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Six Degrees To Meltdown

(Alpheus, March 2008)


On the morning of February 23, 2008, the world looked for several minutes into an economic abyss with a possible crash on the New York Stock Exchange. Within minutes of opening the index went down an unprecedented 464 points. I watched the event with amazement on CNN, which was broadcasting live from the trading floor. A steep decline was expected because Asian and European markets had performed very badly the days before, futures indexes indicated big losses and then recent economic indicators were worse than expected. The Federal Reserve saw it also coming and pre-emptively cut its benchmark rate by 0.75 percent, making its decision known just one hour before trading started. The market went through a roller coaster and ended the day only 128 points down. What other manipulations might have occurred to stabilize the market, for example by the Plunge Protection Team, and how far down the index might have gone without the Fed's intervention, is anybody's guess, but it will not have been pretty. Within days gold went over $900 and is now over the psychological benchmark of $1000, joining two other important milestones like oil over $100 and the Euro over $1.50.

A similar situation as described above almost happened Monday morning March 17. Some Asian markets were steeply down and the 5th biggest US investment bank was technically insolvent. The Federal Reserve tried feverishly on Sunday before the Asian markets opened, to put together a package of unprecedented measures "hoping to prevent a systemic meltdown in financial markets" as the New York Times put it. The Federal Reserve slashed another .25% of its discount rate; arranged $30 billion for JP Morgan Chase to take over insolvent Bear Stearns and opened its printing press to investment banks. Then on Tuesday they slashed another .75% and the Dow jones went through another roller coaster. The big correction on Wall Street has not yet occured because the Federal reserve keeps preventing it with ever more dramtic measures. Eventually they are expected to run out of ammunition.

Meanwhile the effects of the sub-prime mortgage fiasco/scandal is rippling through the global financial system with such a relentless force that it leaves analysts stunned, traders frazzled, banks wobbly, credit markets frozen, hedge funds popping, litigations mushrooming, municipal bonds unsold and its insurers downgraded, investors facing bankrupting margin calls, homeowners foreclosed, consumer confidence dropping, employees losing jobs, retail sales plummeting, businesses belly-up, municipalities losing their tax-base and facing increased crime and homelessness, and much, much more. All kinds of records are broken and comparisons with the Great Depression more frequent, with even a French research company coining the coming downturn as the Very Great US Depression. To prevent a recession Congress throws some spending money at the problem, ignorant of what caused this situation in the first place, and the Fed is cranking out hundreds of billions of inflationary fiat dollars to lubricate a banking system that is progressively becoming more cautious, suspicious, opaque, stuck and (silently) insolvent. Only two comercial banks so far have gone bankrupt in 2008, but the Federal Deposit Insurance Company is hiring, knowing it will have a busy year.

Much more could be reported in fascinating and revealing detail, like the ticking $500 trillion derivatives time bomb, but lack of time and expertise prevent me from double-checking all facts and refining all reasoning for a possible extended article. I am a dilettante as far as economic maters are concerned, and I mean that in a positive way as "enthusiastic amateur." Therefore I invite you to just go straight to the articles and read for yourself. An introduction might be appropriate to explain the choices of authors and articles. In a later article I will report on my investigation into the nature of money, which is a far from obvious phenomenon, and on the possible solutions to the economic mess we are in developed by several citizen thinkers. One interesting proposal comes from Stephen Zarlenga of the American Monetary Institute: nationalize and reform the Federal Reserve System; re-regulate the financial services sector; have banks go back to full reserve lending; and have the US Treasury Department issue debt-free money, spent into the economy on the crumbling US infrastructure like dams, levees, roads, bridges, public transportation, schools, a nationwide fiber-optic network and maybe even education and healthcare. So, as worse is still to come, get prepared, sit tight, and let your spirits not get dampened. Mine have just turned a corner.

Prof. Nouriel Roubini, Ph.D.

The first three articles are by or about New York University economics professor Nouriel Roubini. He is an academic straight-talker whose accessible views many economic analysts and journalists take serious. He even has access to the highest echelons of world finance like the IMF, the annual World Economic Forum at Davos, Switzerland, and recently he testified before Congress. He is the one who lays out the logic or "anatomy" of a possible "systemic financial meltdown" scenario in 12 steps in both a shorter column and a longer study and warns the world that a meltdown "has a rising and significant probability of occurring." Martin Wolf of the Financial Times summarized Roubini's 12 steps in his "America's Economy Risks Mother of all Meltdowns."

