The Resourceful Bear Blog

Jeffrey Garten expressed the vision of a global monetary authority in 2001.
Jeffrey E. Garten, while the dean of the Yale School of Management, on July 18, 2001, wrote in his NY Times article Free Trade Has to Be Managed, the genesis construct calling for a Global Monetary Authority, a GMA: "The forces that have increased flows of money, goods, services and information around the globe and helped create growth are now working to make the economic downturn deeper and more widespread.

Few mechanisms now exist to manage globalization. Cooperation among governments is increasing, but it is still uneven. We live in a world economy, but we lack institutions that could stabilize and regulate this economy.

President Bush and the other G-7 leaders have to decide whether they have the foresight to construct new systems that can regulate commerce across borders as well as act to moderate a worldwide recession".

In September 2008 Mr. Garten specifically called for a Global Monetary Authority.
On September 25, 2008, in Financial Times article, he wrote We Need A New Global Monetary Authority

In late October 2008, Australia Central Banker Guy Debelle states that US Federal Reserve Dollar Swap Agreements provide global financial stability and liquidity
Business Spectator presents the October 31, 2008 Reuters article RBA's Debelle Says Signs US Dollar Swaps Are Easing Liquidity Pressure which reports: "Top Australian policy maker on Friday said there were signs the Federal Reserve's massive expansion of US dollar swaps with other central banks seems to be working to ease liquidity pressures in global markets.

In a speech to a risk management conference, Reserve Bank of Australia, RBA, Assistant Governor Guy Debelle also said the domestic money market had proven resilient to the global crisis, thanks in part to an expansion of the central bank's liquidity operations.

Debelle, who heads the RBA's financial markets unit, said the Fed's expansion of US dollar swap agreements with an expanding range of other central banks seemed to be helping.

"Overall, it appears this has had some success with conditions in the US dollar swap markets improving over the last few weeks, and the cost of US dollar funding declining to more normal rates," he said.

The Fed established a dollar swap agreement with the RBA last year, essentially lending it US dollars that it can then lend out in return for collateral denominated in Australian dollars.

Just this week the Fed established $30 billion of swap lines with central banks in Brazil, South Korea, Singapore and Mexico, bringing the number of lines to 14.

Ten of the swap lines now amount to $255 billion, while those with the European Central Bank, the Bank of England, Bank of Japan and the Swiss National Bank are technically unlimited.

This sea of dollars seems to be meeting safe-haven demand for the currency across the world, helping pull down the three-month London interbank rate to 3.19 per cent on Thursday, from a ruinously high 4.82 per cent earlier this month.

Debelle said the RBA's expansion of its own domestic market operations had proved effective in meeting the demand for cash. It has widened the pool of eligible collateral for its repurchase agreements, extended the maturity of its lending and offered term deposits to commercial banks.

"In particular, the fact that the Bank has for a long time, dealt daily with a wide range of counterparties across a wide range of maturities has allowed us to respond quickly and flexibly," he said.

"Nevertheless, the Bank is continually reviewing all aspects of the operating framework to ensure that it is consistent with the evolving nature of the domestic financial market."

Will Dollar Swap Agreements lay the foundation and confidence for a Global Monetary Authority?
As evidenced by a pull down the three-month London interbank rate to 3.19 per cent on Thursday, from a ruinously high 4.82 per cent earlier this month, Dollar Swap Agreements are working to some degree.

The goal of a Global Monetary Authority is liquidity and stability, this is currently being provided by Dollar Swap Agreements, but the massive Dollar Swap Agreements are only part of the reason why the three month London interbank rate fell some. The other reason is that there has been profit taking on the unwinding of yen carry trade, better termed the euro carry trade, which is the EUR/JPY, which had fallen to the lowest level since 2003.

Stockcharts.com shows retracement in the yen carry trade ... FXE:FXY Daily ... FXE:FXY weekly

Cyclopip in BabyPips October 30, 2008 article Cross-Eyeing: EUR/JPY - Trade Adjustment shows the profit taking retracement in the chart of the EURJPY ... Retracement of the EURJPY

I think the effect of dollar swap agreements will be short lived. I expect a global financial breakdown is coming regardless of the US Central Bank dollar swap agreements.
My belief is that the 0.5% funded Bank of Japan currency traders will continue to short sell a number of currencies, and especially short sell the EUR/JPY, which will cause continued disinvestment globally. Interest rate differentials between central banks, as well as the indebtedness of emerging markets like the former soviet union nations of Ukraine, Hungary and Romania, traded by GUR, to the Austrians traded by EWO, will assure that stocks and currencies will continue to sell off with abandon. As I read, the Gaius Marius article CDS Funding Disaster, I can understand why the Fed has been aggressively pushing dollar swap lines and why it was so eager to "loan" AIG money. I look at the charts in Trader Tim Knight article Is It Back?, and concur that the markets are likely to fall lower again beginning tomorrow October 31, 2008.

Eventually a tough global monetary authority will arise.

Gold is the investment safe haven for those believe that the US Dollar has peaked in value and who want to be independent from a future Global Monetary Authority
Was a high been established in the US Dollar on October 27, 2008 at 86.75? Only time will tell! ... $USD Weekly ... $USD Daily

Jesse reports that Dubai runs out of gold.

The weekly chart of gold reads $738.50 ... $GOLD

Jesse shows that gold having hit $730 is likely to head higher.

Yes, gold is back to the $730 region of a year ago as is seen in the Kitco Alf Field Point of Recognition article of Oct 29 2007.

Is $730, strong support for gold? Tommorrow October 31, will likely tell.

I like to follow the five day Yahoo Finance chart of the EUR/JPY, USD/JPY, UUP, GLD, and RJI.

It's an ideal time to invest in gold: I recommend that one buy gold and put it far, far away from the current financial system, safe and sound in a guarded vault, like BullionVault and GoldMoney, with an account personally at streetTracks Gold Trust, and in physical possession of gold coins.

It was a hey day for all, except the yen carry traders, as the US Dollar, US Stocks, world stocks, debt, and gold rose on the massive support of the US Dollar by the Federal Reserve. Joe Bel Bruno of the Associated Press wrote that Wall Street moved higher on hopes of credit recovery. Hope is all that can be expected.

The ongoing five cay Yahoo Finance chart of UUP, HYG, LQD, MUB, CMF, and SPY, shows a "pop" came to debt instruments, as the US Dollar, US stocks and world stocks rose as the US Federal Reserve provided Dollar support ... The rise seen here in the chart of UUP, HYG, LQD, MUB, CMF, and SPY is likely capitalism's finale rally.

Eddy Elfenbein documents today's fall in The Ted Spread to 3.27; it closed down at 2.83.

Mike Mish Sheldon relates: 'Armageddon in Corporate Bonds'; and I say 'Ditto In Municipal Bonds'.

Gold, $GOLD, rose $2 to close at $790.

The gold ETF, GLD, rose to $78.50

Oil, USO, rose to $61.80

The US Dollar, $USD, rose to a new high at 83.07 ... $USD

The chart of the dollar bull ETF, UUP, suggests that a top is being made in the US Dollar ... UUP.

US stocks, VTI, closed up, in a pennant formation, to close at 49; prices usually fall from such patterns ... VTI

World stocks, EFA, closed up in similar fashion to close at 47.35.

US Treasury Bond, TLT, rose to 94.62

World currencies, DBV, rose 2.75% in a pennant pattern to close at 22.

The S&P, SPY, and the Dow, DIA, rose more than the Nasdaq 100, QQQQ, and the Russell 2000, IWM:
SPY 6%
DIA 6%
QQQQ 3%
IWM 4%

The chart of the Russell 2000, IWM, shows the death of capitalism quite well. The Russell 2000 is comprised of small US companies highly dependent on a functional financial, banking and credit system. Unfortunately the lending system had a cardiac arrest on September 11, 2008 when the banks found they could not sell stock to obtain capital; in consequence lending ceased across the board. While the Federal Reserve and world central banks have provided liquidity facilities in the extreme, and even provided full dollar funding to the markets, trust between lender and debtor has expired and cannot be and will not be enjoyed again. The stock and bond markets are going to fall desperately.

Notice the fall off of value in the Russell 2000 beginning on September 11, 2008, that is 9-11-2008, and then a short sell covering rally and a crescendo fall, that is waterfall, lower; and now a rise in a pennant pattern. Prices are usually resolved down from such patterns ... IWM

Risers of the day included:
Metal and mining manufacturing 15%
Energy producers XLE 10%
Utilities VPU 8%
Energy services OIH 11%
Steel SLX 11%
Brazil EWZ 9%
China FXI 8%
Russia 8%
BRICS EEB 7%

A major part of today's rally was simply a rally to get the oil stocks back up to the edge of a massive head and shoulders pattern that goes back to April 2006. Take for example, Exxon Mobil, XOM: it has moved back up to 75 so it can fall once again ... XOM

Despite the central banks moving towards extending 0% interest, the bond markets have declared a defacto interest rate hike. For example, the interest rate on the 10 year US Government note, $TNX, has been rising. It is going up from 38 ... $TNX

The joy on Wall Street and on many investment blogs was simply capitalism's death rattle -- a gurgling or rattle-like noise produced shortly before or after death by the accumulation of excessive respiratory secretions in the throat.

Financial services, IYF, rose 2%, and Real estate, IYR, rose 1% ... Chart of IYR shows the bearish dragonfly candlestick

The yen carry trade, EUR/JPY, FXE:FXY, termed the Armageddon Trade for its recent damage to global wealth and liquidity recently, fell 0.10%; and the yen, FXY, fell 0.25%. The chart of FXE:FXY shows the Armageddon Fall in the Armageddon Trade, the term applied to the ability of the yen carry trade to cause a total wipe out of stock, commodity and currency values. This chart is the chart of the century. The chart of the once lucratively rewarding energy service providers, OIH, shows three black crows as the yen carry trade, better termed, the euro carry trade unwound; the fall is always more dramatic than the rise ... OIH ... FXE:FXY

The Euro, FXE, fell 0.4%.

The British Pound, FBX, fell 0.8%.

The Canadian Dollar, FXC, fell 0.3%.

World currencies, DBV, rose in a pennant pattern to close at 22 ... DBV

The ongoing five day Yahoo Finance chart of USD/CHF compared to USD/EUR, USD/JPY, UUP, and GLD, shows all the currency pairs taking the US Dollar higher; surprisingly liquidity flowed into gold, despite the rise in the US Dollar. I attribute gold's rise to the rise in the metal and mining manufacturing stocks, XME, 15% rise ... Chart of currency trades shows gold to be surprisingly up

The chart of gold relative to stocks, GLD:VTI, provides clear, cogent, and convincing evidence of both the value of gold and the investment demand for gold ... GLD:VTI

I hope for those still invested in the stock markets that they went short at the end of the day.

The suretors, that is the debt guarantors, were especially good candidates to go short; these included Ambac, ABK, Radian Group, RDN, and MBIA, MBI as these had hoped to get Federal Reserve funding. They are now set to fall greatly ... ABK ... RDN ... MBI

The risk of loss of investment principle is at the highest level ever, despite assurances from central banks globally that monies in banks is guaranteed; given the fall of stock and bond market value I believe that is coming, their statements of surety are going to be severely tested.

If one has wealth, it is best to put it far, far away from the current financial system, safe and sound in a guarded vault, like BullionVault and GoldMoney, with an account personally at streetTracks Gold Trust, and in physical possession of gold coins.

This especially being the case, as I cite the horrific experience of clients of Lehman Brothers whose accounts were frozen and now have to come up with money to secure their position.

