Standby Letters of Credit And Other Bank Guaranties: Revisited

1 04 2019

 By Timothy D. Naegele[1]

The United States has experienced periods of boom and bust since its rich history began.  Such is the basic nature of economic cycles, and of our capitalist system that governs global economic activity.  Like the laws of gravity, certainties exist in economics too.  What goes up, comes down—sometimes with a resounding thud.

When crises arise, as they will, public policymakers in America and other countries must be prepared to deal with them in a responsible and effective manner, and have tools at their disposal to do so.  One area of economic activity that few Americans know about, much less comprehend, involves the staggering amounts and extensive uses of guaranties—issued globally by banks, other financial institutions, businesses, governmental agencies[2], and individuals themselves.

According to the latest figures published by the Fed, the aggregate amount of “Financial standby letters of credit and foreign office guarantees” in the fourth quarter of 2018 stood at more than a half-trillion dollars—$566.8 billion, to be exact—which seems exceptionally low.[3]  My newest law review article deals with standby letters of credit and other bank guaranties, and with their counterparts in other areas of domestic and international commerce.[4]

The article builds on an earlier discussion of such issues, before the U.S. Senate more than 40 years ago.[5]  Since then, crises have come and gone; and the issue today is what public policymakers have learned in the interim about how to anticipate and address them.  As I have written:

Guaranties have been used in commercial transactions for centuries, in various contexts and in various parts of the world.  Banks have not been alone in their willingness to engage in such undertakings, and have sought new methods of characterizing guaranty transactions in recent years, in an effort to circumvent legal bars as to these practices.

. . .

A guaranty is a promise by one party to answer for the payment of some debt, or the performance of some obligation, in case of the default of another party, who is in the first instance liable for such payment or performance.  A standby letter of credit is merely one form of a guaranty which has been subject to increased usage by banks in this country during recent years.  There are a variety of reasons why the use of standby letters of credit has increased.  The primary reason from a legal standpoint is that our courts have held that national banks are not permitted to guarantee the obligations of another party.

The national banks involved have been imaginative enough, in responding to this situation, to fashion an instrument which they contend is not an illegal guaranty but is akin to a traditional letter of credit, as a means of avoiding any legal or regulatory constraints. . . .

[T]he standby letter of credit is a means by which a bank permits its customer to make use of the bank’s credit standing and goodwill in the customer’s business.  . . .  [T]he bank is in effect “selling off” its credit to others. . . .

. . .

Quite obviously, instead of “lending” its credit[] in certain transactions, the bank itself could provide funds directly to its customer.  At the time the customer seeks such funds, however, the bank may not . . . wish to lend such monies.

. . .

[T]he use of such instruments abroad has been sanctioned owing to the fact that the laws of several countries authorize banking institutions chartered thereunder to engage in such undertakings.  Accordingly, it has been determined that American banks would be at a severe competitive disadvantage if their foreign counterparts were permitted to guarantee certain transactions, while American banks competing for the same business were prohibited from doing so.  It is questionable, however, whether there has ever been a conscious assessment of the risks which attend foreign transactions of this nature vis-a-vis the benefits derived therefrom.

. . .

Banks are special institutions subject to rules designed to assure their soundness for the benefit of depositors and to maintain public confidence in the banking system.  The potential bank liability on a standby letter of credit, and consequent risk of loss to the depositors and shareholders of the bank, is just as real as if the transaction had been a typical lending transaction by the bank.

. . .

It is appropriate to focus on the use of guaranties in the standby letter of credit context because banks are reluctant to disclose fully or describe the various types of guaranty transactions, and because it presents a useful illustration of a high risk situation once one is able to cut through the complexities of the transactions involved.

. . .

A fee of from one-quarter of one percent to one percent, or as much as $1 million on a $100 million standby letter of credit financing, is collected by the bank for its services; and the bank is not required to commit any funds of its own, unless a default occurs.[6]

No one should deny the opportunity for U.S. banks and other financial institutions to make a profit and serve their customers, as long as they act responsibly and legally, and their solvency and stability are not put at risk.  However, aggregating more than a half-trillion dollars today on the part of American banks and other financial institutions alone, standby letters of credit and other bank guaranties present enormous potential risks to the U.S. and global economies.


Capitol and flag


© 2019, Timothy D. Naegele

[1]  Timothy D. Naegele was counsel to the United States Senate’s Committee on Banking, Housing, and Urban Affairs, and chief of staff to Presidential Medal of Freedom and Congressional Gold Medal recipient and former U.S. Senator Edward W. Brooke (R-Mass). He and his firm, Timothy D. Naegele & Associates, specialize in Banking and Financial Institutions Law, Internet Law, Litigation and other matters (see and Timothy D. Naegele Resume). He has an undergraduate degree in economics from the University of California, Los Angeles (UCLA), as well as two law degrees from the School of Law (Boalt Hall), University of California, Berkeley, and from Georgetown University. He served as a Captain in the U.S. Army, assigned to the Defense Intelligence Agency at the Pentagon, where he received the Joint Service Commendation Medal (see, e.g., Mr. Naegele is an Independent politically; and he is listed in Who’s Who in America, Who’s Who in American Law, and Who’s Who in Finance and Business. He has written extensively over the years (see, e.g.,, and can be contacted directly at

[2]  For example, in a lawsuit where a judgment of more than $4 million was rendered against a bank, the bank’s federal regulator was permitted to issue a letter of credit (or guaranty) on behalf of the bank, which allowed it to appeal the verdict.

