2010 October 18 « Socio-Economics History Blog

China’s Not The Villain If The West Tries To Debase Its Debt Through QE!

There are 2 sides to a coin. Yes, it is true the CNY is undervalued somewhere between 30-50% against the USD. But a revaluation of the CNY will not help America much. It will benefit lower cost countries like, Vietnam, Indonesia, Thailand and even the Asia exporting Tigers like Taiwan, Korea and Singapore.
China is caught in a web of its own making. They have US$2.6T of foreign reserves of which 60% is denominated in USD. When the USD goes down the toilet bowl, the CNY will follow along should the Chinese still refuse to revalue it. But if China does revalue the CNY, its massive USD holdings will take a hit in billions of USD. So, selling your goods (hard assets) for pieces of toilet paper ain’t such a smart idea. How can this end well for China? Revalue or not they lose!
The Chinese are right in accusing the west of making the CNY a scapegoat of their problems. The Anglo-American western hegemony definitely intends to debase their currencies and hyper-inflate away all their debts. How else will these Illuminist banksters get out of their quadrillion dollar toxic derivatives problem? When a cup of coffee cost one trillion dollars, hey, I can afford to lose US$40 trillion dollars too (Bank of America and CitiBank’s exposure is about US$40T each). Do you still believe that fiat currencies are not heading down the toilet bowl? Got Gold yet?

China’s not the villain if the West tries to debase its debt through QE
Last weekend’s “currency war summit” ended in dismal failure. Future historians will wince.
The annual meetings of the International Monetary Fund in Washington are supposed to generate some kind of resolution. Instead, all we got was posturing and a slew of pious speeches saying that “co-operation is crucial”.

What is now clear is that some of the world’s leading economies are deliberately debasing their currencies in order to make their exports more competitive and lower the real value of the massive debts they owe the rest of the world. Tempers are rising, as are protectionist sentiments. Across the globe, governments are talking about “aggressive tariff barriers” and “trade retaliation” – language that hasn’t been used by mainstream peacetime politicians since the mid-1930s.

Yet instead of knuckling-down and addressing the urgent task of building some kind of an agreement to contain a fully-blown currency conflict, world leaders last Sunday urged the IMF only to “study the issues”, and “play a stronger role in monitoring how the policies of each member state affects the others”. This was a pathetic response. The concluding statement of the fund’s policy-setting committee meekly pledged to “work toward a more balanced pattern of global growth, recognising the responsibilities of surplus and deficit countries”.

To his credit, even the IMF’s own managing director, Dominique Strauss-Kahn, labelled such language “ineffective”. The governments controlling the IMF simply kicked the tough conversations into the long grass – postponing them until the Seoul G20 summit in early November at the earliest. While policy at the global level is non-existent, the US and several other “advanced” nations, including the UK, are in the midst of a radical policy experiment that is about to get even more extreme. For most of last week, the dollar fell further on speculation that the Federal Reserve, having already bought $1,700bn (£1,062bn) of dodgy mortgage-backed securities and government bonds with newly-created money, will soon indulge in further “quantitative easing”.

As a result, the US currency hit record lows against the Chinese yuan, Swiss franc, Australian dollar and the Japanese yen. And, of course, that is just what America wants. Ben Bernanke, the Federal Reserve chairman, continued to fuel speculation that the US is about to unleash hundreds of billions of dollars more QE money. “There would appear – all else being equal – to be a case for further action,” he said in a speech on Friday. Yet America’s now blatant policy of trying to print its way out of trouble, a ploy being copied by others, is far from proven and could actually make things worse: QE on the scale now being proposed has never been tried. It is beyond the realms even of economic theory.
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Crude is above $80 a barrel. With the price of copper and tin soaring, the London Metal Exchange price index last week hit a two-year high. Commodity prices are strong – and rising – even though Western demand remains sluggish because of economic weakness. There are, of course, solid reasons why the price of oil, metals and other tangibles should stay firm – not least the on-going rapacious demand among emerging nations in Asia and elsewhere as they industrialise, build more infrastructure and their energy-hungry middle classes continue to grow. On the supply side, too, with the credit crunch having starved the capital-intensive extractive industries of cash in recent years, there are fewer mining and drilling projects about to come on stream.

