Sunday, March 30, 2008


My head is spinning and it seems like there is too much going on to digest, let alone formulate something at least akin to a clear thought.

A couple of personal issues have been keeping my mind in check. Nothing bad, just a lot of petty things piling up seemingly at the same time, so I just was not in the right frame of mind to sit down and sort out my thoughts, not to mention writing anything down which was not completely senseless gobbledygook. Come to think of it, I probably wasn't even in the right mindset for senseless gobbledygook.

But what is going on in my own small world is nothing compared to what is unfolding on a larger scale.

The unfolding and development of events have also left me speechless.

As British and US forces are now drawn into the battle for Basra, the rising daily death count in Iraq is still being sold to the public as ample prove of how successful "the surge" is going. (If the amount of civilian deaths is the measure of success, well, yeah, you can probably subscribe to the Bush administration's claim.)

Never mind the fact that many Americans (although the numbers are steadily declining; yes, there is hope) still seem to believe the fairytale that this shameful war, which was based on bullshitting and lies to begin with and has been going on for five years now, is fought in the name of democracy and freedom, and is part of the global fight agains terrorism.

Hint: There were no WMDs, aka weapons of mass destruction (only the weapons of mass deception used by the honorable administrations in the US of A, and in the UK), and, no, Saddam Hussein had no connections to Al Quaida, and hence had nothing to do with 9/11 - even the Pentagon has recently been forced to acknowledge this.

Pssst! In his "The Age of Turbulence: Adventures in a New World", published in September 2007, Alan Greenspan, the former Fed-head, claimed that the Iraq war wasn't about freedom and democracy for the USA, or for Iraq for that matter, but it was really about ... oil! Not that Greenspan had any problem with this; he was mainly "saddened" about the fact that it is politically inconvenient to publicly acknowledge this fact.

Needless to say that the disclaimers are never touted with quite as much fanfare as the false claims. But then the latter are part and parcel of the marketing package to sell this entire mess to the public as a justified war, whereas the former would, perhaps, raise questions rather left unasked.

Closer to home, the subprime mess, aka credit crunch, aka credit crisis, seems to be reaching a new climax - or should I say nadir? - every week.

And it has lead to a - perhaps not entirely new, but nevertheless weird - kind of socialism, where profits are privatized, whereas losses are socialized. As in the Bailout of the Month, aka Operation Enduring Moneypress, or "Save the Bear" (Stearns, that is):

"The Fed spent the weekend [of March 15-16] putting together a plan to be announced Sunday evening, regardless of the outcome of Bear's negotiations, that would enable all Wall Street banks to borrow from the central bank. Mr. Bernanke called the Fed's five governors together for a vote Sunday afternoon. All five voted in favor, using for the second time since Friday the Fed's authority to lend to nonbanks.

The steps were announced at the same time the Fed agreed to lend $30 billion to J.P. Morgan to complete its acquisition of Bear Stearns. The loans will be secured solely by difficult-to-value assets inherited from Bear Stearns. If the assets decline in value, the Fed -- and therefore the U.S. taxpayer -- will bear the cost." (Wall Street Journal).

The initial JPMorgan Chase offer of 0.054-and-then-some shares in exchange for a share of Bear Stearns, which at that time amounted to about 2$ per Bear Stearns share (the closing price on March 14 had been 30$; one week earlier, Bear Stearns had traded for around 70$), was raised some days later, to amount to around 10$ a share. This was, perhaps, JPM's easter egg.

N.B.: On Tuesday, March 25, former Bear Stearns CEO Cayne "cashed out", selling his entire stake (5.6 million shares) for 10.84 apiece. This became known to the public on Thursday -- after market close. At which BSC shares took another plunge; but, as a small consolace for the possibly-soon-to-be-ex-Bear-Stearns employees who had their entire retirement money cut to around a tenth to what it was worth at the end of last year, BSC are still trading above 10$. For now. As of market close on March 28, 2008.

Meanwhile, on this side of the Atlantic, federal banks are also rushing to the rescue of beleaguered financial institutions. Take, for instance, last year's attempt by the Bank of England to rescue Northern Rock.

It turns out that the rescue attempt failed due to the sheer scale of Northern Rock's troubles -- it had to borrow 25 billion pounds from the bank of England --, and the bank now has had to be nationalized. Which, in essence, amounts to the taxpayer picking up the bill.

By 2011, Northern Rock will throw out about 2000 employees -- excuse me: It will cut about a third of its jobs, "as part of a restructuring program aimed at eventually returning the bank to the private sector." Read: After the taxpayer has payed the bill (=socializing the costs), the bank will then, after returning to profitability with the aid of "We, the people", happily privatize the profits.

The German version of "Save Our Souls", er, banks, runs along a similar vein. Different stage, part of the same drama, similar outcome (i.e., "We, the people" are left to pay the bill). And it is not only the IKB, but all of Germany's Landesbanken, who find themselves deep in the sh--er, swamps. Heaven forbid that anyone discusses the political implications of state-owned banks running into trouble, whose bill has to be picked up by the -- you guessed it! -- taxpayer.

And in a new twist in the story of Compassionate Capitalism (no state intervention, please! Unless, of course, things are starting to go awry -- for corporations), Deutsche Bank chief Josef Ackermann had the incredible chuzpe -- again something to leave me speechless -- to go screaming "State! Please! Help!", when he suddenly realized that "the natural market behavior wouldn't be enough to correct the unfolding global crisis."

A week and a half after this touching cry for help, Deutsche Bank revealed that it might not meet its profit goal, due to challenging market conditions which might/could/will "adversely affect our ability to chieve our pretax profitability objective."

Looks like Ackermann's earlier statement was a kind of pre-warning to the profitwarning. (Darn! Had I only interpreted the signs correctly and bought put-options on Deutsche Bank! Then again, on March 17th, DB had just hit a new multi-year low, and has since been rising steadily, so perhaps going short at that point was not such a great idea, after all.)

But lo and behold, before you are shedding too many tears for Mr. Ackermann: Despite the challenging conditions, he was able to collect 13.98 million Euros in compensation for 2007. Unless he spent it all at once (or invested all of it in one of those troubled SIVs, which I am pretty sure he didn't), he should be able to make ends meet for a while. After all, this amount represented a rise of 5.8 percent from his 2006 compensation of 13.2 million Euros.

"Why," my sweetheart asked after summing up our discussion, "isn't everyone up on the barricades, storming the bastilles?"

His question, of course, was of merely rhetorical character.

Top graphic: speechless, by maximatic

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