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Posts Tagged ‘Financial crisis’

Thanks to my readers for making FauxCapitalist.com reach the 100,000 hits milestone since its inception in September 2008, which marked the start of the worst financial crisis since the Great Depression.

While some alternative media content farms reach this level of views in a single week or a month, I decided to provide a real solutions-oriented alternative for economic and political issues, with 100% original content, all without a single penny of advertising revenue.

I also wanted to provide a home for alternative Canadian content with an international perspective that I felt wasn’t being adequately provided anywhere else, as I think Canada has an important story to tell the world in charting a prosperous way forward in our increasingly globalized world, in the face of many organized threats to liberty and prosperity.

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New York stock market index

When I applied for a pre-approved mortgage at the height of the financial crisis in early 2009, the bank asked for the current market value of my assets.

At the same time, many U.S. banks were marking their assets to model, meaning they could decide what to value them at based on a model they created.

While the very banks that marked their assets up based on pre-crash levels  to sell mortgages to customers on the basis of having the collateral, they expected something different from their customers. Namely, the current market value of their assets, which were mostly highly depreciated relative to a year prior.

The world’s richest man as of the end of 2010, Warren Buffett, before he turned his back on his principles, wrote in 2002:

In extreme cases, mark-to-model degenerates into what I would call mark-to-myth.

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The Big Five Canadian banks and their stocks: Royal Bank of Canada (RY), Toronto-Dominion (TD), Bank of Nova Scotia (BNS), Bank of Montreal (BMO) and Canadian Imperial Bank of Commerce (CM), have been paying common dividends since the 1800s.

BMO, Scotiabank, TD, CIBC, and RBC haven’t missed paying dividends on common shares since 1829, 1832, 1857, 1868, and 1870, respectively.

That is, through WWI, WWII, the Great Depression, all the U.S. and international financial crises, and with and without a central bank.

As of June 30, 2010 prices on the NYSE, their annual dividends are:
RY 3.80%, TD 3.40%, BNS 3.90%, BMO 4.70%, CM 4.90%

Whereas the big five U.S. banks (JP Morgan, Bank of America, Wells Fargo, Citigroup and Goldman Sachs)  are only paying:
JPM 0.50%, BAC 0.30%, WFC 0.70%, C 0%, GS 1.00%

They are also listed on the Toronto Stock Exchange, so you can buy in Canadian dollars to hedge against a declining USD, when appropriate.

In February 2009, I wrote how the Big Five Canadian banks were on pace to dwarf the five biggest U.S. banks, with the the five biggest U.S. banks having twice the market capitalization of the five biggest Canadian banks, despite the U.S. economy being nine times the size of the Canadian economy.

As of the end of June 2010, the five biggest U.S. banks are still less than three times the market capitalization of the five biggest Canadian banks.

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Article IV, Section 4 of the U.S. Constitution states:

The United States shall guarantee to every State in this Union a Republican Form of Government”

The word “democracy” is nowhere to be found in either the U.S. Constitution or in that of any of the constitutions of the 50 states.

Despite constant popular reference to the United States as a “democracy,” from the Greek words demos (people), and kratein (to rule), the U.S. Constitution, the “supreme Law of the Land,” states otherwise.

The ancient Greeks, the originators of Western civilization, didn’t regard democracy as ” the worst form of Government except all those other forms that have been tried from time to time,” as Winston Churchill did. They regarded it as the worst form of government — period.

In a democracy, the majority can infringe on the rights of the minority. This is often done under the guise of “the public good.” In a republic, the rights of everyone are protected.

What is the significance for us today? It’s to recognize the difference between the two, to recognize what the United States was set up as (a republic), what it has been gradually transformed into (a democracy), and the dangerous effects of that transformation.

Since the financial crisis of 2008, the effects have been very evident: the banking bailout, stimulus package, private health insurance mandates, all under the guise of “the public good,” infringe on the rights of all Americans, at the expense of privileging some.

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On Wednesday, January 20, 2010, Prince Alwaleed bin Talal was on the Charlie Rose show, and gave some candid assessments, most notably, about the current state of the U.S. First, some background:

CHARLIE ROSE: Prince Alwaleed bin Talal is here. He`s chairman of the Kingdom Holding Company, the Saudi investment firm with billions invested across the globe. “Forbes” ranks him as one of the world`s 25 wealthiest people. “Time” magazine once dubbed him the “Arabian Warren Buffett.”

His firm has major stakes in banks, real estate, hotels, and media companies. His largest investment is in Citigroup, the embattled bank where he is the largest shareholder.

Then, he made the following candid statements about the U.S.:

CHARLIE ROSE: And what do you think of America and our future?

ALWALEED BIN TALAL: I like to summarize, but if you want I can elaborate. America is down, not out.

CHARLIE ROSE: But that`s not good.

ALWALEED BIN TALAL: I know, but you`re down now.

CHARLIE ROSE: Down in what way?

ALWALEED BIN TALAL: There was a book written about the Islamic world “What Went Wrong.” I think right now you could write a book about the United States what went wrong politically, economically, financially, you know, the crisis that you`re in right now. You`re a mess. You are in a mess in the United States. I have to be honest with you, because I love the United States. I admire the United States.

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According to CharlieRose.com, the global financial crisis ended on March 10, 2009.

Prior to the week of November 22-28, 2009, the site had the “Financial Crisis” collection on its front page, with the last episode in the series on March 10, 2009.

Quite an interesting coincidence that the last episode from that collection was on the exact day that the Dow Jones Industrial Average reached its lowest level since the full crisis hit in September, 2008, at 6547.01.

What’s happened since then?

THEN: The official unemployment rate stood at 8.1%.
NOW: 10.2%.

THEN: The U.S. dollar was worth 84 on the USDX.
NOW: 75, a 10.7% decline.

THEN: Gold traded at a New York Mercantile Exchange closing price of $896.10 USD.
NOW: Gold traded at an all-time high of $1195.80 USD on Friday, November 27, an increase of 33%.

THEN: The federal budget deficit for 2008 was $438 billion.
NOW: $1.4 trillion.

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