P-ED CONTRIBUTOR
How the Banks Put the Economy Underwater
By YVES SMITH
Published: October 30, 2010
IN Congressional hearings last week, Obama administration officials acknowledged that uncertainty over foreclosures could delay the recovery of the housing market. The implications for the economy are serious. For instance, the International Monetary Fund found that the persistently high unemployment in the United States is largely the result of foreclosures and underwater mortgages, rather than widely cited causes like mismatches between job requirements and worker skills.
This chapter of the financial crisis is a self-inflicted wound. The major banks and their agents have for years taken shortcuts with their mortgage securitization documents — and not due to a momentary lack of attention, but as part of a systematic approach to save money and increase profits. The result can be seen in the stream of reports of colossal foreclosure mistakes: multiple banks foreclosing on the same borrower; banks trying to seize the homes of people who never had a mortgage or who had already entered into a refinancing program.
Banks are claiming that these are just accidents. But suppose that while absent-mindedly paying a bill, you wrote a check from a bank account that you had already closed. No one would have much sympathy with excuses that you were in a hurry and didn’t mean to do it, and it really was just a technicality.
The most visible symptoms of cutting corners have come up in the foreclosure process, but the roots lie much deeper. As has been widely documented in recent weeks, to speed up foreclosures, some banks hired low-level workers, including hair stylists and teenagers, to sign or simply stamp documents like affidavits — a job known as being a “robo-signer.”
Such documents were improper, since the person signing an affidavit is attesting that he has personal knowledge of the matters at issue, which was clearly impossible for people simply stamping hundreds of documents a day. As a result, several major financial firms froze foreclosures in many states, and attorneys general in all 50 states started an investigation.
However, the problems in the mortgage securitization market run much wider and deeper than robo-signing, and started much earlier than the foreclosure process.
When mortgage securitization took off in the 1980s, the contracts to govern these transactions were written carefully to satisfy not just well-settled, state-based real estate law, but other state and federal considerations. These included each state’s Uniform Commercial Code, which governed “secured” transactions that involve property with loans against them, and state trust law, since the packaged loans are put into a trust to protect investors. On the federal side, these deals needed to satisfy securities agencies and the Internal Revenue Service.
This process worked well enough until roughly 2004, when the volume of transactions exploded. Fee-hungry bankers broke the origination end of the machine. One problem is well known: many lenders ceased to be concerned about the quality of the loans they were creating, since if they turned bad, someone else (the investors in the securities) would suffer.
A second, potentially more significant, failure lay in how the rush to speed up the securitization process trampled traditional property rights protections for mortgages.
The procedures stipulated for these securitizations are labor-intensive. Each loan has to be signed over several times, first by the originator, then by typically at least two other parties, before it gets to the trust, “endorsed” the same way you might endorse a check to another party. In general, this process has to be completed within 90 days after a trust is closed.
Evidence is mounting that these requirements were widely ignored. Judges are noticing: more are finding that banks cannot prove that they have the standing to foreclose on the properties that were bundled into securities. If this were a mere procedural problem, the banks could foreclose once they marshaled their evidence. But banks who are challenged in many cases do not resume these foreclosures, indicating that their lapses go well beyond minor paperwork.
Increasingly, homeowners being foreclosed on are correctly demanding that servicers prove that the trust that is trying to foreclose actually has the right to do so. Problems with the mishandling of the loans have been compounded by the Mortgage Electronic Registration System, an electronic lien-registry service that was set up by the banks. While a standardized, centralized database was a good idea in theory, MERS has been widely accused of sloppy practices and is increasingly facing legal challenges.
As a result, investors are becoming concerned that the value of their securities will suffer if it becomes difficult and costly to foreclose; this uncertainty in turn puts a cloud over the value of mortgage-backed securities, which are the biggest asset class in the world.
Other serious abuses are coming to light. Consider a company called Lender Processing Services, which acts as a middleman for mortgage servicers and says it oversees more than half the foreclosures in the United States. To assist foreclosure law firms in its network, a subsidiary of the company offered a menu of services it provided for a fee.
The list showed prices for “creating” — that is, conjuring from thin air — various documents that the trust owning the loan should already have on hand. The firm even offered to create a “collateral file,” which contained all the documents needed to establish ownership of a particular real estate loan. Equipped with a collateral file, you could likely persuade a court that you were entitled to foreclose on a house even if you had never owned the loan.
That there was even a market for such fabricated documents among the law firms involved in foreclosures shows just how hard it is going to be to fix the problems caused by the lapses of the mortgage boom. No one would resort to such dubious behavior if there were an easier remedy.
The banks and other players in the securitization industry now seem to be looking to Congress to snap its fingers to make the whole problem go away, preferably with a law that relieves them of liability for their bad behavior. But any such legislative fiat would bulldoze regions of state laws on real estate and trusts, not to mention the Uniform Commercial Code. A challenge on constitutional grounds would be inevitable.
Asking for Congress’s help would also require the banks to tacitly admit that they routinely broke their own contracts and made misrepresentations to investors in their Securities and Exchange Commission filings. Would Congress dare shield them from well-deserved litigation when the banks themselves use every minor customer deviation from incomprehensible contracts as an excuse to charge a fee?
There are alternatives. One measure that both homeowners and investors in mortgage-backed securities would probably support is a process for major principal modifications for viable borrowers; that is, to forgive a portion of their debt and lower their monthly payments. This could come about through either coordinated state action or a state-federal effort.
The large banks, no doubt, would resist; they would be forced to write down the mortgage exposures they carry on their books, which some banking experts contend would force them back into the Troubled Asset Relief Program. However, allowing significant principal modifications would stem the flood of foreclosures and reduce uncertainty about the housing market and mortgage securities, giving the authorities time to devise approaches to the messy problems of clouded titles and faulty loan conveyance.
The people who so carefully designed the mortgage securitization process unwittingly devised a costly trap for people who ran roughshod over their handiwork. The trap has closed — and unless the mortgage finance industry agrees to a sensible way out of it, the entire economy will be the victim.
Yves Smith is the author of the blog Naked Capitalism and “Econned: How Unenlightened Self-Interest Undermined Democracy and Corrupted Capitalism.”
A version of this op-ed appeared in print on October 31, 2010, on page
Life takes us in many strange directions and wonderful discoveries. It never turns out the way we thought it would.
Sunday, October 31, 2010
South Africa's Hugh Masekela At 71
Apartheid and all that jazz
By David Honigmann
Published: October 29 2010 23:24 | Last updated: October 29 2010 23:24
Hugh Masekela, photographed on his recent London stopover
Hugh Masekela began the day in Oslo; he will finish it in Brecon. In transit, making a quick stop in London, he knows precisely what he wants. “I need an espresso,” he growls, his trademark East Rand rasp undiluted by decades travelling the world. “And a cognac.”
Next month, Masekela, now 71 and South Africa’s most celebrated living musician, embarks on a UK tour with fellow veterans the Mahotella Queens.
They may join him on stage for a closing song. “We just did a tribute to [activist/singer] Miriam Makeba in Toulouse. [Singer/songwriter] Thandiswa Mazwai was also there, and Zohani Mahola, the lead singer of Freshlyground, and Vusi Mahlasela. We all rehearsed with the band I play with. It was a most marvellous night,” he says.
Masekela has been playing the trumpet since he was 14. At school in Sofiatown, the doomed black suburb of Johannesburg later bulldozed as a “black spot”, he “saw a movie about a trumpet player” – it was Young Man with a Horn, in which Kirk Douglas starred as Bix Beiderbecke. “And I fell in love with it. Especially the soundtrack, which was played by Harry James. The most beautiful sounds in the world.”
EDITOR’S CHOICE
The surprising durability of radio - Oct-29
Krystle Warren, The Forge, Basingstoke - Oct-25
Frazey Ford, Purcell Room, London - Oct-19
Music that spans the world - Oct-08
Show Boat, Châtelet, Paris - Oct-06
Jan Garbarek and the Hilliard Ensemble, Cambridge - Oct-04
Masekela had come to the attention of school chaplain Trevor Huddleston as a troubled youth. “I said to Father Huddleston, ‘If I got a trumpet I wouldn’t bother anyone.’ So he got me a trumpet and a trumpet teacher and we ended up forming a band.” An early recording of the Father Huddleston Band, playing “Ndenzeni Na”, showcases Masekela’s animated trumpet playing powering the music forward.
Huddleston went one better. Expelled from South Africa after convincing his diocese to reject the apartheid-era government’s Bantu Education Act, he returned to England via New York. “He met Louis Armstrong and told him about us and Louis Armstrong sent us a trumpet. We became news. The older musicians discovered us. Five of us are still professional musicians today.” Masekela apart, the best-known is the trombonist Jonas Gwangwa, who composed the score for Richard Attenborough’s 1987 film Cry Freedom.
With his friends, Masekela played “in all the townships, anywhere you could get work”. It was a tough apprenticeship. “Even today, South African muscians can play any kind of music because we were never categorical in our approach. When I played in the township dance bands we had to learn ballroom dance songs, the wedding march, waltzes. And we had the movies too. There was Doris Day, there was Mario Lanza ... and the cowboys. We would imitate Smiley Burnette – he was the greatest yodeller.” Masekela briefly yodels, impressively, then segues into a snatch of “My Darling Clementine”.
He worked his way through bands such as the Jazz Dazzlers and the Jazz Epistles. He was part of the cast of the musical King Kong and went into exile in the early 1960s along with many of its members. “We all sought more knowledge and skills – and recognition, because we thought we were good enough for the world. The apartheid regime isolated us, so it became a major yearning to go where you had access to enhancing your knowledge. That’s the reason there was such a big exodus.”
Also in the King Kong cast was Miriam Makeba, six years Masekela’s senior. She and Masekela were married from 1965 to 1968, during which time they lived in America. “We were very successful.” Masekela played trumpet with The Byrds and won a Grammy nomination for “Grazin’ In The Grass”; Makeba landed a Grammy for an album with Harry Belafonte. “We supported each other before we got married and long after we were married. We were passionate about South Africa and we also had our grudges. Miriam couldn’t go back to bury her mother after she died. [In 1960, when Makeba tried to return home for her mother’s funeral, she found that her passport had been revoked.] She addressed the UN in 1963 – she was the first person to bring knowledge about South Africa to the entire world.” At this point, Makeba was stripped of her citizenship altogether.
Makeba died last year, in the middle of a tour. “She was an amazing person because she sacrificed a very lucrative career to fight for liberation, to make people aware about oppression, not only in South Africa but in Angola, Mozambique, the Congo, Zambia, everywhere,” Masekela says. “She became friends with all the liberation movements and raised money for all of them. I don’t think anyone did more for Africa than Miriam Makeba in the history of the continent. She was an amazing woman.”
Even if Masekela’s best-known songs are breezy instrumentals, he is highly political. “The media has tried to compartmentalise me, but my biggest stand is against the decimation of nature and against injustice anywhere in the world.”
He insists that injustice is not restricted to Africa. “I see injustice in England. All over the world is injustice, against the poor, against the illiterate, against migrants. There’s racist injustice, there’s ethnic cleansing. If it exists in Africa, it was exacerbated by its exploitation by the industrial complex of the world.”
In Ghana he met another liberation-minded musician, Nigeria’s Fela Kuti. “Fela has been as over-compartmentalised as Mandela has,” he says. “The media always looks for somebody. The liberation of South Africa has been reduced to ... Mandela. But Mandela could never have been – with all due respect – without the people of South Africa. Without the people who laid down their lives and without the people who built his name while he was in jail.”
Masekela contributed his own piece of the Mandela myth with his song “Bring Him Back Home”. The original version of the song pictures Mandela, then imprisoned, walking down the streets of Soweto with his former wife Winnie; in performance she has now been airbrushed out of the chorus. Now, though, Masekela dismisses it: “It was just a song, it was just a song. I come from a people, and those people are much bigger than me. They are my source and my resource and if it wasn’t for them I wouldn’t be. Whenever people try to say I did something I say, ‘One day I just woke up and wrote a song because Mandela sent me a birthday greeting from jail’. It doesn’t make me a liberation hero. I refuse that mantle.”
Nonetheless, Masekela’s concern with social justice is a constant thread in his music. “Stimela (Coal Train)” has grown into a chilling 20-minute tour de force in which he imitates the wheezing of the train bringing migrant workers to work in South Africa’s mines. “I grew up at a time when there were small townships, mining towns surrounded by mining compounds. There were immigrant migrant labourers from all the neighbouring countries and the entire hinterland of SA itself.”
But the anger is mixed with fondness. “There were 20 or 30 ethnic groups with types of clothing like plumage,” he says. “Different dressing and pageantry and drumming and singing and dancing.”
When not touring, Masekela lives on a one-and-a-half acre plot – “like a little farm” – in Bryanston, a well-heeled, liberal northern suburb of Johannesburg. “I have one of the most beautiful gardens in the world. The two things I like doing most outside music are gardening and tai chi. It helps to centre and focus me.”
When not gardening, he is involved in theatrical productions that revive South Africa’s musical heritage. “I’m part of the cast of a play called Songs of Migration that we’re bringing to England next year. It’s a cross-section of South Africa’s migration songs from as far back as we can go to the most recent. With very high-level performances” – notably from singer Sibongile Khumalo – “and a great script by James Ngcobo. We’re also working on a Miriam Makeba musical. And a Joseph Shabalala portrait. The women of South Africa – the Dolly Rathebes and Dorothy Masukas. Revival through entertainment.”
He is suddenly animated. “A lot of our heritage was rubbished by international business and religion as heathen and backward, and savage and barbaric. For very many decades we believed it. But that’s going to go away. When that goes away there’s going to be a major arts revival and renaissance in Africa.”
The cognac and espresso have come to an end. “My biggest obsession is working on a revival of the past for Africa. Africa’s past – there’s amazing history and diversity and wealth that has to be put together to show the world and to show future generations. We’re the only community that is impoverished all over the world. But the biggest wealth that cannot be taken away from us is our heritage, and that is my biggest obsession. To show it, in whatever vehicle, and to campaign for people to wake up to it and revive it. That’s the greatest way forward for the African. I don’t think anyone’s going to do it for us.”
Hugh Masekela’s UK tour runs from November 6 to 20. For details, go to www.musicbeyondmainstream.org.uk
By David Honigmann
Published: October 29 2010 23:24 | Last updated: October 29 2010 23:24
Hugh Masekela, photographed on his recent London stopover
Hugh Masekela began the day in Oslo; he will finish it in Brecon. In transit, making a quick stop in London, he knows precisely what he wants. “I need an espresso,” he growls, his trademark East Rand rasp undiluted by decades travelling the world. “And a cognac.”
Next month, Masekela, now 71 and South Africa’s most celebrated living musician, embarks on a UK tour with fellow veterans the Mahotella Queens.
They may join him on stage for a closing song. “We just did a tribute to [activist/singer] Miriam Makeba in Toulouse. [Singer/songwriter] Thandiswa Mazwai was also there, and Zohani Mahola, the lead singer of Freshlyground, and Vusi Mahlasela. We all rehearsed with the band I play with. It was a most marvellous night,” he says.
Masekela has been playing the trumpet since he was 14. At school in Sofiatown, the doomed black suburb of Johannesburg later bulldozed as a “black spot”, he “saw a movie about a trumpet player” – it was Young Man with a Horn, in which Kirk Douglas starred as Bix Beiderbecke. “And I fell in love with it. Especially the soundtrack, which was played by Harry James. The most beautiful sounds in the world.”
EDITOR’S CHOICE
The surprising durability of radio - Oct-29
Krystle Warren, The Forge, Basingstoke - Oct-25
Frazey Ford, Purcell Room, London - Oct-19
Music that spans the world - Oct-08
Show Boat, Châtelet, Paris - Oct-06
Jan Garbarek and the Hilliard Ensemble, Cambridge - Oct-04
Masekela had come to the attention of school chaplain Trevor Huddleston as a troubled youth. “I said to Father Huddleston, ‘If I got a trumpet I wouldn’t bother anyone.’ So he got me a trumpet and a trumpet teacher and we ended up forming a band.” An early recording of the Father Huddleston Band, playing “Ndenzeni Na”, showcases Masekela’s animated trumpet playing powering the music forward.