See Timothy D. Naegele, The Bank Holding Company Act’s Anti-Tying Provision: Almost 50 Years Later—Part I, 135 BANKING L. J. 315, 336-338 (June 2018) (Naegele 2018, Part I) [Timothy D. Naegele-Part I] (discussing Lucken et al. v. Heritage Bank National Association et al., U.S. District Court for the Northern District of Iowa, Case # 5:16-cv-04005, PACER Docket Sheet entry 197, paragraphs 6-8 (“Pursuant to Federal Rule of Civil Procedure 62(d), if an appeal is taken, the appellant may obtain a stay by supersedeas bond.  . . . Defendants have obtained . . . a Letter of Credit in favor of Plaintiffs for an aggregate amount not to exceed $5,000,000.00, available through Federal Home Loan Bank of Des Moines, Des Moines, Iowa.  . . . In addition, Plaintiffs and Defendants have executed an agreement setting forth the events of default which would trigger calling upon the letter of credit”)) [PACER Docket Sheet entry 197]; see also (“The Bank Holding Company Act’s Anti-Tying Provision: Almost 50 Years Later”)

[3]  See off-balance-sheet-items

[4]  See Timothy D. Naegele Standby Letters of Credit

[5]  See Timothy D. Naegele, Standby Letters of Credit And Other Bank Guaranties, Compendium Of Major Issues In Bank Regulation, Committee On Banking, Housing And Urban Affairs, United States Senate 621 (May 1975) [Naegele-Standby Letters of Credit And Other Bank Guaranties].

This Senate submission and its attachments constitute a useful starting point for the discussion of this subject, and they will be referred to throughout this article.  The author respectfully suggests that it might be useful for the reader to review them.

[6]  See id. at 626-629, 633, 634, 635.



15 responses

1 04 2019
H. Craig Bradley


How are we possibly going to pay for today’s spending by our government in California? Borrow and spend. Who secures our credit? Of course, we the property owners do, as our properties are collateral for Gov. Newsome’s expanding social spending ( Medical for all ). What happens when the heavy hitters ( high income producers ) leave California? In short, trouble.


1 04 2019
Timothy D. Naegele

Thank you, Craig, for your comments.

Yes, California governmentally is bizarre. This has been true for a very long time, with no positive end in sight.

The rest of the nation recognizes this, and has little or no empathy.


3 04 2019
H. Craig Bradley


Needless to say, high overall tax rates ALWAYS result in low rates of economic growth anywhere in the world. So, its not only about the overall size of government, its also the level of taxation just as much. “The People” seem to have been so brainwashed (public schools ?) they can no longer recognize this simple correlation. You can bet the Liberal elites and their cronies sure do.

Sadly, its the same pattern of recognition currently exists in most other states, as well. The whole country will follow California down the Marxist Road in about 10 more years, just as soon as President Trump finishes his two terms in office. AOC and Medicare for All ?

In the future, collectivism with a vengeance is coming eventually to America. Capital will flee to Asia when it does, deflating all the asset classes that were inflated by capital flight (flows) from other countries, principally Europe and China. The dollar will weaken at that time, and we will then have our twin goals of high inflation and high interest rates. Stagflation is a com’in to town.


3 04 2019
Timothy D. Naegele

Thank you too, Craig.

What you posit is a recipe for disaster once President Trump leaves office, unless his successor is like minded and equally conservative.

I do not disagree. Indeed, i believe that if Hillary Clinton had been elected, we would have been heading for a repeat of the “Great Recession” of 2008, or far worse.


3 04 2019
3 04 2019
Timothy D. Naegele

Thank you, Craig. Student debt is the government’s largest asset, yet the Left and universities seek forgiveness.

The universities have ratcheted up their costs, with the expectation that they will be bailed out, which is irresponsible if not insane.

Bricks-and-mortar universities may become dinosaurs as more higher education shifts online. Again, the universities will want/demand bailouts, which must be denied.

They pushed the student loans to increase their coffers, and fund their Leftist-tenured professors; and they saddled their students with oppressive student debt in the process.

As I have written before, such educational institutions are dinosaurs, just like newspapers.