Tom Cahill of Bloomberg on October 15, 2008 reports that "Lehman Brothers ... hedge-fund clients may have to pay more collateral on $65 billion of assets frozen when the investment bank went bankrupt a month ago. Lehman’s London-based prime brokerage has about 3,500 active clients including hedge funds that own about $45 billion in securities, Steven Pearson, the partner at PricewaterhouseCoopers responsible for unraveling the unit, said ... They hold an additional $20 billion in short positions, or bets that prices will fall. While investors are largely unable to access their Lehman accounts, the value of the securities continues to fluctuate along with the markets. The clients may be required to put up more collateral if the value of those securities drops, a process known as a margin cal ... ‘Who is the holder of the risk of the securities? The hedge funds. If the value of the securities fell, they have to meet margin calls.’ Lehman’s bankruptcy, the world’s biggest, has rocked hedge funds that relied on the firm to provide loans, clear trades and handle administrative tasks."

Jesse in chart article is suggesting support for gold will come in at $740 before it soars again to $930 and beyond.

Elaine Meinel Supkis provides appropriate social commentary; "As the US tumbles into a bad, bad recession, we are having an election. And there is virtually no discussion about what is really wrong. Indeed, the main focus in this election isn't war or our trade deficit or yawning budget deficit, it is nearly all about race. To the fury of many who want otherwise. But then, from day one in the US, it has been all about race and slavery which were embedded within our Constitution and excised very painfully and often, extremely violently. I will discuss this history later. First, the economic news. After central banks nationalized the G7 banking systems, they managed to sort of restart the old status quo. This is bad".

Julie Creswell and Ben White of the New York Times in article 'The Guys From Government Sachs' document the bloodless political and economic coup effected by Hank Paulson to overthrow the neoliberal laissez faire capitalism established by University of Chicago professor Milton Friedman.

The Secretary of the US Treasury has appointed Wall Street Goldman Sachs investment bankers as stakeholders in state capitalism, that is state corporatism, to be taskmasters enslaving Americans and the world to debt.

"This summer, when the Treasury secretary, Henry M. Paulson Jr., sought help navigating the Wall Street meltdown, he turned to his old firm, Goldman Sachs, snagging a handful of former bankers and other experts in corporate restructurings.

In September, after the government bailed out the American International Group, the faltering insurance giant, for $85 billion, Mr. Paulson helped select a director from Goldman’s own board to lead A.I.G.

And earlier this month, when Mr. Paulson needed someone to oversee the government’s proposed $700 billion bailout fund, he again recruited someone with a Goldman pedigree, giving the post to a 35-year-old former investment banker who, before coming to the Treasury Department, had little background in housing finance.

Indeed, Goldman’s presence in the department and around the federal response to the financial crisis is so ubiquitous that other bankers and competitors have given the star-studded firm a new nickname: Government Sachs.

The power and influence that Goldman wields at the nexus of politics and finance is no accident. Long regarded as the savviest and most admired firm among the ranks — now decimated — of Wall Street investment banks, it has a history and culture of encouraging its partners to take leadership roles in public service.

It is a widely held view within the bank that no matter how much money you pile up, you are not a true Goldman star until you make your mark in the political sphere. While Goldman sees this as little more than giving back to the financial world, outside executives and analysts wonder about potential conflicts of interest presented by the firm’s unique perch.

They note that decisions that Mr. Paulson and other Goldman alumni make at Treasury directly affect the firm’s own fortunes. They also question why Goldman, which with other firms may have helped fuel the financial crisis through the use of exotic securities, has such a strong hand in trying to resolve the problem.

The very scale of the financial calamity and the historic government response to it have spawned a host of other questions about Goldman’s role.

Analysts wonder why Mr. Paulson hasn’t hired more individuals from other banks to limit the appearance that the Treasury Department has become a de facto Goldman division. Others ask whose interests Mr. Paulson and his coterie of former Goldman executives have in mind: those overseeing tottering financial services firms, or average homeowners squeezed by the crisis?

Still others question whether Goldman alumni leading the federal bailout have the breadth and depth of experience needed to tackle financial problems of such complexity — and whether Mr. Paulson has cast his net widely enough to ensure that innovative responses are pursued.

“He’s brought on people who have the same life experiences and ideologies as he does,” said William K. Black, an associate professor of law and economics at the University of Missouri and counsel to the Federal Home Loan Bank Board during the savings and loan crisis of the 1980s. “These people were trained by Paulson, evaluated by Paulson so their mind-set is not just shaped in generalized group think — it’s specific Paulson group think

There are people at Goldman Sachs making no money, living at hotels, trying to save the financial world,” said Jes Staley, the head of JPMorgan Chase’s asset management division. “To indict Goldman Sachs for the people helping out Washington is wrong.”

Mr. Paulson himself landed atop Treasury because of a Goldman tie. Joshua B. Bolten, a former Goldman executive and President Bush’s chief of staff, helped recruit him to the post in 2006.

Neel T. Kashkari arrived in Washington in 2006 after spending two years as a low-level technology investment banker for Goldman in San Francisco, where he advised start-up computer security companies.

The A-team includes Dan Jester, a former strategic officer for Goldman who has been involved in most of Treasury’s recent initiatives, especially the government takeover of the mortgage giants Fannie Mae and Freddie Mac. Mr. Jester has also been central to the effort to inject capital into banks, a list that includes Goldman.

Another central player is Steve Shafran, who grew close to Mr. Paulson in the 1990s while working in Goldman’s private equity business in Asia. Initially focused on student loan problems, Mr. Shafran quickly became involved in Treasury’s initiative to guarantee money market funds, among other things.

Other prominent former Goldman executives now at Treasury include Kendrick R. Wilson III, a seasoned adviser to chief executives of the nation’s biggest banks. Mr. Wilson, an unpaid adviser, mainly spends his time working his ample contact list of bank chiefs to apprise them of possible Treasury plans and gauge reaction.

Another Goldman veteran, Edward C. Forst, served briefly as an adviser to Mr. Paulson on setting up the bailout fund but has since left to return to his post as executive vice president of Harvard. Robert K. Steel, a former vice chairman at Goldman, was tapped to look at ways to shore up Fannie Mae and Freddie Mac. Mr. Steel left Treasury to become chief executive of Wachovia this summer before the government took over the entities.

Treasury officials acknowledge that former Goldman executives have played an enormous role in responding to the current crisis. But they also note that many other top Treasury Department officials with no ties to Goldman are doing significant work, often without notice. This group includes David G. Nason, a senior adviser to Mr. Paulson and a former Securities and Exchange Commission official.

Robert F. Hoyt, general counsel at Treasury, has also worked around the clock in recent weeks to make sure the department’s unprecedented moves pass legal muster. Michele Davis is a Capitol Hill veteran and Treasury policy director. None of them are Goldmanites.

Timothy F. Geithner, the president of the Federal Reserve Bank of New York, told him no, according to a former Lehman executive who requested anonymity because of continuing investigations of the firm’s demise. Its options exhausted, Lehman filed for bankruptcy in mid-September.

Mr. Geithner, 47, played a pivotal role in the decision to let Lehman die and to bail out A.I.G. A 20-year public servant, he has never worked in the financial sector. Some analysts say that has left him reliant on Wall Street chiefs to guide his thinking and that Goldman alumni have figured prominently in his ascent.

After working at the New York consulting firm Kissinger Associates, Mr. Geithner landed at the Treasury Department in 1988, eventually catching the eye of Robert E. Rubin, Goldman’s former co-chairman. Mr. Rubin, who became Treasury secretary in 1995, kept Mr. Geithner at his side through several international meltdowns, including the Russian credit crisis in the late 1990s.

Mr. Rubin, now senior counselor at Citigroup, declined to comment.

A few years later, in 2003, Mr. Geithner was named president of the New York Fed. Leading the search committee was Pete G. Peterson, the former head of Lehman Brothers and the senior chairman of the private equity firm Blackstone. Among those on an outside advisory committee were the former Fed chairman Paul A. Volcker; the former A.I.G. chief executive Maurice R. Greenberg; and John C. Whitehead, a former co-chairman of Goldman.

The board of the New York Fed is led by Stephen Friedman, a former chairman of Goldman. He is a “Class C” director, meaning that he was appointed by the board to represent the public.

During his tenure, Mr. Geithner has turned to Goldman in filling important positions or to handle special projects. He hired a former Goldman economist, William C. Dudley, to oversee the New York Fed unit that buys and sells government securities. He also tapped E. Gerald Corrigan, a well-regarded Goldman managing director and former New York Fed president, to reconvene a group to analyze risk on Wall Street.

Some people say that all of these Goldman ties to the New York Fed are simply too close for comfort. “It’s grotesque,” said Christopher Whalen, a managing partner at Institutional Risk Analytics and a critic of the Fed. “And it’s done without apology.”

But when bankruptcy loomed for A.I.G. — a collapse regulators feared would take down the entire financial system — federal officials found themselves once again turning to someone who had a Goldman connection. Once the government decided to grant A.I.G., the largest insurance company, an $85 billion lifeline (which has since grown to about $122 billion) to prevent a collapse, regulators, including Mr. Paulson and Mr. Geithner, wanted new executive blood at the top.

They picked Edward M. Liddy, the former C.E.O. of the insurer Allstate. Mr. Liddy had been a Goldman director since 2003 — he resigned after taking the A.I.G. job — and was chairman of the audit committee. (Another former Goldman executive, Suzanne Nora Johnson, was named to the A.I.G. board this summer.)

Like many Wall Street firms, Goldman also had financial ties to A.I.G. It was the insurer’s largest trading partner, with exposure to $20 billion in credit derivatives, and could have faced losses had A.I.G. collapsed. Goldman has said repeatedly that its exposure to A.I.G. was “immaterial” and that the $20 billion was hedged so completely that it would have insulated the firm from significant losses.

As the financial crisis has taken on a more global cast in recent weeks, Mr. Paulson has sat across the table from former Goldman colleagues, including Robert B. Zoellick, now president of the World Bank; Mario Draghi, president of the international group of regulators called the Financial Stability Forum; and Mark J. Carney, the governor of the Bank of Canada."

I am glad the New York Times is telling us the truth about the ruling elites from Goldman Sachs. But note, that they confuse readers by praising these bankers. This is a prime example of Orwellian disinformation where left is right and down is up, bad becomes good, and error becomes policy. God's Word reassures me greatly that He is Sovereign throughout all of this, and that He has two kinds of vessels, the first vessel is found in Romans 9:20-23 and the second vessel in Isaiah 51:20 and I Thessalonians 5:9.

Elaine Meinel Supkis provides the charts from the Federal Reserve which document how much the insolvent banks are borrowing to stay alive. The FRED GRAPH documents the banks have no reserves, and are borrowing to recapitalize their balance sheets to protect them as long as they can from being wiped out by exposure to settlement on credit default swaps and other derivatives. This chart shows capitalization after the banks discovered they could not sell stock to obtain capital.

Here are the charts of the money center banks, KBE, and regional banks, IAT; the yen carry traders sold out of their interest already, leaving others holding the bag in these toxic walking dead men. Both charts show today's bearish dragonfly candlesticks ... KBE ... IAT

The US Government will be carrying out state corporate rule through the CPFF lending facility at the nine banks it acquired. Lending which use to come from the commercial lending marketplace, will now be coming from the Federal Reserve, that is the Banks of Banks, and flowing to corporations deemed essential for the purposes of the security and prosperity needs of the North American homeland, that is combined Canada, Mexico, and America, that, is CanMexAmerica.

