Will Americans Be Able To Handle The Next Great Depression? Not If They Are Anything Like This Guy

Will Americans be able to handle the next Great Depression?  The truth is that most Americans today simply do not possess the strength of character to handle losing their jobs, their homes and the inflated lifestyles that we have all enjoyed by spending beyond our means.  During the Great Depression of the 1930s, things were different.  Family units were much stronger, people knew how to rely on each other and most Americans possessed enough morality and inner strength so that they did not freak out when things went from bad to worse.

But that is not the case in the United States today.  Instead, Americans have become a bunch of spoiled brats who come apart at the seams at the first sign of trouble.  We pushed prayer and the Ten Commandments as far out of public life as we could and instead we filled our minds with literally thousands of hours of character-rotting entertainment.  Now our families are falling apart, we’ve raised entire generations who expect the world to be handed to them on a silver platter, and we’ve got tens of millions of crybabies who don’t have any concept of how to respond to hard times.

But hard economic times are coming.  In fact, for many Americans they are already here.  So how will most Americans respond when they start losing their jobs and their homes?  Well, the truth is that we are already seeing a lot of people “go postal” because they simply do not know how to handle these setbacks.  Just consider the video below.  It is footage of one of the greatest office freakouts of all time.  If you were to get fired tomorrow, would you react like this guy?….  

The reality is that an economic collapse does not have to be the end of the world.  The guy in the video above could have gone out and tried to get another job or start his own business.  But instead he treated it like it was the end of his life and he threw a massive temper tantrum.

Unfortunately, we are likely to see an increasing number of spoiled Americans throw temper tantrums as the economic collapse goes from bad to worse in the years ahead.  The U.S. financial system is literally coming apart at the seams, and at this point there is very little that can be done to prevent a total economic breakdown.

So we are going to see more Americans trash their homes when they are foreclosed upon, we are going to see more Americans commit insurance fraud, we are going to see more Americans “go postal”, we are going to see more Americans freak out in public and we are going to see more Americans turn to crime.

Why?

Because the collective morality of America has experienced a catastrophic collapse.  People care very little about what is right or wrong anymore.  What they care about is what is going to make themselves happy and comfortable.

The only thing that has been keeping the entire U.S. from turning into New Orleans right after Hurricane Katrina is the relative level of affluence that we are all still experiencing.  Yes, things are not as good as they were, but the United States still has one of the highest standards of living in the world.

For now.

If you want to get an idea of where the U.S. is headed, go spend a few days in Detroit.  Once one of the shining examples of the American Dream, today many areas of Detroit resemble a war zone.  The real unemployment rate in Detroit is somewhere up around 45 or 50 percent and the crime rate is shooting through the roof.  Vandalism is rampant and some houses in the worst areas are virtually unsellable because they aren’t even worth the taxes that must be paid of them.

When people get desperate, their true character comes out.  When the U.S. financial system completely fails one day, the thin veneer of civilization that we all take for granted will evaporate in a matter of days.

At that point we will all wish that we had paid a lot more attention to teaching our kids about “character” and “morality”.

Goldman Sachs Admits To Engaging In “Improper Behavior” During The Housing Crash – But They Aren’t About To Give The Money Back

Goldman Sachs Wall StreetIn an absolutely stunning admission, the CEO of Goldman Sachs acknowledged on Wednesday that the investment bank engaged in “improper” behavior during 2006 and 2007.  This improper behavior included making huge bets against the housing market while at the same time peddling more than $40 billion in securities backed by risky U.S. home loans.

The CEO of Goldman Sachs, Lloyd Blankfein, made this stunning admission during the opening hearing of the Financial Crisis Inquiry Commission.  The Financial Crisis Inquiry Commission is a 10 member panel that Congress created to investigate the causes of the worst financial crisis since the Great Depression.

The chairperson of this commission, Phil Angelides, warned Blankfein that he would be “brutally honest” during his questioning.  He directly confronted Blankfein about Goldman’s behavior during the housing crash.  In particular, he pressed Blankfein about whether it was proper or not for Goldman Sachs to make huge bets against the housing market when they were peddling tens of billions of dollars worth of mortgage-backed securities at the same time.  In response to the questioning by Angelides, Blankfein made the following statement….

