24 Experts Warn Of Meltdown 2010 : Martial Law : Economic Collapse
Bob Chapman (ALSO: Germany Is Headed Towards Rioting)
First 6 months of 2010, Americans will continue to live in the 'unreality'…the period between July and October is when the financial fireworks will begin.
· The FED will act unilaterally for its own survival irrespective of any political implications …(source is from insider at FED meetings).
· In the last quarter of the year we could even see Martial Law, which is more likely for the first 6 months of 2011.
· The FDIC will collapse in September 2010.
· Commercial real estate is set to implode in 2010.
· Wall Street believes there is a 100% chance of crash in bond market, especially municipals sometime during 2010.
· The dollar will be devalued by the end of 2010.
I *think* that I've seen him interviewed by Alex Jones. Seems very sharp especially about the 1000 Point market loss (and 15 mins to recovery) on 05.06.10(?).
Gerald Celente Trends
Terrorist attacks and the "Crash of 2010". 40% devaluation at first = the greatest depression, worse than the Great Depression.
Mr Doom & Gloom... WTG. When it's rainbows & skittles he can feel free to predict that too; (if we ever come close to producing a trend with that probability.) Of course, a nickname like Mr Rainbows & Skittles doesn't have that ominous ring to it.
Igor Panarin
In the summer of 1998, based on classified data about the state of the U.S. economy and society supplied to him by fellow FAPSI analysts, Panarin forecast the probable disintegration of the USA into six parts in 2010 (June/July 2010, as he specified on December 10th 2000.)
Never heard of Igor, but his credentials seem adequate.
Neithercorps On Youtube? This maybe them IDC.
Have projected that the third and final stage of the economic collapse will begin sometime in 2010. Barring some kind of financial miracle, or the complete dissolution of the Federal Reserve, a snowballing implosion should become visible by the end of this year. The behavior of the Fed, along with that of the IMF seems to suggest that they are preparing for a focused collapse, peaking within weeks or months instead of years, and the most certain fall of the dollar.
Never heard of Neithercorps
Webbots
July and onward things get very strange. Revolution. Dollar dead by November 2010.
I don't consider webbots accurate at all; I could kill a webbot with my pinky! They are wussy girly things! ... Just my opinion.
LEAP 20/20 LEAP20/20
2010 Outlook from a group of 25 European Economists with a 90% accuracy rating:
We anticipate a sudden intensification of the crisis in the second half of 2010, caused by a double effect of a catching up of events which were temporarily « frozen » in the second half of 2009 and the impossibility of maintaining the palliative remedies of past years. There is a perfect (economic) storm coming
...
or in common language, "THE BIG ONE, WHERE WE ALL GO OVER THE FALLS TOGETHER."
Never heard of them... IDC.
Joseph Meyer
Forecasts on the economy. He sees the real estate market continuing to decline, and advised people to invest in precious metals and commodities, as well as keeping cash at home in a safe place in case of bank closures. The stock market, after peaking in March or April (around 10,850), will fall all the way down to somewhere between 2450 and 4125 during the next leg down.
Never heard of him ... His prediction is obviously wrong since we're ½ way through May already.
Can't go wrong with Gold & Silver.
Harry Dent (Investor)
A very likely second crash by late 2010. The coming depression (starts around the summer of 2010).
... the Dow to the 10,700-11,500 range ... market decline ... Dow later this year to 3,000-5,000.
Richard Russell (Market Expert)
On 02.03.10 said that the bear market rally is in the process of breaking up and panic is on the way.
...
He now sees the DOW falling to 7,286 and if that level does not hold, “I see it sinking to its 1980-82 area low of DOW 1,000.” The current action is the worst he has ever seen.
(Bob Chapman (noted above) says for Russell to make such a startling statement is unusual because he never cries wolf and is almost never wrong.)
Niño Becerra (Professor of Economics) Random Link
Predicted in July 2007 that what was going to happen was that by mid 2010 there is going to be a crisis only comparable to the one in 1929.
...
In May of 2010, the crisis starts with all its force and continues and strengthens throughout 2011. He accurately predicted the current recession and market crash to the month.
He seems to have put out many YouTube Videos and seems very popular in the Spanish speaking crowd.
Lyndon LaRouche
The crisis is accelerating and will become worse week by week until the whole system grinds into a collapse, likely sometime this year (2010). And when it does, it will be the greatest collapse since the fall of the Roman Empire.
... Continued
WALL STREET JOURNAL (02.2010)
"You are witnessing a fundamental breakdown of the American dream, a systemic breakdown of our democracy and our capitalism, a breakdown driven by the blind insatiable greed of Wall Street: Dysfunctional government, insane markets, economy on the brink. Multiply that many times over and see a world in total disarray. Ignore it now, tomorrow will be too late."
Clever quote at the end of the statement.
Eric deCarbonnel His Website; Very Interesting
There is no precedence for the panic and chaos that will occur in 2010. The global food supply/demand picture has NEVER been so out of balance. The 2010 food crisis will rearrange economic, financial, and political order of the world, and those who aren’t prepared will suffer terrible losses ...
The US debt markets will freeze again, this time permanently. There will be no buyers except at the most drastic of firesale prices,
...
The dollar's collapse will rob US consumers of all purchasing power,
...
AHA! He's predicting the dollar will completely collapse before 2011. I almost wrote him off... However, he has an interesting website.
Alpha-Omega Report (Trends Forecast)
Going into 2010, the trends seemed to lead nowhere or towards oblivion.
...
Oil prices will skyrocket into the stratosphere and become so expensive that world’s economies will collapse (based on Iranian actions.)
...
2010 could be a meltdown year for the world’s economy, regardless of what goes on in the Middle East.
They have a wishy washy stance. Maybe true maybe not... Only God knows. So, why bother, homey.
Robin Landry (Market Expert)
I believe we are headed to new market highs between 10780-11241 over the next few months. The most likely time frame for the top is the April-May area. Remember the evidence IMHO still says we are in a bear market rally with a major decline to follow once this rally ends.
John P. Hussman, Ph.D.
In my estimation, there is still close to an 80% probability (Bayes' Rule) that a second market plunge and economic downturn will unfold during 2010.
Robert Prechter
Founder of Elliott Wave International, implores retail investors stay away from the markets… for now.
...
“predicting another crash in 2010 that will bring stocks below the 2009 low. His word to the wise, “be patient, don’t rush it” keep your money in cash and cash equivalents.
Richard Mogey
Current Research Director at the Foundation for the Study of Cycles:
... but will crash in 2010 and reach all-time lows late 2012. Mogey says that the 2008 crash was nothing compared to the coming crash. Gold may correct in 2009, but will go up in 2010 and peak in 2011. Silver will follow gold.
James Howard Kunstler (01.2010)
... stimulus and bailouts will just compound the central problem with debt. ... Six Months to Live: The economy that is. ... the buzz I’ve gotten the first two weeks of 2010.
Don't know them; ain't going looking.
Peter Schiff 03.13.10
"In my opinion, the market is now perfectly positioned for a massive dollar sell-off. ... My gut is that the dollar sell-off will be sharp and swift." ... Schiff is famous for his accurate predictions of the economic events of 2008. (AND is running for soon to be Former Senator Dodds' Senate seat in CT.)
Reminds me of a Star Trek episode (or movie) when Kirk exclaims that he trusts a guess from Spock more than having final navigational calculations from a computer!
Lindsey Williams
Dollar devalued 30-50% by end of year. It will become very difficult for the average American to afford to buy even food. This was revealed to him through an Illuminati insider.
Is he milking a 40 year old 'brush with eliteness'? Or is he the real deal.
Unnamed Economist At US Gov't (GLP)
What we have experienced the last two years is nothing to what we are going to experience this year.
If you have a job now…you may not have it in three to six months 08.31.10.
Stock market will fall = Great Depression.
Foreign investors stop financing debt = Collapse.
6.2 million are about to lose their unemployment.
GLP
Jimmy "Doomsday" (AKA Mr. TellUsExactlyWhatYouReallyThink)
· DOW will fall below 7,000 before mid summer 2010
· Dollar will rise above 95 on the dollar index before mid summer 2010
· Gold will bottom out below $800 before mid summer 2010
· Silver will bottom out below $10 before mid summer 2010
· California debt implosion will start its major downturn by mid summer and hit crisis mode before Q4 2010
· Dollar index will plunge below 65 between Q3 & Q4 2010
· Commercial real estate will hit crisis mode in Q4 2010
· Over 35 States will be bailed out by end of Q4 2010 by the US Tax Payer
· End of Q4 2010 gold will hit $1,600 & silver jump to $35 an oz.
AKA Mr. Jimmy "TellUsExactlyWhatYouReallyThink"
George Ure
Markets up until mid-to-late-summer. Then "all hell breaks lose" from then on through the rest of the year.
