They Are More Powerful Than Governments
January 31, 2012
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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It Won’t Be Mad-Max, But It Will Be Mad
January 16, 2012
The collapse. Blogs talk about it all the time. Some portray a future resembling the 1979 movie, Mad Max starring Mel Gibson depicting an apocalyptic future of gangs and individuals killing each other for the world’s last resources. In today’s reality, a more likely scenario of apocalypse will be one of economic meltdown, which may occur rapidly or may occur in slow motion – but will occur nonetheless, and will cause pain, hardship, and a given amount of social chaos for a period of years.
Like much of the Eurozone, the U.S. is broke. Although increasing numbers of people are realizing this, the fact remains that many people are not fully aware of the magnitude of the situation and are not aware of the fact that this has been cleverly hidden from them, albeit temporarily.
The consequences of years of over-the-top debt spending and promised financial obligations are catching up with most of the subsidiaries of the U.S. government. What do I mean by that? The cities and towns, counties and sates are running large deficits with mostly zero chance to balance without severely cutting benefits and programs or severely taxing the businesses and citizenry even more than they already are.
Either way, it will only increase the downward spiral as fewer dollars will be available for people and businesses to spend. Politicians absolutely do not have the guts to pull the plug (self preservation) and will absolutely continue to kick-the-can down the road – that is, continue to borrow more money from the FED to keep the government running at current levels of spending.
The thing is, and the the thing that’s going to ultimately cause the implosion, is that the U.S. government can continue to borrow newly printed money from the FED, at will… whereas the U.S. states, counties, cities and towns cannot print their own money to back-fill their deficits. The ONLY way that they can ever hope to resolve their debts is to drastically cut off their spending (they will still owe and have to pay their existing debt) and/or they will have to drastically increase their tax revenues. That’s it. No other way.
When the ratings of these various entities begin to be downgraded due to their excessive debt-to-income on their balance sheets, their cost of borrowing more money goes much higher – which only makes the problem worse. This is happening all over Europe right now, and will certainly happen in the U.S. in the not too distant future. When it does, very painful choices will have to be made, and the middle class will suffer greatly.
The middle class will suffer the most because either way, they will get slammed more than they already have been slammed. Many will have their pensions drastically cut. Taxes will go higher. The spending power of their dollar will continue to diminish as the Federal Reserve loans more money to the U.S. government. More jobs will be lost as fewer people spend a diminishing amount of money. Those who have jobs will continue to slip further behind as ‘real’ inflation far out-paces their wage.
There is NO EASY WAY OUT of this looming mega disaster. NONE.
We can only hope that their is a crash landing rather than an all out nose dive into the ground at cruise speed. The point is, the future may not be Mad Max (except perhaps in pockets), but it will be ‘mad’. There will be those that are going to be entirely stunned when the depression catches up with them, caught entirely unaware. These folks will probably suffer the most since they will have done nothing to prepare or to change their ways now in order to soften the blow later.
So, I’m warning you now, IT IS GOING TO HAPPEN. The magnitude and duration is unknown, but the net amount of pain will be severe – either very long and moderately painful or shorter and mind-numbingly painful. My bet is the long version because the government doesn’t want a massive social meltdown which would surely occur given a short and severe outcome.
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We Are 5 Minutes From Exponential Armageddon
December 4, 2011
We are presently living in the beginning of the last 5 minutes of a 50 minute exponential curve function, a time when change will become alarmingly rapid, a time which will leave many people in shock and fear.
We are all ‘wired’ for linear functions – things that happen at a relatively known rate or constant. Understanding ‘exponential’ requires thinking and understanding as it is not natural for us in our everyday lives. It is a function such that the rate of change will be going along somewhat calmly and then at some later point in time it suddenly ramps up in a dizzying escalation. It is in fact the function that many of our built-in systems are tied to, and a function which will show its teeth very soon.
I have been following Chris Martenson for several years and have a deep respect for his background, his opinions, and his predictions. He has a scientific background, a very logical mind, and a talent for teaching and presentation.
The following video presentation is worth far more than the time you will spend to watch it and it encapsulates the situation we are now in, and is presented in a manner that is understandable, factual, and without apparent bias.
As I watched this presentation, I could not stop watching – as his words rang true with my own beliefs. His presentation lasts 40 minutes followed by 30 minutes of questions-and-answers. The following 70 minutes of your time (at least the first 40) may open your eyes, or reaffirm what you’ve been feeling all along…
Oh, and the earlier reference to 5 minutes left till Armageddon is revealed in a hypothetical example in Chris’ presentation.
You may wish to visit Chris’s website from time to time at http://www.chrismartenson.com/ (but don’t forget to come back and visit us too!)
