U.S.
Economic Terrorism the New 'Winning Trade'
17 February 2010By Jeff Nielson
When Wall Street planned and executed the U.S.
housing-bubble (and all its related scams), it
destroyed the lives of tens of millions of Americans.
Then, when it subsequently 'crashed' global markets,
it inflicted hardship on most of the world. But the
Oligarchs were just getting started.
As governments responded in a totally predictable
manner, Wall Street began to collect on its
interest-rate swap scam (see “WHO were the WINNERS in
Interest Rate Swaps?”). With this scam the Oligarchs
progressed from merely destroying companies and
individuals to destroying schools, hospitals, towns
and even states.
However, as we are now finding out, those were merely
Wall Street's “appetizers”. For their “main course”,
the Oligarchs have moved up to destroying nations.
Here, I must confess to once again underestimating the
Oligarchs. I had thought that the latest propaganda
campaign was merely a tactic to pull the worthless,
U.S. dollar out of yet another nose-dive. How wrong I
was!
I should have been tipped-off by the
obsessive/excessive “coverage” from the U.S. media of
Greece's (and now the rest of the “PIGS”s) financial
problems. The indifference of Americans to any and all
events which take place outside of their own borders
is legendary. Apart from wars, Americans generally
have as much curiosity about the “rest of the world”
as the average house-fly.
Even if a massive earthquake had swallowed-up Greece
like some modern-day Atlantis, such an event would
have interested Americans for no more than a few days.
To illustrate this, we only need to observe how
grossly disproportionate has been the “coverage” of
Greece's financial problems compared to the
devastating earthquake which struck Haiti – a close
neighbour to the U.S.
For those propaganda-numbed sheep who would argue that
Greece's budget crisis warrants weeks of
around-the-clock coverage, you need to acquire some
perspective. As has been frequently mentioned outside
of the U.S. propaganda-machine, the Greek economy
constitutes less than 3% of the EU. In other words,
this would be like the rest of the world writing
commentary-after-commentary predicting disaster for
the United States because of financial problems in the
state of Oregon.
For the record, while there are a handful of European
nations with serious financial crises, these nations
represent no more than 1/3 of the EU economy. In
contrast, as has been frequently published, there are
at least forty U.S. states struggling to ward off
insolvency – and representing somewhere around 80% of
the U.S. economy.
Bolstered by its propaganda-machine, Wall Street (and
its hedge fund allies) launched their attacks –
unveiling a new way to wreak financial devastation
with their unregulated casino, known as the
“derivatives” market. The new weapons-of-choice for
Wall Street are “credit default swaps” - something
which I discussed in some detail in a recent
commentary (see “The Goldman Sachs/AIG Saga”).
Essentially, credit defaults swaps (CDS's) are a form
of insurance to hedge against the risk of default on
debt – or, rather, that is what they are supposed to
be. Instead of using CDS's to hedge their risk, much
of the CDS market was simply a Wall Street sham,
pretend-insurance allowing Wall Street to pretend it
had reduced its risk – allowing the oligarchs to
over-leverage their balance sheets to the insane level
of 30:1.
There are many ways to demonstrate that CDS's were
never intended to be a “hedge against risk”. The most
obvious way is to simply to look at the size of the
market. The credit default swap market is roughly $60
trillion in size – by itself it is as large as the
entire global economy. Thus, the first observation to
make is that it is obviously impossible to properly
back this insurance – and thus it cannot be
“insurance”. If the insurers lack the capacity to make
good on claims, then obviously these contracts do not
represent real “insurance”.
Wall Street zealots will argue that no insurance
market is capable of paying-out on most or all of its
claims. However, there is a huge difference between
CDS's and conventional insurance: correlation. With
most forms of legitimate insurance, there are no
correlations between one insured party making a claim
on their insurance, and other insured parties also
making claims.
If the house down the street from you suffers a fire,
there is no reason to believe you are about to have a
fire of your own. Of course there is always the
possibility of an arsonist, but a) that is a very
low-probability event; and b) over the insurance
market as a whole, even a group of arsonists would
produce claims on only a tiny minority of the insured.
In contrast, the banksters' unregulated casino – the
derivatives market – is highly correlated. If events
cause a claim against one contract, the likelihood of
claims against other contracts immediately begins to
rise exponentially. The Oligarchs claim otherwise.
They continually produce “statistics” which supposedly
indicate close to zero net exposure. However, given
the intentional absence of any transparency in that
market, there is no evidence to support those claims.
There is however, an abundance of evidence that they
are lying.
The 2008 near-collapse of the entire U.S. financial
sector clearly illustrates that rather than having
offsetting “hedges” which would cancel each other out,
that instead, once the Wall Street dominoes began to
topple that they would have all come crashing down –
if not for the $10 trillion in hand-outs, loans, and
guarantees used to prop-up the Oligarchs. In other
words, it took $10 trillion of backing to offset Wall
Street's 'bets' to a sufficient degree to ward off
total implosion (for the moment).
We now have a new example to demonstrate the
dishonesty of the oligarchs: Greece. If as the
Oligarchs claim, the CDS market was one of “offsetting
hedges”, then it would have been mathematically
impossible for the “spreads” on Greek credit default
swaps to have widened so far, so fast. By “spreads”,
I'm referring to the gap between the insurance rates
which Greece must pay on its debt versus the insurance
rates for other (supposedly) more solvent economies.