Eddy Elfenbein in article 'October 20, 2008 CEO Pay at the Nine Government-Owned Banks' presents the CEO pay of the nine banks which have been nationalized.

State corporate rule was rejected by both the currency traders and the stock investors today
Gaius Marius relates in article Dictatorship Of The Treasury relates that the banking system is being nationalized piecemeal and that the facility of TARP is nationalization of the financial system.

I say that the announcements of our leaders Ben Bernanke and Hank Paulson relate a political and economic coup, for the purpose of establishing state capitalism, that is state corporatism.

John writes in The Beast Arises Through Economic Crisis: "By using monetary inflation as a sapping device, the FED is knocking down the few federalist pillars that, at least in theory, separated the various layers of government. It is also preparing to nationalize key segments of the commercial economy. All of this is being done through the FED’s New Deal era “emergency powers” to extend “credit” to any entity it chooses, whether governmental, commercial, or “public-private partnership.”

The revolution of 1913-1933, which inflicted the Federal Reserve, income tax, and the New Deal apparatus upon the United States, left us with a system Mussolini described as a “corporate state,” more commonly known as Fascism.

Admittedly, the American version was milder than most, at least domestically. The Revolution of 2008 is consolidating the elements of that system into a monolithic, unitary State of the sort Lenin and his heirs would applaud.

The creation of the Federal Reserve in 1913 was a partial enactment of the fifth plank of the Communist Manifesto, which called for creation of “a national bank with State capital”; last week, with the creation of a de facto economic dictatorship under the Secretary of the Treasury, Congress implemented the other key element of that plank, “centralization of credit in the hands of the state.”

Approval of the new economic dictatorship was the irreducible purpose of the so-called Economic Stabilization Act, which — true to the measure’s pedigree of grandly named government interventions — has summarily failed to stabilize the economy.

The $700 billion disbursed by the bill was a trifle, in light of the magnitude of the debt flood to be “bailed out” and the ability of the FED to create what it’s pleased to call “money” in any amount it chooses. But that relatively trivial amount was enough to create a constituency for the bill not only on Wall Street, but also in statehouses, city halls, and wherever else the Horseleach’s Daughters convene.

With both the corporatist and political elements of the parasite class enlisted to support the revolution, all that remained was the neutralize the productive class — the common people, who found ourselves on the bad end of what the reliably perceptive Chris Floyd calls “one of the largest single redistributions of wealth since the Bolsheviks seized power in Russia in 1917.”

Unanimity is, almost without exception, a bad thing in politics. The near-unanimity of the electorate in rejecting the Wall Street “bailout” measure is one of those incalculably precious exceptions. In the teeth of this near-unanimity, Congress — led by the Senate, supposedly the more deliberative chamber — took the rejected bill, an austere 3-page Enabling Act for the economic dictatorship, plumped it up with several hundred pages of bureaucratic boilerplate and undisguised pork, and passed it four days later.

Bribing a Congressman is generally about as challenging as seducing Catherine the Great. Getting the institution to surrender its institutional control over the public purse was a bit more difficult. Some Congressmen — well, at least one, perhaps two or three others — recalled their duty to their constituents, as well as their constitutional mandate to control the public purse, and held fast. Many others opposed the Enabling Act/Plutocrat Bailout because of simple terror over the prospect of immediate unemployment.

But in this case, bribery was coupled with undisguised official terrorism — the use or threatened use of violence to achieve a radical change in the political system.

As Brad Sherman, a Democratic Congressman from California, testified in a remarkable address on the House Floor — an address the likes of which will soon be punishable as sedition — that representatives of the Regime candidly informed recalcitrant congressmen that refusal to pass the Enabling Act would result in nothing less than “martial law in America.”

The problem with that explanation, of course, is that the Bush Regime is actively preparing for martial law. So is the German government. So is the British government. Most likely, so are other governments throughout the Euro-Zone, and everywhere else central banks are still coupled to the rapidly disintegrating dollar.

There is no way we can honestly construe the comments reported by Rep. Sherman as anything other than a legitimate, credible threat to accomplish, through a coup de main, what Congress was being ordered to do: Surrender its power over the purse to an executive branch department that is an appendage of Wall Street".

I relate that laissez-faire capitalism is dead. The Milton Friedman neoliberal free-market ideology that enabled securitization of auction rate securities, CDOs, subprime mortgages, and monoline bond insurance, is history. The age of financial neoliberalism, whose claim was that modern global financial markets would provide for stability and growth, is over. The University of Chicago Professor's policies have only resulted in destabilizing speculation, spectacular asset deflation, runaway product price inflation, and enslavement of Americans to debt and the taskmasters of government and banking.

The currency traders, with funding coming from 0.5% interest loans from the Bank of Japan, sold the EUR/JPY short, inducing those invested in stocks to sell ... FXE:FXY

And for short sellers, it was like shooting ducks in a pond; it was simply "click and shoot" to amass amazing returns. But beware, those who play with fire and financial alchemy, often get burned badly. There could come a liquidity run where brokerages globally will shut down without warning; and the day trader, and those still invested there, awaken to find their funds frozen like those in Iceland's banks: one may not always have full and immediate access to one's funds held in brokerage accounts.

The lending markets continued in freeze over mode: The Ted Spread traded at 4.3 which suggests that a total world wide financial collapse is imminent.

It is important to understand that there is no, repeat no commercial lending going on at the current time. Chan Sue Ling in Bloomberg article Shipping Lines Say Tight Credit Cutting World Trade relates that German banks with funds to lend are offering about 200 basis points above Libor, double previous rates, while in Singapore the rate is plus-350 points, according to Tobias Koenig, managing partner of Koenig & Cie. In the main though, shipping lines aren't able to borrow, he added.

``There is no rate because all banks are closed for business,'' he said. ``You have a few banks rescuing their best customers, but that's it.''

More than two-thirds of 104 bankers polled said they were unable to obtain funding at or close to Libor, according to an October survey by trade publication Marine Money Asia. About 80 percent expect shipping bankers will not be able to raise enough financing for clients this year and next, the survey showed.

``There are a lot of banks that will do deals today but they will do it on a bilateral basis with good clients, which they have long relationships with,'' Tom Zachariassen, an executive at Nordea Bank, said yesterday.

Libor, set by 16 banks in a survey conducted by the British Bankers' Association each day in London, determines rates on $360 trillion of financial products worldwide, from home loans to derivatives. The cost of borrowing in dollars for three months fell 12 basis points to 4.64 percent yesterday.

I relate that the Federal Reserve will be unable to stimulate lending in the marketplaces and the credit gridlock, that is, the lending gridlock, will continue for a number of reasons:
1) the banks know they are walking dead men, and simply want the TARP swaps to help preserve their balance sheet.
2) they are aware the consumer is tapped out and overextended and at risk for non payment of loans.
3) they want to preserve capital as they and their customers have exposure to settlement of credit default swap derivatives on Lehman Brothers and others.
4) there is no trust between lender and debtor as the fair value accounting rule of the SEC, and the mark to market provisions of FASB 157 have been thrown out the window.
5) there is an awareness that the CPFF facilities are for the top tier Fed invested nine banks.

The municipal bond market has seized up again, and the municipal bond ETFs and mutual funds will be falling awesomely lower in value, as a run on these gets underway.

States and municipalities are going to dramatically reduce payrolls. Funding for new projects cease will cease, and countless municipalities will be going into foreclosure. Only the most basic of services, such as a low level of law enforcement, will be provided.

Corporations, finding the commercial paper market place shuttered, are in a desperate way. They lack the cash on hand to cut payroll and accounts payable checks, buy raw materials, and order ongoing services, and as such are going to quickly close. Others finding lending closed, are not going to be able to refinance debt, and will fail, and go into bankruptcy.

Investment grade debt traded flat ... LQD

Junk bonds, HYG, fell 4% ... HYG

The municipal bond market, MUB, fell 3% ... MUB

Eddy Elfenbein relates today's carnage: "The Dow dropped today by 733.08 points to close at 8577.91. That's a loss of 7.87%. By percentage, this was worse than both October 9 (-7.33%) and September 29 (-6.98%). This was the worst day for the Dow since October 26, 1987, and it was the ninth-worst day ever".

Charts reflect the days transactions:
The gold ETF, GLD, traded slightly up to its 50 day moving average ... GLD

Gold, $GOLD, traded slightly down at its 50 day moving average at $840 ... $GOLD

The US Dollar, rose slightly to $82.09 ... $USD

US Treasuries, TLT, rose slightly to their 50 day moving average at 95.01 ... TLT

Oil, USO, fell 6% on an unwinding yen carry trade, that is, on a falling EUR/JPY. The media is reporting that oil is falling on grim economic data; however this is only partially true. Oil, like the stocks, are being driven lower by a falling yen carry trade, better termed euro carry trade. One of the greaest economic stories never told is that the Euro, FXE, as well as the other commodity currencies such as the Australian dollar, FXA, and the Canadian Dollar, FXC, in carry trades have carried stock values in great waves of gain and loss ... USO

Energy producers, XOP, fell 18% ... XOP

Energy services, OIH, fell 17% ... OIH

Metal and mining manufacturers, XME, fell 17%. Rio Tinto announced it is cutting production at some of its aluminum smelters in response to slowing Chinese growth. Rio Tinto chief executive Tom Albanese declared that the Chinese economy “is pausing for breath after spectacular GDP growth.” Shares in the mining giant plummeted by 16 percent in response to the announcement. Other energy and commodity firms’ stock also fell yesterday, including Alcoa (down 12.8 percent) and Exxon Mobil (14 percent) ... XME

Real estate fell 14% ... IYR

Real Estate REITS, RWR, fell 13% ... RWR

BRICS, EEB, fell 18% ... EEB

Emerging Markets, EEM, fell 16% ... EEM

World shares EFA, fell 11% ... EFA

The Nasdaq, QQQQ, fell 9% ... QQQQ

The Russell 2000, IWM, fell 9% ... IWM

Gold and gold alone is the measure and means of wealth preserving wealth in a deflationary investment world
David N. Vaughn relates in A Coming New Currency!, the Alf Field statement: "The resulting massive creation of new liquidity would destroy or vastly reduce the purchasing power of currencies as we know them today" ... "The assets in the most secure category at the tip of the inverted pyramid are gold and silver bullion, assets that have performed the function of protecting wealth throughout the ages. In the layer above the precious metals lie the companies that mine and hold large deposits of gold and silver".

Adrian Ash presents the question Why choose gold when the Fed lowers the central bank interest rates.

I recommend that one be invested in gold, because of financial system instability, lack of liquidity and because of possible inability of the US government to make good on its surety promises of insuring bank accounts, brokerages, money markets and now commercial paper. I recommend diversification of investment in gold in four locations immediately, yes immediately: the gold ETF, GLD, directly through streetTRACKS Gold Trust, and not in a brokerage account; two BullionVault, three GoldMoney; and four a limited number of gold coins purchased from sources like Kitco.com.

The end of monetary expansion ends in all things being rented to the central bank
Elaine Meinel Supkis in article Burns, Nixon, Gold And The New World Order Chinese relates "US government debt is now the ONLY really solid 'reserve' left as the Federal Reserve sells or rather, gives away, Treasuries in return for useless 'assets' which no banker in their right mind considers to have any realistic future value at this point. But the Treasuries themselves are drawn up against the biggest pool of potential wealth on earth: the accumulated holdings, belongings and future earnings of the American People, themselves!

