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Old     (barry)      Join Date: Apr 2002       01-11-2010, 2:35 PM Reply   
By Jeff Clark
January 11, 2010
Stowe, Vermont, U.S.A.

The Biggest Financial Deception of the Decade

Enron? Bear Stearns? Bernie Madoff? They’re all big stories about big losses and have hurt a lot of employees and investors. But none come close to getting my vote for the decade’s most dastardly deception...

First came Enron, with $65.5 billion in assets, going belly-up and becoming the largest bankruptcy in U.S. history at that time. Chairman Kenneth Lay said that Enron’s decision to file bankruptcy would “stabilize the company,” but over the next five years the company was completely liquidated. The stock went from a high of $84.63 in December 2000 to a whopping 26¢ one year later.

And what had we been told by the media? Fortune magazine dubbed Enron “America’s Most Innovative Company” for six consecutive years. A well-intentioned friend wanted to give me a gift subscription to the magazine for Christmas; I choked on my cocktail and luckily he assumed my drink was too strong. In the end, you can thank Enron for bringing us the Sarbanes-Oxley Act of 2002, a ghastly financial reporting regulation for which compliance is grossly expensive, and — stop the presses! — hasn’t prevented similar repeats.

Next came WorldCom filing for bankruptcy in 2002, their assets of $103.9 billion dwarfing Enron’s. “We will use this time under reorganization to regain our financial health and focus, while operating with the highest integrity,” assured CEO John Sidgmore. Was his eggnog spiked? Today, WorldCom stock certificates have been spotted as doilies under pancake house coffee mugs signifying it’s decaf.

Tyco, Adelphia, Peregrine Systems… it’s a crowded field around this time. But their stories of fraud and greed and mismanagement get boring after awhile.

Bear Stearns set us all up for the Big Meltdown of 2008. It was B.S. (no, I mean Bear Stearns) that pioneered the asset-backed securities markets, and we all know how that turned out. Later we learned that as losses mounted in 2006 and 2007, the company was actually adding to its exposure of mortgage-backed assets, gearing itself up to 35:1. With net equity of $11.1 billion supporting $395 billion in assets, B.S. carried more leverage than a streetwalker’s push-up bra.

And during it all, Bear Stearns was recognized as the “Most Admired” securities firm in a survey by Fortune magazine (there’s that Lower Manhattan tabloid darling again). Frequent sightings of company executives on country club fairways assured the public that all was well. And CEO Alan Schwartz told us there was “no liquidity crisis for the firm” and insisted he “had the numbers to back it up.” His company was sold four days later to JPMorgan Chase at $10 per share, a 92% loss from its $133.20 high. Perhaps his numbers were prepared by ex-Arthur Andersen employees.

Lehman Brothers, the 158-year-old investment bank, was next and still today holds the title as the largest bankruptcy in U.S. history. L.B. succumbed to 2007’s Word of the Year, “subprime,” and its $600 billion in assets all went poof! In just the first half of 2008, before the meltdown, Lehman’s stock slid 73%.

And what did CEO Dick Fuld tell us in April of that year? “I will hurt the shorts, and that is my goal.” He must have been referring to the attire of his tennis club buddies, because the ones who actually got hurt were numerous other banks, money market funds, institutions, hedge funds, REITs, brokers, private and public trusts, foundations, government agencies, foreign governments, employees, and investors.

Moving on to the largest U.S. government bailout recipient by far, AIG’s troubles spawned my favorite placard of the decade: seen outside their Manhattan offices stood a sign that simply read, “Jump!” Maybe its creator heard what I did from AIG’s financial products head Joseph Cassano: “It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of these [credit default swap] transactions.”

He must have substituted his prescription eyewear with those giant New Year’s Eve glasses, because the government sunk $180 billion into the company and it still had to be split up and the assets sold to the highest bidder. I’m sure that his non-flippant comment had nothing to do with him making CNN’s “Ten Most Wanted Culprits” list in 2008.

