Three Statistics Which Spell Doom for America

I found this May 25, 2012 article interesting: http://www.washingtonsblog.com/2012/05/as-an-encore-to-bailing-out-...

The government has allowed the amount of derivatives to reach 1.2 quadrillion dollars.

...

What is the government doing for an encore? Bailing out the derivatives clearinghouses.

As the Wall Street Journal reported yesterday:

Little noticed is that on Tuesday Team Obama took its first formal steps toward putting taxpayers behind Wall Street derivatives trading — not behind banks that might make mistakes in derivatives markets, but behind the trading itself. Yes, the same crew that rails against the dangers of derivatives is quietly positioning these financial instruments directly above the taxpayer safety net.

...

***

If there’s one truth we’ve learned about government financial backstops, it’s that sooner or later they will be used. So eventually taxpayers will have to bail out one derivatives clearinghouse or another. It promises to be quite a mess.

So, while "Team Obama" wasn't involved in the majority of the bailouts, it certainly isn't helping the US taxpayers by making them the safety net for derivative failures.

Bush Jr left office in 2008. The price of gasoline was in the high $2 range when Hurricane Katrina hit in 2005, when it then jumped up to low-mid $3. I don't particularly remember gas prices going down so I looked for gas prices in 2008. I found this: http://useconomy.about.com/od/suppl1/a/Gas-Prices-in-2008.htm, with a nice chart that shows gas prices juxtaposed with the bailouts:

2008 Gas Prices Timeline

Week in 2008	Gas Price	Oil Price	Dow Close	Event
January 7	$3.16	$96.50	12,827.49	Economy lost jobs for the first time since 2003. GM announced $38 billion loss.
February 4	$3.03	$91.77	12,635.16	Fed lent $300 billion to banks with bad debt.
March 3	$3.21	$101.90	12,258.90	Bear Stearns bailout. Fannie and Freddie absorbed $300 billion in toxic debt.
April 7	$3.38	$100.88	12,612.43	Hedge fund manager David Einhorn shorted Lehman. BEA revises Q4 2007 GDP estimate, reporting economy actually contracted .3%. Some investors shifted from stocks to commodities, boosting oil prices.
April 14	$3.44	$106.60	12,302.06	Stock market drops over uncertainty.
April 21	$3.56	$110.42	12,825.02	Stocks rise as most investors regain confidence.
April 28	$3.65	$114.34	12,871.75	Fed cut rate to 2%, LIBOR rose to 2.85%, indicating bankers' unwillingness to lend to each other. BEA announced Q1 GDP at .6%, calming fears of recession.
May 5	$3.66	$111.98	12,969.54	Fannie Mae announced $2.2 billion loss.
May 12	$3.77	$119.84	12,876.31
May 19	$3.84	$122.58	13,028.68	Einhorn questioned Lehman's accounting, sending its stock price down 20%.
May 26	$3.99	$126.47	12,548.35	More investors shifted from stocks to oil futures, creating an asset bubble.
June 2	$4.03	$128.76	12,503.82	Worst jobs report in 5 years send investors out of stocks.
June 9	$40.9	$126.33	12,280.32
June 16	$4.13	$132.08	11,842.36
June 23	$4.13	$132.08	11,350.01
June 30	$4.15	$135.54	11,350.01
July 7	$4.17	$141.07	11,231.96	Fannie and Freddie stocks prices fell 16-18% on July 7. Oil hit record $143.68/barrel on July 11.
July 14	$4.16	$137.43	11,055.54	Fannie's stock fell another 22%, Lehman's dropped 31%.
July 28	$4.01	$126.70	11,131.08	Fannie and Freddie bailout passed. Investors start shifting out of both stocks and commodities to ultra-safe Treasuries.
August 4	$3.94	$125.43	11,284.15
September 1	$3.73	$103.69	11,516.92	Lehman goes bankrupt Sep 15. Fannie and Freddie nationalized Sep 17. Run on money market Sep 18. Fed takes over AIG. Paulson asks Congress for $700 billion bank bailout on Sep 21. WaMu goes bankrupt on Sep 26. Hurricanes Gustav and Ike shut down refineries, but oil prices keep falling. Dow drops 777 points on September 30 after Senate rejects bailout bill.
October 6	$3.54	$91.90	9,955.50	Congress passes bailout on October 6 as Dow dropped 800 points. Dow closed below 10,000 for the first time since 2006. On October 8, Fed cut rate to 1.5% but LIBOR rose to 4.52%, indicating absolute panic among bankers. On October 29, Fed cuts rate again to 1%, and LIBOR finally responds by falling to 3.46%. Economy lost 150,000 jobs.
November 3	$2.46	$59.43	9,625.28	Investors pull out of commodities, sending oil prices down. Citigroup bailed out. Economy lost 533,000 jobs.
December 1	$1.87	$43.70	8,149.09	OPEC removes 2.2 million barrels from daily production. Fed cuts rate to zero. LIBOR falls to 2.19%. Big 3 auto bailout.