And if someone has already posted this elsewhere on ATS... This isn't really a duplicate since I've trimmed the quotes as much as could for easy < 5 minute skim. Adding links and comments to uniquely qualify what is appearing to be a widely quoted piece of source text. "24 Experts Agree..."
Criminal probe of Wall Street banks expands
New York Attorney General Andrew Cuomo's office on Wednesday served subpoenas on four U.S. banks and four European lenders, the source said.
Cuomo is targeting Citigroup, Credit Agricole, Credit Suisse, Deutsche Bank, Goldman Sachs Group Inc, Morgan Stanley, UBS and Merrill Lynch, now owned by Bank of America, the source said.
The investigation comes as Wall Street and major banks around the world are attracting scrutiny from regulators stemming from transactions that occurred in the run-up to the subprime mortgage meltdown and financial crisis.
The Wall Street Journal on Wednesday reported that U.S. federal prosecutors, working with securities regulators, were conducting a preliminary criminal probe into whether four banks misled investors about their roles in mortgage bond deals.
The banks under early-stage criminal scrutiny are JPMorgan Chase, Citigroup, Deutsche Bank and UBS, the newspaper reported on its website, citing a person familiar with the matter.
The banks have also received civil subpoenas from the U.S. Securities and Exchanges Commission as part of a sweeping investigation of banks' selling and trading of mortgage-related deals, the report said.
A spokesman for JPMorgan told the Journal the bank had not been contacted by federal prosecutors and was not aware of any criminal investigation. The other banks either declined comment or were not immediately available.
The reports come less than a month after the SEC charged Goldman Sachs with fraud over its marketing of a subprime mortgage product.
Federal investigators are also probing Morgan Stanley, The Wall Street Journal reported on Wednesday. The bank's chief executive, James Gorman, said he had no knowledge of any such investigation.
The companies that rated the mortgage deals were McGraw-Hill Cos Inc's Standard & Poor's, Fitch Ratings and Moody's Investors Service, a unit of Moody's Corp.
The New York attorney general's investigation was first reported by The New York Times.
Spokesmen for UBS and Deutsche Bank declined to comment, and a spokeswoman from Credit Agricole declined to comment on the New York Attorney General's investigation. The other banks did not immediately return messages seeking comment.
(Reporting by Steve Eder in New York, JoAnne Allen in Washington and Steve Slater in London; editing by Todd Eastham, Karen Foster and John Wallace)
http://www.bailoutmainstreetnow.com/home/index.php/economy/stock-market/938-criminal-probe-of-wall-street-banks-expands-.html
POLITICO (Washington) - The Wall Street reform bill is taking that rarest of paths through the Senate — actually gaining tougher provisions against the industry as it proceeds, not being watered down to win votes as health care reform was.
And that's put Republicans in a difficult spot. They like the bill less with each passing day but know they risk looking like they're siding with Wall Street if they vote no.
Even top Republicans such as Sen. Judd Gregg of New Hampshire predict the bill will pass as early as this week, but it's not clear yet how many Republicans will be willing to sign on to legislation they say falls short in key areas.
"I'm very concerned about the direction of the bill," Gregg said Sunday on C-SPAN, citing Democratic votes against a proposal by Sen. John McCain (R-Ariz.) on troubled mortgage giants Fannie Mae and Freddie Mac. "How can you take a bill up in the Senate and totally ignore that issue?"
Democrats know public opinion is on their side and keep pressing their advantage. The latest example came Thursday, when the Senate voted, 64-33, to pass an amendment by Sen. Dick Durbin (D-Ill.) that would allow the government to oversee debit card transaction fees.
Consumer advocates loved it. The industry hated it, because the small fees on millions of card swipes add up to big revenue for ailing banks.
"It's getting worse," one Wall Street official said. "And it was made much worse by the Durbin vote."
Senate Majority Leader Harry Reid (D-Nev.) may cut off debate on the bill as early as Monday with a procedural move that would require 60 votes, which would set up a final vote later this week.
Of course, the situation is provoking smiles at the White House, where officials are quietly thrilled by a political dynamic that's entirely different from the one they faced in the health care debate, in which asking many members to vote for the administration's proposal was asking them to risk their careers. Now, many members of Congress are eager to vote for the Wall Street measure — and scrambling to introduce measures to make it tougher.
That dynamic is playing out in vote after vote.
On credit-ratings agencies, the Wall Street establishment watched with horror as senators voted, 64-35, to upend the traditional way of doing business. Under the old model, firms issuing bonds would pay the ratings agencies to grade the offers — which critics called a conflict of interest.
The new plan would establish a credit-ratings board that would stand between issuers and raters, determining which agency issues the ratings for certain bonds.
Very few observers earlier in the year thought that Congress would change the ratings agency system much at all.
On an audit-the-Fed proposal that was once deemed a long shot to be included in the bill, senators voted 96-0 to add a compromise plan that would allow the government to audit the actions of the Fed during the 2008 economic crisis but not its activities generally.
That overwhelming vote stood as a stark bipartisan contrast to the often party-line votes that held the health care bill together.
Asked whether the bill is getting tougher as it goes through the Senate, Durbin said, "Yeah, I think so. I think there's been some improvements on it. And some of the challenges trying to weaken it have been defeated."
Of the Republicans, Durbin said, "I've always thought that they want to be part of Wall Street reform. I think that's why the filibuster crumbled."
The politics behind the change are clear: An NBC News/Wall Street Journal poll taken May 6-10 found that Wall Street is enormously unpopular in America — Goldman Sachs, for example, had an approval rating of just 4 percent. That's lower than BP at 11 percent amid the Gulf oil spill and Toyota at 31 percent after the repeated recalls.
President Barack Obama, by contrast, had a 49 percent approval rating in the poll.
That gives the president and his allies in Congress every incentive to be seen as reining in out-of-control Wall Street executives and very little incentive to be seen as casting a vote that, in an election year, can be characterized as pro-Wall Street.
For Republicans hoping to blunt some of the most dramatic changes, the politics of the Wall Street bill are growing more difficult.
"I say this facetiously, but for those of us who want a good bill, we should file cloture, because every day it gets worse," Sen. Bob Corker (R-Tenn.) said. By that, he meant that Republicans would be better off voting for the bill now, rather than letting debate continue, because they like the measure less and less as the process continues.
That's dismaying to Alabama Sen. Richard Shelby, the top Republican on the Senate Banking Committee.
"Will Republicans support this bill? I wouldn't think that many of them would support this bill," he said.
For now, the bill's momentum has split Republicans into two factions — one group, which includes Corker, that would like to call a vote as soon as possible before the bill, from their perspective, gets worse. The other argues for extending debate, hoping to shape the bill with new amendments.
Gregg, who worked extensively to resolve controversial derivatives issues, last week echoed Corker's message. "It's pretty obvious that the Democrats have decided to go with the language that's in the bill ... and it's extremely detrimental language to Main Street and to people who use credit in this country, but that's their position," Gregg told POLITICO. "We should probably finish this bill at some point because it's getting worse every day.
Moderate Republicans, however, claim substantive work on the bill can still be done and say the amendment process should continue.
Sen. Olympia Snowe of Maine is viewed as one Republican likely to vote for the bill in the end, but she has serious reservations about cutting off debate.
"There's no reason to rush a major initiative of this kind. We've grown so accustomed to just putting things on a fast track — it's a new legislative approach that's going to do a greater disservice to the country if we don't get this right," Snowe said.
Republican leaders say they are reserving judgment on the series of votes that could begin as early as Wednesday. A GOP leadership aide said Friday that it is too soon to tell how Republicans will vote when cloture is filed.
"I don't know that he'll ever recommend that they vote for this bill," a GOP aide said of Senate Republican leader Mitch McConnell's approach with his caucus. "But I think once people are satisfied with the number of amendments, maybe that will be different." (c) Capitol News Company, LLC 2010
http://www.bailoutmainstreetnow.com/home/index.php/world-news/world/1006-nightmare-on-wall-street.html
Conspiracy of Banks Rigging States Came With Crash
I had always assumed the entire business of the markets to be a massive criminal enterprise that allowed public participation simply because it made a few people extremely wealthy.Insider Crimes, Funny Money and Options Rackets
I had always assumed the entire business of the markets to be a massive criminal enterprise that allowed public participation simply because it made a few people extremely wealthy.
—Insider Crimes, Funny Money and Options Rackets
Via: Bloomberg:
A telephone call between a financial adviser in Beverly Hills and a trader in New York was all it took to fleece taxpayers on a water-and-sewer financing deal in West Virginia. The secret conversation was part of a conspiracy stretching across the U.S. by Wall Street banks in the $2.8 trillion municipal bond market.
