Bernard Madoff's Ponzi Scheme

This cartoon explains it all.

The Little Book of Bull Moves in Bear Markets

I have just finished reading The Little Book of Bull Moves in Bear Markets by Peter Schiff.

Mr. Schiff provides a very enlightening opinion on the future of our economy and what we should all be doing to protect ourselves. Our government is leading us into a disastrous future and we need to prepare.

I highly recommend that you buy his book and read it. We will soon face an inflationary calamity here with the United States dollar.

Happy Holidays from Citigroupbailout.com!

Happy Holidays! May your lives be blessed and wonderful in the years to come!

Peter Schiff on Hyperinflation

Helicopter Ben lowers interest rates

Well... the Federal Open Market Committee did it again and lowered interest rates. While it didn't really matter if they lowered it or now because effective interest rates were close to 0% before the meeting, it just shows how desperate the Federal Reserve is to jumpstart the American economy again.

This only proves that it is more of a reason to own commodities more than ever now. We all must be prepared for the future.

Madoff and Manipulation of the Silver Market

I'm sure that everyone has heard about the Madoff case where he potentially lost $50 billion for his clients. Cases like these only add insult to injury to our economic system.

I mean... how could this person lose $50 billion and get away with it? I guess if you compared it to the United States's $10 trillion national debt it would look meaningless.

I read a convincing article on the manipulation of the silver market today. In it, David Morgan tells about the widening disparity between paper silver on the futures markets and physical silver. It's worth a read.

http://www.marketoracle.co.uk/Article4796.html

I believe silver is extremely undervalued right now. At a ratio of nearly 80 ounces of silver to 1 ounce of gold at today's prices (about $10.70 an ounce), it is extremely underpriced compared to the historical ratio of 16 to 1. If the ratio were 16 to 1, the price of silver should be roughly around $52.25.

Physical silver is becoming increasingly difficult to buy. I've visited many bullion dealers online, and they have all charged ridiculous premiums to the spot price of silver. For those interested in investing in silver, I would look at the silver ETF that is traded on the NYSE with the symbol SLV. I've listed the fund summary below.

The objective of the investment is to reflect the price of silver owned by the trust less the trust's expenses and liabilities. The fund is intended to constitute a simple and cost-effective means of making an investment similar to an investment in silver. Although the fund is not the exact equivalent of an investment in silver, they provide investors with an alternative that allows a level of participation in the silver market through the securities market.

All the money that were or will be used for the Wall Street bailouts will eventually make its way into the system. Inflation will cause everything priced in dollars to increase, and silver is included. The government can only do two things to pay for the bill: 1) Raise Taxes or 2) Print Money. Since the Obama presidency will probably not lead to an increase in taxes, the government will need to run the printing presses on for longer periods of time.

Nationalization of the United States - Ron Paul 12/10/08

Ron Paul's comments to the House Of Representatives on 12/10/08.



The American government cannot keep bailing out companies without collapsing the dollar. The Detroit bailout is the first major bailout outside of the financial sector. This will only open the zipper further, and more and more companies will ask the government for money.

Load up on gold, silver, agriculture, and oil now! Shorting the 30 Year Treasury bond is also a wise course for the future.

Are we really in a democracy? Treasury and White House defies Congress

Well as many of you must've heard... the White House and the Treasury plans to bail out the automakers anyway even though the Senate voted down the bill.

Are we really in a democracy? We need to stand up and make our voice heard! Why does the government keep bailing out these companies when it is clear that the majority of the people oppose them?

Can we learn from Japan? History does indeed repeat

Quoted from Wikipedia:

In the decades following World War II, Japan implemented stringent tariffs and policies to encourage the people to save their income. With more money in banks, loans and credit became easier to obtain, and with Japan running large trade surpluses, the yen appreciated against foreign currencies. This allowed local companies to invest in capital resources much more easily than their competitors overseas, which reduced the price of Japanese-made goods and widened the trade surplus further. And, with the yen appreciating, financial assets became very lucrative.

With so much money readily available for investment, speculation was inevitable, particularly in the Tokyo Stock Exchange and the real estate market. The Nikkei stock index hit its all-time high on December 29, 1989 when it reached an intra-day high of 38,957.44 before closing at 38,915.87. The rates for housing, stocks, and bonds rose so much that at one point the government issued 100-year bonds. Additionally, banks granted increasingly risky loans.

