Specialized Defroster

Heated Liquidity Freezes - Treats the Creak of Credit

When the one wants to do the tons of money, it should be surrounded by thousands of idiots, Says an old adage on the stock market. It himself is reiterated when the Buffet of Warren announced the investment of $ 5 billions in Goldman Sachs (GS) and $ 3 billions in General Electrique (GE) removing it 10% interest by the year what's more to liberate convertible of rights in the actions for after 5 years to the currently depressing prices.

It was considered by a lot as sign confidence of one of the investors more revered and legendary of all time, all Buffet of Mr. Warren. Person bothered to ask the businesses of investee, why was given it the yield of 10% that normally was associated with the links of degree of junk or businesses. Did to this bluer one of businesses of title of first order degenerate in the junk statute? Are they online next of "olympic 2008 Parade of financial ones in bankruptcy"?

Person noticed even the quick transformation of the legendary investor in the Lender of Money of usurious To his advanced age of 78. Person noticed even that there was not true crisis of liquidity, but the lenders as Mr. Buffet aligned on the lateral line to look for the Risk the Secured Return (RRR) potential borrowers. "Bigger Risks it, Higher you Pay" Was the simple message posted on the foreheads of possible every lender.

Otherwise, when the Federal Reserve Bank wanted to lend to lean 1.5%, why the GS and GE should pay 10% to Mr. Buffet? In the hours of reception $ 3 billion Mr. Buffet, GE hurried to the market in commercial paper for student more complete money for the payment of salaries and the salaries, and was happy to see that the Mr. Bernanke of boss of Federal Reserve Bank got dressed in the Suggestion of Santa, paying out billions more to just 2% (the cut to 1.5% on the following day). In runs, $ 3 billion Mr. Warren Buffet appear to have "gone with the wind "In the hours.

What Mr. Warren Plug announced poorly was understood and poorly was interpreted by almost everyone on Wall Street, the Principal Street, Capitol Hill, Federal Reserve Bank, and the entire community of journalists, the analysts, the commentators and the interviewers. It meant, but did not say it, that the true rates of the market were extremely high, without taking billion into account dollars is printed in the backyard of Federal Reserve Board for the free distribution later, and that person wanted to lend unless it was rewarded with the associated return with the risk. (RRR)

Through the Atlantic, to London, comparatively to liberate the market, the rates of LIBOR are increased to the more top, and nevertheless person emerged as the lender to lend to the commercial same bank.

Why the lenders look for the highest return when the risk increases?

If the ready lender today $100 for just 3% (when the rates of Federal Reserve Bank are only 1.5%), and this loan spoils itself, it has the ready one 33 times (100/3) more just to resume the old loan, and that also, provided that no new loans spoiling themselves. If it had lent to says 24%, and if the loan spoils itself, it has ready only 4 times more to resume its old loans, presuming again all new loans remain good. This is why the local governments have the increase the funds to 20% or more in some cases. C'est-a -dire, there are lenders outside of Mr. Buffett.

When the profile of risk of big banks increased to the bankruptcy range to meet hundreds of billion dollars, the monetary market becomes very stretched, and the lenders withdraw in the shelters when the rates of the continuous market to be managed the level low by Federal Reserve Bank. The action of the Federal Reserve Bank to pump the markets with more of $900 billions by the day before and the rate cutting by 0.5% does not help. Money goes bankrupt the banks that release simply the new funds against the old losses. They do not lend more.

The simple injection of liquidity is not enough. The Federal Reserve Bank has the brand it conditional, that if $50 billions are given to say, the group of Citi, it should deploy funds only to grant the new loans or the purchase of the new papers of Advertising distributed by the various matters of business with suitable under the limit for that money widely are distributed. Suppose, the under limit is regulated to $ 500,000 for the small businesses to $2 billions for the big businesses as General Motors, they can continue matters while paying their employees the salaries and the salaries.

