From Matt Taibbi’s “The Great American Bubble Machine” in Rolling Stone Issue 1082-83.

The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They’ve been pulling this same stunt over and over since the 1920s — and now they’re preparing to do it again, creating what may be the biggest and most audacious bubble yet.

As Americans, we are made to believe that we are stewards of the world.  The US is billed as a balance against the ‘axis of evil’ and supposed to counteract the communistic forces of the former Soviet Republic.  The dollar is intended to be the reserve currency of choice and continues to see inflows as investors flee from emerging markets.  Yet beneath the surface, this is just a veil of egotistical rantings – instead, we must take a pause in this thinking and consider the possibility that the United States superpower status is in decline.

Just as the New World came into power following the concentration of colonial power in Spain and England during the 18th century, so the baton is being passed onto new economic power houses.  Even US Intelligence reports indicate that the balance is shifting eastward towards the emerging economies of China and India.  The report, “Global Trends 2025: A Transformed World,” was drafted by the National Intelligence Council to better inform U.S. policymakers about international trends and political ramifications facing president-elect Barack Obama.  The Euro zone should also take note, since the European Union has been characterized as a future “hobbled giant” crippled by internal bickering and infighting between member states with competing domestic interests.  The economies will be threatened by the expense of paying for retiring baby-boomers; today it is in the form of bickering about healthcare and attempts to save pension plans weighing down century-old industries (automakers).

What are some of the reprocussions facing the world?  Most certainly it will be driven by resource constraints in the basic necessities – water and food.  Interesting enough, the Global Trends project has been under way for a year, but was completed before the global financial crisis occurred.  The full text of the report is available on the CIA Web site ( http://www.dni.gov/nic/PDF_2025/2025_Global_Trends_Final_Report.pdf ).

 

China

Which economy will be the first to recover from the current financial crisis?  Just like gold experienced a trendline breakout in 2001 which signalled the start of a bull run in commodities, the Chinese stock market is the first chart to show the signs of a bottoming process.  In the last month, it has traded back to a solid support level around 1,700 and has retraced most of the ’3 waves + a dome’ monthly topping pattern.  Keep a close eye on this chart in future months, since it will most likely lead all other emerging markets as well as any US recovery.

 

Sub-prime deconstructed

There are very few people that speak truths on Wall Street.  Most money managers, investment bankers, and CNBC talking heads are just shills on the corner pawning their wares concealing hidden agendas.  Every once in a while a crusader sticks their neck out and dares to take action – these market mavericks are far and few between, but in his chilling essay, Michael Lewis exposes some of the brave traders that actually stayed one step ahead of the curve as the markets imploded during the financial crisis.  Liar’s Poker was an expose of the Wall Street excess, but paled in comparison to the lies, deceit, and propaganda which dominated the housing crisis.

“That Wall Street has gone down because of this is justice,” Steve Eisman says. “They fucked people. They built a castle to rip people off. Not once in all these years have I come across a person inside a big Wall Street firm who was having a crisis of conscience.”

 

Refried Beans

“Wall Street stages late rally on Geithner news” reads the Reuters headline news as a CNBC report around 3pm on Friday is credited with sparking a recovery.  Announcing a cabinet appointment sure seems like a viable excuse to rally over 6% from 11-year lows on the S&P 500.  Then again, options expiration probably have nothing to do with this stomp and romp, eh?

In a stinging essay entitled “Who are the Architects of Economic Collapse?“, we are asked to examine just who Geithner and Summers actually represent.  In the course of examining their roles in previous administrations, we are reminded that the 1999 Financial Services Modernization Act (FSMA) was conducive to the the repeal of the Glass-Steagall Act of 1933. A pillar of President Roosevelt’s “New Deal”, the Glass-Steagall Act was put in place in response to the climate of corruption, financial manipulation and “insider trading” which resulted in thousands of bank failures precipitated by the 1929 market collapse.  Who were the leading architects of this debacle?  Lawrence Summers, Paul Volker, and Timothy Geithner – all candidates for the treasury secretary position.

As the public is witness to an ever-alarming veil of secrecy surrounding the allocation of $700 billion in TARP bailout funds to banks, former Goldman Sachs CEO (and Bush’s current treasury secretary) Henry Paulson appears shifty-eyed and reticent to release any details of why, who, and how much money is being shovelled from public funds into private equity firms.  Timothy Geithner is CEO of the Federal Reserve Bank of New York, which is the most powerful private financial institution in America.  Summers is currently a Consultant to Goldman Sachs and managing director of a Hedge fund, the D.E. Shaw Group.  Both men were instrumental in the 1997 Asian crisis involving he currency manipulation against Thailand, Indonesia, and South Korea.

Once again the United States is putting the architects of financial deregulation into positions of financial power under the new administration.  Meet the new boss, same as the old boss.  We won’t be fooled again?

  

“The biggest potential political problem here has nothing to do with Detroit and everything to do with Wall Street — specifically Cerberus, a private-equity firm based in New York. Mr. Bush’s former Treasury secretary, John Snow, is chairman; ex-vice president Dan Quayle has been a prominent spokesman; and the firm’s chief executive, Stephen Feinberg, gives generously to Republican causes.”

The Case Against Giving GM and Chrysler a Hand, Wall Street Journal, November 5, 2008

“But Paulson, like the long line of Goldman public servants who came before him—Rubin, Corzine, John Whitehead, Stephen Friedman—doesn’t need this job. He isn’t some retired or pushed-out exec. He took the job… The stock market greeted his appointment with one of the worst days on record.”

Goldman Sachs Is Just the Treasury Secretary We Need – New York Magazine, James “CNBC Mad Monkey” Cramer

“Whether it’s a credit crunch to fix or an Olympics to plan, the list of Goldman Sachs alumni is sure to have a candidate”

How Goldman Sachs took over the world, The Independent, July 22 2008

Is this perhaps an executive “Get out of Jail free” card? I was NOT enamored of Clinton’s last minute pardons as he skeedaddled out of the White House. I wonder myself just how much the rent will be if you land on ‘Broadway’? Of course, everybody deserved a pardon now and then .. for a price. A very wise observer of financial markets noticed that large natural disastors – tornadoes, earthquakes, landslides, hurricanes – (and associated suffering of the poor) are often nature’s way of balancing out manipulation in the markets. Is it any wonder that September 2008 saw the greatest number of land-fall hurricanes ever recorded in the United States? Today we marvel at this beauty Paloma now let loose in the Carribean, especially that it was born over that finance-haven of the Caymen Islands. Pablo Picasso would be proud that mother Nature has spawned a ‘Guernica‘ in the modern world.