“I do think the behavior is improper, and we regret . . . the consequence that people have lost money in it.”

Lost money?

The truth is that tens of billions of dollars were lost.  In fact, the garbage that Goldman sold them has some state governments on the verge of bankruptcy.

But Goldman came out of the housing crash smelling like a rose.  In fact, they made tens of billions of dollars in 2009.

So will this commission get to the bottom of this mess?

Not likely, but at least Angelides was willing to ask some of the tough questions.

You can see a large portion of the confrontation between Blankfein and Angelides below….

Meanwhile, the U.S. government continues to deal with the horrific aftermath of the housing crisis.  The U.S. government just posted its largest December budget deficit on record (91.9 billion dollars) as higher unemployment reduced revenue and the government spent large amounts of money to help the U.S. economy recover.

A 91 billion dollar deficit in a single month?

What kind of madness is this?

We are dumping a massive debt on to our children and grandchildren that they will never, ever be able to repay.

In fact, a two year study by the 24 member Committee on the Fiscal Future of the United States says that the United States must soon either raise taxes or cut government spending to curb its debt.

But either action would have devastating effects on the U.S. economy.

However, if the U.S. government keeps piling up debt at the current rate it is absolutely going to destroy the financial system of the United States.

The truth is that the U.S. government is between a rock and a hard place.

If it raises taxes or cuts spending it will seriously hurt the economy, but if the government continues to rack up debt at this pace the consequences will be catastrophic.

The truth is that hard choices need to be made and that there is going to be economic pain no matter what is decided.

In fact, U.S. Chamber of Commerce President Tom Donohue is warning that the U.S. faces a double-dip recession because of the new taxes and the new regulations under consideration by Barack Obama and the Democratic Congress.

While some in the mainstream media talk hopefully of “recovery”, the truth is that things continue to get worse for the U.S. economy.

Millions of Americans have lost their jobs and are now stuck in a cycle of hopelessness.  In fact, some analysts now believe that the true unemployment rate in the United States is close to 22 percent.

All of this unemployment means that millions of Americans cannot pay their mortgages.  Almost 3 million U.S. homeowners received at least one foreclosure filing during 2009 which set a new all-time record.

However, things are going to get even worse for the housing market when the next wave of adjustable mortgages start resetting in 2010.  A massive wave of adjustable mortgages is scheduled to reset between 2010 and 2012, and the reality is that there is simply no way that another huge wave of mortgage defaults is going to be able to be avoided.

Things have gotten so bad that a record number of American citizens are turning to the U.S. government for assistance.  The number of Americans enrolled in the food stamp program has set a record for the ninth month in a row.

So is there any end to this economic misery?

Are things going to get even worse?

Well, not for the folks over at Goldman Sachs.  Total bonuses for executives at Goldman Sachs for 2009 are expected to be somewhere around 20 billion dollars.

You see, being a bankster is quite profitable these days – even if it did take a little “improper behavior” to get it done.

11 Clear Signs That The U.S. Economy Is Headed Into The Toilet

The U.S. Economy Is Headed Into The ToiletThe vast majority of the talking heads on television are still speaking of the current economic collapse as if it is a temporary “recession” that will soon be over.  So far, the vast majority of the American people seem to believe this as well, although for many Americans there is a very deep gnawing in the pit of their stomachs that is telling them that there is something very, very wrong this time around.  The truth is that the foundations of the U.S. economy have been destroyed by an orgy of government, corporate and individual debt that has gone on for decades.  It was the greatest party in the history of the world, but now the party is over.  The following are 11 signs from just this past month that show that the U.S. economy is headed into the toilet and will not be recovering….

#1) When even Wal-Mart is closing stores you know things are bad.  Wal-Mart announced on Monday that it will close 10 money-losing Sam’s Club stores and will cut 1,500 jobs in order to reduce costs.  So if even Wal-Mart has to shut down stores, what chance do other retailers have?

#2) Americans are going broke at a staggering pace.  1.41 million Americans filed for personal bankruptcy in 2009 – a 32 percent increase over 2008.

