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The Solari Report – 07 May 2009
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In our last two Solari Reports we listened to two astute commentators (Dmitry Orlov, Clif High) describe why they believe the U.S. dollar could lose its reserve currency status, including in the next year.
On this week’s Solari Report I will be presenting an introduction to derivatives. Wikipedia describes derivatives as follows:
“Derivatives are financial contracts, or financial instruments, whose values are derived from the value of something else (known as the underlying). The underlying value on which a derivative is based can be an asset (e.g., commodities, equities, mortgages, real estate, loans, bonds) , an index (e.g., interest rates, currency exchange rates, stock market indices, consumer price index (CPI), weather conditions, or other items. Credit derivatives are based on loans, bonds or other forms of credit. The main types of derivatives are forwards, futures, options and swaps.”
The title of my presentation is:
Derivatives 101: Useful knowledge in plain English about credit default swaps, interest rate swaps, futures and other complex financial instruments that help centralize the financial system, steal money in the trillions and make the financial news incomprehensible.
I will address why these financial tools are so important to maintaining the dollar as reserve currency and continuing the “Slow Burn.”
I coined the “Slow Burn” scenario years ago to describe a politically managed economy in which financial and economic failures would not translate into system collapse. Instead, they would translate into continued transfers of resources from political outsiders to political insiders to subsidize and manage the asset values and power of various corporate and bank interests. Countries would be drained to feed the system, or various populations, species or places. Replenished by draining others, the system would continue to move forward.
For many years, a variety of highly capable, intelligent people have tried to persuade me that the dollar is imminently going to lose its status as the global reserve currency and collapse and that the price of gold is going to shortly increase to $2,000/oz. or more. When these events do not come to pass and time goes by—something strange happens. We never sit down and do a “lessons learned” to determine why it did not happen. No one wants to discuss it. There is no venue to ask and answer the questions:
- Why does the dollar’s performance defy economic fundamentals?
- Why is it that U.S. trade and budget deficits don’t matter?
- How can $20 trillion in global bailouts not yet trigger global hyperinflation?
It turns out that understanding the Slow Burn and the amazing strength of the U.S. dollar requires several “building blocks” of knowledge that most of us have not acquired through our formal education or media:
Shadow Governance: Our world is governed on a highly centralized basis that networks into every industry (or so-called “cartels”) and every place—whether country, region or local area. This system is not new—it has evolved organically for centuries within “the central banking-warfare model.” Much of its evolution has organized around intergenerational pools of capital, the growth of which reflect the fundamentals of economic and military warfare as they determine command of intelligence, technology, populations, natural resources and trade routes.
The U.S. Federal Credit: The U.S. economy is a highly controlled political economy, with most of the economy managed through the U.S. government budget—both the Congressionally approved budget as well as secretive black budgets run with no transparency and oversight but with the benefit of governmental powers and authority. Building literacy of how this governmental financial mechanism operates both globally, throughout financial and commodities markets, and at the federal, state, and local levels requires an understanding of the financial ecosystems of places and industries.
Suppressed Technology and Knowledge: Political control depends on suppression of knowledge. We do not have ready access to the knowledge that we need to understand our history and economy. Significant health, energy, information, military, and space technology has been suppressed, from the citizens who funded its development and management.
Advanced Surveillance Technology and Weaponry: Historically, financial leadership requires some form of military dominance and enforcement – which comes down to supremacy on land, on sea, and/or in the air. What this means is that invisible weaponry, particularly that created with new advanced technology, can have a profound influence on our world while many people can not fathom that such powers exist. The U.S. has sea and air supremacy which is critical in supporting the dollar.
Control Files and Tools: Many of us have enjoyed the movie, The Matrix, yet we fail to understand how our own incentives and behavior are manipulated. While it has become easier to see the control on a broad, national scale, we are resistant to seeing and understanding how it operates at a more intimate level—in the media and entertainment we choose, within our own family, our school, our workplace, and our community. We see the torture in Guantánamo Bay. We do not see it in our community. Indeed, to see the control mechanisms and how to navigate them often requires that we understand the areas of knowledge described above.
One of my goals for The Solari Report is to break down these different areas, help you understand them and see the threads weave through the current news of the day. The more you are armed with this knowledge, the more powerful you become. I want us to address what is holding up the dollar and why. Understanding this is critical to understanding how to best manage our time and assets.
