A Yen for Destruction

The Yen carry trade has been the prop for the bubble, but is a disaster. Cheap Japanese
Yen at zero interest rate is used to buy other currencies and speculate around the world. Now the end is neigh!!! The financial apocalypse is here, unless we get a New Bretton Woods, like Franklin Roosevelt did in the 1940s.

Of course, if we were directing cheap credit to big infrastructure projects to create millions of jobs, that's a whole 'nother story. That's the good stuff.


May 23 - U.S. ECONOMIST WARNS, CLOSE THE YEN CARRY
TRADE BEFORE IT'S TOO LATE. In a surprising editorial in the
{Japan Times}, Thomas Palley of the U.S.-China Economic and
Security Review Commission, calls on Japan to shut down the
"dangerous" yen carry trade before it triggers "global contagion"
upsetting the world financial markets. Most notably, Palley says
it is this carry trade -- and {not} the value of the Chinese
yuan, which is triggering huge trade imbalances with the United
States, and "generating worldwide asset inflation." Palley also
says the carry trade has pressured other Asian countries to
undervalue their currencies, costing jobs and growth elsewhere in
the world.
In late February, economist Lyndon LaRouche warned the yen
carry trade was a burning fuse for a global financial blow-out.
Palley's May 23 warning comes only one day after Asahi Shinbun,
the major Tokyo daily, editorialized on the same danger. But
Asahi Shinbun's editorial attributes the danger to unregulated
hedge funds, which it said are now dominating this carry trade.
Palley blames the low-interest-rate policy of the Bank of Japan
and monetary authorities.
The yen carry trade is a huge, perhaps $700 billion-$1
trillion, engine for worldwide speculations, done with cheap
borrowed yen "carried" to every capital market and speculation in
the world. Palley attacks this trade for threatening to trigger a
general crisis: "the carry trade generates global financial
fragility by creating fundamental -- and dangerous --
mismatches.... Unexpected yen appreciation could cause large
exchange-rate losses.... Such losses, or just the thought of them
have the potential to trigger global contagion."
Adding a number of arguments to the effect that closing the
interest-rate gap between Japan and the rest of the OECD
countries -- i.e., ending the carry trade -- would benefit
Japan's own economy and population, Palley concludes, "Japan
should decisively abandon ultra-low interest rates."

John Edwards and the Mortgage Blowout

Dear sweet John Edwards, the people's candidate, has been exposed as up to his eyeballs in hedge fund money and sponsorship by Fortress Investment Group. Now Fortress is at the short end of the sub-prime mortgage blowout. Not only that, but the sub-prime scam promised poor people new homes in the booming economy, and is leaving them only foreclosure and bankruptcy.

Fortress Investment Group, the $35 billion hedge fund that employed John Edwards from October 2005 until December 2006 -- and which provided the largest bundled contributions to his Presidential campaign in 1st Quarter 2007 -- blew up in Edwards face today, with the page one news that Fortress is and has been a major player in every aspect of the predatory subprime mortgage market which is now evicting poor people from their homes in sites of economic devastation like New Orleans. Edwards had sought to make ``fighting poverty'' the signature issue of his campaign.

Subprime loans are a predatory ``product'' foisted on people with poor credit, which charge higher rates, often carry fees, and large rate increases which are hidden from the buyer. With the blowout of the housing bubble, home foreclosures rose to 1.2 million for 2006, mainly through defaults by subprime lenders.

Today's Washington Post (5/11) exposes Fortress's connections to every phase of subprime looting. When Fortress hired Edwards, it owned a major stake in Green Tree Serving LLC. Green Tree made subprime loans to mobile home owners during the 1990s, then had switched to the collection side of the business when Fortress bought a major stake in it in 2003. In 2005, Green Tree represented 4% of Fortress' Holdings.

In July 2006, Fortress bought Centex Home Equity, one of the top 25 subprime lenders. In December 2006, Centex, which is now called Nationstar Mortgage, bought the loan-making division of Champion Mortgage, bringing another subprime lender into Fortress.