Float a New Bank or use smaller Regional Banks and subsidizes them with $ 200 billions
The Bush administration can spread again loans by the new bank or the smallest current banks to the small businesses, the big entities, and the business consumers, expose to true tangible the security with the first right of retention. Limit the loans until 25% of their annual sales, for that their money rolls on every 3 months at least.

Why to avoid the big ones to exist banks?
All big banks are saddled with billion dollars of bad old loans. Most of them are irrevocable as they has not any support of security. They are secondary papers with the second right of retention. The primary security was seized, was seized and was sold by the primary lender, with nothing left for the secondary supports. While subsidizing these banks in bankruptcy are as to add fuel to empty. The good money would be launched after the bad money. When money is rare, the efforts should be to use the new also provision efficiently as possible.

The banks that are almost in bankruptcy could be asked to transfer the accounts of deposit and loan (including the primary mortgaged loans with the first right of retention (not the secondary drift hides) to the new banks, for that the normal continuous matters.

The old banks with billion dollars of bad loans without the security could be merged for that the angry duties are released against every other. If after this adjustment, they always are unviable, to allow them to die the natural death or holds the speeches with the debtors to accept only 20% of the remarkable debts remboursables in after 5 years. Thus, the responsibility of the big banks will be reduced to 20% and liquidated @ 4% on after 5 years.

Higher Rates are the biggest enemy to used drifts and exchanges
We are in the middle of used extremely the economy. It must is deleveraged. These drifts prospered in the environments of low interest rate where the cost of exchange was very low. If the rates rise at the reasonable level, even until 9%, all used transactions will be forced to reverse immediately. At the same time, the Bush Administration can subsidize the banks the Mortgaged loans to the consumers to the special price of says 3%, for that their interest cost does not rise. This type of arrangement of differential interest can bring immediate stability in the market place.

Higher Rates help also Underwriters
Ask AIG ae" why and where did it loses in billion dollars, when there was a lot does not claim because of the natural calamities, empty, the flood, or the death of individuals. They did not lose in their basic insurance companies of affaires.le receives the income of free premium of the assured. They found difficult to invest in the public Treasure in the long term to high yield or the local government adheres links of well evaluated businesses.

Mr. Greenspan killed efficiently it walked of links of public Treasure in the long term (10 to 30 years) by lowering artificially interest rate or canceling even 30 links of years completely for 4 years (2003 forward) for that the interest maintaining the cost for the public Treasure remains artificially low on his massive public debt.

When the insurance company did not find of alternate in the long term producing high the investment of the ministry of the sure finances they began looking for exotic drifts that gave them higher yields, without realizing that they obtained in. The businesses like that AIG at last began buying extremely diverted them from risk as CDO, (the Duties of Debt of Collateralized) CD (the Echanges of Defect of Credit) and CLN (the Credit Linked up Grades) without realizing the financial risk and the legal evaluation of the titles to supported. If the insurance companies had the option to invest in says, 6% 10 links of year or 8% in 30 links of year, they would not have invested in the diverted papers with the titles of safeguard of false one.

Money should have cost

Money as much was printed of that the toy houses can be constructed by the American children with the true dollars of United States. If Paulson and Bernanke print $1 trilled now, they will have characters 100 billion $10 Grades of Change with the logo of former presidents. Themselves they are spread out over the 8 high avenue manner to United States, it will cover 22,600 Miles

The economists like Greenspan and the secretaries of the ministry of the finances as Rupert Rubin or as Henry Paulson (of Goldman Sachs) did the money without value the moment they were distributed or were created. Their money had not equipment cost 1% to 2% for most of the times. Their theory was this low interest will raise the stock market that will increase the PIB, that will increase the value of their stocks held in Goldman Sachs. This was a myth.

Low rate do not increase PIB or take to the healthy growth
The example,
Look at Japan.. It followed close to Zero politics of interest rate since 1994. 14 years passed and his index of reference Nikkei-225 fell of 38000 to 9000 + yesterday (lost 75%) with no perceptible growth in the true terms. Take the Japanese retirement with 10 millions of difficult discovered yen to take care of itself in its days take the retirement because it does not win does not import what on its economies of time of life. If it spends, it feels that its economies will be empty in some years. If it obtained even 6% interest, it would have obtained the income of interest of 600,000 yen that it could spend without seeing its economies reduced.