Huddleston went one better. Expelled from South Africa after convincing his diocese to reject the apartheid-era government’s Bantu Education Act, he returned to England via New York. “He met Louis Armstrong and told him about us and Louis Armstrong sent us a trumpet. We became news. The older musicians discovered us. Five of us are still professional musicians today.” Masekela apart, the best-known is the trombonist Jonas Gwangwa, who composed the score for Richard Attenborough’s 1987 film Cry Freedom.
With his friends, Masekela played “in all the townships, anywhere you could get work”. It was a tough apprenticeship. “Even today, South African muscians can play any kind of music because we were never categorical in our approach. When I played in the township dance bands we had to learn ballroom dance songs, the wedding march, waltzes. And we had the movies too. There was Doris Day, there was Mario Lanza ... and the cowboys. We would imitate Smiley Burnette – he was the greatest yodeller.” Masekela briefly yodels, impressively, then segues into a snatch of “My Darling Clementine”.
He worked his way through bands such as the Jazz Dazzlers and the Jazz Epistles. He was part of the cast of the musical King Kong and went into exile in the early 1960s along with many of its members. “We all sought more knowledge and skills – and recognition, because we thought we were good enough for the world. The apartheid regime isolated us, so it became a major yearning to go where you had access to enhancing your knowledge. That’s the reason there was such a big exodus.”
Also in the King Kong cast was Miriam Makeba, six years Masekela’s senior. She and Masekela were married from 1965 to 1968, during which time they lived in America. “We were very successful.” Masekela played trumpet with The Byrds and won a Grammy nomination for “Grazin’ In The Grass”; Makeba landed a Grammy for an album with Harry Belafonte. “We supported each other before we got married and long after we were married. We were passionate about South Africa and we also had our grudges. Miriam couldn’t go back to bury her mother after she died. [In 1960, when Makeba tried to return home for her mother’s funeral, she found that her passport had been revoked.] She addressed the UN in 1963 – she was the first person to bring knowledge about South Africa to the entire world.” At this point, Makeba was stripped of her citizenship altogether.
Makeba died last year, in the middle of a tour. “She was an amazing person because she sacrificed a very lucrative career to fight for liberation, to make people aware about oppression, not only in South Africa but in Angola, Mozambique, the Congo, Zambia, everywhere,” Masekela says. “She became friends with all the liberation movements and raised money for all of them. I don’t think anyone did more for Africa than Miriam Makeba in the history of the continent. She was an amazing woman.”
Even if Masekela’s best-known songs are breezy instrumentals, he is highly political. “The media has tried to compartmentalise me, but my biggest stand is against the decimation of nature and against injustice anywhere in the world.”
He insists that injustice is not restricted to Africa. “I see injustice in England. All over the world is injustice, against the poor, against the illiterate, against migrants. There’s racist injustice, there’s ethnic cleansing. If it exists in Africa, it was exacerbated by its exploitation by the industrial complex of the world.”
In Ghana he met another liberation-minded musician, Nigeria’s Fela Kuti. “Fela has been as over-compartmentalised as Mandela has,” he says. “The media always looks for somebody. The liberation of South Africa has been reduced to ... Mandela. But Mandela could never have been – with all due respect – without the people of South Africa. Without the people who laid down their lives and without the people who built his name while he was in jail.”
Masekela contributed his own piece of the Mandela myth with his song “Bring Him Back Home”. The original version of the song pictures Mandela, then imprisoned, walking down the streets of Soweto with his former wife Winnie; in performance she has now been airbrushed out of the chorus. Now, though, Masekela dismisses it: “It was just a song, it was just a song. I come from a people, and those people are much bigger than me. They are my source and my resource and if it wasn’t for them I wouldn’t be. Whenever people try to say I did something I say, ‘One day I just woke up and wrote a song because Mandela sent me a birthday greeting from jail’. It doesn’t make me a liberation hero. I refuse that mantle.”
Nonetheless, Masekela’s concern with social justice is a constant thread in his music. “Stimela (Coal Train)” has grown into a chilling 20-minute tour de force in which he imitates the wheezing of the train bringing migrant workers to work in South Africa’s mines. “I grew up at a time when there were small townships, mining towns surrounded by mining compounds. There were immigrant migrant labourers from all the neighbouring countries and the entire hinterland of SA itself.”
But the anger is mixed with fondness. “There were 20 or 30 ethnic groups with types of clothing like plumage,” he says. “Different dressing and pageantry and drumming and singing and dancing.”
When not touring, Masekela lives on a one-and-a-half acre plot – “like a little farm” – in Bryanston, a well-heeled, liberal northern suburb of Johannesburg. “I have one of the most beautiful gardens in the world. The two things I like doing most outside music are gardening and tai chi. It helps to centre and focus me.”
When not gardening, he is involved in theatrical productions that revive South Africa’s musical heritage. “I’m part of the cast of a play called Songs of Migration that we’re bringing to England next year. It’s a cross-section of South Africa’s migration songs from as far back as we can go to the most recent. With very high-level performances” – notably from singer Sibongile Khumalo – “and a great script by James Ngcobo. We’re also working on a Miriam Makeba musical. And a Joseph Shabalala portrait. The women of South Africa – the Dolly Rathebes and Dorothy Masukas. Revival through entertainment.”
He is suddenly animated. “A lot of our heritage was rubbished by international business and religion as heathen and backward, and savage and barbaric. For very many decades we believed it. But that’s going to go away. When that goes away there’s going to be a major arts revival and renaissance in Africa.”
The cognac and espresso have come to an end. “My biggest obsession is working on a revival of the past for Africa. Africa’s past – there’s amazing history and diversity and wealth that has to be put together to show the world and to show future generations. We’re the only community that is impoverished all over the world. But the biggest wealth that cannot be taken away from us is our heritage, and that is my biggest obsession. To show it, in whatever vehicle, and to campaign for people to wake up to it and revive it. That’s the greatest way forward for the African. I don’t think anyone’s going to do it for us.”
Hugh Masekela’s UK tour runs from November 6 to 20. For details, go to www.musicbeyondmainstream.org.uk
Saturday, October 30, 2010
Barbara J. Desoer, President of Bank of America Home Loans
Managing U.S. Mortgages Makes Desoer Besieged at Bank of America
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By David Mildenberg and Lisa Kassenaar
Oct. 28 (Bloomberg) -- Every Friday afternoon, Barbara Desoer, president of Bank of America Corp.’s home loan unit, sits down alone to listen to another 20 telephone recordings.
As the California sun streams into the gleaming, white- brick former headquarters of Countrywide Financial Corp., she absorbs tales of fury and despair, Bloomberg Markets magazine reports in its December issue.
Desoer, 57, says it’s important that she hear the voices of some of the 100,000 people who call the bank’s mortgage service representatives every day, many struggling to keep up with their loans. She’s also examining her own work.
“I want to understand, are we as effective as we claim to be?” she said in an August interview.
That question was answered, in some measure, in late September, when Desoer slammed the brakes on her bank’s foreclosure process after accusations that Bank of America -- along with competitors Ally Financial Inc. and JPMorgan Chase & Co. -- had been signing and submitting to judges thousands of foreclosure affidavits without verifying whether they were accurate.
Those documents were required to take away people’s homes.
Desoer -- who says her best quality is common sense -- on Oct. 1 suspended foreclosures for borrowers in the 23 states where they are processed through the courts. She later expanded the freeze to all 50 states, then reversed course on Oct. 18, announcing the bank would proceed with foreclosures in the 23 “judicial” states.
Toughest Job
The foreclosure controversy makes Desoer’s job, already one of the toughest in banking, that much harder. She heads a 50,000-employee unit -- 17 percent of Bank of America’s 286,000- person workforce -- that handles one in every five U.S. mortgages. More than 75 percent of the loans were inherited from Countrywide, the bank and mortgage company that former CEO Kenneth D. Lewis bought in July 2008 for $2.5 billion.
On Oct. 15, Angelo Mozilo, Countrywide’s co-founder, agreed to pay $67.5 million to settle a U.S. Securities and Exchange Commission lawsuit alleging that he misled investors. The penalty is the largest-ever for a senior executive of a publicly traded company. Mozilo neither admitted nor denied wrongdoing.
Lewis asked Desoer, who had worked for Bank of America since 1977, to handle the melding of Countrywide into Bank of America. Helping to manage takeovers was a job she’d done before for Lewis when he’d bought credit card giant MBNA Corp. in 2006 and Chicago’s LaSalle Bank NA in 2007.
CEO Candidate
Desoer’s position makes her one of the most powerful women in finance. She was a top candidate to replace Lewis as CEO when he resigned in December 2009; she lost out to the younger Brian Moynihan, 51.
“I was honored to be in the selection pool,” she says. “I felt I had earned the right to be in that pool.”
From almost the moment she stepped into her job as head of Bank of America Home Loans and Insurance, Desoer has been besieged. Delinquencies on the Countrywide loans were already rising fast when Lewis bought the portfolio in 2008. Two months later, Lehman Brothers Holdings Inc. went bankrupt, the government was forced to bail out Fannie Mae and Freddie Mac, and credit markets seized up. The economy began to deteriorate, the Federal Reserve cut rates sharply and home refinancings surged.
In January 2009, Lewis bought Merrill Lynch & Co., around the same time taking $45 billion from the Troubled Asset Relief Program to help keep the bank afloat.
‘Unbelievable Changes’
Desoer found herself steering into a cyclone.
“If you had said, ‘Barbara, take that flip chart and write down the biggest, most unbelievable changes you could imagine,’ I would never have come up with a list as extreme as what came our way,” she says. “It was a war zone.”
One of her first jobs was to oversee lawyers coping with investigations by 11 state attorneys general into whether Countrywide had misled customers with the weakest credit histories by selling them interest-only, adjustable-rate mortgages that became unaffordable when their rates reset.
In October 2008, the bank settled lawsuits by California, Connecticut, Florida and Illinois, agreeing to cut the interest rates on thousands of loans and lower the amount that borrowers owed by $8.4 billion.
Bank of America neither admitted nor denied wrongdoing.
Delinquencies and defaults kept rising through the recession of 2009 and into this year. Today, of the 14 million Bank of America mortgage customers, 1.3 million are in some form of delinquency, including 195,000 who haven’t made a payment in more than 2 years. The troubles prompted the bank to triple its loan workout staff to 18,000 in the 18 months ended in October.
Housing Millstone
“Nobody in the history of mortgage banking has had to deal with what Desoer has,” says Joe Anderson, a former Countrywide senior managing director who ran the firm’s biggest division before leaving the company in 2006. “She’s dealing with variables that no one ever has before.”
The foreclosure freeze was one more sign that the housing crisis still hangs like a millstone around the neck of U.S. banking. Homes that banks seized through foreclosure accounted for 24 percent of all home sales in the country during the second quarter, according to a Sept. 30 report by RealtyTrac, an Irvine, California-based research firm.
They made up a greater share in the states hardest hit by the housing crisis, accounting for 56 percent of purchases in Nevada, 47 percent in Arizona and 43 percent in California. Some 45 percent of Bank of America’s nonperforming loans are in California and Florida.
Shares Plunge
Investors are nervous. In the week ended on Oct. 15, Bank of America’s stock dropped 9 percent. During that same week, attorneys general in all 50 states said they would launch a joint investigation of the foreclosure breakdown, and Senator Christopher Dodd, head of the Senate Banking Committee, announced he would hold hearings beginning on Nov. 16.
The attorneys general are organizing meetings with major lenders to discuss foreclosure issues, Colorado Attorney General John Suthers said Oct. 26.
Largely due to troubles in the home loan unit, Bank of America’s stock was down 25 percent for the 12 months ended on Oct. 27 and 76 percent over three years.
The volume of the outcry over the alleged mishandling of foreclosures was amplified by the fact that it came just before Nov. 2 U.S. elections.
“It’s a perfect political football because you have a ready, available villain who you can make a bad guy, you have victims by the thousands and you have opportunities for big political gains,” says Rick Sharga, senior vice president at RealtyTrac. “The timing of this could not be worse -- in the middle of a hot political season.”
‘Good Processes’
Moynihan and Desoer both say that no homeowner was evicted unfairly.
“We believe that our assessment shows the basis for past foreclosure decisions is accurate,” Desoer says. “We have good processes and good controls.” In early October, Desoer said the bank was nevertheless examining documents in 102,000 foreclosure cases.
On Oct. 18, Desoer said the bank was restarting the process in the 23 states where evictions go through the courts because the bank had found nothing wrong. A week later, the bank found errors in as many as two dozen of the first several hundred pending foreclosures that are to be resubmitted, including misspelled names and incorrect digits in address numbers, spokesman Dan Frahm says. None of the mistakes were serious enough to forestall home seizures, he says.
$10.4 Billion Writedown
A day later, the bank reported a $7.3 billion loss for the third quarter, aggravated by a $10.4 billion writedown in the value of its credit card business due to stricter regulations and a new fee on debit cards. That compared with a loss of $1 billion a year earlier. The home loan division had a net loss of $3.95 billion in the first three quarters of this year.
The losses aren’t over. Desoer and Bank of America’s lawyers are gearing up for demands from investors that it repurchase tens of billions of dollars worth of loans issued by Countrywide and packaged into securities. Investors usually have the right to sell loans back to banks if they can prove they were misled as to their quality.
Fannie Mae, Freddie Mac, mortgage insurers and other investors had made $12.9 billion in claims on BofA as of Sept. 30. Those demands may eventually exceed $35 billion, says Christopher Gamaitoni, vice president at Compass Point Research and Trading LLC in Washington. During the five quarters ended on Sept. 30, the bank had approved repurchase of loans with a face value of $4.9 billion, it announced on Oct. 20.
New Bailout?
The cost of servicing troubled loans, maintaining foreclosed property, loan buybacks and the legal costs arising from repurchase demands may force Bank of America to seek another government bailout, says Christopher Whalen, managing director at Institutional Risk Analytics, a Torrance, California-based research firm.
“These cash-flow issues could push BofA back into the arms of the government,” Whalen says. “No one wants to hear this, but it’s true.”
The bank repaid the $45 billion it borrowed from TARP in December 2009, and Desoer insists it won’t need any new bailout.
As the losses mount, so do complaints from borrowers -- some of them in Desoer’s weekly listening sessions -- who say that Bank of America abuses the foreclosure process.
Mary Dyer says she negotiated with the bank for more than two years in an effort to block foreclosure on her family’s home in Virginia Beach, Virginia. She had paid $348,000 for the house in 2005. By 2008, the value was less than that of the mortgage.
No Short-Sale
Dyer, a homemaker, and her husband, a Department of Defense employee, struggled to keep up with their $2,200 monthly payments, emptying their government thrift savings plan in the process.
The Dyers say they got four “short-sale” offers, in which the buyer would have acquired the home for less than the $300,000 balance on their mortgage. In August 2009, the house was sold at auction for $252,000 -- though the Dyers had presented the bank with short-sale offers exceeding $280,000, says Karen Halpin, an agent with William E. Wood & Associates in Virginia Beach, who represented the Dyers.
“Bank of America should not be allowed to get away with this,” Dyer says. “My credit has been destroyed; we’ve lost retirement savings; my home was foreclosed.”
Screwed Up Systems
Halpin says inadequate communication is the biggest frustration.
“People in different departments don’t talk to each other,” she says. “Their systems are so screwed up, and they can’t handle what they are doing.”
Bank of America declined to comment specifically on the Dyer case. Short sales are often complicated because borrowers need to demonstrate hardship to qualify, while changes in real- estate prices and high volumes of cases can cause frustration for some customers, spokesman Dan Frahm says.
Juggling the demands of angry customers and investors was not part of Barbara Desoer’s career plan when she graduated from Mount Holyoke College in South Hadley, Massachusetts, with a degree in mathematics in 1974. Her goal was to become an actuary, and she went to work for Pacific Insurance Co. in California. She helped underwrite products for Fairmont Hotels and other mid-size companies.
“I loved the business, but I was dealing with the agent and never got to meet the management,” she says. “That big C of character I could never assess directly.”