But something else is going on. International investors, deeply alarmed by the Western world’s wildly expansionary monetary policy and the related destruction in the value of paper currency, are starting to park their wealth in assets “that governments can’t print more of”. The obvious manifestation of this is the price of gold, which hit another record on Thursday. Silver has also just reached a 30-year high, and is set to scale $25 per ounce.

Aside from precious metals, though, the nightmare scenario is that QE leads to a spike in the price of oil and other commodity imports needed to keep the Western world running – as a result of investors using such assets as an “anti-debasement hedge”. There are signs this is starting to happen. If the trend becomes stronger, and speculators pile in via commodity-related price indices and “exchange-traded funds”, the result could be a commodity price run-up that shatters the already anaemic Western recovery.

Were that to happen, central banks such as the Fed would huff and puff, spouting populist nonsense about “clamping down on speculation”. But the reality is that high, and even spiralling, commodity prices are an absolutely rational response to QE. Such price rises would, in fact, cause a decline in real incomes in the very countries printing the money – seeing as commodities and other tangibles are inputs into the goods and services we buy. These deeply counter-productive QE outcomes could very easily come to pass. Yet across the Western world, among politicians and media commentators, there is barely a whimper of protest about this reckless and unprecedented policy.

Attention is focused, instead, on China and its “over-valued currency”. Like a pantomime villain, the Peoples’ Republic is blamed for the West’s economic woes. In August, America’s trade deficit surged to $46bn, its deficit with China alone hitting a record $28bn. But to listen to most US politicians, you’d think such numbers had nothing to do with the fact that China makes a lot of goods the world wants and US exports in many sectors have become uncompetitive.

Not least due to America’s QE, the yuan has appreciated around 3pc against the dollar since June – when Beijing signalled an end to its “currency peg” regime. However, with crucial mid-term elections looming in early November, US legislators and union bosses are urging President Obama to take tougher action, blaming “Chinese trade distortions” for the loss of “millions of US jobs”.

China is hitting back. A government spokesman argued on Friday that it’s “totally wrong to blame the yuan for the Sino-US trade imbalance” and urged America not to make China its “scapegoat”. Imminent US legislation imposing retaliatory tariffs on China is almost certain to breach World Trade Organisation rules. Unless this stand-off is defused, it can only end badly.

So expect “currency manipulation” to be top of the agenda at the G20 summit. But don’t expect much in terms of resolution. As South Korea’s President Lee Myung-Bak says: “If the world fails to reach agreement on foreign exchange policy and insists on its own interests it will bring about trade protectionism and cause very difficult problems to the global economy”. Then again, South Korea has itself intervened heavily in currency markets in a bid to boost its exports.

The QE end-game is impossible to foresee. While the dollar is falling for now, if commodities balloon then correct sharply the dollar itself could spike. Having said that, the long-term trajectory of the US currency must surely be down. The irony is that by implementing yet more QE, America may not do itself much good. It could succeed, though, in imposing chaos on the rest of the world.

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October 18, 2010 Posted by mosesman | Economics | Bankruptcy, Collapse, Currency, Devaluation, Gold, GreatDepression, Hyper-inflation, Meltdown, US | 1 Comment

Winning The Currency War By Unleashing Financial Nuclear War!