Germany ended its monetary hyper-inflation collapse very simply: the government declared that all things in Germany were now going to be RENTED TO THE BANKS via fiat. The new currency was called, 'Renten Mark' which was a huge change from 'Reichsmark.' Governments can do this! When Germany finally went bankrupt less than 10 years later, all Germans were bankrupt. This total bankruptcy was dealt with very severely: the rise of Hitler and fascism coupled with the open looting first, of the Jews, then of all of Europe".

I relate that the United States is continuing down the same path as Germany, that is the end of monetary expansion ends in all things being rented to the central bank: all different types of debt is now being swapped out by the banks for US Treasuries as is seen in the US Federal Reserve Press Release of October 13, 2008.

Because of this, there will be a run on the US Treasuries, TLT, producing a rise in interest rates, $TNX, and a sell off of the US Dollar, $USD, especially through the currency traders obtaining 0.5% interest loans from the Bank of Japan, and going short the USD/JPY and short the USD/CHF. This will cause gold to rise in value. And US stocks, VTI, will continue to tumble lower in a death spiral together with the world stocks, EFA.

To address an ongoing dearth of liquidity and financial instability, the world bankers will institute a new international financial architecture, which see the rise of a global monetary authority, which will institute unified regulation of banking globally.

Soon there will be no national seigniority, as sovereign nations and their constitutions become history, as principles of global governance work through regional economic and security pacts or agreements; and these will serve as the basis for regional currencies. The US Dollar will be replaced with the Amero for purposes of commerce and trading in the North American homeland.

A world banker, a Seignior, meaning top dog who takes a cut, will arise to take charge of finance, banking, commerce and trade world wide. He will install a global seigniorage wealth and commerce system. This individual will have such a commanding way that interest rate differentials between nations and regions will disappear. All seigniorage will come and go through him: all sovereign wealth funds, and banks will report to him.

Once financial institutions fail, and stocks and bonds fail, and currencies totally burn out, the principle that "the end of monetary expansion ends in all things being rented to the central bank" will compel the Seignior to institute a one world currency system which is based upon the "mark" which comes from the Greek word charagma meaning "etching in", or "tattoo upon", or "stamp", or "badge of servitude", which enables one to conduct economic activity, and which authorizes one to receive economic benefits; the mark will be required in order to buy or sell.

Between the soon coming world leader, the Sovereign, and the world banker, the Seignior, they will own the world "lock, stock and barrel".

The Bible prophecy of Revelation Chapter 13 foretells the future
I. Introduction
The Apostle John wrote from prison, on The Isle of Patmos about 90 AD, the Revelation Of Jesus Christ, the last book of the Bible, which foretells those things which must shortly come to pass: meaning a series of events that once they begin, fall quickly into place one right after the other.

II. Revelation Chapter 13 tells of three separate beasts which rise to sovereignly direct mankind's activities (1).
A. Revelation 13:1-4 tells of a sovereign system which directs all of mankind's activities through seven institutions and ten regions of global governance.
B. Revelation 13:5-10 tells of a sovereign king, that is a monarch, who has sovereign power and authority to rule.
C. Revelation 13:11-18 tells of a globally sovereign religious leader and banker
He is the Seignior, meaning, top dog who takes a cut; in modern day terms, an investment banker, he is also the world's religious leader, and via investment and commerce connections institutes a global seigniorage wealth and commerce system (2).

This individual will have the financial experience or connections of CFR Co-Chairperson Robert E. Rubin or a John Paulson or a George Soros or a Tony Blair.

Photo of Treasury Secretary Robert Rubin, Treasury Secretary, and Alan Greenspan, the Federal Reserve Chairman, at a House Hearing in 1995 Photo by Stephen Crowley of The New York Times from the article The Reckoning Taking Hard New Look At A Greenspan Legacy by Peter S. Goodman who said of Alan Greenspan: "And his views held the greatest sway in debates about the regulation and use of derivatives, exotic contracts that promised to protect investors from losses, thereby stimulating riskier practices that led to the financial crisis. For more than a decade, Alan Greenspan has fiercely objected whenever derivatives have come under scrutiny in Congress or on Wall Street.

“What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so,” Mr. Greenspan told the Senate Banking Committee in 2003. “We think it would be a mistake” to more deeply regulate the contracts, he added.

III. Verse Commentary

13:11 another beast This is a third of three beasts, who is preceded by the beast system, and the beast political leader; this beast promotes the power of the former two; and convinces the world to worship them both. He is called 'false prophet' in Revelation 19:20 and Revelation 20:10.

13:11 out of the earth Just as the Antichrist is the embodiment of Lucifer, Satan, the Devil, the false religious leader will be sent forth and controlled by a demon from the pit of hell.

13:11 two horns like a lamb This describes the relative position of the false prophet compared to the beast system which has ten horns. The word horn in scripture symbolizes authority; and lamb symbolizes peacefulness: He uses his position to adeptly resolve global economic, religious, political and natural resource conflicts. Yet his outward gentleness belays his real deceptive dealings to lord it over mankind.

13:11 like a dragon He has a commanding way.

13:12 exercises all the authority of the first beast This oracle yields all the power and influence of the beast system.

13:12 causes The word causes is used eight times of him. He yields influence to establish false world religion, which is Luciferian in nature: he entices and induces to eventually dominate the world.

13:12 to worship People are compelled to accept and worship, both the beast system, and the beast world leader.

13:12 whose deadly head wound was healed This refers to a catastrophic global financial breakdown.

13:13 great signs The words 'great signs' is used of Jesus in John 2:11 and John 2:23 and John 6:2. He works false miracles which cause the world to accept the beast system and the the Antichrist.

13:14 make and image to the beast He directs construction of a symbol, that is, a representation of the beast system.

13:15 speak The image of the beast system communicates, which is contrary to what is normal of idols.

13:15 causes to be killed His gentle appearance is a lie, he is a killer.

13:16 a mark He introduces a seigniorage system which is based upon the "mark" which comes from the Greek word charagma meaning "etching in", or "tattoo upon", or "stamp", or "badge of servitude", which enables one to conduct economic activity, and which authorizes one to receive economic benefits; the mark will be required in order to buy or sell (3).

All seigniorage comes and goes through him: all sovereign wealth funds, and banks report to him. There is no national seigniority, as sovereign nations and their constitutions are history, as principles of global governance working through regional economic and security pacts or agreements exist; and these serve as the basis for regional currencies.

His religious and economic power complements the military and political power of the sovereign king; and between this false prophet and the Antichrist, they own the world "lock, stock and barrel".

IV. Footnotes.
(1) Sovereignly means to rule in a monarch fashion; sovereign means to rule powerfully and authoritatively; the word came into use in 1250 to 1300. Dictionary.com

(2) Seigniorage means top dog bank note system, and comes from the Scottish and Bank of England financial system which was devised to maintain the value of currency The History of Seigniorage Wealth Elaine Meinel Supkis February 7, 2008 Money Matters Blog

(3) David Deschesne Editor, Fort Fairfield Journal, A Mark in the Right Hand or in their Forehead, Fort Fairfield Journal, July 6, 2005 in his explanation of Revelation Chapter 13:16-17.

V. Revelation Chapter 13, Holman Christian Standard Bible
The Beast System Arises Out Of The Mass Of Humanity To Direct And Rule All Of Mankind's Activities.
1 And I saw a beast coming up out of the sea; he had 10 horns and seven heads; on his horns were 10 diadems, and on his heads were blasphemous names.

2 The beast I saw was like a leopard, his feet were like a bear's, and his mouth was like a lion's mouth; the dragon gave him his power, his throne, and great authority.

3 One of his heads appeared to be fatally wounded; but his fatal wound was healed; the whole earth was amazed and followed the beast.

4 They worshiped the dragon because he gave authority to the beast; and they worshiped the beast, saying, "Who is like the beast? Who is able to wage war against him?"

The Sovereign King Rules For 42 Months.
5 A mouth was given to him to speak boasts and blasphemies; he was also given authority to act for 42 months.

6 He began to speak blasphemies against God: to blaspheme His name and His dwelling—those who dwell in heaven.

7 And he was permitted to wage war against the saints and to conquer them; he was also given authority over every tribe, people, language, and nation.

8 All those who live on the earth will worship him, everyone whose name was not written from the foundation of the world in the book of life of the Lamb who was slaughtered.

9 If anyone has an ear, he should listen:

10 If anyone is destined for captivity, into captivity he goes; if anyone is to be killed with a sword, with a sword he will be killed; here is the endurance and the faith of the saints.

The Sovereign Banker Institutes The Mark, Greek Word Charagma, Meaning Etching In Or Tattoo Upon, Which Is Required In Order To Buy Or Sell.
11 Then I saw another beast coming up out of the earth; he had two horns like a lamb, but he sounded like a dragon.

12 He exercises all the authority of the first beast on his behalf and compels the earth and those who live on it to worship the first beast, whose fatal wound was healed.

13 He also performs great signs, even causing fire to come down from heaven to earth before people.

14 He deceives those who live on the earth because of the signs that he is permitted to perform on behalf of the beast, telling those who live on the earth to make an image of the beast who had the sword wound yet lived.

15 He was permitted to give a spirit to the image of the beast, so that the image of the beast could both speak and cause whoever would not worship the image of the beast to be killed.

16 And he requires everyone—small and great, rich and poor, free and slave—to be given a mark on his right hand or on his forehead,

17 so that no one can buy or sell unless he has the mark: the beast's name or the number of his name.

18 Here is wisdom: The one who has understanding must calculate the number of the beast, because it is the number of a man. His number is 666.

VI. Further reading on Revelation Chapter 13
For continued reading on Revelation Chapter 13, I recommend: Beast System, Sovereign, And Seignior To Rule Mankind, Bible Reveals

My personal application
I believe that God is Sovereign, and as such from eternity past, foreknew, foresaw, and worked out today's events; everything is working out according to his foreordained plan.

While some reference the rule of law, and others the rule of men, I reference the Word, Will and Way of The Lord; and what ever comes of that so be.

I do as I am commanded by the Lord, I keep the 'Luke 21:36 Watch', that is, I watch and pray always that I might be accounted worthy to escape all these things (the end time horrors) that are coming, and stand before the Son Of Man.

Charts show that gold rose and stocks fell when Bush took his pen to sign EESA; perhaps this week saw Peak US Dollar and Peak Treasuries and a bottoming in gold providing a safe entry point for buyers of the safe haven metal.
The Russell 2000, IWM, fell 2.87% for the day to close at 619 ... IWM

The ongoing Yahoo Finance one year chart of gold, GLD, compared to IAT, IWM, IWN, and IWO, shows a rise of 18% for gold ... Gold is up eighteen percent since the Citigroup CDO Bust started October 8, 2007.

The ongoing Yahoo Finance dive day chart of gold, GLD comapred to ITA, IWM, IWN, and IWO, shows gold's stunning rise in value as stocks fell when Bush took his pen out ... Five day chart of gold shows gold's rise and stocks fall at Bush's command

The ongoing MSN Finance one month chart of gold, GLD, compared to ITA, IWM, IWN, and IWO shows the breakout of gold on September 11, 2008 ... One Month chart of gold shows the breakout of gold since the banks were unable to sell assets or raise capital beginning on 9-11-2008

The Stockcharts.com chart of the gold ETF, GLD shows a close at $82.59.

The Yahoo Finance ongoing chart of GLD relative to the EUR/JPY and the USD/JPY, provides fascinating insights into the interplay of gold and the two major currency pairs. A rising USDJPY and a falling EURJPY took the US Dollar up and gold down as the market took the bailout to be dollar friendly ... GLD down for the week.

