Then there was this 14th May Evans-Pritchard story about an incendiary interview with Mark Patterson, which mysteriously vanished from the Telegraph website the next day. The story is that it was removed because it contained “factual errors”, which I’m quite happy to believe because I have observed Evans-Pritchard to exaggerate somewhat from time to time.

Here’s the letter from Mark Patterson denying the story

There’s just one thing though. The original article was actually spot-on.

Here’s the story below so you can decide what you think for yourself. Highlighting is mine.

US ’sham’ bank bail-outs enrich speculators, says buy-out chief Mark Patterson

The US Treasury’s effort to stabilise the banking system through the TARP programme is a hopelessly ill-conceived policy that enriches speculators at public expense, according to the buy-out firm supposed to be pioneering the joint public-private bank rescues.

“The taxpayers ought to know that we are in effect receiving a subsidy. They put in 40pc of the money but get little of the equity upside,” said Mark Patterson, chairman of Matlin Patterson Advisers.

The comments are likely to infuriate Tim Geithner, the US Treasury Secretary, because MatlinPatterson took advantage of the TARP’s matching funds to buy Flagstar Bancorp in Michigan. His confession appears to validate concerns that the bail-out strategy is geared towards Wall Street.
Under the convoluted deal agreed earlier this year, Matlin Patterson has come to own 80pc of the shares while the US government has ended up with under 10pc.

Mr Patterson said the US Treasury is out of its depth and seems to be trying to put off drastic action by pretending that the banking system is still viable.

“It’s a sham. The banks are insolvent. The US government is trying to sedate the public because they are down to the last $100bn (£66bn) of the $700bn TARP funds. They think they’re doing this for the greater good of society,” he said, speaking at the Qatar Global Investment Forum.

Mr Patterson said it would be better for the US to bite the bullet as Britain has done, accepting that crippled lenders must be nationalised. “At least the British are not hiding the bail-out,” he said.

Matlin Patterson said private equity and hedge funds were deluding themselves in hoping to go back to business as usual after the trauma of the last 18 months.

“This is not a normal recession and there will be no V-shaped recovery. The crisis has destroyed leveraged companies. We’re going to see a catastrophic increase in the number of LBO’s (leveraged buyouts) going into default because they’re knee-deep in debt and no solution exists since they can’t refinance,” he said.

“Alfa hedge funds have been making their money by gambling with excessive leverage, so the knife that cuts off leverage is going to cut off their heads as well,” he said.

Like many bears, Mr Patterson expects the great crunch to end in deliberate inflation, deemed a lesser evil than outright depression.

“The US government has thrown 29pc of GDP at this crisis compared to 8pc in the early 1930s. The Fed’s balance sheet has risen from $900bn to $2.7 trillion to bail out the system. America has to do it because the only way out is to debase the currency, but that is going to lead to some very high inflation three years down the road,” he said.

Matlin Patterson, however, has missed the Spring rebound, the most powerful rise in equities in over 70 years. “We shorted the equity rally because we thought it was lunatic. We’ve kept adding positions seven times, and we’re still holding,” he said. Ouch!

What’s wrong with this picture? A handful of telegenic designer anarchists besiege the City surrounded by a mass of journalists as they vandalise a deserted retail branch of the almost state owned government scapegoat bank. Interviews with the protesters indicated that they have on the whole only the slightest grasp of what the financial crisis entails but are certain that bankers earn more than them which elevates their envy to political statement. Bank workers who grasped this ignorance were seen waving £10 notes at the hapless ignorant in the streets below and who can blame them.

What is really astonishing about these events is that we have reached a Post Modern watershed where we are witnessing a protest by a politically motivated but brainwashed group that rather than being at odds with the state works in the state’s favour by focussing public anger away from their complicit part in fermenting the financial crisis. Is it not usual for the public or doubly so acclaimed anarchists to be at odds with the state rather than their willing tool? Not any more, after decades of Post Modern indoctrination in state education our darling new generation are not taking to the streets to demand freedoms or to bring the state to task – no they want more controls and more state intervention in their lives.

State complicity in the financial crisis.

How The Fed created the housing bubble.

