Editor’s Note: It was the worst thing to happen to the U.S. since Fort Sumter. October, 1929. Wall Street crashed and helped drive the country into the Great Depression—a deep economic and spiritual wound that has afflicted three generations of Americans. Eighty years later, as the country struggles through the harsh aftermath of another crash, two Sunday Journal contributors mark a grim anniversary and weigh the question that haunts everyone: “Is this the 1930s all over again?”

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Let’s make a bet.  If you can promise us that your bank is not the next to go under, then we can get you a great price on a share of the Brooklyn bridge.   If you are worried about gold prices, then you probably are on suicide watch concerning your bank or investment firm.  The US dollar is on life support.

Lehman Brothers, fourth largest investment firm, filed for bankruptcy, after Barclays pulled out of an 11th-hour rescue, becoming the largest financial firm to fail in the global credit crisis, after federal officials refused to help other companies buy the venerable investment bank.

Bank of America meanwhile has purchased Merill Lynch for around $ 50 billion, creating a new financial giant.

As if things were not bad enough, AIG has now reportedly asked for a $ 40 billion loan from the government.

Washington Mutual remains up in the air at this point. The company has lost a whooping 92 per cent of its market value in the last year but does currently have a fairly large base of assets and deposits and there is currently hope that it will be able to make it through the current crisis.

Traders fear that the collapse of Lehman would send shockwaves around the world and spark a global sell-off of shares.

Lehman Brothers Holdings Inc, founded in 1850, was a diversified, global financial-services firm. It is active in investment banking, equity and fixed-income sales, research and trading, investment management, private equity, and private banking.

It was a primary dealer in the US Treasury securities market.

Its primary subsidiaries included: Lehman Brothers Inc., Neuberger Berman Inc., Aurora Loan Services, Inc., SIB Mortgage Corporation, Lehman Brothers Bank, FSB, and the Crossroads Group.

The firm’s worldwide headquarters were in New York City, with regional headquarters in London and Tokyo, as well as offices located throughout the world.Tokyo, and operates in a network of offices around the world.

AGENCIES

Many investors are applauding Bank of America’s recent purchases, but does anyone really believe that BofA is immune to the subprime massacre?  Is BofA well enough to stand the fate of their US based colleagues?

Sept. 15 (Bloomberg) — Bank of America Corp., the biggest U.S. consumer bank, agreed to acquire Merrill Lynch & Co. for about $50 billion as the credit crisis claimed another of America’s oldest financial companies.

Bank of America will pay $29 a share for New York-based Merrill in stock, 70 percent more than the Sept. 12 closing price, the company said in a statement today. Merrill, battered by $52.2 billion in losses and writedowns from subprime- mortgage-contaminated securities, has plunged more than 80 percent from its peak of $97.53 at the start of last (more…)

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Economy Will Stay Sluggish, Bernanke Tells Congress

Chip Somodevilla/Getty Images

Ben S. Bernanke, chairman of the Federal Reserve, testified before the Senate Banking Committee in Washington on Tuesday.

By STEVEN R. WEISMAN

Published: July 16, 2008

WASHINGTON — Warning of the dual risks of a further slowdown and higher inflation, Ben S. Bernanke, chairman of the Federal Reserve, offered a gloomy assessment Tuesday of any immediate prospect for improvement in American economic difficulties, including energy prices and instability in financial markets.

Related

Scramble Led to Rescue Plan on Mortgages (July 15, 2008)

Live Video: Bernanke Testimony (via MSNBC)

In prepared testimony at the Senate Banking Committee, Mr. Bernanke avoided the word “recession” in characterizing the current economy, noting instead that consumer spending and exports were keeping growth “at a sluggish pace” while the housing sector “continues to weaken.”

“The economy has continued to expand, but at a subdued pace,” Mr. Bernanke said. But he added that spending for personal goods had “advanced at a modest pace so far this year, generally holding up somewhat better than (more…)

June 4, 2008

Open letter to:

Henry Paulson
US Secretary of The Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Edmond C. Moy
Director of The US Mint
801 9th Street, NW
Room 8S23-3
Washington, D.C. 20220

RE: US Silver Eagles Illegal Rationing

Dear Sirs:

It has come to my attention that 1oz US Silver Eagle coins are being rationed by the US Mint to 13 authorized dealers and not being made available to the public in adequate amounts.
http://www.silverinstitute.org/news/

According to US Law: 31USC5112(e) this action is illegal and I demand that this rationing program end immediately.

http://frwebgate.access.gpo.gov/c

(e) Notwithstanding any other provision of law, the Secretary shall mint and issue, in quantities sufficient to meet public demand, coins which–

(1) are 40.6 millimeters in diameter and weigh 31.103 grams;
(2) contain .999 fine silver;
(3) have a design–
(A) symbolic of Liberty on the obverse side; and
(B) of an eagle on the reverse side;
(4) have inscriptions of the year of minting or issuance, and the words “Liberty”, “In God We Trust”, “United States of America”, “1 Oz. Fine Silver”, “E Pluribus Unum”, and “One Dollar”; and
(5) have reeded edges.

(f) Silver Coins.—

(1) Sale price.–The Secretary shall sell the coins minted under subsection (e) to the public at a price equal to the market value of the bullion at the time of sale, plus the cost of minting, marketing, and distributing such coins (including labor, materials, dies, use of machinery, and promotional and overhead expenses).
(2) Bulk sales.–The Secretary shall make bulk sales of the coins minted under subsection (e) at a reasonable discount.
(3) Numismatic items.–For purposes of section 5132(a)(1) of this title, all coins minted under subsection (e) shall be considered to be numismatic items.”