F. William Engdahl, Ph.D.

Next in line is the writer on geopolitics and geo-economics, F. William Engdahl, author of the acclaimed study "A Century of War: Anglo-American Oil Politics and the New World Order," and frequent contributor to the high quality Global Research web site. He is currently writing on the economy and released so far 5 installments of what looks like a book in the making. His chosen metaphor to bring home the danger of the situation is "The Financial Tsunami." The 5th part, "The Predators Had A Ball," nicely captures the basics of the situation and can therefore be read by itself.

Ambrose Evans-Pritchard

Switching back to the mainstream press with the views of Ambrose Evans-Pritchard of The Telegraph (United Kingdom). He has been around a long time as an economic journalist and commentator and is a good example of a non-US reporter who has more freedom to be non-ideological, incisive and factual about American matters than the big US media allow their own reporters to be. He ended his March 7, 2008 article with the eerie confession that for "the first time since this Greek tragedy began, I am now really frightened."

Kurt Richebächer's Shoes

Since the unfortunate death of Kurt Richebächer last year the question rose about who could step into his shoes. The issue is important because he was regarded as the pre-eminent hard-nosed analyst of the American economy in the mold of the Austrian school of economics and cranked out on a consistent basis a 12-page monthly report with an Austrian take on the latest statistics and trends. Never before in my life I paid so much per page and got so much out of it. Years ahead he foresaw and laid out the logic of the economic downturn we are now in. The publishers of the Richebächer Letter are still looking for someone to take up his pen. As the names of Jim Willie, Mike Whitney and Bob Chapman were dropped in this context, because of their analytic acumen, some of their relevant articles are presented in this installment on the economy.

Miscellaneous Analysts

If the above is all too esoteric or 'European,' the views of some US commentators are also included. In general, I like Jim Jubak and some others at msn.money, and I'm glad that trend-spotter and economic forecaster Gerald Celente has some degree of access to the mainstream US media. Meanwhile the elitist Washington Post is also letting the cat out of the bag through one of its columnists, David Ignatius. He rejoices that, fortunately, the average American does not understand what is going on, otherwise the ignorant public will clamor for bailouts and fixes that might do more harm than good and interfere with the necessary market correction: "The public, fortunately, doesn't understand how bad the situation is. If it did, we might have a real panic on our hands. And there would be more pressure for bad policies -- ones that try to freeze the damage, rather than letting prices fall to levels where buyers will return and the markets will clear."

Mike Shedlock

Before getting into some stronger stuff as a finale, check the most recent, March 6, 2008, Mish's Global Economic Trend Analysis by Mike "Mish" Shedlock for the latest look into the abyss or jaws of hell (and other stark metaphors) to convey the plausible, but not necessary, nightmare scenario of the catastrophic blow up and end of the line, tsunamic meltdown slow-motion, chain-reaction crash of the broken, utterly unhinged, global financial casino. In short: economic 9/11-Armageddon.

Warren Buffet

The story of how Warren Buffet came to look upon derivatives as "financial weapons of mass destruction" will help to get a sense of the magnitude, danger and, even for experts, the incomprehensible nature of the derivatives market. By definition derivatives are complex financial contracts that derive their value from underlying assets like stocks, bonds or mortgages. Originally designed and used to hedge against the risks of market volatility, speculators have now taken over the market and put it on steroids to a system-endangering level, against which there is no ultimate hedge, insurance or lender of last resort. Many of these contracts have build-in time limits and are periodically due on the third Friday of March, June, September and December. (I'm not calling another crash for March 21, because the Plunge Protection Team will again make some open and covert pre-emptive moves like lowering the Fed benchmark with probably another dramatic .75%. The PPT is apparently very concerned--they are convening Monday at the White House--because of last week's developments, especially the insolvency of 5th largest US investment bank Bear Stearns and investment fund Carlyle Capital. Rumors are also flying around that a big commercial bank is in deep trouble, which I guess is Citibank.)