One supporting factor for gold is the James Chen USD/JPY update which shows the chart of USDJPY at the brink of resistance.

Valeria Bednarik confirms in article USD/JPY For Today suggesting that the USDJPY is down from today's 105.35.

James Chen's USD/CHF made chart of the day; it suggests that the USDCHF has hit resistance and is headed down.

The Elliott Wave Analysis Of EUR/USD, USD/JPY and GOLD by TheLFB News for Oct 03 08 provides the EUR/USD chart suggesting that it will be going up; and the GOLD chart suggesting it will soon be fininishing an Elliott Wave 2 down and also heading up with a floor of $770 to $800 ... EURUSD soon to be going up ... GOLD bottoming from and Elliott Wave 2 down

US Government Bonds, TLT, closed for the week at $97.40 ... TLT

The Ten Year US Government Note, $TNX shows a close at 36.44.

The US Dollar, $USD, closed the week at $80.47 ... $USD Weekly and $USD Daily

Jesse in Committment of Trader report for the US Dollar provides this chart of DX Dollar at resistance.

The dollar bull ETF, UUP, courtesy of Jack Chan from JC's Buy and Sell Signals shows a bearish lollipop hanging man candlestick ... UUP manifests a lollipop

Gold, $GOLD, closed the week at $835 ... $GOLD

S&P 500, $SPX, closed down 9.4% for the week at 1099.23; this is the first time in four years Eddy Elfenbein relates.

Fertilizer manufacturer, Agrium, AGU fell 36% this week; this chart more than any shows how the Euro drove commodity stocks up and it relates took that the Euro as part of an unwinding yen carry trade lives up to its name the Armageddon Trade ... AGU

At the beginning of the week, I asked blog readers, Which Way For SFK And SDK?

Well, charts show SFK rose 21% and SDK rose 27% ... SFK and SDK

Debt ETFs were stable today; these include LQD, HYG, CFT and EMB which will likely continue to loose value; and the principal value of the tax free municipal bond mutual funds like USSTX, will likely continue to fall, as interest rates rise. And the municipal bond ETFs such as MUB and TFI will likely continually go lower as well.

The Ted Spread closed at 3.85; this is the code red alarm relating that a total financial system breakdown can come at any time!

Here are various helpful charts for your examination.
The on going monthly MSN Finance chart of the gold ETF, compared to world stocks, EFA, and US Stocks, VTI, and US Treasuries, TLT

The ongoing five day Yahoo Finance chart of gold, GLD, relative to the US Dollar ETF, UUP, and the Euro, FXE, and oil, USO

The on going five day Yahoo Finance chart of the gold ETF, GLD, compared to FXE, EFA, and EEB

The on going five day Yahoo Finance chart of the gold ETF, GLD, compared to IWM, and SPY

The on going five day Yahoo Finance chart of the gold ETF, GLD, compared to FXE, USO, and RJI

The ongoing ten day MSN Finance chart of EUM, compared to TWM, SDK, and SFK

The the ongoing five day Yahoo Finance chart of EUM, compared to TWM, SDK, and SFK

The ongoing five day Yahoo Finance chart of the yen, compared to gold and the world's major currencies

Gold relative to world stocks: GLD:EFA

Gold relative to US Stocks: GLD:VTI

Gold relative to the euro: GLD:FXE

Gold relative to world currencies: GLD:DBV

Gold relative to oil: GLD:USO

Here is the news report at 4:30 PM announcing that President Bush had signed EESA.
At approximately 4:30 PM ET on Friday, October 3, 2008, Julie Hirschfeld Davis and David Espo of the Assoicated Press reported:

With the economy on the brink and elections looming, Congress approved an unprecedented $700 billion government bailout of the battered financial industry on Friday and sent it to President Bush who quickly signed it. (Here is the roll call vote courtesy of MyWay showing how the House members voted).

"We have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country," Bush said shortly after the vote, although he conceded, "our economy continues to face serious challenges."

Underscoring that somber warning, the Dow Jones industrials, up more than 200 points at the time of the House vote, ended the day down 157.

The final vote, 263-171 in the House, capped two weeks of tumult in Congress and on Wall Street, punctuated by daily warnings that the country confronted the gravest economic crisis since the Great Depression if lawmakers failed to act. There were 58 more votes for the measure than an earlier version that failed on Monday.

"We all know that we are in the midst of a financial crisis," House Republican leader John Boehner of Ohio said shortly before casting his vote for a massive government intervention in private capital markets that was unthinkable only a month ago.

"And we know that if we do nothing, this crisis is likely to worsen and to put us into an economic slump like most of us have never seen," he said.

House Speaker Nancy Pelosi, D-Calif., said the bill was needed to "begin to shape the financial stability of our country and the economic security of our people."

Treasury Secretary Henry Paulson pledged to begin using his new authority quickly, and Federal Reserve Chairman Ben Bernanke said the central bank would work closely with the administration.

At its core, the bill gives the Treasury Department $700 billion to purchase bad mortage-related securities that are weighing down the balance sheets of institutions that hold them. The flow of credit in the U.S. economy has slowed, in some cases drying up, threatening the ability of businesses to conduct routine operations or expand, and adversely affecting consumers seeking financing for mortgages, cars and student loans. Some state governments have also experienced difficulty borrowing money.

The House vote marked a sharp change from Monday, when an earlier measure was sent down to defeat, largely at the hands of angry conservative Republicans.

On Friday, 91 Republicans joined 172 Democrats to support the bill, while 108 Republicans and 68 Democrats opposed it. Twenty-five Republicans and 33 Democrats switched their votes from "no" to "yes." One Democrat who supported Monday's version, Rep. Jim McDermott of Washington, opposed the bill Friday. One Republican who didn't vote Monday, Rep. Jerry Weller of Illinois, voted "yes" on Friday.

Several of the Democrats who switched were members of the Congressional Black Caucus who said presidential candidate Barack Obama had pledged to support legislation easing the burden on consumers if he wins the White House.

Republican presidential candidate John McCain also lobbied for the measure, according to aides who declined to release a list of lawmakers he called.

Following Monday's vote, Senate leaders quickly took custody of the measure, adding on $110 billion in tax and spending provisions designed to attract additional support, then grafting on legislation mandating broader mental health coverage in the insurance industry. The revised measure won Senate approval Wednesday night, 74-25, setting up a furious round of lobbying in the House as the administration, congressional leaders, the major party presidential candidates and outside groups joined forces behind the measure.

In addition, the measure was changed to broaden the federal government's deposit insurance program, and the Securities and Exchange Commission loosened a regulation to ease the impact of the distressed assets on the balance sheet of financial institutions.

Despite occasionally strong criticism of the added spending and tax measures, the maneuvers worked — augmented by a sudden switch in public opinion that occurred after the stock market took its largest-ever one-day dive on Monday.

"No matter what we do or what we pass, there are still tough times out there. People are mad — I'm mad," said Republican Rep. J. Gresham Barrett of South Carolina, who opposed the measure the first time it came to a vote. Now, he said, "We have to act. We have to act now."

Rep. John Lewis, D-Ga., another convert, said, "I have decided that the cost of doing nothing is greater than the cost of doing something."

Critics were unrelenting.

"How can we have capitalism on the way up and socialism on the way down," said Rep. Jeb Hensarling of Texas, a leader among conservative Republicans who oppose the central thrust of the legislation — an unprecedented federal intervention into the private capital markets.

It was little more than two weeks ago that Paulson and Bernanke concluded that the economy was in such danger that a massive government intervention in the private markets was essential.

White the main thrust of their initial proposal was unchanged, lawmakers insisting on greater congressional supervision over the $700 billion, measures to protect taxpayers and steps to crack down on so-called "golden parachutes" that go to corporate executives whose companies fail.

Earlier in the week, the legislation was altered to expand the federal insurance program for individual bank deposits, and the Securities and Exchange Commission took steps to ease the impact of the questionable mortgage-backed securities on financial institutions.

In the moments before the vote, Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, pledged "serious surgery" next year to address the underlying causes of the crisis.

If anything, the economic news added to the sense of urgency.

The Labor Department said initial claims for jobless benefits had increased last week to the highest level since the gloomy days after the 2001 terror attacks. The news of the payroll cuts came on top of Thursday's Commerce Department report that factory orders in August plunged by 4 percent.

Typifying arguments the problem no longer is just a Wall Street issue but also one for Main Street, lawmakers from California and Florida said their state governments were beginning to experience trouble borrowing funds for their own operations.

Pelosi said, "We must win it for Mr. and Mrs. Jones on Main Street."

One month before Election Day, the drama unfolded in an intensely political atmosphere.

Members of the Congressional Black Caucus credited Obama with changing their minds.

Reps. Elijah Cummings and Donna Edwards, both Maryland Democrats, were among them. They said Obama had pledged if he wins the White House that he would help homeowners facing foreclosure on their mortgages. He also pledged to support changes in the bankruptcy law to make it less burdensome on consumers.

Obama's rival, Republican Sen. McCain, announced a brief suspension in his campaign more than a week ago to try and help solve the financial crisis.

Republican Rep. Sue Myrick of North Carolina, who switched her vote to favor the measure, said, "I may lose this race over this vote, but that's OK with me. This is the right vote for the country."

Myrick said she hadn't heard from McCain as she made up her mind about how to vote. "They told me he was going to call me. He didn't," she said.

The vote on Monday had staggered the congressional leadership and contributed to the largest one-day stock market drop in history, 778 points as measured by the Dow Jones Industrials.

Associated Press writers Jim Abrams, Charles Babington, Alan Fram, Suzanne Gamboa, Kimberly Hefling, Andrew Miga, Andrew Taylor, and Erica Werner contributed to this story.

The Emergency Economic Stabilization Act, EESA, doesn't make the credit crisis go away; it makes the credit crisis worse, much worse -- Here are 4 problems with EESA.

Problem #1: EESA helps only a few select banks and not banks as a whole.
... I relate that while Regional Banks, IAT, are currently up 22% since the US Dollar stock rally began, July 14, 2008, when the yen carry traders, sold oil, USO, and commodities, RJI, to go long the banks, the facility of TARP provided under the Emergency Economic Stabilization Act of 2008, that is EESA, is unlikely to be of much help to most regional banks.

The authority and facilities given to the Federal Reserve Chairman by the Paulson-Bush-Pelosi bailout legislation provide a rescue of derivative laden and threatend JPMorgan, Citigroup, Bank of America and Morgan Stanley, and not of the community and smaller banks.

The President said: "We have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country."

That is understatement, they acted unconstitutionally, to provide frightening auhority and facilities to the Chairman of the Federal Reserve. The legislation does nothing to resolve the crisis; it assures that it will quickly escalate.

The reporter relates: "The Securities and Exchange Commission loosened a regulation to ease the impact of the distressed assets on the balance sheet of financial institutions."

Yes I know, that was unconscionable; the action is a denial and abandonment of The Truth. And as I write the Suspension Of The Fair Value Accounting Rule By SEC And Congress Is Causing Credit Gridlock And Places One's Investments At Risk .

Problem #2: EESA doesn't resolve the current crisis of confidence, that is a lack of trust, it exasperates risks stemming from unknown and unrevealed counterparty risk on derivaties and from a suspension of fair value accounting by ruling of SEC and by mandate of Congress.
... Blair Lee in October 3, 2008, Gazette.NET article Who Killed The House Bailout? wrote:

Predictably, the media gave congressional Republicans the full discredit for the $700 billion bailout plan's 228-205 defeat on Monday. But the voting patterns show a different story. A once-in-a-lifetime, unholy and inadvertent coalition of disparate congressional voting blocs sank the measure.