In this week’s Solari Report, in Money & Markets, I will discuss the extraordinary success of the Obama Administration’s first 100 days in further centralizing political and financial controls and how this is shifting popular opinion, answer your latest questions in Ask Catherine and then present Derivatives 101.
What are derivatives? Who uses them and why? Why are derivatives at the heart of the current bailouts? We will cover these questions as well as how critical derivatives are to the political management of the financial system and maintenance of the Slow Burn. Understanding derivatives is part of understanding the federal credit system—and how the Anglo-American interests maintain a strong dollar and trigger and exploit the selective collapses that subsidize it. Derivatives are at the financial heart of building Empire.
This week, in Let’s Go to the Movies, we will be discussing A Very British Coup. Made for British television, when a populist committed to disarmament becomes British prime minister, he finds himself up against the entrenched Anglo-American partnership of spies, diplomats and investment interests and some of the dirty tricks they can bring to bear on an honest government official. Want to communicate effectively with your political representatives? To do so, you need to understand the pressures they face when trying to act in our interests, including the risk that the media will not allow the truth to be told.
If you are a subscriber to The Solari Report, you can post your questions at your private panel or as a comment to this blog post. If you would like to learn more about The Solari Report and subscribe, click here.
We would love to have you join us.
View this week’s Money & Markets Charts here.
Hi! The audio file appears to be missing. I am interested in Catherine’s thoughts about derivatives!
Linda:
Great book!
Catherine
Catherine–
Just finished reading ‘The Creature from Jekyll Island’, about the history of the Federal Reserve. Have you read this book?? The third edition came out in 1998 and is spooky! I’m glad I was sitting down– it made my head spin. And then made me mad as hell.
Catherine: here is the http://www.rense.com radio broadcast of the interview w/ Andrew Gause as equested by Jim….the solstice is coming soon, as always, Richard
me has sent you a RealPlayer video link:
The Rense Radio Network
andy gause and buying down the derivatives
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@Jim: You might try http://www.rense.com in the archives. If I am not mistaken it was last Friday nights show.You probably have to subscribe to his program to access the archives. Sorry that’s about as close as I can get you to the interview/discussion. Catherine sometimes is aired on his show too….It is always worthwhile to listen to her. His program begins 10pm PST Sunday-Friday –so you pretty much have too be a nightbird to listen LIVE ( free )…That’s why I fell asleep during the best part… He allows some very esoteric stuff ( UFO’s and the like ) so you have to pick and choose what night a thoughtful provacative program might be aireed, LOL Richard
Could someone please supply the URL for that Gauss interview? Thanks!
Richard:
I will try to listen…..
Catherine
Catherine: I know I should have been listening to Rense that night more closely…he kept asking Gauss over and over about the quadrillion derivative amount and that could be the only possible solution: a way to devalue it ( as it has no intrinsic value ) and then pay it down to zero…all the time having the taxpayer pick up the bill…Please give your view on this soon, as always, Richard ( theoldwiseman)
In an interview with Jeff Rense last week, Andy Guass made this interesting observation…
In reviewing the H41 balance sheet, 6 months ago the Fed created a 115% increase in the building blocks of money and will be pumping this into the global economy over the next 18 months (the past 6 months and the next twelve.
In the words of Andy Guass – “That will not only give a jolt to the system, but it will make you feel like a heroin addict when he takes the first shot. We’ll be high, feeling no pain, but it’s the withdrawals that’s going to kill us.”
He also stated that the 1-2 quadrillion dollar derivatives debt will be devalued down to a 1-2 trillion dollars and paid off.
I have no way of confirming this, but it make sense that this would be the central banking fraternity’s next move. In thier think tank documents, they emphasise a doctrine of ‘gradualism’ in transforming the world in their image.
the whole economic system is a ponzi scheme to spiphon off other nations; money into london bank vaults.
31st jan.2007.
What so called democracy really mean for the rapacious anglosaxon race(yes it is a race war by parasitic Anglo-Saxons against the rest of the world)
it is very important to realize and understand the trickery of the english race in manipulating usa to wage wars on behalf of britain which gains most from Iraq war and any war that usa imposes on the third world and even on Europe.
Here are some of the writings done years ago to give a global picture of what is REALLY happening in the world and by WHOSE agency.
The modus operandi of Britain is to make country and regions unstable and install british stooge with explicit instruction to bring the money -looted ones -to Britain from where it is not going to go anywhere else.