#3) American workers are working harder than ever and yet making less.  After adjusting for inflation, pay for production and non-supervisory workers (80 percent of the private workforce) is 9% lower than it was in 1973.  But those Americans who do still have jobs are the fortunate ones.

#4) Unemployment is absolutely exploding all over the United States.  Minority groups have been hit particularly hard.  For example, unemployment on many U.S. Indian reservations is over 80 percent.

#5) Unfortunately the employment situation is showing no signs of turning around.  December was actually the worst month for U.S. unemployment since the so-called “Great Recession” began.

#6) So just how bad are things when compared to past recessions?  During the 2001 recession, the U.S. economy lost 2% of its jobs and it took four years to get them back. This time the U.S. economy has lost more than 5% of its jobs and there is no sign that the bleeding of jobs will stop any time soon.

#7) Can you imagine trying to get your first job in this economic climate?  Our young men and women either can’t get work or have given up on work altogether.  The percentage of Americans 16 to 24 who have jobs is 13 percent lower than ten years ago.

#8) So where did all the jobs go?  Over the past few decades we have allowed the corporate giants to ship mountains of American jobs overseas, and there are signs that this trend is only going to get worse.  In fact, Princeton University economist Alan S. Blinder estimates that 22% to 29% of all current U.S. jobs will be offshorable within two decades.  So get ready for even more of our jobs to be shipped off to Mexico, China and India.

#9) All of these job losses are leading to defaults on mortgages.  Over the past couple of years we have seen the American Dream in reverse.  According to a report that was just released, delinquent home loans at government-controlled mortgage finance giants Fannie Mae and Freddie Mac surged 20 percent from July through September.

#10) But that is nothing compared to what is coming.  A massive “second wave” of mortgage defaults is getting ready to hit the U.S. economy starting in 2010.  In fact, this “second wave” is so frightening that even 60 Minutes is reporting on it

#11) Meanwhile, the Federal Reserve has announced that it made a record profit of $46.1 billion in 2009.  Apparently during this economic crisis it is a very good time to be a bankster.

America: Land Of The Unemployed – 3 Unemployment Charts That Will Absolutely Shock You

UnemploymentWith the unprecedented spending by the U.S. government over the past year and a half, shouldn’t we at least see some jobs being produced by now? After all, if we are putting our children and grandchildren into perpetual debt from which they will never emerge, shouldn’t we at least be able to put American workers back to work? Unfortunately, as you will see from the charts in this article, that is most definitely not the case. In fact, unemployment is reaching levels in the U.S. that have not been seen for decades. The high paying manufacturing and construction jobs that were the bedrock for the American middle class for decades have disappeared and they are simply not coming back.

Despite the reckless spending of the U.S. government, the U.S. economy continues to bleed jobs month after month.  In fact, December was the worst month for U.S. unemployment since the “Great Recession” began.  The U.S. labor force contracted by 661,000 in December.  The number that actually “lost” their jobs in December was much smaller than this.  The 661,000 number includes thousands upon thousands of American workers that have given up on employment and have simply dropped out of the system. The broader U6 measure of unemployment in the United States rose to 17.3 percent in December.  That is staggering.

In fact, the civilian participation rate in the employment pool has nosedived and has now reached levels not seen since the recession of the early 80s…..

Unemployment

In particular, the construction industry has been hit particularly hard.  As you can see from the chart below, construction employment boomed during the years of the housing bubble, but the bursting of the housing bubble has been absolutely catastrophic for construction employment….

Construction Employment

But not only have millions of people lost their jobs, they also can’t find jobs once they start looking for work.  The average duration of unemployment is already at record levels and it is shooting through the roof….

Duration Of Unemployment

It is really easy to tell someone to “go get a job”, but in many areas of the United States there simply are NO jobs.

In fact, there have been reports of people literally getting down on their knees and begging for a job at a city dump in Florida.  In other areas of the U.S., hundreds of people line up to apply for fast food jobs.

Without jobs or even the hope for a job, many families are now existing on the edge of survival.  Millions of men and women would be more than willing to work if something was available.

But nothing is available.