First, a bipartisan combination of conservative Republicans and Blue Dog Democrats balked at such a risky and expensive taxpayer-financed free market intervention.

Second, 78 percent of the 41 incumbents in tight re-election contests voted "no," responding to angry constituent e-mails. Political self-preservation knows no party lines: 17 of the "no" votes were Republicans, 15 were Democrats. Lesson: Don't propose sweeping, highly controversial legislation five weeks before a national election.

Third, the Congressional Black Caucus broke ranks with the Democratic House leadership and overwhelmingly voted against bailing out white, wealthy Wall Street.

House Democratic leaders, in one of those inexplicable Capitol Hill double standards, excoriated the Republicans but excused the Black Caucus because its members were casting "a vote of conscience."

Maryland's Congressional delegation offers a good example of what happened. The four white Democratic liberals (Hoyer, Van Hollen, Sarbanes and Ruppersberger) all voted "yes." Meanwhile, "no" votes were cast by Roscoe Bartlett, the Western Maryland conservative Republican, and by Maryland's two liberal Democratic blacks, Elijah Cummings (Baltimore City) and Donna Edwards (Prince George's and part of Montgomery). This has to be the first and last time in history that the 4th, 6th and 7th districts band together against the rest of Maryland's congressional delegation.

Missing from Maryland's voting pattern was a "no" vote by a closely contested incumbent. Wayne Gilchrest, the Eastern Store moderate Republican, might have played that role, but he was defeated in the primary, so he voted "yes." Likewise, in a fit of lame duck spite, he's backing Obama for president.

Congressman Bartlett and congresspersons Cummings and Edwards voted "no" together, but for completely different reasons. Bartlett, a free market conservative, wants to let the financial institutions solve their problems by themselves. In his view, the extent of permissible government intervention is taking the current $100,000 ceiling off FDIC deposit insurance and making it unlimited.

Meanwhile, Cummings and Edwards want to bypass Wall Street and spend the $700 billion directly on home foreclosure aid, unemployment payments, food stamps, home heating assistance and Medicaid. It's no coincidence that, together, Cummings' and Edwards' districts contain 58 percent of the state's recent home foreclosures. But neither their plan nor Bartlett's has a prayer of becoming law. Nor is doing nothing an option. Without a comprehensive approach, the government is left limping along, dealing with one bank failure after another.

Our financial system runs on credit and confidence. People must borrow money to make money. But banks won't lend to businesses and depositors won't lend to banks (or governments) without the reasonable expectation of being repaid, with interest. When that confidence disappears, so does our economy. The bailout stabilizes lenders and investors by having the government take $700 billion of devalued mortgage-backed securities off the balance sheets. In other words, in order to jump-start the nation's financial system, Uncle Sam becomes this toxic paper's buyer of last resort.

Maybe this is a bad idea. Maybe Roosevelt's New Deal was, too. But what's the alternative? Or put it this way: Isn't it wiser and cheaper to try something before, instead of after, the train wreck? How much would our parents and grandparents have paid to avoid the 1930s Great Depression and its aftermath, World War II?

Apparently, public opinion against the bailout is shifting somewhat: 45 percent now support it, while 44 percent say do nothing. Meanwhile, a revised $700 billion bailout bill passed the Senate on Wednesday night and heads to the House.

Senate passage was less difficult, because only one-third of that body is up for re-election, as opposed to all 435 House members, so only three senators in tight re-elections felt compelled to vote "no." Also, the Senate's Black Caucus is a group of one, Barack Obama, and he's now playing to a national constituency.

To gain House passage, the Senate's bill is loaded with billions and billions of new tax cuts and new spending to win the votes of naysayers like Bartlett, Cummings and Edwards. It will probably work at the expense of ballooning, even further, our national debt and national interest payment. Yes, folks, we're addressing the national crisis brought on by fiscal recklessness by being even more reckless. God help us.

Blair Lee is CEO of the Lee Development Group in Silver Spring.

Presented below are my related comments to Blair Lee.

He related "Congressman Bartlett and congresspersons Cummings and Edwards voted "no" together, but for completely different reasons. Bartlett, a free market conservative, wants to let the financial institutions solve their problems by themselves. In his view, the extent of permissible government intervention is taking the current $100,000 ceiling off FDIC deposit insurance and making it unlimited."

"Meanwhile, Cummings and Edwards want to bypass Wall Street and spend the $700 billion directly on home foreclosure aid, unemployment payments, food stamps, home heating assistance and Medicaid. It's no coincidence that, together, Cummings' and Edwards' districts contain 58 percent of the state's recent home foreclosures. But neither their plan nor Bartlett's has a prayer of becoming law."

"Nor is doing nothing an option. Without a comprehensive approach, the government is left limping along, dealing with one bank failure after another."

I say one option could have been to convene a Congressional investigation to completely investigate events of late, especially after September 11, 2008 when banks were unable to sell assets and raise capital. And of course to thoroughly investigate credit default swaps and their destabilizing ways as well as the destabilizing ways of yen carry traders who borrow at 0.5% interest fromt the bank of Japan to go short the EUR/JPY for great personal gain and the destruction of the world's economy.

Mr. Lee continues: "Our financial system runs on credit and confidence. People must borrow money to make money. But banks won't lend to businesses and depositors won't lend to banks (or governments) without the reasonable expectation of being repaid, with interest. When that confidence disappears, so does our economy."

I say there is indeed a crisis of confidence and a complete lack of trust, and it comes in large part from countyparty risk on default event settlement of derivatives of existing, and future financial organizations. Our nation and the world needed to address these risks but failed to do so.

Jesse in article Waves of Credit Default Swaps Incoming relates that its "time to start settling those Credit Default Swaps for Fannie and Freddie (Oct. 6), Lehman Brothers (Oct. 10) and Lehman Brothers (Oct 23)".

A lack of trust is that which is going to cause the destruction of the US Dollar, $USD, and send interest rates higher, such as the interest rate on the 10 Year US Government Note, $TNX, and send the value of US Government bonds, traded by the ETF, TLT down.

The legislation will accelerate an exit from municipal bond mutual funds and ETFS as well as money market funds, MMFs, owned by the wealthy.

"The bailout stabilizes lenders and investors by having the government take $700 billion of devalued mortgage-backed securities off the balance sheets. In other words, in order to jump-start the nation's financial system, Uncle Sam becomes this toxic paper's buyer of last resort."

I say the bailout stabilizes only a few select financial organizations JP Morgan and possibly Morgan Stanley, and actually destabilizes the rest as these two organizations and other crony bankers are likely going to be given preferential treatment. The debt will indeed be coming off the the publically approved SEC and FASB 157 balance sheets and income statements; but the assets are marked to fantasy and not to market, thus the securitized CDOs, mortgage backed securities, and other debt creates even more of a greater risk now becuase no one knows the true value as fair value rules, that is fair value accounting, has been thrown out the window.

We indeed are entering a new era, Uncle Sam is now the world's investment banker. The Federal Reserve becomes the Bank of Banks, and goes into the business of securitization of CDOs. The legislation nationalizes US Banks, and privatizes profits to a select group of elites, while it socializes risk and losses unto the US taxpayers.

Yes Uncle Sam is indeed the purchaser of the toxic paper, and becomes the buyer of last resort; and in so doing enslaves Americans, and really the whole world unto debt of the worst kind. The debt should have been liquidated, that is done away with, but it now remains and is the world's heritage and inheritance of a bygone era of credit liquidty, that started with the fairy tale neoliberal laissez fair economic policies of Milton Friedman, and continued through with the easy credit of The Purveyor of Credit Liquidity, Alan Greenspan, and culminated with the neocon helicpter drops of Ben Bernake lowering of the central bank rate, and provisions of TAF, TSLF, and PDCF facilities.

The econonomy will not be jump started, only a small portion of crony capitalists, that is those who participate in state corporate rule, that is state corporatism get a boost through public private partnerships to be signed by the government. Here stakeholders from business and government will become overlords and taskmasters of Ameican citizens.

"Senate passage was less difficult, because only one-third of that body is up for re-election, as opposed to all 435 House members, so only three senators in tight re-elections felt compelled to vote "no." Also, the Senate's Black Caucus is a group of one, Barack Obama, and he's now playing to a national constituency."

I wonder how many of the Black Caucus caved in. Those who did so, forgot their ancestor's history of slavery: their vote enslaved Americans and the world unto debt, and established bankers and government officials as the beast's task masters and overlords.

Problem #3: EESA's increased FDIC limits: these are going to take gullible leming investors up a hill, and then off a cliff to their destruction -- that is sad but true.

The smart investor anticipates what's gona happen to his money in banks and appreciates the value of gold.

Whereas, the gullible investor simply gets led off a cliff like a leming .... click here for image of gullible investor

... The reporter relates that "Earlier in the week, the legislation was altered to expand the federal insurance program for individual bank deposits." The raising of the limit of FDIC insurance accelerates the process of liquidity evacuation as investors flee stocks, and unfortunately municipal bonds which are especially liquidity stressed; the legislation herds investors into banks and away from the physical asset which will protect their wealth.

Problem #4: All liquidity supplied by EESA gets trapped and instantly vaporized.
... The facility of TARP provided under the Emergency Economic Stabilization Act of 2008, that is EESA, is designed to provide liquidity. Yet, all liquidity that has been provided by the Federal Reserve under currency swaps with other central banks, facilities of TAF, TSLF, PDCF, acquisitions of companies such as AIG and Bear Stearns, and emergency grants has literally disappeared as soon as it went into the system. The $700 billion to be provided will meet the same doom: instant vaporization.

The liquidity goes only to banks and major broker-dealers, the rest of the financial system has no access to it; the credit transmission mechanisms will not see even a dime of it, so thus corporations, educational institutions, municipalities desperately in need will be frozen out.

Peter Schiff in Safehaven.com article Liquidity Is In The Eye Of The Holder writes: The government is seeking to "create liquidity" by overpaying.

The government's assumptions about the "held to maturity" value of these mortgages completely understate the likelihood of widespread default. Some of the "illiquid" assets represent tranches of mortgage-backed securities that will be completely wiped out. Even the higher quality tranches will suffer severe losses due to mortgages that will inevitably go bad.

For example, take a $500,000 adjustable rate mortgage on a condo in Las Vegas that has a current value of only $250,000. To assume that this asset can be safely held to maturity is absurd, when in all likelihood the borrower will default shortly after the rate re-sets, even if the borrower has not yet shown signs of distress. Of course such a mortgage would be completely illiquid if one tried to sell it anywhere near par, but would be extremely liquid if priced to reflect a more realistic value; say 35 cents on the dollar. But if the government pays prices that fairly factors in likely defaults, it will bankrupt the very institutions it is trying to bail out.

Also missing in the discussion is the concept of the time value of money. Even if a substantial percentage of the $700 billion is eventually recovered, it will still represent a huge loss for taxpayers who theoretically have to come up with the cash today to buy the mortgages. Further, the inflationary nature of the bailout ensures a substantial rise in long term interest rates. This will further suppress the present values of the low coupon mortgages the government will be restructuring.

In addition to the government bailout, distressed lenders are looking to the suspension of "mark to market" accounting rules as a means of salvation. These rules require institutions to value their mortgage assets according to the most recently traded price. However, suspending these rules will not make the losses go away. Rather it will simply allow lenders to pretend that the losses do not exist.