GM, with $91 billion in assets, filed for bankruptcy in the summer of 2009 and is now largely owned by the U.S. and Canadian governments (i.e., taxpayers). The $19.4 billion in federal help wasn’t enough to keep the nation’s largest automaker out of bankruptcy. But don’t despair: the government is pouring another $30 billion into GM to fund “reorganization operations.”

GM shares? Bye-bye. For 83 years GM had been a member of the prestigious 30 Dow Industrial stocks. It managed to survive the Great Depression but not this decade’s Greater Depression. Yet chairman Ed Whitacre had insisted, “I remain more convinced than ever that our company is on the right path and that we will continue to be a leader in offering the worldwide buying public the highest quality, highest value cars and trucks.” I wonder what he thinks now that the stock is named “Motors Liquidation,” trades only on the pink sheets, and sells for about 50¢?

Topping off our list is the infamous Bernie Made-off (er, Madoff), who scammed $65 billion over 20 years from unsuspecting institutions and wealthy investors. But don’t be too upset, because the number is probably half that amount. Hey, the alleged size of the losses comes from his own ledger book, and should we really trust his balance sheet? Dubbed the largest Ponzi scheme ever, I beg to disagree, as you’re about to see...

By now you are probably wondering... what’s bigger than all these? He’s covered the major frauds and scams of the past decade — what could possibly be left?

To quote my favorite sleuth, Hercule Poirot, “When all the facts are laid before me, the solution becomes inevitable.”

Here are a few clues…

Federal Reserve Chairman Ben Bernanke said on July 16, 2008, that Fannie Mae and Freddie Mac are “adequately capitalized” and “in no danger of failing.” Then-Secretary Treasurer Henry Paulson declared on August 10, 2008, “We have no plans to insert money into either of those two institutions.”

* Both Fannie and Freddie were nationalized 28 days later, on September 8, 2008. Ben Bernanke claimed on February 28, 2008, “Among the largest banks, the capital ratios remain good and I don’t expect any serious problems of that sort among the large, internationally active banks...” Henry Paulson added on July 20, 2008, that “It’s a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.”

* Since the recession started in December, 2008, 144 banks have failed. Paulson informed us on April 20, 2007, that “All the signs I look at show the housing market is at or near the bottom.”

* The number of foreclosures skyrocketed shortly thereafter and will now any day surpass those during the Great Depression. Ben Bernanke announced on June 20, 2007, that “[The subprime fallout] will not affect the economy overall.”

* Less than one year later, the stock market crashed, losing 53% of its value, and is still down 25% despite one of the biggest bounces in history.

Those in charge of our country’s finances not only failed to see the crises developing and then bungled the handling of the recovery, they’ve deliberately misled us about what they’re doing to our currency. In spite of emphatic promises, flowery speeches, pat-on-the-back assurances, and continual reassurances, here’s what they’ve actually done to the dollar:

* Since September 1, 2008, the monetary base has ballooned from $908 billion to $2.0 trillion. The current monetary base is now equal to bailing out General Motors 23 times.

* Bailout funds in 2008 and 2009 total $8.1 trillion. That’s almost 78 WorldComs. It’s over 123 Enrons.

* U.S. debt has risen sharply, from $6.2 trillion in 2002 to $12.1 trillion today. That’s over $39,000 per citizen.

* David Walker, the comptroller general of the Government Accountability Office from 1998-2008, warned that the U.S. is on the hook for $60 trillion in unfunded liabilities. Independent analysts peg the figure at near twice that. Whatever the number, it is incomprehensibly large. The only way we will meet these liabilities is to print the money and inflate them away.

We’re bailing out corporations that should fail, making financial promises we can’t keep, and adding layers of debt we can’t possibly repay. And the real killer is, if we don’t have the cash, we just print it. It is, by any reasonable account, the “blunder that will plunder” the next several generations. It is changing America permanently, and the problems will persist long after you and I are laid to rest. Bottom line: after all the bailout programs, housing initiatives, rescue efforts, stimulus schemes, bank takeovers, wars, unemployment benefit extensions, and numerous other promises, the biggest financial deception of the decade is what the U.S. government is doing to the dollar. Nothing else even comes close.