Actually, it looks like gas prices were the post-Katrina prices and suddenly dived in Nov 2008 because investors pulled out of commodities, followed by OPEC reducing production during the last several months of the Bush Administration. This, of course, happening during the bailouts and the stock market dropping. So, it appears the decline in 2008 gas prices is multi-factorial.

I didn't find a similar chart for 2009, but this article at http://www.reuters.com/article/2009/11/02/us-usa-gasoline-price-idU... states that in November 2009 the average price of gas was $2.69 a gallon, up 29 cents from a year ago. So, in 2009, even though gas prices were rising from the bottoming out in Nov 2008, they were still less than they had been since Hurricane Katrina in 2005.

While the biggest bailouts happened on Bush's watch, it is interesting to note that "[Obama] could have insulated himself a little better from association with the distasteful bailout by not seeming to cater to the banks as much as he has: Among other things, he gave bank apologists like Larry Summers and Tim Geithner big jobs in his administration and has let the too-big-to-fail banks get even bigger." http://www.huffingtonpost.com/2012/04/10/bank-bailout-opinion-harri...

And let's not forget that Obama bailed out the auto industry in 2009. It is interesting to note that Bush's bank bailouts made money, while Obama's bailout of the auto industry didn't:

Most of America’s media think President Obama's 2009 bailout of General Motors and Chrysler was a huge success.

Former Massachusetts Democratic Congressman Barney Frank threw cold water on this meme on NBC’s Meet the Press Sunday correctly informing viewers that the auto bailout lost money for the federal government. By contrast, we made money from George W. Bush's 2008 bank bailout.

http://newsbusters.org/blogs/noel-sheppard/2013/09/15/barney-frank-...

But, yes, the derivatives market is a very dangerous part of the casino culture and should be outlawed.

You need to be a member of Earthchangers College to add comments!

Join Earthchangers College

Comments

Cheryl Nelson October 15, 2013 at 12:43am

You would think. But it does prove that if we want the cabal to be gone for good, we cannot leave any of them around with any power whatsoever.
Cheryl Nelson October 14, 2013 at 11:43pm

I found this May 25, 2012 article interesting: http://www.washingtonsblog.com/2012/05/as-an-encore-to-bailing-out-...

The government has allowed the amount of derivatives to reach 1.2 quadrillion dollars.

...

What is the government doing for an encore? Bailing out the derivatives clearinghouses.

As the Wall Street Journal reported yesterday:

Little noticed is that on Tuesday Team Obama took its first formal steps toward putting taxpayers behind Wall Street derivatives trading — not behind banks that might make mistakes in derivatives markets, but behind the trading itself. Yes, the same crew that rails against the dangers of derivatives is quietly positioning these financial instruments directly above the taxpayer safety net.

...

***

If there’s one truth we’ve learned about government financial backstops, it’s that sooner or later they will be used. So eventually taxpayers will have to bail out one derivatives clearinghouse or another. It promises to be quite a mess.