Some oligarch Jews (like thee criminal U.K.-based fugitive oligarch Boris Berezovsky)
were the stooge of British in Russia and they brought so many ill gotten money to uk. So did the Kuwaitis-who brought 4 billions of pounds within a week of first Iraq war problem in august 1990 -so has continued the massive loot of the rest of the world by the English .race through this money protection racket . It is money protection racket in the sense that those eliete’s money is protected only when it is made to be lodged in British London banks. The witness, who appeared on the Rossiya channel with his face hidden and was referred to as Pyotr, accused 61-year-old Berezovsky of killing Alexander Litvinenko because the former security officer knew how the exiled tycoon had obtained political asylum in Britain in 2003. This thief boris berezosvky is a terrorist as well who calls for violet end to Putin-the president who is one of the most loved of his countrymen compared to any in the world.
As someone said “We live in a world where criminals are good guys and patriots are villains: where Berezovsky is a liberal “human rights” activist and Putin is a moral monster.” that putin who is one of the most popular leader of any in the world.
say even if Russia destroys usa then if Britain or rather england is allowed to exist then the english parasitic dog race will ,by very parasitic nature, will try to disrupt Russia or other countries’ existence. therefore instead of attacking usa or poland it is best policy of Russia to attrack and destroy to the whole of england which must be evaporated to a rubble.
IN ’88 when Dalai lama, at the height of Tibetan disturbances, visited west, the then british prime minister refused to meet Him. Later on with the demise of Russia and usefulness of China gone and with manipulation to keep power in Hong Kong somehow intact, the same british media and government ,like dog, started barking at China. It is interesting that amnesty international selectively targets those very countries( as it did china after cold war) who are out of favour (because they would not be a british stooge) of the british media and govt. This is not surprising as amnesty international is the creation of british govt, and british media. england with the most appalling record of human rights in last 200 years of her evil rule, needed some organisation to keep the others from charging england off her past and current evil practices. In other words it went for aggressive posture in propaganda war so that others can be demoralized and stopped from pointing out the real evil which is england. That is why amnesty international is one armour of the british lies to exploit the rest of the world. Amnesty international must be ignored and an independent human watchdog (which england will simply ignore) created. One purpose of amnesty international is to create an atmosphere for hatred towards the would be victims of british exploitation so that a victim could be blamed to have deserved the consequences. That is why ,now amnesty international sometimes threatens China, sometimes India and etc.
Mrs Margaret Thatcher, Britain’s so called iron Lady, refused to receive the Dalai Lama during his UK visit in the late-1980s for fear of offending his Chinese oppressors. Perhaps the iron in her was wrought iron, much given to bending in the heat.
In fact Britain is running a protection racket in the world through the help of american army-(because Britain is a third rate country with fourth rate army so it cannot do it on its own).
What Britain does is let the other countries be made instable (Kuwait, Iraq, Saudi Arabia, Afghanistan etc) then let the british stooge be installed there-those people who have no following in own country and with strict instruction to those stooges that they will bring the money to britan,-that is how London has enriched itself in last 15 years after fall of soviet union. Billions of soviet money have flown illegally to London and the british court -kangaroo court if ever there was any -have not let the money go citing “it will harm england’s balance of payment”?
That is why british media gets incensed if the traitors like soviet spies are not left safe in Britain -because then the whole business of protection money racket and money that Britain gets is in jeopardy. That is what explains influx of foreign money to London and how London has overtaken new York in stock market. Forget about service industry -british are the most ill mannered race what service can they provide except protection racket on back of american arms? Britain is looting even usa. Through it is usa which has worked hard (through illegal invasions ) to make other countries unstable so that Britain can get money from protection of stooge elites of those countries..
the modus operandi of Britain is to make country and regions unstable and install british stooge with explicit instruction to bring the money -looted ones -to Britain from where it is not going to go anywhere else.
Some oligarch jews were the stooge of British in Russia and they brought so many ill gotten money to uk. So did the Kuwaitis-who brought 4 billions of pounds within a week of first Iraq war problem in august 1990 -so has continued the massive loot of the rest of the world by the English race through this money protection racket . it is money protection racket in the sense that those elite’s money is protected only when it is made to be lodged in British London banks.
