The War on Cash: Causes and Cures

February 12, 2016

Posted by in Financial crisis with no comments

THE WAR ON CASH: CAUSES AND CURES

That we are moving at light speed to a cashless society is not the plan of some future dystopian agenda.

It is happening now.

The media flanking PR includes articles, editorials and opinion pieces from the elite of the financial press and mega-banking institutions on the planet including: the Wall Street Journal, The Financial Times, Bloomberg, Harvard, Citibank, JP Morgan Chase and a host of others.

Moreover, virtually every major country and / or central bank in the world has instituted restrictions on the use or ownership of cash. I mean everybody has jumped on this bandwagon.

https://www.corbettreport.com/the-war-on-cash-a-country-by-country-guide/comment-page-1/

Cash is bad, it’s dirty, it is used by criminals, it is a relic, it’s analog!

The war includes such acts of government sanctioned financial terrorism as teams of the French Financial Police going through trains in France and confiscating cash from people traveling through the country that exceeds the limit set by the French government.

You think this is something out of a science fiction novel?.

“France passed another new Draconian law; from the summer of 2015, it will now impose cash requirements dramatically trying to eliminate cash by force. French citizens and tourists will only be allowed a limited amount of physical money. They have financial police searching people on trains just passing through France to see if they are transporting cash, which they will now seize.”

https://www.armstrongeconomics.com/world-news/taxes/the-new-age-of-economic-totalitarianism-the-london-meeting-to-end-currency/

Why?

Because, central bankers, who control governments, want to implement negative interest rates. This means the depositor not only does not receive interest on his deposit, but pays the bank to hold the money.

This is occurring now at major banks in the United States and Europe as we speak.

http://ww2.cfo.com/banking-capital-markets/2015/02/jp-morgan-chase-charge-large-deposits/

This dramatically increases bank revenue and cuts the expense of handling that filthy paper. It can also stop bank runs.

But if the banks institute sweeping negative interest rates, depositors will take their money out of the bank and put it in safes at home, or under the mattress, in the cookie jar, or in the out house.

But if money is digital….no can do.

And governments benefit in a number of ways. Hopelessly addicted to spending like heroin junkies they frantically look for the only fix that can soothe their lust: taxes.

Digital money gives them access to the zeros and ones that can feed their insatiable compulsion to spend.

And then, of course, they will be able to stick their digital nose into any and all of your financial transactions – the ultimate totalitarian control mechanism.

This agenda is in full swing globally as we speak. As just one example, Israel has established a committee to turn their nation into an entirely cashless society.

Will Israel be the first cashless society on the entire planet?  A committee chaired by Israeli Prime Minister Benjamin Netanyahu’s chief of staff has come up with a three phase plan to “all but do away with cash transactions in Israel”

http://www.conspiracyclub.co/2015/02/02/israel-first-cashless-society/

What does one do in the face of a global fiscal jihad?

There are solutions.

Buy and read The Coming Financial Crisis a Look Behind the Wizard’s Curtain.

 http://www.amazon.com/Coming-Financial-Crisis-Wizards-Curtain/dp/0996968644/ref=sr_1_1?ie=UTF8&qid=1455255506&sr=8-1&keywords=john+truman+wolfe

The_Coming_Financial_Crisis_front_cover copy copy

 

 

 

The War on Cash Gets a New Honcho

February 7, 2016

Posted by in Financial crisis with no comments

The War on Cash Gets a New Honcho

Next month (March, 2016), the largest bank in the United States, J.P. Morgan Chase, will demand ID for customers to deposit cash.

Yep. You want to put some greenbacks in your Chase account, flash a passport or driver’s license or birth certificate.

They’re sorry for the inconvenience, but, hey, they are protecting us.

  • “Customers will need to be prepared to show an ID ….

These requirements apply only to cash deposits made to personal accounts at a branch and do not affect other types of deposits, including check deposits.

Some of our branches are already enforcing these requirements; all of our branches will be enforcing them by March 3rd.

We’re trying to do more to combat money laundering and other criminal activities. Changes like this help us to do that. We’re sorry for any inconvenience this may cause.

For those that want to know the strategy now at play in the world of money, banking and finance, check out this ground breaking look behind the wizard’s curtain of global finance and what you can do about it.

http://www.amazon.com/Coming-Financial-Crisis-Wizards-Curtain/dp/0996968644/ref=sr_1_1?ie=UTF8&qid=1454838207&sr=8-1&keywords=john+truman+wolfe

 

The_Coming_Financial_Crisis_front_cover copy copy

Banking, Deflation and Negative Interest Rates

February 2, 2016

Posted by in Financial crisis with no comments

Like some quietly evolving financial virus, the world of banking is changing before our very eyes.

Perhaps it is striking your awareness. Perhaps not.

But there are steps you should take to stay ahead of this.

There are a number of factors at play here.

  1. Sovereign debt has soared to $200 trillion (Sovereign debt is the amount of borrowing by independent – sovereign – nations).
  2. Derivatives, casino like bets by banks and other financial institutions, has reached $1.2 Quadrillion. Yes, that’s a Q.
  3. There is a major global effort to eliminate cash as a form of money and replace it with digital money – zeroes and ones.

Sound impossible?

One example: Norway’s biggest bank has called for the elimination of cash.

http://www.ibtimes.com/norways-biggest-bank-calls-country-stop-using-cash-2276140

There is growing evidence of this agenda in the U.S. and internationally.

  1. We are in a deflationary environment (short def: more goods and services available than money available to buy them = prices go down). Interest rates have actually turned negative in Europe, and now in Japan.

http://www.msn.com/en-us/money/markets/boj-introduces-negative-interest-rate-to-boost-economy/ar-BBoQqa2?ocid=ansmsnmoney11

And several knowledgeable sources have predicted they are coming here. I would agree. (Treasury bill are currently paying 0%).

What are negative interest rates?

This means that you pay the bank or the government for holding your money. For example, a government entity issues a bond. Traditionally, the city, state or federal government would pay the investor who bought the bonds an interest rate. Say, again just for example, 5%. You buy a $50,000 bond and the government pays you $2,500 per year in interest until the bond matures and they pay you the principal.

Or,

You buy a CD at your bank that pays you 2%.

But now, in Europe and Japan, the bank or the government is charging you for the privilege of holding your funds. You buy the bond for $50,000. The government pays you no interest and when the bond matures, they give you $49,500.

Here’s a look at Swiss interest rates. See how they have dipped below zero.

 

 

 

 

 

Swiss Rates

 

http://www.businessinsider.com/negative-interest-rates-switzerland-sweden-and-war-on-cash-2015-11?r=UK&IR=T

When the bubble breaks – see 1 & 2 above – and to me it is not a question of if, but when, bank holidays (temporary bank closures) will ensue. There will, of course, be other ramifications, but “Bank Holidays” (cute euphemism) are a likely occurrence.

I am not writing this to freak you out. But this situation continues to deteriorate, and one can’t stick one’s head in the sand either.

Here are a few simple steps to take to give yourself some protection and breathing room.

  1. If you bank with one of the big “Money Center,” multi-branch banks (e.g. Bank of America, J.P. Morgan Chase, Citibank, Wells Fargo) I would encourage you to move your banking to a smaller regional or local independent bank or a credit union. The switching may occasion a bit of inconvenience, but these larger banks are pregnant with exposure to the derivatives casino.
  1. Take some Andy Jacksons or Ben Franklins out of the bank and put them in a safe at home. The amount is up to you, but I would suggest that you accumulate a month’s expenses in actual cash. Remember if banks close, your ATM won’t function and credit card limits could be reduced to the balance due.

Important datum: in a deflationary environment, cash is king.

  1. If you don’t have any precious metals (silver and gold bullion coins) buy some. I recommend 1 oz. silver coins called silver eagles. As a minimum, I would accumulate a month’s expenses in silver eagles (they are currently about $17.50 a piece as I write this on January 31, 2016).

Check locally for a reputable bullion coin dealer.

If you need or want some expanded individual consulting or advise on these and / or related matters, I do provide such on a professional basis. You can contact me at bruce@brucewiseman.net.

However, I have not written this alert to promote this consultation service. I do provide the service and am happy to do so, but this is simply a general alert to friends and associates because of the growing evidence to hand. While this is an area I have written about in books and articles for some time, the fact that the Bank of Japan instituted negative interest rates in the third largest economy on earth Friday (January 29, 2016) prompted me to provide some rudimentary steps folks should take in this increasingly precarious world of banking and finance.

 

Keep your powder dry.