Dmitry Orlov

Recently a compassionate Russian, Dmitry Orlov, was so kind to make some very well educated forecasts about American economic life after a meltdown by comparing it with what the Russians had to go through in the late 1980s and '90s when they lost their own empire. He lived through the economic meltdown of the Soviet Union and Russia and made a study of how the average Russian coped with that. He confidently stated that an "economic collapse is amazing to observe, and very interesting if described accurately and in detail." He is convinced that the US will loose its own empire, experience an economic collapse, and its citizens will have to go through a very painful adjustment to a new lifestyle, for which, he thinks, they are poorly prepared and therefore offers some common sense hard-nosed advise.

Al Martin (?)

How the scenario might play out on a federal level, if you have the stomach to activate your brain about that, is the subject of Al Martin's hypothetical "Protocols For Economic Collapse In America," in which he lays out the legal tools the United States Treasury might deploy to deal with a major financial collapse of the federal government when it can not service its debt anymore. He foresees that either there will have to be very deep spending cuts, and/or steeply increased taxations, or the United States Treasury can declare a "force majeure" and repudiate all its debt, i.e. declaring the US Government bankrupt, which can trigger other "collapse protocols" designed and coordinated by the Department of Defense, including martial law. It is not clear whether the article is by the prolific conspiricist Al Martin of almartinraw.com and why the article appeared, or re-appeared on February 23, 2008, while it probably was written more than 4 years ago, for it refers to a possible coming second Bush-Cheney administration. Maybe he had withdrawn the article and thought that the occurrence of the almost-crash last February was a good reason to release it again. The great importance of this article though is that it moves into a next level of parapolitical analysis and views the economic collapse as an inside job by the "Bushonian Cabal" in order to impose a dictatorship on the unruly Americans and to get their hands on citizen's assets to bail themselves out and pay off foreign creditors.

The Parapolitical Angle

To round off a para-politico-economic analysis, the motives of the High Cabal to create an economic disaster will have to be laid bare. Basically I hypothesize that the motives overlap with the ones operative behind the 9/11 false flag terrorist inside job as laid out in "War and Truth V: What happened on 9/11?" Ever since the esoteric-Masonic network successfully pulled off the American Revolution there has been a reactionary, systematic, trans-generational, trans-national, European-based effort to contain, subvert and undo the political and civilizational gains made through this event. The primary leverage over society that the reactionary forces sought was monetary, which was to be gained by legislating the power of issuing money into private hands. After more than a century of moving battle lines between conniving private bankers and perceptive public servants the former attained, through a series of well-executed conspiratorial maneuvers, a firm, though reversible, victory with the establishment of the Federal Reserve System, about which the accurate quip goes that it is neither federal, nor has reserves, nor is a bank, but a private, legalized counterfeiting operation in the hands of the international banking fraternity. Within 16 years the Fed set the conditions for the 1929 crash and depression, which gave the High Cabal a good opportunity to re-structure the economy and banking sector and re-engineer American society. This they accomplished also through the well-organized, semi-secret power-base and recruiting grounds of the Germany-based Skull & Bones at Yale University and the UK-based Round Table in New York. In 1919 both hooked up to co-create the immensely influential Council on Foreign Relations (CFR) together with J.P. Morgan. After WWII and after having given birth to the UN, IMF and World Bank, the CFR would mold and provide the managers for the new global system and do the think tanking for the Bilderberg conferences and the Trilateral Commission. The CFR got also interlocked with quite some communist front organizations and harbored and promoted some successful Soviet spies like Alger Hiss and 'Boris,' who is still on the loose influencing policies at the highest levels of the international power elite. In what way all these groups are the interconnected offspring from Weishaupt's Illuminati is still an open question. (For a visual display of this network see "Secret and semi-secret long-term policy planning groups on a chronological-geographic grid.") Through academic studies, journalistic investigations and their own open confessions it is quite obvious that this cabal likes to get rid of sovereign nation states and have all nations merge into a world government of sorts and beholden to the international banking fraternity. The biggest obstacles to the implementation of this long-term plan are the US Constitution and American citizens. Therefore one of its greatest strategic prizes would be a thoroughly deconstructed, malleable US in a state of Post Traumatic Stress Disorder after she had gone through several economic, political, moral and constitutional breakdowns. So, we end by asking, is the unfolding economic crisis one in a series of hits to bring the US into submission to the One World agenda or are we conspiranoids, projecting monsters where only benign though ignorant windmills exist? Dare to check? In either case, radical financial and monetary reforms are called for and coming, but, please, be very skeptical of the solutions coming from the people that were responsible for the mess in the first place.

