Plunge Protection And Other News
As the facts of the global financial meltdown can no longer be ignored, even the BBC is showing some signs of telling the truth. Indeed, as time goes on, the occurrence of the “D” word in the mainstream media is increasing, although it’ll be a while before Evan Davis will speak that much truth.
Yesterday’s reduction in interest rates by the Fed demonstrates a number of things:
1. They are shitting bricks
2. They don’t know what to do about it
3. They fall back to type when in this kind of situation
So it came as no surprise that Helicopter Ben pulled his interest rate prank yesterday morning. It was also no surprise that clear market manipuation followed quickly afterwards as the Plunge Protection Team got to work to make sure the talking heads could report that the rate cut had had a positive effect.
Sadly for them, they only had partial success here in the UK, as the BBC’s response was extremely muted. Better luck next time, guys, if you get one.
Because the next big hurdle is just around the bend. It began to come into view when Ambac, the world’s second largest bond insurer, lost its triple-A rating from Fitch. Moody’s followed up on the news by announcing that they would also be likely to downgrade Ambac’s rating as well, particularly since they have had to disclose a $3.26bn loss yesterday.
What does this mean? Well, if the credit worthiness of the bond insurance companies is questioned, so is the credit worthiness of the bonds they insure.
Even Wall Street now accepts that Ambac’s chances of avoiding collapse are less than 30%. The same goes for other similar companies.
All this puts the $2.3 TRILLION of municiple, mortgage backed and asset backed bonds in jeopardy. Worse, there are $45 TRILLION of credit default swaps in trouble as well.
Bearing in mind the banks, as acknowledged by Mervyn King in a speech yesterday, have still not admitted the total value of the write downs related to the sub-prime mortgage collapse, what do you think the effect of the collapse of a bond insurer might be?
So hang on tight, because the roller coaster’s just been redesigned, and you might feel a little sick.
On a more positive note, although the Chinese have expressed concerns that the consumer spending collapse is going to impact their exports badly, they, at least, are recognising that a solid infrastructure is the most basic requirement for any economy.
With this in mind, they have signed an agreement with India for joint nuclear power development, and have also agreed plans for the building of new, faster, railway links between the two countries. This is a huge undertaking - China’s railway system is already twice the size of the EU’s, and thirty times bigger than the United States. So maybe they don’t need to worry about exports too much - they have enough to be going along with.
In the US, a Bloomberg/Schwarzenegger Presidential ticket is being set up, beginning with their appearance on the front cover of Time Magazine.
Last year, Bloomberg set himself up to potentially run as an independent: “I have filed papers with the New York City Board of Elections to change my status as a voter and register as unaffiliated with any political party. Although my plans for the future haven’t changed, I believe this brings my affiliation into alignment with how I have led and will continue to lead our City.”
According to Time, Bloomberg and Schwarzenegger are the “new action heroes.” They left out the word “fascist.” Also of note is the fact that the new partnership is being supported by Rockefeller Foundataion money, and that’s on top of the $1 billion of his own money that Bloomberg has said he would put into any presidential campaign.
Strategically, the world is sitting on a British inspired powderkeg. While the situation in the Balkans becomes more dangerous, the Russians have made it very clear that they will not allow themselves to be pushed around.
General Baluyevsky, Chief of the General Staff, has issued a direct warning to western governments, saying that if anybody does anything which threatens the sovereignty of Russia, or any of its allies, then Russia would be willing to take any necessary steps, inclusing pre-emptive nuclear war. While he stressed that Russia has no plans to attack anyone, he made it quite clear how important it is that the world community clearly understands Russia’s position.
Meanwhile, in Europe, pressure has been building for constitutional change to allow acceptance of the fascist Lisbon Treaty. So watch out France and Germany, because your so-called “representatives” are attempting to push through the necessary constitutional change quietly, secretly, with almost no media coverage. In the UK, of course, the Foreign Affairs Select Committee shouted loud and clear, with plenty of media coverage, that there is no fundamental difference between the provisions on foreign affairs contained in the Lisbon Treaty and the original EU Constitution.
The British public’s response to their shout was, “Oh.”