 

Best,

Bruce

 

 

 

 

 

 

 

The IRS got hacked the other day

June 3, 2015

Posted by in Financial crisis with 6 comments

The droids at the Internal Revenue Service got hacked the other day.

The bad guys grabbed 100,000 tax returns right out of the agency’s computers. These guys don’t waste time stealing Dollars, Euros or Pounds. No. They go for the gold: a name with a social security number is the hottest currency on the planet these days.

A few weeks ago, it was the White House. That’s right, the President’s email got hacked. Wikileaks is drooling.

A bit earlier it was the Pentagon.

Then there was the Sony hack that splashed across the media for weeks because celebrities were involved. This was followed by the hack of the nation’s second largest health insurance company – Anthem Blue Cross. Cyber criminals filched the personal account information of 80 million customers. Last year the loss of the personal account information of millions of Target’s customers made screaming headlines. The media also covered the hacking of JP Morgan Chase, and Yahoo mail.

There are two points here: 1) cyber crime has exploded; 2) only the big names make headlines.

The unfortunate reality is that the number of malware programs worldwide has skyrocketed over the last decade and is continuing to rise at astronomical rates. But while hacks of top federal agencies and corporate mega brands make the headlines, what many don’t know is that cyber criminals have now turned their attention to small businesses.

A Verizon report released last year stated that small- to medium-sized businesses are the top target for cyber criminals, due in large part to these businesses relying only on ineffective antivirus software for protection. Of the nearly 900 breaches that Verizon examined, 71% were in companies with less than 100 employees.

Most small business owners think they are protected. I know because we conducted in depth surveys of small business owners. The vast majority is confident that their anti-virus programs and firewalls protect their information and that of their customers.

Eh…not so much.

Symantec Senior VP Brian Dye estimates that antivirus now catches only about 45% of cyber-attacks—less than half, while New York based security expert Vikas Bhatia calls the level of attacks on small business “an epidemic”.

The simple truth is that small businesses are at risk from cybercrime but owners don’t have a clue about their vulnerability. But get hacked, and it can be…painful. I am not going to recite a litany of horror stories here, but getting hacked can cost untold thousands and do serious damage to your reputation – in some cases shut you down.

New-generation malware is significantly more invasive and destructive than the malware of a decade ago.

How so?

For years, malware – viruses, worms, trojans, etc. – was identifiable by a “signature”- some combination of zeros and ones. The virus signature was unique and when the antivirus company became aware of a malicious signature, they downloaded it to the antivirus defense system in their customer’s computer, which would then recognize it in an incoming file and stop it.

That is called, no surprise, signature-based protection. And it still works, to a point – according to Dye, about 45% of the time. But about half the time, the malware can now get through.

What happened?

In short, cyber criminals found out how to by-pass signature based protection, surreptitiously enter your network and engage in a digital mayhem, robbery, trash your system, or all three.

But the white hats were not devoid of their own cyber geniuses and those that protect corporate networks devised a cyber security defense system that was not signature based. It was something else entirely. It is called Virtual Machine Technology. In this case, files entering a network unknowingly enter a “virtual” mock up of the network. This area is generally called a “sandbox.”

If the file behaves in ways that indicates it intends to do harm (there is an endless list of potential bad behaviors) the file is deleted and the person running the network is advised of such.

Phew!

Got it covered.

At least for the big guys. Large corporations could finally get protected, because the cost of Virtual Machine Technology tends to run anywhere from about $50,000 to $1,000,000 and more.

Yike!

What about the little guy? Most small businesses can’t cough up $50,000 and nobody was addressing the small business market with sandbox technology.

Then, along came Dan.

Dan Lorch is an electrical engineer by training who dove into the computer world in the 1980s. Lifetimes ago in digital history. Without writing a full-blown resume here, suffice it to say that most recently Dan was a cyber warrior running a vast anti-virus lab in Asia. For five years he oversaw the work of 125 anti-virus specialists, for a world-class anti-virus corporation.

When the corporation was purchased by another, Dan, who had been watching the evolution of the cyber security industry with a strategic eye, sat down with the cream of his digital engineers and said:

“Can we build a virtual machine based security system that the small business owner can afford?”

It took 15 months. Once complete, it was beta tested. Final bugs were worked out and then it was deployed. It is now operating in both the U.S. and the Philippines and is catching malware that is getting by the anti-virus and firewall defenses that small business owners were relying on for protection.

Virtual Machine Technology does not replace anti-virus programs; it simply stands behind them and catches the malware that evades them.

The cost varies depending on the size of the company, but the pricing is a small – very small – fraction of what is charged for the “enterprise” solutions.

The product is called Veedog (www.veedog.com). You can check out the website.

If you are interested in getting more information, contact Richard Byrd at veedogbulldog@gmail.com or call directly to 818-800-9001.

Best,
Bruce

A final note in the interest of full disclosure. I am doing the market research and overseeing the PR and marketing for Veedog. And I have a financial interest in its success. To give you some sense of my viewpoint on the company, in 27 years in business, I have taken a proprietary interest in two companies – Veedog is the second one.

Cyprus and the Global Banking Mafia America is on the Hit List

April 17, 2013

Posted by in Financial crisis with 3 comments

When Alexander the Great ruled Cyprus, the Mediterranean island tucked into the underbelly of Turkey like a fetus in the geo-political womb, he took control of the island’s currency by removing the images of the local kings on the coins and replaced it with his own.

Alexander’s military genius was often accompanied by a savage brutality. But his rule of Cyprus, where the local kings wisely embraced him as a homie and jumped on the “Alexander is Conquering the World” crusade, was essentially economic and political.

THE ORGANIZED CRIME FAMILY OF GLOBAL FINANCE

The modern day pretenders to world domination, the international bankers, known as the “Troika” in Europe, have been much more brutal in their suppression of the banking system and economy of Cyprus. But then their plans reach much farther than this Mediterranean tax haven awash with deposits from retired KGB capitalists and modern day Russian Oligarchs (deposits from Russians made up $20 billion of the $68 billion in bank accounts on Cyprus).

Troika is the name given to the European branch of the organized crime family in charge of managing the European Financial Crisis. It is made up of the IMF, the European Central Bank (ECB) and the European Commission (the governing body of the European Union).

Is it possible that the banking crisis on this small, island nation halfway around the world could affect the deposit accounts in the United States?

In ways you could hardly imagine.

Cyprus was a pilot – a test – of a much larger, global agenda. It reads like a script from a Bond movie.

If only it were fiction…

Your deposit accounts in U.S. banks are not what you think they are. But I am getting ahead of myself; the story starts on Cyprus.

The two largest banks in Cyprus, the Bank of Cyprus and Laiki Bank had previously purchased bonds from the land of Pericles – no surprise as 78% of the population of Cyprus is of Greek heritage. When Greece defaulted on its IOUs in February of 2012, these banks suffered devastating losses. They were kept alive by injections from the European Central Bank (the Fed for the EU), who threatened to pull the needle last month unless the Cypriot government and the banks agreed to a bailout.

Like all Mafia agreements, it was a deal Cyprus could not refuse.

Had they not agreed, their dealer would have removed the needle from their banking system and they would have been thrown out of the EU, relegating them to the planet’s financial leper colony currently populated solely by Iceland.

The Cypriot government caved. Here’s what happened.

The Troika agreed to a 10 billion Euro ($12.8 billion dollar) bailout. But it’s really a bail-in because depositors with more than 100,000 euros in the country’s two largest banks got an eye-watering haircut totaling 5.8 billion euros.

There hasn’t been a mass scalping like this since Sitting Bull hacked off Custer’s curls along with the rest of the hapless members of the Seventh Cavalry at the Little Big Horn.

In plain English, the depositors are going to eat a portion of the bank’s loses.

Yum.

WHAT HAPPENED IN CYPRUS

Here are the details.

Laiki bank, the country’s second largest, is being closed. Accounts with 100,000 euros ($128,000) or less are being transferred to the Bank of Cyprus, the largest.

Accounts at Laiki with deposits in excess of 100,000 euros – a total of 4.2 billion euros – are being transferred to a “Bad Bank,” which sounds like they are being sent to the principal’s office. But transfer to a Bad Bank in Cyprus means they are being written off.

All of Laiki’s bond holders and other creditors are also being sent to the principal’s office from which they will not return. All the creditors, that is, except Laiki’s 9 billion euro loan from the European Central Bank – that’s being transferred to the Bank of Cyprus.

Isn’t that special?

Depositors in the Bank of Cyprus with account balances in excess of 100,000 euros will have about 40% of the excess converted to stock in the bank.

How cool is that? Without even being asked, they are getting an investment in the bank’s stock. The fact that the bank is bankrupt is…well, tough.