All of their jobs have been shipped off to Mexico, China and India.

For the last several decades the politicians in Washington D.C. have sold out U.S. workers and have sold out the U.S. economy and now the day of reckoning is here.

Unfortunately, as is too often the case, it is the working man that is feeling the pain first.

But eventually we will all feel the economic pain.

The great American economic empire is crumbling and the fall will be very great.

The economic despair that is coming in the years ahead is going to be so great that there are no words to even describe it.

You better get ready.

Ponzi Scheme: The Federal Reserve Bought Approximately 80 Percent Of U.S. Treasury Securities Issued In 2009

The Federal Reserve Bought Approximately 80 Percent Of U.S. Treasury Securities Issued In 2009No, the headline is not a misprint.  According to CNBC, the Federal Reserve bought approximately 80 percent of the U.S. Treasury securities issued in 2009.  In other words, the Federal Reserve has been gobbling up the massive tsunami of U.S. government debt that has been created over the past year.  This is absolutely unprecedented, and it is yet another clear indication that the U.S. financial system is on the verge of a major economic collapse.

You see, the Federal Reserve is not part of the federal government.  In fact, the Federal Reserve is about as “federal” as Federal Express is.

The Federal Reserve is a private bank owned and operated for profit by a very powerful group of elite international bankers.

It is this private central bank that controls the money supply and the issuance of currency in the United States.

When the U.S. government needs to borrow more money (which happens a lot) they go over to the Federal Reserve and they ask them for some more green pieces of paper called Federal Reserve Notes.

The Federal Reserve swaps these green pieces of paper for pink pieces of paper called U.S. Treasury bonds.

Now normally the Federal Reserve takes these U.S. Treasury bonds and they sell them all to other buyers.

But in 2009 there were not nearly enough buyers.

So in 2009 the Federal Reserve sold itself about 80 percent of this debt.

This is even being admitted on CNBC.  The video below is from January 8th, and at the 1:45 mark CNBC anchor Erin Burnett drops this bombshell along with a comment about how it is a Ponzi scheme….

So why is it a Ponzi scheme?

Well, basically the Federal Reserve is creating money out of nothing, loaning it to the U.S. government and then collecting interest on the loan.

That is nice work if you can get it.

But also, this intervention by the Federal Reserve is keeping interest rates on U.S. Treasury bonds artificially low.

In a true “free market” situation, the interest rates on U.S. treasuries would rise to reflect the rapidly declining economic situation in this nation.

Due to the massive explosion in the size of the U.S. government debt and due to the very weak U.S. economy, interest rates on U.S. treasuries should have shot through the roof by now.  Rational investors would normally require an increased return for the increased risk that U.S. treasuries now represent.

But that is not happening.

Instead when there are no buyers for U.S. treasuries at current interest rates, the Federal Reserve just steps in and buys up all the excess bonds that need to be purchased.

But in a normal free market situation, interest rates would rise on U.S. treasuries until they would be attractive enough for investors to buy them all.

However, that would create some huge problems.

If the U.S. government was not able to borrow all of the money it wanted to at artificially low interest rates, the results would be absolutely disastrous.

Much higher interest rates on U.S. government debt would cause the U.S. federal budget deficit to absolutely explode.  Interest rates on everything else throughout the economy would also skyrocket.  As mortgage rates climbed dramatically, the housing market would completely collapse.  The U.S. economy would be totally in flames.

But for now (and this situation cannot last forever) the Federal Reserve is keeping interest rates artificially low by lending the U.S. government as much money as it wants at extremely low interest rates.  Of course the Federal Reserve is making an insane amount of money out of the arrangement, so it is working out quite nicely for them as well.

But by essentially “printing” a flood of cheap money for the U.S. government to borrow, the Federal Reserve is ultimately going to end up destroying the value of the U.S. dollar.

Every fiat currency throughout history has always ended up losing its value, and that is exactly what is going to happen this time too.  The only way to protect the buying power of your money is to put it into something that will hold value (like gold or silver).  Your dollars are never going to be worth more than they are today.

The actions taken by the U.S. government and the Federal Reserve have guaranteed the demise of the U.S. dollar.  At this point it is unavoidable.  It is only a matter of how soon it will happen and how bad it will be as things play out.