The call came less than two hours before bids were due for contracts to manage $90 million raised with the sale of West Virginia bonds. On one end of the line was Steven Goldberg, a trader with Financial Security Assurance Holdings Ltd. On the other was Zevi Wolmark, of advisory firm CDR Financial Products Inc. Goldberg arranged to pay a kickback to CDR to land the deal, according to government records filed in connection with a U.S. Justice Department indictment of CDR and Wolmark.
West Virginia was just one stop in a nationwide conspiracy in which financial advisers to municipalities colluded with Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Lehman Brothers Holdings Inc., Wachovia Corp. and 11 other banks.
They rigged bids on auctions for so-called guaranteed investment contracts, known as GICs, according to a Justice Department list that was filed in U.S. District Court in Manhattan on March 24 and then put under seal. Those contracts hold tens of billions of taxpayer money.
California to Pennsylvania
The workings of the conspiracy — which stretched from California to Pennsylvania and included more than 200 deals involving about 160 state agencies, local governments and non- profits — can be pieced together from the Justice Department’s indictment of CDR, civil lawsuits by governments around the country, e-mails obtained by Bloomberg News and interviews with current and former bankers and public officials.
“The whole investment process was rigged across the board,” said Charlie Anderson, who retired in 2007 as head of field operations for the Internal Revenue Service’s tax-exempt bond division. “It was so commonplace that people talked about it on the phones of their employers and ignored the fact that they were being recorded.”
Anderson said he referred scores of cases to the Justice Department when he was with the IRS. He estimates that bid rigging cost taxpayers billions of dollars. Anderson said prosecutors are lining up conspirators to plead guilty and name names.
“This will go on for a long time and a lot of people will be indicted,” he said in a telephone interview.
Research Credit: ofgoatsandmen
Via: Bloomberg:
A telephone call between a financial adviser in Beverly Hills and a trader in New York was all it took to fleece taxpayers on a water-and-sewer financing deal in West Virginia. The secret conversation was part of a conspiracy stretching across the U.S. by Wall Street banks in the $2.8 trillion municipal bond market.
The call came less than two hours before bids were due for contracts to manage $90 million raised with the sale of West Virginia bonds. On one end of the line was Steven Goldberg, a trader with Financial Security Assurance Holdings Ltd. On the other was Zevi Wolmark, of advisory firm CDR Financial Products Inc. Goldberg arranged to pay a kickback to CDR to land the deal, according to government records filed in connection with a U.S. Justice Department indictment of CDR and Wolmark.
West Virginia was just one stop in a nationwide conspiracy in which financial advisers to municipalities colluded with Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Lehman Brothers Holdings Inc., Wachovia Corp. and 11 other banks.
They rigged bids on auctions for so-called guaranteed investment contracts, known as GICs, according to a Justice Department list that was filed in U.S. District Court in Manhattan on March 24 and then put under seal. Those contracts hold tens of billions of taxpayer money.
California to Pennsylvania
The workings of the conspiracy — which stretched from California to Pennsylvania and included more than 200 deals involving about 160 state agencies, local governments and non- profits — can be pieced together from the Justice Department’s indictment of CDR, civil lawsuits by governments around the country, e-mails obtained by Bloomberg News and interviews with current and former bankers and public officials.
“The whole investment process was rigged across the board,” said Charlie Anderson, who retired in 2007 as head of field operations for the Internal Revenue Service’s tax-exempt bond division. “It was so commonplace that people talked about it on the phones of their employers and ignored the fact that they were being recorded.”
Anderson said he referred scores of cases to the Justice Department when he was with the IRS. He estimates that bid rigging cost taxpayers billions of dollars. Anderson said prosecutors are lining up conspirators to plead guilty and name names.
“This will go on for a long time and a lot of people will be indicted,” he said in a telephone interview.
Research Credit: ofgoatsandmen
Source: Cryptogon
http://www.bailoutmainstreetnow.com/home/index.php/economy/stock-market/1044-insider-crimes-funny-money-and-options-rackets.html
Major Investment Bank: "Greece Is Going Down, Germany Drafting Law For Orderly Insolvencies"
Submitted by Tyler Durden on 05/19/2010 08:33 -0500Zero Hedge has long claimed that Greece will be forced to default, with the only question being how this will be structured by Europe in a way to not allow the evil speculators to make buck on this process. Today, Greece shot itslef in the foot a little after announcing its latest debt number, which makes any expectations of climbing out of its Keynesian hole even more laughable. As Market News reports, "Greece's general government debt rose to E310.3 billion in 1Q from E298.5 billion at the end of last year, according to data released Wednesday by the General Logistics Office of the Finance Ministry." That austerity sure is doing miracles already. But it doesn't matter: it appears that Germany has already made its mind to let Greece drown. As Neil Hume at Alphaville reports, "Big IB to clients: "they have it all planned: they are going to sink the ship (greece). Merkel is now drafting law for orderly insolvencies, but they don't want anyone to make money out of it, hence the ban."" If this is true, it 's curtains for Europe. Shorting the Euro at this point is like shorting Lehman: you may see savage short covering squeezes but the end result is well known.
SEC Report On May 6 Meltdown Discusses HFT, Has Not One Mention Of The NYSE's "Supplementary Liquidity Providers"
- Equity Markets
- FINRA
- GETCO
- High Frequency Trading
- Meltdown
- New York Stock Exchange
- OTC
- Reuters
- Trading Systems
- Volatility
- Wall Street Journal
The SEC has released its Preliminary Findings Regarding the Market Events of May 6, 2010, which find nothing, and just bring the promise of further investigations. The to-date proposed solution to the problem is laughable - more curbs, which do nothing to address the underlying issues at hand, which are that the modern version of market makers, HFT algos, pull liquidity away on a whim, and which can destabilize the market in an instant once "momentum ignition" strategies take over. As we have speculated, the SEC will find nothing material until such time as the next flash crash wipes out not 10% but puts the market into indefinite hibernation. One thing the report does do is provide an extensive analysis of High Frequency Traders, a concept that was barely known as recently as a year ago.
High Frequency TradersWhat is hilarious is that the SEC, as demonstrated by footnote 88, gets its information from Jonathan Spicer of Reuters and Scott Patterson of the WSJ: See, e.g., Jonathan Spicer and Herbert Lash, Who’s Afraid of High-Frequency Trading?, Reuters.com, December 2, 2009 (available at http://www.reuters.com/article/idUSN173583920091202) (“High-frequency trading now accounts for 60 percent of total U.S. equity volume, and is spreading overseas and into other markets.”); Scott Patterson and Geoffrey Rogow, What’s Behind High-Frequency Trading, Wall Street Journal, August 1, 2009 (“High frequency trading now accounts for more than half of all stock-trading volume in the U.S.”).
Highly automated trading systems have helped enable a business model for a new type of professional liquidity provider that is distinct from the more traditional exchange specialist and over-the-counter (“OTC”) market maker. In particular, proprietary traders now use high speed systems by submitting large numbers of orders that can result in more than 1 million trades per day by a single firm. These proprietary traders often are labeled as engaging in high-frequency trading (“HFT”), though the term does not have a settled definition and may encompass a variety of strategies in addition to passive market making.
HFT traders can be organized in a variety of ways, including as a proprietary trading firm (which may or may not be a registered broker-dealer and member of FINRA), as the proprietary trading desk of a multi-service broker-dealer, or as a hedge fund (all of which are referred to hereinafter collectively as a “proprietary firm”). Other characteristics often attributed to proprietary firms engaged in HFT are: (1) the use of extraordinarily high-speed and sophisticated computer programs for generating, routing, and executing orders; (2) use of co-location services and individual data feeds offered by exchanges and others to minimize network and other types of latencies; (3) very short time-frames for establishing and liquidating positions; (4) the submission of numerous orders that are cancelled shortly after submission; and (5) ending the trading day in as close to a flat position as possible (that is, not carrying significant, unhedged positions over-night). Given the competitive pressures to maximize their speed of trading, HFT firms typically will attempt to streamline the code for their trading algorithms. However, every check and filter in that code reduces its speed, creating a tension.
HFT is one of the most significant market structure developments in recent years. Estimates of HFT volume in the equity markets vary widely, though they often are 50 percent of total volume or higher. By any measure, HFT is a dominant component of the current market structure and is likely to affect nearly all aspects of its performance. In addition, though the term HFT implies a large volume of trades, some of the concerns that have been raised about particular strategies used by proprietary firms do not necessarily involve a large number of trades. Indeed, any particular proprietary firm may simultaneously be employing many different strategies, some of which generate a large number of trades and some that do not. Conceivably, some of these strategies – for example, if they dampen short-term volatility or promote efficient pricing by narrowing spreads – may benefit market quality and long-term investors and others could be harmful.
One thing that there is no mention of anywhere in the report, is the NYSE contraption known as Supplementary Liquidity Provider, a program created to give Goldman dominance over the DMM-parallel liquidity rebate system at the NYSE. One would think that the SEC would be aware of this program that was supposed to expire in early 2009, yet continues to be extended and provides Goldman and Getco with, arguably, unprecedented forward-looking information on order flow.