“
This is how the british and Americans now conduct their battle for “hearts and minds” – by making local satraps so widely and deeply despised that they are totally dependent on their Washington overlords for their sheer physical survival. The real “benchmark” the Iraqis have to display to the Americans’ satisfaction is an infinite capacity for obedience.”
“In the aftermath of President Abraham Lincoln’s defeat of the London-backed slave-holders’ Confederate insurrection, the London-linked New York faction of U.S. finance unleashed a predatory looting of the physical assets of the territory formerly ruled by the defeated Confederacy. That operation, which was described then as “carpet bagging,” is a term that pointed to the style of the personal baggage, in which the travelling, locust-like predators carried their personal effects.”
A very famous news mogul-Mr.Rudolph Hearst (Jewish proprietor of he the Hearst newspaper chain ))- had been stopped from running for American presidency in 1916 because he was suspected by the English that
might not have been inclined to rescue england in the 1st world war. Anyway, the southern constituency was pressing hard for america to come to rescue england who was staring defeat and thus loosing the prospect of enslaved nations who would have been feed from defeat of england. America did come to aid of england and it was called end of isolationalism. But this end of isolationalism would be tolerated only when it suits english interest against others and not in case of others like freedom for Irish people in northern Ireland (an occupied part of Ireland).and that British agent Wilson intervened on side of Britain in name of spreading democracy at point of gun! Woodrow Wilson was re-elected in 1916 on a promise to stay out of the Great War.
Think of that-Britain was looting two third of the world at the time and killing starving millions of people-and this Wilson comes to Britain rescue in name of protecting democracy! And that is exactly what these bastards mean when they utter democracy-that is a code word for them to attack other countries for furtherance of british interest. Then if two millions Iraqi are killed -starved -it is price worth paying. Somebody can legitimately ask than what to do with 60 millions English people and then it would be worth the price to save the world from English rapacity.
“The First World War was by far the bloodiest conflict in human history up to that time. Schwartz and Skinner noted, “Woodrow Wilson proclaimed a war for democracy against ‘Prussian dictatorship,’ but that was propaganda. Germany had civil rights, an elected parliament, competing parties, universal male suffrage, and an unparalleled system of social democracy.” Germany was far more democratic than either the British or French empire.”
“The significance of the revived promotion of Marx’s name is located in the process, directed from London, by Prince of Wales Edward Albert, for clearing the way for “A New Seven Years War” on the European continent, through a series of measures, including the ouster of Germany’s Chancellor Bismarck, the assassination of France’s President Sadi Carnot, the Dreyfus case, the British launching of Japan into wars against China, and the London-steered assassination of U.S. President William McKinley. The McKinley assassination had the crucial function of shifting control of the U.S. Presidency from the U.S. traditional orientation of friendship toward both Bismarck’s Germany and Russia, by putting the U.S. Presidency in the hands of a dutiful nephew of a Confederate spy, Theodore Roosevelt, and, a bit later, a fervent champion of the Ku Klux Klan, London’s asset Woodrow Wilson. It was only with the election of President Franklin Roosevelt, that the U.S. Presidency fell again into the hands of a true U.S. patriot, as the death of Franklin Roosevelt put the Presidency back into the hands of a Wall Street tool and Churchill accomplice, Harry S Truman.”
An Anglophile to the core, ku kulx klan stooge Wilson didn’t care about the fate of the Russians. His concern was in keeping German forces split along two fronts. The payoff worked: Russia’s provisional prime minister Aleksandr Kerensky kept the Russians involved in the war.
In 1916, Woodrow Wilson was re-elected to the presidency chiefly on the strength of a slogan: “He kept us out of war.” By 1917, the peacenik prez was leading the charge against Germany, jailing antiwar activists, and exhorting Americans to fight a “war to end all wars.” In 1940, Franklin Delano Roosevelt told the voters: “I have said this before, but I shall say it again and again and again: your boys are not going to be sent into any foreign wars.” Behind the scenes, however, he was maneuvering to do just that – and by the end of 1941, we were fighting a two-front war, embracing “Uncle” Joe Stalin as a fellow “anti-fascist,” and planning the internment of the Japanese-American population.
