the world, hence disrupting its plans to reshape the Middle East. The U.S. onslaught on the Middle East drove Muslims to rise up and join al-Qaeda, says al-Jihad2, adding, “We are tired of analysts who claim al-Qaeda will be terminated soon. Don’t they have a sensible man to admit that al-Qaeda won in every field of confrontation?”

Several times the post also ridicules a July 28 Rand Corporation report entitled “How Terrorist Groups End: Implications for Countering al-Qa’ida.” The report suggested the United States abandon its heavy reliance on military force in its counterterrorism strategy to pursue an approach emphasizing policing and intelligence gathering.[1]

Ineffective Western Tactics in the War on al-Qaeda

Previous jihadi movements were defeated and dismantled by Western counterterrorism tactics because they failed to win public support and failed to train jihadis for ideological, political and military confrontations with the infidels. Al-Qaeda succeeded in confronting not just local security forces, but rather the entire global security machine. The most important aspect of al-Qaeda’s operations, claims al-Jihad2, is the continuous build-up and development of its resources while perpetrating terror attacks. Continued Western attacks on al-Qaeda have only strengthened its resolve and support from Muslims. The author recalls an encounter he had while raising funds for al-Qaeda operations: “What makes people donate large sums of money to al-Qaeda after all the restrictions imposed on it by the international counter-terrorism apparatus? What motivates a little girl to give me one dollar when she knew I was raising funds for al-Qaeda?” The girl’s own answer to this question: “I want them to kill the Americans (the Jews) because they fight the Muslims.”

The Major Battle Fronts of al-Qaeda

In the seven years since the terror attacks in the United States, al-Qaeda has mounted a series of successful attacks on many fronts. Osama bin Laden, who has baffled the world’s smartest military and security analysts, is still planning more devastating blows, according to al-Jihad2.

• Palestine: The world’s attention turned to the Israeli-Palestinian conflict when Osama bin Laden, in his first statement after the 9/11 attacks, vowed to disrupt America’s peace if the Jews did not pull out of Palestine. Israel remains at the core of international Islamic issues and provides a revolutionary motivation for Palestinians to join al-Qaeda’s war on crusaders and Jews under American command. Is al-Qaeda winning in Palestine? If al-Jihad2’s measure of success is the spread of Salafi-Jihadi groups such as the Jaysh al-Islam (Islamic Army) in Palestinian areas, Israel’s establishment of an additional security agency to confront global jihad movements would seem to corroborate al-Jihad2’s claim of Salafi-Jihadi success (Al-Ghad [Jordan], September 25). Al-Jihad2 concludes his point on Palestine by suggesting al-Qaeda attacks are pending in the heart of Jerusalem.
 
• The Islamic State of Iraq (ISI): Evidence for the success of al-Qaeda in Iraq is the re-establishment in Iraq of the caliphate that was abolished by Turkey’s Mustafa Kemal Ataturk in 1924. In the first five years of the ISI’s 20-year plan to develop a caliphate in the whole region, al-Qaeda asserted its superiority over all enemies of Islam in Iraq, resulting in many Iraqi resistance leaders pledging allegiance to ISI.

• Al-Qaeda in the Arab Peninsula: The Arab peninsula is an exceptional domain for al-Qaeda operations because it can engage all enemies of Islam present in the oil-rich region. The rough terrain and the non-luxurious life of many people in the peninsula are important factors in motivating them to join al-Qaeda. The movement considers Yemen an area of strategic research. All the terror acts committed by al-Qaeda in Yemen are only a prelude to its future plans for Yemen as outlined in the book The Responsibility of the People of Yemen towards the Holy Places of Muslims and their Wealth by Salafi-Jihadi ideologist Abu Musad al-Suri.[2] Other States in the peninsula provide vast financial sources for al-Qaeda.

• Al-Qaeda in Afghanistan: Al-Qaeda’s plan for Afghanistan is to gradually take over Kabul by cutting off its supply lines, followed by the reestablishment of the Islamic Emirate. The mujahideen are waging war on multiple fronts in Afghanistan against NATO and apostate forces. The Taliban and al-Qaeda presently control large districts in Afghanistan due to the influx of volunteers and Salafi-Jihadi shaykhs. “How does al-Qaeda’s situation in Afghanistan during the Tora Bora battles compare to today? I leave the answer to the incompetent RAND institution” says al-Jihad2.

• Al-Qaeda in Pakistan: Pakistan’s Taliban made outstanding progress this year by controlling the tribal areas and undermining America’s strongest ally in the region, former President Pervez Musharaff. Al-Jihad2 believes Pakistan will never stabilize unless it is ruled by an Islamic government supportive of al-Qaeda and the Taliban because the Pakistani public dislikes the United States and its allies. Al-Qaeda expects improved relations with Pakistani authorities now that military command has been separated from the presidency.

• Al-Qaeda in the Islamic Maghreb: The establishment of Salafist groups in the Maghreb region has presented an “insurmountable barrier to Crusader France and the European nations behind it.” Though the “Algerian system is fading,” direct French intervention is expected to prop it up. Nevertheles, the Maghreb region offers numerous advantages for conducting jihad, including vast open areas with unprotected borders, an abundance of mountain fortresses, long beaches with maritime access and a ready supply of weapons from central and western Africa.