In March 2007, Newcastle Investment Corp., a real estate investment trust managed by Fortress, moved into the subprime market by buying a $1.7 billion loan portfolio. In March 2007, Fortress also bought $4 billion in subprime loans from Fremont General Corp. Thus, while Edwards the candidate made speeches about fighting predatory lending, his former employer and largest contribution base was participating in every phase of the predatory subprime market.

John Edwards is not alone among the so-called top-tier Democratic Presidential candidates in taking huge contributions from hedge funds. The hedge funds, and the banks and private equity companies they run, are the second largest source of contributions to Hillary Clinton and Barack Obama. Both Clinton and Obama have also accepted contributions from Fortress.

It used to be said, ``caveat emptor''--let the buyer beware. Today, it may be said, let the bought beware, by refusing hedge fund money.

Baby Boomer Euphoria Comes Down

In '68, you would see the people
who represented the baby boomer hardcore were really arrogant
bastards, whereas their younger brothers and sisters were a
little more cautious about things. They weren't infected with
this euphoria. You saw the same thing with the baby boomers
themselves in the United States, between 1963 and 2000. From 1963
until 2000, the baby boomers, with the election of the first baby
boomer president, Bill Clinton, thought they had arrived. This
was now the GOLDEN GENERATION, unlike any other generation. It
was the WONDERFUL generation. All other ideas and cultures were
WRONG. We had now come into our own. And this generation, under
Alan Greenspan, put out oodles and oodles of phony money for the
housing industry and new areas, and also for the Y2K bubble, the
computer industry.
And this generation, they wandered around from 1993 (??) to
2000, they wandered around until the late spring of 2000, they
wandered around in a state of ecstasy. We are the WONDERFUL
generation, echoing their parents (sic*) who had been baby
boomers born between 1945 and 1956. So again, in the children,
reflected the same piece of insanity which their parents had had
over 20-30 years before. And suddenly, in 2000, it collapsed. And
the baby boomer since that time has been vengeful, hateful and
depressed. And said, we want our money. Everything is money.
Because that's what they believed from 1953 to 1999, 2000. We
won! We are the baby boomers. We have a baby boomer president. We
are now getting a new baby boomer president, George W. Bush. He's
also a baby boomer, don't you know? So, the baby boomers think
they're running the country. They control the Senate. They are a
very powerful factor in the House. They dominate most of the
business and related institutions in the country, to the extent
they still exist, and they have this sense of lost euphoria. They
thought everything was wonderful. They had it made, just like
their parents between 1945 into 1956, had it made! It was taken
away from them! They had won the brass ring. They had been on the
merry-go-round and they got the brass ring. I got the brass ring!
I'm entitled to this free ride on the next turn. And the free
ride wasn't coming, and so now they were resentful against the
fact that the free ride had been taken away from them, and they
want the free ride back!
And that's what you're looking at! So therefore, how do you
deal with this? Well, you say, what do you call such a
generation, in history. It's called a Lost Generation. Otherwise
called a "D" generation. What it signifies is that in such a
period as now, you have to go to a younger generation which is
not infected with this type of disease, because the
characteristic of the baby boomer generation is, We are the
Wonderfuls! There was nothing like us before we came, and there
will be nothing like us after we're gone. We are a moment, a
miracle in history. Nothing like us before. Nothing like us
afterwards. We are in heaven. Why aren't we getting the respect
we deserve.
This is the problem. So, what do you do, if that's the case?
What do you do with such nuts? What you do is you go to a younger
generation. See, some of us are not of that persuasion. Some
people who are younger than I am, in the baby boomer generation,
are also not of that persuasion. They don't believe in this crap.
They believe that there's a better way of living. That we should
return to some values that we had before in this country, and
should build on that. But they feel that they're a minority in
the baby boomer ranks. So what do they do? They say, okay, who do
we go to, as allies, to deal with this baby boomer problem? You
go to the generation of young adults, between 18 and 35 years of
age, principally, and you say, you guys are going to take over,
aren't you? Aren't you going to take over as you grow older, and
develop your skills? Why don't you concentrate on preparing to
take over, and in the meantime, why don't you practice it, while
you're learning?