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Robert Chapman,
[economist] wrote more than a decade ago, " The point everyone misses is
that buying derivatives is NOT investing. It is GAMBLING, insurance and high
stakes bookmaking. Derivatives create nothing."
They not only create
NOTHING, but they serve to enrich non- producers, at the expense of the
people who do create real goods and services. HA - who's fooling who? You'd
think everyone in Washington was on a 'day pass' from the local institution,
feigning shock that this has come upon us. Aside from Bush - they all
knew. Why do you think Greenspan left on the first lifeboat with his stash.
In congressional [useless] hearings in the early 1990s, derivatives
trading was CHALLENGED as being an illegal from of gambling. So
what! The practice was legitimized by Fed Chairman Alan Greenspan, who not
only lent legal and 'regulatory' support to the trade but actively promoted
derivatives as a way to improve 'risk mangement'.
This was done
to boost the flagging profits of the banks; and at the larger banks and
dealers, it worked. BUT the cost was an increase in risk to the entire
financial system.
Derivatives trades have
grown exponentially, until now, they are larger than the entire global
economy. Now do you understand - the CRISIS of hurry up, we're late -
we've late. A monster totally out of control was created. Few bozos in
Washington have a clue - they're running on FEAR.
Sit down. If you
think $700 Billion is a BIG number, 'hold onto your wallets' as one dubious
character in my town is fond of saying. The Bank for International
Settlements reported that total derivative trades exceeded, one
quadrillion dollars - that's 1,000 trillion dollars.
Ah, and you're worried about that $840.00 for your home heating
tank ( 200 gallons).
How is that figure possible you ask? The gross
domestic product of all the countries in the world is only $60 trillion
dollars. Sit down: The answer is that GAMBLERS can bet as much as
they want. They bet MONEY they don't have, and that is where the HUGE
increase in risk comes in.
Lately
you've heard the term 'Credit
default
swaps' ( CDS). These are the most widely traded form of credit derivative.
Credit default swaps are BETS between two parties on whether or not a
company will default on its bonds. In a typical default swap, the
'protection buyer' gets a large PAYOFF from the 'protection seller' if the
company defaults within a certain period of time, while the 'protection
seller' collects periodic payments from the 'protection buyer' for assuming
the risk of default. Credit default swaps resemble insurance policies, but
there is NO requirement to actually hold any ASSET or suffer LOSS, so Credit
default swaps are used to increase profits by GAMBLING on market changes.
The past several years
has been one grand UNBIRTHDAY party after another. We
weren't invited - but we're asked to
clean up the mess!
A Hedge Fund could sit back
and collect $320,000 a year in premiums just for selling 'protection'
on risky junk bonds. Sort of like GANGS selling
'protections' to various small business owners in disreputable
neighborhoods.
The 'premiums are 'free money' - free that is
until the bond goes into default , when the Hedge Fund could be on the hook
for $100 million in claims! Oops - what if the Hedge Fund
doesn't have the $100 million? The fund's corporate shell - or limited
partnership is put into bankruptcy ; but both parties are claiming the
derivatives as an asset on their books - which they now have to write
down. PLAYERS who have 'hedged their bets' by betting BOTH ways cannot
collect on their winning BETS; and that means they cannot afford to pay
their losing bets, causing other PLAYERS to also default on their bets.
Thus the dominoes go down in an avalanche of cross
defaults that infects the whole banking industry and jeopardizes
the global pyramid scheme. Warren Buffet (billionaire investor) called
'derivatives' the ' weapons of financial mass destruction'. It
is also why the banking system cannot let a MAJOR DERIVATIVES PLAYER to go
down --and it is the banking system that calls the shots. The Federal
Reserve - as most intelligent - informed citizens are aware of, is owned by
a conglomerate of banks. Mr. Paulson - now heading the US Treasury was a
former CEO of Goldman Sachs. I believe in 2006 - his salary was $163
million. Upon his move to the Treasury (nothing like the wolf in the hen
house) he got a multi million dollar golden parachute and multi millions in
Goldman stock.
Daniel Amerman - Financial Sense maintains
that the government's takeover of Fannie Mae and Freddie Mac was not
actually a bailout of the mortgage giants.
- While Joe
Sixpack's kid go to jail for a joint - or stealing a car
; the Wall Street Hedge Hogs Fannie Mae and Freddie Mac
boys - cooking the books, lament that their crime has
been found out. Too big to fail and it appears that
they're 'too big to jail?'
It was a bailout
of the
financial derivatives industry, which was faced with a
$1.4 trillion 'event of default' that would have bankrupted
Wall Street and much of the financial world.