See, e.g., (“Are Colleges Dinosaurs?“) and (“Grad-School Loan Binge Increases Debt Worries”) and (“Newspapers Are Dead, Not Dying“)


3 04 2019
H. Craig Bradley


Mike has been preaching ( “Dirty Jobs” Cable series) on hundreds of thousands of high paying, (skilled) blue collar jobs going unfilled for lack of qualified applicants. Companies pay good wages for skilled help with a few years of experience behind them. College no longer qualifies.

We are not adapting to economic changes as a nation. Today, the best pay goes where its needed and a college degree is not where to find such employment for the majority of college students anymore. Been that way for at least 15 years now, yet we can’t seem to change our national priorities. We are simply addicted to debt, be it student debt, auto loan debt, housing debt, credit card debt, or national debt. All the same: digging our (national) great big hole.

Time to Get Smart, not “educated” :


3 04 2019
Timothy D. Naegele

I agree, Craig; and I agree with Mike Rowe—with whom I have agreed for a long time.

As I have written—which of course is the much bigger and overriding issue:

[T]his is war. It is multi-faceted and multi-dimensional, and not simply a culture war; and it must be treated as such.

See (“The Treasonous Left’s Attempt To Destroy Our Electoral College”)

The latest, as you know, are the scumbag Jerry Nadler’s efforts to subpoena the entire Mueller report; and attack and destroy the Trump presidency nonstop.

See, e.g., (“House Judiciary Panel Approves Subpoenas for Mueller Report”) and (“House panel authorizes subpoena for Mueller report as Trump backs away from calls for public release”)

Nadler and Maxine Waters, Elizabeth “pocahontas” Warren and countless others are among the many reasons why lots of us left the Democratic Party, and will never go back.


1 06 2019
Timothy D. Naegele

2008 Or Worse? [UPDATED]

Steven Pearlstein—a Washington Post business and economics columnist, and Robinson professor of public affairs at George Mason University—has written:

Federal Reserve Chair Jerome Powell gave a speech a couple of weeks back that showed that financial regulators have learned many lessons from the 2008 financial crisis, but not the most important one, namely: If regulators wait to act until they can say with certainty that a credit bubble is about to burst, they’ve waited too long.

That’s particularly true when it comes to the opaque and unregulated “shadow” banking system on Wall Street that has now supplanted regulated banks as the leading source of credit for businesses and consumers. This shadow system gets its money from big investors rather than depositors, and it revolves around hedge funds, investment banks and private equity funds rather than banks. These shadow banks have made borrowed money cheaper and easier to get, but they have also made the financial system and the U.S. economy more susceptible to booms and busts. And with another giant credit bubble ready to burst – this one having to do with business borrowing – we’re about to learn that painful lesson again.

The rise of the shadow banking system began in the 1980s with “junk” bonds, which for the first time allowed companies with less than blue-chip credit ratings to borrow more easily and cheaply from investors in the bond market than from banks on which they had always relied.

Then, beginning in the 1990s, shadow banks moved aggressively into home mortgages and other consumer debt – auto loans, student loans, credit card debt – which they bought from banks and other lenders, packaged together and sold to investors as bond-like securities. You know how that turned out.

After the crash in 2008, shadow bankers shifted their attention to business lending, using the same “securitization” process to buy and package “leveraged” loans – bank loans to big companies that were already highly indebted – into collateralized loan obligations, or CLOs. Investors couldn’t get enough of the CLOs, which promised higher returns than low-yielding government and corporate bonds, and corporations gorged on leveraged loans to fund mergers and acquisitions, buy back their own shares and pay special dividends to investors.

More recently, Wall Street wiseguys have shifted from buying loans to making them directly – in this case to midsize companies, long considered the last preserve of the traditional banking system. The new players are private equity firms, hedge funds, investment banks, insurers and once obscure entities known as “business development companies.”

In each of the last four years, investors poured more than $100 billion into these middle-market private credit funds, which now have combined assets of between $600 billion and $900 billion, according to estimates by Bloomberg News; Preqin, a data company; and Ares Capital, a leading direct lender. The banks’ share of middle-market lending has been nearly cut in half as private lenders have not only taken business away from the banks but also significantly expanded the market by making loans that banks are unwilling or unable to make.

“It’s a wild west space,” a top credit strategist from Bank of America told the Financial Times this year. “The whole thing has exploded in size, and everyone is getting into it.”

The banks’ initial retreat from the middle market was a result of the orgy of bank mergers in the 1990s, during which regional banks were rolled up into a handful of large national banks. While middle-market lending was the bread and butter of regional banks, the megabanks were focused on lending to the largest corporations. Moreover, to realize the cost savings that were promised from the mergers, the megabanks reduced the number of lending officers with the knowledge of and experience with companies and industries to make customized loans based on estimates of expected cash flows. Instead, the megabanks began offering middle-market customers a set of standardized loan products that required very little paperwork or evaluation.

This retreat from middle-market lending accelerated in the aftermath of the 2008 financial crisis, when regulators began requiring banks to set aside more capital as a financial cushion against loan losses. More capital was also required for loans to companies that already had lots of debt or that had gone through a year or two of hard times. Regulators also raised red flags whenever they saw loans without covenants that allowed the bank to demand that a loan be paid back if the company failed to hit certain business targets.

