Author: KlatooBaradaNikto

That is how Professor Nouriel Roubini phrases his prediction that thousands of banks will fail across this country in the next few months,causing losses in excess of 2 trillion dollars.

He says that the mortgage crisis has only hit the subprime loans as of today causing the crisis for homeowners and the big banks.

He says that the loan losses are going to hit even the upper end of the mortgage pole, causing a calamity of even greater proportions.

Bank failures will become ubiquitous.If the US treasury that bailed out Bear Stearns,Fannie Mae or Freddie Mac,repeated the pattern we will have hyperinflation and stagnation at the same time.

The US is at the end of its tether.What could be hidden before can no longer be done.

“Flee from the wrath to come” says the Bible.

Many years ago, as an engineeriung student I came across a mathematical concept called Imaginary or Complex Numbers that had me fascinated for a long time.In this system, numbers were classified as real and imaginary and a well developed set of rules were constructed to define the relationships between the two sets.Although the imaginary numbers themselves had no independent existence,with the rules deployed many problems in engineering,physics and mechanics could be solved yielding real results.

Those ideas came to my mind when Mr.Bernanke and Mr.Paulson went about saving the big financial houses while ignoring the clamor of the masses reeling under the mortgage and gasoline crises that have gripped the country.

Up until the mid 70’s this nation’s economy was primarily one in which the making and selling of good and services constituted the majority of economic activity.Those transactions had to be transparent because the primary participants in the activity were the buyer and the seller.

That simple economy underwent a radical change in the 80’s as the financial middle men like Citigroup,J.P.Morgan and Chase entered the fray and began the looting of corporations that had done business with the equity that had been built up over many generations.The financial giants wanted to get their hands on this equity.They were able to entice the corporate bigwigs to loot their own companies by saddling them with debt and selling the corporations to bidders who had no money to begin with.Thus was born the subprime swindle of corporations destroying the auto and other manufacturing industries in the country.The role of the financial middle men can be compared to that of a parasite that eats the meat and leaves the dregs to the body of the organism.We now see that exact role being played out in our own economy.

Because the financial industry has no real stake in the economy other than to feast on the fruits of works of many generations, no solution to our problems is possible so long as the financial industry remains the beneficiary.The bailing out of the GSE’s like Fannie Mae or Freddymac will only whet the appetites of the financial leeches and they will be back for more.

What was once a subordinate role for the financial industry has now become the dominant one over that of the real economy.We need to change that .Like Complex Numbers, when the imaginary numbers dominate, the result will also be imaginary not yielding real world solutions.

Now I know why my profesors taught me Complex Algebra.

In all the verbiage emanating from the candidates this political cycle, one constantly hears the refrain that either Obama or McCain will make us more secure in this age of terrorism.

What is never mentioned is the ludicrousness of this proposition.Given that this country spends more on “defense” than the rest of the world combined and maintains a string of well equipped bases around the world and has a huge CIA budget devoted to destabilization of foreign governments,propaganda and assassination of foreign leaders, elementary curiosity should provoke questions on who is the greater threat to others.Given the nature of our Press/media as propaganda organs, that is not likely to happen.

What this simple minded analysis shows is that no original thought about important matters would be allowed to cross the mind of the candidates or the Press.We will all be bickering around the edges, as it were, on whether Barack Obama is a celebrity in the mold of Britney or Paris,and,God forbid, they missed Lindsay or Madonna.

Meanwhile in the real planet GM and Ford are collapsing with bankruptcy looming for both in a matter of months.The federal budget deficit is approacing half a trillion dollars with no reprieve in sight.

But the bogeyman,the dark skinned Arab/Muslim is lurking in the smoldering ruins of the WTC Towers,the man with Anthrax is comfortably dead and Barack wants to put the make on your sister using high falutin’ words.The terrorists are indeed here.

Last week, after announcing massive losses from continuing operations,both GM and Ford laid out their plans for survival in an age of ever diminishing prospects.

GM first.A company that has symblized the ascendancy of the finance and accounting men over engineers and quality men,finally went for broke and now has staked its survival on an electric car called the Volt.The car is really a hybrid that can travel about 40 miles on an initial charge without any gasoline.After that a gasoline engine is used to recharge the battery which powers electric motors driving the wheels.

The GM version of the hybrid differs from Toyota’s more famous Hybrid Synergy Drive which uses two drive trains in parallel.A conventional gasoline engine mated to a transmission is used alongside a battery driven electric motor.This parallel hybrid system has been tested in over a million Prius autos in the past ten odd years and has been a resounding success.It delivers excellent fuel economy, over 50 miles per gallon,is reliable and has had very few reported problems.

If GM wants to make a break from this Toyota version, it will have to convince the public that its system is reliable over the long term,it delivers the fuel economies promised and that its price is within reason.The crucial missing link in GM’s strategy is the Lithium-Ion Battery which needs to be developed to provide the power to the motors.The infrastructure to charge the batteries also needs to be available.