Another 20% of the excess is being put in a special non-interest bearing account that is subject to additional write off.

For example, if you had 500,000 euros in the Bank of Cyprus, about 160,000 has been converted to stock in the bank and another 80,000 has been snatched from your account and put into a non-interest bearing account which may be used for more of the bail-in.

Leaves you with 260,000 euros. The silver haired Marxists at the IMF refer to it as a “wealth tax”. Karl is orgasmic.

This was the first time account holder’s funds have been summarily taken from them to cover the failure of the bank in which the deposits were held.

But it won’t be the last. Oh no, not by a long shot.

In Europe, Jeroen Dijsselbloem, the Dutch Finance Minister who helped structure the Cyprus bail in, told reporters on March 25th that the Cyprus plan would be “…the template for any future bank bailouts.” Financial markets roiled after the statement and Mario Draghi, the Darth Vaderish President of the European Central Bank, denied the report and publicly chastised Dijsselbloem, but this is clearly the unspun thinking of the Troika.

THE PLAN OF THE FDIC AND THE BANK OF ENGLAND

And it won’t be the last if the FDIC and the Bank of England have anything to say about it.

You see, rather than being a one-time, extraordinary event, the handling of the Cyprus banking crisis was the opening gambit of a little known plan. That plan is to “Bail–in” bank failures of those that are deemed “Too big to fail” by having the depositors cover a percentage of the bank’s losses.

Say what?

That’s right. However, the term “Too big to fail” got some push back during the financial crisis of 2008-2009, and so the banking elite have resorted to their time-honored tactic of using terminology that is understood by… virtually no one.

Thus, the joint plan issued by the FDIC and the Bank of England on December 10, 2012 is not for banks that are too big to fail. No, no. It is for “Globally Active, Systemically Important, Financial Institutions”, G-SIFIs for short.

They are no longer banks, they are G-SIFIs. Sounds like something out of the Martian Chronicles.

Listen to the boys from the Bank of England and the FDIC:

“An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company into equity.”

In English Comrade.

You probably think that when you deposit money in the bank, they are holding your funds for you.

Eh… Sorry.

Legally, once you give your money to the bank, they own your funds. The deposit is a bank liability – a debt – and you have become a creditor. Your deposit isn’t secured by anything, so you are what is known as an unsecured creditor.

And equity? That’s another name for ownership of a company or…stock.

So, let’s read it again: returning the G-SIFI (the bank) to the private sector (the FDIC took over the bank when it failed. Now they are going to turn it private again) would be provided by converting a sufficient amount of unsecured debt (deposits) into equity (stock).

The FDIC plan is to take some of your deposits and turn them into stock and recapitalize the bank. Moreover,

“No exception is indicated for ‘insured deposits’ in the U.S., meaning those under $250,000, the deposits we thought were protected by FDIC insurance. This can hardly be an oversight, since it is the FDIC that is issuing the directive.”
http://www.counterpunch.org/2013/03/28/the-confiscation-scheme-planned-for-us-and-uk-depositors/

And where did this bizarre plan originate?

THE BANK FOR INTERNATIONAL SETTLEMENTS

The plan originates from the Financial Stability Board, a newly created entity that acts as a hit man for the Bank for International Settlements (BIS) – the bad boys of Basel, Switzerland.

In my book, Crisis by Design I exposed the creation and purpose of the Financial Stability Board and turned an investigative spotlight on the BIS. If the European Central Bank, the IMF and the U.S. Federal Reserve are heads of the planet’s financial crime families, the Bank for International Settlements is the Godfather and the Financial Stability Board, Luca Brasi.

  • On April 2, 2009, the members of the G-20 (a loose-knit organization of the central bankers and finance ministers of the twenty major industrialized nations) issued a communiqué that gave birth to what is no less than Big Brother in a three-piece suit.

    Which means? . . .

    The communiqué announced the creation of the all-too-Soviet-sounding Financial Stability Board (FSB)….

    The Financial Stability Board. Remember that name well, because they now have control of the planet’s finances . . . and, when one peels the onion of the communiqué, control of much, much more.

    …the Bank for International Settlements (BIS), out of which the FSB operates… (is) Known as Hitler’s bank, the Bank for International Settlements worked arm in arm with the Nazis, facilitating the transfer of gold from Nazi-occupied countries to the Reichsbank, and kept its lines open to the international financial community during the Second World War.

    …the BIS is completely above the law.

    It is like a sovereign state. Its personnel have diplomatic immunity for their persons and papers. No taxes are levied on the bank or the personnel’s salaries. The grounds are sovereign, as are the buildings and offices. The Swiss government has no legal jurisdiction over the bank and no government agency or authority has oversight over its operations.

    In a 2003 article titled “Controlling the World’s Monetary System: The Bank for International Settlements,” Joan Veon wrote:

    “The BIS is where all of the world’s central banks meet to analyze the global economy and determine what course of action they will take next to put more money in their pockets, since they control the amount of money in circulation and how much interest they are going to charge governments and banks for borrowing from them. . . .
    When you understand that the BIS pulls the strings of the world’s monetary system, you then understand that they have the ability to create a financial boom or bust in a country. If that country is not doing what the money lenders want, then all they have to do is sell its currency.

    So it is no surprise to find that the plan to use depositor’s money to cover bank failures originated from the Financial Stability Board.

    The pretense is that these august institutions are operating in the best interest of the public – what a joke. The BIS and its minions, the European Central Bank, the IMF and the U.S. Fed are run by bankers interested in protecting themselves and maintaining their financial control over the governments and economies of Earth.

    Which leaves us where?

    • The two largest banks in Cyprus were failing. In March of this year (2013), the IMF, the European Central Bank, and the European Union (known as the Troika) forced a “bail out” plan on the banks that included converting billions of euros of depositor’s funds to bank stock.
    • The depositors had no say in this as it turns out that bank deposits are actually owned by the bank, the depositors being unsecured creditors.
    • It also turns out that this plan was not a unique, one-time solution, but the initial step of a strategic agenda, which was formally issued by the FDIC and the Bank of England on December 10, 2012.
    • The FDIC / Bank of England plan originated from the Financial Stability Board, the newly created enforcer for the Bank for International Settlements, the planet’s most powerful and controlling financial institution.

    DERIVATIVES

    There is, however, one more piece of this puzzle that directly affects depositors of U.S. banks. An important piece.

    To understand this aspect of the game, one must have a rudimentary understanding of Derivatives – a type of investment Warren Buffet has called Financial Weapons of Mass Destruction.

    Derivatives are financial instruments that derive their value from some underlying asset.

    The term was slammed into the public consciousness during the financial crisis of 2008-2009 among discussions of the infamous mortgage-backed securities.

    Mortgages were packaged up and sold in bundles to banks and others. The actual mortgages were the underlying asset.

    But mortgage-backed securities are not the boogieman of international finance today – oh no.

    INTEREST RATE SWAPS

    The entire planet is now mired in a vast interconnected Ponzi scheme of more than a $1.2 Quadrillion dollars of derivatives, the majority of which (about 60%) are bets on the direction of interest rates.

    That’s right; about seven hundred trillion dollars of these derivatives are what are called interest rate swaps and are traded in a casino that is so vast even the people who built it have lost control.

    Interest rate swaps are nothing more than bets on the direction of interest rates – will they rise or fall? An investment bank thinks rates will go up. Another bank thinks they will go down.

    And they bet.

    The bet is called a swap (they are swapping risk).

    Those doing the betting are called counter-parties.

    Once a bet is made, there are bets on that bet and bets on those bets and then bets on the bets of the bets, and today… stay with me … they make up a $700,000,000,000 – seven hundred TRILLION dollar house of cards.

    The figure is mind numbing.

    How exposed are U.S. Banks?

    Bank of New York Mellon: $1.375 Trillion in derivatives
    State Street Financial: $1.390 Trillion in derivatives
    Morgan Stanley: $1.722 Trillion in derivatives
    Wells Fargo: $3.332 Trillion in derivatives
    HSBC: $4.321 Trillion in derivatives
    Goldman Sachs: $44.192 Trillion in derivatives
    Bank of America: $50.135 Trillion in derivatives
    Citibank: $52,102 Trillion in derivatives
    JP Morgan Chase: $70,151 Trillion in derivatives

    Total derivatives exposure of the nine biggest US banks: $228.72 Trillion
    http://demonocracy.info/infographics/usa/derivatives/bank_exposure.html

    However, note, that because there are bets on bets on bets, many of the derivatives would cancel each other out – the actual cash that is at risk is about 20% of the face amount above or about $45 trillion (the entire annual production of the U.S. economy is about $15 trillion).