The Risk: If the mortgage giants were not bailed
out by the government ---should they default on the $
5 trillion in bonds and mortgage - backed securities they
own or guarantee, settlements are immediately triggered on
$1.4 trillion in credit 'default swaps' entered into by
major financial firms, which have PROMISED to make good on
Fannie/ Freddie defaulted bonds in return for VERY lucrative
fee income and multi million dollar BONUSES.
Thus the value of the vulnerable bonds plummets by 70%,
causing $1 trillion ( 70% of $1.4 trillion) to be due to the
'protection buyers'. This is more money than the financial
institutions have to spare. The Credit default sellers are
highly leveraged themselves, which means they depend on day
to day lines of CREDIT just to stay afloat. When their
creditors see the trillion dollar hit coming, they pull
their financing, leaving the strapped institutions with
massive portfolios of TOXIC assets. The avalanche of cross
defaults begins until you have every major investment bank
and commercial bank UNABLE to meet its obligations.
This triggers one massive round after another --trillions
upon trillions upon trillions. So we have the Federal
government / financiers stepping in to prevent a world wide
disaster ---even though this rewards these corrupt
'speculators' at the expense of work a day Americans/
shareholders etc, who will get wiped out. Who cared
(especially McCain who profited) about the thousands who
lost their pensions in the Savings & Loan heist?
As Amerman
states: " It's the best GAME in town. Take a huge amount of risk, be paid
exceedingly well for it, and if you screw up - you have proof that the
government will come in and bail you out at the EXPENSE of the rest of the
population ---who did not share in the profits. Thus we have the privatization
of profits and the socializing of loss.
Professor Nouriel Roubini ( Global
EconoMonitor) warned:
"What we are facing now is the beginning of the
unraveling and collapse of the entire shadow financial system, a system of
institutions (brokers, dealers, hedge funds, private equity funds, SIVs etc,)
that LOOK like banks (as they borrow short, are highly leverage, and lend and
invest long in in illiquid ways), and thus are highly vulnerable to bank -
like -runs; but unlike banks they are not regulated and supervised (thank you
President Clinton - Congress - former Senator Phil Gramm) . They don't
have access to deposit insurance and don't have access to lender of last resort
support of the central bank.
As Professor Roubini states : 'Another hole has been
plugged in a very leaky boat - keeping it afloat another day. How long is can
these stopgap measures be maintained?".
Today, we've heard that
'hearings' will be held, to find out the source of this crisis. This is a
joke - just another, 'after the fact' bunch of nonsense, that Congress
engages in - to make it look as if they are somewhat engaged / they're not.
This is just another, Mrs. O'Leary's Cow Seminar, about Lantern Safety
(Chicago Fire).
We've also heard the President (others) already remarking
(now that the vote is over), that this won't be a 'quick fix', that
it will 'take time'. Already - with this $700 BILLION not even given away
(mostly to foreign banks - speculators) they're already murmuring that,
'it's not enough'.
Washington ( specifically Republicans) refer to us
as 'small people - Joe Sixpack'. Meantime their
'brilliance' - ala Harvard - Yale - Princeton
have brought the nation to ruination. They are
merely
gangsters in designer suits - slurping
down 30 year Scotch instead of a Bud Light! These
icons of
finance/politics, now need
to rip off Joe Sixpack - living the 'low life' - to
cover their asses.
Of course it
isn't. Meantime we're being dutifully
distracted, by a senseless election/ and the
bovine gaffs of Caribou Barbie ( to distract us).
What are we voting for? More war ---rubber stamp
bailouts - and a get out of jail card for the
legion of financiers/ politicians etc, who lived
lavishly while bankrupting the nation?
Who pray tell, is bailing out Mr and Mrs. America?
It appears that there are those who are 'too big to
fail' and others who are 'too small' to give a damn
about [ us].
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We are told, that
while (darn), this 'get out of jail card vote', may not do
anything concrete for Main Street , except psychologically, with
the FDIC covering $250,000 in bank accounts . This should have us all
breathing easier. After the trillions they've robbed, I can see why
this might seem like mere 'chump change' to them. Detached! It appears that
they think everyone (including Joe drinking his cheap beer), has a
quarter million gathering dust at the bank. That's why tens of
thousands from Seattle to Hawaii to Florida are living in tent cities or in
their cars. These are the dispossessed from various storms - the laid off
steel/textile/ paper mills/ manufacturing plants and now real estate agents.
