Economy in Meltdown due to Imploding Derivatives Monster and Toxic Debt
Economics / Credit Crisis 2009 May 01, 2009 - 01:14 AMBy: Sharon_Kayser
The Swimming Naked Prophecy - It's only when the tide goes out that you learn who's been swimming naked - Warren Buffet (2007). It surely kind of prophetic to hear a market guru, like Buffett, embracing such a philosophical approach two years ago as the Berkshire profits plunged 96% in early March amid the dysfunctional world economy. It is even more baffling to hear him blame the derivatives after admitting that the firm' s equity holdings had lost 44% because of them. One has to wonder exactly which game is he playing. In 2003, he was among the very first experts to warn about CDOs callin derivatives *financial weapons of mass destruction* and *time bombs*.
This grabbed the media's attention and put on a red alert a myriad of intrigued journalists who directly began to investigate the opacity surrounding these innovative products, all of which led them to the conclusions that Buffett would eventually be proven right. Yes, this was the ultimate CDOs horror story that circulated for many months on the Net. Talk about complacency! But even more troubling: how does it come to be that he was unable to take action in order to prevent his shareholders from dealing with this nasty surprise? And one might ask too: how does it come that Buffett' shareholders didn't do anything to reduce Berkshire's exposure to those exotic financial deals... Of course everybody reaped highly satisfying returns for a while. But that was then, and this is now. As of October 2008, the Size of Derivatives Monster was coming down to $190K per person on the planet! It is not a matter of 'if' but 'when' and when this derivative bubble explodes, we will see who was swimming naked. What a clever man, Buffett, whose private wealth won't most likely suffer too much from the Greatest Depression.
Although Tens of thousands rally at tax day 'tea parties', it is still kind of challenging to explain to the average Joe and Jane that our economic system is legalized 'grand robbery'. As a matter of fact Westerners are largely silent as their nations are systematically destroyed. When profits are privatized and losses socialized, we definitely deal with an undeniable feudal component. And of course taxpayers wouldn't be victimized if taxation and usury didn't exist in the first place: it really is the power to destroy. David M. Walker, former Comptroller General of the United States, forecasts that taxes could easily double, which would amount to $483,000 per American household.
Optimal indebtedness has made money scarce. According to Evans-Pritchard , unless this capital is forthcoming, a clutch of countries will prove unable to roll over their debts at a bearable cost. The 'human calamity' has been announced by the World Bank! Debt is not money, it’s a charge against future money. And making people believe that it has to be considered as an asset is simply fraudulent. This has nothing to do with the 'right' or the 'left' but morality, yet we can see why political parties use the 'anti-tax' sword when they see it fit. But which one is truly 'right' on? , one would ask. Again please follow the money: the lesser the taxes, the lesser government fraud, it is logic applied.
IMF just predicted that the US economy will be worse than the world economy in 2010. But why the heck wasn't this aired on all TV broadcasts several years ago? The answer to that question is just more than appalling. 'Few Americans realize that over the last 94 years they have been enserfed', Paul Craig Roberts wrote. The scheme is obvious. The real crime lies in the 'Radical Redistribution' of wealth, asserted Chuck Collins in a Buzzflash interview. Alas it is only when this process is taking place that we can forecast a full-fledged systemic crisis. But at the very heart of this worldwide financial Greek tragedy, lies the very root of the current crisis is Money itself... It’s charging interest, stupid!
If you do not know Nomi Prins yet, her book titled 'Other People's Money' deserves to be put on your must read list a.s.a.p. Her work is an appalling indictment and it will irate you beyond anything you can imagine. Indeed - Prins argues that the free market system is in the hands of criminal wizards whose machinations have overrun the government while claiming to be its champions - and that there is no way to stop those scandalous doings with the system now in place. Laws are simply inadequate to the task. She also describes at length a whole industry that feeds on unlimited quantities of easy money to fund expansion. The most astonishing is that all the so-called (de)regulations were drafted under Clinton's tenure. The funny thing is that Bill Clinton asked not to be blamed for the economic debacle.