The law is clear that the silver coins must be supplied to the US public in “quantities sufficient to meet public demand” EVEN IF it means the US Mint drives up the price of silver bullion on the open market in order to obtain the silver needed to produce the US Silver Eagles. That rise in price should, theoretically, decrease the current voracious demand for US Silver Eagles and allow for the true price discovery of silver bullion. That’s how our freely traded markets are supposed to function in order to determine the “fair market value” of any asset.

Unfortunately, the rationing of Silver Eagle coins greatly distort the fair market value of both the coins as well as the silver bullion used to make them. By rationing the coins, the US Treasury and US Mint are artificially suppressing the demand for silver bullion thus creating artificial downward pricing pressure on silver. The size of this artificial price/demand loss is unknown BUT given that the 1oz US Silver Eagle is by far the most popular silver coin in the world, I would suggest that the artificial suppression is significant. For example, when the Silver Eagle rationing program started in mid-March 2008, the price of silver bullion immediately dropped from $21/oz to $17/oz thus trimming 20% off its fair market value in only 4 days. Clearly the fair market value is being artificially distorted. As stated in section (f) above, the public is entitled to purchase US Silver Eagle coins at the “market value of [silver] bullion” plus costs associated with production. Currently, that is not the case. I expect you to end the rationing program immediately and fulfill your legal obligation to the people of the United States of America.

The US Mint is not sanctioned to be a market maker or market manager in precious metals. The Mint is, by law, the facilitator of US Silver Eagle supply and that supply is legally designated to be limited only by the willingness of the purchaser to buy. If the Mint receives an order for 10M ounces or 20M ounces or even more it is 100% legally obligated to immediately supply those Silver Eagles from inventory or enter into the physical silver market and purchase the silver bullion and process it. What effect that purchase has on the price of silver bullion should not be of consequence to the Mint since the price is passed on to the purchaser (plus fabrication).

Luckily, for the stability of the silver market, the CFTC has assured the world that there is no silver price manipulation and that there is currently (and apparently always will be) an adequate supply of physical silver to cover any demand that surfaces.

http://www.cftc.gov/newsroom/

I would also like to point out that the US Silver coin has always had tremendous historical and monetary significance to the citizens of the United States of America. US Silver Eagles represent “honest money” and to witness their continued manipulation is disheartening.

I am also sending this letter to other interested parties below to inform them that another silver crime is in progress.

Sincerely,

Bix Weir
US Citizen

Cc: Michael Mukasey, US Attorney General
A. Roy Lavic, Inspector General CFTC
Senator Dianne Feinstein
Congressman Ron Paul

Apparently we are supposed to bail them out IN BOTH DIRECTIONS while they aggravate their previous disasters. This gang is writing more derivatives on the short side. We cannot stop it and the authorities will not. There is only one conclusion; faster inflation followed by hyperinflation and then depression. Are they intentionally trying to implode this system? What nefarious plan lies in wait for the American Sheeple? We’ve heard of disastrous serious ideas pushing our situation over the edge on purpose. Would they do that? Why not if it furthers their personal agendas. - Traderrog

We will not discuss politics in our work as it only starts unfinished fights. Rather we prefer to stick to our markets’ commentary knitting and throw verbal rocks at those economic freaks that deserve it. That crowd grows thicker by the minute and when we toss a verbal boulder or two, we don’t even have to aim any more. This is a really sad and pathetic turn of events. Why does the Federal Reserve, U.S. Treasury and other housing welfare providers persist in catching a falling knife? These ridiculous efforts to band aid on-going disaster will only encourage more of the same.

Tom Donlan and Alan Abelson in Barron’s tell us the truth each week but no one in New York or Washington with any authority listens, or gives a hoot. Mr. Donlan some weeks ago suggested a correct answer to the housing mess. He told us to just let ‘em all fail and walk with ensuing foreclosures. The loans were bad and so were the buyers. By flushing the bowl and purging our housing-lending-system of these problems, banks would instantly re-price their seized properties to reality. New, qualified buyers would show up to apply for real loans using proper terms not the Greenspan inspired garbage. Donlan’s plan would clean it up in 18 months. The status quo takes four more years with infinitely more extensive damage.

Instead, these controlling minions run around like rabid rabbits throwing cash at each and every idiot band aid idea in hopes of placating congress and their complaining Sheeple. We’ve seen this game before in the middle 1980’s when failing banks and S&L’s were either killed-off quickly, or repaired by the government’s Resolution Trust program designed to immediately fix a nasty spreading problem. It worked.

We also saw those results of long delays in Japan as they suffered years of no-fix-em permitting brain-dead zombie corporations to continue marching through years of existence melting precious propping capital like snow in July. This method destroyed any hopes of Japan’s exit to prosperity. Rather, this polite, non-complaining culture was forced to endure a years of “a thousand cuts” episode and never quite recovered. Some years ago, long after the 1989 implosion in Japan, the U.S. sent some New York smash-up repair teams who made a valiant effort copying this Resolution Trust idea. It was too late. The patient, Japanese economy was too sick to fully recover. Now we just received news Japan has fallen below important economic support lines and has sunk once again into recession.

After all of those years of suffering the Japanese are about to jump into the frying pan again not even once allowed to enjoy a recovery from post 1989 to the present. Keep in mind this nation has been primarily responsible for propping up America buying over a trillion in our crappy paper. Sometimes it seems so unfair with little or no justice. Japan and its people deserve better.

More Situations Leading to Depression (more…)