The Anglo-American Illuminist hegemony which controls the privately owned central banking cartel is executing a financial world war against the world. Most people are still asleep. America, UK and Japan have announced they will proceed with QE massively. Japan is, of course, owned by the Anglo-American empire. The EU is not far behind in QE IMO. Keep in mind that about 60% of world reserves is held in USD. The whole world suffers when QE 2.0 is enacted.
When you create voluminous amounts of money out of thin air, it will cause inflation and destruction of currencies. My belief is that hyper-inflation is just a matter of time: 2011 or early 2012 very likely. Where are all these monies going to flow to? The emerging market is the likely destination, besides commodities and precious metals.
When a tidal wave of trillion of dollars flow into an economy, it will bid up stocks and asset prices. It will cause havoc in interest rates. No country can withstand such shock to its financial system. The only way is to put up capital controls to limit inflows and outflows. Imagine when one trillion dollars is pulled out of a small economy like Singapore overnight, it will cause the Singapore dollar to collapse, stock prices to tank, interest rates to skyrocket and asset prices to dive. So going forward, globalization and open economies are dead. You have to be insane to allow your country to be bought up by Illuminist banksters with their funny ‘Monopoly’ money!
Even when countries put up all the necessary capital controls, they still have to contend with rising commodity price inflation ie food, raw materials, oil, energy, industrial metals, building materials… prices will escalate. By following the route of competitive devaluation no country will be able to withstand the inflation onslaught. You do not need to be a genius to see a coming global currency crisis. All fiat currencies are going down the toilet bowl. Do you understand the Illuminist’s Hegelian Dialectic: Order Out of Chaos path to a One World Currency and Global Central Bank now? World war cannot be that far behind as the Illuminist snakes fight it out for control of their New World Order.

Winning The Currency War By Unleashing Financial Nuclear War
Let us be very clear about the impact of the coming massive Quantitative Easing (QEII) by the FED, the financial bully of Wall Street. It is the unleashing of a financial nuclear weapon! The financial media is portraying this process as “a war of survival” between America and the rest of the world. This is a war waged by Wall Street. Its main instrument is a Global Ponzi Scheme.

If the American people is hoodwinked into believing the financial media, which justifies the use of “financial WMDs” against America and the world, the consequences will be catastrophic and the American economy and people will be devastated. Moreover, for the 1% of the financial elites, about half will survive, consolidate their control and form new global alliances. This is already taking place, as highlighted in my recent article. [1]
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In the same way that the American people were dragged into invading Afghanistan and Iraq on the promise of victory (Bush’s Mission Accomplished), Wall Street will do likewise in launching this unprecedented financial war on the promise that they will come out the victors!

The propaganda has already commenced. The Financial Times, one of the leading mouth-pieces of the financial establishment has declared victory even before the launch of the first WMD. To quote Martin Wolf:

“To put it bluntly, the US wants to inflate the rest of the world, while the latter is trying to deflate the US. The US must win, since it has infinite ammunition: there is no limit to the dollars the Federal Reserve can create. What need to be discussed are the terms of the world’s surrender”.

Wall Street´s Utmost Arrogance. Why?
The US has “unlimited nuclear weapons” enough to destroy the entire planet. When Russia and China did not have nuclear weapons, the US dared unleash two nuclear bombs on Nagasaki and Hiroshima to blackmail the rest of the world to toe the line.

But, China declared that “nuclear weapons are paper tigers” and “America is a paper tiger”. However, during the Korean and Vietnam Wars, when the US and its allies had so much military superiority, they did not have the guts to unleash a regional nuclear war, or a global nuclear war! And as they say, the rest is history.

As a declining military power, the US is left with nothing but bully tactics – the constant threat that “all options are on the table”. And this is echoed by its regional bullies – the UK, Japan and Israel against Iran, North Korea, Syria and Lebanon. It is in the same way that I view the threat of Quantitative Easing (QEII) by the FED and Wall Street – their so-called unlimited financial WMDs.

I dare say, to borrow Bush’s words, “Bring Them On!” This is so typical of a bully who has run out of ammunition and is using sheer arrogance to intimidate.

The Flaw In the QEII Grand Strategy
The first fundamental flaw in this grand strategy is the false assumption that because the dollar is the global reserve currency, the FED has the capacity to increase the amount of dollars in an unlimited fashion.

The second fundamental flaw is that (and notwithstanding the fact since 2007, the rest of the world has started to take measures to decouple from the US) the rest of the world would still look towards the USA as the ultimate market for their exports.

The third fundamental flaw is that the rest of the world would still be willing to accept “toilet paper Federal Reserve Notes” (printed or digital) as legal tender. The financial generals planning this war must be in some “wonderland” to base their entire war plans on the above three fundamental assumptions. How stupid and out of touch can they get?

