FROM SYDNEY, AUSTRALIA Topic: NORTH AMERICAN AFFAIRS
SYDNEY, Australia - Not so long ago, investment analysts with Ph. D. degrees used to be flattered by a mere prospect of being interviewed by the Long-Term Capital Management L.P. hedge fund. And why not. This Greenwich, CT, investment firm employed several Nobel laureates, giving it "star power," along with an aura of respectability and infallibility. In 1995, LTCP returned 43% to its investors, after fees. This was followed by 41% and 17% returns respectively in 1996 and 1997, according to a Sept. 24 Wall Street Journal report. No wonder so many of LTCP founder's, John Meriwether's fair weather friends had their high net worth clients invest in his firm (e.g., Merrill Lynch, Republic Banc...).
Those days are gone. Earlier this month, Meriwether informed its investors that the merry times are over. The fund was down 44% in August, and 52% for the year, to $2.3 billion in capital. But considering its highly leveraged investments (at one point this year, the value of its investments topped $100 billion), a failure of such a high-profile Wall Street high-flyer could spook other investors into a selling spree.
Enter "Greenscam's" (Alan Greenspan, the Fed's chairman) Meriwether bailout. The Federal Reserve is not expected to use its (read U.S. taxpayers' money) to bail out this Wall Street blue chip gambling operation, according to a Financial Times Sept. 24 article. But the Fed has used its clout to try to engineer a $4 billion private bailout with loans of $250 million by big name Wall Street investment banks, such as Merrill Lynch, J.P. Morgan, Goldman, Sachs, Morgan Stanley, Dean Witter, Deutsche Bank, UBS, etc.
Meanwhile, stockmarket gamblers seeking a silver lining on a stormy Wall Street's horizon were buoyed by the Fed chairman's hint about a possibility of lower interest rates pushing the Dow up 257 points on Sept. 23. Greenspan said that the global crisis had "infected" the U.S. financial markets and is threatening the growth of the American economy.
The second statement is hogwash. As the regular TiM readers know very well from examples which we have provided over the years, the Wall Street casino is driven by cashflows, not the economic performances of the companies it trades. It is a "Greenscam" myth, therefore, that a drop in equities will slow down the American economy. By perpetuating this myth, the Fed chairman is showing us where his real loyalties lie - on Wall Street, not Main Street, as he would have us believe.
The Russian economy, for example, we are told by the establishment media has been devastated by the flight of foreign capital. Actually, this really means mostly Moscow. Banks and other enterprises in the Russian capital had received about 80% of all foreign investments, according to a senior Russian diplomat in Europe with whom we discussed the situation this week. As a result, smaller cities in remote areas which invested in its industrial base, rather than in the stockmarket, and which had never depended on foreign capital, are now much better off than Moscow. Another lesson learned about the pitfalls of globalization.
True enough, the U.S. economy could get a boost from a drop in interest rates. But this may also fuel inflation, which has been Greenspan's main economic bogey for years. At a time of slowing demand from overseas buyers, especially those from Asia, a rise in inflation would hardly be cheery news for America's Main Street. As anyone living in New York City, for example, already knows, low inflation is another government myth. The cost of living there has soared during the boom years of the "bull" market. Lowering interest rates could only make it worse.
So why does Greenspan seem about to abandon his anti-inflation fight? Because stockmarket would be the only clear winner from lowering of interest rates, as investment cashflows would likely reverse themselves out of the government bonds back to the equity markets. In short, it's another Main Street sellout, and a Wall Street bailout.
Meanwhile, Wall Street's financial perversions, such as stock buybacks, meant that about $660 billion was effectively taken out of the economy during the 1990s, $455 billion in the last three years alone - without creating a single new product or a job. That's more money poured down the drain and into the Wall Street cash collector than the multinational companies had invested during the same period in all developing countries around the world - combined! ($550 billion).
If Greenspan and Congress really want to give our economy, a boost, they could start by outlawing such scams. Or else the Fed chairman may be remembered as a mere "Greenscam."
Also, check out... "Canadian Banks Speculating Against Canadian Dollar", "Election '98: Much Ado About Nothing", "A Spoof on Goof: ABC Adds God to Its Editorial Lineup," "Taking a Little Bite Out of the 'Big Apple'", "Greenscam's Meriwether Bailout," "Wall Street's Conquest of America," "Yeltsin-IMF Deal: Feeding Drugs to Drug Addict", "Like Watergate, Cover-up Worse Than Original Crime," "Death Merchants 80; U.S. Taxpayers 19" , "The Great American Divide Widens"
Or Djurdjevic's WASHINGTON TIMES columns: "When Will Wall Street's Bubble Burst?", "Russia, IMF, and Global House of Cards", "Rekindling NATO to Fuel Cold War..." or his CHRONICLES column: "Wiping Out the Middle Class."