Given GM’s track record in bringing new products to the market,the burden of proof is now on GM.If this hailmary pass fails, GM is toast.

Ford, lacking GM or Toyota’s resources, has wisely opted to license Toyota’s Hybrid Synergy Drive.But Ford’s problem like GM’s is that over the past four decades they have steadily lost ground in the perception game against the Japanese and the Germans, and increasingly against the Koreans.Their product line is seen by many as inferior,lacking in technical sophistication and simply tiresome.What is worse is that they have lost the younger generation completely.My son who is a car nut says that he does not know any one in his class that purposely goes out and buys a Ford or a GM,old or new.

I do not blame the engineers or the technicians who are very dedicated to their companies.They have been let down by the managements at GM and Ford which are infested by the Harvard Business School types to whom understanding the technical intricacies of a car is the equivalent of getting a root canal job.They are at home in the world of financial statements,balance sheets and income statements.They have not realized that those financial results come AFTER a product is designed, marketed and sold.

I just hope that GM and Ford have fortune smiling at them soon.Unfortunately, their rivals don’t seem to be standing still.The plug-in version of the Prius followed by a Lithium-Ion powered version is expected in 2010.

Everyone knows what a supporter of free enterprise I am.I like risks, especially if somebody else takes them.I believe that rewards come from taking risks.You take the risks and I will take the rewards.That is what I told my friend,Ken Lay, bless his heart.

When I asked my wife, that would be Wendy to you,to remove all impediments to trading energy as a commodity,little did I realize that Ken Lay would use that to make me a multimillionaire.Before I could thank him, he left his mortal soul to meet his kindred soul,Barbara Olsen, someplace in heaven or Aspen, Colorado.

Now my friend, John McCain, wants me to be his economic adviser.I told him, in confidence,of course, that we have a nation that encourages people to eat, live in homes and clothe themselves.They simply do not think of themselves as poor people.This is the only country where all the poor people are fat.If it was up to me ,I would force all fat and poor people to eat no more than 200 calories per day.That alone would save the nation billions.

As for the subprime mortgage crisis, I suggested to the UBS board of which I am Vice Chairman, thanks again to Ken Lay,that we impound all mcmansions,convert them into luxury condos and either rent or sell them to people in Abu Dhabi,Dubai,Qatar and other places.In place of retiring their mortgages, I would like to make the black people work for free for the Arab homeowners.How is that for a twist on slavery?And,if some of the blacks object, I would suggest to John that we send them over to the Middle East on long tours of duty.

As for the private numbered bank accounts in Lichtenstein, I categorically deny that the number 0221789 belongs to me.That is Wendy’s number.I don’t have access to it.

As for eliminating the deficits,both the budget andn trade deficits,I want to suggest that John eliminate publishing these numbers for the country as a whole.That is what a collectivist political system will do.Instead we should only talk about our private deficits and how best we can each correct that.If each one of us makes an effort to eliminate our personal deficits, there will be no federal or state deficit at all.I have done my part by getting myself a multimillion dollar deal at UBS,Wendy is doing her best to serve on many boards and we are both assisting Cindy in adding to the billions she will get when InBev buys out Anheuser Busch.I think a numbered bank account in Lichtenstein might be just what the doctor ordered for Cindy who knows a thing or two about potent drugs,know what I mean?

I simply can’t understand why there is so much whining when George Bush has given us so much opportunity to clean up in this economy.

What I like about this job is that even if I lose,I win.Can’t do better than that.

As I watched a video of Barack Obama playing hoops with US soldiers at a base in Kuwait,it suddenly dawned on me that a disproportionate number of the soldiers,men and women, were black.Forget the sociological and economic implications of this,it also raises the question why the most ardent supporters of the war against the Muslims/Arabs are missing in action.

Where are the brave TV warriors of yesteryear,i.e. Kristol,Perle,Adelman,Feith,and others?One even finds them missing on TV’s many programs.It is as though someone waved a magic wand and they vanished.

I am not complaining mind you.I just find it very odd.

Consider the following items in the news.

A McCain economic adviser, Phil Gramm, calls Americans a nation of whiners at a time when the evidence for the collapse of the economy is all around.Loss of jobs, whole cities and counties underwater in debt,people losing their homes to burdensome debt.

What is worse is that the man Phil Gramm was also responsible along with his wife Wendy for the massive debacle of Enron and continues to spout the same bromides that he uttered when he stood up in Congress and deregulated energy trading from SEC scrutiny and allowed it to be traded like a commodity.

After protesting for several days that a bail out of Fannie Mae and Freddie Mac is not in the works,Henry Paulson and Ben Bernanke, announced that that is precisely what they plan to do tomorrow,July 14.