For starters, the USA is no longer a BUYERS’ MARKET i.e. the US is no longer in a position to dictate the terms regarding the purchase of its imports. American consumers are drowning in debt. The financial institutions that were supporting their insatiable appetite for loans are all insolvent and cannot continue giving easy money to the consumers to indulge in their fantasies. And adding insult to injury, expect the sellers in these depressed conditions to be paid in toilet paper Federal Reserve Notes. We are not watching Comedy Hour. This is the reality show!

In the near and short term, the sellers (exporting nations) will suffer acute pain but, in the last two years regional trade has already begun to offset the drag from exports to the US. But the near term pain of exporting nations pale in comparison to the trauma and mental anguish by Americans going to Wal-Mart and other Hypermarket retailers and not even finding the cheap goods that they were so used to purchasing.

A shift in trading patterns could potentially result in “empty shelves” in stores across America. There are over 40 million Americans on food stamps. Attached to this time bomb, is another potentially explosive process: an impoverished and disillusioned middle class.

Moreover, within the realm of international trade, there will be growing barter trade, especially in commodities and one of the first commodities to be de-dollarised will be crude oil, the mighty crude which since 1973, has been the main pillar propping up the dollar.

If the Saudis had not succumbed to Kissinger’s blackmail, the dollar could have collapsed as a reserve currency a long time ago. Oil producing countries (with perhaps the exception of Saudi Arabia) could well enter into bilateral trade agreements (including barter) to sell crude in any currency other than the dollar.

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October 18, 2010 Posted by mosesman | Economics, GeoPolitics | Bankruptcy, Collapse, Currency, Devaluation, Eurozone, Gold, GreatDepression, Hyper-inflation, Illuminati, Japan, Meltdown, New_World_Order, oil, US, War | Comments Off

Zardari Says He Has Proof of US Terror Against Pakistan!

What Zardari and many Pakistanis say you won’t hear in the western Illuminist controlled MSM. Zardari is correct. The Illuminist secret government is employing their intelligence agencies to hire useful idiots to foment this war against the Pakistani people and American soldiers. They hire mercenaries to pose as terrorists to foment war. This is how they conquer Pakistan and set the stage for their Satanic World War 3? See also:

New War Rumors: U.S. Plans To Seize Pakistan’s Nuclear Arsenal
US Eyeing Expanding its War on Terror Formally into Pakistan?

Zardari says he has proof of US terror against Pakistan
The so called Pakistani sycophantic secularists are in cahoots with the war mongering Neocons and Neolibs in the US. Both blame the local Pakistanis for the terror attacks in Pakistan. It is poignant to note that almost all major Pakistani leaders have now concluded and publicly accused the US of sponsoring terror in Pakistan. The Turkish Prime Minister Tayyip Erdogan directly accused America of sponsoring terror in Turkey and Pakistan.

Two former Dierector Generals of the Pakistani Intelligent services the ISI, General Durrani and General Hamid Gul have also accused the CIA Army of carrying out the attacks against Pakistan. The following narrative lists President Zardari pointing the finger at America. The Pakistani PM Mr. Syed Gilani, and the Internal Minister Mr. Rehamn has also accused “the foreign hand” in many of the explosions in Pakistan.

Bob Woodward‘s book directly lists the “CIA Army’s” nefarious role in bombing in Pakistan. Rick Rozoff has been involved in anti-war and anti-interventionist work in various capacities for forty years. He lives in Chicago, Illinois. He prodigiously put together a patchwork of news items that display the high level of criticism conducted at the highest levels by the Pakistani leadership.