You better get ready.

A Record Number Of Americans Turn To Food Stamps As America Is Gripped By Economic Despair

Food StampsWould you ever accept government welfare?  Would you look down on someone who does?  Well, if you would look down on a fellow American who receives food stamps then get ready to look down on a massive sea of people.  The truth is that over 37 million Americans now receive food stamps, and the program is expanding at a pace of about 20,000 people a day.  As hordes of Americans have been forced out of their jobs and their homes, millions are finding that the only way they can make it is to accept food stamps.  For many it is a tremendously humbling moment to turn to the government for help, and for so many millions to be dependent on the food stamps program is yet another indication of how deep the economic despair in America has gotten.

Most of the time you won’t even notice them being used at the checkout counters.  Today food stamps take the form of inconspicuous plastic cards and they can be used to purchase a wide variety of food items.  A record 37.2 million people, which is approximately one out of every eight Americans, received food stamps in September, and that number is growing rapidly.

In particular, children are being enrolled in this program in staggering numbers.

One out of every four children in America now gets assistance from food stamps each month.  In fact, it is projected that half of all U.S. kids will be on food stamps at some point in their lives.

So if nobody in your family has ever had to go on food stamps consider yourself to be very fortunate.

Things are particularly bad in rural areas such as Tennessee.  Nearly 1,186,000 people who live in Tennessee, or more than one in six residents, currently receive some kind of food stamp assistance and that number is rapidly increasing.

But there are places where things are even worse.  In fact, there are 239 counties in the United States where at least a quarter of the population now receives food stamps.

Not only that, but it has now come out that about one in 50 Americans lives in a household with a reported income that consists of nothing but food stamps.

Can you imagine trying to live on nothing but food stamp assistance?

That is the case for 2 percent of all Americans.

Can you imagine the despair they must feel?

So is there economic hope on the horizon?

Hardly.

The number of Americans filing for personal bankruptcy rose by nearly a third in 2009.

In addition, the number of people preparing to buy a home in November fell sharply in the latest sign that the housing market may be headed for another downturn.

So more Americans are going to go broke.

And more Americans are going to lose their homes.

And a whole more Americans are going to end up on food stamps.

Can you feel the despair in the air?

We can.

The Most Important News

How Goldman Sachs Made Tens Of Billions Of Dollars From The Economic Collapse Of America In Four Easy Steps

Goldman SachsInvestment banking giant Goldman Sachs has become perhaps the most prominent symbol for everything that is wrong with the U.S. financial system, but most Americans cannot even begin to explain what they do or how they have made tens of billions of dollars from the economic collapse of America.  The truth is that what Goldman Sachs did was fairly simple, and there may not have even been anything “illegal” about it (although they are now being investigated by the SEC among others). 

The following is how Goldman Sachs made tens of billions of dollars from the economic collapse of America in four easy steps….  

Step 1: Sell mortgage-related securities that are absolute junk to trusting clients at vastly overinflated prices.

Step 2: Bet against those same mortgage-related securities and make massive bets against the U.S. housing market so that your firm will make massive profits when the U.S. economy collapses. 

Step 3: Have ex-Goldman executives in key positions of power in the U.S. government so that bailout money can be funneled to entities such as AIG that Goldman has made these bets with so that they can get paid after they win their bets.   

Step 4: Collect the profits – Goldman Sachs is having their “most successful year” and will end up reporting approximately $50 billion in revenue for 2009.

So is it right for the biggest fish on Wall Street to make tens of billions of dollars by betting that the U.S. housing market will collapse?

You see, when you are talking about a financial giant the size of Goldman Sachs, the line between “betting that something will happen” and “making something happen” gets blurred very quickly.

Not that Goldman Sachs was the only one betting against the housing market.

According to the New York Times, firms like Deutsche Bank and Morgan Stanley also created mortgage-related securities and then bet that they would fail…..

Goldman was not the only firm that peddled these complex securities — known as synthetic collateralized debt obligations, or C.D.O.’s — and then made financial bets against them, called selling short in Wall Street parlance. Others that created similar securities and then bet they would fail, according to Wall Street traders, include Deutsche Bank and Morgan Stanley, as well as smaller firms like Tricadia Inc.

