The Three Trillion Dollar War
Feb 23, 2008
The endless borrowing at endless interest for a seemingly endless number of years works as long as there is an endless amount of available credit; but can it continue? Here is an estimate by Joseph Stiglitz and Linda Blimes of the London Times as to the real extent of the financial cost.
From the unhealthy brew of emergency funding, multiple sets of books, and chronic underestimates of the resources required to prosecute the war, we have attempted to identify how much we have been spending – and how much we will, in the end, likely have to spend. The figure we arrive at is more than $3 trillion. Our calculations are based on conservative assumptions. They are conceptually simple, even if occasionally technically complicated. A $3 trillion figure for the total cost strikes us as judicious, and probably errs on the low side….
The price in treasure has, in a sense, been financed entirely by borrowing. Taxes have not been raised to pay for it – in fact, taxes on the rich have actually fallen. Deficit spending gives the illusion that the laws of economics can be repealed, that we can have both guns and butter. But of course the laws are not repealed. The costs of the war are real even if they have been deferred, possibly to another generation.
http://tinyurl.com/2ygcgo
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German State-Owned Banks on Verge of Collapse
Feb 20, 2008
Der Spiegal Online details how Germany is being sucked into the imploding derivatives bubble, as the Ponzi implodes internationally. Note how the position and credit situation of this bank was made desperate at the insistence of authorities in Brussels (EU), setting them on a high risk course. There should be some interesting back story there.
The German government has had to bail out state-owned banks with taxpayers’ money after their managements recklessly gambled away billions on subprime investments. But if a state-owned bank were to go under, the consequences could be disastrous for the whole economy . . . . Hard up for funds, many of the public-sector banks began speculating with high-risk securities. According to a former bank executive, many “literally stocked up on these investments” shortly before the cut-off date. Others even continued to do so after the cut-off date. Lacking a functioning business model, they turned to what was essentially gambling — and lost.
http://tinyurl.com/2q7f9x
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U.S. to turn up heat on tax protesters
Feb. 20, 2008
The current crisis creates a tax hungry IRS, and it looks like it is not the high rollers who will get the heat so much as the tax protestor or rather Tax Denier participants. To understand the position of many of the targeted non-filers more fully than this article explains, look up online Aaron Russo’s film of last year, “America: From Freedom to Fascism”; there is a great airing of the situation there.
Although someone like Snipes is high profile and wealthy, the target here is a lot of rather median-to-small earners. That begs the question of whether the IRS and Justice Department are trying to head off an exodus by the suddenly-poor from the tax collecting system, just as many are now walking away from their “upside down” mortgages. Are they expecting to have to head off a growing sense of rebellion in our financial system, as the air goes out of the Ponzi scheme?
The Justice Department, on the heels of a split verdict in its tax evasion prosecution of actor Wesley Snipes, is planning a crackdown on the so-called tax protester movement . . . . Officials say the movement costs government many millions.
By Robert Schmidt, Bloomberg News
http://tinyurl.com/2lruhq
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Wall Street Bank Run
Thursday, February 21, 2008
This commentary, by David Ignatius of the Washington Post, describes the banks’ run upon themselves, as credit contracts and contracts; and further points out just WHO is bringing money back into the country to keep things pumped up, and to whom America will owe an enormous debt.
It doesn’t look like an old-fashioned bank run because it involves the biggest financial institutions, trading paper assets so complicated that even top executives don’t fully understand the transactions. But that’s what it is — a spreading fear among financial institutions that their brethren can’t be trusted to honor their obligations.
Frightened financiers are pulling back from credit markets — going on strike, if you will — to escape the unraveling daisy chain of securitized assets and promissory notes that binds the global financial system. As each financier tries to protect against the next one’s mistakes, the whole system begins to sag. That’s what we’re seeing now, as credit market troubles spread from bundles of subprime residential mortgages to bundles of other kinds of debt — from student loans to retailers’ receivables to municipal bonds.
The hubris in this system was Wall Street’s confidence that it could value paper securities that had been sliced and diced so many times that they no longer had solid connections to their underlying assets. The nation’s leading financier, Warren Buffett, had warned years before that “derivatives,” whose value was balanced loosely on the real assets underneath, were the equivalent of “financial weapons of mass destruction.” But in the rush for profits, nobody listened.
And who is bailing out America’s biggest banks and financial institutions from the consequences of their folly? It’s the sovereign wealth funds, owned by such nations as China and the Persian Gulf oil producers. The new titans are coming to the rescue, if that’s the right word for their mortgage on America’s future.
http://tinyurl.com/2u37sl
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WEB OF DEBT BLOG 
Works of art are never finished . . .
March 2, 2008 at 5:06 pm Ellen: I’m still reading the first edition of your book (and I am so grateful for the clarity of it all; what a welcome education). Are you able to quickly summarize what topics are in the new version that are not in the original? Any hint on the topic of your new book? Many thanks for all this work…what a service.
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