International Forecaster Weekly

Debt Upon Debt And Bankrupt Financial Institutions

A moment for the big picture, panic set in to resolve the insolvency crisis now upon us, new moral hazard, soon an end to the bubbles, toxic waste worth next to nothing, legislative malfeasance, markets soon to be put under maximum pressure, everyone now terrified of lending and our way of life is set to change 

Bob Chapman | November 29, 2008

    Let's step back for a moment, and look at the big picture, to determine what the Illuminist miscreants have been up to over the past year.  Their plans to pawn off all the toxic waste derivatives on others backfired when Meredith Whitney exposed Citibank's subprime derivatives as being toxic waste, worth a mere fraction of par.      This untoward event was a watershed event for our nation, and for Illuminist plans to destroy us.  Ever since she exposed the toxic waste derivative subterfuge, which the Illuminists planned to use to infect and sabotage economies around the world, thereby causing the collapse of the world financial system to pave the way for world government, the Illuminists have been in damage control mode.  They were caught holding far more of the toxic waste than they had planned because they were unable to unload what had already been created, or that which was in the process of being created, due to Ms. Whitney's timely critique.
    Ever since the exposure of their scheme, they have been running around like chickens with their heads cut off trying to stop the fallout from the resulting insolvency of Illuminist companies, and they have been trying in vain to prevent their precious Ponzi financial system from collapsing before they are ready to complete the nationalization of our financial system, and of other economic sectors like the automobile and insurance industries, under a corporatist, fascist police state of Orwellian feudality.  Their desperation has become increasingly palpable, such as Hanky Panky's martial law threats to get the TARP plan approved, and his  bait and switch trick, wherein he promised to use the bailout funds to buy toxic assets, and then turned around and gave it to his Wall Street cronies in the form of equity injections so they could continue to pay dividends to shareholders and outrageous salaries and bonuses to the executives who have bankrupted their companies, as well as to acquire the smaller fry banks in a fresh round of competition elimination.  In the process, they have redefined the term "moral hazard."
    But the current epic debacles now infesting our financial system as it unravels right before our eyes was carefully set up by these malevolent, Illuminist slime-balls over several decades.
    In order to create the final real estate and derivative bubbles which they planned to use to take the world financial system down to provide the initiative for implementing world government, they initiated the Ponzi scheme which ended rather poorly in 2000.  The Ponzi debacle came in the aftermath of the orchestrated 1987 Stock Market Crash which was used as the excuse to get President Reagan to create the President's Working Group on Financial Markets so that the Illuminists could manipulate markets worldwide on a 24/7 basis while cleaning up with insider trading profits based on foreknowledge of such manipulations provided by their puppets in our government.  The bubble was used to shore up the damage caused by various disasters, including the 1987 crash, the S&L crisis, and the recession of the early 1990's.  The recession of the early 1990's was in turn caused in the aftermath of the broken real estate bubble that was formed by the Illuminists to cover up the damage created by the nasty recession of the early 1980's.  And the nasty recession of the early 1980's came in the aftermath of Paul Volcker's curtailment of the flow of money and credit by use of high interest rates to stop the rampant inflation of the 1970's which commenced with the elimination of the Gold Standard by Nixon in 1971 as failed price controls and the huge expenditures of the Vietnam War came back to haunt us.
    The breaking of the bubble provided the impetus for the final series of bubbles, which the Illuminati had planned in order to create the derivative system which they intended to use to infect and destroy the economies of the world to bring about world government.
    First, they eliminated Glass-Steagall with the Gramm, Leach Bliley Act during the Clinton Administration so that commercial banks, investment banks and insurance companies could combine to form the same gargantuan banking conglomerates which are now considered to be too-big-to-fail and which are stuffing themselves senseless with bailout money at the public trough to continue the rip-off of our middle class in favor of the crony capitalists and elitist scum.  Also during the infamous and traitorous Clinton Administration they passed the Commodity Futures Modernization Act which eliminated regulation of the OTC derivatives markets so they could pawn off their toxic waste on many unsuspecting financial institutions around the world behind the backs of regulators as the greatest bubble of all time was being formed -- a Quadrillion Dollar Derivative Death-Star.  And because Glass-Steagall had been eliminated, the system of checks and balances achieved through the separation of the various financial functions of commercial banks from those of investment banks and insurance companies had completely broken down.  The fraud committed by the rating agencies who labeled toxic waste as AAA paper was the direct result of the conflicts of interest which arose as the Glass-Steagall Act was discarded and the new behemoth, and now totally insolvent, banking conglomerates were formed.