This reckless activity has spooked our foreign creditors, weakened our global standing, diluted our currency, is punishing savers and retirees, and ultimately sets us up for a level of inflation this country has never seen before.

Yet, what is the guardian of our economy and money telling us now?

“Will the Federal Reserve’s actions to combat the crisis lead to higher inflation down the road? The answer is no; the Federal Reserve is committed to keeping inflation low and will be able to do so. In the near term, elevated unemployment and stable inflation expectations should keep inflation subdued, and indeed, inflation could move lower from here.” (Ben Bernanke, December 7, 2009).

This is pure rubbish. If inflation could be controlled by just thinking stable inflation thoughts, then Ben should be able to grow a full head of hair by just thinking scalp follicle thoughts. This is so ridiculous, it’s insulting.

Government actions make a mockery of their words; what they say and what they do are diametrically opposed. It’s clear that inflation is not a question of if, but when.

Any level-headed individual has to conclude that there will be a steady — and likely accelerating — decline in the dollar’s purchasing power. It’s inevitable.

The great masses don’t quite understand it yet, but they will. There will be no escape from the cold, hard slap in the face citizens will receive when a high level of inflation arrives. And when it does, it will make a mockery of any opposing viewpoint.

So the question before you is simple: Will you be a prepared survivor for what lies ahead, despite what our government leaders tell us, or will you be a complacent victim of the biggest financial deception of the decade?

For me, there’s only one solution. Don’t kid yourself into thinking a man-made asset will protect your purchasing power. This is the time to be overweight gold and silver. I advise letting them serve their purpose for you.

I made a prediction on WW last year that by Sept/Oct we'd see hyperinflation- as usual my timing is pretty bad and I was wrong; not about hyperinflation.. it's coming. I was wrong about the time line. Make preparation..anything you think will help you and your loved ones.. do it now while there's a still time. Folks, we are in big, big trouble...
Old     (mammoth)      Join Date: Apr 2005       01-11-2010, 3:07 PM Reply   
Hey...I remember that!

But still, I always wonder how a smart guy like you ends up using such poorly written articles when you could make the point better yourself. This one lost me on somewhere around the 3rd or 4th paragraph of subjective history. What was this article getting at?

And before you make the prediction for the third are you(we) defining hyperinflation?
Old    bigdtx            01-11-2010, 3:10 PM Reply   
meltdowns like those of the 1930s and before won't happen anymore. In those days information took seconds, minutes, hours, days to circulate.

Today everyone knows everything immediately. World governments are in collusion to prevent collapses like we saw at in the past. Why? Because they are all invested - with their taxpayer funds in these interconnected markets.

We may see a double dip - but it won't be a collapse - no government wants to see that.

Now... if a major world government goes broke - that's another story - but they too would likely be bailed out by the rest of the club.

Won't happen - BigdTX 2010/01/11 - mark it down.
Old     (barry)      Join Date: Apr 2002       01-11-2010, 3:52 PM Reply   
I don't think it's that poorly written.. is it? I guess I have a history of using poorly written articles..Sorry about that. I don't pay much attention to how things are written, but if I feel like the content is important I pass it along.

Third time? I remember being ridiculed back in 2002 for starting posts warning of future economic trouble..but you weren't around then so that can be one of the predictions your referring to... what other two?

I would define hyperinflation as multiple increases of over 30% within months. Generally inflation is reported annually..

meltdowns like those of the 1930s and before won't happen anymore.

No kidding?!... so, Zimbabwe and Argentina never happened? You might be able to convince me that Zimbabwe is almost irrelevant as an economy, but certainly not Argentina- a G20 major economy, who was not "bailed out".

Of course no government wants to see a collapse.
Control is lost once they start monetizing debt.
Old     (wakeboardsam)      Join Date: Jun 2008       01-11-2010, 3:54 PM Reply   
You should read
Old     (poser007)      Join Date: Nov 2004       01-11-2010, 5:04 PM Reply   
No, it wasn't poorly written. What I got out of it was the same old thing I have been saying for years. You can not trust man no matter what title is in front of his or her name. Education never has and never will make a society a more relevant or moral place to live. We have been fed lie after lie by big business, big government, and every other Ivy leager who has ever come down the pike. We can all see where civilization goes when lead by human ideals and our limited understanding.