So, while "Team Obama" wasn't involved in the majority of the bailouts, it certainly isn't helping the US taxpayers by making them the safety net for derivative failures.
Cheryl Nelson October 14, 2013 at 11:37pm

Most of the large banks that received bailouts have paid back their loans, with interest. However the government still owns stock shares in some of them. Now the Fed, which is private, has been buying toxic assets from banks (which means the Fed owns them).

Derivatives are a shadowy area. It is layers of complexity on top of underlying assets. Some are regulated, some are not. Some are okay (as in hedging), some are bets. It is speculated that derivatives far exceed the wealth of the entire world.

Cheryl Nelson October 14, 2013 at 9:47pm

Week in 2008	Gas Price	Oil Price	Dow Close	Event
January 7	$3.16	$96.50	12,827.49	Economy lost jobs for the first time since 2003. GM announced $38 billion loss.
February 4	$3.03	$91.77	12,635.16	Fed lent $300 billion to banks with bad debt.
March 3	$3.21	$101.90	12,258.90	Bear Stearns bailout. Fannie and Freddie absorbed $300 billion in toxic debt.
April 7	$3.38	$100.88	12,612.43	Hedge fund manager David Einhorn shorted Lehman. BEA revises Q4 2007 GDP estimate, reporting economy actually contracted .3%. Some investors shifted from stocks to commodities, boosting oil prices.
April 14	$3.44	$106.60	12,302.06	Stock market drops over uncertainty.
April 21	$3.56	$110.42	12,825.02	Stocks rise as most investors regain confidence.
April 28	$3.65	$114.34	12,871.75	Fed cut rate to 2%, LIBOR rose to 2.85%, indicating bankers' unwillingness to lend to each other. BEA announced Q1 GDP at .6%, calming fears of recession.
May 5	$3.66	$111.98	12,969.54	Fannie Mae announced $2.2 billion loss.
May 12	$3.77	$119.84	12,876.31
May 19	$3.84	$122.58	13,028.68	Einhorn questioned Lehman's accounting, sending its stock price down 20%.
May 26	$3.99	$126.47	12,548.35	More investors shifted from stocks to oil futures, creating an asset bubble.
June 2	$4.03	$128.76	12,503.82	Worst jobs report in 5 years send investors out of stocks.
June 9	$40.9	$126.33	12,280.32
June 16	$4.13	$132.08	11,842.36
June 23	$4.13	$132.08	11,350.01
June 30	$4.15	$135.54	11,350.01
July 7	$4.17	$141.07	11,231.96	Fannie and Freddie stocks prices fell 16-18% on July 7. Oil hit record $143.68/barrel on July 11.
July 14	$4.16	$137.43	11,055.54	Fannie's stock fell another 22%, Lehman's dropped 31%.
July 28	$4.01	$126.70	11,131.08	Fannie and Freddie bailout passed. Investors start shifting out of both stocks and commodities to ultra-safe Treasuries.
August 4	$3.94	$125.43	11,284.15
September 1	$3.73	$103.69	11,516.92	Lehman goes bankrupt Sep 15. Fannie and Freddie nationalized Sep 17. Run on money market Sep 18. Fed takes over AIG. Paulson asks Congress for $700 billion bank bailout on Sep 21. WaMu goes bankrupt on Sep 26. Hurricanes Gustav and Ike shut down refineries, but oil prices keep falling. Dow drops 777 points on September 30 after Senate rejects bailout bill.
October 6	$3.54	$91.90	9,955.50	Congress passes bailout on October 6 as Dow dropped 800 points. Dow closed below 10,000 for the first time since 2006. On October 8, Fed cut rate to 1.5% but LIBOR rose to 4.52%, indicating absolute panic among bankers. On October 29, Fed cuts rate again to 1%, and LIBOR finally responds by falling to 3.46%. Economy lost 150,000 jobs.
November 3	$2.46	$59.43	9,625.28	Investors pull out of commodities, sending oil prices down. Citigroup bailed out. Economy lost 533,000 jobs.
December 1	$1.87	$43.70	8,149.09	OPEC removes 2.2 million barrels from daily production. Fed cuts rate to zero. LIBOR falls to 2.19%. Big 3 auto bailout.

This reply was deleted.

Blogs