Previous articles in this series:
The State of the US Economy, September 2007 (Sept. 2007)
Manipulation, Manipulation, Manipulation (Oct. 2007)



Article: Anatomy of a Financial Meltdown

Author: Nouriel Roubini

Source: Daily Times (Pakistan), February 17, 2008

URL: http://www.dailytimes.com.pk/default.asp?

Excerpt: Indeed, adding up all these losses in financial markets, the sum will hit a staggering $1 trillion. Tighter credit rationing will then further hamper the ability of households and firms to borrow, spend, invest, and sustain economic growth. The risk that a systemic financial crisis will drive a more pronounced US and global recession has quickly gone from being a theoretical possibility to becoming an increasingly plausible scenario.


Article: The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster

Author: Nouriel Roubini

Source: Global EconoMonitor, February 5, 2008

URL: http://www.fxstreet.com/futures/market-review/

Excerpt: Why did the Fed ease the Fed Funds rate by a whopping 125bps in eight days this past January? It is true that most macro indicators are heading south and suggesting a deep and severe recession that has already started. But the flow of bad macro news in mid-January did not justify, by itself, such a radical inter-meeting emergency Fed action followed by another cut at the formal FOMC meeting.
To understand the Fed actions one has to realize that there is now a rising probability of a "catastrophic" financial and economic outcome, i.e. a vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe. The Fed is seriously worried about this vicious circle and about the risks of a systemic financial meltdown.
That is the reason the Fed had thrown all caution to the wind - after a year in which it was behind the curve and underplaying the economic and financial risks - and has taken a very aggressive approach to risk management; this is a much more aggressive approach than the Greenspan one in spite of the initial views that the Bernanke Fed would be more cautious than Greenspan in reacting to economic and financial vulnerabilities.
To understand the risks that the financial system is facing today I present the "nightmare" or "catastrophic" scenario that the Fed and financial officials around the world are now worried about. Such a scenario - however extreme - has a rising and significant probability of occurring. Thus, it does not describe a very low probability event but rather an outcome that is quite possible.


Article: America's Economy Risks Mother of all Meltdowns

Author: Martin Wolf

Source: Financial Times, February 19, 2008

URL: http://www.ft.com/cms/s/0/

Excerpt: Recently, Professor Roubini's scenarios have been dire enough to make the flesh creep. But his thinking deserves to be taken seriously. He first predicted a US recession in July 2006. At that time, his view was extremely controversial. It is so no longer. Now he states that there is "a rising probability of a 'catastrophic' financial and economic outcome". The characteristics of this scenario are, he argues: "A vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe."


Article: The Financial Tsunami (in 5 parts)

Part I: Sub-Prime Mortgage Debt is but the Tip of the Iceberg

Part II: The Financial Foundations of the American Century

Part III: Greenspan's Grand Design

Part IV: Asset Securitization-- The Last Tango

Part V: The Predators Had A Ball

Author: F William Engdahl

Source: Global Research & Engdahl's web site

URL: http://www.engdahl.oilgeopolitics.net/index.html

Excerpt: Even experienced banker friends tell me that they think the worst of the US banking troubles are over and that things are slowly getting back to normal. What is lacking in their rosy optimism is the realization of the scale of the ongoing deterioration in credit markets globally, centered in the American asset-backed securities market, and especially in the market for CDO's-Collateralized Debt Obligations and CMO's-Collateralized Mortgage Obligations. By now every serious reader has heard the term "It's a crisis in Sub-Prime US home mortgage debt." What almost no one I know understands is that the Sub-Prime problem is but the tip of a colossal iceberg that is in a slow meltdown.


Article: Bush convenes Plunge Protection Team

Author: Ambrose Evans-Pritchard

Source: The Telegraph (UK), January 11, 2008

URL: http://www.telegraph.co.uk/money/main.jhtml?