But certainly Goldman Sachs was the most prominent financial player involved in this type of activity.

In fact, without mentioning specifics, Goldman has even admitted publicly to wrongdoing.  On November 17th, 2008 Goldman Sachs CEO Lloyd Blankfein even issued a public apology….

“We participated in things that were clearly wrong and have reason to regret.”

But complicated financial transactions are something that most Americans simply do not understand, so the public outrage towards Goldman Sachs and others has been somewhat limited.  But that does not change the very serious nature of the activities that Goldman was involved in….

“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” Sylvain Raynes, an expert in structured finance at R & R Consulting in New York, recently told The New York Times. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”

But the sad thing is that many Americans do not even understand what Goldman Sachs is.  Goldman Sachs was founded in 1869 and has forged a reputation as one of the elite financial institutions in the entire world.  They only hire “the best and the brightest” and Ivy League graduates flock to the firm.  Of the five major investment banks that dominated Wall Street before the crash, only Goldman Sachs and Morgan Stanley have survived.  Merrill Lynch and Bear Stearns were severely damaged by the crash and ended up being purchased by retail banks and Lehman Brothers ended up folding. 

There are persistent rumors that Goldman played a major role in the collapse of Bear Stearns and that ex-Goldman CEO Hank Paulson could have done much more to bail out Lehman Brothers, but perhaps nobody will ever know the full truth.  All we do know is that at the end of the crash several of Goldman’s competitors were destroyed and Goldman found itself in a more dominant position than ever.

The truth is that Goldman is a financial shark and they do not apologize for it.

An article in Rolling Stone recently put it this way….

The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

So how did Goldman Sachs prosper so greatly in an environment that destroyed their competitors?

The following is an extended breakdown of just how Goldman Sachs was able to reap tens of billions of dollars in profits from the collapse of the U.S. housing market….

Step 1: Sell mortgage-related securities that are absolute junk to trusting clients at vastly overinflated prices.

In late 2006, Goldman Sachs made some fundamental changes in the way that they were approaching the U.S. housing market.  According to a McClatchy report, Goldman spokesman Michael DuVally said that the firm decided at that time to reduce its mortgage risks by selling off subprime mortgage-related securities and by purchasing credit-default swaps to hedge against a serious downturn in the U.S. housing market.

The key moment came in December 2006.  After “10 straight days of losses” in Goldman’s mortgage business, Chief Financial Officer David Viniar called a meeting of key Goldman personnel.

Vanity Fair described the results of that meeting this way….

After a now famous meeting in David Viniar’s office on December 14, 2006, Goldman’s traders began to protect the firm against further declines in the market. Just as you can short the S&P 500, the traders took short positions in an index that tracked the price of mortgage-backed securities. They also either sold assets they owned to others at losses or dramatically marked down the price on their own books.  In the aftermath of the crisis, criticism erupted that Goldman had continued to sell mortgage-backed securities to its clients while betting against those very securities for its own account. Clearly, in the simplest terms possible, this is true: while Goldman was never the biggest underwriter of C.D.O.’s (collateralized debt obligations—Wall Street’s vehicle of choice for mortgage-backed securities), the firm did remain in the top five until the summer of 2007, when the market crashed to a halt.

So Goldman Sachs proceeded to sell approxmiately $39 billion of its own mortgage securities in 2006 and 2007 and they sold at least $17 billion more mortgage securities for others, but they never told the buyers of those securities that Goldman was secretly betting that a significant drop in U.S. housing prices would send the value of those mortgage securities plummeting.

These sales and the massive clandestine wagers placed by Goldman enabled the firm to pass most of its potential losses on to others prior to the collapse of the U.S. housing market.

But many of the investors who got the short end of the stick were not pleased.  When they discovered that what Goldman had promoted as triple-A rated investments were actually a bunch of garbage, many of them were absolutely furious.

“The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion,” said Boston University economics professor Laurence Kotlikoff. “This is fraud and should be prosecuted.”