“ When this English edition of Professor Stanislav Menshikov’s book has been printed, Russia’s President Vladimir Vladimirovich Putin will have delivered his landmark May 10, 2006 “state of the union” address. The President’s address will have marked the probable close of what had been the demographically murderous, greatest carpetbagging swindle in history. The carpetbagging which Professor Menshikov’s book describes, is the post-1989 looting of the territory of the former Soviet Union, a looting that, in fact, has also been the predatory ruin of most of the East European territory of the Comecon outside Russia then and now.”-from
@Gerry: to further my point about “offbooks” funds; see
http://www.marketoracle.co.uk/Article5392.html
and the disclosure of DARK POOLS OF LIQUIDITY being traded between UBS, Morgan Stanley and JPMorgan Chase!!!!! Remember that UBS is currently being sued by the US DOJ in US District Court in Miami in an attempt to force them to disclose the names of the 52,000 American potential tax scofflaws and evaders with numbered acccounts in Switzerland ( to do this they would have to abandon the age old secrecy laws. Already they gave up to 300 names ; were fined $750m and then given $5b by AIG in a counterparty giveaway as part of the bailout!!!) the battle is ongoing ….As long as the Swiss numbered bank account system remains intact along with the viability of the numerous tax haven countries ( see http://www.thekomisarscoop.com ) massive “dark pools of liquidity” are being moved offshore….and as Catherine intones will ..”swing back…” at the opportune moment to purchase ( plunder?) the (OUR?) physical assets at their bottom value worldwide….If you have a sinister mind and as a PHD student you might not…( and as an example of this my Poli Sci 101 professor Dr. Haberer used to say in 1968 at the height of student campus demonstrations against the vietnam war: “Man does not have the political will!!!!!”—hogwash!!!) one might connect the dots and actually compose a theory that an engineered destruction of the US economy by design is unfolding before our very eyes!!!! to accommodate that tsunami of offshore funds to return and purchase assets at rock bottom prices ( one example is Britain’s Mr. G. Brown’s “giveaway” @ $275 per ounce half the BOE bullion reserve while he was Chancellor of the Exchequer in the 1990’s ). The Dubai Ports World deal was another example…So pay attention and wait and see whatever strategic facilities and networks will be handed over in the next decade. Just maybe the policing of our highways and cities by foreign or private entities( Blackwater just lost their ability to remain in Iraq)??? How about that?? We had a wave of Arab oil money returning to the USA in the 1970’s and a Japanese wave in the 1980’s and lo and behold today the Mainland Chinese possess $1.4 tr in US dollar assets they might like to unload…What might that buy? They just doubled their gold reserve and have increased their copper mining holdings too….I remember a PBS special many years ago that was a historial piece that took place in China at the turn of the 20th Century when the British initiated a stock exchange and basically bought most of China’s physical assets ( railroads, timber, coal, minerals, etc..)…and then the Maoist revolution overturned that. The tide has changed and the Chinese are headed this way!!!! First stop IMF gold bullion!!! We are being lulled to sleep while the banksters’ computers are on overtime transferring wealth to and fro along the global hotlines…IMO, The Bank of the South funded to a tune of $7b is an attempt to return to a Bolivarian South America…Also imo other nation states will also regroup in other regions in due time to oppose the “heist”…. So Gerry derivatives are the new money (particularly CDS’s )…Quite ingenious if not so blatently sinsiter…will it be ANIMAL FARM OR 1984??? What do you think Gerry??? as always, my early am rant was excessive, my apologies Catherine, as always, Richard
@GerrY: please permit me to answer for Catherine ( w/out her permission ) ….YES!!!! Why do you suppose this week that the 10 major financial institutions ( AIG, GMAC, American Express, METLIFE, and the various supersized banks ( except JPMorgan/Chase and Goldman-Sachs ), among them the former brokerages, former RE Investment and mortgage brokerage firms, former investment banks and mergered current commercial banks ) still require further capitalization ( $74 b ) as enunciated in the Stress tests???…Most of the derivatives ( CDO’s and ABS’s ) and in particular the CDS’s are “offbooks” and have many foreign bank counterparties!!! Unfathomable amounts ( the number quoted by the Bank of International Settlements in Switzerland has been $634 trillion—-others believe it amounts to $1200 trillion )in the trillions are HIDING….The International Swaps and Derivative Association ( the lobbying group lead by Sir Robert Pickle )is still viable; and has with the assistance of the many still capitalized and still minimally taxed & unregulated Hedge Funds ( at one point there were 9,000 hedge funds ) convinced ( bribed?? )all nation states that this organization and the product it created remain viable!!! A recent weekend meeting sponsored by the WSJ and George Soros just prior to the last G-20 meeting prescribed a 20 point program to stabilize the Swaps market… Oh, yes this fraudulant activity is still ongoing…Read Catherine’s entire archive to understand the history of theft at the federal level; and remember she most likely believes that most US government agencies ( including HUD-her former employer ) are merely “delivery systems for the transfer of wealth from the poor to the wealthy” ( see the NSA Act of 1947 and the CIA Act of 1949 )!!!!