    The largest of these behemoths, Citigroup, may well go under despite its de facto nationalization by virtue of loans and loan guarantees as it infamously joins AIG in the suspended animation category while the elitists attempt to unravel its Byzantine puzzle of counterparty liability and other massive potential fallout.  Say goodbye to another two or three trillion as these twin titans of financial destruction join Fannie and Freddie in the race to hyperinflate the US public into oblivion as bailout after bailout is funded by direct monetization of treasuries that eventually no one will want anymore.      America is already a mammoth hedge fund leveraged at almost 200 to 1.  You have Fed general collateral with a face value of about 2.2 trillion that has been, or will be, exchanged for toxic waste under the Term Securities Lending Facility or that has been, or will be, acquired through the Fed's general lending powers, which are now being extended to commercial paper.  This toxic waste is at best worth 30 cents on the dollar, and secures $100 trillion in current and future debts and entitlements profligately created by the morons and village idiots in Congress, meaning that $660 billion is now the only security backing a $100 trillion commitment, sort of like a giant credit default swap.  And people wonder why treasuries are becoming more and more difficult to unload?  The only demand for treasuries right now is being generated by the intentional destruction of the world economy, by de-leveraging and by the relative worthlessness of other fiat currencies.  But soon that demand will falter as hyperinflation from trillions in fresh bailout cash and a coming "re-flation" of the financial system destroys the value of these perceived safe-haven instruments.
    While all this legislative malfeasance was happening, the SEC allowed investment banks to increase their leverage to insane levels of as much as 60 to 1 from the 10 or 15 to 1 level, and of course this was done to help fuel the real estate and derivative bubbles.  And while the investment banks were engaged in achieving levels of leverage reserved for psychopathic maniacs, the Illuminati at the Fed initiated ludicrously low interest rates and allowed, by virtue of their total lack of regulation and oversight, the implementation of a deceitful system of loan qualification standards which ignored decades of well developed loan standards.  As a result, mortgages were granted to the totally and completely unqualified through rampant loan fraud all the way up the loan chain from the borrowers at the bottom to the securitizers at the top.      This is why all the assumptions used to create the various tranches of these financial weapons of mass destruction were totally flawed.  They were based on debt created under previous, well-developed, and very wise, loan standards, which were discarded to put homes into the hands of the unqualified.  The main Fannie and Freddie fraud was the acceptance of these new moronic loan standards for the granting of mortgages, and this in large part helped to power the granting of loans to the unworthy which is at the heart of the current real estate and credit-crunch debacles.
    Throw in the 911 attack, the destruction of our industry through the free trade, globalization, off-shoring, outsourcing, and legal and illegal immigration agendas which culminated in NAFTA and CAFTA (thanks Slick Willie, for giving us the SHAFTA), as well as the continual lies regarding economic statistics emanating from our government which are causing many companies to make bad decisions, and you have a lethal cocktail of financial trouble which the Illuminists are going to try to use to destroy the world economy to pave the way for world government.  Gold and silver are going to rise as the world financial system falls, so make sure that you own some, meaning a lot.
Billionaire Bilderberger, George Soros, was recently interviewed by the Spiegel (Mirror) of Germany. We find it of interest that Mr. Soros continues to be a financial celebrity in spite of the fact that in France he was convicted of a felony and upon appeal was turned down. He was involved in fraud and rigging markets. Obviously being a Bilderberger is more important.
Mr. Soros says in his latest book, “The New Paradigm for Financial Markets,” “The Credit Crisis of 2008” that he predicted the worst financial crisis since the 1930s. It has gone beyond his wildest imagination. We might add that we predicted the same result three years before Mr. Soros did, but then again we are not Bilderbergers nor do we get interviewed by mainstream media.
He says over the next two months the market will experience maximum pressure because of lack of leadership. He sees a transition period, which we don’t. We see a long battle between inflation and deflation terminating in depression and either war or revolution or both. He says the financial community has still not grasped the magnitude of the economic decline and he is correct. Even in his projection he sees relief in the short-to-intermediate term, which he should know is not possible – even Soros is in part in denial. Either that or he is deliberately misleading people by giving them false short-term hope.
He went on to say that those in and behind government made a fatal mistake allowing Lehman Brothers go bankrupt. This in part was why Citigroup essentially went bankrupt and they were bankrupt.
