Everyone is suffering from the economic slowdown. Many have lost their jobs and houses because of bankers selling questionable financial “rabbits out of hats” such as Collateralised Debt Obligations (CDOs) and the positively fraudulent use of Credit Default Swaps (CDSs) otherwise knowm as derivatives.
Many privately wealthy people have lost much of their capital by buying these Collateralised Debt Obligations (CDOs) or by investing in companies that got caught with them.
Many people of more modest means have lost investments, too, and seen the value of their superannuation plummet, as well. Their Mutual Funds have been caught with CDOs and also hold shares that have lost value through the same process.
And lastly, everybody will suffer from the coming inflation and from future increased taxes caused by government debts incurred to pay off the fraudsters and so make the filthy rich obscenely rich.
And all this through a simple scam. From James Lieber's excellent article in the Village Voice (Jan 27th '09), “What Cooked the World's Economy” -
“The bottom line in this scandal is that fantastically wealthy entities positioned themselves to make unfathomable fortunes by betting that average Americans - Joe Six-Packs and hockey moms - would fail.“
In short, with AIG and JP Morgan in the lead, insurers, investment houses and banks created subprime loan assets by selling loans to people who couldn't afford them and had the rating agencies give them prime rating. These subprime assets had higher subprime returns with apparent prime safety. This was irresistable bait for the greedy. The anonymous “counterparties” behind the AIG/JP Morgan push insured these subprime loans (CDOs) with derivatives (CDSs or Credit Default Swaps aka derivatives) betting that the loans would fall over and thus collecting handsomely. And in the process, bleeding the above companies and others dry and then bleeding the whole nation dry through the government and its bailouts which was the real and ultimate "mark" all along.

The concept was simple. However, the implementation took some doing over many years including dismantling the regulatory provisions and hobbling the oversight bodies.
With this information, looking back over those years makes it plain that it was all deliberatly engineered. The same cast of characters are present at every step; building, priming, selling and detonating the charges and then lobbying excitedly and making threats for the compensation or more correctly, the payoff.
The situation is no different (except in scale) to a man (counterparty) renting a house to pyromaniacs (sub-prime borrowers) then selling the house complete with tenants to an investor (mutual funds, some banks etc) and subsequently insuring the now unloaded house (CDS's) with an insurance company (AIG) multiple times, say twenty times, against burning down which it promptly does. The original seller, (counterparty) collects on his twenty insurance policies twenty times even though he doesn't own the house and then goes looking for another house to buy and rent to more pyromaniacs and on sell and so repeat the process. He keeps doing this until he bankrupts every insurance company he can find and then demands that the government pay up on the fraudulent policies the insurers can't cover now .
That's pretty much it except that the people talked into the subprime mortgages which were designed to be defaulted on were not criminal pyromaniacs but rather gullible or naively hopeful workers. All the other parties, including the complicit senior executives of the insurance companies were and are guilty of criminal behaviour.
The solution to this mess is also simple – declare the Credit Default Swaps (deritatives) invalid legally, no more payouts, and instead provide government funds to assist the people struggling with their mortgages so that not only do they retain a roof over their heads but also to stop the triggering of these fraudulent insurance policies against their default. These derivatives are nothing short of a scam.
The scam is still being worked through because the “bailouts” are an integral part of it and the criminals are directing it all. This is how come the likes of Joseph Cassano of AIG Financial Products are not only not in jail but are still in employment and, unbelievably, also receiving huge bonuses.

To understand in more detail how it all worked, this from James Lieber's article may help,
'“Derivatives weren't initially evil. They began as insurance policies on large loans. A bank that wished to lend money to a big, but shaky, venture, like what Ford or GM have become, could hedge its bet by buying a credit derivative (insurance policy) to cover losses if the debtor defaulted.”
A market or trading forum was needed to facilitate the selling of these loan insurance policies (a.k.a. Credit Derivatives or CDs or just “derivatives”) on a large scale and thereby create a new financial services industry (and new profit centre) and was duly supplied in the form of a computer network. From Leiber again,
“the company that put the basic hardware and software together for pricing and clearing derivatives was Bloomberg. It was quite expensive for a financial institution - say, a bank - to get a Bloomberg machine and receive the specialized training required to certify analysts who would figure out the terms of the insurance. These Bloomberg terminals, originally called Market Masters, were first installed at Merrill Lynch in the late 1980s.
Subsequently, thousands of units have been placed in trading and financial institutions; they became the cornerstone of Michael Bloomberg's wealth, marrying his skills as a securities trader and an electrical engineer.
It's an open question when or if he or his company knew how they would be misused over time to devastate the world's economy.”
How did legitimate insurance on a loan mutate so badly? Well, it soon became apparent (if it wasn't the purpose from the begining) that with the insurance (derivative) in place, there was more money to be made from a loan going bad and collecting on the insurance than if the loan was secure and paid off in due course. Particularly if the loan could be insured for more than it was worth or was purchased for. Coupled with the fact that the loan could be insured multiple times and the fact that you didn't even need to own the loan yourself. So if you insure a loan twenty times over so that when it falls over, you are paid its full book value twenty times. This is more than a “goldmine”; this is an exponential formula to unlimited wealth if the fabulous profits are parlayed a few times. Imagine betting on the winning number on a roulette table and letting the winnings ride and having the number come up again . . . and then keep on repeating this process with no pit-boss (or regulator) to shut the table down!
Now think in trillions!