In a market where the 'bets' were perfectly offset,
there would be no movement in the “spreads” at all. In
a market which was mostly offset, the spreads could
only move slowly – in tiny increments. The fact that
Greek spreads have “blown up” in global financial
markets (over a period of days) is proof-positive that
“someone” has been piling onto only one side of the
bet: namely, the bet on Greek default.
Given the always perfect synchronicity between the
message of the U.S. propaganda-machine, and Wall
Street's current scam(s), and given that the
propaganda-machine has done everything possible to
amplify fear over Greece's financial woes, the
circumstantial evidence is overwhelming. And, of
course, if the propaganda-machine has been deployed in
this manner, this also means that the U.S. government
is fully complicit in Wall Street's latest scheme – if
only as a passive accomplice.
To comprehend how ruthless and devastating this attack
has been, we can have a glimpse at a CDS contract
between two of the Oligarchs. In “Bankster Sues
Bankster - AGAIN”, I commented on the lawsuit by
Citigroup against Morgan Stanley. There was no dispute
on the terms. Morgan Stanley wrote-up the CDS, it
“blew up”, and Citi wanted to collect. This raises the
obvious question: why would one Oligarch force one of
its brethren to sue, simply to collect on a debt?
Could it have been that, in Morgan Stanley's eyes this
CDS was merely a sham – and it was outraged when Citi
sought to treat it like legitimate insurance?
That is certainly one possible motive. The other was
the size of the pay-out. Even after Morgan Stanley
liquidated all the collateral which supposedly
“backed” this contract, it was forced to pay out at
300:1 against what it had received in premiums. In the
case of this one contract, that meant Morgan Stanley
had to pay out $200 million (on top of its
“collateral”) against the $0.75 million it had
received from Citi.
With pay-outs like that, it should have surprised no
one that Goldman Sachs was the first bankster to come
up with the idea of using CDS's as a profit-making
weapon. The trial guinea-pig was AIG. Having “raped”
AIG for more than $10 billion, while only needing to
“invest” relative pennies to net that windfall, Wall
Street was ready to unleash this financial “weapon of
mass destruction” on the world.
To understand the relative consequences of this attack
against Greece, we need only compare what would happen
if the same thing had been done to the United States.
As I have written on countless occasions, the
hopelessly insolvent U.S. economy is burdened with $60
trillion in total public/private debt (not including
one penny of the $70 trillion or so, in “unfunded
liabilities”).
Thus, there is a very good reason why the Federal
Reserve has been “buying up” virtually every U.S. bond
in sight – in order to artificially keep U.S. interest
rates several percent lower than they would be without
such radical intervention. Raising U.S. interest rates
by even one percent would drain an additional $600
billion per year out of the U.S. economy – in
additional interest payments alone.
This would be equal to a 5% drop in U.S. GDP – before
factoring in the “multiplier effect” of all that lost
capital. It would immediately push the U.S. into a
debt-default spiral – which could only be averted by
hyperinflationary money-printing...and that would be
the scenario even without other nefarious nations
attempting to deliberately force it into default.
Naturally, this means that the endless “chatter” from
the U.S. propaganda-machine that the Fed is
“contemplating interest rate increases” has zero
probability. Put simply, the U.S. government can never
afford to voluntarily raise interest rates again.
Thus, given that the debt problems of the U.S. economy
are already far worse than those of Greece (see
“Fiscal Follies: Greece versus the U.S.”), if someone
else had done to the U.S. what the U.S. is doing to
Greece, the U.S. would be plummeting toward imminent
bankruptcy, as we speak. In other words, the “Greek
bail-out” now being cobbled-together by the EU was
forced by the use of financial “WMD's” by Wall
Street's economic terrorists.
It will be even more interesting to see what happens
next. If the CDS spreads now begin to “mysteriously”
(and rapidly) widen for Spain, Portugal, and perhaps
other EU members, this will signal that these
financial psychopaths are going to simply continue to
“nuke” one vulnerable economy after another.
The Oligarchs must be stopped. Given that we cannot
rely upon our capricious “Gods” to produce some
convenient plague to wipe this blight off of the face
of the Earth, this means it is imperative that the
Wall Street oligarchies be smashed into little pieces
immediately, and their casino must be thoroughly
regulated, or merely unwound, and then closed.
Destroying entire nations for profit is a human
abomination for which we lack even a proper term. It
goes well beyond “greed”. It can't be described as
“immoral”, since like all psychopaths, the Oligarchs
are completely amoral. These are “crimes against
humanity” but on a scale which goes well-beyond
Hiroshima and Nagasaki.
Americans are now at a cross-roads. They can continue
in their apathetic coma, allowing their two-party
dictatorship (and the Wall Street Puppet-Masters) to
continue to rape and pillage not only their own nation
but any and every other economy foolish enough to
allow the Oligarchs to get it in their choke-hold.
That way lies the path to being an economic pariah –
shunned and isolated by the rest of the world.
The alternative is for Americans to overthrow their
two-party dictatorship. Each day, the possibility of
doing so through something short of outright
Revolution wanes. With a broken political system, two
hopelessly corrupt political entities, and a
propaganda-machine which would have been envied by
Hitler and Stalin, this will likely be a much more
difficult task than when Americans deposed their
relatively benign, British monarch.
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