Appendix a-14. Where were the DMM and LRP's on May 06?
Liquidity Replenishment Points
: NYSE utilizes a hybrid floor/electronic trading model, unlike most other markets today which are fully electronic. In attempting to meld the traditional open-outcry floor-based auction model with today’s technology, NYSE’s trading system utilizes what are known as "liquidity replenishment points" ("LRPs").96 LRPs are best thought of as a "speed bump" and are intended to dampen volatility in a given stock by temporarily converting from an automated market to a manual auction market when a price movement of sufficient size is reached. In such a case, trading on NYSE in that stock will "go slow" and pause for a time period to allow the Designated Market Maker to solicit additional liquidity before returning to an automated market. This "speed bump" occurs even when there may be additional interest on NYSE’s book beyond the LRP price point.
LRPs are calculated by NYSE automatically throughout the trading day. Specifically, the LRP is calculated upon the opening trade of the day in the security or, if there is no opening trade, on the opening quote, and is recalculated (i) every 30 seconds thereafter based on the last sale; (ii) after a manual trade by the DMM; (iii) when automatic executions resume after an LRP is reached; and (iv) upon the first sale or quote after automatic executions resume following an LRP. The precise LRP value varies according to the security’s share price and average daily volume within specified ranges. LRPs are calculated by adding or subtracting the LRP value to the last sale price or quote as appropriate on the exchange in the relevant security.
:
97
When an incoming order on the NYSE would result in an execution [at or] outside an LRP or the stock is quoted outside an LRP, automatic executions in the security are suspended on that side of the market. In addition, NYSE will suspend automated quotations in the security, and will identify its quote on the consolidated tape with a "non-firm" indicator. This is referred to as a "slow market" or "going slow" in the security. NYSE will resume automated quotations and automatic executions as soon as possible after an LRP is reached, once the DMM manually determines the reopening price. In many cases, this occurs in a fraction of a second, but when the market is particularly volatile, it can take a minute or more. Upon resumption of automatic executions, a new LRP is calculated for the security. On days of major market volatility, stocks with significant and continual declines may cause NYSE trading to remain in the "go slow" mode for extended periods or to intermittently return to automated execution status before quickly again hitting another LRP and thereby "going slow" again.
Liquidity Replenishment Points
: NYSE utilizes a hybrid floor/electronic trading model, unlike most other markets today which are fully electronic. In attempting to meld the traditional open-outcry floor-based auction model with today’s technology, NYSE’s trading system utilizes what are known as "liquidity replenishment points" ("LRPs").96 LRPs are best thought of as a "speed bump" and are intended to dampen volatility in a given stock by temporarily converting from an automated market to a manual auction market when a price movement of sufficient size is reached. In such a case, trading on NYSE in that stock will "go slow" and pause for a time period to allow the Designated Market Maker to solicit additional liquidity before returning to an automated market. This "speed bump" occurs even when there may be additional interest on NYSE’s book beyond the LRP price point.
LRPs are calculated by NYSE automatically throughout the trading day. Specifically, the LRP is calculated upon the opening trade of the day in the security or, if there is no opening trade, on the opening quote, and is recalculated (i) every 30 seconds thereafter based on the last sale; (ii) after a manual trade by the DMM; (iii) when automatic executions resume after an LRP is reached; and (iv) upon the first sale or quote after automatic executions resume following an LRP. The precise LRP value varies according to the security’s share price and average daily volume within specified ranges. LRPs are calculated by adding or subtracting the LRP value to the last sale price or quote as appropriate on the exchange in the relevant security.
:
97
When an incoming order on the NYSE would result in an execution [at or] outside an LRP or the stock is quoted outside an LRP, automatic executions in the security are suspended on that side of the market. In addition, NYSE will suspend automated quotations in the security, and will identify its quote on the consolidated tape with a "non-firm" indicator. This is referred to as a "slow market" or "going slow" in the security. NYSE will resume automated quotations and automatic executions as soon as possible after an LRP is reached, once the DMM manually determines the reopening price. In many cases, this occurs in a fraction of a second, but when the market is particularly volatile, it can take a minute or more. Upon resumption of automatic executions, a new LRP is calculated for the security. On days of major market volatility, stocks with significant and continual declines may cause NYSE trading to remain in the "go slow" mode for extended periods or to intermittently return to automated execution status before quickly again hitting another LRP and thereby "going slow" again.
Let's go back a couple of weeks and try to remember those stock tickers that we at the heart of this "flash"
meltdown.
PG and ACN.
Hmmm... these aren't NASDAQ listed. They're NYSE listed.
Did anyone bother to measure the degree to which these two stocks were traded by Goldman and Getco... up to the point of bid collapse? If it was 10%-15%, no problem. It was probably well north of that.
Tyler is right the highlight the NYSE Supplemental Liquidity Provider Program in this instance. The stated purpose of this program is to provide essential liquidity to the markets-- and we got a real test of that this month. The result here is not just "fail", but "major fail".
One would think that in such an instance, the NYSE should have frozen the program-- THEN launch a thorough investigation to determine the source of the problem. The exchange has operated over 100 years without SLP, where's the harm in halting the program for a week or two?
Well... that when investors should wonder whether there are more sinister forces at work. The SEC is asleep at the wheel-- perhaps because they are incented to sleep at the wheel.
Today, the number of Americans who are able to financially survive without any reliance on the U.S. government whatsoever is declining at a staggering rate. Whether it is through direct handouts, entitlement programs, student loans, government bailouts, government contracts or direct employment, the truth is that now a solid majority of the American people are at least partially dependent on the federal government for their economic survival. The sad thing is that the majority of the American people say that there is too much government in their lives when opinion polls are taken, but if you try to take the government check that they are getting away from them those same people will scream bloody murder. But the truth is that it is getting to be really, really hard to be completely independent of the U.S. government economically. That is because the U.S. government has their hands in almost everything. The ideal of a "limited federal government" has long since faded away. Very few people seem to believe in it anymore. Instead, Americans today look to the federal government as the answer to all of our problems, as the provider of all of our needs, and as the regulator of every single detail of our lives.
The U.S. government has become the "Big Mother" that we all scramble to for a handout when we get into trouble.
When you sit down and really analyze it, you quickly realize that there is no way that the U.S. government can be extricated from the U.S. economy now. Instead of the free enterprise system that we once had in this country, today we have a situation where the U.S. government has become the very core of the economy. It is the hub around which everything else in the economy revolves.
You don't believe this?
The following are 11 signs that the U.S. government has become an overgrown monstrosity that almost every American is dependent upon for economic survival....
#1) The Explosion Of Government Handouts
39.68 million Americans are now on food stamps. Millions of others are completely dependent on the extended unemployment benefits that they are receiving. Millions of other Americans are able to survive financially because of the dozens of other welfare programs that the U.S. government subsidizes. More Americans are receiving some form of welfare than ever before in history, and each month the numbers continue to go up. Could there come a day when we all receive government handouts every month?
#2) The Entitlements Programs That Threaten To Destroy U.S. Government Finances
Entitlements are the single biggest U.S. government expense. These programs include Social Security, Medicare, Medicaid and other social Ponzi schemes. Tens of millions of Americans receive government assistance through these programs. In fact, nearly 51 million Americans received $672 billion in Social Security benefits in 2009. We all have friends or family members who receive these kinds of payments. But cutting so many people a check year after year is slowly but surely destroying U.S. government finances. According to an official U.S. government report, rapidly growing interest costs on the national debt together with spending on major entitlement programs will absorb approximately 92 cents of every dollar of federal revenue by the year 2019. That is before a penny is spent on anything else. This is clearly not a sustainable financial situation by any definition, but who wants to tell tens of millions of Americans that their checks are going to be reduced?
#3) The U.S. Government Is Now Even Paying Mortgages
Yes, you read that right. As part of the "stimulus" package, the U.S. government is going to send money to some of the states that were hit the hardest by the real estate crisis. So what is that money going to be used for? Well, Florida, Michigan, California and Arizona have all announced that they plan to use $1.4 billion the Obama administration is sending their way to help the unemployed and the "underwater" pay their mortgages.
#4) Without The Student Loan Program A Huge Percentage Of College Students Would Not Get An Education
The federal student loan program (which was recently entirely nationalized) helps millions of college students pay for their education. Without this assistance by the government, a lot less students would be going to college. In fact, many of you that are reading this article directly benefited from the federal student loan program.
#5) The Bailout Of AIG
One of the biggest insurance companies in the world, AIG, would not be in existence today if not for direct federal government intervention. It kind of makes you wonder what George Washington and Thomas Jefferson would think about a federal government that hands big bags of cash to a giant insurance company so that it can survive. Whether it was so they could pay off their debts to Goldman Sachs or whether it was so that they could keep paying out record-setting bonuses, the truth is that AIG would not have made it without the federal government stepping in.