Excerpt: On Friday, Mr Bush convened the so-called Plunge Protection Team for its first known meeting in the Oval Office. The black arts unit - officially the President's Working Group on Financial Markets - was created after the 1987 crash. It appears to have powers to support the markets in a crisis with a host of instruments, mostly by through buying futures contracts on the stock indexes (DOW, S&P 500, NASDAQ and Russell) and key credit levers. And it has the means to fry "short" traders in the hottest of oils. … Judging by a well-briefed report in the Washington Post, a mood of deep alarm has taken hold in the upper echelons of the administration.


Article: Crisis may make 1929 look a 'walk in the park'

Author: Ambrose Evans-Pritchard

Source: The Telegraph (UK), December 29, 2007

URL: http://www.telegraph.co.uk/money/main.jhtml?xml=/money/

Excerpt: Twenty billion dollars here, $20bn there, and a lush half-trillion from the European Central Bank at give-away rates for Christmas. Buckets of liquidity are being splashed over the North Atlantic banking system, so far with meager or fleeting effects. As the credit paralysis stretches through its fifth month, a chorus of economists has begun to warn that the world's central banks are fighting the wrong war, and perhaps risk a policy error of epochal proportions.
"Liquidity doesn't do anything in this situation," says Anna Schwartz, the doyenne of US monetarism and life-time student (with Milton Friedman) of the Great Depression.
"It cannot deal with the underlying fear that lots of firms are going bankrupt. The banks and the hedge funds have not fully acknowledged who is in trouble. That is the critical issue," she adds.
Lenders are hoarding the cash, shunning peers as if all were sub-prime lepers.


Article: Enter 2008: The System Breaks

Author: Jim Willie

Source: Golden Jackass website, Jan 3 2008

URL: http://www.gold-eagle.com/editorials_08/willie010308.html

Excerpt: The year 2008 will be the year that THINGS JUST PLAIN BREAK. It will be a truly deadly year, unavoidably lethal to the US Economy and especially to the US banking sector. Nothing has been repaired. Some tangible solutions will be offered in the next section, all legitimate in a real world. However, we do NOT live in a real world, but rather in a Fairy Tale world of US Hegemony and Wall Street with a chokehold around the US entire system. Managed inflation is the policy never to be reversed, until total breakdown occurs. Treason is rampant, called simply Power Games. All attempts so far are to shore up the existing system, to enable Wall Street to sell as much of their damaged asset backed bonds to suckers, and to avoid international lawsuits against Wall Street firms. In 2008, an alarming sequence is assured of enormous damage that puts the entire US economic and financial system in a perilous situation. The powers survived the end of 2007, with heavy usage of band-aids, rubber bands, and paper clips, but reality continues to itemize a relentless sequence of unfixable, tragic, intractable problems. The pressure points are big banks suffering from insolvency, prime mortgage bonds destined for massive losses, consumers without kitties to rob to keep spending, a worsening housing market from chronic inventory bloat, and deepening problems in the lending industry frozen from insolvency and distrust. Pitch in a global resentment of US fraud and heavy-handed tactics, especially from the last couple decades.


Article: The Bonfire of Capital: Less Money, More Pain

Author: Mike Whitney

Source: Counterpunch, February 22, 2008

URL: http://www.counterpunch.org/whitney02222008.html

Excerpt: The country is now headed into a deep and protracted recession. Low interest credit and financial innovation have paralyzed the credit markets while inflating a monstrous equity bubble that is wreaking havoc with the world's financial system. The new market architecture, "structured finance", has collapsed under the stress of falling asset-values and rising defaults. Many of the banks are technically insolvent already, drowning in their own red ink. Public confidence in the nations' financial institutions has never been lower. Monetary policy and deregulation have failed. The system is self-destructing.


Article: Iran's Oil Bourse Could Topple The Dollar

Author: Mike Whitney

Source: Rense.com, February 5, 2008

URL: http://www.rense.com/general80/topple.htm

Excerpt: The petrodollar system is no different than the gold standard. Today's currency is simply underwritten by the one vital source of energy upon which every industrialized society depends---oil. If the dollar is de-linked from oil, it will no longer serve as the de-facto international currency and the US will be forced to reduce its massive trade deficits, rebuild its manufacturing capacity, and become an export nation again. The only alternative is to create a network of client regimes who repress the collective aspirations of their people so they can faithfully follow directives from Washington.