    Still, there was a piece of the derivative picture that puzzled me. The biggest banks in the country, the guys that own the Fed, are buried in trillions of dollars of derivatives. The majority of the derivatives are interest rate swaps. Sooner or later interest rates are going to rise, and when they do, many of the banks that own these swaps are going to get slaughtered.

    But surely they know that. They may be evil, but they aren’t stupid when it comes to their own survival.

    And then the penny dropped.

    The original article I read on this situation written by Ellen Brown (one of the few researchers who understands who and what the BIS is and does – www.ellenbrown.com) linked to another article that turned all the lights on.
    http://www.nakedcapitalism.com/2013/03/when-you-werent-looking-democrat-bank-stooges-launch-bills-to-permit-bailouts-deregulate-derivatives.html

    In the US, depositors have actually been put in a worse position than Cyprus deposit-holders, at least if they are at the big banks that play in the derivatives casino. The regulators have turned a blind eye as banks use their depositories to fund derivatives exposures … (remember, depositors are unsecured creditors) … One big reason was that derivatives reforms made derivatives counterparties require collateral for any exposures, meaning they are secured creditors. The 2005 bankruptcy reforms made derivatives counter parties senior to unsecured lenders.

    ….

    Remember the effect of the 2005 bankruptcy law revisions: derivatives counter parties are first in line, they get to grab the assets first and leave everyone else to scramble for crumbs.

    You get the picture now: the Bank for International Settlements, through its Financial Stability Board created a strategy that failing banks (and those pregnant with the evil spawn of derivatives) could save themselves by taking some of their depositors funds and converting them to stock in the bank.

    For example, Bank of America transferred its derivatives from its Merrill Lynch operation to its depository operation (the bank) in late 2011. Ellen Brown states it quite clearly:

    “The deposits are now subject to being wiped out by a major derivatives loss.” http://www.counterpunch.org/2013/03/28/the-confiscation-scheme-planned-for-us-and-uk-depositors/

    WHAT TO DO

    1- In the first place, according to one source, the FDIC will have to get legislative approval for their plan.

    “Congress would never approve such a law,” you say.

    Really?

    Take a look at a couple of corporate lobbying coups.

    (April 1, 2013) The Monsanto Protection Act, which President Obama signed into law this week, will strip judges of their constitutional mandate to protect consumer rights and the environment, while opening up the floodgates for the planting of new untested genetically engineered crops, endangering farmers, consumers and the environment. The result is that GMO crops will be able to evade any serious scientific or regulatory review.
    http://www.nationofchange.org/how-monsanto-protection-act-became-law-1364825964

    Did you know that when the pharmaceutical industry muscled the Prescription Drug Benefit law through Congress a few years ago – a trillion dollar tax payer gift to Big Pharma – that it contains a provision that prohibits the government from negotiating the price they pay for drugs?

    And, as the great Dave Barry says, “We are not making this up.”

    The law that created Part D Medicare prescription drug benefits prohibits price negotiation by the government. The law, enacted in 2003, after an incredible lobbying blitz by drug companies, states that the Secretary of Health and Human Services “may not interfere with the negotiations between drug manufacturers and pharmacies…; and may not require … or institute a price structure for the reimbursement of covered part D drugs.” 42 U.S.C. 1395w-111(i). This part of the law was a giveaway to drug industry lobbyists written in part by Rep. Billy Tauzin, who later took an extremely lucrative position as the CEO of PhRMA, the drug industry’s lobbying group. [New York Times]
    http://www.ourfuture.org/makingsense/alert/2008083312/negotiate-prescription-drug-prices

    And you have seen above how the banking industry managed to legislate derivatives into a position senior to depositors.

    So let’s just not bank on Congress protecting the interests of the American public (no pun intended). That doesn’t mean we shouldn’t fight like Hell to prevent the legislation when it is presented. But this assumes that the wording is not buried in some 2,000 page bill benefiting widows and orphans that is quietly passed by lawmakers in the middle of the night.

    2- If you have deposits in one of the G-SIfIs, I recommend you move them (the list of the Financial Stability Board’s G-SIFIs can be found at the following link).
    http://www.financialstabilityboard.org/publications/r_121031ac.pdf (This link went to the FSB’s site listing G-SIFIs when I wrote the paper. However, strangely, testing it now, reveals that the FSB has disabled it.)

    If it does not work when you read this, use:

    http://regreformtracker.aba.com/2011/11/financial-stability-board-names-29.html (scroll to the bottom of the article and click the G-SIFI link).

    Isn’t it too cute that the planet’s biggest banks get labeled as too big to fail. It doesn’t matter what they do, the government will not let them fail and if the FDIC has its way, they will simply convert some of the their depositor’s funds to stock – Shazam! Saved.

    It is also noteworthy that many of these banks are packed to the pin stripes with derivatives.

    3- Then again, it is quite possible that when the FDIC pushes its deposits to stock legislation, it could seek to expand the program’s jurisdiction, enabling them to convert the deposits of any failed bank to stock.

    I’m just saying…

    After all, the definition of a systemically important financial institution (SIFI) is a bank, insurance company, or other financial institution whose failure might trigger a financial crisis. That is a very broad definition.

    It would take a “crisis” for such legislation to pass Congress. But these guys can create a financial crisis with the click of a mouse and then hold Congress hostage to panic and civil unrest until they coughed up legislation. It has only been a few years since Hammering Hank Paulson slammed TARP through Congress during the 2008 financial crisis with threats of riots in the streets. TARP was a $300 billion gift to Wall Street investment banks, the fraternity from which he came.

    A few people bitched. Nothing was done.

    Regardless of any legislation now or in the future, you should be leery of any bank that is carrying derivatives on its balance sheet. Remember uncle Buffet’s warning, they are “Financial weapons of mass destruction.”

    Even if your bank isn’t carrying derivatives, you need to be sure they are sound. The banks in Cyprus didn’t fail because they had derivatives, they had other investments (Greek bonds) that went bad.

    You can check the general health of your bank at www.bankrate.com or www.weissrating.com. The information at Bankrate.com is free, Weiss charges $20 for a report on a bank.

    These sites give letter grades that are certainly better than having no data at all. However, they don’t have data on interest rate swaps the bank might be carrying, and they omit some other key analysis points. Still, they are much better than nothing.

    Credit unions can be a good alternative to a bank. They are often healthier than their bank cousins, though some carry derivatives as well. Both Bankrate and Weiss also have credit union ratings. The large chain banks (B of A, Citibank, Wells, Chase) usually have the convenience of a close location, while credit unions often just have a main office and perhaps a branch or two. But it is the large chain banks that are buried in derivative exposure and are named as G-SIFIs (potentially subject to the deposit to stock conversion scheme). Moreover, with online banking today, you can do most of your banking at home.

    If you feel you need a professional analysis of your bank, including derivatives exposure, and/or research for a healthy alternative bank or credit union near you, contact me via email (see below). Having been a banker in my former life, I can read a bank’s balance sheet and look in corners that normally escape the general public. I charge for this service depending on what is needed as it takes time and research and sometimes I need to call the bank to peel some onions that appear to be sprouting on the bank’s financial statement.

    Whether you do the research on your own or contact me, please don’t blow this off. I’m not trying to be alarmist here: the U.S. banking industry is not going to crash tomorrow.

    But mark well: these plans being put in place by the Bank for International Settlements and published by the FDIC are not idle “safeguards”. They are being put in place for a reason. A banking crisis will come. Sooner or later, it will come. The entire global banking structure is sitting on the mother of all bubbles – a multi-trillion dollar derivatives casino, and when it explodes, all Hell will break loose.

    Having your funds in a healthy financial institution will help protect them, particularly if/when the FDIC’s plan to “convert deposits to stock” in failing banks goes into effect.

    4- And finally, if you really want to do something about the criminally corrupt banking system and the banksters that control the world’s financial structure, promote the concept, to legislators and others, of a monetary system based on products and real estate – a system whereby money represents actual production. That would eliminate inflation and deflation and send the global financial mafia into permanent retirement.

    Meanwhile, keep your powder dry.

    John Truman Wolfe
    AKA Bruce Wiseman
    Bruce@brucewiseman.net

  • A GREEK TRAGEDY

    December 13, 2012

    Posted by in Financial crisis with no comments

    Twenty thousand battle-hardened troops and cavalry stormed off 600 Persian war ships onto the Plains of Marathon 26 miles north of Athens.

    These were the shock troops of the Persian army, warriors that had built the Persian Empire into the most powerful military presence in the world of 490 BC.