• Al-Qaeda in the African Horn: Since the end of the Cold War and the establishment of an American presence in fourteen African states formerly part of France’s neo-colonial sphere of influence, al-Qaeda has planned to repulse U.S. influence in Africa. “The African Horn, the country of the two migrations [Somalia] and the southern belt of defense of Prophet Muhammad’s Peninsula, is considered one of the main battlefields against the crusaders” said al-Jihad2 quoting Shaykh Mukhtar Abu al-Zubair, Emir of the Mujahideen Youth in Somalia (al-Shabaab). The post focuses on the early presence of al-Qaeda in Somalia. In 1993, claims al-Jihad2, Osama Bin Laden dispatched Abu Talha al Sudani, a senior al-Qaeda leader, to train Somali mujahideen youth who, in turn, summoned other senior leaders such as Shaykh Abu Hafs al-Masri, Shaykh Abu Ubaidah al-Banshiri, Shaykh Yusuf al-Iri and Shaykh Abdul Aziz al-Muqrin for consultation and the planning of future al-Qaeda battles with Western and U.S. forces in the African Horn. Abu Talha al-Sudani was officially appointed by Osama Bin Laden to oversee operations in Eastern Africa but was later killed in a fierce battle with Ethiopian forces in 2007.

These are the battlefronts where al-Qaeda has been victorious and reinforced its presence and strength, according to al-Jihad2, who adds that al-Qaeda receives many letters and delegations from Muslims all over the world petitioning to join the movement. Concerning its future plans, al-Jihad2 proclaims al-Qaeda will concentrate on assassinating tyrant and infidel leaders in an attempt to liquidate all forms of the U.S. military, security, diplomatic and economic presence in the region.

Some jihadi forum members hailed al-Jihad2’s posting, considering it indicative of an upcoming large-scale terror attack by al-Qaeda. Other forum participants believe the posting’s analysis contains many hidden messages written in code.

“Al-wala’ wa al-bara’” (Loyalty [to Islam] and Disavowal [to its Enemies]) is still the central theme of al-Qaeda’s adherents. Following this concept, al-Qaeda’s list of infidels and enemies to be eliminated is growing, requiring more jihadis to replace the ones who perished in the global counterterrorism campaign. The release of this post on al-Qaeda’s strategy, coinciding with the release of another interview with an anonymous al-Qaeda soldier promising major terror attacks in the near future, leaves the impression that al-Qaeda is increasing its propaganda efforts to lure more Islamists to replace the fallen.

Abdul Hameed Bakier is an intelligence expert on counter-terrorism, crisis management and terrorist-hostage negotiations. He is based in Jordan.

I stunned many people I knew when I said I was supporting Obama over socialists like Bush and "self sacrifice" McCain. Now we watch as Bush nationalizes companies, and supported by the liberal wing of the Democratic Party moves to sacrifice the future of young people. In a election where everything is topsy turvy, the left and open socialists of the Democratic Party are actually against the very measures Bush supports and does- even though they would cheer if the very same measures were done by Hugo Chavez.

If I had a daughter between 18 and 34 I would tell them to stop dating their age pool. Most older people are not going to be able to retire or give up their jobs, younger folks are going to be working at Best Buy and Whole Foods and other menial jobs trying to pay their school loans and unable to get the jobs the baby boomers, also in debt cling to- there is no house coming their way from their parents- only debt. This bail out, which is actually just printing more money, does not include "making America go green", the cost of the Iraq war, the future cost of the expanding war in the Middle East. Nor does it include the cost of health care, etc.
 
That sound you just heard, was an entire generation getting screwed. Mothers, don't let your daughters fall for the generation gap marketing myth.
 
That party, is clearly over.

Today Pakistan fired on U.S. helicopters searching for Bin Laden. The question becomes for those under 18, college and a low paying job, or the military.

Some choice.

THE ANSWER BOTH PARTIES REJECT

Statement Before the Financial Services Committee, "The Future of Financial Services: Exploring Solutions for the Market Crisis," September 24, 2008
Mr. Chairman,

It is truly a shame that, less than two decades after the fall of communism, the lessons of price control are completely lost on most Washington power-brokers. The Treasury proposal before Congress is nothing more than a form of price control, an attempt to keep asset prices artificially elevated. The root of our recent economic boom, as in any other business cycle, was government intervention into the market under the guise of lowering the interest rate, which is itself a price. The function that prices play in the market in equalizing supply and demand, and the distortions that necessarily accompany each government effort at price-fixing, are forgotten by too many in Washington.

One of the primary causes for the length and severity of the Great Depression in this country was the federal government's attempts at keeping prices artificially elevated. A typical example of getting causation backward, the federal government assumed that falling prices caused the depression, whereas in reality the falling prices were the result of the economic depression, and were necessary to bring the economy back into equilibrium. In its attempt to keep agricultural prices high, the federal government began to pay farmers to destroy their crops, while unemployed people lined up at soup kitchens around the country.

