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Wednesday, 07/08/2009 11:18:46 PM

Wednesday, July 08, 2009 11:18:46 PM

Post# of 5943
OT: from Richard Russell's Dow Theory Letters 7/6/09 on the Wall Street and banks "bailout."

Frank Rich in the Sunday New York Times notes that Wall Streeters have put a big one over on the confused American people. He compares Madoff's thievery to the much bigger robbery pulled off by Wall Streeters. Writes Rich, "The estimated $65 billion involved in Madoff's flimflam is dwarfed by the more than $2.5 trillion paid so far by American taxpayers to bail out those masters of Wall Street's universe. AIG alone has already left us on the hook for $180 billion. It's hard for those who didn't have money with Madoff to get worked up about him when so many of the era's real culprits have slipped away scot-free. Already, some of these same players are up to similarly greedy shenanigans again, now that the coast seems to be clear.

"Washington had no choice but to ride to their rescue last fall to prevent an even greater systemic catastrophe. As the economist, Joseph Stiglitz wrote in this month's Vanity Fair, 'In the developing worlds, people look at Washington and see a system of government that allowed Wall Street to write self-serving rules which put at risk the entire global economy-- and then, when the day of reckoning came, turned to Wall Street to manage the recovery. They see continued re-distributions of wealth to the top of the pyramid, transparently at the expense of ordinary citizens....

"The Times reported on Thursday, the institutions that received the most bailout loot are often the biggest offenders. That would include the too-big-to-fail Citigroup, which has so far received $45 billion in taxpayers money, along with guarantees on $300 billion in toxic assets, to mitigate its reckless risk-taking during the reign of such obscenely rewarded (and now departed) executives as Charles Prince and Robert Rubin. While taxpayers will soon own some 34% of Citi, it is not only increasing our credit card interest rates (to nearly 30% in some cases) but raising its own base salaries (by 50%) to work around Washington's new restrictions on bonuses....

"What's uncontroversial and indisputable is that Goldman alumni have played key roles in both the Bush and Obama administrations' responses to the current crisis, even though Goldman has a big stake in the outcome. ... Goldman also rules at the New York Fed, a supposed monitor of Wall Street. Until May, the Fed's Chairman was serving simultaneously on the Goldman board. He resigned only after the Wall Street Journal reported that he was also still buying Goldman stock during his Fed tenure. At least the other failed watchdog, the Securities and Exchange Commission, has now cleaned house."

Russell Comment --The whole bailout campaign stinks to high heaven. It was created and run by Wall Street -- FOR Wall Street.

Again, I say, personally, I wouldn't have lifted a finger to bail Wall Street out. Let all these Wall Street thieves stew in their own toxic juices. Thieves should be out on the street or in jail, not luxuriating in government bailout money. In the end, the bailouts will simply extend the bear market in stocks and the economy. The Wall Streeters will be richer, and the nation will be poorer, choking on trillions in debt that will keep future generations struggling to deal with the sins of Wall Street. Too bad Obama didn't have the courage (or knowledge) to tell the nation what was going on. Obama should have said, "sit tight" and "this too shall pass." Unfortunately, after the trillions spent in bailouts, "this too will not pass."

So to put the $2.5T "bailout" in perspective:
The US-government's publicly traded debt is about $7 trillion, representing nearly 50% of the size of the US-economy.

Below I include two paragraphs by Gary Dorsch, editor of the Global Money Trends Newsletter. These two paragraphs do a great job in explaining what could happen to the US dollar and why there could be a flight to gold.

"In the midst of the longest and deepest, post World-War II recession, America's financial position with the rest of the world has deteriorated sharply. Three decades of massive trade deficits have turned the United States from the world's top lender to the world's largest debtor, - and dependent upon the whims of the so-called emerging nations, laden with huge foreign currency reserves, to finance the bailout of Wall Street Oligarchs, and President Barack Obama's social programs.
"Foreigners own roughly half of the US-government's publicly traded debt, or $3.47-trillion, representing nearly 25% of the size of the US-economy, the highest level in history. If foreign lenders were to significantly reduce their purchases of US-Treasury notes, without even dumping their current holdings, US long-term interest rates could zoom higher, and the US-dollar could crumble."

Read it and weep.
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