Also see this article written by former NY Gov. Eliot Spitzer:
http://www.slate.com/id/2217811
Support her good works…( Sorry I’m not familiar with your thesis topic )as always, Richard (theoldwiseman )
Dear Catherine,
I first realized you existed on a long drive through the night. I was listening to coast to coast radio: and you were the featured speaker.
I have to wonder if they banks and financials are STILL trading in derivatives?
What is your take on this possibility??
Gerry MBA, Phd (organizational behavior)My thesis was “The Pirenne Theory Revisited on America”
correction @ 6:41 am: “…I find great comfort ( not solace )…..” richard
Dear Catherine: Sorry, I wasn’t able to participate in the derivatives 101 seminar. How did it go? Looking forward to any synopsis.
@Henry: “…because Enlightenment is at the root of our ‘culture’ that we are in terminal trouble….” (????); “…rationalism and individualism …both amount to ignorance of the real…” (????) Please permit me to apologize—I thought that the sound fundamental underpinnings written for posterity in the Declaration of Independence , the US Constitution and the Bill of Rights ( here ); and along with the French Revolutionary ideals of Equalite, Fraternite and Liberte ( sp?) are/were why we currently see the present gulf between “our” ( and yes I include you ) perceptions and the ones we oppose as presented by the MSM and the general political/corporate environment which seems to control the global economy. At least that’s my opinion. Are you suggesting that the elite ( who are probably headed to “…spiritual suicide….” as you suggest ) are the only participants in a world influenced by the enlightenment?? Personally, I find great solace in the teachings enculcated in these lofty written ideals and precepts. warm regards, Richard ( the oldwiseman )
It is because the Ennlightenment is at the root of our “culture” that we are in terminal trouble. In essence, the Enlightenment is rationalism and individualism: both amount to ignorance of the real, and history and the present is there to prove it. The promethean mentality embodied in modernism amounts to a spiritual suicide.
The slow burn in my opinion is quite accurate. Letting the air out of the market needs to be done slowly in order to keep the sheeple in their pens. – aka their 401k S&P 500 index funds, mutual funds, etc. Need to keep that dollar cost averaging money flowing in. It’s always buy and hold, be a long term “investor”, you can’t time the market, you’ll miss the train if you’re not in the market, stocks are cheap,garbage, garbage, garbage.
But it seems that perhaps a few sheep are straying from their pens,
Some investors in 401(k) retirement funds who are moving to grab their money are finding they can’t.
Even with recent gains in stocks such as Monday’s, the months of market turmoil have delivered a blow to some 401(k) participants: freezing their investments in certain plans. In some cases, individual investors can’t withdraw money from certain retirement-plan options. In other cases, employers are having trouble getting rid of risky investments in 401(k) plans.
http://online.wsj.com/article/SB124148012581385199.html?ref=patrick.net
Does the same thing happen to wall street and corporate executives?
When the bottom finally does arrive – the headlines will be literslly screaming for people to get out of stocks at all costs, because they’re a horrible investment. Of course, that’s when they’ll be cheap.
Never underestimate a wild cornered animal to do the unthinkable in order to escape. Financial engineering has been going on for some time to cover up the “bad” stuff. I recommend the book by Frank Partnoy, FIASCO. Some excerpts,
“That was merely one of many such conversations at BT and I imagine at most other investment banks. If a client couldn’t figure out how much a complex derivative trade was worth on a given day, the investment bank could misrepresent the up front value of the trade, then revalue the trade over time extracting more fees.”
“The trick LEH had discovered was that if you put the xxx bond into a trust and added some zero coupon bonds with the junk interest payments, you could convince S&P to rate the entire trust AAA. Combining the two was like baking a cake and then adding icing. The cake was crap, but the icing was real chocolate. The icing persauded the ratings agencies to call a crap cake a chocolate cake.”