The most damning evidence is when Nomi Prins explains why banks don't care about the failures at all: the word 'losses' is not part of their jargon behind closed doors. The name of the game in town is milking the system, using every trick possible to make *some* incredibly rich and leave everyone else holding the bag. According to her knowledge, investment banks have sold up to 30 times every mortgage in America. This brings us back to Buffett's dire CDOs warnings... with a financial structure like this, everything is built on sand. How ready are you and every member of your family to lose the $190K - which you do not have on your bank account? Although these are notional values, the threat remains very real. Think of AIG, which already had approximately $500BN derivatives exposure and then start imaging what would happen if the same toxic instruments engulfed other multinationals.
IMF sees a long and severe slowdown, as of April 14, and warned of 'worrisome parallels' between the current crisis and the Great Depression, despite the drastic measures already taken by central bankers and global leaders. This nefarious organizartion, responsible for the misery in the developing world, figured out that US taxpayers would have to face bill of $1,900bn or $6,200 per person, children included, to stabilize the world economy. In other words keeping the bubbles inflated no matter what. World citizens are slowly being siphoned by the mother of all financial vacuums while the system has clearly become predatory. Zombie Banks feed off on bailout money and ultimately whatever stimulus injections. As if that weren't enough, U.S. 2008 household wealth fell $11.2TN from a year ago and 50% of them are two paychecks away from losing everything. What is going to happen once they realize that they fell for a game called ' The equity illusion'? With the system we have, massive liquidations are unavoidable, they are bound to occur since every banknote in circulation is a debt (IOU) that must be paid pack. Real money doesn't exist because if we paid all our debts, there wouldn't be any money left in circulation. Period. So it isn't by mistake that the clock ticks towards a Financial Judgement Day.
The 'Max Keiser' Solution
In the meantime another a massive $410BN spending bill was passed amid the collapse of factories' output tumbling at a rapid pace globally. Even the Chinese begin to question their massive holdings of Treasuries and other U.S. debt - and getting worried as witnessing their exports plunge 25.7% in February and which they plan to address with a $585 billion stimulus. Billions here, trillions there. But how wise is it to pour so much into a scheme that caused to date a $50,000bn wipe out in asset values worldwide? Yet they are still making us believe that 'they are on top of it' while ignoring the Japanese economic lessons of the 1980's Asian meltdown. The end result is a damning evidence: alas February, the Times.uk reported that Japan fell into a spiral of despair and currently is on the brink of implosion according to Roubini's rgemonitor.com. Japan Says Economy Is in ‘Severe’ State, read a Bloomberg headline on April 17. But wait, there is more: on the top of that a major contraction could grip China at any time - unless its economic managers start printing faster their own shadows. To keep the record straight, China experienced double-digit growth between 2003 and 2007 and then recorded 9% growth in 2008... now down to 6.1%!! This horrific news surely explains why China plans to slash new purchases of US debt. Indeed an article ran this month by the American Thinker revealed that in the first quarter of 2008, the Chinese purchased $153.9bn US Treasuries versus a mere $7.7bn in the first quarter 2009. Rest assured, the boomerang effect has been long overdue.
Beyond America, the picture isn't looking better at all. April alone give us a good glimpse of what lies ahead: the G-8 copes with its first bankruptcy, Singapore was foreseeing the worst economic plunge amid a shrinking GDP; that the very survival of the euro will soon be thrown into serious question; that Russia's banking problem is just beginning; that the full blown bust in Dubai is a story that gets uglier by the day, that toxic debts could reach $4tn worldwide; that the Irish's economy is in free fall collapse; that Switzerland is tipping into deflation, that the European bank bailout totals $4 Trillion... etc. But wait, the cherry on the cake is a very disturbing CNBC slideshow about The World's Biggest Debtor Nations. The results will get you to scratch your head for a while, especially if you thought that America would be ranked first... sorry, it is Ireland with an external debt (as % of GDP) amounting to 811%, followed by The UK then Belgium! The Scandinavian countries are also cited as much larger debtors than the U.S. This is freaking unbelievable, isn't it?