At the height of the bubble, real estate values were extremely over-valued. Prices were highest in Tokyo's Ginza district in 1989, with choice properties fetching over US$1.5 million per square meter ($139,000 per square foot). Prices were only slightly less in other areas of Tokyo. By 2004, prime "A" property in Tokyo's financial districts had slumped and Tokyo's residential homes were a fraction of their peak, but still managed to be listed as the most expensive real estate in the world. Trillions were wiped out with the combined collapse of the Tokyo stock and real estate markets.

With Japan's economy driven by its high rates of reinvestment, this crash hit particularly hard. Investments were increasingly directed out of the country, and Japanese manufacturing firms lost some degree of their technological edge. As Japanese products became less competitive overseas, the low consumption rate began to bear on the economy, causing a deflationary spiral.

The easily obtainable credit that had helped create and engorge the real estate bubble continued to be a problem for several years to come, and as late as 1997, banks were still making loans that had a low guarantee of being repaid. Loan Officers and Investment staff had a hard time finding anything to invest in that would return a profit. Meanwhile, the extremely low interest rate offered for deposits, such as 0.1%, meant that ordinary Japanese savers were just as inclined to put their money under their beds as they were to put it in savings accounts. Correcting the credit problem became even more difficult as the government began to subsidize failing banks and businesses, creating many so-called "zombie businesses". Eventually a carry trade developed in which money was borrowed from Japan, invested for returns elsewhere and then the Japanese were paid back, with a nice profit for the trader.

The time after the bubble's collapse (崩壊, hōkai^?), which occurred gradually rather than catastrophically, is known as the "lost decade or end of the century" (失われた10年, ushinawareta jūnen^?) in Japan. The Nikkei 225 stock index eventually bottomed out at 7603.76 in April 2003 before resuming an upward climb.

This sounds remarkably similar to what has happened in the U.S.'s recent past, and history could very well repeat itself. We're doing the same exact thing as the Japanese are now... bailing out banks and not letting anyone fail... and creating "zombie businesses". People will eventually lose confidence in the dollar, and will start to shift their wealth out of dollars and into tangible assets.

However, this time there is no "carry trade" available to us. My prediction is that many of the bondholders of the U.S. will start to lose confidence and sell U.S. treasuries. They need to do so in order to raise money for their own purposes. China, India, and other asian nations are the major bondholders of U.S. treasuries. This selling will lead to a decline in the dollar because the government needs to print money to repay the bonds and lead to major increase in all the prices tangible assets.

History does indeed repeat my friends. Soon the United States will be a "zombie" nation, and it will be Asia (most notably China and India) that will rise out of this economic disaster the best prepared and ready to rule to future.

Job Market

It's very painful for the job market now. Just today, a report by the Bureau of Labor says that employers have slashed HALF A MILLION jobs in November. This is a very bad time for everyone, especially new job seekers like me who are struggling to find employment.

It's funny how Citigroup had a career fair at my college to recruit bankers and financial advisors. This was before the mess when their bailout happened. I didn't attend but that room that they had their presentation in was full with job seekers and emotional students. I've talked to many of my classmates, and none of them were contacted by Citigroup again.

We live in very scary times. Right now I'm looking at employment in the defense industry as that seems to be the only industry which our government subsidizes to the extreme.

According to http://www.nationalpriorities.org/costofwar_home, the United States has spent over $577,000,000,000 in the Iraq War.

Ron Paul's Texas Straight Talk 12/1/08

From Ron Paul's Texas Straight Talk dated 12/1/08:

The Neo-Alchemy of the Federal Reserve

As the printing presses for the bailouts run at full speed, those in power are no longer even pretending that the new giveaways will fix our problems. Now that we are used to rewarding failure with taxpayer-funded bailouts, we are being told that this is “just a start,” more funds will inevitably be needed for more industries, and that things would be much worse had we done nothing.

The updated total bailout commitments add up to over $8 trillion now. This translates into a monetary base increase of 75 percent over the last two months. This money does not come from some rainy day fund tucked away in the budget somewhere – it is created from thin air, and devalues every dollar in circulation. Dumping money on an economy, as they have been doing, is not the same as dumping wealth. In fact, it has quite the opposite effect.

One key attribute that gives money value is scarcity. If something that is used as money becomes too plentiful, it loses value. That is how inflation and hyperinflation happens. Giving a central bank the power to create fiat money out of thin air creates the tremendous risk of eventual hyperinflation. Most of the founding fathers did not want a central bank. Having just experienced the hyperinflation of the Continental dollar, they understood the power and the temptations inherent in that type of system. It gives one entity far too much power to control and destabilize the economy.