The shadow banks, however, were only too happy to step in and fill the void left by the regulated banks, lending directly to firms with lower credit ratings and lending with fewer covenants and more flexible terms. They were able to offer customized loan packages that incorporate a mixture of cheaper first-in-line “senior” debt with riskier and more expensive “junior” or “mezzanine” financing.

Loans could be approved quickly, without having to get approval from the loan committees found in most banks. And for all that speed, flexibility and additional lending risk, companies were willing to pay interest rates averaging 2 percentage points above what banks might have charged, according to a paper by Sergey Chernenko of Purdue, Isil Erel of Ohio State and Robert Prilmeier of Tulane.

To fund all this loan-making, the shadow banks have turned to insurance companies, pension funds, university endowments and wealthy investors, offering them a chance to buy into a diversified pool of loans that offer returns ranging from 6 percent to 13 percent, depending on the level of risk they are willing to assume.

And even though traditional banks may be making fewer loans to midsize businesses, they’ve been eagerly lending to the hedge funds, private equity firms and business development companies that are making more of those loans. In fact, the fastest growing category of revenue and profit for the banks in recent years has been lending to “non-bank financial institutions.” According to the latest report from the Federal Reserve, unregulated credit funds now have access to more than $1 trillion in lines of credit from regulated banks, an increase of 65 percent over five years. And there is evidence that, in the face of increased competition, the private funds are taking on higher and higher levels of debt to continue offering the same high yields to their investors.

Middle-market lending, of course, is just part of the biggest expansion in corporate borrowing the U.S. economy has ever seen, a result of eight years of cheap and easy money engineered by the Fed and other central banks after the 2008 financial crisis.

The ratio of corporate borrowing to a variety of metrics – profits and assets, book value or the size of the overall economy – is at or near an all-time high. So is the riskiness of the loans, reflecting the amount of debt companies have taken on, the absence of covenants and the rosy assumptions made about the amount of cash flow companies will have to cover debt service.

Meanwhile, the difference in interest rates between the safest loans and the riskiest – in financial jargon, the “spread” – is at historically low levels, a reliable indication of too much money chasing too few good lending opportunities. According to the latest “financial stability” reports from the Federal Reserve and the International Monetary Fund, all of these measures have gotten worse in the last two years, with many flashing yellow and red on their dashboards of systemic financial risk.

“Anytime you have this much money chasing loans, you are going to have accidents,” a banker told me recently.

If all this newly borrowed money were being used to create new technology or enhance productivity, piling up all this debt might be a risk worth taking. But the evidence suggests that what it is mostly doing is artificially stimulating the economy. Companies have used much of this newly borrowed money to buy back their own shares, pay special dividends to private equity investors and acquire other companies, all of which have the effect of inflating stock prices. The recent wave of richly priced mergers and overpriced stock offerings, and the declining returns offered by recent commercial real estate deals, are all good indications of a credit bubble waiting to burst.

So, is this a replay of 2008?

In some ways no, as Fed Chairman Powell noted in his May 20 speech.

For starters, the regulated banking system is much better capitalized, with banks easily passing stringent “stress tests” now required by regulators to assess their ability to withstand the economic and financial equivalent of a Category 4 hurricane.

And household debt has grown no faster than household income and is concentrated in households best able to pay it back.

Even in the shadow banking system, the structure of investments has changed in ways that make it more difficult for investors to pull their money out at the first sign of trouble, making a “run” on the system less likely. Moreover, unlike regulated banks, shadow banks are not required to immediately “write down” the value of the loans in their portfolios when prices fall on the open market. That limits the amount of forced or panic selling.

But in other ways, there are troubling parallels between the 2008 mortgage bubble and today’s bubble in corporate credit.

As before, too much of the lending growth is driven by investors’ search for yield rather than borrowers need for new capital.

And as before, this excess of supply relative to demand has led to a deterioration of lending standards that started in the shadow banking system and has now spread to regulated banks anxious about a further reduction in their market share. (My favorite stat: During the first three months of this year, according to Trepp, a data company, interest-only loans – loans requiring no payback of principal until the loan is due – accounted for three-quarters of all new commercial real estate loans.)

As before, regulated banks have discovered that they can make almost as much profit selling and lending into the shadow banking system as they can making and holding loans themselves.

And as before, regulators don’t know what they don’t know about the shadow banking system. They don’t know exactly where the risks are concentrated or how investors will respond to a turn in sentiment or an increase in defaults. They don’t know how much leverage the shadow banks have taken on and how much forced selling there will be if loan values fall. They don’t know all the indirect ways in which the regulated banks are exposed to the shadow banking system.

Another worrisome similarity is the way bankers have used their political clout with Republican politicians to fight off attempts by regulators to restrain their risk-taking.