Article: Meltdown Looms Larger as Credit Markets Freeze

Author: Mike Whitney

Source: Counterpunch, March 13, 2008

URL: http://counterpunch.org/whitney03132008.html

Excerpt: The stock market was headed for a crash this week, but Bernanke managed to swerve off the road and avoid a head-on collision. But nothing has changed. Foreclosures are still soaring, the credit markets are still frozen, and capital is being destroyed at a faster pace than any time in history. The economic situation continues to deteriorate and even unrelated parts of the markets have now been infected with subprime contagion. The massive deleveraging of the banks and hedge funds is beginning to intensify and will continue to accelerate until a bottom is found. That's a long way off and the road ahead is full of potholes.


Article: The Current Credit-Crunch Catastrophe

Author: Bob Chapman

Source: International Forecaster Weekly, February 16 2008

URL: http://theinternationalforecaster.com/

Excerpt: Bank reserves are being eaten alive by loan defaults and asset write-downs faster than the Fed can replace them. That is because the fractional reserve system Ponzi scheme is now working in reverse and unraveling big-time. This is why Hanky Panky Paulson is running around trying to figure out how to stop the defaults that are bleeding the banks dry. The Fed and Wall Street made a big blunder and grossly underestimated the percentage of loan defaults from toxic waste and the impact that this would have in non-subprime sectors while they grossly overestimated the liquidity of this kind of maniac paper and falsely boosted its credit rating. And remember, the Fed cannot control the creation of credit by non-bank institutions which are also getting hammered. The bank's that dabbled in toxic waste must either borrow reserves from the Fed, or call in a total of demand loans equal to 7 or 8 times the amount of reserves that have been lost or they will become insolvent and have to be liquidated by the FDIC which in the end won't even be able to pay losses at pennies on the dollar as the entire financial system comes tumbling down unceremoniously.


Article: A painful fix for the credit crisis

Author: Jim Jubak

Source: msn money, Jubak's Journal 2/22/2008

URL: http://articles.moneycentral.msn.com/Investing/

Excerpt: The crisis of confidence that has gripped the debt markets is like an old-fashioned, Depression-era run on the banks -- but now with trillions of dollars on the line.
In a bank run, depositors, fearing their bank might not have enough capital to cover its obligations, rushed to pull out their money before it all disappeared. The bank would try to call in whatever loans it could to provide cash and, of course, stopped making loans. If the run was fast and heavy enough, the bank would shut its doors, freezing the accounts of depositors who hadn't been quick enough to pull out their money and calling in all outstanding loans to the borrowers who depended on the bank. … If the bank was big enough, the run and subsequent closing of its doors could send ripples out across the banking sector as customers at other banks began to worry about whether their banks were safe. That often led to runs on other banks and a banking crisis like the panics of 1930-33, when 2,489 banks failed. …. In the current credit crisis, as in the bad old days of bank runs, the key questions are: Whom can you trust to pay what they owe? How do you restore confidence to the system?


Article: Panic of 08 - Politician Won't Prevent It

Author: Gerald Celente

Source: Rense.com, February 25, 2008

URL: http://www.rense.com/general80/p2anic.htm

Excerpt: The same question has been asked throughout history: "How could it have been that, with all the evidence staring them in the face, people couldn't see disaster coming?"

History is again repeating itself. Despite the mountains of evidence and baskets of statistics pointing to "Panic," the media, the man on the street and the politicians avoid the facts and deny the ugly truth or defend their beliefs with a vengeance attacking those who beg to differ.

Battered equity markets, rising unemployment, a diving dollar, $100 per barrel oil, soaring commodity prices, plummeting real estate values, record home foreclosures, slumping retail sales, crumbling consumer confidence, a credit crunch, the subprime crisis, write- offs and write-downs the data doesn't lie. Banks, brokerages, and bond insurers begging for bailouts and pleading for cash.

SIVs, CDOs, ARSs VRDNs, hedge fund operators, derivative players, buyout specialists an alphabet soup of exotic scams, rigged games, Wall Street cons and double dealers.

America's on the rocks and sinking fast and there's no one there to save it. Not the Federal Reserve, the President of the United States, nor the presidential wannabes in waiting. There are no quick fixes or human geniuses that can make the debt-bloated pig fly, yet a desperate public prays that its pathetic politicians will lead them to economic salvation.