Our central bankers have had a tremendous amount of hubris over the years, believing that they could actually manage a paper money system in such a way as to replicate the behavior and benefits of a gold standard. In fact, back in 2004 then Fed Chairman Alan Greenspan told me as much. People talk about toxic assets, but the real toxicity in our economy comes from the neo-alchemy practiced by the Federal Reserve System. Just as alchemists of the past frequently poisoned themselves with the lead or mercury they were trying to turn to gold, today’s bankers are poisoning the economy with accelerated fiat money creation.

Throughout the ages, gold has stood the test of time as a consistently reliable medium of exchange, and has frequently been referred to as “God’s money”, as only God can make more of it. Seeking superhuman power over money in the way alchemists did in ancient times caused society to shun them as charlatans. In much the same way, free people today should be sending the message that this power and control over our money is no longer acceptable.

The irony is that even had the ancient practice of alchemy been successful, and gold was suddenly, magically made abundant, alchemists still would have failed to create real wealth. Creating gold from lead would have cheapened its status to that of rhinestones or cubic zirconia. It is unnatural and dangerous for paper to be considered as precious as a precious metal. Our fiat currency system is crumbling and coming to an end, as all fiat currencies eventually do.

Congress should reject the central bank as a failure for its manipulations of money that have brought our economy to its knees. I am hoping that in the 111^th Congress my legislation to abolish the Federal Reserve System gains traction so that the central bank can no longer destroy our money.

Gold to $2000/ounce next year according to an internal note at Citigroup

The same bank that got bailed out by the American government is now predicting that gold will rise above $2000 an ounce next year.

Read it here at the Telegraph.co.uk

Peter Schiff gets Cut off on CNN

I encourage everyone to watch the YouTube video below. Peter Schiff is a genius and knows exactly what's wrong with the financial system. I just find it strange how he gets cut off at the end.



Buy REAL assets today and you will be rewarded.

We're Officially in a recession! Also Oil Thoughts

Yes... they've announced the obvious... and the Dow Jones Industrial Average drops 680 points. I'm sure that everyone knew that from the beginning.

I would recommend buying USO (United States Oil Limited Partnership) which is supposed to track the performance of a barrel of crude oil. There is too much negative news on oil and I believe it will be a good investment. Regardless if it goes down further from here, oil will never go to zero and there will always be a demand for it. China and other Asian countries are growing and everyone everywhere will not have faith in the United States anymore. I believe that this will trigger a chain reaction, prompting bondholders to sell U.S. Treasuries and collapse the value of the dollar.

Protect your wealth now by buying "real" assets, and not the phony crap like Lehman Brothers, Citigroup and Fannie Mae which the media keeps pumping up. In a bear market, even good companies like Apple and Microsoft are punished. I would stay away from any stocks and encourage everyone to own something of real value to prepare for the coming dollar collapse.

Citigroup sells Japanese unit

Citigroup today announced that they are going to sell their Japanese unit. Citigroup is desperately trying to conserve cash and turn around.

You can read the whole story here: http://biz.yahoo.com/ap/081130/as_japan_citigroup.html

More and more companies are being taken over by international companies or selling their divisions to them. Just take a look at Anheuser-Busch (InBev), Morgan Stanley (CIC), Lehman Brothers (Barclays), or Ford selling their 20% share in Mazda back to the parent company. Pretty soon this country will be called the International States Of America, because more American companies will be owned by foreigners.

I highly recommend that everyone view Jim Roger's interview on YouTube below.

It's Black Friday again! Time for us to spend.... or not

I hope everyone in the United States had a Happy Thanksgiving yesterday. Today, also known as Black Friday, is the day where stores entice people to buy stuff for the Christmas season. Watch out for many deals such as Free Shipping, No Tax and XX% off.

However, we should be reminded not to spend beyond our means. Spending beyond our means helped create this economic crisis. The government and media tells us that we need debt in order to function. If this is the case, why does the Federal Reserve keep pumping liquidity in the market and tell the American people and the government to keep borrowing more of what they can't afford while it does nothing to help the current situation. We are heading towards a socialist state, and while bailing out a major institution like Citigroup will help prevent an economic meltdown, its far reaching effects will be felt far and wide. I am preparing for inflation to take off in the next 6 months or so, and it will not look pretty.

I would suggest buying things that store their value such as gold, silver, and agriculture in order to prepare. Here's something the media doesn't tell you. While gold is still hovering around $810 an ounce, it has been making all time highs in every other currency other than the U.S. dollar and the Japanese Yen. Gold will always preserve wealth, while phony paper printed with green ink will not.