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Financial Professionals Sounding The Alarm, Economic Disaster Is Coming
November 28, 2011
You don’t have to search very far beyond the main stream to find lots of meaty articles about the dire economic straits we’re in – a world sinking in enormous debt of fiat currencies. A corrupt banking system swimming in 600 trillion of unregulated derivatives, an unimaginable staggering sum.
The reality is that we are getting much closer to a trigger event of an economic disaster, a domino effect of toppling systems, while at the same time we hope for miraculous resolutions.
This thing will begin in Europe.
British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.
Diplomats are preparing to help Britons abroad through a banking collapse and even riots arising from the debt crisis.
Diplomats have also been told to prepare to help tens of thousands of British citizens in eurozone countries with the consequences of a financial collapse that would leave them unable to access bank accounts or even withdraw cash.
Source: The Telegraph
With fiscal time bombs ticking in both Europe and the United States, the pertinent question for now seems to be which will explode first.
the U.S. is crystal clear in its intention to ignore its debt problems. With the failure of the Super Committee this week it actually became official. American politicians will not, under any circumstances willingly confront our underlying debt crisis.
Source: Financial Sense, Peter Schiff – Who’s Fuse is Shorter?
Is the world on the verge of another massive global financial collapse? Yes. The western world is drowning in an ocean of debt unlike anything the world has ever seen before, and our financial markets are gigantic casinos that are dependent on huge mountains of risk and leverage remaining very stable. In the end, this house of cards that has been built on a foundation of sand is going to come crashing down in a horrifying manner.
Most people out there are working hard and are busy preparing for the holidays and they are hopeful that the economy will turn around soon. But that is not going to happen. We are heading for another major global financial collapse, and when it happens the U.S. economy is going to get even worse.
The epicenter for the coming global financial collapse is almost certainly going to be in Europe. As you will see below, financial professionals all over the world are sounding the alarm about Europe. It is a disaster that everyone can see coming but that nobody seems to be able to prevent.
Source: The Economic Collapse – 17 Quotes About The Coming Global Financial Collapse That Will Make Your Hair Stand Up
Alf Field: I have come out of retirement for this one off, once only, speech to warn that the good ship “Life As We Know It” is sinking. You have the choice of getting into a life boat now or going down with the ship.
The following are the brutal truths that the modern generation will have to face as the U.S. and the rest of the world deals with the ongoing global financial crisis:
- The slate needs to be wiped clean and a new sound monetary system introduced.
- That will require the elimination of all debt, deficits, unfunded social entitlements, the US Dollar as Reserve currency, and the big one, the $600 trillion of derivatives.
- To eliminate these problems by default and deflation will cause a banking collapse and untold economic pain, leading to riots and political change.
- Politicians are appointed for relatively short terms and opt for the easy solutions.
- While politicians continue to have the ability to create new money at will, they will do so in order to prevent a melt down on their watch.
- Consequently the odds point to governments wiping the slate clean by generating enough new money to eventually destroy their currencies.
- The new international monetary system is likely to involve precious metals. It will have to be money that people trust and that governments cannot create at will.
Every experiment with government issued fiat money has ended with the destruction of that money. There is no reason to believe that it will be different this time. The world’s 40 year experiment with floating ‘I owe you nothing’ fiat currencies is coming to an end.”
Source: Financial Sense – Alf Field is Back
Eighteen months into a sovereign debt crisis — and after many futile efforts to resolve it — the endgame appears to be fast approaching for Europe.
While its leaders may well hold to the current path of offering piecemeal solutions, nervous investors are fleeing European countries and banks.
American financial institutions are also at risk [to European crisis]. According to the Institute of International Finance, they have $767 billion worth of exposure through bonds, credit derivatives and other guarantees to private and public sector borrowers in the euro zone’s weakest economies.
Source: The New York Times – Time Runs Short for Europe to Resolve Debt Crisis.
What can you, Joe Citizen, do about it? Get your money out of banks that may implode. Consider a credit union, or at least check the strength of your bank (there are a number of online resources for this). Keep an amount of cash at home. Be ready to survive a ‘bank holiday’, a period of time when the banks are closed and you cannot withdraw money. Be prepared for events of social unrest should a collapse occur.
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YOU OWE 15 Trillion
November 16, 2011
Have you seen this lately? U.S. National Debt Clock
The U.S. has crossed the 15 Trillion dollar mark of national debt, not including social security, medicare, and prescription drug liabilities.
$15,000,000,000,000.00
To bring that debt back to zero, not only would the U.S. have to balance the budget, but every tax paying citizen would have to pay $133,000.00 to the government to pay off the debt.
Yes, that’s right, YOU (and everyone else that pays taxes – EVERYONE) would have to pay $133-Grand to Uncle Sam.