Article: Wall Street Bank Run

Author: David Ignatius (columnist)

Source: Washington Post, February 21, 2008

URL: http://www.washingtonpost.com/wp-

Excerpt: It doesn't look like an old-fashioned bank run because it involves the biggest financial institutions trading paper assets so complicated that even top executives don't fully understand the transactions. But that's what it is -- a spreading fear among financial institutions that their brethren can't be trusted to honor their obligations. ….
The public, fortunately, doesn't understand how bad the situation is. If it did, we might have a real panic on our hands. And there would be more pressure for bad policies -- ones that try to freeze the damage, rather than letting prices fall to levels where buyers will return and the markets will clear.


Article: Financial System Broken - Markets 'Utterly Unhinged'

Author: Mike "Mish" Shedlock

Source: Mish's Global Economic Trend Analysis, March 06, 2008

URL: http://globaleconomicanalysis.blogspot.com/2008/03/

Excerpt: But let's not be too gloomy here. Other than overleverage, bad debts, sinking home prices, no jobs, shrinking wages, cash strapped US consumers, rising oil prices, a sinking US dollar, $500 trillion in derivatives not marked to market, rampant overcapacity, underfunded pension plans, looming boomer retirements, no funding for Medicaid, no funding for Medicare, and no Social Security trust fund, everything is just fine. And even though the Fed, central bankers in general, and governments combined to create this problem, the irony is nearly everyone is begging for them to fix the problem by encouraging still more speculation in housing, commercial real estate, and the markets. Sorry folks, it's the end of the line and payback time for the world's most reckless financial experiment in history. The deflation genie can't be put back in the bottle until leverage everywhere is unwound.


Article: Derivatives the new 'ticking bomb' - Buffett and Gross warn: $516 trillion bubble is a disaster waiting to happen

Author: Paul B. Farrell

Source: MarketWatch, March 10, 2008

URL: http://www.marketwatch.com/news/story/derivatives-

Excerpt: The fact is, derivatives have become the world's biggest "black market," exceeding the illicit traffic in stuff like arms, drugs, alcohol, gambling, cigarettes, stolen art and pirated movies. Why? Because like all black markets, derivatives are a perfect way of getting rich while avoiding taxes and government regulations. And in today's slowdown, plus a volatile global market, Wall Street knows derivatives remain a lucrative business.
Recently Pimco's bond fund king Bill Gross said "What we are witnessing is essentially the breakdown of our modern-day banking system, a complex of leveraged lending so hard to understand that Federal Reserve Chairman Ben Bernanke required a face-to-face refresher course from hedge fund managers in mid-August." In short, not only Warren Buffett, but Bond King Bill Gross, our Fed Chairman Ben Bernanke, the Treasury Secretary Henry Paulson and the rest of America's leaders can't "figure out" the world's $516 trillion derivatives.
Why? Gross says we are creating a new "shadow banking system." Derivatives are now not just risk management tools. As Gross and others see it, the real problem is that derivatives are now a new way of creating money outside the normal central bank liquidity rules. How? Because they're private contracts between two companies or institutions.


Article: The $300 Trillion Time Bomb

Author: Jesse Eisinger

Source: Portfolio, March 29, 2007

URL: http://www.portfolio.com/views/columns/wall-street/

Excerpt: The binding threads are derivatives, and the brightest minds on Wall Street worry about how they work-especially as stock markets around the world hit a bump. The term derivatives describes an array of financial contracts whose value is determined by, or derived from, an underlying asset such as a stock or currency. The derivatives market, one of the fastest-growing areas of finance, is estimated at $300 trillion. A subset of that-credit default swaps, which are derivatives based on companies' creditworthiness-last year reached $26 trillion, twice the size of the U.S. economy.
In their most benign form, derivatives are probably the greatest financial innovation of the past 25 years. They have helped smooth currency and interest-rate fluctuations by allowing investors to protect themselves. But when it comes to the really big stuff-such as global market collapses-derivatives could turn from vaccine to contagion. Investors use them as a form of insurance, which may give a false sense of security. "A financial crisis is likely to be a global event, not a local event, and derivatives will probably help make that happen," says Joe Brandon, C.E.O. of General Re, a reinsurer owned by Berkshire Hathaway.
Brandon has grown intimately familiar with the perils of derivatives during a grand five-year experiment conducted on orders from his boss, Warren Buffett, to close Gen Re's derivatives business.