Berkeley Graduate
After she earned a Master of Business Administration from the University of California, Berkeley, she joined San Francisco-based BankAmerica. This daughter of a General Motors Co. auto plant manager liked being a banker, she says, and the interaction it allowed with corporate chieftains.
“You had to get to the right people and convince them you had ideas,” she says. “You also had access to the CEOs and could assess their character. It’s a sixth sense.”
By 1996, Desoer had risen to chief executive officer of BankAmerica’s California retail bank. When Charlotte-based NationsBank Corp. bought BankAmerica in 1998 -- taking its name as its own -- CEO Hugh McColl Jr. named Desoer head of Northern California banking and, 18 months later, head of marketing, prompting a move to North Carolina.
In July 2001, Lewis, the bank’s new CEO, promoted her to head of consumer products, including credit cards and mortgages. In 2005, she moved up to chief of operations, overseeing a $6 billion budget.
Last Woman Standing
Marc Oken, a former chief financial officer at the bank, notes that Desoer is the only executive left from the old BankAmerica, reflecting both her loyalty and her survivor instinct.
“The NationsBank people were a tough crowd,” says Oken, who worked for the bank from 1989 to 2005. “But Barbara was not somebody you could push around. She was always organized, and she showed outstanding judgment.”
Today, Desoer works out of the former Countrywide headquarters, a three-story building in Calabasas, California, with long balconies overlooking wooded walking trails populated by wild deer. The collection of Hudson River School paintings that Mozilo left behind -- serene scenes of rocks and hills in upstate New York -- still hang throughout the building, which is a 15-minute drive from the beaches of Malibu.
Desoer doesn’t have much time to enjoy the scenery. She spends her days in meetings aimed at pushing back the flood of nonperforming loans and the rising demands from investors that the bank buy back their securitized loans.
Repurchase Claims
“We will vigorously contest such claims and defend the interests of Bank of America shareholders,” Chief Financial Officer Charles Noski said in a conference call with investors discussing third-quarter earnings.
Most of the risky loans were issued by Countrywide, which boasted an aggressive, sales-oriented style that Desoer has abandoned, says David Lykken, whose Austin, Texas-based firm worked as a consultant to Countrywide for more than a decade.
“The Countrywide culture was to beat Wall Street, to go after every competitor, and if there wasn’t an enemy, then you would create one,” Lykken says. “It was fun in a dysfunctional way. Barbara is now telling her people that they’ve got all the risk they want and they have all the market share they want. They don’t want to grow the business.”
Desoer says it’s “absolutely untrue” that she isn’t interested in growth. She says the bank has increased the number of “jumbo” mortgages it issues -- loans that exceed the limit of $417,000 on most loans set by Fannie Mae and Freddie Mac.
A Goal Unmet
More broadly, Desoer says her priority is to ensure that her home loan unit lives up to Moynihan’s oft-repeated goal of becoming the most trusted brand in financial services.
It’s not working yet. In August, researcher JD Power & Associates ranked banks according to the customer service provided by their mortgage units. Bank of America was No. 15 out of 19.
To contact the reporters on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net; Lisa Kassenaar in New York at lkassenaar@bloomberg.net.
To contact the editor responsible for this story: Michael Serrill in N
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By David Mildenberg and Lisa Kassenaar
Oct. 28 (Bloomberg) -- Every Friday afternoon, Barbara Desoer, president of Bank of America Corp.’s home loan unit, sits down alone to listen to another 20 telephone recordings.
As the California sun streams into the gleaming, white- brick former headquarters of Countrywide Financial Corp., she absorbs tales of fury and despair, Bloomberg Markets magazine reports in its December issue.
Desoer, 57, says it’s important that she hear the voices of some of the 100,000 people who call the bank’s mortgage service representatives every day, many struggling to keep up with their loans. She’s also examining her own work.
“I want to understand, are we as effective as we claim to be?” she said in an August interview.
That question was answered, in some measure, in late September, when Desoer slammed the brakes on her bank’s foreclosure process after accusations that Bank of America -- along with competitors Ally Financial Inc. and JPMorgan Chase & Co. -- had been signing and submitting to judges thousands of foreclosure affidavits without verifying whether they were accurate.
Those documents were required to take away people’s homes.
Desoer -- who says her best quality is common sense -- on Oct. 1 suspended foreclosures for borrowers in the 23 states where they are processed through the courts. She later expanded the freeze to all 50 states, then reversed course on Oct. 18, announcing the bank would proceed with foreclosures in the 23 “judicial” states.
Toughest Job
The foreclosure controversy makes Desoer’s job, already one of the toughest in banking, that much harder. She heads a 50,000-employee unit -- 17 percent of Bank of America’s 286,000- person workforce -- that handles one in every five U.S. mortgages. More than 75 percent of the loans were inherited from Countrywide, the bank and mortgage company that former CEO Kenneth D. Lewis bought in July 2008 for $2.5 billion.
On Oct. 15, Angelo Mozilo, Countrywide’s co-founder, agreed to pay $67.5 million to settle a U.S. Securities and Exchange Commission lawsuit alleging that he misled investors. The penalty is the largest-ever for a senior executive of a publicly traded company. Mozilo neither admitted nor denied wrongdoing.
Lewis asked Desoer, who had worked for Bank of America since 1977, to handle the melding of Countrywide into Bank of America. Helping to manage takeovers was a job she’d done before for Lewis when he’d bought credit card giant MBNA Corp. in 2006 and Chicago’s LaSalle Bank NA in 2007.
CEO Candidate
Desoer’s position makes her one of the most powerful women in finance. She was a top candidate to replace Lewis as CEO when he resigned in December 2009; she lost out to the younger Brian Moynihan, 51.
“I was honored to be in the selection pool,” she says. “I felt I had earned the right to be in that pool.”
From almost the moment she stepped into her job as head of Bank of America Home Loans and Insurance, Desoer has been besieged. Delinquencies on the Countrywide loans were already rising fast when Lewis bought the portfolio in 2008. Two months later, Lehman Brothers Holdings Inc. went bankrupt, the government was forced to bail out Fannie Mae and Freddie Mac, and credit markets seized up. The economy began to deteriorate, the Federal Reserve cut rates sharply and home refinancings surged.
In January 2009, Lewis bought Merrill Lynch & Co., around the same time taking $45 billion from the Troubled Asset Relief Program to help keep the bank afloat.
‘Unbelievable Changes’
Desoer found herself steering into a cyclone.
“If you had said, ‘Barbara, take that flip chart and write down the biggest, most unbelievable changes you could imagine,’ I would never have come up with a list as extreme as what came our way,” she says. “It was a war zone.”
One of her first jobs was to oversee lawyers coping with investigations by 11 state attorneys general into whether Countrywide had misled customers with the weakest credit histories by selling them interest-only, adjustable-rate mortgages that became unaffordable when their rates reset.
In October 2008, the bank settled lawsuits by California, Connecticut, Florida and Illinois, agreeing to cut the interest rates on thousands of loans and lower the amount that borrowers owed by $8.4 billion.
Bank of America neither admitted nor denied wrongdoing.
Delinquencies and defaults kept rising through the recession of 2009 and into this year. Today, of the 14 million Bank of America mortgage customers, 1.3 million are in some form of delinquency, including 195,000 who haven’t made a payment in more than 2 years. The troubles prompted the bank to triple its loan workout staff to 18,000 in the 18 months ended in October.
Housing Millstone
“Nobody in the history of mortgage banking has had to deal with what Desoer has,” says Joe Anderson, a former Countrywide senior managing director who ran the firm’s biggest division before leaving the company in 2006. “She’s dealing with variables that no one ever has before.”
The foreclosure freeze was one more sign that the housing crisis still hangs like a millstone around the neck of U.S. banking. Homes that banks seized through foreclosure accounted for 24 percent of all home sales in the country during the second quarter, according to a Sept. 30 report by RealtyTrac, an Irvine, California-based research firm.
They made up a greater share in the states hardest hit by the housing crisis, accounting for 56 percent of purchases in Nevada, 47 percent in Arizona and 43 percent in California. Some 45 percent of Bank of America’s nonperforming loans are in California and Florida.
Shares Plunge
Investors are nervous. In the week ended on Oct. 15, Bank of America’s stock dropped 9 percent. During that same week, attorneys general in all 50 states said they would launch a joint investigation of the foreclosure breakdown, and Senator Christopher Dodd, head of the Senate Banking Committee, announced he would hold hearings beginning on Nov. 16.
The attorneys general are organizing meetings with major lenders to discuss foreclosure issues, Colorado Attorney General John Suthers said Oct. 26.
Largely due to troubles in the home loan unit, Bank of America’s stock was down 25 percent for the 12 months ended on Oct. 27 and 76 percent over three years.
The volume of the outcry over the alleged mishandling of foreclosures was amplified by the fact that it came just before Nov. 2 U.S. elections.
“It’s a perfect political football because you have a ready, available villain who you can make a bad guy, you have victims by the thousands and you have opportunities for big political gains,” says Rick Sharga, senior vice president at RealtyTrac. “The timing of this could not be worse -- in the middle of a hot political season.”
‘Good Processes’
Moynihan and Desoer both say that no homeowner was evicted unfairly.
“We believe that our assessment shows the basis for past foreclosure decisions is accurate,” Desoer says. “We have good processes and good controls.” In early October, Desoer said the bank was nevertheless examining documents in 102,000 foreclosure cases.
On Oct. 18, Desoer said the bank was restarting the process in the 23 states where evictions go through the courts because the bank had found nothing wrong. A week later, the bank found errors in as many as two dozen of the first several hundred pending foreclosures that are to be resubmitted, including misspelled names and incorrect digits in address numbers, spokesman Dan Frahm says. None of the mistakes were serious enough to forestall home seizures, he says.
$10.4 Billion Writedown
A day later, the bank reported a $7.3 billion loss for the third quarter, aggravated by a $10.4 billion writedown in the value of its credit card business due to stricter regulations and a new fee on debit cards. That compared with a loss of $1 billion a year earlier. The home loan division had a net loss of $3.95 billion in the first three quarters of this year.
The losses aren’t over. Desoer and Bank of America’s lawyers are gearing up for demands from investors that it repurchase tens of billions of dollars worth of loans issued by Countrywide and packaged into securities. Investors usually have the right to sell loans back to banks if they can prove they were misled as to their quality.
Fannie Mae, Freddie Mac, mortgage insurers and other investors had made $12.9 billion in claims on BofA as of Sept. 30. Those demands may eventually exceed $35 billion, says Christopher Gamaitoni, vice president at Compass Point Research and Trading LLC in Washington. During the five quarters ended on Sept. 30, the bank had approved repurchase of loans with a face value of $4.9 billion, it announced on Oct. 20.
New Bailout?
The cost of servicing troubled loans, maintaining foreclosed property, loan buybacks and the legal costs arising from repurchase demands may force Bank of America to seek another government bailout, says Christopher Whalen, managing director at Institutional Risk Analytics, a Torrance, California-based research firm.
“These cash-flow issues could push BofA back into the arms of the government,” Whalen says. “No one wants to hear this, but it’s true.”
The bank repaid the $45 billion it borrowed from TARP in December 2009, and Desoer insists it won’t need any new bailout.
As the losses mount, so do complaints from borrowers -- some of them in Desoer’s weekly listening sessions -- who say that Bank of America abuses the foreclosure process.
Mary Dyer says she negotiated with the bank for more than two years in an effort to block foreclosure on her family’s home in Virginia Beach, Virginia. She had paid $348,000 for the house in 2005. By 2008, the value was less than that of the mortgage.
No Short-Sale
Dyer, a homemaker, and her husband, a Department of Defense employee, struggled to keep up with their $2,200 monthly payments, emptying their government thrift savings plan in the process.
The Dyers say they got four “short-sale” offers, in which the buyer would have acquired the home for less than the $300,000 balance on their mortgage. In August 2009, the house was sold at auction for $252,000 -- though the Dyers had presented the bank with short-sale offers exceeding $280,000, says Karen Halpin, an agent with William E. Wood & Associates in Virginia Beach, who represented the Dyers.
“Bank of America should not be allowed to get away with this,” Dyer says. “My credit has been destroyed; we’ve lost retirement savings; my home was foreclosed.”
Screwed Up Systems
Halpin says inadequate communication is the biggest frustration.
“People in different departments don’t talk to each other,” she says. “Their systems are so screwed up, and they can’t handle what they are doing.”
Bank of America declined to comment specifically on the Dyer case. Short sales are often complicated because borrowers need to demonstrate hardship to qualify, while changes in real- estate prices and high volumes of cases can cause frustration for some customers, spokesman Dan Frahm says.
Juggling the demands of angry customers and investors was not part of Barbara Desoer’s career plan when she graduated from Mount Holyoke College in South Hadley, Massachusetts, with a degree in mathematics in 1974. Her goal was to become an actuary, and she went to work for Pacific Insurance Co. in California. She helped underwrite products for Fairmont Hotels and other mid-size companies.
“I loved the business, but I was dealing with the agent and never got to meet the management,” she says. “That big C of character I could never assess directly.”
Berkeley Graduate
After she earned a Master of Business Administration from the University of California, Berkeley, she joined San Francisco-based BankAmerica. This daughter of a General Motors Co. auto plant manager liked being a banker, she says, and the interaction it allowed with corporate chieftains.
“You had to get to the right people and convince them you had ideas,” she says. “You also had access to the CEOs and could assess their character. It’s a sixth sense.”
By 1996, Desoer had risen to chief executive officer of BankAmerica’s California retail bank. When Charlotte-based NationsBank Corp. bought BankAmerica in 1998 -- taking its name as its own -- CEO Hugh McColl Jr. named Desoer head of Northern California banking and, 18 months later, head of marketing, prompting a move to North Carolina.
In July 2001, Lewis, the bank’s new CEO, promoted her to head of consumer products, including credit cards and mortgages. In 2005, she moved up to chief of operations, overseeing a $6 billion budget.
Last Woman Standing
Marc Oken, a former chief financial officer at the bank, notes that Desoer is the only executive left from the old BankAmerica, reflecting both her loyalty and her survivor instinct.
“The NationsBank people were a tough crowd,” says Oken, who worked for the bank from 1989 to 2005. “But Barbara was not somebody you could push around. She was always organized, and she showed outstanding judgment.”
Today, Desoer works out of the former Countrywide headquarters, a three-story building in Calabasas, California, with long balconies overlooking wooded walking trails populated by wild deer. The collection of Hudson River School paintings that Mozilo left behind -- serene scenes of rocks and hills in upstate New York -- still hang throughout the building, which is a 15-minute drive from the beaches of Malibu.
Desoer doesn’t have much time to enjoy the scenery. She spends her days in meetings aimed at pushing back the flood of nonperforming loans and the rising demands from investors that the bank buy back their securitized loans.
Repurchase Claims
“We will vigorously contest such claims and defend the interests of Bank of America shareholders,” Chief Financial Officer Charles Noski said in a conference call with investors discussing third-quarter earnings.
Most of the risky loans were issued by Countrywide, which boasted an aggressive, sales-oriented style that Desoer has abandoned, says David Lykken, whose Austin, Texas-based firm worked as a consultant to Countrywide for more than a decade.
“The Countrywide culture was to beat Wall Street, to go after every competitor, and if there wasn’t an enemy, then you would create one,” Lykken says. “It was fun in a dysfunctional way. Barbara is now telling her people that they’ve got all the risk they want and they have all the market share they want. They don’t want to grow the business.”
Desoer says it’s “absolutely untrue” that she isn’t interested in growth. She says the bank has increased the number of “jumbo” mortgages it issues -- loans that exceed the limit of $417,000 on most loans set by Fannie Mae and Freddie Mac.
A Goal Unmet
More broadly, Desoer says her priority is to ensure that her home loan unit lives up to Moynihan’s oft-repeated goal of becoming the most trusted brand in financial services.
It’s not working yet. In August, researcher JD Power & Associates ranked banks according to the customer service provided by their mortgage units. Bank of America was No. 15 out of 19.
To contact the reporters on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net; Lisa Kassenaar in New York at lkassenaar@bloomberg.net.