#6) The "Too Big To Fail" Banks
But it wasn't just AIG that got bailed out. A number of big banks may have gone under if not for the U.S. government. The U.S. government decided that they were "too big to fail". Well, what about all the small banks that are going under? The truth is that they are "too small to bother with". We now live in a nation where the U.S. government is the one who decides which banks live and which banks die like dogs. Doesn't that just make you feel all warm and fuzzy?
#7) The Bailout Of General Motors
But not only does the federal government bail out financial institutions - it is also now in the car business. Yes, grand old General Motors may have ended up on the scrap heap of history if not for the U.S. government stepping in. So if you work for General Motors or if you work for any company that does business with General Motors, you can thank Uncle Sam for the fact that you still have a job.
#8) The Bailouts Of Fannie Mae and Freddie Mac
If the U.S. government had not bailed out Fannie Mae and Freddie Mac, we may not have much of a mortgage industry at this point at all. According to Inside Mortgage Finance, government-related entities backed 96.5% of all home loans during the first quarter of 2010, which was up from 90% in 2009. So if you borrowed money to buy a home over the past couple of years, there is a very strong likelihood that the U.S. government was involved.
#9) The U.S. Government - The Nation's Biggest Employer
According to the Bureau of Labor Statistics, approximately 2 million civilians work for the federal government, excluding the Postal Service. When you add in all U.S. military personnel, that number goes much higher.
The truth is that as the government continues to expand (become more bloated), more Americans than ever are hopping aboard the gravy train. Today, the average federal worker now earns about twice as much as the average worker in the private sector. So if you want to do little work, produce little of real value and enjoy super cushy benefits, maybe you should apply for a job with the federal government too.
#10) Millions Of Americans Are Employed By Firms That Rely On Government Contracts
When considering the impact of the U.S. government on the economy, you can't forget the hundreds of companies that would go out of business if their U.S. government contracts were taken away. There are literally millions of people who work for companies that do business with the government. If the government disappeared it would cause economic chaos for those firms. The truth is that a whole lot of people make a really good living plugging into the sweetest revenue source of them all - the U.S. government.
#11) The U.S. Government Takeover Of The Health Care System
The U.S. government takeover of the health care system is going to fundamentally change the economics of the health care industry. The U.S. government will now play a major role in deciding which hospitals get built and which do not. Approximately 17% of U.S. GDP is spent on health care, and now the U.S. government has unprecedented control over where that money goes. Over a dozen new taxes have been established by the new health care reform law, and the U.S. government is going to pour an unprecedented amount of money into the system. So will this result in all of us getting better health care? We'll just have to wait and see.
The truth is that the Founding Fathers never envisioned a federal government that completely dominated that national economy. But that is what we have got. As of now, only a very small percentage of Americans are still able to say that they are completely financially independent of the U.S. government.
You see, in economic terms the U.S. government is not just the elephant in the room. It is the elephant that sat on the room and nearly suffocated everything else out of existence.
As Americans, we live in an economy that is so intertwined with the government that it is impossible to separate the two anymore.
But the really bad news is that the U.S. government is in massive financial trouble. According to one new report, the U.S. national debt will reach 100 percent of GDP by the year 2015. Many economists regard that as an incredibly dangerous threshold to cross.
If U.S. government finances collapse, it will mean the collapse of the entire U.S. economy as well. There is simply no separating the two. And considering the fact that the U.S. government has piled up the biggest mountain of debt in the history of the world, things don't look promising.
America is headed for an unprecedented economic collapse, and the U.S. government is leading the way. If you can get financially independent, now is the time to try to do that, but the reality is that we will all feel massive economic pain when this thing comes crashing down.
Most Americans have no idea what the term "Keynesian economics" means, but the truth is that it has been deeply influencing U.S. economic policy for decades. Essentially, it is an economic theory that originated with a 20th century British economist named John Maynard Keynes, and it advocates government intervention in the economy in order to smooth out economic cycles. The general idea was that lower interest rates and increased government spending could be used to increase aggregate demand when the economy was experiencing a downturn, thus increasing economic activity and reducing unemployment.
And you know what?
To a certain degree, Keynesian economic theory actually does work.
Increased government spending DOES stimulate the economy.
But the problem is that governments all over the world decided that they would just run constant budget deficits and stimulate the economy all the time.
All of this debt has brought a temporary prosperity to many of the nations around the globe, but there is one huge problem with debt.
It has to be paid back eventually.
With interest.
So what happens when nations have to start spending huge chunks of their national budgets just to service all the debt that they have piled up?
Well, that is when they taste the bitter side of Keynesian economics.
In fact, we see that starting to happen all over the world right now.
All of a sudden, governments all over the globe are talking about huge budget cuts, pay decreases, and higher taxes.
We all know about what is going on in Greece right now, but suddenly it seems like "austerity measures" are being implemented all over the place. Just consider the following examples....
*Portugal has pledged to impose fresh austerity measures that include much higher taxes and dramatic budget cuts.
*Barack Obama is personally pressuring Spain to make severe austerity cuts.
*It's not just Southern Europe that is facing these austerity measures either. It is being reported that Germans are bracing themselves for a "bitter" round of budget cuts.
*The exploding debt situation in the U.K.was a major issue in the most recent election. Bank of England governor Mervyn King has even gone so far as to warn that public anger over the "austerity measures" that soon must be implemented in the U.K. will be so painful that whichever party is seen as responsible will be out of power for a generation.
*Federal Reserve Chairman Ben Bernanke says that United States citizens will soon have to make difficult choices between higher taxes and reduced government spending.
*California Governor Arnold Schwarzenegger is reportedly planning to seek "terrible cuts" to eliminate an $18.6 billion budget deficit facing the most-populous U.S. state through June 2011.
*In fact, many U.S. states are getting ready for their biggest budget cuts in decades.
Austerity measures for everyone?
That is the way it is shaping up.
So what happens when austerity measures are implemented?
Well, just as Keynesian economics correctly predicts that economic growth goes up when government spending increases, it also correctly tells us that economic growth goes down when government spending decreases.
So all of these austerity measures are going to mean economic pain for a whole lot of people.
Not only that, but there are now whispers that this European debt crisis could potentially cause the break up of the euro.
Whether or not that is actually the case, officials in Europe are sure seizing on this crisis to advocate for increased centralization of power in the EU.
For example, senior administrators of the European Union are proposing that they be given unprecedented power to scrutinize the spending plans of member countries before national parliaments can vote on those budgets.
Talk about a loss of sovereignty.
But not only that, the Governor of the Bank of England, Mervyn King, has come right out and said that he believes that the European Union must become a federalized fiscal union if it is to survive.
Doesn't it seem like whenever there is a crisis the solution that is always being proposed is to give centralized institutions even more power?
There has also been talk that nations such as Greece could end up being ejected from the euro, but the reality is that such a scenario is not very likely.
For one thing, the ECB has already come out and said that under current EU law, ejection of a nation from the monetary union is "legally next to impossible".
In addition, leaders throughout Europe realize that if the euro fails then the entire EU may fail as well. German Chancellor Angela Merkel made this very clear when she recently warned that if the euro collapses, "then Europe and the idea of European union will fail."
For many in Europe that would seem like a disaster, but the truth is that it would be a wonderful, wonderful thing if the euro failed.
Why?
Because it would represent a major defeat for those who are seeking to drag us towards a "world currency" and a "global government".
It would also be a huge victory for those who still believe in national sovereignty and the decentralization of economic power.
So let us hope that the euro breaks up.
But don't count on it.
Meanwhile, the one thing that we can count on is all of the economic pain that all of these new austerity measures are going to bring.
When most people discuss how the Federal Reserve benefits the big banks, they usually only focus on the ways that the Federal Reserve directly brings in income. But there is so much more to it than that. The truth is that the Federal Reserve is used in a whole variety of ways to indirectly assist the big banks in making huge gobs of money. One of the ways this is currently being accomplished is through the U.S. Treasury carry trade.
So how does this carry trade work?
Well, it basically has three steps and it works something like this....
#1) Mr. Big Bank goes over to the Federal Reserve and says, "Hey Mr. Federal Reserve - please loan me a big bag of cash for next to nothing." Of course, the Federal Reserve is more than happy to loan it to him.
#2) Mr. Big Bank then invests the same big bag of cash into U.S. Tresuries which have a much higher interest rate than what Mr. Big Bank just borrowed at. To give you an idea, 10-year U.S. Treasuries are earning around 3 and a half percent right now.
#3) Mr. Big Bank sits back and enjoys the huge amount of risk-free cash which comes pouring in.
This little three step procedure helped enable four of the biggest U.S. banks (Goldman Sachs, JPMorgan Chase, Bank of America and Citigroup) to have a "perfect quarter" during the first quarter of 2010. What that means is that these four banks had zero days of trading losses in the first quarter.