Workers in Hawaii live in tents unable to afford rising rents with
only the obscenely wealthy (Oprah) able to buy up thousands of acres
that native Hawaiians cannot afford.
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Not one (ordinary) person will be helped in this $850 billion dollar
HEIST. What we're experiencing is a 'home invasion' by LOAN SHARKS -
on 300 million + American homes. We're supposed to believe that
there were some kind of heroics going on because legislators worked
round the clock in an atmosphere of FEAR.
John McCain rushed to Washington like Mighty Mouse - to save the day.John
who has missed approximately 435 votes and hasn't been in Washington
since March. His 'conservative Republican buddies' told him to 'cop a walk'.
Washington and the media would like the people to think that this
horrific meltdown (all a cover) is due solely to people buying homes that
they were unable to afford. Few have talked of the great fraud perpetuated
against financially challenged people - no match for slick talking loan
officers. The banks weren't worried - New York Times Sept 30 -1999:
"In a move to help create home ownership rates among minorities, and low
income consumers, Fannie Mae Corp is easing the credit requirements on loans
that it will
purchase from the banks and other
lenders. A pilot program will extend home mortgages to individuals
whose credit is not good enough to qualify for conventional loans. (note
this was made nationwide by Spring 2000."
In addition - banks, thrift institutions, mortgage companies pressed
Fannie Mae to make more 'loans' to so called sub borrowers. Fannie Mae
expanded home ownership for millions of families in the 90s by reducing down
payments.While this may not pose a risk in flush economic times / there's
big trouble once the house of cards starts falling. Fannie Mae does not lend money directly to consumers. Instead it purchases
loans than banks make on what is called the secondary market.
Echoes
of the Great Depression with millions of homes now
foreclosed on. I fear that selling pencils
won't see
us through this go round.
Once upon a time - before the Hedge Hogs - and soulless
nation robbers, got protective laws repealed, and
set their buddies in high places of decision making / a
couple (person) wishing a mortgage visited their local
bank. A certain down payment was required - a
credit check - and one's job history was investigated.
After Gramm/Clinton - Financial Modernization Act etc
--all this ended. "The reason so many people are losing
their homes is because they were chummed into buying
homes they couldn't afford. Back in 1998, the Rev Jesse
Jackson accused Fannie Mae of racial discrimination and
began a campaign to get major shareholders to sell their
stock. To shut him up, Freddie Mac began to give money
to the rabble rouser's causes, not the least of which is
his Rainbow /Push Coalition. Thus Jackson formed 'Catch
the Dream' - conning people into homes they were sure to
lose. Now this flim flam huckster has a new theme song,
'Save the Dream'. He's asking that Michigan
taxpayers bail out Fannie and Freddie's victims." CJ
Williams Wherever there's a buck to be made - there's
Jesse.
Today with banks selling
mortgages, one (those who have mortgages) is hard
pressed to know just who holds their mortgage? It maybe
a bank in Singapore - Australia or Germany etc?
With each sale - the price was inflated, thus there's no
way of knowing who holds these mortgages or their true
worth?
The Ghost of Christmas Future USA --company
housing (now called 'work force) rentals. "I owe my soul to the company
store".
With the
Ponzi scheme revealed, and the house of cards
falling in on them - the word is out that credit is
being withheld - with banks afraid, even to loan to
one another. Even those with sterling credit ratings
- down payments etc, are being refused home loans.
No more easy credit - despite what the President
says about getting that car loan -mortgage - or
student loan; the reason for this hurry up vote!!
Home ownership I fear will ( as in feudal times) be
a privilege of the very few. Others will reside in
'work force' rental housing - now being introduced
(quietly) across the country.
Oops, we've got a problem - we've got to
'borrow' this bailout money from those who are tapped out!
'The borrower is slave to the lender' Proverbs
This $700 billion is only the
beginning. It's a number they pulled out of their backsides, because it 'was a
big number'.Without student loans, higher education will exist, again, for
only the children of the well to do (connected). Our infra-structure is being
bought up by foreign interests (including turnpikes which we paid for).
Imagine if these buffoons had worked round the clock to secure needed health
insurance (such as they have - we pay for) for the tens of millions without!
People in super -power USA, are dying on ER floors - dumped out of
hospitals to mission districts - and unable to afford needed
prescriptions, with the US charging, more than any other
industrialized nation (thanks to Pharmaceuticals writing the bill). Speculators
have driven the price of home heating oil and gasoline to obscene prices.
Rest assured nobody in the Senate Chambers - Department of Defense
or the
White House will be found frozen to death this winter. McCain has eight doctors
- many can't find one!