A similar situation exists today, where many mortgage-backed securities and other similar assets are horribly overvalued. The market response would be to allow these assets to be sold on the market at whatever price they would bring. This would result in a shakeout of bad debt and a shorter, sharper correction than would otherwise occur. Unfortunately, the political will to allow banks to take the responsibility for their lending actions is at times lacking.

Many here in Congress are asking where the money for this bailout will come from, and indeed it is a good question. $700 billion does not just materialize out of the ether, but then again neither do the hundreds of billions of dollars that we spend every year to fund our imperial war machine. We must the face the fact that our country is dead broke, and not just that, we are facing over $10 trillion in debt, and tens of trillions more in unfunded liabilities. This $700 billion bailout will only increase that debt, and increase the amount of money we pay merely to service the interest on that debt. The end result of this is higher taxes on our children and grandchildren, and the full-scale destruction of the dollar.

The only viable solution to this financial crisis is to keep the government from intervening any further. The Federal Reserve has already loaned hundreds of billions of dollars through its numerous lending facilities, and the Congress has passed legislation authorizing further hundreds of billions of dollars to bail out Fannie and Freddie, yet each successive crisis event seems to be advertised as larger and more severe than the previous one. It is time that this Congress put its foot down, reject the administration's proposal, and allow the bust to work itself out so that our economic hangover is not as severe as it might otherwise be.

Statement before the Joint Economic Committee, "The Economic Outlook," September 24, 2008
Mr. Chairman,

I believe that our economy faces a bleak future, particularly if the latest $700 billion bailout plan ends up passing. We risk committing the same errors that prolonged the misery of the Great Depression, namely keeping prices from falling. Instead of allowing overvalued financial assets to take a hit and trade on the market at a more realistic value, the government seeks to purchase overvalued or worthless assets and hold them in the unrealistic hope that at some point in the next few decades, someone might be willing to purchase them.

One of the perverse effects of this bailout proposal is that the worst-performing firms, and those who interjected themselves most deeply into mortgage-backed securities, credit default swaps, and special investment vehicles will be those who benefit the most from this bailout. As with the bailout of airlines in the aftermath of 9/11, those businesses who were the least efficient, least productive, and least concerned with serving consumers are those who will be rewarded for their mismanagement with a government handout, rather than the failure of their company that is proper to the market. This creates a dangerous moral hazard, as the precedent of bailing out reckless lending will lead to even more reckless lending and irresponsible behavior on the part of financial firms in the future.

This bailout is a slipshod proposal, slapped together haphazardly and forced on an unwilling Congress with the threat that not passing it will lead to the collapse of the financial system. Some of the proposed alternatives are no better, for instance those which propose a government equity share in bailed-out companies. That we have come to a point where outright purchases of private sector companies is not only proposed but accepted by many who claim to be defenders of free markets bodes ill for the future of American society.

As with many other government proposals, the opportunity cost of this bailout goes unmentioned. $700 billion tied up in illiquid assets is $700 billion that is not put to productive use. That amount of money in the private sector could be used to research new technologies, start small businesses that create thousands of jobs, or upgrade vital infrastructure. Instead, that money will be siphoned off into unproductive assets which may burden the government for years to come. The great French economist Frédéric Bastiat is famous for explaining the difference between what is seen and what is unseen. In this case the bailout's proponents see the alleged benefits, while they fail to see the jobs, businesses, and technologies not created due to this utter waste of money.

The housing bubble has burst, unemployment is on the rise, and the dollar weakens every day. Unfortunately our leaders have failed to learn from the mistakes of previous generations and continue to lead us down the road toward economic ruin.
RON PAUL

In the UK, a ban by the Financial Services Authority on the short-selling of banking shares saw the index of blue-chip companies soar as traders scrambled to buy bank shares.

Within minutes of the FTSE 100 opening in London, the shares of Britain's biggest banks were up an eye-watering amount; Barclays surged 34pc, Lloyds TSB 65pc, Royal Bank of Scotland 48pc and Bradford & Bingley was up 60pc.

Pelosi, in her most recent financial disclosure form, reported that her husband owned between $250,000 and $500,000 of stock in AIG, which ceded majority control to the U.S. government this week in exchange for $85 billion of loans.

Kerry, the 2004 Democratic presidential nominee, disclosed that his wife, Teresa Heinz Kerry, had more than $2 million of AIG stock at the end of 2007, when shares were worth $58.30. AIG has fallen 85 percent this week to close yesterday at $2.69. The lawmakers' aides didn't respond to calls seeking comment.

The FTSE 100 surged the most in its history, joining a global rally, after governments around the world took decisive action in a bid to stop further banking collapses and a full-blown economic crisis.

In the UK, a ban by the Financial Services Authority on the short-selling of banking shares saw the index of blue-chip companies soar as traders scrambled to buy bank shares.

Within minutes of the FTSE 100 opening in London, the shares of Britain's biggest banks were up an eye-watering amount; Barclays surged 34pc, Lloyds TSB 65pc, Royal Bank of Scotland 48pc and Bradford & Bingley was up 60pc.

http://www.opensecrets.org/news/2008/09/update-fannie-mae-and-freddie.html

THE CLINTON HOUSING BUBBLE BURSTS