Wouldn't you like to have a perfect batting average?
Don't you wish you could pitch a perfect game every time?
Well, it certainly helps when you are being subsidized by the Federal Reserve as Bloomberg recently explained....
The trading results, which helped the banks report higher quarterly profit than analysts estimated even as unemployment stagnated at a 27-year high, came with a big assist from the Federal Reserve. The U.S. central bank helped lenders by holding short-term borrowing costs near zero, giving them a chance to profit by carrying even 10-year government notes that yielded an average of 3.70 percent last quarter.
Doesn't it just seem like whenever we turn around the Federal Reserve is doing something new to "help out" the big banks?
This is just getting ridiculous.
Remember all of that talk about how the U.S. government had to help out Wall Street so that they could help out Main Street?
Well, a ton of money did get injected into the banking system.
In fact, the Federal Reserve pumped hundreds upon hundreds of billions of dollars into the banking system since the beginning of the financial crisis. This has caused the U.S. monetary base to explode....
So did the big banks use all of that money to help out Main Street?
No.
In fact, business lending by the big banks has been falling precipitously.
So what have the big banks been doing with all of that money?
Buying U.S. government debt of course....
So instead of making loans to American businesses who desperately needed it, most of this new money has gone to pump up yet another bubble. This time the bubble is in U.S. Treasuries. Asia Times recently described how this trillion-dollar carry trade in U.S. government securities is setting up a very dangerous situation....
Remarkably, the most aggressive buyers of US government debt during the past several months have been global banks domiciled in London and the Cayman Islands. They borrow at 20 basis points (a fifth of a percentage point) and buy Treasury securities paying 1% to 3%, depending on maturity.
This is the famous "carry trade", by which banks or hedge funds borrow short-term at a very low rate and lend medium- or long-term at a higher rate. This works as long as short-term rates remain extremely low. The moment that borrowing costs begin to rise, the trillion-dollar carry trade in US government securities will collapse.
But as long as the gravy train of the U.S. Treasury carry trade continues, why should the big banks make risky loans to American businesses and consumers when increasing numbers of them are turning out to be deadbeats anyway?
That is a good question.
Meanwhile, we have this sick situation where the Federal Reserve subsidizes the big banks and enables them to buy up a big chunk of the debt the U.S. government is constantly churning out.
Our national banking resources are increasingly being turned away from building up our once great system of free enterprise, and instead are being devoted to servicing the never ending spiral of government debt and funny money that we have created.
But a bunch of folks down on Wall Street are getting exceedingly rich from this little game, so they certainly aren't going to complain about it. And as long as the vast majority of Americans continue to stay in the dark about all of this, the bouncing ball will just continue to keep rolling.
Now that the Greek debt crisis has been "fixed" by a gigantic pile of more debt, many are wondering which European nation will be next to experience a massive debt crisis. Increasingly, all eyes are turning to the U.K. and their public debt that is spiralling out of control. The U.K. government's deficit is projected to be approximately 13 percent of GDP in 2010, which is even worse than Greece's 12.5 percent figure. Right now the public debt of the U.K. is "only" at 68 percent of GDP, but three years ago it was sitting at about 40 percent, so as you can see the national debt of the U.K. is absolutely exploding in size. In fact, it is now being projected that the public debt of the U.K. will exceed 100 percent of GDP within the next three years. Considering the fact that citizens of the U.K. are some of the most highly taxed people in the world already, there just is not much room for raising more revenue.
So obviously there is a problem.
A massive, unchecked, out of control problem that threatens to blow out the entire U.K. economy.
And considering the fact that it took just about everything that Europe could muster to bail out poor little Greece, how in the world is Europe going to be able to bail out the U.K. when their debt crisis violently erupts?
If Greece almost brought down the euro and the financial system of Europe, then what would a financial implosion in the U.K. do?
Considering the fact that the Greek economy is approximately 16% the size of the U.K. economy, it is very sobering to think what a "Greek style" debt crisis in the U.K. would mean for the entire world.
But if something is not done rapidly it will happen.
Just consider the following charts....
Now how in the world do you go from a deficit that is between 2 and 3 percent of GDP in 2007 to one that is above 11 percent in 2009? That takes some serious financial mismanagement. Not only that, but as we mentioned earlier, this year the deficit is projected to be approximately 13 percent of GDP. That is a level that is catastrophic.
Kornelius Purps, the fixed income director of Europe's second largest bank is very open about the fact that he believes that the U.K. is likely the next European nation that will face a very serious debt crisis....
"Britain's AAA-rating is highly at risk. The budget deficit is huge at 13% of GDP and investors are not happy. The outgoing government is inactive due to the election. There will have to be absolute cuts in public salaries or pay, but nobody is talking about that."
In fact, Morgan Stanley has already warned that there is a very strong probability that some of the rating agencies may remove the U.K.'s AAA status before 2010 is over.
If that happened, it would make the crisis that we just saw in Greece look like a Sunday picnic.
So what must be done?
Well, already world financial authorities are calling for "austerity measures" and deep budget cuts to be implemented in the U.K., but the reality is that those moves will cause deep economic pain.
In fact, Bank of England governor Mervyn King recently warned that public anger over the "austerity measures" that soon must be implemented in the U.K. will be so painful that whichever party is seen as responsible will be out of power for a generation.
The cold, hard reality is that the U.K. is in for economic pain in any event. Either they cut the budget and implement severe "austerity measures" which will hit people really hard economically, or they continue on the current course and risk a much worse version of what just happened in Greece.
Not that the rest of the world should be gloating about what is going on in the U.K. either.
The financial situation in Japan is even worse than what the U.K. is dealing with, and the United States is going to have the biggest economic downfall of them all one of these days.
As we wrote about yesterday, the sad truth is that the governments of the world are rapidly running out of money and are drowning in debt. It is a gigantic mess, and the term "sovereign debt crisis" is going to pop up in the news very regularly from now on.
You see, it is not just the financial systems of the U.S. and the U.K. that are broken. The entire world financial system is fundamentally flawed and is doomed to failure.
Right now the central banks of the world can do their best to try to hold things together with a tsunami of debt and paper money, but they are not going to be able to keep up this balancing act forever.
When it does all start coming apart and the dominoes do start falling, it is going to be a complete and total nightmare. Paper currencies around the globe will lose value at breathtaking speeds as central banks flood economies with cash in an attempt to stop the madness.
But more debt and more paper never solves anything. All it does is make the long-term problems even worse.
When the tipping point comes, things are going to move fast. Let's just hope that we all have a good bit more time to prepare before that happens.
meltdown.
PG and ACN.
Hmmm... these aren't NASDAQ listed. They're NYSE listed.
Did anyone bother to measure the degree to which these two stocks were traded by Goldman and Getco... up to the point of bid collapse? If it was 10%-15%, no problem. It was probably well north of that.
Tyler is right the highlight the NYSE Supplemental Liquidity Provider Program in this instance. The stated purpose of this program is to provide essential liquidity to the markets-- and we got a real test of that this month. The result here is not just "fail", but "major fail".
One would think that in such an instance, the NYSE should have frozen the program-- THEN launch a thorough investigation to determine the source of the problem. The exchange has operated over 100 years without SLP, where's the harm in halting the program for a week or two?
Well... that when investors should wonder whether there are more sinister forces at work. The SEC is asleep at the wheel-- perhaps because they are incented to sleep at the wheel.
11 Signs That The U.S. Government Has Become An Overgrown Monstrosity That Almost Every American Is Dependent Upon For Economic Survival
Today, the number of Americans who are able to financially survive without any reliance on the U.S. government whatsoever is declining at a staggering rate. Whether it is through direct handouts, entitlement programs, student loans, government bailouts, government contracts or direct employment, the truth is that now a solid majority of the American people are at least partially dependent on the federal government for their economic survival. The sad thing is that the majority of the American people say that there is too much government in their lives when opinion polls are taken, but if you try to take the government check that they are getting away from them those same people will scream bloody murder. But the truth is that it is getting to be really, really hard to be completely independent of the U.S. government economically. That is because the U.S. government has their hands in almost everything. The ideal of a "limited federal government" has long since faded away. Very few people seem to believe in it anymore. Instead, Americans today look to the federal government as the answer to all of our problems, as the provider of all of our needs, and as the regulator of every single detail of our lives.The U.S. government has become the "Big Mother" that we all scramble to for a handout when we get into trouble.
When you sit down and really analyze it, you quickly realize that there is no way that the U.S. government can be extricated from the U.S. economy now. Instead of the free enterprise system that we once had in this country, today we have a situation where the U.S. government has become the very core of the economy. It is the hub around which everything else in the economy revolves.
You don't believe this?
The following are 11 signs that the U.S. government has become an overgrown monstrosity that almost every American is dependent upon for economic survival....