Luis 21, blind and paralyzed doesn't even get
a purple heart. He was ordered to tear down a
statue of Saddam and it fell on him. Alas, nobody informed Luis of
Greenspan's admission that,
yes, the war was about "OIL".
War is costing (borrowed) upwards of
10 billion per month. The interest alone on all this 'borrowed' money is
upwards of 450 billion per year. This is money that is being thrown to
the winds / fighting the 'concept' of terrorism. One would be better off
attempting to catch the morning fog in a bottle. Terrorism? I say economic
terrorism that destroys an entire nation - should have the military
industrial complex on Wall Street, not off in distant lands.
Besides the Hedge Hogs - financiers - bankers
- brokers etc; war has been very very good for the OIL Hucksters. They've
made the most obscene profits in HISTORY. Still McCain doesn't think their
12 billion in subsidies needs to cut. Palin is screaming 'drill -
drill drill'. Why not? Alaskans get thousands ( royalty checks) each year
for every man - woman- and child (which has the Palins cleaning up). Joe
Sixpack? Palin and her oil manager hubby make $250,000 +
per year (not counting oil royalty checks).
One
cannot support a nation with this massive debt ( 11.5 trillion) - on service
sector jobs: Walmart - Home Depot - Rite Aid - Prisons - Casinos -
Waste Industry - etc. While tens of thousands of Wall Street financiers -
brokers - speculators etc, are now jobless/ President Bush had the
gall to lament over their joblessness, remarking that he would see to it
that they had 'job retraining'. TRUE. Perhaps they can join the
millions of textile - paper mills, auto industry - steel workers -
Maytag workers etc and retrain as nurses aides - Walmart Greeters - or
better yet, blackjack dealers? John McCain advised steel workers in
Ohio to 'sell their stuff on Ebay' to make a living. In Michigan he was more
blunt - "Your jobs aren't coming back". John who has been on the government
tit (medical) his entire life gets a pension of $58,000 plus his pay for not
showing up in Washington. This doesn't include Cindy's multi-millions/ which
she controls. She recently bought John a new corporate jet to avoid
the humiliation that human resources are subjected to at airports.
Cindy's ONE outfit cost three
times more than our house. Maybe it's me, but one
would think
that you'd be a bit more sensitive in a time of massive
unemployment/ foreclosures - with
people worried about paying for a tank of home heating oil.
With a Sugar Momma - multi
millionaire wife, seven homes, and 13 cars --John doesn't have a clue as to
how many seniors his age are eating (where open!) at soup kitchens.
Sarah and her hubby clear over $250,000 per year which makes them pretty
rich beer (Joe Sixpack) guzzlers. With his wife Cindy wearing an outfit (one
evening) at the convention, costing $313,000 - I can understand why he can't
relate to the 'middle - class'. The point is not how much Cindy wants
to spend on her wardrobe/ but don't come slumming, with the work a day
folks, and say you understand their plight. NOT.
It's time to get Mad --as
MAD AS HELL
video here
Howard Beale: "I don't have to tell you things are bad.
Everybody knows things are bad. It's a depression. Every
body's out of work or scared of losing their jobs. The
dollar buys a nickel's wort: banks are going bust; shop -
keepers keep a gun under the counter, punks are running
wild in the streets; and there's nobody anywhere who
seems to know what to do, and there's no end to it."
"We know the air if unfit to breathe and our food unfit
to eat, and we sit watching our TVs while some local news
caster tells us that today we had 15 homicides - 63 violent
crimes as if that's the way its supposed to be."
"We don't go out anymore. We sit in the house and slowly
the world we're living in is getting smaller and all we say
is -'Please leave us alone - let me have my TV - steel
belted tires and I won't say anything. Just leave us alone"
"I want you to get MAD!"
"I don't want you to protest. I don't want you to riot. I
don't want you to write to your Congressman, because I
don't know what to tell you to write. I don't know what to
do about the depression and inflation and the Russians (or
Muslims - JM) and the crime. All I know is that first you've
got to get MAD. You've got to say, "I'm a HUMAN BEING,
goddammit. My life has VALUE."
"I want you to get up right now - go to the window - open
it, and stick out your head and yell, I'm MAD as hell, and
I'm NOT going to take it ANY MORE!" The movie: Network
JM
Sources:
CJ Williams
Kate Walsh Sunday Times Oct 5
International Forecaster
New York Times, Sept 30, 1999
Ellen Brown (attorney) - Web of Debt
Daniel Amerman - Financial Sense
Alice in Wonderland
Financial Sense
Nouriel Roubini
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