Random Thoughts

Houses Of Terror and Cards

Once again we see the impotence and ineptitude of India's governments. The vermin legislators indulge in tamashas, mouth platitudes, vote for bribes, pander to illegal immigrant vote banks ' which serve as a sea of refuge for terrorists ' and move around in armor plated limousines with commandos guarding them, while the common people have to put up with unsafe public transportation and risk their lives for their daily shopping. When will the ignorant and apathetic electorate vote to throw the rascals out?

America is soon going to give Pakistan hundreds of millions of dollars to upgrade its F-16 planes so that they will be better equipped to rain nuclear bombs on India. The lame reason is that the upgraded planes will make the Northwest province and FATA of Pakistan safer for the Pakistani army. The NDA and its newly bought allies voted to support the nuclear deal without a word on its merits or demerits, and to sell India's nuclear deterrence and foreign policy for the hundreds of billions of dollars of increased sales by Indian industrial houses in purchasing outmoded nuclear power plants from America, which will hold India hostage and in slavery for perpetuity.

One doesn't need to be a Sherlock Holmes or a rocket scientist to conclude that such coordinated multiple blasts in Bangalore and Ahmedabad within 48 hours require premeditated planning, with adequate finances, logistics, safe houses, local collaboration and escape routes. A determined terrorist bomber at the risk of life cannot be prevented, but such multiple bombings in multiple cities clearly show that the state and central governments are not putting all their resources to work and are mollycoddling those who are helping the terrorists. There is no earthly reason not to start a nationwide identification and deportation of illegal immigrants from Bangladesh and Pakistan, as a first step.

If the government thinks that Indian citizens are the perpetrators, one needs to make every effort to find the cause of such traitorous terrorist behavior and mete out severe punishment to such criminals, Hindu or Muslim, whose intention is to foment communal strife by terror. When convicted, the sentence should be carried out despite foolish idiots screaming for clemency, provided the judgment is unbiased and after the due process of law. Imprisoning them for later exchange for hijacked planes by their cohorts, prolongs the terror agony with more damage to life and property.

The American government started two wars after a terrorist attack and yet keeps preventing India from any meaningful response on Pakistani terrorist camps after dozens of attacks in multiple cities of India and its parliament. It is the main source of financing the Pakistan military government which trains, equips, finances and encourages terrorists the world over. US legislators and the executive branch are legally bribed by campaign contributions while the Indian ones prefer illegal enrichment. The former are the prime cause of the decline of the richest and most powerful nation on earth and the Indian idiots are putting the future of their country in the hands of those who have already ruined their own country for thirty pieces of silver.

Let me give you a specific example of what is going on with Fannie Mae, Freddie Mac and the housing crisis in America. Both of these are government sponsored enterprises with the implicit backing of the federal government that the corrupt crooked Congress has just made explicit by passing the housing bill this weekend and the perpetually lying idiot president withdrawing his veto threat. These entities over the past decade have spent nearly 200 million dollars lobbying the elected scum buckets so that they could generate obscene paper profits allowing them to pay their CEOs tens of millions of dollars in annual compensation. They have kept expanding their book of business by borrowing from the market cheaply because of their implicit connection to the federal government. In the process they abandoned due diligence, caution and prudence so that they now have debts exceeding five trillion dollars. These bonds that they and the investment banks (Merrill, Goldman, Bear Stearns, Lehman etc.) sold to the central banks of China, Russia, Japan etc. and the sovereign wealth funds of Asian nations are all under water and have lost substantial value. Some of these bonds which the two GSEs hold on their own books are also marked down to market and thus by GAAP accounting these firms have more liabilities than assets.

As William Poole, the retired governor of the Federal Reserve Bank of St. Louis publicly announced, these firms are presently technically insolvent and as Bill Gross, the chairman of PIMCO which manages nearly a trillion dollars of fixed income assets publicly stated, no one would buy the bonds or equity of these institutions if the federal government does not explicitly guarantee them. This is why Paulson, Wall Street's Trojan horse in the government was running around like a headless chicken arranging the rescue and idiot Bush was ordered to shut up and not veto the bill. Of course Senate finance committee chairman Christopher Dud had already gotten loans at cheaper rates which he had not publicly acknowledged and was all for rescuing both companies.

Another reason for the rescue was that over a trillion dollars of these two entities' paper is held by foreign banks including the largest chunk by foreign central banks and if the rating agencies degraded it to junk, Russia, China and Japan to name a few, would stop buying dollars or dollar denominated debt. The dollar and the US stock markets would go into a free fall. The rescue is not working yet. Over this weekend two more US banks went bust. The rating agencies have threatened to downgrade some of Fannie's and Freddie's debt and the interest rate on treasuries and mortgages have made an upward move. House prices keep falling and the overhanging inventory of unsold homes keeps rising. The rising mortgage interest rates and tightening credit standards and squeeze, prevent new people from being able and willing to buy homes. This worsens the falling price of homes which makes even more people's mortgage debt greater than the value of their home. Mortgage debt is a non-recourse loan by law and the lender has no claim of the non-home assets of the borrower who bought the home. So many homeowners simply mail the house keys to the bank and continue to live in the home until they are evicted by legal foreclosure. That takes time and court costs for the lender and increases the inventory of unsold and foreclosed homes.

Fannie and Freddie own nearly ten billion dollars worth of foreclosed homes. These homes are often vandalized and stripped plumbing and wiring sold for scrap. This makes the home unusable and leads to a drop in value of adjacent homes in the development. It also decreases the local real estate tax revenue of the township with less money for police and schools. Recently a home in Flint, Michigan owned by Fannie found no buyers for 6500 dollars even though its appraised value was 110,000 dollars when initially sold before foreclosure and vandalizing. Thus Fannie will take a loss of over 80,000 dollars on this one of thousands it owns. It is not unlikely that the government may have to put hundred billion dollars to keep the companies afloat and assume a debt of five trillion dollars increasing the national debt by 50% at the stroke of a pen.

The Federal Reserve is in a bind and is massively reflating the economy in the hope that it will stabilize the stock market, economy and house prices. Unfortunately house prices keep falling and deflating. The consumer is overburdened by debt and worried about being laid off. The destructive policies of Reagan, Bush Sr., Clinton and Idiot Bush Jr., have kept most Americans' incomes stagnant while enriching the top 1% or less. This makes houses and spending less affordable except by credit card borrowing at usurious rates, using home equity credit lines to reduce their home equity to survive or lying about their incomes and ability to pay, while taking out sub-prime loans at teaser low interest which morph into exorbitant Mafia rates in six months to a year.

The problem will never be solved until the house prices and incomes attain a matching affordable level. This can happen only if incomes go ballistic by massive inflation or house prices fall precipitously and both will destroy the US economy and the dollar. The Fed is hoping that stable house prices and rising incomes with moderate inflation will bring about a soft landing despite its incompetence over 25 years. The problem is that speculators, hedge funds and the wealthy, do not trust this scenario as long as the Fed keeps pumping up the money supply and so chose to put the potentially sinking and worthless dollars into commodities like metals, grains and energy. The Middle Eastern thief kings prefer to keep their oil in the ground as does Russia. The sovereign wealth funds, once conned and having suffered 50% losses in their investment in banks like Merrill, Morgan Stanley, Citibank etc., are unwilling to recapitalize them again. That is why the Fed opened its window to all of them and helicopter Ben is raining dollars on the world, unfortunately to little avail. God help America, as the dyslexic idiot president would say!


More by :  Gaurang Bhatt, MD

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