To contact the editor responsible for this story: Michael Serrill in N
Friday, October 29, 2010
BAM! Foreclosure Fraud – Homeowner Awarded House, Sanctions Granted & Mortgage Satisfied, US Bank NA v Thomas Garner � Foreclosure Fraud – Fighting Foreclosure Fraud by Sharing the Knowledge
BAM! Foreclosure Fraud – Homeowner Awarded House, Sanctions Granted & Mortgage Satisfied, US Bank NA v Thomas Garner � Foreclosure Fraud – Fighting Foreclosure Fraud by Sharing the Knowledge
BAM! FORECLOSURE FRAUD – HOMEOWNER AWARDED HOUSE, SANCTIONS GRANTED & MORTGAGE SATISFIED, US BANK NA V THOMAS GARNER
Posted by Foreclosure Fraud on October 29, 2010 · 2 Comments
This comes in from Matt Weidner…
BOMBSHELL- FREE HOUSE (SORRY DAVID J. STERN)!
The bombshells are going to start falling like infantry fire on a battlefield….there are consequences for lies and fraud and open deceit….
Judges can either ignore the blatant lies, fraud and deceit or they can enter the Orders just like this one. If they enter Orders like this it will be a sign to the American people that there is some fairness and equity left in this country. All it takes is a few mortgages being wiped out as a penalty for fraud and deceit before the world will really, really take notice of the battle we’ve all been fighting for so many years.
This is not just about fighting for individual homes in foreclosure, it’s about fighting for the heart and soul of America. There must be some victory for the Common Man and Orders like this are it…
For more on Matt go here…
From the order…
Defendant’s Motion for the Court to take Jurisdiction Over the Matter of Sanctions & Outstanding fees is GRANTED
Defendant’s Motion to Strike Plaintiff’s Notice of Voluntary Dismissal is GRANTED
Defendant’s Motion to Strike Plaintiff’s Motion for Summary Judgment is GRANTED & Dismiss Plaintiff Complaint WITH Prejudice is GRANTED
Defendant’s Request for an Order Requiring Plaintiff to File a Satisfaction of Mortgage and Cancellation of Lis Pendens is GRANTED and Plaintiff is required to provide proof that the Defendant’s Mortgage has been SATISFIED and the Lis Pendens is canceled
Defendant’s Motion for Sanctions is GRANTED and Plaintiff is Ordered to Pay Defendant (Reserved Pending Hearing)
Now that’s how you rule on a case…
Check out the order below…
~
4closureFraud.org
I sure could use some…
~
Sanctions Granted Mortgage Satisfied US Bank NA v Thomas Garner
View this document on Scribd
BAM! FORECLOSURE FRAUD – HOMEOWNER AWARDED HOUSE, SANCTIONS GRANTED & MORTGAGE SATISFIED, US BANK NA V THOMAS GARNER
Posted by Foreclosure Fraud on October 29, 2010 · 2 Comments
This comes in from Matt Weidner…
BOMBSHELL- FREE HOUSE (SORRY DAVID J. STERN)!
The bombshells are going to start falling like infantry fire on a battlefield….there are consequences for lies and fraud and open deceit….
Judges can either ignore the blatant lies, fraud and deceit or they can enter the Orders just like this one. If they enter Orders like this it will be a sign to the American people that there is some fairness and equity left in this country. All it takes is a few mortgages being wiped out as a penalty for fraud and deceit before the world will really, really take notice of the battle we’ve all been fighting for so many years.
This is not just about fighting for individual homes in foreclosure, it’s about fighting for the heart and soul of America. There must be some victory for the Common Man and Orders like this are it…
For more on Matt go here…
From the order…
Defendant’s Motion for the Court to take Jurisdiction Over the Matter of Sanctions & Outstanding fees is GRANTED
Defendant’s Motion to Strike Plaintiff’s Notice of Voluntary Dismissal is GRANTED
Defendant’s Motion to Strike Plaintiff’s Motion for Summary Judgment is GRANTED & Dismiss Plaintiff Complaint WITH Prejudice is GRANTED
Defendant’s Request for an Order Requiring Plaintiff to File a Satisfaction of Mortgage and Cancellation of Lis Pendens is GRANTED and Plaintiff is required to provide proof that the Defendant’s Mortgage has been SATISFIED and the Lis Pendens is canceled
Defendant’s Motion for Sanctions is GRANTED and Plaintiff is Ordered to Pay Defendant (Reserved Pending Hearing)
Now that’s how you rule on a case…
Check out the order below…
~
4closureFraud.org
I sure could use some…
~
Sanctions Granted Mortgage Satisfied US Bank NA v Thomas Garner
View this document on Scribd
Hyper Inflation Has Arrived According To Brilliant Gonzalo Lira
Signs Hyperinflation Is Arriving
This post is gonna be short and sweet—and scary:
Back in late August, I argued that hyperinflation would be triggered by a run on Treasury bonds. I described how such a run might happen, and argued that if Treasuries were no longer considered safe, then commodities would become the store of value.
See, how come I don’t look as cool
when I make my predictions?
Such a run on commodities, I further argued, would inevitably lead to price increases and a rise in the Consumer Price Index, which would initially be interpreted by the Federal Reserve, the Federal government, as well as the commentariat, as a good thing: A sign that “the economy is recovering”, a sign that “normalcy” was returning.
I argued that—far from being “a sign of recovery”—rising CPI would be the sign that things were about to get ugly.
I concluded that, like the stagflation of ‘79, inflation would rise to the double digits relatively quickly. However, unlike in 1980, when Paul Volcker raised interest rates severely in order to halt inflation, in today’s weakened macro-economic environment, that remedy is simply not available to Ben Bernanke.
Therefore, I predicted that inflation would spiral out of control, and turn into hyperinflation of the U.S. dollar.
A lot of people claimed I was on drugs when I wrote this.
Now? Not so much.
In my initial argument, I was sure that there would come a moment when Treasury bond holders would realize that they are the New & Improved Toxic Asset—as everyone knows, there is no way the U.S. Federal government can pay the outstanding debt it has: It’s simply too big.
So I assumed that, when the market collectively realized this, there would be a panic in Treasuries. This panic, of course, would lead to the spike in commodities.
However, I am no longer certain if there will ever be such a panic in Treasuries. Backstop Benny has been so adroit at propping up Treasuries and keeping their yields low, the Stealth Monetization has been so effective, the TBTF banks’ arbitrage trade between the Fed’s liquidity windows and Treasury bond yields has been so lucrative, and the bond market itself is so aware that Bernanke will do anything to protect and backstop Treasuries, that I no longer think that there will necessarily be such a panic.
But that doesn’t mean that the second part of my thesis—commodities rising, which will trigger inflation, which will devolve into hyperinflation—will not occur.
In fact, it is occurring.
The two key commodities that have been rising as of late are oil and grains, specifically wheat, corn and livestock feed. The BLS report on Producer Price Index of commodities is here.
Grains as a class have risen over 33% year-over-year. Refined oil products have risen just shy of 13%, with home heating oil rising 18% year-over-year. In other words: Food, gasoline and heating oil have risen by double digits since 2009. And the 2010-‘11 winter in the northern hemisphere is approaching.
A friend of mine, SB, a commodities trader, pointed out to me that big producers are hedged against rising commodities prices. As he put it to me in a private e-mail, “We sometimes forget that the commodity markets aren’t solely speculative. Most futures contracts are bought by companies who use those commodities in their products, and are thus hedging their costs to produce those products.”
Very true: But SB also pointed out that, hedged or not, the lag time between agricultural commodities and the markets is about six-to-nine months, on average. So he thought that the rise in grains, which really took off in June–July, would hit the supermarket shelves in January–March.
He also pointed out that, with higher commodity costs and lower consumption, companies are going to be between the Devil and the deep blue sea. My own take is, if you can’t get more customers, then you’re just gonna have to charge more from the ones you got.
Coupled to these price increases is the ongoing Currency War: The U.S.—contrary to Secretary Timothy Geithner’s statements—is trying to debase the dollar, so as to make U.S. exports more attractive to foreign consumers. This has created strains with China, Europe and the emerging markets.
A beggar-thy-neighbor monetary policy works for small countries getting out of a hole of their own making: It doesn’t work for the world’s largest single economy with the world’s reserve currency, in the middle of a Global Depression.
On the contrary, it creates a backlash; the ongoing tiff over rare-earth minerals with China is just the beginning. This could easily be exacerbated by clumsy politicking, and turn into a full-on trade war.
What’s so bad with a trade war, you ask? Why nothing, not a thing—if you want to pay through the nose for imported goods. If you enjoy paying 10, 20, 30% more for imported goods—then hey, let’s just stick it to them China-men! They’re still Commies, after all!
Furthermore, as regards the Federal Reserve policy, the upcoming Quantitative Easing 2, and the actions of its chairman, Ben Bernanke: There is an increasing sense in the financial markets that Backstop Benny and his Lollipop Gang don’t have the foggiest clue about what they’re doing.
Consider:
Bruce Krasting just yesterday wrote a very on-the-money précis of the trial balloons the Fed is floating, as regards to QE2: Basically, Bernanke through his WSJ mouthpiece said that the Fed was going to go for a cautious, incrementalist approach, vis-à-vis QE2: “A couple of hundred billion at a time”. You know: “Just the tip—just to see how it feels.”
But then on the other hand, also just yesterday, Tyler Durden at Zero Hedge had a justifiable freak-out over the NY Fed asking Primary Dealers for their thoughts on the size of QE2. According to Bloomberg, the NY Fed was asking the dealers how big they thought QE2 would be, and how big they thought it ought be: $250 billion? $500 billion? A trillion? A trillion every six months? (Or as Tyler pointed out, $2 trillion for 2011.)
That’s like asking a bunch of junkies how much smack they want for the upcoming year—half a kilo? A full kilo? Two kilos?
What the hell you think the junkies are gonna say?
Between BK’s clear reading of the tea leaves coming from the Wall Street Journal, and TD’s also very clear reading of the tea leaves by way of Bloomberg, you’re getting a seriously contradictory message: The Fed is going to lightly tap-tap-tap liquidity into the markets—just a little—just a few hundred billion dollars at a time—
—while at the same time, the Fed is saying to the Primary Dealers, “We’re gonna make you guys happy-happy-happy with a righteously sized QE2!”
The contradictory messages don’t pacify the financial markets—on the contrary, they make the markets simultaneously contemptuous of Bernanke and the Fed, while very frightened as to what they will ultimately do.
What happens when the financial markets don’t really know what the central bank is going to do, and suspect that the central bankers themselves aren’t too clear either?
Guess.
So to sum up, we have:
• Rising commodity prices, the effects of which (because of hedging) will be felt most severely in the period January–March of 2011.
• A beggar-thy-neighbor race-to-the-bottom Currency War, that might well devolve into a Trade War, which would force up prices on imported goods.
• A Federal Reserve that does not seem to know what it is doing, as regards another round of Quantitative Easing, which is making the financial markets very nervous—nervous about the Fed’s ultimate responsibility, which is safeguarding the U.S. dollar.
• A U.S. economy that is weak to the point of collapse, where not even 0.25% interest rates are sparking investment and growth—and which therefore prohibits the Fed from raising interest rates, if need be.
• A U.S. fiscal deficit which is close to 10% of GDP annually, and which is therefore unsustainable—especially considering that the total U.S. fiscal debt is well over 100% of GDP.
These factors all point to one and the same thing:
An imminent currency collapse.
Therefore, I am confident in predicting the following sequence of events:
• By March of 2011, once higher commodity prices reach the marketplace, monthly CPI will be at an annualized rate of not less than 5%.
• By July of 2011, annualized CPI will be no less than 8% annualized.
• By October of 2011, annualized CPI will have crossed 10%.
• By March of 2012, annualized CPI will cross the hyperinflationary tipping point of 15%.
After that, CPI will rapidly increase, much like it did in 1980.
What the mainstream commentariat will make of all this will be really something: When CPI reaches 5% by the winter of 2011, pundits and economists and the Fed and the Obama administration will all say the same thing: “Happy days are here again! People are spending! The economy is back on track!”
However, by the late spring, early summer of 2011, people will realize what’s going on—and the Federal Reserve will initially be unwilling to drastically raise interest rates so as to quell inflation.
Actually, the Fed won’t be able to raise rates, at least not like Volcker did back in 1980: The U.S. economy will be too weak, and the Federal government’s balance sheet will be too distressed, with it’s $1.5 trillion deficit. So at first, the Fed will have to let the rising inflation rate slide, and keep trying hard to explain it away as “a sign of a recovering economy”.
Once the Fed realizes that the rising CPI is not a sign of a reignited economy, but rather a sign of the collapsing dollar, they will pursue a puerile “inflation fighting” scheme of incremental interest rate hikes—much like G. William Miller, the Chairman of the Fed from January of ‘78 to August of ‘79, pursued so unsuccessfully.
2012 will be the bad year: I predict that hyperinflation’s tipping point will be no later than the first quarter of 2012. From there, it will accelerate. By the end of 2012, I would not be surprised if the CPI for the year averaged 30%.
By that point, the rest of the economy—unemployment, GDP, all the rest of it—will be in the toilet. By that point, the rest of the economy will no longer matter: The collapsing dollar will make 2012 the really really bad year of our Global Depression—which is actually kind of funny.
It’s funny because, as you know, I am a conservative Catholic: I of course put absolutely no stock in the ridiculous notion that “The Mayans predicted our civilization’s collapse in 2012!”—that’s all rubbish, as far as I’m concerned.
It’s just one of those cosmic jokes that 2012 will turn out to be the year the dollar collapses, and the larger world economies go down the tubes.
As cosmic jokes go, all I’ve got to say is this:
Good one, God.
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Email ThisBlogThis!Share to TwitterShare to FacebookShare to Google Buzz Posted by Gonzalo Lira at 10:57 AM
47 comments:
Anonymous said...
That's a pretty bold prediction but I give you props for making it publicly. John Williams from shadowstats said that he sees the everything being in place around March - June 2011 for hyperinflation to start taking hold. The Nov. 3rd FOMC meeting has the potential to be the final nail in the coffin for the U.S. dollar. Exciting times ahead. Keep writing.
October 28, 2010 11:27 AM
Anonymous said...
I am new to your blog and found your assessments refreshingly understandable but pretty scary. Hope you are wrong on the timing...
October 28, 2010 11:32 AM
Anonymous said...
GL, living in Europe, I would like to know your take on what happens to some of the European economies.
My particular country (a smaller Northern one) is living hand-to-mouth, or more accurately, the government is borrowing like there's no tomorrow to meet all the obligations they have given themselves over the years, to cover for the fact that revenues have dropped like a stone.
They also project to do that borrowing from other countries well into late 2010s.
So, if 2012 is the year of hyperinflation in the U.S., shutting down the U.S. borrowing of world's monies, does that borrowing window close for most of the other western countries as well at the same time?
Because if that is the case, my particular country is looking at at least a 17% instant "austerity" on the budget (and more as economy falls further), going into a system of "get one peso, spend one peso" (from Bolivian Juan Cariaga, www.pbs.org/wgbh/commandingheights/shared/minitext/tr_show02.html#11, about their hyperinflation correcting measures).
October 28, 2010 11:40 AM
riotwire said...
The biggest thing that sticks out to me from your post is that everyone is waiting anxiously like begging dogs to see what the private Fed Reserve is going to give them. I've known that we are all pawns in a bigger game all along, but how long are we going to stand by and accept this system as legitimate? When are we going to demand from our government, our representatives, that there must be consequences for their actions?
Or are we really that dumb to beg for the table scraps of these clowns who treat their positions like they are owed that position of power? The power comes from you and me recognizing it as legitimate. If we don't, we will be an unstoppable force against those who we willingly allow to take advantage of us.
I guess it took putting it in those words for it to really sink in. I hope you are wrong, but I am preparing as much as possible for when you are right. Be blessed.
October 28, 2010 12:11 PM
Brian said...
Great post as always, GL. Bold prediction, but based on data and some pretty sound reasoning. I too, hope you are wrong, but just one glance at the Fed's balance sheet, Bernanke's persistance, and lawmakers' ambivalence/ignorance has me resigned to the fact that we are done for.
Idea for future post: what can investors/people due to prepare for this economic tsunami? Is gold the real store of value or would it make sense to take those worthless dollars and buy companies that sell needs like food when everyone dumps their stock for cash? I don't pretend to know the answer, but I would be interested in hearing other ideas.