Article: Closing the 'Collapse Gap': the USSR was better prepared for collapse than the US

Author: Dmitry Orlov

Source: Energy Bulletin, December 4, 2006

URL: http://energybulletin.net/23259.html

Excerpt: An economic collapse is amazing to observe, and very interesting if described accurately and in detail. A general description tends to fall short of the mark, but let me try. An economic arrangement can continue for quite some time after it becomes untenable, through sheer inertia. But at some point a tide of broken promises and invalidated assumptions sweeps it all out to sea. One such untenable arrangement rests on the notion that it is possible to perpetually borrow more and more money from abroad, to pay for more and more energy imports, while the price of these imports continues to double every few years. Free money with which to buy energy equals free energy, and free energy does not occur in nature. This must therefore be a transient condition. When the flow of energy snaps back toward equilibrium, much of the US economy will be forced to shut down.


Article: Protocols For Economic Collapse In America

Author: Al Martin

Source: Rense.com, February 23, 2008

URL: http://www.rense.com/general80/protc.htm

Excerpt: And this is how the U.S. Treasury would handle an economic collapse. It's called the 6900 series of protocols. It would start with declaring a force majeure, which would immediately be interpreted by the marketplaces as a de facto repudiation of debt. Then the SEC and the various regulatory exchanges would anticipate the market's decline, hour by hour -- when Japan's markets opened the next day, what would happen when the European markets, and all the inter- linkages of the global markets. … The origin of these protocols comes from the Department of Defense. …. In the economic collapse scenario, the starting point would be the United States Treasury declaring a force majeure on debt service, which is de facto repudiation, and that's how it would be interpreted by the world's capital marketplaces. Then the scenario goes on from there. …. David Walker, US Comptroller General and chief of the GAO has said that should the Bush-Cheney regime be re-ensconced into power and, hence, the scourge of Bushonomics persist, that the United States could no longer service its debt beyond 2009. They're not hiding it from anybody anymore. They are telling you what's happening.


Article: War and Truth V: What happened on 9/11?

Author: Govert Schuller

Source; Alpheus, March 31, 2006

URL: http://www.alpheus.org/html/source_materials/

Excerpt: An inter-locked and well-disciplined network of lone operators and Secret Teams operating within the White House, Pentagon, FEMA, CIA, FBI, FAA and NORAD, coordinated by a High Cabal of a very few key insiders planned, executed and covered-up the 9/11 events and the Anthrax scare even while framing Osama Bin Laden and Al-Qaeda as the patsies. The Pentagon was hit by anything but a commercial airliner and WTC 1, 2 and 7 collapsed by controlled demolition. They subsequently pushed diverse agendas like the militarily invasion of oil-rich central Asia, curb civil liberties, enrich the military-industrial complex, etc. all for the sake of the main beneficiaries of American Imperialism. … [A more trans-national version of the above would posit that not] only US Secret Teams and a US High Cabal [was] involved, but also other teams lodged deep inside foreign governments and coordinated by both US and non-US members of the trans-national Power Elite. The issues for them go beyond oil, money and power, which for them are merely tools to advance, by a subtle dialectic process, the crumbling of the US political and economic system and the emergence of a fascist New World Order. In this case the Neo-conservatives and Zionists are the second line of patsies in case the official version of blaming OBL and Al-Qaeda fails. … [An esoteric version would be similar to] the previous one, but with the added perspective that the main network of the High Cabal of the trans-national Power Elite is comprised of the surviving remnant of Weishaupt's Order of Illuminati and other like-minded groups, who are mostly to be classified on spiritual levels as Fallen Ones, Adepts of the Left-handed Path, incarnated Fallen Angels, black magicians, etc. They are the organized counter-force to the spiritual and civilizational gains made by the world-wide Masonic and Theosophical Enlightenments and like nothing better than to enslave mankind in spiritual darkness, material poverty and intellectual ignorance, while they live of the fat of the land and try to postpone their own day of judgement.



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