If History shows us anything, it's that when a nation adheres to Gods plan, that nation doesn't only survive, it thrives. The United states was blessed for centuries because it was built on the pillars of freedom and God fearing men who upheld righteousness and a standard of living that was pleasing to God. Sure there were times we went through some rough times. For the most part, each generation had it better then the next. For the first time in 70 years that is going to change. With a mountain of debt that could never be paid back, a failing economy, a job market that seems to get worse every time we turn on the news, this country has managed to push God out of the schools, push him out of all governmental offices, we're trying hard to push him out of Christmas, we've stopped kids from being able to pray at school, nor can we mention the name Jesus without offending someone. Don't be mocked, what you sow you shall also reap.

For years we have killed innocent babies and candy coated it as a womens right to choose. We have traded the blessings of God for the God of materialism and selfishness. Instead of cleaning the closet we've come out of the closet flaunting sexual perversion in the face of the one who died for us. Despite what the so-called exports are saying, this current economy is a direct result of mans rebellion against God. When left to our own devices, man will always screw things up. If you read the Old Testiment, Israel flourished under Godly Kings, but when a King of immoral character would reign, there would be famine in the land, wars and trouble would brew on every horizon. When Israel would finally repent, and turn back from their selfish wicked ways, God would not only forgive them, he would replentish their land and provide again.

While most of you will read this and laugh, mock, etc.. everything I have written is true. Show me a nation who fears and loves God, and I will show you a nation that flows with milk and honey. Let the flaming begin.
Old     (zo1)      Join Date: Aug 2002       01-11-2010, 5:31 PM Reply   
LOL, only 6 posts to turn it into religion...
Old     (stanfield)      Join Date: Mar 2004       01-11-2010, 6:22 PM Reply   
I'd say that most middle east nations both fear and love their god.
Old     (bjeremi)      Join Date: Mar 2006       01-11-2010, 6:40 PM Reply   
Come on Stan, it has to be the "Right" god.
Old     (wakeboardsam)      Join Date: Jun 2008       01-11-2010, 7:18 PM Reply   
I think you are correct. The people mocking your opinion are idiots IMO. Religion, or at least what you are talking about has an implied level of morals. Most people today have none.
Old     (wakemetoday)      Join Date: Mar 2006       01-11-2010, 7:41 PM Reply   
Anybody out there remember Jimmy Carter and the 70's? Same thing but worse this time because of our budget deficit. Anytime liberals are in charge this happens but somehow it's always someone else's fault. Ironically, the same states that voted this bunch in will suffer the worse financially.
Old     (wake77)      Join Date: Jan 2009       01-11-2010, 8:24 PM Reply   
It is historically proven that GW, TJ, and the other founding fathers were not overly obsessed with religion or a godly nation, as what is often said about the early US.
Old     (mammoth)      Join Date: Apr 2005       01-12-2010, 6:33 AM Reply   
What I got out of it was the same old thing I have been saying for years. You can not trust man no matter what title is in front of his or her name.

Barry, is that what the article was about?

...see what I mean about the writing thing?
Old     (curtisco24)      Join Date: Dec 2005       01-12-2010, 8:46 AM Reply   
Flight I agree with your post 100%. You are exactly right.
Old     (fly135)      Join Date: Jun 2004       01-12-2010, 9:07 AM Reply   
If it's about religion, maybe this is why God is punishing us.
Old     (zo1)      Join Date: Aug 2002       01-12-2010, 9:10 AM Reply   
^^ LOL, maybe we should just take a step back. Look at our issues and evaluate the root cause and then take appropriate action to resolve the root cause.

If you smoke and get lung cancer, sure you can get chemo and radiation BUT if you continue to smoke, ya think it is gonna happen again?

What's the definition of insanity again?
Old    bigdtx            01-12-2010, 9:46 AM Reply   
"Anytime liberals are in charge this happens but somehow it's always someone else's fault."