Armed with such fantasies, banks could pretend that their mortgage assets had more value, and that their balance sheets were well capitalized. They would not need to raise more capital in order to fund new loans. But, just as a person with no sensitivity to pain runs the risk of catastrophic injury, such a move would encourage financial institutions to take greater risks which, in the end, will produce more bankruptcies and greater losses.

In fact, the Senate version of the bailout bill, which authorizes a suspension of mark-to-market, also increases the dollar limit on FDIC insured deposits from $100,000 to $250,000 (with no extra money budgeted to fund the increased taxpayer liability). Only in Washington would a bill pass which simultaneous makes banks more likely to fail while increasing taxpayer exposure when they do!

Gold is the timely safe haven.
I believe a run on stock brokerages is coming soon; and I suggest that one take one's money out of brokerage accounts, and that one buy gold, even though gold can easily fall from its current $835 to $825, $800 or $775, with a falling EURJPY.

And the gold ETF, GLD, could very easily fall to $77.50.

While bank accounts will have higher FDIC limits, I want something that is tangible, that I can secure, that I can personally own and have a large degee of personal control over.

I recommend diversification of investment in gold in four locations immediately because of financial system instability and lack of liquidity: the gold ETF, GLD, directly through streetTRACKS Gold Trust, and not in a brokerage account; two BullionVault, three GoldMoney; and four a limited number of gold coins.

I am simply a blogger who communicates what I see as an investment demand for gold; I suggest that one consult with a licensed investment professional before making any investment decisions.

The Yen Carry Trade Unwound In Trading In Asia Before The US Stock Market Opened
An unwinding yen carry trade, EUR/JPY, FXE:FXY, sent the Euro, FXE, lower which induced a sell off in Asia shares, before the US stock markets opened, as is seen in the ongoing Yahoo Finance Chart of AIA relative to EWJ, JSC, and FXI ... FXE:FXY Daily ... FXE:FXY Weekly ... AIA relative to EWJ, JSC and FXI

Stocks gapped lower upon opening, and immediately went into freefall, ahead of the vote on the President's bailout plan, the Emergency Economic Stabilization Act of 2008, EESA, providing TARP, as can be seen in the five day Yahoo Finance chart of the Nasdaq, QQQQ ... QQQQ

Foreign shares fell on a lower Euro, FXE, as can be seen in the on going six month Yahoo Finance chart of the Proshares 200% inverse ETFs, EFU, EEV, and FXP ... EFU, EEV and FXP

The natural resource shares also fell on a lower Euro, FXE, as can be seen in the ongoing six month Yahoo Finance chart of SLX, XLE, KOL, OIH, GDX and XME ... SLX, XLE, KOL, OIH, GDX, and XME

The MSN Chart of URR, compared to EEM and EEB documents how an unwinding yen carry trade beginning in June 2008, caused terrific destruction to stock market value in the emerging markets, EEM, and in the BRICS, EEB, as carry traders went about to buy yen and repay their 0.5% Bank of Japan loans ... URR as a proxy for the Euro, and EEM, and EEB

The BRICS, EEB, fell as can be seen in the ongoing six month Yahoo Finance chart of RSX, EWZ, FXI and INP ... RSX, EWZ, FXI and INP

Alternative energy fell as can be seen in the ongoing six month Yahoo Finance Chart of ICLN, TAN and FAN.

World real estate shares fell as can be seen in the ongoing six month Yahoo Finance Chart of WPS, TAO, IYR, and EEM ... WPS, TAO, IYR, EEM

Mortgage REITS, REM, fell 9% on risk aversion to mortgage backed securities.

Semiconductors, SMH, fell 9% lower, leading the Nasdaq, QQQQQ, down as the yen carry traders had massive amounts of monies in stocks such as Cypress Semiconductors, CY, and sold today at any price they could get ... CY

On July 14, 2008, the carry traders, sold commodities, RJI, gold, GLD, and oil, USO, to take profit and go long the financial sector, causing a dollar rally, and a US stock rally, but today the carry traders were forced out of their financial sector positions by the unwinding of EURJPY.

Financial shares, IYF, fell 9%; and thus value shares fell more than growth shares. Rydex S&P 500 Pure Value, RPV, fell 11% and Russell 2000 Value, IWN, 8%.

Regional Banks, IAT, fell 11%. Among losers, Fifth Third Bancorp, FITB, dropped 44 percent, FirstFed Financial Corp, FED, gave up 25 percent, and KeyCorp, KEY, slumped 33 percent, Regions Financial, RF, 41%, Ohio based National City 63%.

Money Center Banks, KBE, fell 15%. Citigroup, C, fell 12%, and Bank of America, BAC, 18%.

Shares of investment bankers tumbled: Goldman Sachs Group Inc, GS, fell 13% and Morgan Stanley, MS, fell 16%; they had dropped by as much as 24 percent and 19 percent.

The Dollar Rally stocks fell: Retail, XRT 6%, Homebuilding, ITB 11%, Consumer Discretionary, XLY 7%.

Trader Tim Knight in article The Best Is Yet To Come relates: The risk/reward on my index puts got so extreme that I sold all of them a few minutes before the close ... Today was the best trading day of my entire life, and, again, the terrific community here is a major part of that. I hope that, in turn, millions of dollars in profits were made amongst the audience here. Thanks, everyone, and I'll write more later today!

Peak US Treasuries Was Likely Achieved Today
Charts of US Government Debt and Interest are as follows:
TLT closed at 97.25

BTTRX closed at 60.08

SHY closed at 83.89

$TYX closed at 41.61

DXKSX, which is 250% inverse of $TNX, closed at 13.22

The 3 month ongoing Yahoo Finance chart of TLT compared to WIP and TIP ... TLT, WIP and TIP

Trust Has Left The Financial System
The Foreign Exchange Currency Outlook article How $200 Billion Of Bad Mortgages Could Have Created Such A Falling Pyramid Effect relates: It’s conceivable that if oil were still falling and if gold were not rallying so strongly that the US dollar could survive this latest “fix” for the financial sector mess.

But oil is rising and gold is rallying, and the perception is spreading that we are probably only half-way through the plans that will be needed, and haven’t even started the economic consequences of the failure. Many other shoes are out there to be dropped, especially now that the Feds have their wallet open for the picking.

We wrote last week that we are happy to see a vigorous initiative from the US government and a comprehensive one instead of the case-by-case situation we have had since Bear Stearns. But don’t be misled—nobody in his right mind can be “happy” about this outcome.

It’s awful in just about every way imaginable.

It favors the institutions that created this mess in the first place (those still standing, that is) and nowhere is there a single provision for the ordinary Joe, whether as mortagee or investor. It may just manage to resolve the liquidity crisis, but it doesn’t solve the problem of under-capitalization of the banks, which still need to raise more funds. With the Middle East and Asian investors already licking their wounds from having jumped in with both feet at the beginning of this crisis, where is the capital going to come from? The need for US government’s action has already demonstrated that the private sector isn’t willing to cough up fresh capital.

This means more bank failures, more mergers, and a giant contraction of credit everywhere in the world, not just the US.

We are having a hard time understanding how $200 billion of bad mortgages could have created such a falling-pyramid effect. It’s true that banks and brokers tried to make a silk purse out of a sow’s ear, with the aid of the ratings agencies, believing modern portfolio theory was the alchemist’s stone, but still, how did something so small become so big?

The answer is that it didn’t.

The $200 billion in liar’s loan mortgages were not magically, virally multiplied to infect every CDO and other alphabet-soup asset class to the extent of $700 billion or $1.5 trillion or any other number.

In fact, because of various accounting and mark-to-model rules, the ultimate owners of a lot of this paper are going to make a tidy profit of it. It’s not bad, just not trusted. (That doesn‘t mean the US taxpayer will get the profit. The agencies tasked with buying and then selling the paper will manage to siphon off the gains to the insiders and interested parties).

The key is “not trusted.” Trust is everything. It’s everything in romance, commerce and finance. In a nutshell, the banks don’t trust one another today, perhaps projecting their own bad actions on others, and the old banker’s principle of “know your customer” is out the window.

You can’t legislate trust.

Critics are moaning about how the fat cats will only get fatter from the bailout while the little guy gets hosed, but anyone with a 401k plan is not complaining too loudly and in any case, the immediate losses or escape from losses is not the main event.

The main event is the loss of trust in society at large, not just the financial sector. The social contract was broken, and it was broken in Washington. Raw naked capitalism may be good at setting optimal prices, but that’s about it. To say total lack of regulation is a necessary corollary of capitalism is to have read no economic history and to misread human nature.

And gosh, isn’t Washington where the rescue is coming from? If a poll were taken today asking the public whether it trusts Wall Street or Washington to “do the right thing,” the answer would be an overwhelming “no.” This is not a political statement (please don’t write) but rather an economic observation.

Trust is essential to economic activity. You need trust to get new companies funded and trade conducted (think of letters of credit, not to mention open account trade). You need trust to let the gas tank in your car go down to one-quarter and not be filling it up every day just to be sure you can get it. You need trust to have a successful economy.

Observers in less developed countries note that the key reason they do not get growth is that they have no banking sector or capital markets.

Well, why not?

In large part because Tribe A doesn’t trust Tribe B.

We can see nothing that Washington or Wall Street can do this week to reverse the situation. In fact, more bad news is surely on the plate. The only thing that can save the US Dollar Outlook now is a Shock from elsewhere, like Germany. (Japan seems safe for the moment.) Aside from the mysterious yen, the US dollar is toast.

The EUR/JPY Unwound Causing Massive Disinvestment From Not Only Stocks But Currencies As Well
The EURJPY is called the Armageddon Trade, and for good reason: as when it unwinds, then it causes terrific disinvestment from the emerging markets, especially so now that the markets are liquidity deprived.

ActionForex EUR/JPY Daily Outlook shows the unwinding to 152.42; it is also seen in these Stockcharts.com charts FXE:FXY Daily ... FXE:FXY Weekly

BNZ New Zealand Dollar, -1.6%
BZF Brazilian Real, -7.0%
FXB British Pound, -1.8%
FXE Euro, -1.3%
FXC Cansdian Dollar, -1.0%
FXA Australian Dollar -3.9%
ICN Indian Rupe -1.8%
CYB Chinese Yuan -0.3%
FXS Swiss Krona -1.9%

The ongoing MSN chart of the Euro, FXE, compared to the Brazilian Real, the New Zealand Dollar, the Australian Dollar and the Indian Rupe shows toay's liquidity meltdown

The Ted Spread Reflects Not Only Liquidity Meltdown But A Total Drought And Absence Of Liquidity
The Ted Spread is a metric of liquidity. It opened at 3.25 today and remained there until close. This high value relates that money and cash is completely out of the financial system. The TED Spread has only been above 3.0% three in its history: immediately prior to the 1987 stock market crash; last week, and two weeks ago when the stock sold off and redemptions from money market accounts forced closure of several big name funds.

These other metrics of liquidity show there was not only a complete liquidity breakdown, but a complete liquidity exhaustion today.
PGF -17% ... Financial preferred
HGI -13% ... International yield hog
JNK - 4% ... Junk bonds
CVY -11% ... Claymore yield hog
CSD - 8% ... Claymore spin off
LQD - 9% ... U.S. investment-grade corporate bonds
HYG - 8%.... High yield bonds

The MSN chart of the preferred shares ETF, PGF, for the period September 11, 2008 through September 29, 2008, reflects how the credit drought tumbled the preferred stocks.