    The Greeks were absurdly outnumbered and some of the Greek generals hesitated going into battle, considering that a wait for reinforcements would be more prudent. But one of the generals, Miltiades, counseled attack.

    The vote was split, so Miltiades went to the Polemarch of Athens (a dignitary, who, by custom, was permitted to vote with the generals). His name was Callimachus.

    The Greek historian Herodotus, the “Father of History,” reports the conversation between Miltiades and Callimachus.

    ‘With you it rests, Callimachus, either to bring Athens to slavery, or, by securing her freedom, to be remembered by all future generations.’


    The Greeks attacked. They fought for their lives. They fought for their families. But most of all, they fought for their freedom.

    When it was over, 6,400 Persians lay slain on the field of battle. One hundred ninety-two Greeks had died.

    The Battle of Marathon was the first of the three battles of the Persian Wars between Greece and Persia – the outcome of which would alter the course of Western Civilization forever.

    (According to legend, it was a man named Phidippides, who ran the 26 miles from Marathon back to Athens in three hours to tell the Athenians of the great victory. He died after delivering his message. It is the modern day marathon that memorializes his run.)

    It was the victory at Marathon, and subsequent victories over the Persians, that created the sense of pride and power that ushered in the century of Athenian greatness known as The Golden Age of Greece.

    During these years, Greece produced: one of the greatest statesmen in human history – Pericles; two of the most preeminent thinkers the world has ever known, Socrates and Plato, who brought whole new realms of thought and philosophy to the Western World; the Parthenon, which is still revered as one of the architectural marvels of the world; and a culture imbued with a majesty of art, literature and theater.

    Greece is the birthmother of Democracy.

    Today, the former Athenian nation-state, takes the spotlight as the lead in a pitiful play, which shines the spotlight of history on that nation’s economic chaos. The play is produced by the International Monetary Fund and is directed by perennial banking bad boy, Goldman Sachs. It is titled, The Global Financial Crisis.

    I know it is a harsh metaphor, but the Glory that was Greece is gone. That was then and this is now, and the country has become a broken pawn in a real life drama that is being played on the stage of international finance. Some of the cast know it is a play. Most do not. The audience – legislators, regulators, finance ministers, and nations large and small – think it is real. Which it is.

    They just don’t know that it is an orchestrated reality.

    Here’s the story.

    DEBT AS ADDICTION

    The political descendents of those magnificent Athenians are addicts today. Like a junkie on Horse, they are driven by an insatiable lust to spend. And like all governments, they spend without regard to consequence – on war and welfare, on interest and infrastructure, on beggars and banks, on anything that will keep them in power and soothe their collective Marxian conscience.

    To feed their habit, they must borrow.

    The Greeks have borrowed in excess of $330 billion. This is a meaningful sum anywhere. In Greece, it is Everest.

    The Greek Tragedy has been shoved off the front pages of the financial press by their Euro-cousins in Ireland as this is written. And Ireland will soon be followed by Portugal and Spain. Still, I am using Greece for illustrative purposes because this kind of financial freebasing has turned the planet into a playground for the ultimate drug dealers – the pirates in pinstripes. It is time it was exposed and hung from the yardarm of public opinion.

    Here’s how that rolls out.

    The Greek economy is managed like a free drug clinic in the Haight Ashbury. The government provides literally hundreds of benefits and subsidies: health care is essentially “free,” civil servants can retire with pensions in their 40s, and the government-run utilities and enterprises lose more money than a convention of Bernie Madoff investors. Greek legislators must have apprenticed with the financial masterminds in the United States Congress: the Post Office is broke, AmTrak is broke, Social Security is broke, Medicare is broke, Fannie Mae and Freddie Mac are broke, and AIG, the insurance company that the government acquired last year, has cost the taxpayers $182 billion… so far.

    In 2001, Greece wanted to get into the European Union (EU). They also wanted to use the Euro as their national currency. (The countries in the EU that also use the Euro are referred to as the Eurozone. Not all European Union members use the Euro.)

    But their debt was too high. Too much welfare, too many pensions, too much interest and the 12th largest military budget in the world (taken as a percentage of GDP). Perhaps they are still fighting the Persians in their collective mind.

    In any case, the EU said, “No can do.”

    What to do?

    Some suggested that the country cut back on spending and use their income to pay their debt down. But these people were arrested and burned at the stake as economic heretics.

    The problem seemed unsolvable to the money men of Athens. How do we get into the European Union with our current debt load? How do we get in, and also keep the needle in our veins?

    In the distance we hear a bugle signaling a cavalry charge. This is followed by the sound of screeching tires as a Humvee stretch-limo the size of the Hindenburg squeals around the corner, roars up the street and pulls to a stop in front of the Presidential mansion in Athens.

    The chauffeur exits the driver’s side and walks briskly around the car and opens the rear door. The first person out is a Julia Roberts look-alike in a Valentino pantsuit. She is wearing designer shades and is carrying a Prada briefcase. She is followed by an unusually tall man wearing a midnight blue Armani suit with teal pinstripes. He is ostrich egg bald, is wearing granny glasses and has a Tumi laptop bag slung over his shoulder. He is furiously working the keys of a Blackberry while talking on a Bluetooth headset.

    Goldman Sachs has arrived.

    Greek treasury officials fall to their knees and weep with joy.

    Saviors of nations, bankers to the over-borrowed, Goldman is there to help. Help, that is, as long as the country is willing to pledge some national assets with their tax revenues attached as collateral. They are team players, by God; give them some of your country’s tax revenue and the boys from Goldman Sachs will climb any mountain, ford any stream, follow any rainbow ‘til you find your dream (a lender with deep pockets and the ethics of a crack dealer).

    What that dream looked like in real life was a package of financial sophistry that camouflaged Greece’s debt, pushed it onto the backs of their children, got them into the EU and enabled them to continue to feed their habit.

    A “fix” by any other name…

    In short, Goldman converted ten billion dollars of Greek debt that had been purchased with U.S. dollars and Japanese yen into debt that could be repaid in Euros. However, in creating this “currency swap”, they used a fictitious value for the Euros which lowered the reported amount of Greek debt by billions.

    The structure enabled Greece to owe billions to Goldman in a currency deal without having to report it to the European Union as a loan, which is clearly what it was. Turns out using the Alice in Wonderland value for the Euro wasn’t illegal, just deceptive as hell.

    Having cut the deal, Goldman’s covert loan needed to be paid. Greed never sleeps. And since the faux currency swap was not officially a loan, Goldman had to have some way to get repaid other than “loan payments”. To wit, the pirates of pinstripe go on a Hellenic treasure hunt and wind up commandeering the rights to a few of the country’s income-producing crown jewels — airport fees, the national lottery and toll road income.

    Pericles, where are you?

    Securing the rights to the tax revenues, they wrap the repayment into an interest rate swap. (Don’t go to sleep on me now, I’ll explain).

    Greece had previously issued some bonds and had to pay the bond holders a fixed rate of interest of 4%. So, as their part of the swap, Goldman agreed to pay Greece a fixed rate of 4%. In return, the government of Greece agreed to pay Goldman a floating rate.

    The exact amount Greece had to pay Goldman is not known. However, what is reported is that Goldman received a rate in excess of LIBOR (the rate set in the UK that banks charge each other for short term loans) + 6.6%.

    The rate was floating, not fixed, but note that even if LIBOR was zero – 0% – (which it wasn’t) Goldman would be paying Greece 4% but would be receiving 6.6%. The absolute worst they could get, then, was an annual profit of 2.6% on a deal for $10 billion in bonds ($260,000,000).

    But that’s not really enough to push those year-ending Goldman bonus babies to the Hamptons. Oh no, not by a long shot, because Goldman also picked up a fee to arrange this charade of about $300,000,000.

    In summary, Goldman arranges what appears to be a currency swap for Greece, which is really a loan that doesn’t have to be reported to the EU as such.

    In so doing, Greece pushes its existing debt back to the future, is accepted into the European Union, gets yet another loan, and still has access to the debt needle.

    Goldman gets a fee of $300,000,000 for setting the deal up and ongoing revenue from an interest rate swap estimated at $260,000,000 a year from government owned assets.

    Yeah, Baby!

    Of course, the story doesn’t end there. But then you knew that, didn’t you?

    ENTER THE NATIONAL BANK OF GREECE

    In 2005, Goldman apparently, and we say, “apparently” as all of these figures are a matter of news reports, not official Goldman records, having received their eye-watering fee and having recouped about a billion dollars from the interest rate swap (which is what they were reportedly out-of-pocket on the deal), sold the balance of the deal to the National Bank of Greece.