One of the victims of this fraud was the state of Mississippi….

Mississippi Attorney General Jim Hood, whose state has lost $5 million of the $6 million it invested in Goldman’s subprime mortgage-backed bonds in 2006, said the state’s funds are likely to lose “hundreds of millions of dollars” on those and similar bonds.

Another one of the victims of this fraud was California’s retirement system for public employees…. 

California’s huge public employees’ retirement system, known as CALPERS, purchased $64.4 million in subprime mortgage-backed bonds from Goldman on March 1, 2007. While that represented a tiny percentage of the fund’s holdings, in July CALPERS listed the bonds’ value at $16.6 million, a drop of nearly 75 percent, according to documents obtained through a state public records request.

So who is left holding the bag in cases such as these?

The taxpayers.

And that is just fine with Goldman Sachs.  Just as long as they keep raking in huge profits.

Vanity Fair was even more blunt regarding this injustice….

“Goldman’s management team was almost flawless in its execution. But how many people needed government help because of the things Goldman sold them?”

The truth is that a lot of people needed help because of the things Goldman sold them, but up until now Goldman has completely gotten away with it.

Step 2: Bet against those same mortgage-related securities and make massive bets against the U.S. housing market so that your firm will make massive profits when the U.S. economy collapses. 

Not only did Goldman sell mortgage-related securities that were absolute junk to investors at vastly overinflated prices, they also placed massive bets that the U.S. housing market would absolutely collapse.

The New York Times recently described how Goldman used a new index known as the ABX to make many of these bets….

A handful of investors and Wall Street traders, however, anticipated the crisis. In 2006, Wall Street had introduced a new index, called the ABX, that became a way to invest in the direction of mortgage securities. The index allowed traders to bet on or against pools of mortgages with different risk characteristics, just as stock indexes enable traders to bet on whether the overall stock market, or technology stocks or bank stocks, will go up or down.

Goldman, among others on Wall Street, has said since the collapse that it made big money by using the ABX to bet against the housing market. Worried about a housing bubble, top Goldman executives decided in December 2006 to change the firm’s overall stance on the mortgage market, from positive to negative, though it did not disclose that publicly.

These bets would only make money for Goldman Sachs if the U.S. housing market declined.

So if the biggest giant on Wall Street has a huge financial incentive to see the U.S. housing market fail, what do you think the odds are that they are going to do anything to support it?

Step 3: Have ex-Goldman executives in key positions of power in the U.S. government so that bailout money can be funneled to entities such as AIG that Goldman has made these bets with so that they could get paid. 

For years, Goldman Sachs has encouraged executives to serve in U.S. government positions.  Now they are world famous for the amount of influence their former employees have over government policy.

For example, according to the New York Times, Treasury Secretary Hank Paulson (also a former Goldman CEO) spoke with the current CEO of Goldman Sachs about two dozen times during the week of the bailout, although Paulson says that he obtained an “ethics waiver” before doing so.

So does an “ethics waiver” make everything okay?

But the sad thing is that is not an isolated example.

It turns out that Goldman benefited greatly from a number of decisions made by their former CEO while he was Treasury Secretary….

*Goldman greatly benefited when Paulson elected not to save rival Lehman Brothers from collapse.  Paulson certainly stepped in to help Fannie Mae, Freddie Mac and AIG, but apparently had no problem with letting Lehman Brothers fall apart.

*Under Paulson’s direction, Goldman ended up receiving bailout money (which they may or may not have needed) from the U.S. government and has since paid back much of that money with interest.  So why didn’t Bear Stearns or Lehman Brothers get the bailout funds that they needed? 

*Goldman greatly benefitted when Paulson organized a massive rescue of American International Group while in constant telephone contact with Goldman CEO Blankfein.  AIG ultimately ended up using $12.9 billion taxpayer dollars to pay off every single penny that it owed to Goldman.

But it is not just Paulson who has had significant influence in Washington.

On October 16th, Adam Storch, a Goldman Sachs vice president, was named managing executive of the SEC’s enforcement division.  What do you think the odds are that he will crack down hard on Goldman?