October 28, 2010 1:07 PM
Anonymous said...
Thank you, Mr. Lira. I am just a simple truck driver, but thanks to people like you, I have been looking real smart over the past few years. For all the ignorant/uninformed who now ask for my opinions, I now have something I can use to scare the poop out of them!
These may be scary times, but I intend enjoy myself just the same.
Oh well, back to collecting nuts.
October 28, 2010 1:35 PM
Anonymous said...
Interesting read and indeed scary, but actually, at this point, I would love a trade war with China! What do they have that we can't do without other than cheap goods which the majority of Americans have gone into debt to purchase and of course, JOBS! No one says a word about import duties or tariffs to level the playing field so that we can go back to producing our own goods for consumption at home. Pay more for those goods? Hell yes! Cheap shit from Third World countries is what has killed the goose that has been laying the gold eggs for the rest of the world ever since WWII. The thrill ride is over and we have to get back to reality and produce products and jobs here in America, even if they cost more.
October 28, 2010 1:35 PM
Editor said...
Here's an alternate prediction.
--A merchant in India will read online about how the dollar is dropping against the rupee and how the Fed is actively debasing the dollar. It worries him. So he pulls his dollars out of his mattresses.
--When he goes to his money changer to trade dollars for rupees. He will be shocked to get a much worse price than listed online. This has never happened before, but too many others had the same idea and the money changer is overloaded with dollars. He will notice a line is forming as he leaves and he will get on his cell phone and begin calling friends to warn them about their dollars.
--By that afternoon, Indian banks will see a huge influx of dollars and they'll start trying to lay them off onto someone else.
--The central bank will take some, but then they will get concerned and temporarily close the window to dollars.
--Then the real panic will set in, spreading rapidly around India and across SE Asia and then to the rest of the world.
--Banks and investors everywhere join in, selling dollars and Treasuries. A huge imbalance in sellers vs buyers will cause interest rates to spike and the Fed will step in, buying up Treasuries to prevent this.
--The panic just keeps spreading and the Fed just keeps buying.
--Even while talking to the Fed about coordinating support for the dollar, some central banks will be secretly selling dollars through intermediaries.
--Within 48 hours the Fed is the proud owner of most of the US government's debt. This fact soon become apparent and the buying power of the dollar tanks.
--OPEC countries begin demanding gold for oil deliveries to the USA.
--TEOTWAWKI
October 28, 2010 1:55 PM
Anonymous said...
Yeah that whole mayan calendar nonsense is so far fetched, not like the rock solid precpets of
catholicismm such as the Vigin bith, walking on water etc.
mememonkey
October 28, 2010 2:15 PM
Andy Shand said...
As Abraham Lincoln stated: America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves.
I believe we are in the first stages of a new America, the new normal. This new normal for Americans is not something they are used to, as we all know, Americans have a heightened sense of entitlement.
I was born and raised in Europe where no such entitlements existed, thus I believe I am better suited and more educated in being able to better understand the complexities of the current fiscal Armageddon the USA is facing.
I neither wish or hope that America has to endure what is surely coming, but, I strongly hope that America ditches the old clichés of “Land of the Free” “God Bless America” “Liberty” and all the Patriotic BS. How many US citizens will embrace these once cherished beliefs when they start to see prices rise, no access to affordable healthcare, no decent schools, higher education costs, and so on.
You can always count on Americans to do the right thing – after they’ve tried everything else.
October 28, 2010 2:19 PM
Wil Martindale said...
"However, unlike in 1980, when Paul Volcker raised interest rates severely in order to halt inflation, in today’s weakened macro-economic environment, that remedy is simply not available to Ben Bernanke."
It is not available because Benny the Bubble and his primary dealers are locked in a QUADRILLION dollar interest rate futures derivative stalemate. And not by chance, but by design. It's too mcuh to explain the history of how many times the honorable profession of commerce has been hijacked by organized crime, but if you mix in financial innovation and technology you get magnitudes of risk on the order of the extinction of the human race.
And that extinction is the ransom we gradually bailout, until ... we're extinct.
October 28, 2010 2:20 PM
Raphael said...
Thanks for the post. Very scary scenario. The interesting thing is the timing of the worst part of the collapse. 2012 is an election year and as it's looking like the GOP will be making some significant gains this year I can see how the Dems will blame the collapse on the GOP. Although *we* know that the seeds of this have already been sown and it won't be the fault of whoever is in power for 2011-2012, the liberal media will try to blame it on the Republican Congress and the gullible public might react by voting the Dems back in. I hope that doesn't happen...
October 28, 2010 2:28 PM
Anonymous said...
Hi, GL.
This was posted on economicpolicy.com and supports your analysis, and a great chart.
Linked to, http://www.shtfplan.com/emergency-preparedness/stunning-chart-the-real-rate-of-inflation-and-how-to-protect-yourself_10272010?utm_source=twitterfeed&utm_medium=twitter
Keep up the good work.
October 28, 2010 2:41 PM
Parth said...
Moral of the story -
1) Do not save money -spend it all.
2) In hyperinflation liquor and cigarettes are the most useful barter commodities.
Well iof thats how the world is going to end I must say God is a party animal. Another one please.........Go Giants!!
October 28, 2010 2:42 PM
Anonymous said...
As I understand inflation and rising prices, your hyperinflation scenario resembles a kind of inflation on steroids. That is not hyperinflation, which is actually a rejection of the currency. Under a hyperinflation I don't want more money -- I want to immediately get rid of the money that I have -- to turn it into something real -- to anyone that will take those dollars. Picture in your mind, if you will, a scene where debtors with fists full of dollars are trying to chase down their bankers to pay off debts, with the bankers in full stride trying to get away from them.
The solution to our present monetary problem is to simply let the dollar fall to zero. What wasn't paid off in worthless dollars defaults, and we start over -- preferably with money backed 100% by silver/gold controlled by the free market and without government interference. The U.S. has the largest stockpile of gold of any country in the world. Once that gold was divided evenly among its citizens, the free market would take over.
October 28, 2010 3:15 PM
Anonymous said...
Gonzalo, very nice writing of late.
As far as prophecy goes, one should not make light of things they do not completely understand. Nostradamus did look cool, but he was more than looks. I don't mean that as heavy handed as it sounds, by the way. This would apply towards those who mock gold as a barbaric relic. I'm not saying the world will end in 2012, I personally don't believe that either. Do consider though that Nostradamus may have actually predicted the collapse of the dollar:
--------------------------------------------
Century 8 Quatrain 28
Les simulachres d’or & argent enflez,
Qu’apres le rapt au lac furent gettez
Au descouuert estaincts tous & troublez.
Au marbre escripz prescript intergetez.
The imitations of gold and silver will become inflated,
Which after the rape [or robbery] are thrown into the fire,
After discovering all is exhausted and dissipated by the debt,
All scripts and bonds are wiped out.
----------------------------------------------
Many ways this could apply to now: bond market bubble, QE's, gold/silver short squeeze, an empty fort knox, gold/silver lending schemes.
-Joe
October 28, 2010 3:34 PM
jonil_8 said...
Anonymous;
I assume you meant 'had' the largest stockpile. Since we are blocked by TPTB to audit Fort Knox, I sincerely doubt if there is even one bar left for 'show'.
October 28, 2010 3:51 PM
shelby said...
DEFLATION, NOT HYPERINFLATION
=============================
http://www.marketoracle.co.uk/Article23162.html
I thought I explained it sufficiently in the above article, yet people continue to follow the incorrect logic of this writer Gonzalo Lira. He writes recently that the recent fast rise in commodity prices is a sign of arriving hyperinflation:
http://gonzalolira.blogspot.com/2010/10/signs-hyperinflation-is-arriving.html
It is impossible to get hyperinflation with respect to general commodities, when the unit-of-account (the currency) is global and wages are not increasing at same rate as commodities are, because if the entire world has to pay runaway spiring up prices for commodities, then pretty soon no one has any more money to buy anything, and the global economy implodes. At that point, no one can sell the commodities they held, and there is a crash in prices.
In other words, the stampede (aka public confidence, Sinclair "currency event") logic doesn't work, and thus it is impossible to get hyperinflation when the dollar is the global reserve currency, all other currencies must devalue with the dollar, and hyperinflated quantities of currency are not literally and physically being distributed to all the people every where in the world. The reason all other currencies must devalue with the dollar is because oil and commodities are always available to be purchased with dollars. This is why the US military is stationed all over the world, to make sure that the dollar remains liquid for purchasing commodities and oil. We know that socialism's entitlement and other distributions are just barely keeping the people level in terms of nominal cash flows, no where near hyperinflated increases in distributed currency to the general populace and especially not worldwide in every country.
Hyperinflation can only occur when a local currency is destroyed, by a stampede out of that local currency to commodities. In that case, the price of commodities rise in runaway upward spiral with respect to that local currency, but do not rise with respect to the currency that the rest of the world is using. Thus such hyperinflation is sustainable until the local currency dies.
The only hyperinflation that is possible on a global reserve currency is relative to gold and silver. And this is happening now. This is actually DEFLATION, because everything is getting cheaper with respect to real money (gold and silver). And deflation is exactly what is expected during a debt implosion.
Commodities will rise in price only as fast as the developing world wages rise. We will see periods of boom and bust over the next years or decade, as the global reserve currency (the current fiats all hinged to dollar) dies with respect to gold and silver.
I have made dozens of comments on this site, which further detail my logic:
http://www.google.com/search?q=site:marketoracle.co.uk+Shelby+Moore
I have also discussed this in great depth and quoting from numerous articles (from this site) at my forum (which is free, I sell nothing, I am software developer, ad-hoc economist, and ad-hoc theoretical physicist):
http://goldwetrust.up-with.com/economics-f4/shelby-s-newsletters-t38.htm#3834
I recently explained that we are in global devaluation, which is not the same as hyperinflation, and is much more insidious, perpetual, and hard to escape from:
http://goldwetrust.up-with.com/economics-f4/shelby-s-newsletters-t38.htm#3816
Cheers.
October 28, 2010 3:54 PM
Edward Ulysses Cate said...
It's quite interesting that the Federal Reserve, a private corporation, could possibly end up buying all that debt with money created out of thin-air, just like it always does. However, when they take over debt, they also take title to the collateral supposedly backing that debt. When the Great Red Dragon book was written in 1889, it stated that the foreign Money Power planned to "own the earth in fee-simple." The recent unprecedented debt accumulation might just be how they planned to achieved that goal.
October 28, 2010 3:56 PM
shelby said...
I will post this in multiple parts, as it is too large to fit in one comment.
DEFLATION, NOT HYPERINFLATION
=============================
http://www.marketoracle.co.uk/Article23162.html
I thought I explained it sufficiently in the above article, yet people continue to follow the incorrect logic of this writer Gonzalo Lira. He writes recently that the recent fast rise in commodity prices is a sign of arriving hyperinflation:
http://gonzalolira.blogspot.com/2010/10/signs-hyperinflation-is-arriving.html
It is impossible to get hyperinflation with respect to general commodities, when the unit-of-account (the currency) is global and wages are not increasing at same rate as commodities are, because if the entire world has to pay runaway spiraling up prices for commodities, then pretty soon no one has any more money to buy anything, and the global economy implodes. At that point, no one can sell the commodities they held, and there is a crash in prices.
October 28, 2010 3:56 PM
shelby said...
In other words, the stampede (aka public confidence, Sinclair "currency event") logic doesn't work, and thus it is impossible to get hyperinflation when the dollar is the global reserve currency, all other currencies must devalue with the dollar, and hyperinflated quantities of currency are not literally and physically being distributed to all the people every where in the world. The reason all other currencies must devalue with the dollar is because oil and commodities are always available to be purchased with dollars. This is why the US military is stationed all over the world, to make sure that the dollar remains liquid for purchasing commodities and oil. We know that socialism's entitlement and other distributions are just barely keeping the people level in terms of nominal cash flows, no where near hyperinflated increases in distributed currency to the general populace and especially not worldwide in every country.
Hyperinflation can only occur when a local currency is destroyed, by a stampede out of that local currency to commodities. In that case, the price of commodities rise in runaway upward spiral with respect to that local currency, but do not rise with respect to the currency that the rest of the world is using. Thus such hyperinflation is sustainable until the local currency dies.
The only hyperinflation that is possible on a global reserve currency is relative to gold and silver. And this is happening now. This is actually DEFLATION, because everything is getting cheaper with respect to real money (gold and silver). And deflation is exactly what is expected during a debt implosion.
Commodities will rise in price only as fast as the developing world wages rise. We will see periods of boom and bust over the next years or decade, as the global reserve currency (the current fiats all hinged to dollar) dies with respect to gold and silver.
I have made dozens of comments on this site, which further detail my logic:
http://www.google.com/search?q=site:marketoracle.co.uk+Shelby+Moore
I have also discussed this in great depth and quoting from numerous articles (from this site) at my forum (which is free, I sell nothing, I am software developer, ad-hoc economist, and ad-hoc theoretical physicist):
http://goldwetrust.up-with.com/economics-f4/shelby-s-newsletters-t38.htm#3834
I recently explained that we are in global devaluation, which is not the same as hyperinflation, and is much more insidious, perpetual, and hard to escape from:
http://goldwetrust.up-with.com/economics-f4/shelby-s-newsletters-t38.htm#3816
Cheers
October 28, 2010 3:57 PM
shelby said...
...continued from prior comment
==================
In other words, the stampede (aka public confidence, Sinclair "currency event") logic doesn't work, and thus it is impossible to get hyperinflation when the dollar is the global reserve currency, all other currencies must devalue with the dollar, and hyperinflated quantities of currency are not literally and physically being distributed to all the people every where in the world. The reason all other currencies must devalue with the dollar is because oil and commodities are always available to be purchased with dollars. This is why the US military is stationed all over the world, to make sure that the dollar remains liquid for purchasing commodities and oil. We know that socialism's entitlement and other distributions are just barely keeping the people level in terms of nominal cash flows, no where near hyperinflated increases in distributed currency to the general populace and especially not worldwide in every country.
Hyperinflation can only occur when a local currency is destroyed, by a stampede out of that local currency to commodities. In that case, the price of commodities rise in runaway upward spiral with respect to that local currency, but do not rise with respect to the currency that the rest of the world is using. Thus such hyperinflation is sustainable until the local currency dies.
October 28, 2010 3:59 PM
Anonymous said...
see the hyperinflation occurs when the faith in paper money dies...so is very diff from inflation...
October 28, 2010 4:05 PM
Anonymous said...
Good article. easy to understand, a little sarcastic here and there, but potentially very controversial and awesome. good luck with those bars of silver in 2012, coins and bullets be worth more...
October 28, 2010 4:12 PM
Anonymous said...
Buy gold, silver and bullets. We in the US will need them all before this mess is over.
October 28, 2010 4:15 PM
MarkS said...
So, in essence, you changed your whole nonsensical theory that treasuries would collapse? What caused this dramatic change?
October 28, 2010 4:27 PM
ejhickey said...
Scary article and I took it seriously . Just went out and bought 12 cases of assorted whiskies. Question: should I add some vodka and gin for diversification?
October 28, 2010 4:56 PM
Anonymous said...
Maybe the objective is a quiet move to finally dollarise most or all of the world. The dollar could find enormous renewed demand worldwide because it could act like a very large global put or huge short position against all debt owed everywhere and needed to pay expenses, taxes and interest on debt. It would seem the folks that manufacture the tools that create the dollar could also induce wholesale debt, commodity and personal property liquidation at anytime without hyperinflation. Some very wise people have said, if something is this obvious, it obviously isn't going to happen.
October 28, 2010 4:57 PM
Anonymous said...
I agree with your conclusion about the dollar but think the BLS will find a way to keep core and headline CPI around 2%.
October 28, 2010 5:55 PM
Sharonsj said...
I would like to point out that we have had price inflation over the last two years but the mainstream media has completely ignored it. So has Congress--probably because their maid goes to the supermarket and not them--and so no COLA for the elderly and disabled.
As for prices rising 6 months later, that's a crock. If the price of crude goes up, the gas stations immediately raise the price of gasoline, often on the same day.
Vy the way, I've been stocking coffee and sugar for barter. Vodka too.