Two years ago, when career bank regulators issued guidance meant to crack down on leveraged lending, for example, bankers went running to Republican leaders in Congress, who threatened a congressional veto unless they withdrew it.

And tucked into last year’s budget compromise was a Republican rider allowing business development companies, which have been springing up like mushrooms in a rain forest, to double the amount of money they can borrow relative to the amount of equity capital they raise from investors.

Perhaps the biggest similarity between the previous credit bubble and this one, however, is the stubborn reluctance of regulators to let some of the air out of the credit bubble before it bursts.

After the 2008 crisis, the United States and a dozen other industrialized countries created a clear and simple mechanism for doing so, known as the “countercyclical capital buffer.” The rationale behind the buffer is that when unemployment is near historic lows and asset prices are at record highs, when credit quality is declining and spreads are narrowing, banks should be required to set aside extra capital to protect against a downturn and reduce the amount of credit in the financial system.

Yet in March, with nearly all of those key indicators flashing red, the Federal Reserve’s Board of Governors voted 4 to 1 not to trigger the countercyclical capital requirements. The lone dissenter was Lael Brainard, a veteran of the Clinton White House and the Obama Treasury.

Randal Quarles, the Fed’s vice chairman and point man on bank supervision, declared afterward that the United States didn’t need to use countercyclical buffers because other regulatory controls were now so effective that the American banking system could weather any turbulence without them. In a subsequent talk at Yale University, Quarles, a onetime partner at the Carlyle Group, a private equity firm deeply involved in the shadow banking system, blamed – who else? – the media for overplaying and oversimplifying the risks from the rapid expansion of business lending.

And in his recent speech, Powell, who spent most of his life as a Wall Street lawyer and banker, assured his audience that regulators “will always act to address emerging risk” – which might ring true if you consider “acting” to mean monitoring, studying, sharing data and “working to ensure that banks are properly managing the risks they have taken on.” In other words, doing everything except actually requiring banks to throttle back on their riskiest business lending.

Meanwhile, the Financial Stability Oversight Council, comprising all the government’s financial market regulators, has also been sitting on its hands, monitoring everything but doing nothing. The council was created by Congress as part of the Dodd-Frank financial reform bill as a last line of defense against financial crises. But as with most other provisions of the law, the policy of the Trump administration has been to ignore or undermine it. The council is headed by Treasury Secretary Stephen Mnuchin, a former Goldman Sachs investment banker who eventually made more than $10 million buying and selling – with partners – a California bank that, after engaging in aggressive mortgage lending, failed during the last housing crisis.

Powell, Quarles and Mnuchin are overconfident for the same reason Fed chairmen Alan Greenspan and Ben Bernanke and Treasury Secretary Henry Paulson were overconfident during the Bush years.

They place too much faith in the ability of financial firms to self-regulate and financial markets to self-correct when pricing of risk gets out of whack.

They place too much faith in outdated models of the economy and the financial system that do not account for the rapid growth of the shadow banking system.

And they ignore the “precautionary principle” – that, in an environment characterized by uncertainty, effective financial regulation requires taking the relatively modest risk of acting too soon – and sacrificing a bit of economic growth, corporate profits and investment returns – to avoid the much greater risk of acting too late and winding up with a financial and economic train wreck.

Powell, Quarles and Mnuchin are inclined, either by biography or ideology, to adopt a stance of watchful waiting while assuring us that today is nothing like 2008 and the situation is well in hand.

So remember those names: Powell, Quarles and Mnuchin. When the corporate credit bubble bursts – when companies can’t repay their debts and the shadow banks collapse and lending dries up and stock prices plunge and the economy again falls into recession – they are the ones who should be hauled up before the court of public opinion and called to account.

See (“A new credit bubble gets ready to burst“) (emphasis added)

There is little doubt that without Donald Trump, the U.S. economy might be “tanking,” with vast ramifications—and ripple effects—for the economies of other countries.

Lastly, World War I was considered the “war to end all wars,” and “The Great War,” which was triggered by an obscure event: the assassination of the Archduke in Sarajevo.

See (“Assassination of Archduke Franz Ferdinand“)

Then, along came Germany’s Hitler, Italy’s Mussolini and Japan’s Tojo, and World War II erupted. With June 6th approaching, I watched a series of discussions on CSPAN about Dwight Eisenhower and D-Day.

His granddaughter, Susan, said that she does not believe there will ever be another world war. I was struck by her naïveté. There will always be wars. It is the nature of Man.

Similarly, there have been economic depressions/devastating “recessions” for centuries, if not millennia (e.g., 2008); and some obscure event can trigger them. The presence of standby letters of credit and other guaranties might contribute to the cascading dominoes. Indeed, as I wrote in the article above:

According . . . the Fed, the aggregate amount of “Financial standby letters of credit and foreign office guarantees” in the fourth quarter of 2018 stood at more than a half-trillion dollars—$566.8 billion, to be exact—which seems exceptionally low.


