Comments on: The Financial Crisis of 2008 was a Hoax

By: Stephen Pickering

Stephen Pickering — Tue, 24 Feb 2009 17:14:07 +0000

I’m listening to Bernanke in the background testifying in the Senate. None of this would be happening without the Mark to Market rule. None of it. 8% of mortgages have defaulted. Mark to Market has caused 100% of them to marked down creating billions of false, paper losses, and a false lowering of assets, which brings in the regulators applying Capital Requirement Rules, which legally keeps the banks from lending. This freeze has been and continues to be created soley by the Federal Government. Pete Townshend is right. We do live on an immanence front, and it is purely a put on.

By: Stephen Pickering

Stephen Pickering — Wed, 18 Feb 2009 17:01:59 +0000

Hey Jason,
I appreciate you taking the time to read this and comment. But these financial institutions weren’t losing money operationally. All those billions were indeed paper losses, not real losses. Then the government comes in and says, “Oh you’ve got to write all this down by this much and that means you’ve got to raise 10 billion in Capital. Oh you can’t? O.K. some of you are insolvent, goodbye common shareholder!. Or we’ll give you a loan, but we now own you, such as in the Fed now owning 80% of AIG.
If it were a fair market, a true free market, not clouded by the hand of the regulators, I might agree, but even then no profit or loss should show up on the income statement until a transaction is made. These companies were cash flow positive. They didn’t need to sell anything to pay their debts. If I own property A and I want 200K for it, but I don’t need to sell it, and you offer me 100K, and neither of us will budge, what’s the market value?
If the housing market got to be a bubble during the 02-07 expansion, also I’m assuming that the Mark to Market rule allowed them to book paper profits, extraordinary profits, as extraordinary on the upside as the losses now are on the downside. Do you know if that’s true?
I agree the Fed is a monopoly and that’s one reason that the currency shouldn’t not float. We have had a monetary crisis in this country since 1971 when Nixon closed the London gold window, and that is at the heart of this problem as well. And that’s what I am trying to say. We have a regulatory problem, not a Capitalism problem or a lack of regulation. If the Government went in, right now today and made the phone companies write down the true value of their plant and equipment, all that legacy copper, AT&T and Verizon would be History. Thanks for the link. That information looks invaluable to me. I really appreciate it.

-Stephen

By: Jason Gordon

Jason Gordon — Wed, 18 Feb 2009 16:21:40 +0000

The current situation is correctly understood to be the product of an unprecedented expansion of credit — i.e., debt — due to the Federal Reserve’s monopoly control of interest rates. (ABCT)

All the crumbling leveraged investing and mortgaged asset arbitrage are merely a symptom, though I agree with your assessment of the complications standing in the way of a market clearing correction.

The painful truth is that if there is no money available or willing to purchase what you term “assets” they are nothing of the sort. They are worthless paper. Value is demand driven, and debt based demand demands appreciation — which explains the old fashioned ‘sane’ thinking that only capital goods should be debt financed.

This link has a great graphic illustrating the total economy’s dependance on inordinate and unsustainable debt levels as a percentage of GDP.

http://www.chrismartenson.com/blog/crisis-explained-one-chart-debt-gdp/11570