The high in the long term reasonable rates encourage PIB of economies and increase in the true terms
The example,
In the country as India, the growth is the sturdy interest rate because in the long term for the Provident funds etc are more than 10%. This encourages economies from which the people spend without seeing their economies reduced. The quantity of PF is invested in in the long term producing high the links of Government that assures constant decent income.

Look at which arrived to WORE
And look at what these Greenspan and the business did for United States. Often it was applauded for his brilliant direction of economy. His philosophy was that Consumers contribute to the PIB, therefore to do to spend them more and more of, lower the interest rate. That did the consumers to contract more and more debts ae" the credit card, the car loans, the educational loan, to the house the loans, the summit on the loans on to the house the hypotha¨ques and the host of other products of loan that fatten the banks with the interest rate of usurious.

Look at the signs to the big stores selling Car to the furnishings. No interest for 6 months, no payment for 12 monthsae¦. etc. This is what arrives when money is free and has not the cost. The people become just of the spendthrifts and go bankrupt. Themselves they find difficult to pay ae" the file for the bankruptcy ae" that is all. The this is more as "the Payable when capable one"

Money, the public Treasure and Gold
If money has not the cost, they are more as the paper of Toilet. They can be printed day to the next day in the Press of Bernanke. The links of the ministry of the finances are also papers ae" can be printed to the soft fact of president Bush or of Paulson or of Bernanke. The papers as Dollar and as the links of the ministry of the finances can be printed and reprint as the books are reprinted with the popular request. Gold artificially cannot be produced ae" it must is dug ground

Why the interest rate will go to 24% to even 30%
If you cannot check the inflation, the numbers of inflation of check, was the theory, the conviction and the practice of Greenspan. It invented the new theory of inflation ae" Inflation of Kernel and Not ae"the Basic inflation that excluded from the violent food and prices of energy.

• Rotten idiot. The food and the energy constitute more than 40% budget of household. Every family has at least 2 or 3 children, one of two universities going young adults, 2 to 4 cars depend on the number of adult members in the family. How to be able excludes you the cost of Energy and Food of the inflation and adjusts your politics of interest rate.
• When I left the field of the stock of broking, the index of CRB was 191 ae" it is increased to more than 430 recently, that is the gain of 240 pts in less than 7 years. This index covers more than 17 elements of daily usage ae" Orange juice To Oil to the dairy products and to the commodities of daily usage. In of other terms, the inflation increased by 31% per year (240 divide by 7). The United States had "the negative interest rate" by at least 25% for on 7 years in a row.
• These rates take now on and it has not anything the government can do. The creative direction of inflationary numbers (called manipulations in the terms of the civil one) cannot last for evermore. You have the salary for him. The salary time entered at last October 2008.
• The interest rate have to United States raises it to 24% minimum for eliminer all excesses in the system that was constructed under the shabby system of Alan Greenspan. Can be the high interest rate can remain for only 6 months, but that everyone will force to begin respecting their own dollar.. The lesson United States will learn is that "Money is not Free" and does not take it for a free turn.

How to defrost present liquidity freezes?
Stop the interest rate coupee ae" In fact student of the interest rate until 6% in 6 months in the increases of 1% by the movement. The highest rates will put emphasis on the lenders of money in the market that will force down below the interest rate later with more of participation. Currently, their participation in almost ZERO

Adopt "the differential political one of interest rate"