Don't listen to the policymakers who obviously have started shooting themselves in the foot - the spin is getting enforced no matter what. We just need to listen to a so-called specialist like Christina Romer, an economic historian at the University of California (and on Obama's payroll), to understand why our fate is sealed. 'We Need Banks to Lend Like Crazy', she interjected on CNN a month or so ago. Talking of madness, the Fed is planning 15-fold increase in US monetary base, contended Eric deCarbonnel. At the end of April, a Federal Reserve press release announced the purchase of up to $1.25Tn of agency mortgage-backed securities. This move clearly is a 'silent bailout', isn't it?. The system is so rigged that insiders can no longer hide their incestuous dealings. What are we to think of the White House selecting the head of mortgage giant - Fannie Mae's president and CEO - as an assistant treasury secretary? The infamous Fannie Mae, which got bailed out last September 2008 (along with Freddie Mac). No, really, we cannot make this stuff up. The combined losses amounted to approximately 80% of the companies' share values and dwarf the savings and loan rescue in the 1980, CBSMarketwatch wrote.
More dramatically, even on the Keynesian side, dissent rages: Stiglitz said that Obama's Wall Street ties had doomed the bank's rescue; and Roubini declared that the spin machine about the banks' stress test has become latest 'fudged' experiment invented by the wizards of finance, which now clash with each other over how to disclose results. You see, this new game has gotten some geniuses concerned at the potential damage to weaker institutions. The word 'reform' is a term meaning 'cover-up' for old regulations firing back and exposing their conflicts of interests? They just cannot hide anymore. The whole situation takes another surreal turn as San Francisco Federal Reserve President Janet Yellen said policymakers need to pop bubbles... does she mean that it is time to pop the world's mega bubbles? Are we going to allow the enablers go away with... murder? Thanks to Max Keiser, a famous European market analyst versed in hard currencies, for reminding us that throughout history, bankers responsible for the impoverishment of the community got the harshest penalty possible: DECAPITATION.
Even Soros, the closet Bilderberger, admitted that Americans have been 'Living in a Fool's Paradise' that's gone forever and blamed Obama for having missed the great opportunity to fix the banks. Talking of banks, this could well be the beginning of a trend as the term 'bonus' is sparking rages among the populace: Bloomberg online was the first to mention that Bank of America may increase salaries by 70% for its investment bankers. They are about to fool us again!
Mike Whitney, an extremely prolific financial journalist agrees that the Economic Meltdown 2009 is worse than the Great Depression. The situation is so dire that last month the FDIC warned it was running out of rescue funds and that it could go broke this year as bank failures mount - claiming that was due to the failure to collect insurance premiums from most of the banks over the last 10 years. Let's see: does it mean that even when times were booming the $harks couldn't care less about the (our) future? When one is aware that 99.9% of the money supply consists of debt to private banks, it is truly about time to look for an exit. Adding leverage won't glue the house of cards: all we can do is trying to stay out of debt and reduce expenses. And, this is what will spontaneously happen down the road when consumers enter the Great Squeeze - everything will grind to a halt. Dissent is brewing: some well respected but misguided Keynesians have stepped ahead and blasted Tim Geithner's economic plan as ' extremely dangerous'.
Stormy horizon in sight. The United States will experience a painful readjustment since 50% of Americans are in a collective state of financial depression CBSmarketwatch contended:
A large number of households say that even one missed paycheck would spell financial ruin. And even in households that remain well off, the surveys show a festering fear that financial problems are lurking. "This is flashing so bright red," said Paul Ballew, senior vice president of Nationwide Insurance Co. "Roughly 60% of the population was ill-prepared (financially) before the meltdown." ... More disturbing is that 28% said they could not make ends meet for longer than two weeks without their jobs. (03/20/09)
After having read all this, what would you say if you heard that the real Jobless U.S Rate turned out being 19.8%? Would you believe this double digit to be accurate? Please click on the link if you have any doubt.