The News International, Pakistan‘s largest English-language newspaper, published a report on October 13 based on excerpts from American journalist Bob Woodward’s recently released volume “Obama’s Wars” which stated that during a trilateral summit between the presidents of the U.S., Afghanistan and Pakistan on May 6 of 2009 Pakistani head of state Asif Ali Zardari accused Washington of being behind Taliban attacks inside his country with the intent to use them so “the US could invade and seize its nuclear weapons.”
1) Shaheen Sehbai, Zardari says US behind Taliban attacks in Pakistan
The News International, October 13, 2010
http://www.thenews.com.pk/13-10-2010/Top-Story/1276.htm

According to Woodward’s account of the Pakistani president’s accusations to Khalilzad in May of last year, “Zardari dropped his diplomatic guard. He suggested that one of…two countries was arranging the attacks by the Pakistani Taliban inside his country: India or the US. Zardari didn’t think India could be that clever, but the US could. [Afghan President Hamid] Karzai had told him the US was behind the attacks, confirming the claims made by the Pakistani ISI [Inter-Services Intelligence].”
2) The News International, October 13, 2010
http://www.thenews.com.pk/13-10-2010/Top-Story/1276.htm

When Khalilzad mentioned that U.S. drone attacks inside Pakistan “were primarily meant to hunt down members of al Qaeda and Afghan insurgents, not the Pakistan Taliban,” Zardari responded by insisting “But the Taliban movement is tied to al Qaeda…so by not attacking the targets recommended by Pakistan the US had revealed its support of the TTP. The CIA at one time had even worked with the group’s leader, Baitullah Mehsud,” Zardari asserted.
3) The News International, October 13, 2010
http://www.thenews.com.pk/13-10-2010/Top-Story/1276.htm

…. to continue reading click here!

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October 18, 2010 Posted by mosesman | GeoPolitics | New_World_Order, Pakistan, Terrorism, US, War | Comments Off

Paul C. Roberts: The War On Terror And The Decline Of The American Empire!

Daniel 7:23 (New King James Version)
²³ “Thus he said: ‘ The fourth beast shall be a fourth kingdom on earth,
Which shall be different from all other kingdoms, and shall devour the whole earth, trample it and break it in pieces.

The Global War on Terror (GWOT) is a massive hoax. The Anglo-American-Zionist Illuminist cabal manufactured the entire 9/11 false flag event. They use it as a pretext to invade any country who threatens their hegemony and business (ie natural resources oil, gas…) interest. Of course, anyone can be a terrorist as long as the American NeoCons say you are a terrorist, you are guilty and pre-emptive wars begin.
The Illuminist plan is world conquest via deception. Americans are the cannon fodder. American boys are the useful idiots, willing ‘not so bright’ soldiers in never-ending wars. The plan is to destroy America and much of the world to remake/integrate them into a New Luciferian World Order. For this to succeed no country can have the power to threaten the World Government. The sole remaining superpower: America must be destroyed.
Al CIAda is really just a database of Afghan freedom fighters trained by the CIA, who fought the Soviet Union in the past. It is a tool of Illuminist intelligence agencies to foment wars. They finance disparate ‘terrorist’ groups to achieve their aims. Pakistan is next and thereafter a greater middle east war. Remember the Satanic World War 3 Plan: Zionist West vs Muslim World ! (See also: The Al Qaeda ‘Threat’ Is “Exaggerated”: 120,000 US Troops Fighting “No More that 50 Members of Al Qaeda” !)

The War On Terror
….The “war on terror” is now in its tenth year. What is it really all about? The bottom line answer is that the “war on terror” is about creating real terrorists. The US government desperately needs real terrorists in order to justify its expansion of its wars against Muslim countries and to keep the American people sufficiently fearful that they continue to accept the police state that provides “security from terrorists,” but not from the government that has discarded civil liberties.

The US government creates terrorists by invading Muslim countries, wrecking infrastructure and killing vast numbers of civilians. The US also creates terrorists by installing puppet governments to rule over Muslims and by using the puppet governments to murder and persecute citizens as is occurring on a vast scale in Pakistan today.

Neoconservatives used 9/11 to launch their plan for US world hegemony. Their plan fit with the interests of America’s ruling oligarchies. Wars are good for the profits of the military/security complex, about which President Eisenhower warned us in vain a half century ago. American hegemony is good for the oil industry’s control over resources and resource flows. The transformation of the Middle East into a vast American puppet state serves well the Israel Lobby’s Zionist aspirations for Israeli territorial expansion.

Most Americans cannot see what is happening because of their conditioning. Most Americans believe that their government is the best on earth, that it is morally motivated to help others and to do good, that it rushes aid to countries where there is famine and natural catastrophes. Most believe that their presidents tell the truth, except about their sexual affairs.