2 06 2019
H. Craig Bradley


Here is what Warren Buffet said about the future as far as investing goes anyway:

“You can do your research and invest your money and make certain assumptions regarding prices and tends in the economy”. All is fine and good. Then, unexpectedly, an Archduke is assassinated. All Hell subsequently breaks loose and all your assumptions are rendered obsolete in an instant.

Such are the times we now find ourselves living-in. Nobody can predict anything even though so-many charlatans pretend to be able to do so using proprietary algorithms ( “Little Black Boxes”). Its vaudeville time again. “Interesting Times” indeed.

Regarding Growing Federal Budget Opacity from a Knowledgeable Insider (Kathryn Fitts):

And my Further Thoughts Re: The Risks of Offshore Tourism

Ongoing Dangers facing American Tourists Abroad ( Mexico, Latin America, Caribbean Islands or most anywhere, anymore). Everyone needs to keep their guard-up and develop “situation awareness” at ALL Times. Even while on vacation, you still need to constantly watch your back because nearly all Third World citizens want a piece of you or what you have. (Deep down, they hate Americans and Anglos). However, all third world peoples want to be like the White Man ( prosperous). Who would not want to be a “winner”.

So, you just never know for sure who is truly trustworthy. Without trust and confidence, commerce, trade, and eventually civilization ultimately breaks-down (collapses). We are possibly in such a period and yes, it has indeed “happened many times before”. “All have sinned and all must die and face the judgement of God”.

As a former General Biologist in the Corps of Engineers in Portland, Oregon and Range Technician with the White River Nat’l Forest on the Rifle Ranger district in Rifle, Colorado I can offer the following commentary from a professional’s point-of-View.

First, in all mammal populations, the female is the key to population levels or even maintaining replacement population levels for a whole nation, such as the U.S. or Europe. To date, All Western Democracies have not been able to reproduce themselves in recent decades to counter the trend of reduced populations. This has many economic and political implications beyond the scope of my discussion here.

Second, basic (biological) instinct of all mammals of reproductive age is to bear young and reproduce their genes back into the general population. This applies to rats, people, deer, elk or more commonly and numerously, rabbits, as well. Our culture likes to gussy it all up with notions of romance, but overall and especially collectively, its about maintaining the population levels, economy, and ultimately the survival of a whole nation and culture such as Japan or the U.S.A.

Japan has chronic below replacement level birth rates and low immigration. So, they are going to go extinct as a sovereign nation and people by the end of this century. There is no possible way to reverse the trend, absent massive immigration. Japan says “NO” to open borders. As many times previously in history, whole tribes can forever disappear from the face of the earth just because of basic biology.

The salve of importing more third world populations ( Latinos or Middle East Muslims) who are more fecund does not replace the natural biological role of birth rates at a level capable of sustaining nations or their culture (Way of Life). Ignorance of Basic Biology has huge costs, including the ultimate extinction of whole races ( Anglos) and nations (Rome and Latins) ,as well. They just interbreed with the Barbarians and their genes gradually become diluted (or contaminated). Biologically, ethnic diversity taken to extremes always leads to an extinction event, given enough time. This is our apparent fate.

As far as the Rasta Assault of a 51-year old female American Tourist in the Dominican Republic, well again, a root motivator, at least subconsciously, is purely Biological. The females of any species, be it wildlife or humans are key to maintaining population levels. Entire species of animals and birds have gone extinct over the past few hundred years. So, any action that harms females or destroys them eventually results in diminished population levels and massive cultural changes as we have experienced for the past 50 years. Its Biological.

So, the Dominican Republic male resort worker just took it out on her for no visible reason, but what he was actually acting-out was an assault on the symbol of our ability to reproduce our culture and nation, albeit very primal. This is why I give to charities like Walter Hoving Home. You have to protect the next generation if you want to survive as a race or sovereign nation. It only takes a few men to get the job done, but if the female population declines, so eventually does the overall population of any mammal. Any other social view is just so much poppycock.

Whenever you thoughtfully psycho-analyze people’s particular individual motives and actions ( a favorite local or even national pass-time with the laity), what you often uncover is some pretty primitive emotions at work ( so-called “Lizard Brain”). The field of Biology ( A generalist Science) is all about life and animal behavior, starting at the cellular level and on up to the (complete) species level.

You seldom go wrong once you understand the basics and can then ignore the political commentary or pop-psyche. Is way more than a simple case of criminality when foreigners hate you (Anglos) and if given the chance, may attempt to take your life and or property. At some fundamental level, its basically war. Imagine an America populated with a Caribbean Rastafarian majority. ( Misery).

This is the lesson here. In response, President Trump should not be asking any further questions but should ban U.S. citizens from visiting the Dominican Republic. If you boycott a small, impoverished nation such as a Caribbean Island from tourist traffic and dollars, it will soon shrivel-up and the population will turn inward and destroy itself (predation, disease, and starvation).