Dillon, Read & Co. Inc. and the Aristocracy of Stock Profits.

Not everyone there was entirely clueless I’m glad to say.

This guy understands the crux of the problem with the bailout. Right now taxpayers money is being used to replace the liabilities of mispriced derivative instruments – this is the crime that the G20 leaders are doing everything they can to avoid.

This guy recons that the suspension of the mark to market rule is the way to go, fine in the short term but otherwise its just evading the inevitable and ultimately results in nobody trusting anyone’s pricing strategy. At least it show he’s been thinking about it.

However check out that banner in the foreground. These people are actually demanding a single world currency? Do they have even the slightest clue as to how markets work?

While I have a lot of sympathy with the views of the protesters they really have come to the wrong place as the square mile is for the most part an administration centre and even if you could prevent things happening here the clients would only go elsewhere and nothing would materially change for the planet. Just Britain would be poorer. Really changing the world requires a lot more dedication and hard work than shouting at white men in suits and smashing street furniture. However, if these silly kids want to come and waste their time then we will be waiting… and I’ve been working-out, a lot.

When 35 Greenpeace protesters stormed the International Petroleum Exchange (IPE) yesterday they had planned the operation in great detail.
 
What they were not prepared for was the post-prandial aggression of oil traders who kicked and punched them back on to the pavement.
 
“We bit off more than we could chew. They were just Cockney barrow boy spivs. Total thugs,” one protester said, rubbing his bruised skull. “I’ve never seen anyone less amenable to listening to our point of view.”
 
Another said: “I took on a Texan Swat team at Esso last year and they were angels compared with this lot.” Behind him, on the balcony of the pub opposite the IPE, a bleary-eyed trader, pint in hand, yelled: “Sod off, Swampy.” [Link]

Update : The Proper Way To Respond To G20 Protesters (Here Is The City)

Confused? Take a look at this more explicit video…

Sometimes a picture says a thousand words and a video can say a thousand words with added attention grasping drama. This is the perfect video for de-mystifying the crisis for those outside the financial industry. You can get it in HD format here too.

Beginning of Phase 5 of the global systemic crisis: phase of global geopolitical dislocation.

Due to the global leaders’ incapacity to fully realise the scope of the ongoing crisis (made obvious by their determination to cure the consequences rather than the causes of this crisis), the global systemic crisis will enter a fifth phase in the fourth quarter of 2009, a phase of global geopolitical dislocation.
 
A. Two major processes:
1. Disappearance of the financial base (Dollar & Debt) all over the world
2. Fragmentation of the interests of the global system’s big players and blocks
 
B. Two parallel sequences:
1. Quick disintegration of the current international system altogether
2. Strategic dislocation of big global players.
 
…
 
In the United States, as in Europe, China and Japan, leaders persist in reacting as if the global system has only fallen victim to some temporary breakdown, merely requiring loads of fuel (liquidities) and other ingredients (rate drops, repurchase of toxic assets, bailouts of semi-bankrupt industries,…) to reboot it.
 
…
 
There is only one very small launch window left to prevent this scenario from shaping up: the next four months, before summer 2009. Practically speaking, the April 2009 G20 Summit is probably the last chance to put on the right tracks the forces at play, i.e. before the sequence of UK and then US defaults begin (2). Failing which, they will lose their capacity to control events (3), including those in their own countries for many of them; and the world will enter this phase of geopolitical dislocation like a “drunken boat”. At the end of this phase of geopolitical dislocation, the world will look more like Europe in 1913 rather than our world in 2007.

So what is it that the policy makers and central banks have failed to grasp about the crisis exactly one may ask? Well the current disturbance in the credit markets which we hear so much about, in which banks will not lend to one another except at punitive interest rates in spite of almost zero base rates (credit spreads) is not caused by a lack of available money to lend but in a lack of faith in the ability of counterparties to repay. The Federal Reserve and the Bank of England has gone about solving this problem as if it were a liquidity issue when the basic problem is that there is considerable uncertainty in the credibility of balance sheets.

Even though credit markets have been flooded with cash spreads have not shifted because nobody knows who is solvent and who isn’t.