The persistence of these delusions is extraordinary in the face of daily headlines that report US government bullying of, and interference with, virtually every country on earth. The US policy is to buy off, overthrow, or make war on leaders of other countries who represent their peoples’ interests instead of American interests. A recent victim was the president of Honduras who had the wild idea that the Honduran government should serve the Honduran people.

The American government was able to have the Honduran president discarded, because the Honduran military is trained and supplied by the US military. It is the same case in Pakistan, where the US government has the Pakistani government making war on its own people by invading tribal areas that the Americans consider to be friendly to the Taliban, al-Qaeda, “militants” and “terrorists.”

Earlier this year a deputy US Treasury secretary ordered Pakistan to raise taxes so that the Pakistani government could more effectively make war on its own citizens for the Americans. On October 14 US Secretary of State Hillary Clinton ordered Pakistan to again raise taxes or the US would withhold flood aid. Clinton pressured America’s European puppet states to do the same, expressing in the same breath that the US government was worried by British cuts in the military budget. God forbid that the hard-pressed British, still reeling from American financial fraud, don’t allocate enough money to fight America’s wars.

On Washington’s orders, the Pakistani government launched a military offensive against Pakistani citizens in the Swat Valley that killed large numbers of Pakistanis and drove millions of civilians from their homes. Last July the US instructed Pakistan to send its troops against the Pakistani residents of North Waziristan. On July 6, Jason Ditz reported on Antiwar.com that “at America’s behest, Pakistan has launched offensives against [the Pakistani provinces of] Swat Valley, Bajaur, South Waziristan, Orakzai, and Khyber.”

A week later Israel’s US Senator Carl Levin (D-MI) called for escalating the Obama Administration’s policies of US airstrikes against Pakistan’s tribal areas. On September 30, the Pakistani newspaper, The Frontier Post, wrote that the American air strikes “are, plain and simple, a naked aggression against Pakistan.”

The US claims that its forces in Afghanistan have the right to cross into Pakistan in pursuit of “militants.” Recently US helicopter gunships killed three Pakistani soldiers whom they mistook for Taliban. Pakistan closed the main US supply route to Afghanistan until the Americans apologized.

Pakistan warned Washington against future attacks. However, US military officials, under pressure from Obama to show progress in the endless Afghan war, responded to Pakistan’s warning by calling for expanding the Afghan war into Pakistan. On October 5 the Canadian journalist Eric Margolis wrote that “the US edges closer to invading Pakistan.”

In his book, Obama’s Wars, Bob Woodward reports that America’s puppet president of Pakistan, Asif Ali Zardari, believes that terrorist bombing attacks inside Pakistan for which the Taliban are blamed are in fact CIA operations designed to destabilize Pakistan and allow Washington to seize Pakistan’s nuclear weapons.

To keep Pakistan in line, the US government changed its position that the “Times Square Bombing” was the work of a “lone wolf.” Attorney General Eric Holder switched the blame to the “Pakistani Taliban,” and Secretary of State Clinton threatened Pakistan with “very serious consequences” for the unsuccessful Times Square bombing, which likely was a false flag operation aimed at Pakistan.

To further heighten tensions, on September 1 the eight members of a high-ranking Pakistani military delegation en route to a meeting in Tampa, Florida, with US Central Command, were rudely treated and detained as terrorist suspects at Washington DC’s Dulles Airport.

For decades the US government has enabled repeated Israeli military aggression against Lebanon and now appears to be getting into gear for another Israeli assault on the former American protectorate. On October 14 the US government expressed its “outrage” that the Lebanese government had permitted a visit by Iranian President Ahmadinejad, who is the focus of Washington’s intense demonization efforts. Israel’s representatives in the US Congress threatened to stop US military aid to Lebanon, forgetting that US Rep. Howard Berman (D-CA) has had aid to Lebanon blocked since last August to punish Lebanon for a border clash with Israel.