How’s that sound to you?
While the attention is currently focused on Europe and the Eurozone’s financial woe’s, what about those of the United States of America? Oh, don’t you worry… as soon as the European financial troubles implode, the attention will turn quickly to the U.S., since the great debt bubble ‘balloon’ in Europe is actually part of the same balloon in the U.S., and there are many ‘pins’ ready to burst that balloon.
What’s a citizen to do?
Step one is to get angry about the situation.
Step two is to become vocal about the situation.
Step three is to vote all the ‘regulars’ out of office – regardless of the political party.
If that doesn’t work…
…get ready for social and financial chaos
Middle-class areas shrinking in US: study
The number of middle-income neighborhoods in the United States has dwindled significantly over the past 40 years, as the rich-poor divide deepens across the country.
Source: Yahoo
U.S. banks face a “serious risk”
U.S. banks face a “serious risk” that their creditworthiness will deteriorate if Europe’s debt crisis deepens and spreads beyond the five most-troubled nations.
The six biggest U.S. banks — JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc. (C), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. and Morgan Stanley (MS) — had $50 billion in risk tied to the GIIPS on Sept. 30
Europe’s debt crisis has toppled four elected governments, with the last two, in Greece and Italy, falling last week.
Source: Bloomberg
Fed Now Largest Owner of U.S. Gov’t Debt—Surpassing China
At the close of business on Tuesday, the debt of the federal government exceeded $15 trillion for the first time–with the largest single owner of the publicly held portion of that debt being the Federal Reserve.
The current total national debt of $15.0336 trillion, reported by the Treasury today, consists of approximately $10.3145 trillion in debt held by the public and $4.7191 trillion in intragovernmental debt.
Source: CNSNews
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Merchants Have No Country
October 17, 2011
While reading through some old quotes from Thomas Jefferson this morning, one in particular caught my eye. It reads, “Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains”. How true this still is today, and in fact, it’s more true than ever.
The quote rings true. While certainly not every merchant or business is lumped in with those that ‘have no country’, the plain truth is that businesses are in business to make money, and will go to whatever means necessary to do so. For the most part, their function does not inherently require that they hold loyalty to their country, and in fact many businesses span many countries. Their corporate center may be in Switzerland for tax purposes, their retail centers in the US for Sales, and their manufacturing in China and Mexico for labor, for example.
Today’s modern world when it comes to business is truly global. Western nations have become financial and service oriented while developing nations have become the new manufacturing centers. Western manufacturing is only a shell of what it used to be, and western countries have become entirely reliant upon the cheap goods (relatively speaking) from developing nations. There will be no turning back without financial pain to the system.
Company profits and stock value are now entirely dependent upon utilizing (taking advantage of) the various global advantages at their disposal, and these things are already ‘baked in’ to their price.
Unfortunately the thing has run its course… most consumers have reached their maximum debt load, companies have squeezed the last ounce of blood from the stone (so to speak) and have laid off the stones that can longer be squeezed, the governments have tried to bail out the system and they themselves are rapidly approaching (or have passed) their maximum debt load. Things seem to be at or very near a breaking point – something’s got give…
We shall see.
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US, UK, Europe, House of Cards on a Windy Day
October 7, 2011
How much longer can it keep going? The politicians are stuck. On one side is violent internal upheaval or devastating war, on the other is the collapse of their one-world dreams in an economic morass that will take decades to clear up.
The western world is finding out what happens when its collective credit limit is exceeded. Debt is really nothing more than spending tomorrow’s earnings today. How much longer can money creation keep this sinking ship afloat? Quantitative easing or asset purchase programs are just euphemisms for debasing the currency.
The Bank of England governor Sir Mervyn King said yesterday “This is the most serious financial crisis we’ve seen, at least since the 1930′s, if not ever.”
It’s all a house of cards. If one of the players folds his hand then the whole of world finance risks descending into the abyss.
The ponzi scheme…
The dot com bubble burst, so to keep ‘it’ going at all costs, they dropped interest rates and created more money which then created the real estate bubble. When that collapsed, they changed the rules so that the banks rubbish assets on the ‘books’ aren’t held to market value. Then, print more money and push all that rubbish onto the governments. Except, now the governments are in trouble since they’ve bought too much rubbish.
So, let’s print more money… Counterfeiting has become the norm and the oncoming hyperinflation will wake up even the most cynical Keynesian. The derivative banking and fractional reserve banking has gone too far and is about to cause world collapse.
Here’s an idea… the sooner people break free of the “left vs right,” divide and conquer con game the sooner something constructive can actually be done. Avoid the distractions that are thrown in front of us. Keep your eye on the ball… or should I say, the bankster…
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