Re: SC81

http://www.globalresearch.ca/index.php?context=va&aid=11118

Lurching Toward Gomorrah: More Signs of An Unstoppable Economic Meltdown

Crisis denialists are still around but are slowly and grudgingly giving way to the reality that global capitalism is in serious crisis as recession lurches toward depression in a continuing downward spiral..........

...........Bellweather Canaries in the Coal Mine

Once a bellweather corporate icon and virtual proxy for the S & P 500, General Electric has fallen on hard times. In September 2000, its stock price traded at around $60 a share. On November 20, it fell to $12.84 for a net eight year loss of nearly 79%. Back in April, when the company badly missed its earnings target, the stock lost $47 billion in market value that day, and The Economist remarked that "This is not what investors expect from one of the few remaining triple-A rated companies, famed for hitting its targets." Analyst Bob Chapman believes only gold deserves that rating at a time when no asset class is safe............

............Government fiscal irresponsibility is no different than for businesses. As a result, America's credit worthiness is at risk.

In the late 1970s, 58 companies were rated AAA. In the 1990s, it was 22, and in 2001 nine.

Today, according to 247wallst.com, GE is one of only six corporations rated AAA by S & P (along with ExxonMobil, J & J, Toyota, Berkshire Hathaway, and ADP) but it's status is clearly jeopardized in the view of some analysts. One puts it this way:

"The legendary American institution is in deep trouble. Its PR machine has been in constant spin mode as the company sinks deeper into despair." Its "AAA rating is not worth the paper it is written on. One look at GE's balance sheet will convince you....AAA companies do not need to take the desperate actions that GE has taken in the last few months."

The first signs of real trouble appeared in April when the company missed its target. "It is widely known that they are masters of 'legal' earnings manipulation," so it came as a shock. "Accounting rules allow for wide discretion in reserves and estimates. GE Capital has always been a black box within the larger company," and the management used this division "as its backstop for meeting earnings estimates." It failed, and it's slide has been precipitous enough for the company to need Warren Buffett to invest $3 billion as a psychological boost and have to pay him a 10% dividend and other incentives to get it.

"Credit default swaps (CDSs) protecting against GE Capital default now trade as if GE is a junk bond credit." And issuing $12 billion in new common stock (at $22.25 a share) was "an act of extreme desperation and brings into question whether GE has a lucid strategy."

Its divisions face problems across the board but especially GE Capital, its largest with three subdivisions - GE Commercial Finance, GE Money, and GE Consumer Finance. The company "is a bank disguised as an industrial conglomerate." In boom times, it did wonders for its profits. Today it's "a rocky path to destruction," and as GE goes, so goes the S & P 500 perhaps and the economy along with it..............

............."In the United States, there is already a funding crisis, and they will have to sell a lot more bonds next year to fund the bailout packages that have already been signed off." He added that to solve or stem the current crisis, America will have to radically reduce spending across the board and recall all its troops from around the world. As for a stimulus package, "there is not much of an industry left to stimulate back to life," he believes. Others agree and see depression ahead - not whether but when it will arrive.

Then there's Asia with Bloomberg reporting (on November 19) that: "Asian stocks fell, extending a global rout, as Japan's exports declined the most in almost seven years (7.7% from a year earlier) and US consumer prices sank by a record" raising the specter of deflation. One analyst described it as "the end of the world as we know it" in the worst ever global slump he's seen and "no region (able) to help (others)."

AFP in Tokyo said "Japan (officially in recession) reported a rare trade deficit in October." Exclusive of the slow holiday-affected January period, "it was the first red figure in 26 years" and a sign of more trouble ahead. In America also with JP Morgan Chase predicting that the Fed will cut interest rates to zero by January, hold them there throughout 2009, and other central banks will cut as well. But hold the cheers.

So far, monetary policy has been ineffective and little more than pushing on a string in a liquidity trap climate. Further, perception is everything at a time confidence is at record lows and shows no signs of stabilizing.

Once nominal rates hit zero, "the Fed has run out of ammo" except for what innovative tools it may use - such as buying toxic debt more aggressively and transferring it to its balance sheet in unheard of and reckless new ways.