Moral Hazard

Moral Hazard is defined by the Economist as "that people with insurance may take greater risks than they would do without it because they know that they are protected, so the insurer may get more claims than it bargained for."

AIG acted in this way when they went on luxury resorts totaling around $440,000 in California just weeks after they received their bailout. That sounds like a great idea to use American tax money in order to fund a luxury "vacation." This company came to the taxpayers for help, and what the American people got in return was a mockery on news networks of how the company who just got bailed out spent their money. AIG knows that they have the government like a rope around their neck. They know that the government will take whatever it takes to keep them afloat, and this is why they continue to act irresponsibly. Companies in a desperate situation such as AIG and GM should not be spending ridiculous amounts of money rewarding their top executives with luxury resorts and private jet flights. What a company should do is cost cut and develop strategies in order to turn the company around, but it seems as if all top management cares about is deciding which five star resort they should travel to next month.

(Source: www.dubai-information.info/)

Lehman Brothers and Citigroup

In the Saturday November 22nd weekend edition of the Financial Times, Francesco Guerrerra and Greg Farrell report:

Mr Pandit reiterated his backing for Citi's "universal banking" business model, combining wholesale, retail and investment banking. "This is a fantastic model," he told staff.

Mr Pandit and Mr Crittenden urged employees to get in touch with clients and remind them that the group's financial position was sound. Citi executives are worried about a flight of capital from the bank but say they have seen no unusual movement in retail or corporate deposits.

Mr Pandit, who took over in December, blamed the share price slump on misinformation and scaremongering from investors, short-sellers and rivals, saying the company was in much better shape now than a few months ago. He said the bank was working with regulators on a number of issues, a reference to the lobbying by Citi and other banks to reinstate a ban on short-selling.

In the conference call, Mr Pandit insisted that the bank's underlying business was strong, generating $100bn in annual revenues. Those revenues, along with plans to reduce Citi's annual expenses from their current $62bn level to $52bn in 2009, would give the bank an added cushion to defend itself in an economic downturn, Mr Pandit said.

Hmm... isn't this similar to what Lehman Brothers said about 2 months ago? Here is an excerpt by Henny Sender, Francesco Guerrera, Peter Thal Larsen and Gary Silverman from the September 16th issue of the Financial Times:

In public, Mr Fuld embarked on a crusade to stop what he regarded as a concerted campaign to sink Lehman by a small group of short-sellers. He called on the Securities and Exchange Commission to take action, drawing up a voluminous dossier of “evidence”. The SEC eventually tightened rules outlawing abusive short-selling for Lehman and several other financial groups. But Mr Fuld went further, phoning some Wall Street counterparts to say that he had heard their traders were spreading false rumours about his bank.

But such behind-the-scenes actions only served to confirm the anxieties of Mr Fuld’s critics. In late June and early July, he began discussing the possibility of a management buyout and initiated talks with half a dozen private equity firms, with the idea that each would put up about $2bn. Those talks also went nowhere. By August, analysts were anticipating red ink, with JPMorgan predicting a possible $4bn loss. The share price drop accelerated.

Within the bank, the atmosphere became siege-like. “It was like Fort Apache, The Bronx,” said one senior insider, with reference to a hard-nosed film centred on a beleaguered New York police station.

During the first week of August, Lehman hosted top executives of Korea Development Bank and China’s Citic Securities at its New York headquarters for talks on the purchase of a major stake in the bank. Mr Fuld greeted his guests with a show of strength, people familiar with the talks said. Even when he was not in the room, he directed the negotiations, according to one adviser to KDB, and gave out virtually no information about Lehman’s holdings. “The Koreans were very receptive,” says this person. “But then he [Mr Fuld] tried to change the terms. The deal went away.” Lehman has declined to comment on Mr Fuld’s role in the talks.

Lehman’s insiders argue that KDB never tabled a formal offer and that the prolonged discussions prevented them from seeking other suitors. In their view, Lehman’s downfall was so fast that Mr Fuld had little time to look for alternatives.

What these two banks have in common is that the CEOs were blinded by their pride. When things went sour at their banks, they started to blame everything else... the economy, misinformation, short-sellers, and numerous other reasons to why their bank's share price kept going down. The last person that they would ever blame because of their company's downfall are themselves. It also doesn't make sense that while the short-selling ban was in effect the market continued lower and punished Lehman and Citigroup even lower. This only proves that investors know the true value of a company's stock price... and not company management. The reason why most people sell a stock is because it is unlogical to hold a company who may very well be worthless. In the case of Lehman and Citigroup, they were right. There is no market manipulation from short-selling here... people sold Citigroup and Lehman because they realized that they were owners of an insolvent company.