    At this point, Goldman is out of it; Greece has joined the European Union and it now owes the balance of the off-balance-sheet loan of about $9 billion to their homies at the National Bank of Greece.

    All is well…well, that is until 2008 and the eruption of the Global Financial Crisis.

    THE HELLENIC SWAP

    As the planet’s financial system started to go into the DTs, the European Central Bank did what all central banks do at such times, they went to print mode. They structured a program designed to pour billions of Euros into the European banking system.

    The National Bank of Greece wanted some of that cheap coin. They could borrow it from the European Central Bank (ECB) and lend it out at handsomely higher rates. Yum, yum. But to get it, they had to pledge some collateral to the ECB, collateral they didn’t have.

    What they did have was the income stream from the government tax revenues that they had purchased from Goldman three years earlier. There was just one problem, the European Central Bank would not lend to them on that deal. They needed to pledge some bonds.

    It’s midnight in Athens. From the roof of the headquarters office of the National Bank of Greece we see a gigantic spot light beaming an enormous image of a dollar sign into the Mediterranean sky, a la the Bat Signal.

    The next morning, the Humvee is back with Julia, baldy and their Blackberries. Goldman goes into closed-door session with representatives of the National Bank of Greece and the Treasury officials of the Hellenic Republic. At this point, the Greek government owes the National Bank of Greece about seven billion dollars.

    Goldman channels Houdini yet again. They create and execute what has come to be called “The Hellenic Swap.” And if you want to see some sleight of hand on the stage of international finance, watch this, because this kind of fiscal alchemy is going on 24/7 around the planet with governments large and small.

    In December, 2008, Goldman arranges an interest rate swap between the Greek government and the National Bank of Greece (The Hellenic Swap).

    THE HELLENIC SWAP

    Under the terms of this arrangement, the Greek Government (the Hellenic Republic) is to receive fixed-interest payments from the National Bank of Greece of 4.5 % on $6.96 billion dollars.

    In return, Greece agrees to pay the National Bank of Greece an interest rate of LIBOR + 6.6% on that amount of money. LIBOR was .8% at the time, making the Greece’s interest rate 7.4%. This rate could fluctuate but could never go below 6.6%.

    As can be seen, the National Bank of Greece makes a profit of 2.9% on this swap (about $201,000,000 a year). Nice.

    Except the National Bank of Greece doesn’t keep the swap. Not exactly.

    Shortly after setting up the interest rate swap between the government and the bank, Goldman sets up an entity in London called Titlos, PLC. The name isn’t important, but what they do is. Titlos is what is called a “Special Purpose Vehicle (SPV).” That means it is a legal entity that was set up for the sole purpose of conducting a financial transaction.

    Titlos issues $6.96 billion worth of notes on which interest is payable.

    Titlos then trades the notes to the National Bank of Greece in exchange for their rights to the Hellenic Swap. It so happens that the notes issued by Titlos are the same amount as the balance of the loan that Greece owed the bank ($6.96 billion).

    Greece now owes Titlos the $6.96 billion and is paying the Goldman created shell the 7.4% interest while receiving a fixed rate of 4.5%.

    Titlos receives money, takes an administrative fee and the 4.5% that it must pay Greece, and pays the balance to the National Bank of Greece which services the interest due on the notes.

    And Shazam! The National Bank of Greece now has bonds that it can pledge to the European Central Bank so they can borrow some of that cheap money and lend it dear. In essence, Goldman has become a Central Bank creating money out of thin air.

    We love you, Goldman.

    (Two years later, when the country is on the verge of financial collapse, Goldman issues a statement downgrading the National Bank of Greece saying, “Greece faces both a liquidity and, potentially, a solvency problem. While we believe that, individually, Greek banks tend to be well-run, the problems they face are outside their operational control.”)

    Isn’t that sweet?

     

    THE GREEK BANKRUPTCY

    Meanwhile, the Athenian addiction continued.

    The country finally hit the wall about a year ago, at which point there was a real potential that the nation of Pericles was going to declare bankruptcy.

    What does this mean? It means that Greece had reached the point that they could no longer pay the interest on their debt – their bonds.

    Markets roiled as Greece went cap in hand to their brethren in the European Union, “Buddy, can you spare a billion?” The Eurozone countries bitched, protested and criticized, and in the end, along with help from the IMF, coughed up $146 billion.

    It wasn’t altruism, mind you. No, no. This was pure self-interest. The situation in Greece had helped to drive the value of the Euro down 15% during the first six months of the year. (George Soros, the Dorian Gray of international finance, must have been orgasmic.) The bailout halted the fall.

    If Greece had gone bankrupt, the Euro would have become a doormat on international currency markets and Eurozone economies would have descended into some kind of fiscal horror show.

    But it wasn’t just the sky-diving currency that got them to pony up: European banks including those in France, Germany and Switzerland held over $200 billion dollar’s worth of Greek debt. Just like their good ole’ Uncle Sam, with banks at risk, Greece became “too big to fail.”

    THE GREEK TRAGEDY GOES GLOBAL

    The deeper problem is this: it isn’t just Greece. In what can only be described as one of the world’s more disgusting acronyms, Spain, Ireland and Portugal have now been included in the fraternity of the financially fallen, which is referred to in the financial press as the PIGS (Portugal, Ireland, Greece and Spain). Italy is often included which expands it into PIIGS. Some include Great Britain, which makes it PIIGGS. Still, a pig by any other name….

    The following lead from the May 6, 2010 issue of World Politics Review is one of countless articles exposing the fact that the deficit ridden PIIGS could bring down the economies of Europe.

    With last year’s swine flu scare already a distant memory, the risk of a new epidemic is spreading across Europe. This time the fears have to do not with the H1N1 virus, but with the debt contagion facing Europe’s PIIGS: Portugal, Ireland, Italy, Greece and Spain. With each of these countries carrying high debt-to-GDP ratios, financial markets are growing increasingly skeptical that Greece’s debt crisis will be successfully quarantined within its borders.

    No surprise really when one considers that 15 of the 16 zone members have used swaps to “manage” their debt.

    A UPI story of November 13, 2010 states,

    “The BBC said Irish officials were holding preliminary discussions with the EU about getting assistance from the European Financial Stability Fund. Officials estimated the country would need a bailout of $82 billion to $110 billion.”

    Irish officials denied that they were seeking a bailout until the EU agreed to cough up $115 billion on November 29th so that Ireland could follow in the footsteps of their Hellenic brethren – the debt needle inserted deeply in the fiscal vein while the country goes slowly unconscious.

    IMF, drug dealers to the world.

    The point here is not Ireland, or Greece, for that matter.

    Greece was representative of a larger problem in the PIIGGS. But the problem in the PIIGGS is representative of the entire planet – a world mired in a vast interconnected Ponzi scheme of more than a $1.1 Quadrillion dollars of derivatives, $600 trillion of which are interest rate swaps – a scheme that is so vast, even the people who built it have lost control.

    American banking is not immune. U.S. banks have $216 trillion in derivatives: JPMorgan, $81 trillion, Bank of America, $38 trillion, Citibank, $29 trillion, Goldman Sachs, $39 trillion, HSBC North America, $3.4 trillion, Wells Fargo, $1.8 trillion; this according to the Office of the Controller of Currency’s quarterly report for the first quarter of 2010 and the March 30, 2009 article Geithner’s Dirty Little Secret by William Engdahl. Historically, 60% of derivatives are interest rate swaps. Do the math.

    (Note: the derivatives market consists, to large degree, of bets on other people’s bets. A swap is made [which is really a bet on which way interest rates will go, or whether a country’s bonds will be repaid, etc.] and then other people and institutions bet on which way the swap will go, and then others bet on that bet and others bet on…. In short, it’s a colossal Ponzi scheme operating as a global casino, built on hot air and greed. So, lots of people are betting a derivative will go one way and a corresponding number are betting the opposite. If all of these bets were called at the same time, many would cancel each other out. If all of the bets on bets are washed out, the actual money at risk is about 20% of the face value of the derivatives market. Still, we are talking about trillions.)

    Which brings us back to what is truly driving the actions of the Fed, the International Monetary Fund and the Bank for International Settlements.

    Perhaps you have noticed that the Federal Reserve (which we remind you, is owned by the major New York banks, not the U.S. government) has kept interest rates at zero for the last two years.

    What happened to the banks who bet on low interest rates using interest rate swaps? They made billions in profit. Why? Because they arranged to receive fixed rates from borrowers (cities, states, universities) in exchange for floating rates. The floating rates were tied to the Federal Reserve’s Fed Funds rate, which was lowered to zero due to the “financial crisis.”

