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Russians and Chinese Laugh

Bailing out speculators is like protecting the sharks from the sardines or paying the robbers. Speculation should be discouraged, not rewarded. Otherwise the cure is a sickness. The Capital switchboard is easy and free 800-270-0309 Hundreds of calls will not be ignored.

By Erwin Grandinger

[This article published in: Welt Online September 13, 2008 is translated from the German on the World Wide Web,  http://www.welt.de. Erwin Grandinger is a political analyst and partner of the EPM Group Berlin.]

With the takeovers of real estate financiers Fannie and Freddie, US taxpayers shouldered over five trillion dollars in debts. More nationalization could occur. Be careful! No malice is allowed. We Germans are also paying many billions for the IKB regional bank. Russia, China and India are profiteers of this development. Their time has come.

Last Sunday in early September 2008 is only comparable in financial history since the Second World War with August 15, 1971 when US president Richard Nixon unilaterally cancelled the gold standard and the Bretton Woods agreement of 1944. This Sunday was also a turning point similar to the end of the Soviet Union in December 1991 when the central Moscow authority succumbed to total financial collapse. Public reporting was not at all equal to the event.

In early September 2008 US Treasury Secretary Hank Paulson carried US capitalism, as we know it to the grave. The two largest real estate financiers Freddie Mac and Fannie Mae were nationalized. This was called in a trivializing way "conservatorship." American taxpayers shouldered a loan portfolio of over five trillion dollars, half of the American mortgage market. $300 billion was taken out of their pockets to buy preferred stock, which mostly helped the big Wall Street banks, so their own capital guidelines could be formally preserved. Therefore profits will now be "privatized" and losses "socialized" for the foreseeable future. This means "capitalism for the poor" and "socialism for the rich." The bureaucratic hand guides everything.

More nationalization could occur. Be careful! No malice is allowed. We Germans are also paying many billions for the IKB regional bank (the German government is afraid of giving exact numbers) without consequences for politicians, boards of directors or monitoring boards...

Since the US dollar no longer needs to be backed by gold, the greatest debt economy of all time arose after 1971. The US government, US businesses and US citizens financed their existence (not their provisions) through an indebtedness that is completely inconceivable at least for a European (with the exception of Brits). This process in the US was handsomely flanked by occasional waves of inflation that took the sting out of the worst indebtedness excesses.

Under US Federal Reserve chief Alan Greenspan, "easy money" was the reason for the state. The Treasury printing presses ran so torridly that the Fed for flimsy reasons even stopped reporting M3 money supply statistics in March 2006. The US Congress, the different US politicians and US politics selflessly looked away as long as the illusion machine was well-lubricated by sufficient liquidity. The US service society now tries to maintain the claim to superpower and world reserve currency while the bankruptcy vulture circles over the land. In this mishmash, "Fannie and Freddie" became great in the last 30 years, bought a vast amount of mortgage credits with state-subsidized funds and packaged them according to all the rules of the Wall Street guild. This was also called "financial engineering." This party is now over.

All this happens at a time when the current raw material cycle could still continue for decades. Russia has re-invested itself and seeks to correct the political, military and economic humiliations that befell the land since 1991 (see Georgia). The powers are slowly shifting. The once radiant hero of the falling of the wall is now an invalid. American hegemony is over. Russia, China and India see all this composed. Their time has come.

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