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They Are More Powerful Than Governments

January 31, 2012, by Ken Jorgustin

the-isda-credit-default-swap

You may never have heard of them. The ISDA, the International Swaps and Derivatives Association, is an organization more powerful than any nation government, and is apparently about to redefine ‘sovereign default’.

Why are they so powerful? Because they represent (their members consist of) the largest banks in the world and they literally define (determine) what a credit event is. More specifically, the ISDA governs whether and when a credit event is determined to be a ‘default’.

Today we are standing on the threshold of a credit event that will determine how the Greek debt will be handled. The ISDA will determine whether this is a sovereign default or not. If it determines that Greece has defaulted, then the 5 largest banks in the United States will fail.

Why will these banks fail if Greece is determined to be in default by the ISDA? Because they (the banks) have gone wild issuing 97% of the world’s Credit Default Swaps, or CDS’s.

What are credit default swaps? They are a form of insurance which is purchased by clearing houses who purchase risky debt, such as that in the Eurozone: Greece (for starters). A credit default swap is an agreement that the seller of the CDS will compensate the buyer in the event of a loan default. The buyer of the CDS makes a series of payments (the CDS “fee” or “spread”) to the seller and, in exchange, receives a payoff if the loan defaults.

So, here’s the question…

Will the ISDA determine that Greece is in default?
Answer: No.

Why not? Because the ISDA, whose board of Directors include Bank of America, J.P. Morgan Chase, Citi, Goldman Sachs, Morgan Stanley, and other majors… will not shoot themselves in the foot. Instead, word has it that they will likely redefine the Greece ‘credit event’ as 30 cents on the dollar.

What is the likelihood of your mortgage lender saying the following to you, after you tell them that you don’t have the money and can’t pay them back? Lender: “It’s okay, we won’t categorize this as a loan default, just pay us back 30% of your loan, and we’ll call it good”. ??? Really?!

This is insane. What’s next for the ISDA? 10 cents on the dollar? What happens when they finally get to zero, which it should have been in the first place? How long can they keep this secret from the main stream? There isn’t much time left for this imploding system, and it is astonishing that the main stream news media is not covering this. A media blackout.

All of this will most certainly, definitely, lead to QE3 (quantitative easing) to infinity.

(QE) is an unconventional monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective. A central bank buys financial assets to inject a pre-determined quantity of money into the economy.

 

What does all this mean to you and I?
Answer: The powers-that-be will continue to prop up their chosen too-big-to-fail entities and sovereigns in order to keep the ponzi scheme going until such time that the empty shell collapses on itself. According to Jim Sinclair, who alerted us about this ISDA action in a recent post, he believes the system is more at risk now than it was in 2008, that people don’t understand the fragility of the system, and the system as it exists today will collapse and simply cannot go on more than another 2 years. That brings us to 2014. If he’s right, we’ve got 2 years to prepare.

 

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