One analyst weighs in on this possibility as follows: It's a desperation-driven "course of action that is not working (and) not a sign of intelligence....If Fed funds at 1% (and huge liquidity injections aren't) inducing banks to extend credit, a further reduction....won't have any impact" either, so why do it and maybe makes things worse.

It's why analyst Tim Duy calls Fed policy "adrift" in a November 20 commentary. He cites "a distinct lack of leadership and believes Bernanke "has used up his bag of tricks" and doesn't know what to do next. He calls recent Fedspeak "littered with confusing statements that leave the true policy of the Federal Reserve in question." For example, on interest rates, whether to lower them further or stand pat, and more debate on the target rate is "nothing more than academic masturbation."

That rate is a non-issue, and "policy needs to take a different direction....One can only conclude that Fed officials do not understand their own policies. Policy is adrift. Be afraid; be very afraid....Bernanke cannot elucidate a coherent policy strategy to his organization because no such strategy exists. What does exist is a potpourri of policy responses that amounts to providing liquidity at all costs....Beyond this, the Fed is stuck in a netherworld of dual policy targets - not ready to admit the loss of the interest rate target, not ready to adopt a formal policy of quantitative easing."

"I think it is high time some real critical attention was placed on Bernanke. How complicit was (he) with designing and implementing a clearly failed policy?" And while "Fed officials publicly debate the intent of their own policies, investor confidence is collapsing. Bernanke needs to step forward and define policy. We need to pressure him into providing that leadership - or (have him) step aside for someone else to do it."

It's a sign of the times that another analyst describes this way: America's problems "are trickling down from the top and devastating (people) at every level. A vicious cancer has materialized and every segment of the economy is suffering. Americans increasingly have nowhere to turn as funds dry up and unemployment skyrockets."............

............. The World According to Paul Volcker

At a November Lombard Street Research conference in London he said: "What this crisis reveals is a broken financial system like no other in my life. (He's 81.) Normal monetary policy is not able to get money flowing. The trouble is that, even with all this (intervention and) protection, the market is not moving again....I don't think anybody thinks we're going to get through this recession in a hurry." Leading up to this has been "leveraging in the economy beyond imagination, and nobody was saying we need to do something....Alan (Greenspan) was not a big regulator."

It's now payback time, and according to economist Paul Ashworth, business spending is in "meltdown." And the same is true for maxed out consumers.

Market Watch columnist Paul Farrell sees depression ahead in 2011 and lists 30 reasons why. Here's a sampling:

-- America may lose its AAA credit rating; it already exists in name only;

-- growing numbers of companies need bailouts;

-- "Treasury sneaks corporate tax credits into bailout giveaway, shifts costs to states;"

-- sinking state revenues and rising debts signal trouble;

-- "state, municipal, corporate pensions lost hundreds of billions on derivative swaps;"

-- "consumer debt way up, now at $2.5 trillion; next area for credit meltdowns;"

-- Fannie Mae, Freddie Mac, AIG, the big banks and other companies are bleeding cash and want more taxpayer dollars;

-- bailout costs will be in the many trillions;

-- all asset classes are sinking and signal a global meltdown;

-- retailers are failing; "mall sales (are) in free fall;"

-- unemployment (is) skyrocketing; and

-- "government policy is dictated by 42,000 myopic, highly paid, greedy lobbyists" - exceeded only by Wall Street's level of greed and corruption............

And Obama has picked Timothy Geithner ( New York Fed Chief ) to take the position of US Treasury Secretary. So Geithner is a Federal Reserve man, and he has been inserted into this new postion as a tool of the Fed to get further control of US finances through the powers of his new position within the US government. The Elite Financiers of the Fed will do anything they can like this to protect their position and further their fraudulent ongoing massive scams like the one occuring just today, the " bailout " to the tun of 326 Billion of Citi. The dispicable crook Treasury Secretary Paulson said just days ago that they had decided to pass along half of the the Tarp ( Turd ) funds to the Obama crew to diseminate when they take office. Thats clearly not going to happen now, and the truth is, it was never part of their ( Paulson and Bernake's ) plan. When will the American public ever wake up and take concrete action to stop these monumentally sized ripoffs of the futures of themselves, and their children?