The MSN chart of PGF, HYG, HGI, JNK, CVY, CSD, LQY, and HYG, for the period September 11, 2008 through September 29, 2008, shows the death of liquidity. Liquidity is being drained from the financial system faster than it is being added by liquidity infections from the central banks.

The President Bush's Short Selling Ban Effectively Shut Down The Convertible Bond Market
Tom Lauricella in September 26, 2008 Wall Street Journal article reports: "The Securities and Exchange Commission's ban on short selling of financial stocks has effectively shut down much of the convertible-bond market, a crucial area of financing for struggling companies."

Richard of the Resource Bear News Service reports that the MSN Finance chart of the convertible bond ETFs, CVF, NCZ, NIE, and CHI for the period of September 11, 2008 to September 29, 2008, documents there was significant loss to those invested in convertible bonds: between five and twenty percent; these were off sharply again today

And The President's Ban Terminated Hedge Funds And Long/Short Funds For All Practical Purposes
Rob Curran, Geoffrey Rogow and Joseph Checkler in September 25 Dow Jones article report: "The short-selling ban is taking the 'hedge' out of hedge funds. The Securities and Exchange Commission has banned short sales of roughly 950 financial-related stocks until Oct. 2 ... With their hands tied on those stocks and the algorithms that do much of their trading running into technical hitches, many quantitative and other 'market neutral' hedge funds are drastically reducing trading activity ... Once major buyers and sellers on the stock market, these funds may have to reinvent their models in the event of an extension of the rule beyond Oct. 2. 'There are very, very few short-only funds on Wall Street, so the ban mainly removed long/short funds from the market,' said Dan Mathisson, head of the algorithmic trading unit at Credit Suisse ... 'If they can't put on their short positions, they can't put on their long positions, either. It's just breaking down a lot of their models, and the end result is they're walking away. A lot of funds are reducing the size of their books.'"

Today, the above statements proved true as long short funds were decimated. The best example of a 130/30 ETF is JFT; it fell 12% as is seen in the ongoing three month Yahoo Finance Chart of JFT ... JFT

The Federal Reserve Responded To Today's Liquidity Meltdown By Pumping An Additional $630 Billion Into The System
Scott Lanman and Craig Torres of Bloomberg report that: "The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.

The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed's emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.

``Today's blast of term liquidity will settle the funding markets down, and allow trust to slowly be restored between borrowers and lenders,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. On the other hand, ``the Fed's balance sheet is about to explode".

My comment is that it did little to restore liquidity and nothing to restore trust.

Are All The Reserves Of The US Central Bank Now Gone?
Elaine Meinel Supkis believes that today's $630 Billion was the Fed's Last Bullet: "All the reserves of the Federal Reserve are now gone. The ONLY way the Fed can flood the world with dollars is to beg all the other banks to give us dollars for us to give them. Got that? HAHAHA. This is how the Outer Darkness operates! Up is down and in is out. Everything is the opposite. So the Federal Reserves, which is neither federal nor has reserves, is now the conduit for flash flows of money created out of thin air....by our trade rivals.

I hammer on the issue of trade because money is just another way of saying, 'Trade'. This is why these money games the Fed has been frantically playing are called 'Swaps'. This is basically a 'bait and switch' deal which will turn into a 'switch and steal' operation. The crazy, out of balance world trade system is being kicked back into action via these fraudulent deals between the rival central banks and our foolish Federal Reserve bankers. The game here is to not let the US people know that the jig is up. That we can't run trillion dollar trade or budget deficits!

Indeed, it is not mere irony that this sum we just got via a 'swap' in London is pretty much exactly the size of our trade deficit. This is not coincidence. Or rather, in the Outer Darkness, coincidence is magic and magic is all about having things merge and then in a loud bang, flip into a new system, a new shape, a new reality.

The Derivatives Beast is the darling son of the goddess, Depression who was suckled by her sister goddess, Inflation. He is eating up all our money. The actual dollars. Not merely content with devouring equity values, he is now literally eating dollars. This is why the dollars have to now pour out of our entire system only to disappear. This money is needed to sustain global unbalanced trade. But it vanishes before it can be passed around the planet.

Lord only knows what the Dragon of China is doing with its vast, huge dollar reserves! This $630 billion infusion is one third the size of China's FOREX dollar reserves. Recently, I sat down and calculated Europe's dollar reserves and it was over $600 billion by about $50 billion. So I am also assuming this injection was actually Europe letting the Federal Reserve 'borrow' their dollar reserves!

This is ASTONISHING if it is true. It is another sign that the whole concept of a floating currency with the US as the reserve currency has now officially collapsed! Now we will see a free-for-all as our trade rivals spar to see who replaces the US as a reserve currency".

Meanwhile, the Derivatives Beast burps".

Global Problems Require Global Solutions
A Global Monetary Authority, like that called for Jeffrey Garten in a recent FT.com article, and a chief world banker, will arise to address the challenges to financial stability and liquidity.

Garten’s call for a GMA echoes a piece published in the FT back in June by Timothy Geithner, president of the Federal Reserve Bank of New York, who wrote an article in the Financial Times calling for unified regulation of global banking.

Elaine Meinel Supkis writes: "The creditor nations will join with each other AGAINST the debtor nations. This is natural. Just like when the world went bankrupt and the US was solvent after WWI and then WWII. The US was the top voting entity in global trade and banking organizations.

The new MAO authority will be imposed on us when we finally go bankrupt.

This Brit also wants a global tax. Not on ourselves, we will be the debtor/consumers! No, the sovereign wealth funds, the successful manufacturers and traders will be taxed...so we can consume. This is so stupid, I am not speechless. Heh. Try selling this idea to China!

They will want MAO only if they have veto power".

Central Bankers Effect Political Coup By Nationalizing Banking
Matthew Saltmarsh and Landon Thomas Jr. in New York Times article European Regulators Move Swiftly to Rescue Lenders report: "Just days after Washington brokered the sale of Washington Mutual, the largest American savings and loan, regulators in Britain and Belgium swooped in to engineer rescues of two leading banks with heavy exposure to soured mortgages.

In the latest sign of trouble to hit Europe from the global credit crisis, the Belgian, Dutch and Luxembourg governments announced Sunday a partial nationalization of the Belgian-Dutch financial conglomerate Fortis, involving a combined injection of 11.2 billion euros, or $16.1 billion, from the three governments, which took a 49 percent stake.

Prime Minister Yves Leterme of Belgium, who was joined Sunday by the European Central Bank president, Jean-Claude Trichet, in an unprecedented appearance, announced the accord after a weekend of emergency talks in which the governments had tried to broker a whole or partial sale of the bank to private bidders".

Again Elaine Meinel Supkis writes: "All the G7 nations but Japan are nationalizing all their banking systems. This wave of nationalization sweeping the top financial banking systems is a sign that all are overexposed and all lent far beyond their means. And the era of cheap interest lending was FAKE. I remember how everyone was marveling at the miracle of no inflation. Even as oil prices began their historic, relentless climb and gold shot upwards, everyone at the helm of the G7 nations were smug about cheap lending. Indeed, the US rashly dropped rates to 1% when oil and gold were rapidly climbing!

Instead of being arrested for fraud, reckless endangerment and theft, these same banking gnomes that flooded the world with easy credit right when inflation was certainly taking off are now taking over our governments. For these nationalizations are basically all political coups."

I say these political coups fulfill the bible prophecy of the First Horseman of the Apocalypse. The horse is white signifying conquest over mankind, and the fact the rider has a bow with no arrows, foretells a bloodless political coup.

The Scripture reference is Revelation 6:1-2 where the NIV relates: "I watched as the Lamb opened the first of the seven seals. Then I heard one of the four living creatures say in a voice like thunder, "Come!" I looked, and there before me was a white horse! Its rider held a bow, and he was given a crown, and he rode out as a conqueror bent on conquest".

Here is one artist's rendition of the four horsemen of the apocalypse and here is another artist's rendition.

Arlen L Chitwood relate the Greek word "crown" here is "stephanos" or "conqueror's crown".

Economic and political conquerors will arise to establish ten regional oligarchies of state corporate rule; as well as four rival world powers, consisting of the North being Russia, the East being China and Japan, the South being South America and Africa, and the West being the United States, Great Britain, and Europe.

The leaders will announce Security and Prosperity Framework Agreements, such as the Federal Reserve's TAF, TSLF, and PDCF, and also the SPP, which replace traditional and constitutional law.

Stakeholders, such as the North American Competitiveness Council, that is the NACC, will oversee natural resources, the factors of production and manage the economic institutions of finance, commerce, trade and investment. Societies will be pyramidal in shape. Eventually, a global king, the Antichrist, will rise to rule over mankind.

Again Arlen L Chitwood notes the difference between the Greek words "stephanos" and "diadema", relative to the Antichrist and his kingdom. Stephanos is used of the type crown worn by the Antichrist, when he is first introduced in the book of Revelation (6:2), but later diadema, is used relative to his exercise of delegated power and authority, (12:3; 13:1, 2).

Bank Mergers Escalate As A Means To Prevent Derivative Settlement Events That Arise From Counterparty Exposure
The New York Times reports that Citigroup To Buy Wachovia’s Bank Assets For $1 A Share.

Again Elaine Meinel Supkis remarks : "The derivatives exposure is in the hundreds of trillions of dollars. This is why these rescues are happening simultaneous with frantic law making. The screams we hear are the bankers opening their safes to find the Derivatives Beast inside, munching up all their wealth."

The US Dollar Rose Slightly
The US Dollar, $USD, rose 0.75% to close at 77.57 as most all the world's currencies tumbled ... $USD.

ActionForex reports the USD/JPY lower today at 106.15.

Investment Application
Gold, $GOLD, closed at $894.90 ... $GOLD

Gold, GLD rose 3% today, while oil, USO fell 11%, commodities, RJI fell 8%, world stocks, EFA fell 11%, US Stocks, VTI fell 7%, and the Euro, FXE fell 1% ... GLD

A special note to all those of the Austrian economist persuasion who are preaching, and have been preaching deflation, take note: gold did not deflate today, it inflated.

The facts are in and they establish that gold is the measure and means of preserving wealth in a world of falling oil, commodity, stock and currency wealth.

I am concerned that brokerage accounts are not a safe place to hold money or investments. I know brokerage accounts are insured, but the concern comes from todays massive liquidity meltdown, if brokerages have a liquidity run, that is a liquidity drain, then the insurance would be overwhelmed.

Herb Greenburg in MarketWatch article How To Keep Your Investments Safe recommends a trust account for investments.

I recommend gold and gold alone, as an investment, and that one retain as much personal control over that as possible.

Despite the downside risk of a lower price of gold from its current $894 to $850, $820, with a falling Euro, I believe that gold relative to the Euro, GLD:FXE, gold relative to world stocks, GLD:EFA, and gold relative to US Stocks, GLD:VTI, will maintain value and soon rise considerably more than it has recently ... GLD:FXE ... GLD:EFA ... GLD:VTI

I suggest that to protect against the risk of loss of investment principal, both from market downturn and from brokerage shutdown, that one be invested in "physical gold" in four locations: the gold ETF, GLD, directly through streetTRACKS Gold Trust, and not in a brokerage account; two BullionVault, three GoldMoney; and four a limited number of gold coins.

Keywords
liquidity crisis, liquidity evaporation, liquidity vacuum, evaporation of liquidity, financial system meltdown, financial system breakdown, liquiditymeltdown, liquidity meltdown, liquidity evacuatio