Last 3 major recessions started under:
Bush I
Bush II

But hey, you were on a roll so why let the facts get in the way.
Old     (xistential)      Join Date: Jul 2007       01-12-2010, 9:54 AM Reply   
Is God punishing us? I don't think so.

A large percentage of peoples misery is self inflicted, by the decisions that make and the paths they take. "What a mans sows,that shall he also reap" It is the same on a national scale.

I find it staggering that people everywhere are putting their faith in their respective governments to get us out of this mess. Aren't they the people that that were so instrumental in getting us into it??

Unthinking respect for authority is the greatest enemy of truth.- Einstein
Old     (wake77)      Join Date: Jan 2009       01-12-2010, 10:22 AM Reply   
BigD, Don't you know the conservative response to what you're implying.

The economic downfall during Reagan's era was caused by Carter. However, you cannot blame Carter's downfall on Nixon.

Bush I's was caused by, hell, I guess you can blame that on Carter also.

Bush II's was caused by Clinton. The good economic times during Clinton's era, were the result of Bush I's good deeds.

And now because we have a Democratic president, the rapture is upon us. Last time I read the Bible, it made no mention of God's political affiliation. Maybe Flight's Bible is different than mine.

Any time there is economic turmoil the blame is always placed on the Democrats. Excuse me, any time there is ANY turmoil the blame is always placed on the Democrats.
Old     (innov8)      Join Date: May 2005       01-12-2010, 10:27 AM Reply   
I Agree Flight.
Old     (barry)      Join Date: Apr 2002       01-12-2010, 10:29 AM Reply   
Good grief..
Old     (bennygoodx)      Join Date: Aug 2006       01-12-2010, 10:54 AM Reply   
who wrote that? I love the soft close at the end... haha

I guess one can just sit and worry about what's ahead. Or, you can be diligent, work hard, save, and make good moves. There is still opportunity out there.
Old     (ralph)      Join Date: Apr 2002       01-12-2010, 11:27 AM Reply   
I agree with Barry. Flight not so much. Ha ha. Start converting your equity to gold now while the $US is worth something.
Old     (ralph)      Join Date: Apr 2002       01-12-2010, 11:29 AM Reply   
We are having a property price surge here at the moment, we are almost back to the levels it was before the GFC. Worrying. It seems people have short memories and don't learn things easily.
Old     (wakeboardern1)      Join Date: Aug 2007       01-12-2010, 2:07 PM Reply   
GoodTimes, saving won't do jack if we see hyperinflation.

And a huge part of our government's deficit is generated by programs that support people who refuse to be diligent and to work hard. Sure there are a large number of those who legitimately need the programs, but there are just as many who are manipulating the system by being lazy and blaming everyone else for their problems.
Old     (bendow)      Join Date: Sep 2005       01-12-2010, 3:05 PM Reply   
well said Nick
Old     (pesos)      Join Date: Oct 2001       01-12-2010, 10:51 PM Reply   
If History shows us anything, it's that when a nation adheres to Gods plan, that nation doesn't only survive, it thrives. The United states was blessed for centuries because it was built on the pillars of freedom and God fearing men who upheld righteousness and a standard of living that was pleasing to God.

Pillars like slavery? Lol.

Show me a nation who fears and loves God, and I will show you a nation that flows with milk and honey.

Guess the 95% of the population in Haiti that professes Christian beliefs just weren't praying hard enough.

If you read the Old Testiment, Israel flourished under Godly Kings, but when a King of immoral character would reign, there would be famine in the land, wars and trouble would brew on every horizon.

Actually, if you read the old testament, God's champions were pretty much no }different than Bill Clinton, although their adultery was institutionalized. Strange how the unchanging god tempered his outrage at what the people of the time felt was ok. At least Jacob didn't eat shellfish, then he would have REALLY been in trouble!
Old     (bigdad)      Join Date: Apr 2002       01-12-2010, 10:58 PM Reply   
Well said Wes
Old     (barry)      Join Date: Apr 2002       01-12-2010, 11:29 PM Reply   
Old     (joeshmoe)      Join Date: Jan 2003       01-13-2010, 11:46 AM Reply   
"This is the time to be overweight gold and silver"
why? do you own cashforgold?
Take your $10,000 worth of gold nuggets and get $2,000 dollars back in return, I don't think so!
Old     (barry)      Join Date: Apr 2002       01-13-2010, 11:57 AM Reply   
lol! Comprehension..Teacher.