October 28, 2010 6:32 PM
Anonymous said...
i value these predictions equal to the view counter on this page. seems someone is looking for attention. i am sure in one to two months we ll get new predictions adjusted to the flow of things. that's what's the prediction business about...
October 28, 2010 6:55 PM
Agent P said...
There is a great piece from May 8th of this year. Gonzalo, if you will allow me to point your readers to it, here it is:
Kingworldnews.com
May 8th interview with Rob Arnott (Chairman, Research Affiliates)
Excellent piece that rationally (and accurately) explains our debt-service-load and the likely government responses/reactions to it.
Governments have stifled/distorted the natural laws of deflation before and they will do it again, all effecting a much worse outcome than if the natural deflationary, market-clearing process was allowed to play out.
Unfortunately, Politics is what gets in the way, and as anyone with a pulse recognizes, It's All Political Now -
October 28, 2010 7:13 PM
Vincent Cate said...
As people point out, as long as all world commodities are priced in dollars and 60% of central bank reserves around the world are dollars we probably won't have full hyperinflation. But what this means is the world will be detaching from the dollar in the early stages.
Also, bond market failure really is the normal start of hyperinflation. It might not be "the official trigger" but it probably is the real trigger. If the Fed has to buy all the bonds then the gig is really up.
There are many potential triggering events:
http://pair.offshore.ai/38yearcycle/#triggers
October 28, 2010 7:59 PM
Kreditanstalt said...
Wait! From predicting a T-bond boycott/selloff to detecting currency devaluation??
Wow! GL gets religion...late. This is a sudden 180-degree turn...everyone KNEW that price inflation would be triggered by a run for commodities based on the collapsing dollar.
Does anyone out there REALLY THINK that traditional, cost-push, investment-in-plant-and-equipment, higher employment would drive price inflation? Dream on...to concur with that, you have to buy the current mainstream line...
We've had this argument with the die-with-your-boots-on deflationists for MONTHS now. They're wrong in saying that deflation everywhere will swamp all. You CAN have price inflation coupled with debt-dependent-asset deflation. At the same time. Maybe in different areas but they can coexist...
Just took you a long time to come round to it,and a rather suddent U-turn...
October 28, 2010 8:01 PM
Anonymous said...
Fight the fed and the banksters, put your US dollars into gold and silver ASAP. A supply of food and some knowledge of guns and how to use them and you too should be set to survive the craziness the government is about to unleash upon us all.
October 28, 2010 8:24 PM
Anonymous said...
maybe all this is leading to 12/21/2012 when the alignment takes place as the mayan calendar predicts. let's hope a true transformation of consciousness takes place in each of us during this unique event.
October 28, 2010 8:38 PM
Edwardo said...
Shelby wrote:
"The reason all other currencies must devalue with the dollar is because oil and commodities are always available to be purchased with dollars."
No, they absolutely are not. And I am not suggesting that some other currency will do in lieu of the dollar.
October 28, 2010 8:41 PM
Anonymous said...
Ah Gonzalo: As a Catholic you cannot believe in the Mayan calendar.
One reason it is hard to believe is because the Catholics were so busy burning Mayan codices in the 16th century there is little remaining background material to study.
http://en.wikipedia.org/wiki/Maya_codices
Also in the 16th century Catholics burnt Bruno, a former Dominican (one of the orders that burnt the codices) friar, at the stake for attempting to expand knowledge of the galaxy, and allow Europeans the basis to understand some of what the Mayan calendar had been tracking for centuries.
Typical of Catholic authorities with power: Wipe out knowledge that calls their dogma into question, then ridicule the remnant that escapes.
October 28, 2010 10:13 PM
Vincent Cate said...
I see two big reasons other currencies will be in trouble when the dollar gets in trouble. First, the central bank reserves used to support other currencies are mostly in dollars. So if the reserves become worthless they can not support their local currency. Second, if people see that the mighty dollar can fall, then clearly any paper money is vulnerable.
October 28, 2010 10:17 PM
Anonymous said...
Too bad ole Peter Schiff couldn't stop by at a time like this to at least warn everybody what "might" happen when everybody gets so decidedly on the same side of the trade. How much did he lose his deciples as a result of touting runaway inflation and the death of the dollar before the Lehman/Bear collapse? And he had oil at $150/bbl and Goldman Sux calling for $200/bbl on his side back then. I guess oil forgot it was a measure of inflation but luckily gold picked up the slack *-) I know...I know...Schiff would right now be like everybody else....calling for the death of the dollar and runaway inflation all over again. What was I thinking? I will tell you this tho...all you ex-spurts had better be right about the coming collapse of the dollar and spiraling inflation cuz you are all in this together. I certainly hope you don't mind if I stand close to the exits tho. Uncle Ben has done a fine job of making sure that real estate has sloooooowly meandered it's way to it's final destination. Who's dumb enough to buy a house anyway when there are stocks that have rallied from $2 to $40+ in 2 years? Good thing we don't have to worry about bubbles anymore. Mr. Market is "obviously" gonna be kind to those who heed the rhetoric of Uncle Ben. That's pretty "obvious" ...all you need to do is come to this site and read the commentary. Peter Schiff can't make the same mistake twice...can he? :o
October 28, 2010 10:22 PM
Anonymous said...
It's hard for me to contemplate all those people who took out huge debts to buy more house than they could afford will somehow make out like bandits pushing cart loads of devalued dollars to the bank to pay off their note. (poor borrowers massively short dollars)
Especially when those dollars are owed to the wealthy in society, (tptb massively long dollars)
That's what should happen in a hyperinflation. So I kind of doubt that's what we'll get.
Besides, I think we have already had our inflation. From 1973 till 2008 the price of everything went up.
Remember what Thomas Jefferson said- If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation"
Notice Jefferson says the inflation comes first, after inflation then comes the deflation. The rest of his qoute about people being deprived of their property and ending up homeless also has come true. One smart guy that Jefferson.
Can we have price increases in commodities that don't require debt financing? Sure, Copper, cotton and agriculture are doing well of late. Natural gas, zinc, lead, nickel not so hot. Oil just kind of trading in a range, well off it's 2008 high.
When the essentials, oil and food, rise in price because of peak oil or drought, it just squeezes flat incomes causing the price of non essential commodities to fall. Rising prices in a few select commodities doesn't signal inflation nor hyper inflation necessarily, it might just be a supply constraint.
October 28, 2010 11:10 PM
Anonymous said...
I have nearly 200 cans of Costco tuna fish stashed with 2014 'best by' dates. Not worried about a thing, ha!
October 29, 2010 12:23 AM
Anonymous said...
I think you mean Tyler Durgen of FC Hedge fund.
October 29, 2010 12:48 AM
aardvark said...
Sir, your article is a good one which I wish to share, but it contains (or Lew Rockwell headed it with) such foul language I could not. Perhaps it could be modified?
October 29, 2010 1:01 AM
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October 29, 2010 1:39 AM
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October 29, 2010 3:46 AM
Anonymous said...
From a very small Northern European country I refer you all to the following article published on Wednesday - http://www.theglobeandmail.com/report-on-business/commentary/neil-reynolds/the-scary-actual-us-government-debt/article1773879/
Hold on to your hats chaps..
October 29, 2010 4:14 AM
Post a Comment
Whether you agree with me or not, thank you for your comment.
I do not answer questions or comments from posters. I normally do not purge an individual comment, unless it is blatantly obscene, or obvious spam, a commercial solicitation, or an obvious duplicate. I never purge a negative comment (as you can see by some of the discussions), so knock yourself out.
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If you have a question or a private comment, do feel free to e-mail me at my address expat229@gmail.com.
GL
This post is gonna be short and sweet—and scary:
Back in late August, I argued that hyperinflation would be triggered by a run on Treasury bonds. I described how such a run might happen, and argued that if Treasuries were no longer considered safe, then commodities would become the store of value.
See, how come I don’t look as cool
when I make my predictions?
Such a run on commodities, I further argued, would inevitably lead to price increases and a rise in the Consumer Price Index, which would initially be interpreted by the Federal Reserve, the Federal government, as well as the commentariat, as a good thing: A sign that “the economy is recovering”, a sign that “normalcy” was returning.
I argued that—far from being “a sign of recovery”—rising CPI would be the sign that things were about to get ugly.
I concluded that, like the stagflation of ‘79, inflation would rise to the double digits relatively quickly. However, unlike in 1980, when Paul Volcker raised interest rates severely in order to halt inflation, in today’s weakened macro-economic environment, that remedy is simply not available to Ben Bernanke.
Therefore, I predicted that inflation would spiral out of control, and turn into hyperinflation of the U.S. dollar.
A lot of people claimed I was on drugs when I wrote this.
Now? Not so much.
In my initial argument, I was sure that there would come a moment when Treasury bond holders would realize that they are the New & Improved Toxic Asset—as everyone knows, there is no way the U.S. Federal government can pay the outstanding debt it has: It’s simply too big.
So I assumed that, when the market collectively realized this, there would be a panic in Treasuries. This panic, of course, would lead to the spike in commodities.
However, I am no longer certain if there will ever be such a panic in Treasuries. Backstop Benny has been so adroit at propping up Treasuries and keeping their yields low, the Stealth Monetization has been so effective, the TBTF banks’ arbitrage trade between the Fed’s liquidity windows and Treasury bond yields has been so lucrative, and the bond market itself is so aware that Bernanke will do anything to protect and backstop Treasuries, that I no longer think that there will necessarily be such a panic.
But that doesn’t mean that the second part of my thesis—commodities rising, which will trigger inflation, which will devolve into hyperinflation—will not occur.
In fact, it is occurring.
The two key commodities that have been rising as of late are oil and grains, specifically wheat, corn and livestock feed. The BLS report on Producer Price Index of commodities is here.
Grains as a class have risen over 33% year-over-year. Refined oil products have risen just shy of 13%, with home heating oil rising 18% year-over-year. In other words: Food, gasoline and heating oil have risen by double digits since 2009. And the 2010-‘11 winter in the northern hemisphere is approaching.
A friend of mine, SB, a commodities trader, pointed out to me that big producers are hedged against rising commodities prices. As he put it to me in a private e-mail, “We sometimes forget that the commodity markets aren’t solely speculative. Most futures contracts are bought by companies who use those commodities in their products, and are thus hedging their costs to produce those products.”
Very true: But SB also pointed out that, hedged or not, the lag time between agricultural commodities and the markets is about six-to-nine months, on average. So he thought that the rise in grains, which really took off in June–July, would hit the supermarket shelves in January–March.
He also pointed out that, with higher commodity costs and lower consumption, companies are going to be between the Devil and the deep blue sea. My own take is, if you can’t get more customers, then you’re just gonna have to charge more from the ones you got.
Coupled to these price increases is the ongoing Currency War: The U.S.—contrary to Secretary Timothy Geithner’s statements—is trying to debase the dollar, so as to make U.S. exports more attractive to foreign consumers. This has created strains with China, Europe and the emerging markets.
A beggar-thy-neighbor monetary policy works for small countries getting out of a hole of their own making: It doesn’t work for the world’s largest single economy with the world’s reserve currency, in the middle of a Global Depression.
On the contrary, it creates a backlash; the ongoing tiff over rare-earth minerals with China is just the beginning. This could easily be exacerbated by clumsy politicking, and turn into a full-on trade war.
What’s so bad with a trade war, you ask? Why nothing, not a thing—if you want to pay through the nose for imported goods. If you enjoy paying 10, 20, 30% more for imported goods—then hey, let’s just stick it to them China-men! They’re still Commies, after all!
Furthermore, as regards the Federal Reserve policy, the upcoming Quantitative Easing 2, and the actions of its chairman, Ben Bernanke: There is an increasing sense in the financial markets that Backstop Benny and his Lollipop Gang don’t have the foggiest clue about what they’re doing.
Consider:
Bruce Krasting just yesterday wrote a very on-the-money précis of the trial balloons the Fed is floating, as regards to QE2: Basically, Bernanke through his WSJ mouthpiece said that the Fed was going to go for a cautious, incrementalist approach, vis-à-vis QE2: “A couple of hundred billion at a time”. You know: “Just the tip—just to see how it feels.”
But then on the other hand, also just yesterday, Tyler Durden at Zero Hedge had a justifiable freak-out over the NY Fed asking Primary Dealers for their thoughts on the size of QE2. According to Bloomberg, the NY Fed was asking the dealers how big they thought QE2 would be, and how big they thought it ought be: $250 billion? $500 billion? A trillion? A trillion every six months? (Or as Tyler pointed out, $2 trillion for 2011.)
That’s like asking a bunch of junkies how much smack they want for the upcoming year—half a kilo? A full kilo? Two kilos?
What the hell you think the junkies are gonna say?
Between BK’s clear reading of the tea leaves coming from the Wall Street Journal, and TD’s also very clear reading of the tea leaves by way of Bloomberg, you’re getting a seriously contradictory message: The Fed is going to lightly tap-tap-tap liquidity into the markets—just a little—just a few hundred billion dollars at a time—
—while at the same time, the Fed is saying to the Primary Dealers, “We’re gonna make you guys happy-happy-happy with a righteously sized QE2!”
The contradictory messages don’t pacify the financial markets—on the contrary, they make the markets simultaneously contemptuous of Bernanke and the Fed, while very frightened as to what they will ultimately do.
What happens when the financial markets don’t really know what the central bank is going to do, and suspect that the central bankers themselves aren’t too clear either?
Guess.
So to sum up, we have:
• Rising commodity prices, the effects of which (because of hedging) will be felt most severely in the period January–March of 2011.
• A beggar-thy-neighbor race-to-the-bottom Currency War, that might well devolve into a Trade War, which would force up prices on imported goods.
• A Federal Reserve that does not seem to know what it is doing, as regards another round of Quantitative Easing, which is making the financial markets very nervous—nervous about the Fed’s ultimate responsibility, which is safeguarding the U.S. dollar.
• A U.S. economy that is weak to the point of collapse, where not even 0.25% interest rates are sparking investment and growth—and which therefore prohibits the Fed from raising interest rates, if need be.
• A U.S. fiscal deficit which is close to 10% of GDP annually, and which is therefore unsustainable—especially considering that the total U.S. fiscal debt is well over 100% of GDP.
These factors all point to one and the same thing:
An imminent currency collapse.
Therefore, I am confident in predicting the following sequence of events:
• By March of 2011, once higher commodity prices reach the marketplace, monthly CPI will be at an annualized rate of not less than 5%.
• By July of 2011, annualized CPI will be no less than 8% annualized.
• By October of 2011, annualized CPI will have crossed 10%.
• By March of 2012, annualized CPI will cross the hyperinflationary tipping point of 15%.
After that, CPI will rapidly increase, much like it did in 1980.
What the mainstream commentariat will make of all this will be really something: When CPI reaches 5% by the winter of 2011, pundits and economists and the Fed and the Obama administration will all say the same thing: “Happy days are here again! People are spending! The economy is back on track!”
However, by the late spring, early summer of 2011, people will realize what’s going on—and the Federal Reserve will initially be unwilling to drastically raise interest rates so as to quell inflation.
Actually, the Fed won’t be able to raise rates, at least not like Volcker did back in 1980: The U.S. economy will be too weak, and the Federal government’s balance sheet will be too distressed, with it’s $1.5 trillion deficit. So at first, the Fed will have to let the rising inflation rate slide, and keep trying hard to explain it away as “a sign of a recovering economy”.
Once the Fed realizes that the rising CPI is not a sign of a reignited economy, but rather a sign of the collapsing dollar, they will pursue a puerile “inflation fighting” scheme of incremental interest rate hikes—much like G. William Miller, the Chairman of the Fed from January of ‘78 to August of ‘79, pursued so unsuccessfully.
2012 will be the bad year: I predict that hyperinflation’s tipping point will be no later than the first quarter of 2012. From there, it will accelerate. By the end of 2012, I would not be surprised if the CPI for the year averaged 30%.
By that point, the rest of the economy—unemployment, GDP, all the rest of it—will be in the toilet. By that point, the rest of the economy will no longer matter: The collapsing dollar will make 2012 the really really bad year of our Global Depression—which is actually kind of funny.