Perhaps the most telling headline of all is the October 14 report, “Somalia’s New American Prime Minister.” An American has been installed as the Prime Minister of Somalia, an American puppet government in Mogadishu backed up by thousands of Ugandan troops paid by Washington.

This barely scratches the surface of Washington’s benevolence toward other countries and respect for their rights, borders, and lives of their citizens. Meanwhile, to silence the whistleblower website WikiLeaks and to prevent any more revelations of American war crimes, the “freedom and democracy” government in DC has closed down WikiLeaks’ donations by placing the company that collects its money on its “watch list” and by having the Australian puppet government blacklist WikiLeaks.

WikiLeaks is now akin to a terrorist organization. The American government’s practice of silencing critics will spread across the Internet. Remember, they hate us because we have freedom and democracy, First Amendment rights, habeas corpus, respect for human rights, and show justice and mercy to all.

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October 18, 2010 Posted by mosesman | GeoPolitics | Illuminati, New_World_Order, Terrorism, US, War, Zionism | Comments Off

The Next US Banking Crisis?

ForeclosureGate is being downplayed in the US MSM. They are trying to make it out as a US$10B problem. It seems that the politician snakes maybe trying to cover up the entire problem and protect the banksters. See: CNBC Senior Editor Says Congress Will Pass Law Sanctioning Foreclosure Fraud As Banks Continue To Rob American Citizens.
There is rampant fraud in the real estate market by banksters. No denying it. The amount involved is trillions of dollars. So much worthless MBS, CDOs … real estate collaterized toxic derivatives have been sold throughout the world. Foreign banks who hold these toxic crap are in trouble too.

Here’s That Devastating Report On Bank Of America That Everyone Is Talking About Today
Goldman Charged With Fraud on Structuring of CDO
Morgan Indicted For CDO Fraud
CDO Fraud Probes Explode Across Wall Street
Will this lead to another banking meltdown?

The next US banking crisis?
“Millions of U.S. mortgages have been shuttled around the global financial system — sold and resold by firms — without the documents that traditionally prove who legally owns the loans. Now, as many of these loans have fallen into default and banks have sought to seize homes, judges around the country have increasingly ruled that lenders had no right to foreclose, because they lacked clear title.” (Washington Post, 7th October)

As we see it, here’s the issue in a nutshell:

1. Banks made home loans.
2. Many of the loans were hurriedly packaged into Mortgage Backed Securities (MBS’s) and sold to yield-hungry investors around the world.

3. The securitisation process blurred the mortgage ownership because titles weren’t properly transferred as mortgages were shuttled around.

4. Consequently, in many cases it is no longer clear who owns the mortgage. At least, the correct paperwork to legally define ownership is not in place.

5. If the mortgage owner is not properly (legally) defined, property foreclosure cannot legally occur.

6. Banks tried to get around the lack-of-paperwork problem and thus proceed with foreclosures by creating new paperwork. In doing so they possibly broke the law.

7. Banks now have large potential liabilities to a) MBS owners due to problems with existing foreclosures and an inability to implement future foreclosures, and b) home owners who have had, or are in the process of having, their homes foreclosed with improper documentation.

8. Some banks have voluntarily suspended all foreclosure proceedings while the mess is sorted out, and the Federal Government is considering imposing a moratorium on foreclosures.

At this stage the market ramifications of what is becoming known as “Foreclosuregate” are unclear to us. What is clear is that the stock market currently views the issue as unimportant. ….
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According to the Fed, the cause of the problem is the solution
Artificially low interest rates combined with rapid monetary inflation (the result of the Fed’s manipulation of interest rates and money supply) caused people to spend/borrow too much and prompted many investments that only appeared to make sense due to the unsustainable monetary backdrop. The 2007-2009 “bust” was the inevitable result. The remedy, according to the minutes of the latest FOMC Meeting, is to manipulate interest rates and money supply in a way that encourages more borrowing and spending.

The greater the amount of success achieved by the Fed in its efforts to promote more borrowing and spending, the greater the damage to the US economy because the less able the economy will be to make the necessary adjustments to return to a genuine growth path. It’s as if the US economy has a destruct button and the Fed keeps unwittingly pushing it.