    Consider the fact that the financial crisis seems to have missed JPMorgan, who made about $5 billion in profit on interest rate swaps during the first 9 months of 2008, the very heart of the crisis.

    Goldman Sachs made similar profits on these swaps as did Wells Fargo, to name a few. Of course, the cities, counties and states that took the other side of these bets on the advice of investment bankers to protect their bonds, got slaughtered. But let’s not be too harsh on them. According to Goldman Sachs’ CEO, Lloyd Blankfein, following his testimony before Congress, he’s just a banker “doing God’s work.”

    We love you, Lloyd.

    But here’s the problem.

    The majority of the more than a half quadrillion dollars in interest rate swaps are held mainly by banks.

    Stay with me here.

    With rates at zero, what’s the only way they can go?

    That’s right, up.

    And what will happen to those banks with trillions of dollars of interest rate swaps in their portfolios when rates start to climb?

    The planet is drowning in a multi-trillion dollar game of banker baccarat, whose players will suffer massive losses when rates reverse.

    Will the Fed warn Goldman and JPMorgan about a coming increase in rates so that they can dump their swaps on some other drunk in the casino? Perhaps, but to whom do you sell trillions of dollars of hot air after someone has stuck a pin in the balloon?

    And at this point, this isn’t entirely up to Bennie and the Jets. The U.S. Government went $1.4 trillion in debt last year and recorded a $1.3 trillion deficit this year.

    Which means?

    Which means that for China, Japan or the tooth fairy to buy our Treasury Bills now, rates will have to rise. China is not drinking Tim Geithner’s Kool Aid. And the U.S. government will have to raise rates at some point to entice others to buy our fiscal waste. If we don’t raise them, the market will force them up.

    Not, says Ben, on my watch. The Bald One just announced he was going to buy $600 billion dollar’s worth of U.S. government debt starting immediately. Ben calls the Alice in Wonderland money injection, “Quantitative Easing.” This is the second round of quantitative easing- the first one was an unqualified disaster – so this one is now referred to as QE2.

    Sounds like a Steven Spielberg-created alien robot.

    Ben is nothing if not brilliant. If he takes to the presses and buys Timmy Geithner’s debt he doesn’t have to rely on his comrades in the People’s Republic of China to buy it. Rates will stay low. And the trillions of dollars of interest rate swaps – which are owned by the same people who own his bank – will be safe.

    Ben could be up for a Nobel Prize.

    Except that’s not what happened. Finance ministers from around world issued statements implying that Ben was smoking something. And as noted by Mike Larson, of Money and Markets, some of the key U.S. government bond yields not only didn’t go down, they soared.

    And what did our bankers, the Chinese, do? The Chinese credit rating agency, Dagong Global, downgraded the debt of the United States citing, “…the detrimental effects of the QE2 plan and the U.S.’s sizable debt load.”

    Oops.

    A final thought.

    What if, just what if, monetary systems were based strictly on products and real estate values.

    Currency would not be paper, based on government dictate, and it wouldn’t be based on gold (though a gold-based currency would be better than fiat, the price of gold can be manipulated.)

    The money in circulation would represent the goods and services available to be purchased. There would be sufficient money to buy what was available to be bought. The more productive a country, the more money it would have.

    You couldn’t pull a Federal Reserve prank and inflate the currency or deflate it for that matter, which is what causes roller-coastering economies.

    There are details to work out: It would take an annual survey of actual GDP, and the currency in circulation would have to be adjusted annually to correspond with actual products. But think about it: a monetary system based on actual products.

    Meanwhile, keep your powder dry.

    John Truman Wolfe

    Copyright ©2010. John Truman Wolfe. All Rights Reserved.

    References:
    Revealed: Goldman Sachs’ mega-deal for Greece
    http://www.risk.net/risk-magazine/feature/1498135/revealed-goldman-sachs-mega-deal-greece

    Is Titlos PLC (Special Purpose Vehicle) The Downgrade Catalyst Trigger Which Will Destroy Greece? http://www.zerohedge.com/article/titlos-llc-special-purpose-vehicle-downgrade-catalyst-trigger-which-will-destroy-greece

    Eight Financial Fault Lines Appear In The Euro Experiment!
    http://www.marketoracle.co.uk/Article17332.html

    Sultans of Swap – Explaining $605 Trillion of Derivatives!
    http://www.safehaven.com/article/15906/sultans-of-swap-explaining-605-trillion-of-derivatives

    Goldman, Greece and a Troubling Tango
    http://www.nickdunbar.net/?page_id=298

    London firm was created to route cash by Carrick Mollenkamp http://online.wsj.com/article/SB10001424052748703791504575079903903971986.html

    Goldman Sachs Transactions with Greece

    http://www2.goldmansachs.com/our-firm/on-the-issues/viewpoint/viewpoint-articles/greece.html

    Eurozone approves massive Greece bail-out
    http://news.bbc.co.uk/2/hi/8656649.stm

    Ireland’s Fate Tied to Doomed Banks by Charles Forelle and David Enrich http://online.wsj.com/article/SB10001424052748704506404575592360334457040.html

    Wall Street Collects $4 Billion From Taxpayers as Swaps Backfire
    http://www.bloomberg.com/news/2010-11-10/wall-street-collects-4-billion-from-taxpayers-as-swaps-backfire.html

    The ideas and suggestions contained in this article are not intended as a substitute for consulting with your financial adviser. Always check with your own legal, financial or investment adviser before making investment decisions.
    Neither the author nor the publisher shall be liable or responsible for any loss, injury or damage allegedly arising from any information or suggestion in this article. The opinions expressed in this article represent the personalviews of the author. Past performance is no guarantee of future results and no guarantees are made – experessed or implied.

    Goldman Sachs: Who’s Pulling the Strings?

    July 12, 2012

    Posted by in Financial crisis with no comments

    Here by popular demand, the Goldman Sachs graphic. Click the image to open a full-width view.

    European Central Bank Swallows Nation States

    July 2, 2012

    Posted by in Financial crisis with one comment

    Three months ago, I wrote an article covering the financial crisis in Europe. The article, which is now the final chapter in the updated version of Crisis by Design (http://johntrumanwolfe.com/products-page/), exposes the fact the current crisis is caused. It is designed. Designed to create enough financial chaos in the EU to provide the basis for international bankers to move in and take over.

    That happened yesterday – June 29, 2012.

    What follows is the introductory pages to the article and then a summary and link to the take over of the finances of all Eurozone countries by the European Central Bank, which is now the Fed of Europe.

    A staggering, and predictable development.

    THE FINANCIAL CRISIS: ACT THREE

    It would have been Shakespeare’s greatest tragedy…and farce…and drama.

    It is a play of such power that it brings sovereign nations to their knees and sends Presidents and Prime Ministers to the dustbin of history.

    MordorBut Willie Shakespeare didn’t write this play. It was penned by bankers of Mordor, better known as the Bank for International Settlements.

    It was they who took quill in hand to script this drama. They also Executive Produced the play and brought in the bad boy of international finance – the International Monetary Fund (IMF) – to direct.

    Headquarters of the Bank for International Settlements in Basel, Switzerland

    Headquarters of the Bank for International Settlements in Basel, Switzerland

    Entitled “The Global Financial Crisis,” Act I opened on Wall Street with a 778 point drop in the Dow in September of 2008 and was followed by a command performance in the U.S. Congress shortly thereafter. I examined Act I in great detail in Crisis by Design The Untold Story of the Global Financial Coup (www.crisisbydesign.net).

    Act II, sub-titled The European Financial Crisis, is currently being performed daily in the streets of the PIIGS (Portugal, Italy, Ireland, Greece and Spain) for standing room only audiences in the respective parliaments (see my essay, A Greek Tragedy: Pulling Back the Curtain on Bankers Gone Wild, http://johntrumanwolfe.com/products-page/).

    There is a theme to this play – a message really. The message, subtle at first, now roars from the pages of the financial press like a raging forest fire demanding solutions that have, in fact, been long since preordained: the crisis is too overwhelming for any one country to deal with; sovereign nations can no longer manage their own financial affairs -international financial organizations – the IMF – must act to save these economies.

    If society is going to be saved from a caldron of financial chaos, loans must be made to the governments affected by the crisis as well as to the banks in their countries that are too big to fail. (It is these very banks, of course, that buy the government debt and thereby keep the fiscal needle in the arm of those in power).

    These people have the IQ of roadkill – the countries are in financial crisis because they borrowed too much. The IMF’s solution is to lend them more money.

    Hellooo?

    But they are not really “stupid” in that sense. Oh no. They know exactly what they are doing. The junkie is hooked.