It’s funny because, as you know, I am a conservative Catholic: I of course put absolutely no stock in the ridiculous notion that “The Mayans predicted our civilization’s collapse in 2012!”—that’s all rubbish, as far as I’m concerned.
It’s just one of those cosmic jokes that 2012 will turn out to be the year the dollar collapses, and the larger world economies go down the tubes.
As cosmic jokes go, all I’ve got to say is this:
Good one, God.
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Email ThisBlogThis!Share to TwitterShare to FacebookShare to Google Buzz Posted by Gonzalo Lira at 10:57 AM
47 comments:
Anonymous said...
That's a pretty bold prediction but I give you props for making it publicly. John Williams from shadowstats said that he sees the everything being in place around March - June 2011 for hyperinflation to start taking hold. The Nov. 3rd FOMC meeting has the potential to be the final nail in the coffin for the U.S. dollar. Exciting times ahead. Keep writing.
October 28, 2010 11:27 AM
Anonymous said...
I am new to your blog and found your assessments refreshingly understandable but pretty scary. Hope you are wrong on the timing...
October 28, 2010 11:32 AM
Anonymous said...
GL, living in Europe, I would like to know your take on what happens to some of the European economies.
My particular country (a smaller Northern one) is living hand-to-mouth, or more accurately, the government is borrowing like there's no tomorrow to meet all the obligations they have given themselves over the years, to cover for the fact that revenues have dropped like a stone.
They also project to do that borrowing from other countries well into late 2010s.
So, if 2012 is the year of hyperinflation in the U.S., shutting down the U.S. borrowing of world's monies, does that borrowing window close for most of the other western countries as well at the same time?
Because if that is the case, my particular country is looking at at least a 17% instant "austerity" on the budget (and more as economy falls further), going into a system of "get one peso, spend one peso" (from Bolivian Juan Cariaga, www.pbs.org/wgbh/commandingheights/shared/minitext/tr_show02.html#11, about their hyperinflation correcting measures).
October 28, 2010 11:40 AM
riotwire said...
The biggest thing that sticks out to me from your post is that everyone is waiting anxiously like begging dogs to see what the private Fed Reserve is going to give them. I've known that we are all pawns in a bigger game all along, but how long are we going to stand by and accept this system as legitimate? When are we going to demand from our government, our representatives, that there must be consequences for their actions?
Or are we really that dumb to beg for the table scraps of these clowns who treat their positions like they are owed that position of power? The power comes from you and me recognizing it as legitimate. If we don't, we will be an unstoppable force against those who we willingly allow to take advantage of us.
I guess it took putting it in those words for it to really sink in. I hope you are wrong, but I am preparing as much as possible for when you are right. Be blessed.
October 28, 2010 12:11 PM
Brian said...
Great post as always, GL. Bold prediction, but based on data and some pretty sound reasoning. I too, hope you are wrong, but just one glance at the Fed's balance sheet, Bernanke's persistance, and lawmakers' ambivalence/ignorance has me resigned to the fact that we are done for.
Idea for future post: what can investors/people due to prepare for this economic tsunami? Is gold the real store of value or would it make sense to take those worthless dollars and buy companies that sell needs like food when everyone dumps their stock for cash? I don't pretend to know the answer, but I would be interested in hearing other ideas.
October 28, 2010 1:07 PM
Anonymous said...
Thank you, Mr. Lira. I am just a simple truck driver, but thanks to people like you, I have been looking real smart over the past few years. For all the ignorant/uninformed who now ask for my opinions, I now have something I can use to scare the poop out of them!
These may be scary times, but I intend enjoy myself just the same.
Oh well, back to collecting nuts.
October 28, 2010 1:35 PM
Anonymous said...
Interesting read and indeed scary, but actually, at this point, I would love a trade war with China! What do they have that we can't do without other than cheap goods which the majority of Americans have gone into debt to purchase and of course, JOBS! No one says a word about import duties or tariffs to level the playing field so that we can go back to producing our own goods for consumption at home. Pay more for those goods? Hell yes! Cheap shit from Third World countries is what has killed the goose that has been laying the gold eggs for the rest of the world ever since WWII. The thrill ride is over and we have to get back to reality and produce products and jobs here in America, even if they cost more.
October 28, 2010 1:35 PM
Editor said...
Here's an alternate prediction.
--A merchant in India will read online about how the dollar is dropping against the rupee and how the Fed is actively debasing the dollar. It worries him. So he pulls his dollars out of his mattresses.
--When he goes to his money changer to trade dollars for rupees. He will be shocked to get a much worse price than listed online. This has never happened before, but too many others had the same idea and the money changer is overloaded with dollars. He will notice a line is forming as he leaves and he will get on his cell phone and begin calling friends to warn them about their dollars.
--By that afternoon, Indian banks will see a huge influx of dollars and they'll start trying to lay them off onto someone else.
--The central bank will take some, but then they will get concerned and temporarily close the window to dollars.
--Then the real panic will set in, spreading rapidly around India and across SE Asia and then to the rest of the world.
--Banks and investors everywhere join in, selling dollars and Treasuries. A huge imbalance in sellers vs buyers will cause interest rates to spike and the Fed will step in, buying up Treasuries to prevent this.
--The panic just keeps spreading and the Fed just keeps buying.
--Even while talking to the Fed about coordinating support for the dollar, some central banks will be secretly selling dollars through intermediaries.
--Within 48 hours the Fed is the proud owner of most of the US government's debt. This fact soon become apparent and the buying power of the dollar tanks.
--OPEC countries begin demanding gold for oil deliveries to the USA.
--TEOTWAWKI
October 28, 2010 1:55 PM
Anonymous said...
Yeah that whole mayan calendar nonsense is so far fetched, not like the rock solid precpets of
catholicismm such as the Vigin bith, walking on water etc.
mememonkey
October 28, 2010 2:15 PM
Andy Shand said...
As Abraham Lincoln stated: America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves.
I believe we are in the first stages of a new America, the new normal. This new normal for Americans is not something they are used to, as we all know, Americans have a heightened sense of entitlement.
I was born and raised in Europe where no such entitlements existed, thus I believe I am better suited and more educated in being able to better understand the complexities of the current fiscal Armageddon the USA is facing.
I neither wish or hope that America has to endure what is surely coming, but, I strongly hope that America ditches the old clichés of “Land of the Free” “God Bless America” “Liberty” and all the Patriotic BS. How many US citizens will embrace these once cherished beliefs when they start to see prices rise, no access to affordable healthcare, no decent schools, higher education costs, and so on.
You can always count on Americans to do the right thing – after they’ve tried everything else.
October 28, 2010 2:19 PM
Wil Martindale said...
"However, unlike in 1980, when Paul Volcker raised interest rates severely in order to halt inflation, in today’s weakened macro-economic environment, that remedy is simply not available to Ben Bernanke."
It is not available because Benny the Bubble and his primary dealers are locked in a QUADRILLION dollar interest rate futures derivative stalemate. And not by chance, but by design. It's too mcuh to explain the history of how many times the honorable profession of commerce has been hijacked by organized crime, but if you mix in financial innovation and technology you get magnitudes of risk on the order of the extinction of the human race.
And that extinction is the ransom we gradually bailout, until ... we're extinct.
October 28, 2010 2:20 PM
Raphael said...
Thanks for the post. Very scary scenario. The interesting thing is the timing of the worst part of the collapse. 2012 is an election year and as it's looking like the GOP will be making some significant gains this year I can see how the Dems will blame the collapse on the GOP. Although *we* know that the seeds of this have already been sown and it won't be the fault of whoever is in power for 2011-2012, the liberal media will try to blame it on the Republican Congress and the gullible public might react by voting the Dems back in. I hope that doesn't happen...
October 28, 2010 2:28 PM
Anonymous said...
Hi, GL.
This was posted on economicpolicy.com and supports your analysis, and a great chart.
Linked to, http://www.shtfplan.com/emergency-preparedness/stunning-chart-the-real-rate-of-inflation-and-how-to-protect-yourself_10272010?utm_source=twitterfeed&utm_medium=twitter
Keep up the good work.
October 28, 2010 2:41 PM
Parth said...
Moral of the story -
1) Do not save money -spend it all.
2) In hyperinflation liquor and cigarettes are the most useful barter commodities.
Well iof thats how the world is going to end I must say God is a party animal. Another one please.........Go Giants!!
October 28, 2010 2:42 PM
Anonymous said...
As I understand inflation and rising prices, your hyperinflation scenario resembles a kind of inflation on steroids. That is not hyperinflation, which is actually a rejection of the currency. Under a hyperinflation I don't want more money -- I want to immediately get rid of the money that I have -- to turn it into something real -- to anyone that will take those dollars. Picture in your mind, if you will, a scene where debtors with fists full of dollars are trying to chase down their bankers to pay off debts, with the bankers in full stride trying to get away from them.
The solution to our present monetary problem is to simply let the dollar fall to zero. What wasn't paid off in worthless dollars defaults, and we start over -- preferably with money backed 100% by silver/gold controlled by the free market and without government interference. The U.S. has the largest stockpile of gold of any country in the world. Once that gold was divided evenly among its citizens, the free market would take over.
October 28, 2010 3:15 PM
Anonymous said...
Gonzalo, very nice writing of late.
As far as prophecy goes, one should not make light of things they do not completely understand. Nostradamus did look cool, but he was more than looks. I don't mean that as heavy handed as it sounds, by the way. This would apply towards those who mock gold as a barbaric relic. I'm not saying the world will end in 2012, I personally don't believe that either. Do consider though that Nostradamus may have actually predicted the collapse of the dollar:
--------------------------------------------
Century 8 Quatrain 28
Les simulachres d’or & argent enflez,
Qu’apres le rapt au lac furent gettez
Au descouuert estaincts tous & troublez.
Au marbre escripz prescript intergetez.
The imitations of gold and silver will become inflated,
Which after the rape [or robbery] are thrown into the fire,
After discovering all is exhausted and dissipated by the debt,
All scripts and bonds are wiped out.
----------------------------------------------
Many ways this could apply to now: bond market bubble, QE's, gold/silver short squeeze, an empty fort knox, gold/silver lending schemes.
-Joe
October 28, 2010 3:34 PM
jonil_8 said...
Anonymous;
I assume you meant 'had' the largest stockpile. Since we are blocked by TPTB to audit Fort Knox, I sincerely doubt if there is even one bar left for 'show'.
October 28, 2010 3:51 PM
shelby said...
DEFLATION, NOT HYPERINFLATION
=============================
http://www.marketoracle.co.uk/Article23162.html
I thought I explained it sufficiently in the above article, yet people continue to follow the incorrect logic of this writer Gonzalo Lira. He writes recently that the recent fast rise in commodity prices is a sign of arriving hyperinflation:
http://gonzalolira.blogspot.com/2010/10/signs-hyperinflation-is-arriving.html
It is impossible to get hyperinflation with respect to general commodities, when the unit-of-account (the currency) is global and wages are not increasing at same rate as commodities are, because if the entire world has to pay runaway spiring up prices for commodities, then pretty soon no one has any more money to buy anything, and the global economy implodes. At that point, no one can sell the commodities they held, and there is a crash in prices.
In other words, the stampede (aka public confidence, Sinclair "currency event") logic doesn't work, and thus it is impossible to get hyperinflation when the dollar is the global reserve currency, all other currencies must devalue with the dollar, and hyperinflated quantities of currency are not literally and physically being distributed to all the people every where in the world. The reason all other currencies must devalue with the dollar is because oil and commodities are always available to be purchased with dollars. This is why the US military is stationed all over the world, to make sure that the dollar remains liquid for purchasing commodities and oil. We know that socialism's entitlement and other distributions are just barely keeping the people level in terms of nominal cash flows, no where near hyperinflated increases in distributed currency to the general populace and especially not worldwide in every country.
Hyperinflation can only occur when a local currency is destroyed, by a stampede out of that local currency to commodities. In that case, the price of commodities rise in runaway upward spiral with respect to that local currency, but do not rise with respect to the currency that the rest of the world is using. Thus such hyperinflation is sustainable until the local currency dies.
The only hyperinflation that is possible on a global reserve currency is relative to gold and silver. And this is happening now. This is actually DEFLATION, because everything is getting cheaper with respect to real money (gold and silver). And deflation is exactly what is expected during a debt implosion.
Commodities will rise in price only as fast as the developing world wages rise. We will see periods of boom and bust over the next years or decade, as the global reserve currency (the current fiats all hinged to dollar) dies with respect to gold and silver.
I have made dozens of comments on this site, which further detail my logic:
http://www.google.com/search?q=site:marketoracle.co.uk+Shelby+Moore
I have also discussed this in great depth and quoting from numerous articles (from this site) at my forum (which is free, I sell nothing, I am software developer, ad-hoc economist, and ad-hoc theoretical physicist):
http://goldwetrust.up-with.com/economics-f4/shelby-s-newsletters-t38.htm#3834
I recently explained that we are in global devaluation, which is not the same as hyperinflation, and is much more insidious, perpetual, and hard to escape from:
http://goldwetrust.up-with.com/economics-f4/shelby-s-newsletters-t38.htm#3816
Cheers.
October 28, 2010 3:54 PM
Edward Ulysses Cate said...
It's quite interesting that the Federal Reserve, a private corporation, could possibly end up buying all that debt with money created out of thin-air, just like it always does. However, when they take over debt, they also take title to the collateral supposedly backing that debt. When the Great Red Dragon book was written in 1889, it stated that the foreign Money Power planned to "own the earth in fee-simple." The recent unprecedented debt accumulation might just be how they planned to achieved that goal.
October 28, 2010 3:56 PM
shelby said...
I will post this in multiple parts, as it is too large to fit in one comment.
DEFLATION, NOT HYPERINFLATION
=============================
http://www.marketoracle.co.uk/Article23162.html
I thought I explained it sufficiently in the above article, yet people continue to follow the incorrect logic of this writer Gonzalo Lira. He writes recently that the recent fast rise in commodity prices is a sign of arriving hyperinflation:
http://gonzalolira.blogspot.com/2010/10/signs-hyperinflation-is-arriving.html
It is impossible to get hyperinflation with respect to general commodities, when the unit-of-account (the currency) is global and wages are not increasing at same rate as commodities are, because if the entire world has to pay runaway spiraling up prices for commodities, then pretty soon no one has any more money to buy anything, and the global economy implodes. At that point, no one can sell the commodities they held, and there is a crash in prices.
October 28, 2010 3:56 PM
shelby said...
In other words, the stampede (aka public confidence, Sinclair "currency event") logic doesn't work, and thus it is impossible to get hyperinflation when the dollar is the global reserve currency, all other currencies must devalue with the dollar, and hyperinflated quantities of currency are not literally and physically being distributed to all the people every where in the world. The reason all other currencies must devalue with the dollar is because oil and commodities are always available to be purchased with dollars. This is why the US military is stationed all over the world, to make sure that the dollar remains liquid for purchasing commodities and oil. We know that socialism's entitlement and other distributions are just barely keeping the people level in terms of nominal cash flows, no where near hyperinflated increases in distributed currency to the general populace and especially not worldwide in every country.
Hyperinflation can only occur when a local currency is destroyed, by a stampede out of that local currency to commodities. In that case, the price of commodities rise in runaway upward spiral with respect to that local currency, but do not rise with respect to the currency that the rest of the world is using. Thus such hyperinflation is sustainable until the local currency dies.
The only hyperinflation that is possible on a global reserve currency is relative to gold and silver. And this is happening now. This is actually DEFLATION, because everything is getting cheaper with respect to real money (gold and silver). And deflation is exactly what is expected during a debt implosion.
Commodities will rise in price only as fast as the developing world wages rise. We will see periods of boom and bust over the next years or decade, as the global reserve currency (the current fiats all hinged to dollar) dies with respect to gold and silver.
I have made dozens of comments on this site, which further detail my logic:
http://www.google.com/search?q=site:marketoracle.co.uk+Shelby+Moore
I have also discussed this in great depth and quoting from numerous articles (from this site) at my forum (which is free, I sell nothing, I am software developer, ad-hoc economist, and ad-hoc theoretical physicist):
http://goldwetrust.up-with.com/economics-f4/shelby-s-newsletters-t38.htm#3834
I recently explained that we are in global devaluation, which is not the same as hyperinflation, and is much more insidious, perpetual, and hard to escape from:
http://goldwetrust.up-with.com/economics-f4/shelby-s-newsletters-t38.htm#3816
Cheers
October 28, 2010 3:57 PM
shelby said...