Despite all the money going directly to the big banks, despite all the government guarantees and loans and special tax breaks, despite the shot-gun weddings and bank mergers, despite the willingness of the Treasury and the Fed to do almost whatever the banks have asked, the reality is that credit is not flowing.
 
Why? Because the underlying problem isn’t a liquidity problem. As I’ve noted elsewhere, the problem is that lenders and investors don’t trust they’ll get their money back because no one trusts that the numbers that purport to value securities are anything but wishful thinking. The trouble, in a nutshell, is that the financial entrepreneurship of recent years — the derivatives, credit default swaps, collateralized debt instruments, and so on — has undermined all notion of true value.
 
Many of these fancy instruments became popular over recent years precisely because they circumvented financial regulations, especially rules on banks’ capital adequacy. Big banks created all these off-balance-sheet vehicles because they allowed the big banks to carry less capital.
 
     US Former Secretary of Labour Robert Reich

Uncertainty about the impact of financial distress of one entity [from derivatives] on all other market participants causes trading in the inter-bank market to freeze up further increasing volatility and potentially risk of failure of weaker firms.

Its not a liquidity problem, it is an insolvency problem. Or more accurately, a lack of trust that the other party is not going to go belly up because of derivative liabilities.

Is someone going to explain this to the politicians?

Worse still, George Soros agrees but thinks its already too late.

See also :

Moody’s predicts default rate will exceed peaks hit in Great Depression.

I’ve been hearing stories of idiots, on the basis of stories in the news of City bonus’, spitting at the poor cashiers at their local branch of RBS. I doubt if they’ve ever seen a bonus in their entire careers. The sad thing is that its it people like them, who played no part in this mess who’ve taken the brunt of a lot of this.

Take a look at this summary of job loses collected by Here is the City, they estimate 133,000 since 2007 but I suspect the true figure is nearer 300,000 and its going to be worse in 2009.

If you go down to the City or Canary Wharf today you will see a very different place to what you might have seen two years ago. Not a load of bankers hanging their heads in shame but simply a very quiet place with a fraction of the workforce because while the news bulletins have been giving you a blow by blow account of every factory and retail layoff the finance industry has been silently laying-off hundreds of thousands. Contrary to the image that most people have of the City 99.5% of the people who work there work in support, clerical and IT services. They don’t earn very much money and they have never been the recipients of obscene bonus’ and with every downturn in the economy they have always been the first to be shown the door, worst of all under the current zeitgeist of outsourcing every possible function to a developing nation the toll has been extra-ordinary this time. Worst of all for them they have been more under pressure than anyone to over-extend themselves with a London mortgage during the boom and now without jobs or any prospect of selling their tiny London flats they face financial ruin after years of sweat and long hours in a dreary office. These are not the fat-cats but the lean mice who toiled away from all the glamour barely making a living in one of the most expensive cities in the world.

[socialism] and the myths we’re fed
 
Leon Trotsky [of icepick fame] was reported to have said:
 
“throughout the whole history of the British Labour movement there has been pressure by the bourgeoisie upon the proletariat through the agency of radicals, intellectuals, drawing-room and church socialists and Owenites who reject the class struggle and advocate the principle of social solidarity, preach collaboration with the bourgeoisie, bridle, enfeeble and politically debase the proletariat.”
 
Leon, get knotted. You can talk, having been smuggled into Russia with the collusion of Morgan associates.
 
Read More…

GORDON Brown will today gamble on you buying things you don’t need because they are slightly cheaper, and then believing that rich people are going to pay for it all.
 
The government is expected to cut the price of novelty smoothie makers from £24.99 to £24.36 while at the same time increasing income tax for the hoity-toity chairman of the company that produces novelty smoothie makers.
 
In his pre-Budget report, chancellor Alistair Darling will tell the Commons that all you really care about is shopping and telly and that rich people will be still be able to buy their fancy top hats and opera tickets no matter how much tax they have to pay.

The whole thing is unworthy of further comment really.

For a summary of events, the correct way up I suggest that you take a look at War Nerd’s Exiled Online : Congo Warrior Nkunda is Nkool.