In regards to Treasury Secretary Paulson, Soros said, “When he allowed Lehman Brothers to fail, the breakdown in the financial markets found him totally unprepared.  He then went to Congress and the only plan he had was to bailout the holders of toxic waste. That not having worked, he injected equity capital into the banking system, but he went about it the wrong way. Then he stopped doing anything, leaving a vacuum in leadership, and the markets collapsed. What more could you expect from an ex-linebacker?”
Mr. Soros then added that, “I think we need a large stimulus package, which will provide funds for state and local governments to maintain their budgets because they are not allowed by the constitution to run a deficit. This will cost government billions of dollars, perhaps $600 billion.”
It is the same old Keynesian theories that don’t work, but serve to enrich the elite.
The spread or risk premium on US Treasury CDS, credit default swaps, hit record highs as markets digested the scale of US government programs to buy various consumer loans and related securities. The 10s spread widened to 54.7 bps from a day earlier close of 47.50 bps. The 5s hit 52.0 up from 47.5 bps. Anyone recommending or buying US Treasuries is insane or stupid. That is why we recommend Swiss franc Treasuries.
Park Central Capital Mgt., a money manager, who’s biggest shareholder of the fixed-income hedge fund is H. Ross Perot, has been liquidated because it is no longer viable having lost 40% of its $1.5 billion this year. This is a result of the Lehman bankruptcy that triggered a sell off in corporate bonds. Many more will follow.
Citigroup was saved from bankruptcy by American taxpayers under orders from the Treasury and the Federal Reserve. Former Treasury Secretary Robert Rubin was asleep on the Citi board for ten years. He with other board members and officers of Citi allowed this to happen. They expect us to believe they didn’t know what was happening having received millions in compensation. Here are the rest of the cast of characters that joined in on the mismanagement and looting: Chairman Sir Win Bischoff and directors - former CIA Director John Deutsch, Tim Warner, Chairman Richard Parsons, foundation executive Franklin Thomas, former ATT&T CEO C. Michael Armstrong, Alcoa Chairman Alain Belda, and former Chevron Chairman Kenneth Dorn. We don’t believe any of these professionals are dumb. Citi was allowed to go under so it and all other major banks would come under Fed control.
Each American citizen will pay $1,000 to guarantee Citi’s dubious investments. They can thank the above gang for the tax hoisted upon them. This is the same group, which presided over the helm in 2005 when the Fed suspended Citi’s ability to make acquisitions because of the bank’s failure to adhere to regulatory and ethical standards. As we reach back in our memory before the gang of thugs in suits above, there was the sovereign debt disaster of the 1980s, and the Fed rescue in 1990, where they had to have their own people run Citi, which was also bankrupt at that time.
Citi has been a cash cow for Illuminists for many years. The management allowed Citi to sort of float at sea aimlessly. Citi will be broken up and sold off with the public footing the bill as the rich and connected walk off with their pockets bulging with money.
General Growth Properties, which owns more than 200 mall properties throughout the US, is on the edge of failure, it has to produce $958 million now and $3.07 billion next year. Other big losers are Simon Property Group, the top US mall operator and Boston Properties, owners of skyscrapers and office buildings. Ghost malls will be in your future. Many mall inhabitants are going bankrupt, such as Circuit City and Linens ‘N Things. Hundreds of thousands are closing stores and only keeping their most profitable units open.
The problem is no one will lend. The banks are terrified. This is another bursting market in an illiquid environment.
The NAPM-Milwaukee reported in at 35.0 down from 42.
Now we have Union Bank Suisse, Deutsche Bank, Credit Suisse, the Royal Bank of Canada and Hong Kong Shanghai Bank demanding the same tax breaks that US banks are getting from American taxpayers. The gall  - the unmitigated gall. They tell us that commercial law and tradition prevent their being discriminated against. Ya, try getting tax breaks in their countries.
Contrary to folklore the Fed did not tighten credit after the 1929 crash. They pumped furiously until the 3rd quarter of 1931. They had to stop for nine months due to statute. Simultaneously, the NY Fed acting independently pumped in money and credit just as aggressively.
In those bygone days the government had little debt and no one had credit cards and few could borrow. It was the lay-away plan or nothing at all.
Today it is debt upon debt and bankrupt financial institutions. We and the Fed do not stand a chance. It won’t be long before the fat lady sings.