Again, this is using smart “Biological Warfare” executed by wise public policy and economic policy. A natural two-fer ( Killing two birds with one stone). Survival not necessarily of the fittest, but the smartest or wisest in the Jungle. Stupid people and their kids are going to eventually become extinct. This is the way the world works. Genetic selection is both a biological reality and necessary evil.

The World is in-reality, one Big Jungle inhabited by many feral or wild animals masquerading as civilized man. ( The World is SHIT). It came as a rude awakening for this woman to find out the hard way most of the world is anything but civilized. This hard lesson almost cost her her life. That is the lesson here. We have had it pretty good here at home in the good old U.S.A. However, we have become very complacent and too “Liberal” at the same time for our own collective good. We better wise-up soon as a nation or face the consequences of our folly.

H. Craig Bradley
Retired General Biologist, Range Technician and Amateur Historian


2 06 2019
Timothy D. Naegele

Wow, that is a mouthful, Craig. Thank you.

As I have written—before reading your cite to Warren Buffett (two “t’s,” not one):

World War I was considered the “war to end all wars,” and “The Great War,” which was triggered by an obscure event: the assassination of the Archduke in Sarajevo.

Indeed, things can change in an instant.

Also, American travel abroad is “dicey.” Friends of mine’s wonderful son was killed in Baja, and his organs were harvested. So so sad, to this day.

See (“Who Is Next? The Murder Of A Young American And The Harvesting Of His Body Parts In Mexico”)


3 06 2019
H. Craig Bradley


No offense to Ms. Kathryn Fitts, but there are a number of factors which have brought the world to a new era of permanent constraints to economic growth. By “World” I mean in this order: Japan, Europe (EU), Great Britain, and lastly the United States. Suffice it to say that the next 20 years will hardly resemble the last 40 at all.

We face ongoing declines in the number of live births in ALL Western Democracies which will and are crimping overall economic growth. Live Births in the U.S. have dropped -25% just since 1990 alone! So, in the long term, reduced economic growth (GDP) translates into overall stagnant wages when you pull-out the effects of inflation. Thus, more consumers take-out ever more debt and continue to pull consumption from the future into the here and now. In fact, this is what we have been doing en-masse since 2007. More and more debt from all sources (Private, Public, and Corporate) further suppresses economic growth over time. President Trump can not do any different, under these terms and conditions.

So, we are apparently in a prolonged period of deflation. Unfortunately, we are burdened by ever larger debt loads which have suppressed the Velocity of Money (M2 Velocity). As we spend more and more to service this overall debt load, taxes increase to attempt to keep the beast alive and less discretionary spending results. More credit to enhance consumer spending results in more debt payments and less discretionary money. Downward Spiral, as they say. As evidence of the trend thus far, just observe all the retail business that have already closed and more to come.

While the internet is seen to be the blame, the bigger forces at work are demographics ( reduced or declining population growth), declining labor force participation of 25-54 year olds, reduced productivity made worse by increasing debt service, and declining trend GDP ( <2.0% ).

Stagnant wages and constrained corporate profits around the world will further affect stock market returns ( projected to be maybe 3% + inflation/annually by the late John Bogle, Vanguard Founder) and will impact many public employee pension funds and their returns. Right now, according to the Pew Foundation Studies of Pension Funds, 33% of all public employee pensions are only 33% funded. These funds will assuredly fail and go insolvent, forcing benefit cuts of up to -50% in future years. In the meantime, property taxes will go way-up in some jurisdictions. In response, more residents relocate to low tax or no (income) tax states in an attempt to stay ahead of this progression.

The rest of the public employee pension funds can not "make it" long term with annual total returns less than 7% without either significant tax increases (California and CALPERS, for example) or benefit cuts. Some states have taken meaningful steps to reform public pensions by spreading the risk around using part pension and part 401(K), such as Utah and Arizona. These states will be relatively more stable financially in the future, but the trend of chronically slow economic growth and wages is way too strong and embedded for any of them to escape totally unscathed.

Therefore, its suggested everyone should expect and prepare to take a hit as "austerity" further envelopes the United States and most of the rest of the world, as well. It sure won't be fun anymore for those conditioned to get their jollies by going to the local mall and "shopping until they drop". Have to find another pass-time besides consuming.

We are ALL headed for trouble (civil unrest) and even worse, collectivism with a vengeance once President Trump is out-of-office. California is about 10 years ahead of the rest of the United States. Be advised, in the end, "there is no place to run, no place to hide". To me, it would appear we face many of the same circumstances in the global economy today as we had back in the 1930's when FDR began our journey down the road of Socialism in a big way.

So, we never went back to truly being a Republic since 1932 either. No public policy has worked or reversed this secular trend in my lifetime. I can clearly see it, while others can not. Believe me, we are locked-in. As things grind-down even more in the future, we face about a 50% chance of another major War, probably with Asia (China). We do not seem willing to go down without a fight. Sadly, we lack the political will to reform and restructure to encourage savings and not spending (consumption).