In addition, former Goldman Sachs lobbyist Mark Patterson is the chief of staff for current Treasury Secretary Timothy Geithner.

In fact, ex-Goldman employees are seemingly everywhere.  According to Vanity Fair,  at one  G-7 meeting an anonymous source identified at least 24 out of 32 finance officials in attendance as ex-Goldman employees.

The influence of Goldman Sachs even reaches to the White House.  Goldman was Barack Obama’s number one campaign donor, and its employees gave $981,000 to his campaign.

If you don’t think that kind of money does not buy influence then you are delusional.

Goldman used some of that powerful influence to get the U.S. government to bail out AIG so that AIG could pay off the bets that Goldman had made with them.  In a recent article, Vanity Fair described part of what went down….

After the government bailout of A.I.G., in order to end the collateral calls on the insurance giant, the New York Federal Reserve—whose chairman at the time was former Goldman chairman Steve Friedman—decided to purchase a slew of the securities that A.I.G. had insured, including $14 billion of those on which Goldman had purchased insurance. The government—meaning taxpayers—did so at full price, although according to a recent Bloomberg story, there had been negotiations with A.I.G. to do so at a 40 percent discount. Goldman says that the New York Fed broached the topic of a discount only once. The firm’s response: a flat no. While no one will ever know what would have happened had A.I.G. gone under, the essence of what did happen is perfectly clear. As a recent report by the Office of the Special Inspector General for tarpput it, the decision to pay full price “effectively transferred tens of billions of dollars of cash from the Government to A.I.G.’s counterparties.” Or to put it another way: because Goldman felt it was owed its billions by A.I.G., the firm took it from taxpayers instead.

So what about all of the thousands of small businesses that are failing and what about the millions of Americans that are losing their jobs and homes?

Do they get bailouts?

Of course not.

But the U.S. government definitely made sure that AIG and Goldman were taken care of.

Step 4: Collect the profits – Goldman Sachs is having their “most successful year” and will end up reporting approximately $50 billion in revenue for 2009.

Goldman Sachs ranks #1 in annual net income when compared with 86 peers in the investment services sector.  They are on course for their best year ever.

Yes, they are having a really good “crisis”.

Goldman Sachs is on course to surpass $50 billion in revenue in 2009 and to pay its employees more than $20 billion in year-end bonuses.

20 billion just in bonuses?

That would mean that the average bonus for all Goldman employees would be over $700,000.

No wonder everyone wants to work for them.

It’s good to be on the winning side.

So just how are they making so much money?

In their recent article, Vanity Fair described it this way….

But because so many of Goldman’s competitors were gone or disabled, spreads—the difference between the price at which you sell and buy a variety of securities—were wider than they had been in years, meaning that Goldman could practically mint money. By acting at the moment it did, with Lehman out and Merrill Lynch down for the count, the government enabled this situation.

The other reason for Goldman’s profits is that the government has flooded the system with money, not just the money it used to rescue the financial system but hundreds of billions more in stimulus, in support of the housing market, and in the Federal Reserve’s purchases of securities.

But all of this success has not come without controversy.  In fact, Goldman executives are very much aware of the growing backlash against the firm.

Senior officials at Goldman Sachs have reportedly loaded up on firearms and are now equipped to defend themselves if there is a “populist uprising” against the bank.

In addition, Goldman Sachs employees are now not allowed to gather in groups of 12 or more outside the office.  The firm very much discouraged “holiday parties” as they most definitely did not want to be seen as celebrating the downfall of the U.S. economy.

But the truth is that Goldman Sachs won because so many others lost.

In his very revealing article on Goldman Sachs in Rolling Stone, Matt Taibbi described how Goldman keeps making money from the bursting of these economic bubbles….

They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They’ve been pulling this same stunt over and over since the 1920s — and now they’re preparing to do it again, creating what may be the biggest and most audacious bubble yet.

The truth is that in this latest economic collapse there were millions of losers and just a few winners.

Goldman Sachs was one of those winners.

So will they lose next time?

Not likely.

In their recent article, Vanity Fair quoted an anonymous source in the financial industry as saying the following….

“Are they the Yankees? No, the Yankees actually lose! Goldman never loses.”

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