Every word, every disgusting damn word, of these BBC and Guardian stories is bullshit. actually makes me sick, listening to these stupid lies over and over. The reason Nkunda’s little army (estimates range from 5000 to 10000 men) advanced into Eastern Congo this week is that the Hutu gangs were getting a little too aggressive about jumping ethnic-Tutsi villages in eastern Congo, killing the men and kidnapping women and girls as sex slaves. Nkunda knows very well nobody else will protect the Tutsi, for the simple reason nobody ever has. So he went in to do it himself.

Its all doom and gloom here in London these days with everyone obsessing about the contracting economy and the infernal rain which thankfully has just stopped short of the floods of last year. As yet another storm aligns itself to pound the Americas I find it amazing that there are still people who cannot contemplate that our climate is wounded.

Who killed Britain? A new book reveals that the land Queen Elizabeth II once ruled no longer exists.

The Mail reviews a new book (Our Times: The Age of Elizabeth II by A.N. Wilson) that claims to analyse the falling fortunes of Britain. I’m not a great fan of the Mail’s hysteria-led politics but if this review is anything to go by there is little I could disagree with in it. Though I suspect there will be some pertinent omissions which have allowed it to be published at all.

It does offer unrestricted immigration amongst the causes which interestingly has been picked-up this week by Labour rebel Frank Field who has taken upon himself to stand up to Labour immigration policy, perhaps in an attempt to court voter sentiment for the party, but I’ll be surprised if there is any backbone to it as importing voters to fill the cheap flats that the party donors built is a core Labour strategy and the true meaning of the odd movement of the Stamp Duty taxation barrier last week.

Remember : [almost] Everything you see is a lie.

Perhaps its time to get back to basics?

South Ossetia, is a de-facto independent state, which Georgia claims is its own, however it is primarily made up of Russians, most carry Russian passports and have Russian citizenship. Following a brief period of fighting in the early 1990s, a ceasefire was made between the rebels, whereby a joint Russian-Georgian and Ossetian peacekeeping force (limited to about 500 soldiers) remained in the area to keep the peace. On the night of the 7th of August Georgia broke the ceasefire and launched an all out assault upon South Ossetia, following up on a brief artillery barrage on the 1st which killed about six people. This time Russian forces come under fire, and the capital is heavily damaged by sustained artillery fire. 1,400 civilians are estimated to have died, and 10 Russian soldiers. The following morning additional Russian troops are ordered into South Ossetia to re-enforce existing Russian peacekeeping forces and defend the Russian population. For a more detailed account of events on the ground see the following video :

Looking at the map above it would be easy to get sidetracked by the ethnic and regional territorial boundary squabbles but as is often the way there is more to the geopolitics of this region than meets the eye; this conflict has more to do with oil, NATO enlargement, GUUAM and The Grand Chessboard in the shadow of the cold war.

It is well known that America has been supplying arms and training to Georgian troops with a view towards minimising Russian influence in the region and maintaining political control over the oil pipeline that runs from Azerbaidjan to a Georgian port bypassing Russia entirely.

Georgia and Russia are careening towards war. And the U.S. isn’t exactly a detached observer in the fight. The American military has been training and equipping Georgian troops for years.
 
The news thus far: Georgia, which has been locked in a drone war over the separatist enclave of Abkhazia, has launched an offensive to reclaim another breakaway territory, South Ossetia. Latest reports indicate that Georgian forces are laying siege to Tskhinvali, the South Ossetian capital. And Russia, which has backed the separatists, is sending in the tanks.

It seems that Saakashvili thought that while the world was distracted with the Olympic games he could move in quickly and secure South Ossetia and then use his American allies to pressure the Russians into accepting the new status quo but has badly miscalculated the speed and effectiveness of a Russian response.