So, without true economic reforms, we just pile-on more debt, experience a few transient quarters of elevated GDP Growth and tax revenue, and then slump back-down to trend. Take on ever more debt and "rise and repeat". Cycles that make us feel good, then not so good over and over. ( like a drunk who sobers-up and then goes on yet another binder). Its as if we are stuck in quicksand and every attempt to extract ourselves causes us to just sink that much further. It even reminds me of the Greek Mythology of Sisyphus to an extent. The Greeks knew what Tragedy really is. We seem to be learning it anew.

Ms. Kathryn Fitts financial analysis about ongoing "Deep State" systemic theft (heist) of public assets "out the back door" is quite disturbing. "Asset Stripping" from the Treasury while at the same time adding to the public debt is one area where we could improve our (collective) future but the political will is definitely not there and the public is so uninformed and dumbed-down they could never comprehend it and vote for financial reform anyway.

Basically, we are way too corrupt as a nation and internally "weak" to take the necessary corrective measures. So, like the Greeks when they fought the Persians, and lost and were taken into captivity (slavery) "we too must do what men must do and suffer what men must suffer".

So, the status quo is our collective fate as we sink further into the pit of (financial) quicksand. Its how all past empires or civilizations, such as Rome, declined and fell before us. History repeats because human nature never really changes through the ages. We all should at least know that much but many do not or don't care about what happened to the Roman Empire. So be it.


3 06 2019
Timothy D. Naegele

Nothing is “written.” Ronald Reagan proved that; and Donald Trump is proving it again.


3 06 2019
H. Craig Bradley


Granted, the late President Ronald Reagan was a much better and therefore, popular president than any that preceded him since Kennedy or followed him. President Ronald Reagan was an era president, as well. During his period in office, he spoke and acted like a real or traditional conservative. In fact, he was the last of the traditional Republican conservatives, as it turned-out.

As much as President Trump is treated as a Republican champion, President Trump actually more closely resembles an independent in the way he administrates and conducts himself. Unlike the late Senator John McCain, President Trump is more of a genuine “Maverick” rather than a fake one. However, President Trump is NOT a “conservative” on account of all the new debt he is creating and adding to our already sizeable National debt. Rather, I regard President Trump as a kind of “progressive” in his own right, all marketing aside.

No true-blue conservative would add upwards of $1 TRILLION of annual deficits to our already sizeable national debt and then simply ignore it. So, on the contrary, our debt-based economic problems have not gone away and we are still suffering the same year-to-year anemic annual GDP as occurred under President Obama ( about 2%/year). Personality changes in the White House may or may not affect voter or investor sentiment, but it can never overrule the reality of debt and basic economics for very long, at least. Otherwise, we could just lay back and enjoy the continuing fruits of “Reaganomics” from back in the 1980’s.

This would not be remotely possible, since the whole world has changed radically since the Reagan Presidency. Any other view is more of a “reality show” than actual day-to-day reality. Traditional “conservatism”, except in places like Utah or maybe parts of Texas is dead, as Millineals are more amendable to socialism or at least, a much more aggressive and socially active government.

In fact, Millineal values have already changed the tenor of the U.S. Government and many state governments. This trend will continue and get even stronger in the future with eventual adoption of Universal Basic Income and Medicare for All or some other version of a new National Single Payer health care insurance policy option. Of course, to pay for more government services will necessitate higher taxes and more taxes upon everyone who is any kind of “producer”. We will grow even less productive and “lazy” as a nation when these govt. programs are introduced, mark my words.



3 06 2019
Timothy D. Naegele

Thank you, Craig, for your comments.

First, John F. Kennedy was the most despicable president in U.S. history. If you or anyone else has any doubts whatsoever, please read the following article and all of the comments beneath it.

See (“John F. Kennedy: The Most Despicable President In American History”)

Among other things, Richard Nixon won the 1960 presidential election, but the Kennedys, Chicago’s mob boss Sam Giancana and others in the Mafia rigged the elections in Chicago and West Virginia, and tipped the election in JFK’s favor, which was traitorous unto itself.

Second, yes I agree, Donald Trump is America’s first Independent president, which is wonderful. He is not beholden to the despicable Left, to FAKE NEWS, or to the equally-despicable RINOS in the GOP like John McCain, Mitt Romney and Paul Ryan. Indeed, lots of us are ashamed that we voted for the latter three, except the only other choices were to vote for the racist, treasonous, anti-Semite Barack Obama, or not vote at all.

See, e.g., (“Is Barack Obama A Racist?”) and (“Should Barack Obama Be Executed For Treason?”) and (“DEMOCRATS ARE ANTI-SEMITES”) and (“The Democrats Are Evil But Smart, While The Republicans Are Neanderthals And Dumb”)

Lastly, your concerns about the debt are real.


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