CBS: Citigroup "Too Big To Fail"

Citigroup is not too big to fail! Why should the government spend our tax money saving an institution that helped to create the economic chaos that we're in now? What they're doing is destroying our sovereignty and liberties as a nation for the greater interests of the rich "elite". Even though there is the argument that Citigroup will cause even more chaos in the markets by not receiving the bailout, Americans and other people around the world will soon realize that this financial system that was build up on credit will be unsustainable. CBS and the other major news companies are shrouding the public from the truth of the problem and applauding the government for their reaction to Citigroup. If the government is really trying to save our economy from disaster, why do they keep bailing out the people who helped caused this mess instead of the average people who need it the most?

According to the Food And Agriculture Organization Of The United Nations, the world only needs $30 billion a year to end world hunger. The entire $45 billion package used to bail out Citigroup ($25 billion from earlier and $20 billion from the bailout yesterday) could be used to end world hunger. The world will look upon the United States more favorably if the money used to bail out Wall Street was used to help hunger around the globe.

According to Ron Paul's Texas Straight Talk of November 24, 2008:

This week the bailout of the Big Three automakers was under heavy consideration in Congress’s lame duck session. I have always opposed government bailouts of private organizations. Back in 1979 Congress had hearings about bailing out Chrysler and I was on record pointing out that these types of policies are foolish and very damaging to the long term economic health of our country. They still are.

There was also renewed pressure this week to bailout homeowners and send another round of stimulus checks to “Main Street” to balance out all the handouts to big business. It seems that eventually the entire economy is going to be blanketed over with Federal Reserve notes. Most in Washington are completely oblivious as to why this model of money creation and spending is so dangerous.

We must remember that governments do not produce anything. Their only resources come from producers in the economy through such means as inflation and taxation. The government has an obligation to be good stewards of these resources. In bailing out failing companies, they are confiscating money from productive members of the economy and giving it to failing ones. By sustaining companies with obsolete or unsustainable business models, the government prevents their resources from being liquidated and made available to other companies that can put them to better, more productive use. An essential element of a healthy free market, is that both success and failure must be permitted to happen when they are earned. But instead with a bailout, the rewards are reversed – the proceeds from successful entities are given to failing ones. How this is supposed to be good for our economy is beyond me.

With each bailout we hear rhetoric that this is the mother of all bailouts. This will fix the problem once and for all, and that this is absolutely necessary to avert disaster. This sense of panic squeezes astonishing amounts of dollars out of reluctant but hopeful legislators, who hate the position they are being put in, but are relieved that it will be the last time. It is never the last time, and again and again we are faced with the same scenarios and the same fears. We are already in the bailout business for such a staggering amount that admitting it was wrong in the first place would be too embarrassing. So the commitment to this course of action is only irrationally escalated, in the hopes that somehow, someway eventually it will work and those in power won’t have to admit they were wrong.

It won’t work. It can’t work. We need to cut our losses and get back on course. There is too much at stake for too many people to continue down this road. The bailouts thus far to AIG, Bear Stearns, Fannie and Freddie, and TARP funds amount to around $1.5 trillion. Considering our GDP is $14 trillion, and our Federal budget is already $3 trillion, this additional amount will significantly eat into our future lifestyles. That amounts to an extra $5,000 that every person in the country needs to somehow produce just to keep up. It is obvious to most Americans that we need to reject corporate cronyism, and allow the natural regulations and incentives of the free market to pick the winners and losers in our economy, not the whims of bureaucrats and politicians.

Citigroup bailed out for $20 billion, U.S. Government to Insure up to $306 billion in loans

Late Sunday evening, Citigroup was bailed out for $20 billion from the Treasury's TARP Program. The government doesn't want to admit it, but if Citi wasn't given their bailout, it could've been a real possibility that one of the largest financial institutions in the world might someday declare bankruptcy. The United States government by this act is just delaying the fact that our financial system is unsustainable. We are indeed entering a socialist state by having our government take ownership in private corporations. GM, Chrysler, and Ford need money. I wonder if the government will take over Detroit as well.

Click here to see the terms of the agreement between Citigroup, the Federal Reserve, the Treasury, and the FDIC.