    The banker keeps the needle in the vein, because without it… society goes into withdrawal. And like the agony and convulsions of a body coming off of smack, countries with dependent populations that are forced to live within their means, experience civil unrest, riots and political chaos.

    Withdrawal by any other name….

    Politician become nauseous, and retch endlessly behind closed doors considering such things.

    They posture for the press, and speak of national sovereignty and fiscal austerity; but in the dark paneled rooms where they once held power, they beg for bail-outs in disgustingly propitious tones.

    The money comes… as long as the government signs the loan agreement that comes with it, giving de facto control of their financial, and other governmental, affairs to the IMF, who, in turn, serve the poppy growers in Basel.

    _________

    I wrote this article a few months ago.

    On June 29, 2012 The London Telegraph published the story of Germany caving in to EU demands to bail out Italian and Spanish Banks and to have the European Central Bank take over the finances of EU countries.

    This is summarized in G. Edward Griffin’s weekly newsletter http://www.realityzone.com/currentperiod.html

    A threat by Italy and Spain to ‘block everything’ at an EU summit meeting causes Germany to agree to an EU bailout of those countries to the tune of $126 billion. Also agreed upon is the creation of a new, centralized financial authority that will control the monetary policy of EU countries.

    My emphasis.

    JP Morgan Mauled by Derivatives

    June 29, 2012

    Posted by in Financial crisis with 6 comments

    There are news reports that now suggest that JP Morgan’s derivatives losses are not $2 billion, they are likely to be $8 billion or perhaps as high as $9 billion http://dealbook.nytimes.com/2012/06/28/jpmorgan-trading-loss-may-reach-9-billion/.

    The JP Morgan losses resulted from derivatives called Credit Default Swaps.

    But the danger to the global economy isn’t Credit Default Swaps, it is a world mired in a vast interconnected Ponzi scheme of more than a $1.1 Quadrillion dollars of derivatives, more than half of which are bets on the direction of interest rates. These are called interest rate swaps.

    In fact, an estimated six hundred trillion dollars of these derivatives are interest rate swaps – a casino that is so vast, even the people who built it have lost control.

    Interest rate swaps are bets on whether interest will rise or fall. An investment bank thinks rates will go up. Another bank thinks they will go down.

    And they bet.

    Here’s an example: the City of Houston raises $100,000,000 by selling municipal bonds to build a new sports stadium.

    The bonds are sold with a floating interest rate, which is tied to a rate controlled by the Fed called the federal funds rate (FFR) – say, FFR + 2% – and is at the closing of the bond issue, let’s say, 4%.

    But the city’s budget is extraordinarily upside down and if rates go up, they’ll never be able to handle the interest payments. What to do?

    In the distance we hear a bugle signaling a cavalry charge. This is followed by the sound of screeching tires as a Humvee stretch-limo the size of the Hindenburg squeals around the corner, roars up the street and pulls to a stop in front of the mayor’s office.

    The chauffeur exits the driver’s side and walks briskly around the car and opens the rear door. The first person out is a Julia Roberts look-alike in a Valentino pantsuit. She is wearing designer shades and is carrying a Prada briefcase. She is followed by an unusually tall man wearing a midnight blue Armani suit with teal pinstripes. He is ostrich egg bald, is wearing granny glasses and has a Tumi laptop bag slung over his shoulder. He is furiously working the keys of a Blackberry while talking on a Bluetooth headset.

    Goldman Sachs has arrived.

    The City of Houston and Goldman strike a deal.

    The City will pay Goldman a fixed rate of 4% so their interest expense is guaranteed not to rise. Goldman, in turn will pay the city the floating rate – the fed funds rate +2%, so they can pay their bondholders per the terms of the bond purchases.

    That is an interest rate swap: the city “swaps” its floating rate for a fixed rate. If the Fed Funds Rate goes up, Goldman loses; if it goes down, they win.

    But that transaction doesn’t end there. There are bets on this swap and bets on those bets and then bets on the bets of the bets and… stay with me …a $600,000,000,000 – six hundred TRILLION house of cards.

    This is a colossal global casino, built on hot air and greed.

    Which brings us back to what is truly driving the actions of the Fed, the International Monetary Fund and the Bank for International Settlements.

    Goldman Sachs Tower

    Goldman Sachs Tower at 30 Hudson Street, in Jersey City

    Perhaps you have noticed that the Federal Reserve (which we remind you, is owned by Goldman Sachs and other major New York banks, not the U.S. government) has kept interest rates at zero for the last three and a half years.

    What happened to the banks that bet on low interest rates using interest rate swaps? They made billions in profit. Why? Because they arranged to receive fixed rates from borrowers (cities, states, universities) in exchange for floating rates. The floating rates were tied to the Federal Reserve’s Fed Funds rate, which was lowered to zero during to the “financial crisis” by Helicopter Ben and have remained there.

    Consider the fact that the financial crisis seems to have missed JPMorgan, who made about $5 billion in profit on interest rate swaps during the first 9 months of 2008, the very heart of the crisis.

    Goldman Sachs made similar profits on these swaps, as did Wells Fargo, to name a few. Of course, the cities, counties and states that took the other side of these bets on the advice of investment bankers to protect their bonds, got slaughtered. But let’s not be too harsh on them. According to Goldman Sachs’ CEO, Lloyd Blankfein, following his testimony before Congress, he’s just a banker “doing God’s work.”

    We love you, Lloyd.

    But here’s the problem.

    The majority of the more than a half quadrillion dollars in interest rate swaps are held mainly by banks. As we documented above, the 9 biggest U.S. banks hold a quarter of a quadrillion in derivatives. An estimated $136 trillion are interest rate swaps (the U.S. Gross Domestic Product, basically the value of our annual production of goods and services is $15 trillion).

    Stay with me here.

    With rates at zero, what’s the only way they can go?

    That’s right, up.

    And what will happen to those banks with trillions of dollars of interest rate swaps in their portfolios when rates start to climb?

    The planet is drowning in a multi-trillion dollar game of interest rate roulette, whose players will suffer massive losses when rates reverse.

    And at this point, this isn’t entirely up to Bennie and the Jets. The U.S. Government went $1.4 trillion in debt last year and recorded a $1.3 trillion deficit this year.

    Which means?

    Which means that, at some point for China, Japan or the tooth fairy to buy our Treasury Bills, rates will have to rise. China is not drinking Tim Geithner’s Kool Aid. And the U.S. government will have to raise rates at some point to entice others to buy our fiscal waste. If we don’t raise them, the market will force them up.

    Not, says Helicopter Ben, on my watch. The Bald One bought $600 billion dollar’s worth of U.S. Treasury last year. Ben calls the Alice in Wonderland money injection, “Quantitative Easing.” That was the second round of quantitative easing – the first one was an unqualified disaster – this one has been the same. According to reports, QE 3 is being discussed.

    Ben is nothing if not brilliant. If he takes to the presses and buys Timmy Geithner’s debt he doesn’t have to rely on his comrades in the People’s Republic of China to buy it. Rates will stay low. And the trillions of dollars of interest rate swaps – which are owned by the same people who own his bank – will be safe.

    Helicopter BenBen could be up for a Nobel Prize.

    Except that’s not what happen as a result of QE 2. Finance ministers from around world issued statements implying that Ben was smoking something. And as noted by Mike Larson, of Money and Markets, some of the key U.S. government bond yields not only didn’t go down, they soared.

    And what did our lenders, the Chinese, do? The Chinese credit rating agency, Dagong Global, downgraded the debt of the United States citing, “…the detrimental effects of the QE2 plan and the U.S.’s sizable debt load.”

    Oops.

    What will happen when someone sticks a pin in the derivatives balloon? Not a $2-$9 billion dollar JP Morgan sneeze. No, not even the flu. It will be double bronchial pneumonia.

    What would you rather be holding when that happens, pieces of paper or gold and silver?

    International Bankers and Media Pushing the Global “CRASH” Button

    June 2, 2012

    Posted by in Financial crisis with no comments

    The international bankers and the media are starting to push the global “CRASH” button. Zoellich, head of the World Bank (and former Goldman Sachs exec) has raised the spector of a global Lehman Bros – An International crash. Maybe this is a tease, they don’t usually don’t move this fast after the first major media release, but maybe not. Make sure your bank accounts are below $250K. And check out the story at this link to see the media / PR flank.

    Fasten your seat belts, it might get bumpy.

    http://www.dailymail.co.uk/news/article-2153324/Markets-facing-rerun-Great-Panic-2008-Head-World-Bank-warns-Europe-heading-danger-zone-bleakest-day-global-economy-year.html

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