Why would 'cash for gold' suggest you should be heavy in gold? They are buyers and want to buy your 10,000 worth of gold for 2,000.
Old     (wakemetoday)      Join Date: Mar 2006       01-13-2010, 12:57 PM Reply   
No,Big D, I disagree. The last and current recessions were caused by a combination of things, largely because of policies implemented during the Carter administration. I am still suffering from Carter’s policies. If you study how Regan handled the S and L crisis, you should see the differences in opinions of handling a financial crisis. For example, the current administration should be functioning under Regan's policy of cutting cost instead of raising taxes and weakening the dollar. Medicare is already underfunded some 3 trillion dollars and now the government is promising more entitlements. If you read the original post, the article is saying to buy gold because pumping the amount of money into the economy that this administration is may have good short-term effects but 4 to 5 years from now inflation could run rampant, the dollar will be worthless, and investors will be buying gold instead of dollars. If I were a young man, I would buy gold now and hold it. Ask someone who grew up under Jimmy Carter's reign and you will see what I am talking about. Liberals enjoy spending money that is not theirs, so gold could be valuable commodity in a few years and we all, more than likely, could be paying more taxes.
Old     (joeshmoe)      Join Date: Jan 2003       01-13-2010, 2:07 PM Reply   
buy all the gold you want, then you can sell it when the price drops
Old     (barry)      Join Date: Apr 2002       01-13-2010, 2:12 PM Reply   
The value of gold in relation to goods and services doesn't change, Jo. It really doesn't matter what price you convert your dollars(read: trash). Generally speaking.
Old     (poser007)      Join Date: Nov 2004       01-13-2010, 2:22 PM Reply   
Barry, my apologies for hi-jacking your thread. Wes, Roman Catholicism is the official religion of Haiti, but voodoo may be considered the country's national religion. Voodoo, as you know, is a form of satanic worship. Everything sounds good till the light comes on and exposes the truth.

I'm not saying God created this mess because we didn't do it his way. I'm saying we created this mess because we didn't do it his way.

What got us here?

back door bribes
The love of money

As I mentioned in my earlier post, Biblical history proves that living in accordance to Gods laws or within it's boundaries will produce wonderful results. Not saying tests and trials won't come, just stating facts. If you want to argue against that, then it's between you and God, not you and I.
Old     (bjeremi)      Join Date: Mar 2006       01-13-2010, 2:31 PM Reply   
Come on Flight007 you have got to come up with something better than that.

"Everything sounds good till the light comes on and exposes the truth."

What the hell does that even mean?
Old     (barry)      Join Date: Apr 2002       01-13-2010, 2:42 PM Reply   
It's okay, Dan...Although, I do wish this one stayed strictly economics since there's a lot to discuss.
Old     (poser007)      Join Date: Nov 2004       01-13-2010, 3:38 PM Reply   
All right Barry, ur right, I will stick the the original theme from here on out. I agree with your prediction on hyper inflation, in fact I would be willing to bet that before the end of this year we will start to see some tell tale signs of it. The bandaid that we have put over the economic problem will start to come apart, once it does, the flood gates will open and the economy we see right now will look like a bull market compared to what we may see in the next 12-24 months.
Old     (wake77)      Join Date: Jan 2009       01-13-2010, 10:01 PM Reply   
"If I were a young man, I would buy gold now and hold it."

Gold is like over a 1000.00 an ounce. I don't know many young people that are going to be able to afford enough gold for it to be substantial.
Old     (wakemetoday)      Join Date: Mar 2006       01-14-2010, 1:11 AM Reply   
You buy an SPDR such as GLD. Go to and type in GLD in the left hand corner where it says GET QUOTES.


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