Toward A Global (Civil) War And Food Shortages
Does the Pope know something that we don't, when warning of 'a desert of godlessness' in Good Friday address?
"We witnessed the collapse of the financial system," Soros said at a Columbia University dinner. "It was placed on life support, and it's still on life support. There's no sign that we are anywhere near a bottom." ... "I don't remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world," Volcker said (Reuters - 02/21/09)
Four weeks after the FDIC warning, the G20 met to discuss a big increase in IMF fund (more or less $1TN) after admitting that it would no longer be able to help the world anymore. Alas we can already assume where the money will be coming from: the so-called rich taxpayers from the West. However, after a quick check, this appears unrealistic. The downturn has sparked unrest across Europe. What is coming is very serious, so serious that it will be remembered as a 'double-whammy' of the worst economic crisis in living memory, the express.uk. declared as it revealed top contingency plans to address possible civil disorder and riots. Not only are the IMF' safes empty, it also asserts that world economy is getting so unpredictable that it could lead to war. So what does this mean: that taxpayers have put their trust into an entity which is completely failing its purposes? Furthermore how to trust, again, our monetary scientists at the International Bank Of Settlements - BIS - who didn't see the global collapse coming but are planning to implement a global currency, a project that can only be made possible if all currencies have failed in the first place? The global economic crisis isn't about money - it's about power. And in order to take over the world, an unprecedented event needs to be create so masses would endorse the Big Brother. It's undoubtledly a collapse by design. Most appalling is that the powers-that-be have become able to predict the irrational manner in which consumers will make economic decisions.
Outrageously, when currencies are destroyed food shortages are nightmares coming true. Last November, the Food and Agriculture Organization predicted that the downturn could trigger a new wave of food riots across the developing world. What the organization didn't say is that they already had broken out in about 20 poor countries due to the biofuel craze which made the price of wheat triple, corn double, and that of rice almost double. Talk of throwing oil onto the fire! If the Greens are really serious about helping humanity, it's about time for them to consider other alternatives than policies encouraging murder under the guise of decreasing the reliance on oil:
Even worse is the bioethanol craze. Politicians in both the United States and the European Union are mandating that vast quantities of food be turned into fuel as they chase the chimera of 'energy independence'. ... The result of these mandates is that about 100 million tons of grain will be transformed this year into fuel, drawing down global grain stocks to their lowest levels in decades. Keep in mind that 100 million tons of grain is enough to feed nearly 450 million people for a year.... ( more)
Although Americans fell asleep at the wheel, they are slowly coming back to their senses, realizing that Wall Street speculations were not under the scrutiny of watchdogs but Madoff-like people. Gerald Celente, a prominent forecaster, believes that a violent Revolution will start soon. He rightfully argues that Americans are not going to accept seeing their taxes raised as they are losing their jobs, homes and retirement savings as they unwittingly fund the merger of state and corporations - which is called fascism.
On a more positive note, if the United States is now pointed at as the main culprit of this unraveling crisis, many of its citizens and bright thinkers are most likely among the very few who understand the spirit of free enterprise as advocated by the Founding Fathers. And if any positive changes are ever bond occur in the destiny of the world, the country may well find itself, as an instigator, at the center of a new era.
By Sharon Kayser
Sharon Kayser, screenwriter, works with the Award winning documentary film maker Danny Schechter. Her dramatization DEBT INC is available for sale. Her goal is to organise monthly workshops in Manhattan sponsored by your donations, and which will start in August this year. In her spare time she is an autodidact embracing futuristic concepts such as The Venus Project.
© 2009 Copyright Sharon Kayser - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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