What is happening after a steady assault on ordinary people’s sense of reality by the powerful and well heeled in our society is that the social fabric is being torn apart.That fabric or at least the perception that the ruling class has the people’s interest at heart is what confers the legitimacy in a Democracy.

That is slowly being eroded.

At some point,it would no longer be enough to keep repeating mantras like Bush does and actually deliver in performance what you say.

In another post I have noted that we have come to resemble the Soviet Union in many ways as it neared its end.

One such glaring resemblance is how disconnected from the worries of ordinary people that men like Gramm or McCain are.

Most people do not expect truth to emerge from the mouths of these men.Even a landslide election will no longer matter unless their actions and the results make a material difference in the lives of people.

Those who have followed the remarkable rise of India as a major destination for the world’s high technology companies,may want to read a series of articles by Amy Waldman in the NYT.

Starting about forty years ago, India started seven major Indian Institutes of Technology where the admission is highly competitive.Out of nearly two hundred thousand who compete only 12,000 are selected, a selection rate of 6% which is more stringent than Harvard or MIT.These students go on to becoming an elite professional class that runs many corporations in India and abroad.

Similar Institutes are in operation in Management and in Biological Sciences.

The impact of this educational revolution is only now being felt in the US.It is gathering momentum as India plans to add more such institutes in the coming years.

The reason these Institutes are successful is because they focus on technology only and do not dilute the work by meandering into sociology and politics and other issues.The students are absolute masters at calculus,computer science,physics and chemistry.No other diversions are allowed.

India has many other fine univesrities but the IIT’s are a special case because the institutes function as a true meritocracy in a society laden with caste privileges and corruption.That makes them unique and gives them popular sanction.

Waldman says that the revolution is now spreading to the elementary and secondary schools in urban and rural India.That is because people have come to realize that education represents a way out to a better life for the vast majority of the people as India’s economic prospects improve and it needs highly trained engineers, scientists and designers.Prime Minister Singh, who studied rural economic development at Harvard believes that his major task will be to bring industry and education to rural India.

With that India would have crossed a milestone.So, brace for the assault on the world’s markets by more Indian corporations like Mittal Steel,Reliance Industries,Tata Motors and Ranbaxy Labs (pharmaceuticals).

Personally I prefer the way India has picked itself up by its bootstraps instead of terrorism and such.

 

Last week, giant symbols of American economic might were collapsing like a house of cards.First,GM is said to be close to declaring bankruptcy according to Goldman Sachs.Its stock is now worth less than that of CVS Pharmacy.It would be hard to underestimate the psychological and financial and social damage GM’s collapse represents to the American psyche.The car,the highways and the freedom they represented to Americans were unique in the history of the world.Much of America’s image of itself has been derived from the mythology of freedom car ownership represented.

As that image crashes and burns,it seems that every other symbol of American life either is just ahead or behind the car industry’s travails.The housing industry, which in its own way represented another symbol of the American Dream, is now a  wasteland beset by problems of such magnitude that the Dream has now turned into a nightmare.Fannie Mae and Fredie Mac which are Government Sponsored Enterprises (GSE’s) are crucial to the financial system because they pretty well underwrite over half the mortgages in this country.As the real nature of their dire straits makes its way into the headlines,it is becoming clear that the veneer of prosperity this country has come to expect is peeling away to reveal a sordid base.

In the Soviet Union, stripped of the American boasts of prosperity,sex, freedom and all the rest,the citizens had become so thoroughly disillusioned that they never expected anything from the system.That probably saved the people when the system crumbled.

In the American context, the facts are reversed.The barrage of propaganda over the past fifty odd years, has converted the population to an uncritical and unthinking blob of humanity that thinks that if you are an American you are exempt from the usual rules that govern human conduct.Bush is the prime exemplar of this attitude.So, when the main symbols that Americans have come to rely on to give them an anchor crumble they have nowhere to turn.It is as though a cruel joke has been perpetrated on them for a long time and Bush has been chosen as the messenger of the apocalypse to come.

It is time to shed our illusions and join the rest of humanity as equals and not as people who can do pretty much what we want and expect to be respected much less loved.

In the 70’s our Press and Media would wax eloquent on how the dictators in Latin America or Middle East or eastern Europe would resort to kidnapping and “disappearing” their political enemies.Chile’s Pinochet was a particular target of our Press’ righteous anger.

Fast forward to Gee Dubya’s America the gruesome of 2008.The nation of Iraq with 25 odd million people gets invaded in 2003.Nearly a million of its inhabitants have been killed by Bush’s armies and more than 5 million people turned into refugess in their own land, with no food,clothing or shelter.

Yet, we do not know any Iraqi at a human level.Our Press cannot find a grieving mother, brothers and sisters separated from each other, sons badly wounded.
It is as though our Press cannot be bothered with Iraqis as a people.

No debates about the Press or its lack of accountability while endless debates rage on about trivia.