#1) The Explosion Of Government Handouts
39.68 million Americans are now on food stamps. Millions of others are completely dependent on the extended unemployment benefits that they are receiving. Millions of other Americans are able to survive financially because of the dozens of other welfare programs that the U.S. government subsidizes. More Americans are receiving some form of welfare than ever before in history, and each month the numbers continue to go up. Could there come a day when we all receive government handouts every month?
#2) The Entitlements Programs That Threaten To Destroy U.S. Government Finances
Entitlements are the single biggest U.S. government expense. These programs include Social Security, Medicare, Medicaid and other social Ponzi schemes. Tens of millions of Americans receive government assistance through these programs. In fact, nearly 51 million Americans received $672 billion in Social Security benefits in 2009. We all have friends or family members who receive these kinds of payments. But cutting so many people a check year after year is slowly but surely destroying U.S. government finances. According to an official U.S. government report, rapidly growing interest costs on the national debt together with spending on major entitlement programs will absorb approximately 92 cents of every dollar of federal revenue by the year 2019. That is before a penny is spent on anything else. This is clearly not a sustainable financial situation by any definition, but who wants to tell tens of millions of Americans that their checks are going to be reduced?
#3) The U.S. Government Is Now Even Paying Mortgages
Yes, you read that right. As part of the "stimulus" package, the U.S. government is going to send money to some of the states that were hit the hardest by the real estate crisis. So what is that money going to be used for? Well, Florida, Michigan, California and Arizona have all announced that they plan to use $1.4 billion the Obama administration is sending their way to help the unemployed and the "underwater" pay their mortgages.
#4) Without The Student Loan Program A Huge Percentage Of College Students Would Not Get An Education
The federal student loan program (which was recently entirely nationalized) helps millions of college students pay for their education. Without this assistance by the government, a lot less students would be going to college. In fact, many of you that are reading this article directly benefited from the federal student loan program.
#5) The Bailout Of AIG
One of the biggest insurance companies in the world, AIG, would not be in existence today if not for direct federal government intervention. It kind of makes you wonder what George Washington and Thomas Jefferson would think about a federal government that hands big bags of cash to a giant insurance company so that it can survive. Whether it was so they could pay off their debts to Goldman Sachs or whether it was so that they could keep paying out record-setting bonuses, the truth is that AIG would not have made it without the federal government stepping in.
#6) The "Too Big To Fail" Banks
But it wasn't just AIG that got bailed out. A number of big banks may have gone under if not for the U.S. government. The U.S. government decided that they were "too big to fail". Well, what about all the small banks that are going under? The truth is that they are "too small to bother with". We now live in a nation where the U.S. government is the one who decides which banks live and which banks die like dogs. Doesn't that just make you feel all warm and fuzzy?
#7) The Bailout Of General Motors
But not only does the federal government bail out financial institutions - it is also now in the car business. Yes, grand old General Motors may have ended up on the scrap heap of history if not for the U.S. government stepping in. So if you work for General Motors or if you work for any company that does business with General Motors, you can thank Uncle Sam for the fact that you still have a job.
#8) The Bailouts Of Fannie Mae and Freddie Mac
If the U.S. government had not bailed out Fannie Mae and Freddie Mac, we may not have much of a mortgage industry at this point at all. According to Inside Mortgage Finance, government-related entities backed 96.5% of all home loans during the first quarter of 2010, which was up from 90% in 2009. So if you borrowed money to buy a home over the past couple of years, there is a very strong likelihood that the U.S. government was involved.
#9) The U.S. Government - The Nation's Biggest Employer
According to the Bureau of Labor Statistics, approximately 2 million civilians work for the federal government, excluding the Postal Service. When you add in all U.S. military personnel, that number goes much higher.
The truth is that as the government continues to expand (become more bloated), more Americans than ever are hopping aboard the gravy train. Today, the average federal worker now earns about twice as much as the average worker in the private sector. So if you want to do little work, produce little of real value and enjoy super cushy benefits, maybe you should apply for a job with the federal government too.
#10) Millions Of Americans Are Employed By Firms That Rely On Government Contracts
When considering the impact of the U.S. government on the economy, you can't forget the hundreds of companies that would go out of business if their U.S. government contracts were taken away. There are literally millions of people who work for companies that do business with the government. If the government disappeared it would cause economic chaos for those firms. The truth is that a whole lot of people make a really good living plugging into the sweetest revenue source of them all - the U.S. government.
#11) The U.S. Government Takeover Of The Health Care System
The U.S. government takeover of the health care system is going to fundamentally change the economics of the health care industry. The U.S. government will now play a major role in deciding which hospitals get built and which do not. Approximately 17% of U.S. GDP is spent on health care, and now the U.S. government has unprecedented control over where that money goes. Over a dozen new taxes have been established by the new health care reform law, and the U.S. government is going to pour an unprecedented amount of money into the system. So will this result in all of us getting better health care? We'll just have to wait and see.
The truth is that the Founding Fathers never envisioned a federal government that completely dominated that national economy. But that is what we have got. As of now, only a very small percentage of Americans are still able to say that they are completely financially independent of the U.S. government.
You see, in economic terms the U.S. government is not just the elephant in the room. It is the elephant that sat on the room and nearly suffocated everything else out of existence.
As Americans, we live in an economy that is so intertwined with the government that it is impossible to separate the two anymore.
But the really bad news is that the U.S. government is in massive financial trouble. According to one new report, the U.S. national debt will reach 100 percent of GDP by the year 2015. Many economists regard that as an incredibly dangerous threshold to cross.
If U.S. government finances collapse, it will mean the collapse of the entire U.S. economy as well. There is simply no separating the two. And considering the fact that the U.S. government has piled up the biggest mountain of debt in the history of the world, things don't look promising.
America is headed for an unprecedented economic collapse, and the U.S. government is leading the way. If you can get financially independent, now is the time to try to do that, but the reality is that we will all feel massive economic pain when this thing comes crashing down.
Get Ready To Taste The Bitter Side Of Keynesian Economics
Most Americans have no idea what the term "Keynesian economics" means, but the truth is that it has been deeply influencing U.S. economic policy for decades. Essentially, it is an economic theory that originated with a 20th century British economist named John Maynard Keynes, and it advocates government intervention in the economy in order to smooth out economic cycles. The general idea was that lower interest rates and increased government spending could be used to increase aggregate demand when the economy was experiencing a downturn, thus increasing economic activity and reducing unemployment.And you know what?
To a certain degree, Keynesian economic theory actually does work.
Increased government spending DOES stimulate the economy.
But the problem is that governments all over the world decided that they would just run constant budget deficits and stimulate the economy all the time.
All of this debt has brought a temporary prosperity to many of the nations around the globe, but there is one huge problem with debt.
It has to be paid back eventually.
With interest.
So what happens when nations have to start spending huge chunks of their national budgets just to service all the debt that they have piled up?
Well, that is when they taste the bitter side of Keynesian economics.
In fact, we see that starting to happen all over the world right now.
All of a sudden, governments all over the globe are talking about huge budget cuts, pay decreases, and higher taxes.
We all know about what is going on in Greece right now, but suddenly it seems like "austerity measures" are being implemented all over the place. Just consider the following examples....
*Portugal has pledged to impose fresh austerity measures that include much higher taxes and dramatic budget cuts.
*Barack Obama is personally pressuring Spain to make severe austerity cuts.
*It's not just Southern Europe that is facing these austerity measures either. It is being reported that Germans are bracing themselves for a "bitter" round of budget cuts.
*The exploding debt situation in the U.K.was a major issue in the most recent election. Bank of England governor Mervyn King has even gone so far as to warn that public anger over the "austerity measures" that soon must be implemented in the U.K. will be so painful that whichever party is seen as responsible will be out of power for a generation.
*Federal Reserve Chairman Ben Bernanke says that United States citizens will soon have to make difficult choices between higher taxes and reduced government spending.
*California Governor Arnold Schwarzenegger is reportedly planning to seek "terrible cuts" to eliminate an $18.6 billion budget deficit facing the most-populous U.S. state through June 2011.
*In fact, many U.S. states are getting ready for their biggest budget cuts in decades.
Austerity measures for everyone?
That is the way it is shaping up.
So what happens when austerity measures are implemented?
Well, just as Keynesian economics correctly predicts that economic growth goes up when government spending increases, it also correctly tells us that economic growth goes down when government spending decreases.
So all of these austerity measures are going to mean economic pain for a whole lot of people.
Not only that, but there are now whispers that this European debt crisis could potentially cause the break up of the euro.
Whether or not that is actually the case, officials in Europe are sure seizing on this crisis to advocate for increased centralization of power in the EU.
For example, senior administrators of the European Union are proposing that they be given unprecedented power to scrutinize the spending plans of member countries before national parliaments can vote on those budgets.