• Subsidize the banks of their wallet of finance of hypotha¨que with the better funds market @ 2.5% for the time is. (MFR = the Rates of Finance of Hypotha¨que)
• Subsidize the banks of their wallet of card Of Credit with the better funds market @ 2.5% on the 30 MFR of year
• The other loans of bank to the businesses are allowed @ 3.0% more than 30 Rates of Finance of Hypotha¨que of Year (that is, if MFR is 2.5%, then other commercial loans to be 5.5%).
• Please the grade that loads with even 9.5% the interest rate (based on MFR maximum of 6.5%) of Federal Reserve Bank to counts on the advertising loan is not excessive. This is the judgement Rae Essential in most of the Asian financial centers and the emerging economies.
• Contain to the interest rate clienteles could be limited to 2% on the funds of Federal Reserve Bank evaluates for the respective category.
• The example, if the subsidy of MFR is at 2.5%, then the customer lending to the rate can be 4.5% (2% more than 2.5
• The idea to allow only 2% above the rate of funds of Federal Reserve Bank is to guarantee that the bank passes the advantage of the reductions of the rates in the future to every section of the corporation. Currently, they can pay more but a lot less than the rates of the market.

Merge 3 or 4 big banks that have the l'inter-edchange l'inter-edchange l'inter-edchange exchanges dispose remarkable.
This will cancel angry duties of every other.

• Then To Consolidate the funds the external based debts (not the deposits).
• Call the creditors of bad loans to resolve the discounted solution, consenting to not to pay more than 20% remarkable debt (or more if there is the true security,
• Etendre guaranteed it Federal to such quantity and load the respective banks guarantees the commission @ 2% by the year.
• Take some equity for such helps or deserve the convertible in the actions at any moment for after 10 years.
• The creditors will not have choice but to accept the compromise, otherwise they all will lose.
  EXAMPLE: If the doubtful remarkable total credit is $ 50 billions, attain a compromise for $ 10 billions. Etendre Guaranteed it Federal to $10 Billions and load the commission of guarantee of bank @ 2% of guaranteed quantity ($200 Million per year).
• After all these adjustments,. Ask the bank go out with the secondary public problem
• Of which the State can take 10% of public offer. This will infuse the confidence to invest public.
  

Etendre the Tax relief of tax as in under:

• The tax on the corporations is cut by 5% now, followed by another 3% in the second year, 2% in the third. Total 10%
• The taxes on the present corporations of 35% are too high for does not import that to invest to WORE It descend to 25% in 3 years. (In my suggestion that it is to do to lower to 18% in the progressive manner)
• This will increase the true gains of the business and raises his title price, to render capable student of new capital and raises also the stock market. There will be the true force in the economy, not the paper exchanging manipulations that Paulson and Bernanke devote themselves to.
• The Tax relief of personal tax could be spread while reducing the flagstones of initial tax substantially.
  The initial flagstone of tax radically is reduced if as to take advantage the low salary and the employees of income of the environment.
• While the interest rate can have negative effect on the market (in fact it will have no, because lightly more of interest rate is the than wholesale more desirable collapse of financial system),
• The decrease of Tax On The Corporations and of Personal Tax will have the significant positive effect on the entire range of market of capitals through the United States.

My Letter to the president Bush was neglected and they did to jump on $ 3.5 trilled in 15 days

In my book, I conceived the series completes tables of Tax on the income for the sector of business and the also Individuals. The project is so complete that it will be liked by Individuals and of similar business. Not only that, I gave to most of valid suggestions to increase the income of the other sources, therefore which is lost in the taxation, is more compensated of the other stream of income.

I regret only that the person in the white House paid any attention to my 4 letters of page that contained the summary of 18 chapters of plans for the restoration United States of Americal. I had warned also as if the immediate measures were not taken, the consequences worse would follow. That was my letter recceived by white House on August 25 2008 and the position began the deterioration 15 days later. And you know what arrived from the second week of September. I had sent also a copy of this letter to the General of Consul of Hong Kong for its information and also for the goal of correct identifcation.I would relax the letter soon on this blog site in some days.

By not paying attention to such important letter, at once when the solution escaped the nation, the Bush Administration did to jump on $ 2.5 trilled in the loss of capitalization of the market and also more of $1 trilled in if called "the guarantee out" the projects.

Kalidas, Hong Kong
Item Ref: 0811-006 (Published at first on the blog October 10,2008)
Blog: Http: //www.anilselarka.com/