Financial Market Chaos: The Handwriting is on the Wall for the USA.


The Federal Government uses bizarre accounting practices that are forbidden to mere mortals because if the private sector did its accounting like the government no one would have a clue if they were solvent or not.  Private Sector companies would be closed down and their officers would go to jail if they pulled half the shenanigans inherent in government accounting.  I know this is going to sound crazy but the Federal Government is trying to figure out how to account for nationalizing Fannie and Freddie on its balance sheet!  I kid you not!  Consider this from Bloomberg:


Sept. 11 (Bloomberg) — The Bush administration is considering whether to fold Fannie Mae and Freddie Mac‘s $5.2 trillion in debt into the federal budget, the White House budget office and the U.S. Treasury Department said.

“We’re discussing how to present this in the federal budget with Treasury and stakeholders right now, but a conclusion hasn’t been determined,” said Corinne Hirsch, a spokeswoman for the Office of Management and Budget. The Government Accounting Office and other federal agencies are also weighing in on the issue.

“The reason Fannie Mae was originally turned into a GSE was to take it off the budget,” said Peter Wallison, a fellow at the American Enterprise Institute, a conservative policy think tank in Washington. Wallison was general counsel for the Treasury during the Reagan Administration. “The U.S. budget is a completely cash flow system, it’s like a Mom and Pop candy store. They don’t have any reserves or deferred expenses like private corporations do. It’s completely cash in, cash out.”

“What the administration chooses to incorporate in its budget is up to them, but we hope they will agree,” CBO Director Peter Orszag said in an interview yesterday.

Though much of the companies’ unsecured debt will likely be counted as new federal debt, their mortgage securities won’t necessarily translate into the same amount of federal debt since loans and other assets back those liabilities, Orszag said.

The degree of government control suggests the companies’ expenses, including salaries and electricity bills, should be counted as federal spending and all fee revenue and other income from operations should be reflected as revenue, Orszag said.


Now this is very interesting language, don’t you think?  I would expect this is a socialist system but we’re a free market system aren’t we? There was some interesting language taking place across the Atlantic in Britton and it was coming from Mervyn King of the Bank of England, the British Central Bank and their version of the Federal Reserve.  (The British office of the Illegal Money Cartel that apparently owns the Western “Democracies”) The British banks are in the toilet just as much as ours in the United States and Mr. King told the British Government that they couldn’t count on the Money Cartel to bail out the banks anymore.  In essence he told the government that they better find a way to stabilize banking because the superrich who control both the Bank of England and the Federal Reserve and turning off the taps of money.  The end has come in England and the question naturally becomes can our Federal Reserve’s refusal to pump more money into our failing financial sector be far behind?  I hope Wall Street is watching Lehman Brothers and Washington Mutual go down the drain today because the Federal Reserve might just start distancing themselves from this mess just as the Bank of England did.  If Washington wants to stop this and the Fed is unwilling to help than either they let them fail with a couple months to go before a presidential election or they use tax dollars to prop them up effectively socializing them.  Now isn’t that a pleasant thought? Once again consider this from Bloomberg:


Sept. 11 (Bloomberg) — Mervyn King said the Bank of England’s planned money-market reforms won’t provide long-term assistance to banks to unfreeze lending and any decision on the matter should be left to Prime Minister Gordon Brown.

The central bank “will not and cannot solve the shortage of funding to finance bank lending, including mortgage lending” over the long term, Governor King told lawmakers in London today. “Only private savers or taxpayers via the government can provide such funds.”

King’s central bank will next week unveil proposals to revamp its money-market operations to better cope with financial-market turmoil. With Brown under pressure to ease the U.K.’s housing slump, King is distancing the central bank from any plan to prop up the mortgage market with public funds.

Chancellor of the Exchequer Alistair Darling is scheduled to make a decision on how to help the market for home loans in coming weeks and King said today the minister still has an “open mind” on the matter. A Treasury-commissioned report said in July that Brown could consider guaranteeing mortgage-backed securities.

King said the “financial sector is facing the worst situation since the 1930s.” Deputy Governor Charles Bean said the crisis has some time to run yet.

The Bank of England’s ability to cushion the housing market with interest-rate cuts is limited after inflation accelerated to more than double its 2 percent target


When the Central Banks of the West begin to look for cover and the Government searches for even more creative accounting functions to cover the nationalization of Freddie and Fannie you know it’s a real live crisis.  This isn’t going to be over any time soon and by that I mean it’s going to go on for years and it has all the earmarks, so to speak, of something that changes the political power structure as well as something leading to a truly global economy with standardized regulation and scales of value or as something that destroys the global economy.  I suspect is going to be the former not the latter and that the United States who started this mess with our mortgage lending industry and our deficit spending is going to fall from power much as the bankrupt Soviet Union did before us.


As I write this it looks like Lehman Brothers and Washington Mutual Bank are going to be the next casualties as the carnage continues in the finance companies. Lehman in particular is hanging on by a thread and there’s still no word from the Federal Reserve (The Global Money Cartel) or the Federal Government (The Big Spending Morons) are going to jump in and save these companies.  It begs the question:  Aren’t Lehman Brothers and Washington Mutual Bank “To big to fail”.  If the powers of greed, the Federal Reserve, and the powers of Socialism, the Federal Government, don’t intervene does that mean that the fall out in the rest of the market will be manageable?  Does it mean that these fine institutions are a day late and a dollar short?  Is Ben Bernanke on a coffee break?  Did Hank Paulson go to his Pilates Class instead of managing this modest mess?


If it turns out that we’re backing away from either Government or Central Bank intervention does it mean that the initial intervention in Bear Stearns and Freddie and Fannie was ill-advised and likely to have made the situation worse or are they waiting for the whole mess to crash to justify MASSIVE intervention? Time will tell.


So we wait as things worsen, our governments role changes, our deficits deepen, our stocks decline as our dollar mysteriously strengthens even as the government tries to figure out how to add 6 TRILION DOLLARS to our governments accounting scheme. It seems kinda contra intuitive doesn’t it? Oil prices are going down like someone threw a switch but I can’t find a truly logical reason for it. Now the stock market is almost in positive territory and I can’t help but marvel at the mass delusion that is Wall Street!  Unbelievable!  I leave you with something I found that tries to explain the order of magnitude difference between a billion and a trillion and a look at our national debt today:



The Outstanding Public Debt as of 11 Sep 2008 at 04:04:23 PM GMT is:

$9,696,224,119,454.89,as of Noon Sept 11, 2008

The estimated population of the United States is 304,708,702
so each citizen’s share of this debt is $31,821.29.

Ok—– so add six trillion and you get $15,696,224,119,454.89

Ok—– so divide that by the estimated population and you get your share of the debt right?

$51,512.23 per person.  So if you’re a family of 4 you went from a family debt of $127,285.20 to $206,048.60 and there’s no end in sight.  Visit the Debt Clock Link on my links to see the current figure because it’s always changing!



Consider this:  A million seconds ago is about 12 days ago.  A billion seconds ago is about 31 years ago.  A trillion seconds ago is about 31,688 years ago.

Taken From How to Save America and Yourself on this site.


One response to “Financial Market Chaos: The Handwriting is on the Wall for the USA.

  1. Great Blog post. I am going to bookmark and read more often. I love the Blog template if you need any assistance customizing it let me know!

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