Talk about a loss of sovereignty.
But not only that, the Governor of the Bank of England, Mervyn King, has come right out and said that he believes that the European Union must become a federalized fiscal union if it is to survive.
Doesn't it seem like whenever there is a crisis the solution that is always being proposed is to give centralized institutions even more power?
There has also been talk that nations such as Greece could end up being ejected from the euro, but the reality is that such a scenario is not very likely.
For one thing, the ECB has already come out and said that under current EU law, ejection of a nation from the monetary union is "legally next to impossible".
In addition, leaders throughout Europe realize that if the euro fails then the entire EU may fail as well. German Chancellor Angela Merkel made this very clear when she recently warned that if the euro collapses, "then Europe and the idea of European union will fail."
For many in Europe that would seem like a disaster, but the truth is that it would be a wonderful, wonderful thing if the euro failed.
Why?
Because it would represent a major defeat for those who are seeking to drag us towards a "world currency" and a "global government".
It would also be a huge victory for those who still believe in national sovereignty and the decentralization of economic power.
So let us hope that the euro breaks up.
But don't count on it.
Meanwhile, the one thing that we can count on is all of the economic pain that all of these new austerity measures are going to bring.
Another Way That The Federal Reserve Makes Massive Gobs Of Money For The Big Banks
When most people discuss how the Federal Reserve benefits the big banks, they usually only focus on the ways that the Federal Reserve directly brings in income. But there is so much more to it than that. The truth is that the Federal Reserve is used in a whole variety of ways to indirectly assist the big banks in making huge gobs of money. One of the ways this is currently being accomplished is through the U.S. Treasury carry trade.So how does this carry trade work?
Well, it basically has three steps and it works something like this....
#1) Mr. Big Bank goes over to the Federal Reserve and says, "Hey Mr. Federal Reserve - please loan me a big bag of cash for next to nothing." Of course, the Federal Reserve is more than happy to loan it to him.
#2) Mr. Big Bank then invests the same big bag of cash into U.S. Tresuries which have a much higher interest rate than what Mr. Big Bank just borrowed at. To give you an idea, 10-year U.S. Treasuries are earning around 3 and a half percent right now.
#3) Mr. Big Bank sits back and enjoys the huge amount of risk-free cash which comes pouring in.
This little three step procedure helped enable four of the biggest U.S. banks (Goldman Sachs, JPMorgan Chase, Bank of America and Citigroup) to have a "perfect quarter" during the first quarter of 2010. What that means is that these four banks had zero days of trading losses in the first quarter.
Wouldn't you like to have a perfect batting average?
Don't you wish you could pitch a perfect game every time?
Well, it certainly helps when you are being subsidized by the Federal Reserve as Bloomberg recently explained....
The trading results, which helped the banks report higher quarterly profit than analysts estimated even as unemployment stagnated at a 27-year high, came with a big assist from the Federal Reserve. The U.S. central bank helped lenders by holding short-term borrowing costs near zero, giving them a chance to profit by carrying even 10-year government notes that yielded an average of 3.70 percent last quarter.
Doesn't it just seem like whenever we turn around the Federal Reserve is doing something new to "help out" the big banks?
This is just getting ridiculous.
Remember all of that talk about how the U.S. government had to help out Wall Street so that they could help out Main Street?
Well, a ton of money did get injected into the banking system.
In fact, the Federal Reserve pumped hundreds upon hundreds of billions of dollars into the banking system since the beginning of the financial crisis. This has caused the U.S. monetary base to explode....
So did the big banks use all of that money to help out Main Street?
No.
In fact, business lending by the big banks has been falling precipitously.
So what have the big banks been doing with all of that money?
Buying U.S. government debt of course....
Remarkably, the most aggressive buyers of US government debt during the past several months have been global banks domiciled in London and the Cayman Islands. They borrow at 20 basis points (a fifth of a percentage point) and buy Treasury securities paying 1% to 3%, depending on maturity.
This is the famous "carry trade", by which banks or hedge funds borrow short-term at a very low rate and lend medium- or long-term at a higher rate. This works as long as short-term rates remain extremely low. The moment that borrowing costs begin to rise, the trillion-dollar carry trade in US government securities will collapse.
But as long as the gravy train of the U.S. Treasury carry trade continues, why should the big banks make risky loans to American businesses and consumers when increasing numbers of them are turning out to be deadbeats anyway?
That is a good question.
Meanwhile, we have this sick situation where the Federal Reserve subsidizes the big banks and enables them to buy up a big chunk of the debt the U.S. government is constantly churning out.
Our national banking resources are increasingly being turned away from building up our once great system of free enterprise, and instead are being devoted to servicing the never ending spiral of government debt and funny money that we have created.
But a bunch of folks down on Wall Street are getting exceedingly rich from this little game, so they certainly aren't going to complain about it. And as long as the vast majority of Americans continue to stay in the dark about all of this, the bouncing ball will just continue to keep rolling.
Will The U.K. Be The Next European Nation To Experience A Massive Debt Crisis?
Now that the Greek debt crisis has been "fixed" by a gigantic pile of more debt, many are wondering which European nation will be next to experience a massive debt crisis. Increasingly, all eyes are turning to the U.K. and their public debt that is spiralling out of control. The U.K. government's deficit is projected to be approximately 13 percent of GDP in 2010, which is even worse than Greece's 12.5 percent figure. Right now the public debt of the U.K. is "only" at 68 percent of GDP, but three years ago it was sitting at about 40 percent, so as you can see the national debt of the U.K. is absolutely exploding in size. In fact, it is now being projected that the public debt of the U.K. will exceed 100 percent of GDP within the next three years. Considering the fact that citizens of the U.K. are some of the most highly taxed people in the world already, there just is not much room for raising more revenue.So obviously there is a problem.
A massive, unchecked, out of control problem that threatens to blow out the entire U.K. economy.
And considering the fact that it took just about everything that Europe could muster to bail out poor little Greece, how in the world is Europe going to be able to bail out the U.K. when their debt crisis violently erupts?
If Greece almost brought down the euro and the financial system of Europe, then what would a financial implosion in the U.K. do?
Considering the fact that the Greek economy is approximately 16% the size of the U.K. economy, it is very sobering to think what a "Greek style" debt crisis in the U.K. would mean for the entire world.
But if something is not done rapidly it will happen.
Just consider the following charts....
Now how in the world do you go from a deficit that is between 2 and 3 percent of GDP in 2007 to one that is above 11 percent in 2009? That takes some serious financial mismanagement. Not only that, but as we mentioned earlier, this year the deficit is projected to be approximately 13 percent of GDP. That is a level that is catastrophic.
Kornelius Purps, the fixed income director of Europe's second largest bank is very open about the fact that he believes that the U.K. is likely the next European nation that will face a very serious debt crisis....
"Britain's AAA-rating is highly at risk. The budget deficit is huge at 13% of GDP and investors are not happy. The outgoing government is inactive due to the election. There will have to be absolute cuts in public salaries or pay, but nobody is talking about that."
In fact, Morgan Stanley has already warned that there is a very strong probability that some of the rating agencies may remove the U.K.'s AAA status before 2010 is over.
If that happened, it would make the crisis that we just saw in Greece look like a Sunday picnic.
So what must be done?
Well, already world financial authorities are calling for "austerity measures" and deep budget cuts to be implemented in the U.K., but the reality is that those moves will cause deep economic pain.
In fact, Bank of England governor Mervyn King recently warned that public anger over the "austerity measures" that soon must be implemented in the U.K. will be so painful that whichever party is seen as responsible will be out of power for a generation.
The cold, hard reality is that the U.K. is in for economic pain in any event. Either they cut the budget and implement severe "austerity measures" which will hit people really hard economically, or they continue on the current course and risk a much worse version of what just happened in Greece.
Not that the rest of the world should be gloating about what is going on in the U.K. either.
The financial situation in Japan is even worse than what the U.K. is dealing with, and the United States is going to have the biggest economic downfall of them all one of these days.
As we wrote about yesterday, the sad truth is that the governments of the world are rapidly running out of money and are drowning in debt. It is a gigantic mess, and the term "sovereign debt crisis" is going to pop up in the news very regularly from now on.
You see, it is not just the financial systems of the U.S. and the U.K. that are broken. The entire world financial system is fundamentally flawed and is doomed to failure.
Right now the central banks of the world can do their best to try to hold things together with a tsunami of debt and paper money, but they are not going to be able to keep up this balancing act forever.
When it does all start coming apart and the dominoes do start falling, it is going to be a complete and total nightmare. Paper currencies around the globe will lose value at breathtaking speeds as central banks flood economies with cash in an attempt to stop the madness.
But more debt and more paper never solves anything. All it does is make the long-term problems even worse.
When the tipping point comes, things are going to move fast. Let's just hope that we all have a good bit more time to prepare before that happens.
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