The question you should ask yourself now, perhaps as a European is do I feel safer with the future of European oil supplies under Russian geopolitical control or through an American proxy? Russia has been making many grand gestures towards a greater European partnership for some time now, as Putin explained in his 2007 speech at the 43rd Munich Conference on Security Policy :

I think it is obvious that NATO expansion does not have any relation with the modernisation of the Alliance itself or with ensuring security in Europe. On the contrary, it represents a serious provocation that reduces the level of mutual trust. And we have the right to ask: against whom is this expansion intended? And what happened to the assurances our western partners made after the dissolution of the Warsaw Pact? Where are those declarations today? No one even remembers them. But I will allow myself to remind this audience what was said. I would like to quote the speech of NATO General Secretary Mr Woerner in Brussels on 17 May 1990. He said at the time that: “the fact that we are ready not to place a NATO army outside of German territory gives the Soviet Union a firm security guarantee”. Where are these guarantees?
 
The stones and concrete blocks of the Berlin Wall have long been distributed as souvenirs. But we should not forget that the fall of the Berlin Wall was possible thanks to a historic choice – one that was also made by our people, the people of Russia – a choice in favour of democracy, freedom, openness and a sincere partnership with all the members of the big European family.

Yet the US has shown repeatedly that it is prepared to make allegiances to the detriment of Europeans in the past in order to realise its geopolitical goals also standing the war on terror bizarrely on its head, such as its support for Kosovo (also arming the KLA) which smuggles 75% of the heroin which enters Europe.

Global security and propaganda Dmitry Rogozin – Russia’s ambassador to NATO

“In that context, how America ‘manages’ Eurasia is critical. A power that dominates Eurasia would control two of the world’s three most advanced and economically productive regions. A mere glance at the map also suggests that control over Eurasia would almost automatically entail Africa’s subordination, rendering the Western Hemisphere and Oceania geopolitically peripheral to the world’s central continent. About 75 per cent of the world’s people live in Eurasia, and most of the world’s physical wealth is there as well, both in its enterprises and underneath its soil. Eurasia accounts for about three-fourths of the world’s known energy resources.” (p.31) – Zbigniew Brzezinksi’s The Grand Chessboard

See also : Georgia – The Israeli connection

For past seven years, Israeli companies have been helping Georgian army to prepare for war against Russia through arms deals, training of infantry units and security advice

Update #1 : Craig Murray gets it (well some of it anyway)…

The answer is not to strengthen NATO. NATO is part of the cause of the problem, not the solution. By encircling and humiliating Russia, not least with new missile systems, NATO has creaated the climate in Russia so favourable to Putin.
 
The new NATO is the main symptom of the West’s chronic inability to create a new post cold war security structure. By clinging to and expanding NATO, we merely made the return of the Cold War inevitable – much to the benefit of the arms industry and military establishment. If our leaders had any imagination, they would realise that the answer is to wind down NATO and create new structures into which Russia should be drawn.
 
It is already a decade late for such thinking. With Bush and Brown at the helm and the military and arms industry in grater control than ever of policy in both the US and UK, it is currently impossible.

Update #2 : Obama adviser compares Putin to Hitler

This article is depressing news. It’s the first time I’ve seen a reputable news agency confirm the rumour that Zbigniew Brzezinski is now advising Barack Obama. In case you are not familiar with this neo-con lunatic he has a long career of failure in the American administration but most importantly an unswerving hatred of Russia. If his political influence is on the rise, so will be the propaganda and the body-count.

Also, in case you were still under the impression the Georgian regime was democratic here is a video from 2007 :

Update #3 : War Nerd – South Ossetia, The War of My Dreams

The American military’s response so far has been all talk, and pretty damn stupid talk at that. A Pentagon spokes-thingy called Russia’s response “disproportionate.” What the Hell are they talking about? They’ve been watching too many cop shows. Cops have this doctrine of “minimum necessary force,” not that they actually operate that way unless there are video cameras around. Armies never, ever had that policy, because it’s a good way to get your troops killed needlessly. The whole idea in war is to fight as unfairly and disproportionately as possible. If you’ve got it, you use it. Thank God we never fought “proportionately” in Viet Nam. The French tried that, because they never had much of an air force, and got wiped out. By the time the French withdrew from Indochina, their Lefty Prime Minister, Mendes-France, made a big show of promising peace within 30 days of taking office—and his commanders in Indochina said privately, “I don’t think we can hold out that long.” That’s what fighting “proportionately” gets you: Dien Bien Phu.