“Sure enough, it could generate instantaneous false profits. It could be used to hide just about any investment oss.”
-Basically what I took away from the book, was the biggest buyers of these derivative were pension/retirement funds and insurance companies. Once they were “blown” up, they would either double down or request another derivative designed to cover up the losses for as long as possible.
Go look up the term – ripping your face off, as it relates to wall street vernacular.
Also here’s an article,
Financial Engineering/Alchemy 101 – turning toxic waste into AAA gold
http://www.thebarricadeblog.com/?p=939&ref=patrick.net
Check out the chart regarding what percentage of securties rated since Jan 1, 2000 have received the coveted AAA rating.
Steve:
Don’t assume….:)
John:
Yes, I agree. Things will take more and more cleverness to keep together. I think the problem will not be intelligence or resources, rather the politics of managing the collective greed and hubris.
Oldwiseman:
Oh, my, you are indeed wise. Yes, when with the enormous and growing pools start to flow back on shore. A very big swing….
Catherine
So the dollar will continue to hobble on in a slow burn unless the world decides to go off the dollar? What is your immediate forcast for the bond market this summer? So gold will continue to be suppressed unless the world goes off the dollar or is it possible they will run out of gold to suppress the gold market.
Dear Catherine: Hope this finds you once more in the strawberry patch….
This http://www.321gold.com article might be reading material for your derivatives 101 blog..
http://www.321gold.com/editorials/wilson/wilson050509.html
Clearly we as a civilization founded on high ideals and fundamental precepts derived from great thinkers from the Age of Enlightenment is under severe attack from these self ascribed ‘financial oligarchs’…
IMO, behavioral science and social engineering will remold our collective psyches into a new form of neo-feudalism ( not socialism nor old style fascism ). I know your approach to our dilemma will be explained and disected in a most dynamic way….I only hope you include in this endeavour a huge section on the covert usurpation ( and syphoning away ) of vast trillions into the accounts of the multiple offshore tax havens established by the age old NSA and other Intelligence agency financial entitiies. A loophole as big as a bank has continually been left open to funnel vast amounts of electronic cash to the usual culprits…As you are already aware the very bigness of this slush fund makes common bottom up control of our institutions impossible and pointless…The normal “oversight” has been systematically bought off and the “Slow Burn” you describe is ongoing…I enjoy your approach as ‘Permaculture’…I remember the original concepts that came from ‘the land downunder’ in innovating the thinking behind home grown agronomy…Most folks I interact with still cannot see through the looking glass, and relate in left/right paradigm conversation…How was American education so twisted?? It must have been the TV??? HA!! Hate speech must be the easy way out in speaking one’s mind…I sure miss “critical thinking”…I hope it makes a comeback ( soon!!!). Are you invited to the Jekyll Island gathering organized by Mr. E. Viera and Mr R. Schultz, etc., this month??? I foresee a global satellite link up with strategic cities in a three day seminar style educational broadcast dealing with this very sensative topic …I remember a previous one that took place in the 70’s that linked London, Toronto and LA….If nothing else it might expose the underbelly of the beast ( so to say ). In advance I believe your derivatives 101 seminar will be a smash hit…warm regards, Richard ( the oldwiseman )
Thanks Catherine for these insights surrounding your ‘Slow Burn’ metaphore. I look forward to the derivatives talk Thursday. A number of commentators see things falling apart very quickly. It’s good that you point out just how clever our friends are – those behind our age old instutions. As you say, they have their interests protected in ways that we may not realise.
But it may also require more than cleverness on their part, to keep their world intact. The forces pulling it apart are becoming enormous. And unfortunately for them, they don’t have a great deal more than ‘cleverness’ available to them, for coping with massive changes.
Australian poet Francis Brabazon uses the achetypal figure of ‘Big Fist’ to symbolise the power elite.
“None thrives on song; lives are fattened for gain –
Grain
Grown and ripened only for the mills of Big Fist.
Brain and muscle, love and fair speech, all to him are grist.
But the Wind of God blows where it lists –
And Big Fist and his satraps will bow before its storm.”
Excellent ideas, Catherine. Keep up the good work!
I am assuming this translates into a “buy” rating for the overall market, for now. At least until stocks begin slamming into hard overhead resistance in the form of the 200-day moving average. This will take several weeks to unfold… after we touch the 200-day MA, still a slow burn or Market Crash Part II? Time will tell the story.