...continued from prior comment
==================
In other words, the stampede (aka public confidence, Sinclair "currency event") logic doesn't work, and thus it is impossible to get hyperinflation when the dollar is the global reserve currency, all other currencies must devalue with the dollar, and hyperinflated quantities of currency are not literally and physically being distributed to all the people every where in the world. The reason all other currencies must devalue with the dollar is because oil and commodities are always available to be purchased with dollars. This is why the US military is stationed all over the world, to make sure that the dollar remains liquid for purchasing commodities and oil. We know that socialism's entitlement and other distributions are just barely keeping the people level in terms of nominal cash flows, no where near hyperinflated increases in distributed currency to the general populace and especially not worldwide in every country.
Hyperinflation can only occur when a local currency is destroyed, by a stampede out of that local currency to commodities. In that case, the price of commodities rise in runaway upward spiral with respect to that local currency, but do not rise with respect to the currency that the rest of the world is using. Thus such hyperinflation is sustainable until the local currency dies.
October 28, 2010 3:59 PM
Anonymous said...
see the hyperinflation occurs when the faith in paper money dies...so is very diff from inflation...
October 28, 2010 4:05 PM
Anonymous said...
Good article. easy to understand, a little sarcastic here and there, but potentially very controversial and awesome. good luck with those bars of silver in 2012, coins and bullets be worth more...
October 28, 2010 4:12 PM
Anonymous said...
Buy gold, silver and bullets. We in the US will need them all before this mess is over.
October 28, 2010 4:15 PM
MarkS said...
So, in essence, you changed your whole nonsensical theory that treasuries would collapse? What caused this dramatic change?
October 28, 2010 4:27 PM
ejhickey said...
Scary article and I took it seriously . Just went out and bought 12 cases of assorted whiskies. Question: should I add some vodka and gin for diversification?
October 28, 2010 4:56 PM
Anonymous said...
Maybe the objective is a quiet move to finally dollarise most or all of the world. The dollar could find enormous renewed demand worldwide because it could act like a very large global put or huge short position against all debt owed everywhere and needed to pay expenses, taxes and interest on debt. It would seem the folks that manufacture the tools that create the dollar could also induce wholesale debt, commodity and personal property liquidation at anytime without hyperinflation. Some very wise people have said, if something is this obvious, it obviously isn't going to happen.
October 28, 2010 4:57 PM
Anonymous said...
I agree with your conclusion about the dollar but think the BLS will find a way to keep core and headline CPI around 2%.
October 28, 2010 5:55 PM
Sharonsj said...
I would like to point out that we have had price inflation over the last two years but the mainstream media has completely ignored it. So has Congress--probably because their maid goes to the supermarket and not them--and so no COLA for the elderly and disabled.
As for prices rising 6 months later, that's a crock. If the price of crude goes up, the gas stations immediately raise the price of gasoline, often on the same day.
Vy the way, I've been stocking coffee and sugar for barter. Vodka too.
October 28, 2010 6:32 PM
Anonymous said...
i value these predictions equal to the view counter on this page. seems someone is looking for attention. i am sure in one to two months we ll get new predictions adjusted to the flow of things. that's what's the prediction business about...
October 28, 2010 6:55 PM
Agent P said...
There is a great piece from May 8th of this year. Gonzalo, if you will allow me to point your readers to it, here it is:
Kingworldnews.com
May 8th interview with Rob Arnott (Chairman, Research Affiliates)
Excellent piece that rationally (and accurately) explains our debt-service-load and the likely government responses/reactions to it.
Governments have stifled/distorted the natural laws of deflation before and they will do it again, all effecting a much worse outcome than if the natural deflationary, market-clearing process was allowed to play out.
Unfortunately, Politics is what gets in the way, and as anyone with a pulse recognizes, It's All Political Now -
October 28, 2010 7:13 PM
Vincent Cate said...
As people point out, as long as all world commodities are priced in dollars and 60% of central bank reserves around the world are dollars we probably won't have full hyperinflation. But what this means is the world will be detaching from the dollar in the early stages.
Also, bond market failure really is the normal start of hyperinflation. It might not be "the official trigger" but it probably is the real trigger. If the Fed has to buy all the bonds then the gig is really up.
There are many potential triggering events:
http://pair.offshore.ai/38yearcycle/#triggers
October 28, 2010 7:59 PM
Kreditanstalt said...
Wait! From predicting a T-bond boycott/selloff to detecting currency devaluation??
Wow! GL gets religion...late. This is a sudden 180-degree turn...everyone KNEW that price inflation would be triggered by a run for commodities based on the collapsing dollar.
Does anyone out there REALLY THINK that traditional, cost-push, investment-in-plant-and-equipment, higher employment would drive price inflation? Dream on...to concur with that, you have to buy the current mainstream line...
We've had this argument with the die-with-your-boots-on deflationists for MONTHS now. They're wrong in saying that deflation everywhere will swamp all. You CAN have price inflation coupled with debt-dependent-asset deflation. At the same time. Maybe in different areas but they can coexist...
Just took you a long time to come round to it,and a rather suddent U-turn...
October 28, 2010 8:01 PM
Anonymous said...
Fight the fed and the banksters, put your US dollars into gold and silver ASAP. A supply of food and some knowledge of guns and how to use them and you too should be set to survive the craziness the government is about to unleash upon us all.
October 28, 2010 8:24 PM
Anonymous said...
maybe all this is leading to 12/21/2012 when the alignment takes place as the mayan calendar predicts. let's hope a true transformation of consciousness takes place in each of us during this unique event.
October 28, 2010 8:38 PM
Edwardo said...
Shelby wrote:
"The reason all other currencies must devalue with the dollar is because oil and commodities are always available to be purchased with dollars."
No, they absolutely are not. And I am not suggesting that some other currency will do in lieu of the dollar.
October 28, 2010 8:41 PM
Anonymous said...
Ah Gonzalo: As a Catholic you cannot believe in the Mayan calendar.
One reason it is hard to believe is because the Catholics were so busy burning Mayan codices in the 16th century there is little remaining background material to study.
http://en.wikipedia.org/wiki/Maya_codices
Also in the 16th century Catholics burnt Bruno, a former Dominican (one of the orders that burnt the codices) friar, at the stake for attempting to expand knowledge of the galaxy, and allow Europeans the basis to understand some of what the Mayan calendar had been tracking for centuries.
Typical of Catholic authorities with power: Wipe out knowledge that calls their dogma into question, then ridicule the remnant that escapes.
October 28, 2010 10:13 PM
Vincent Cate said...
I see two big reasons other currencies will be in trouble when the dollar gets in trouble. First, the central bank reserves used to support other currencies are mostly in dollars. So if the reserves become worthless they can not support their local currency. Second, if people see that the mighty dollar can fall, then clearly any paper money is vulnerable.
October 28, 2010 10:17 PM
Anonymous said...
Too bad ole Peter Schiff couldn't stop by at a time like this to at least warn everybody what "might" happen when everybody gets so decidedly on the same side of the trade. How much did he lose his deciples as a result of touting runaway inflation and the death of the dollar before the Lehman/Bear collapse? And he had oil at $150/bbl and Goldman Sux calling for $200/bbl on his side back then. I guess oil forgot it was a measure of inflation but luckily gold picked up the slack *-) I know...I know...Schiff would right now be like everybody else....calling for the death of the dollar and runaway inflation all over again. What was I thinking? I will tell you this tho...all you ex-spurts had better be right about the coming collapse of the dollar and spiraling inflation cuz you are all in this together. I certainly hope you don't mind if I stand close to the exits tho. Uncle Ben has done a fine job of making sure that real estate has sloooooowly meandered it's way to it's final destination. Who's dumb enough to buy a house anyway when there are stocks that have rallied from $2 to $40+ in 2 years? Good thing we don't have to worry about bubbles anymore. Mr. Market is "obviously" gonna be kind to those who heed the rhetoric of Uncle Ben. That's pretty "obvious" ...all you need to do is come to this site and read the commentary. Peter Schiff can't make the same mistake twice...can he? :o
October 28, 2010 10:22 PM
Anonymous said...
It's hard for me to contemplate all those people who took out huge debts to buy more house than they could afford will somehow make out like bandits pushing cart loads of devalued dollars to the bank to pay off their note. (poor borrowers massively short dollars)
Especially when those dollars are owed to the wealthy in society, (tptb massively long dollars)
That's what should happen in a hyperinflation. So I kind of doubt that's what we'll get.
Besides, I think we have already had our inflation. From 1973 till 2008 the price of everything went up.
Remember what Thomas Jefferson said- If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation"
Notice Jefferson says the inflation comes first, after inflation then comes the deflation. The rest of his qoute about people being deprived of their property and ending up homeless also has come true. One smart guy that Jefferson.
Can we have price increases in commodities that don't require debt financing? Sure, Copper, cotton and agriculture are doing well of late. Natural gas, zinc, lead, nickel not so hot. Oil just kind of trading in a range, well off it's 2008 high.
When the essentials, oil and food, rise in price because of peak oil or drought, it just squeezes flat incomes causing the price of non essential commodities to fall. Rising prices in a few select commodities doesn't signal inflation nor hyper inflation necessarily, it might just be a supply constraint.
October 28, 2010 11:10 PM
Anonymous said...
I have nearly 200 cans of Costco tuna fish stashed with 2014 'best by' dates. Not worried about a thing, ha!
October 29, 2010 12:23 AM
Anonymous said...
I think you mean Tyler Durgen of FC Hedge fund.
October 29, 2010 12:48 AM
aardvark said...
Sir, your article is a good one which I wish to share, but it contains (or Lew Rockwell headed it with) such foul language I could not. Perhaps it could be modified?
October 29, 2010 1:01 AM
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October 29, 2010 1:39 AM
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October 29, 2010 3:46 AM
Anonymous said...
From a very small Northern European country I refer you all to the following article published on Wednesday - http://www.theglobeandmail.com/report-on-business/commentary/neil-reynolds/the-scary-actual-us-government-debt/article1773879/
Hold on to your hats chaps..
October 29, 2010 4:14 AM
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Thursday, October 28, 2010
Unemployed Entrepreneur Of The Week: 60-Year-Old Loses Job, Creates 12 Websites
Unemployed Entrepreneur Of The Week: 60-Year-Old Loses Job, Creates 12 Websites
Unemployed Entrepreneur Of The Week: 60-Year-Old Loses Job, Creates 12 Websites
First Posted: 10-28-10 03:35 PM | Updated: 10-28-10 03:38 PM
WASHINGTON -- When Bob Bernstein, 60, was laid off from his job as a real estate broker at the height of the recession in 2008, he says he had a feeling it would be a really long time before he found a job in his field again.
"Like everyone else, I asked myself, what do I do now?" Bernstein said. "The real estate market was going down, so I was not going to find another broker position."
Since there were no jobs in his field, Bernstein decided he was going to have to create a job for himself. He had owned some retail clothing stores for about fifteen years, but he no longer had the energy to deal with landlords, bring in inventory, hire employees and maintain hours. So he decided to take all his entrepreneurial ideas to the web.
"I thought that with the right domain name, whatever creative concept I could come up with could generate some income and maybe even compete against the big guys," Bernstein told HuffPost.
Since he lacked the technical skills to write all the code for a website, he teamed up with DevHub.com, a 2007 start-up company that makes it easy for people with ideas to create lucrative websites using drag-and-drop tools and a built-in network of web advertisers.
Since 2008, Bernstein has eked out a living for himself by creating twelve different websites using DevHub.com, including a travel discount site (DealstoVegas.com), an outdoor sporting goods store (Outtreck.com), a job search hub (Careersquick.com), and a website dedicated to comparing health insurance quotes (RXCare.org).
Bernstein's most lucrative site to date, ZipQuote.com, is a place where users can type in their zipcodes and receive free insurance quotes based on their locations. The site was so successful he moved it off of the DevHub platform and is now treating it as a full-time job.
"My focus and dedication to Zipquote is as if I'm opening a business," said Bernstein, who is now in the process of trademarking the website's name. "It's only been in its current state for about five months, and it makes between $500 and $1000 a month. Hopefully, as I start to promote it, it will grow further and further."
Bernstein said that it's now so easy for him to create websites that he created one last week in the course of a day, and it's made him $50 so far.
"You can literally open anything up online in a day," he told HuffPost. "It's amazing."
DevHub CEO Geoff Nuval said he knows of a number of unemployed people who have used his site to start generating income and, for the lucky ones like Bernstein, to eventually become fully self-employed.
ADVERTISEMENT
"We launched our newest version in late June, and from that version we already have over 60,000 users," Nuval said. "There are a bunch of people who are unemployed or not working at the moment who are using our platform to make some extra cash on the side. It takes away the tech hurdles, so all they have to do is put in the creativity."
Although Bernstein says he isn't making quite as much money running websites as he did in real estate, he does make enough to support his family, and he never wants to go back to his old job.
"I get to work from home, I'm totally focused on what I do because I know it's all for my family and our future, and I'm building a business that is mine, rather than working for someone else and building their business," he said. "It's absolutely rewarding and totally satisfying. I could do this sixteen hours a day."
Unemployed Entrepreneur Of The Week: 60-Year-Old Loses Job, Creates 12 Websites
First Posted: 10-28-10 03:35 PM | Updated: 10-28-10 03:38 PM
WASHINGTON -- When Bob Bernstein, 60, was laid off from his job as a real estate broker at the height of the recession in 2008, he says he had a feeling it would be a really long time before he found a job in his field again.
"Like everyone else, I asked myself, what do I do now?" Bernstein said. "The real estate market was going down, so I was not going to find another broker position."
Since there were no jobs in his field, Bernstein decided he was going to have to create a job for himself. He had owned some retail clothing stores for about fifteen years, but he no longer had the energy to deal with landlords, bring in inventory, hire employees and maintain hours. So he decided to take all his entrepreneurial ideas to the web.
"I thought that with the right domain name, whatever creative concept I could come up with could generate some income and maybe even compete against the big guys," Bernstein told HuffPost.
Since he lacked the technical skills to write all the code for a website, he teamed up with DevHub.com, a 2007 start-up company that makes it easy for people with ideas to create lucrative websites using drag-and-drop tools and a built-in network of web advertisers.
Since 2008, Bernstein has eked out a living for himself by creating twelve different websites using DevHub.com, including a travel discount site (DealstoVegas.com), an outdoor sporting goods store (Outtreck.com), a job search hub (Careersquick.com), and a website dedicated to comparing health insurance quotes (RXCare.org).
Bernstein's most lucrative site to date, ZipQuote.com, is a place where users can type in their zipcodes and receive free insurance quotes based on their locations. The site was so successful he moved it off of the DevHub platform and is now treating it as a full-time job.
"My focus and dedication to Zipquote is as if I'm opening a business," said Bernstein, who is now in the process of trademarking the website's name. "It's only been in its current state for about five months, and it makes between $500 and $1000 a month. Hopefully, as I start to promote it, it will grow further and further."
Bernstein said that it's now so easy for him to create websites that he created one last week in the course of a day, and it's made him $50 so far.
"You can literally open anything up online in a day," he told HuffPost. "It's amazing."
DevHub CEO Geoff Nuval said he knows of a number of unemployed people who have used his site to start generating income and, for the lucky ones like Bernstein, to eventually become fully self-employed.
ADVERTISEMENT
"We launched our newest version in late June, and from that version we already have over 60,000 users," Nuval said. "There are a bunch of people who are unemployed or not working at the moment who are using our platform to make some extra cash on the side. It takes away the tech hurdles, so all they have to do is put in the creativity."
Although Bernstein says he isn't making quite as much money running websites as he did in real estate, he does make enough to support his family, and he never wants to go back to his old job.
"I get to work from home, I'm totally focused on what I do because I know it's all for my family and our future, and I'm building a business that is mine, rather than working for someone else and building their business," he said. "It's absolutely rewarding and totally satisfying. I could do this sixteen hours a day."
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