The End of an Empire

by Larry Levin

What a week it has been; there were more institutional failures, more government takeovers, and the mother of all bailouts. Sadly, this week may mark the beginning of America's imperial decline. Its economy is slipping, just beginning what will surely usher in a deep global recession. It citizens are getting poorer, both nominally and inflation adjusted. The smart thing to do would be to cut costs, bring troops home, reduce Medicare and Medicaid, raise interest rates, and encourage savings. This should allow the country time to get back on its feet. However, politicians have an economic IQ of a shoe size, which leads me to believe they will do the opposite.

Perhaps the reason why socialism is becoming so attractive to so many Americans is because it offers the illusion of safety and stability. Now we reward; liars, thieves, irrationality, irresponsibility, too-big-to-be-efficient, too-big-to-fail, shuffling-other-peoples-money-buffoons, and everything bad. Those who get stuck with the bill - or who the government will be punishing are; the honest, productive, rational, responsible, too-small-to-buy-politicians, physically-productive, and savers. Aint that grand?

At least Wall Street finds this new found socialism attractive. The Dow rose nearly 800-points in two days, after the mother of all bailouts was announced. Wall Street was so happy I'm sure one could have heard - Break out the cigars and Crystal , take off at noon and I'll meet you in the Hamptons . They no longer have to fear failure; your tax dollars are saving their asses. Capitalism without failure is like religion without Hell: it won't end well.

I have read on blogs over the past few days several misguided jubilant claims that capitalism is dead. They were happy with the current state of affairs so that a new big-brother government can be instituted. Capitalism did not die. What did die, however, is the Gordon Gekko style greed-is-good-at-any-cost capitalism.

So what are the current estimates of Wall Street's greed? Let's have a look, shall we?

? $300 billion FHA housing bail out bill.

? $160 billion income redistribution plan (stimulus checks).

? $100 billion (in total) back door bailouts done without Congressional authorization, including hidden loans that may never be repaid.

? $50 billion for Treasury's plan to back money market funds.

? $700 billion for the mother of all bailouts

The current tab is already $1.31-TRILLION dollars. As I recently said - if you believe that I have a performing CDO to sell you - trust me.

The RTC bailout of the S&L's in the 90's was supposed to cost $20-billion. The eventual tab was approximately 6.5 times higher. If we just multiply the mother of all bailout section by a factor of 6.5 and assume no other cost increases, the eventual price tag may be $5.16-TRILLION ($4.55-trillion + $610-billion).

The veil has been lifted on the Wall Street-mortgage scam. Said another way - You always find out who's been swimming naked when the tide goes out. We found out that Wall Street has been kind of a nudist beach - Warren Buffett, in a recent interview.

The numbers above are staggering, and in my opinion are coming. You see, your tax dollars aren't just going to be used to bail out Wall Street, but GLOBAL banks as well. Has your Congressman told you that yet? I didn't think so.

The New York Times printed the first draft of The Mother of All Bailout's Bill recently. A portion of it reads: (a) Authority to Purchase.-The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States .

At first glance this would seem to indicate that only American firms will be bailed out. I doubt it. After all, we imported TV's and toys while we exported junk: CDOs and other mortgage debt. The rest of the world, however, doesn't feel like they should be considered investors, which is speculation. They believe they are owed a return, and YOU will be paying them back. If the Chinese wish to unload some of their purchased toxic sludge they merely sell it to, oh, Goldman Sachs for 40 cents on the dollar. Goldman will then sell it to the Treasury for 50. This will bailout world banks and global central banks, while also making a nice profit for Goldman Sachs and the other banks that get involved, all of which will be sponsored by the American taxpayer.

Have you called your Congressional representative yet? WHY NOT?!?

The US is certainly not practicing what it preaches. The Fed and the Treasury have been more than willing to pour any amount of liquidity into the banking system and the financial system, to nationalize huge enterprises like Fannie and Freddie and to take any other measures. It's clearly very much the opposite of what they prescribed to middle-income countries in the financial crisis in the 1990s," says Mark Weisbrot, an economist at the Center for Economic and Policy Research. Mr. Weisbrot says it was easy for U.S. officials to push harsh policies upon developing countries, because they wouldn't be held accountable by hard-pressed voters. Now that they are in the political hot seat, he says, the choices look very different.

What we are witnessing today is nothing less than a Katrina-like failure of Wall Street's excess, Congressional leaders, and of the Federal Reserve, casting a cloud over the viability and longevity of our entire system. What the Greatest Generation handed down to us - the richest, most powerful, most self-sufficient republic in history, with the highest standard of living any nation had ever achieved - the baby boomers, oblivious and self-indulgent to the end, have frittered away.

Regardless of your party affiliation, and with the exception of Ron Paul, I urge everyone to vote against the incumbent in every race this election cycle.

Real Time Trading Signals*for

Trade Date: 9/19/08

E-Mini S&P Trades*
(before fees and commissions):

1) Engf sell @ 1:35pm at 1250.75 = +.25 (1 lot)

2) Engf buy @ 2:25pm at 1242.50 = +3.25 (1 lot)

3) Algorithm positions (2)...combined total...+2.00

ZB (30 Year Bond) Trades*
(before fees and commissions):

1) No ZB trades today...combined total...0


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