But this jackpot payoff is dependent on the insured loan going bad. So now there is a market for bad or high risk loans and it is an exponentially ever-growing market because once a derivative buyer or “counterparty” (as he is known in the business) has collected big time on his “investment” he naturally wants to plough it all back into the same glorious, no risk, bonanza. But our counterparty's capital has grown like Topsy and he needs a hundred bad loans this time. How many bad loans will he need after a few circuits on this magic merry-go-round? Clearly the “Bad Loan” business needs to go “bigtime” and to do that the financial regulations and supervision need to be eradicated. Bye-bye Glass-Steagall Act. Hello Commodity Futures Modernization Act (CFMA). And thank you, Bill Clinton.
This need for loans to be defaulted on is one of the reasons why Obama and his backers on Wall Street will not help rescue, in any meaningful way, ordinar, but over committed people struggling to stay in their homes or pay off their credit cards. There are still derivatives in play to be collected on.
Lieber again, “By plunking down millions of dollars, a hedge fund could reap billions once these fatally constructed securities plunged. Again, the funds did not need to own the securities; they just needed to pay for the derivatives - the insurance policies for the securities. And they could pay for them again and again. This was known as replicating. It became an addiction. “
It's not over, either. To repeat, its still in play and there are still loans to fall over and there are still payoffs to collect for the mysterious counterparties whom the Fed and everyone else involved refuse to identify.

But let me backtrack a little to how the first half of the scam operated before the government intervention and the second half began.
The challenge was how to do it on a mass scale. It needed to pull most of the financial industry in because the object was to firstly, loot and crash whole economies and secondly, set the stage for a one world currency which would give the issuers of this currency a de facto world government. .
So they needed a respectable and respected front to lead the way for others to follow; to assure the nervous Nellies that success lay in joining “The Charge of the Blight Brigade into the Valley of Debt”.
What better vehicle than AIG, the biggest insurance company in the world? You are probably protesting that this company is “one of their own”. Yes, but many a fortune has been made from bankrupting a company, particularly, one's own. Maurice Greenburg, the head of AIG, established the demolition team in London, AIG Financial Products by name. I suggest this was not only to escape the rather non-existent regulatory control but also to escape internal detection and intervention from senior executives at the parent company who might not be too exicted about the prospect of their careers, status and livelihoods going up in smoke and so "out" the operation before its time is due.
Lieber points out, “In 2000, AIG asked the New York State Insurance Department to decide if it wanted to regulate them, but the department's superintendent, Neil Levin, said no. The question was not posed by AIGFP, but by the company's main office through its general counsel”.
Perhaps head office was trying to get the regulator to do what it ironically couldn't i.e. audit its own subsiduary because Maurice Greenberg placed the sellers of these grenades, the Credit Default Swaps, in London and refused head office access to their books.
With the solid looking facade of AIG in place all that's needed now is an outside “seal of good housekeeping” for the bait which was provided by Standard & Poors and the other rating agencies. The bait made up of mortgages, credit card debt and sundry other things and otherwise known as CDOs (Collateralised Debt Obligations) was sold to,
“Banks like Wachovia, National City, Washington Mutual, and Lehman Brothers (who) loaded up on this financial trash, which soon proved to be practically worthless. Today, those banks are extinct” (unlike the ratings agencies).
Either these institutions were kept in ignorance and were set up by their fellow bankers to fail with the view to taking out the competition;
or, they were gutted and offered up as sacrificial lambs; that the derivatives were, indeed, taken out on the bad loans (CDOs) by the principals of these firms but held in other companies away from the creditors and eventual liquidators and the wholesale looting put down to incompetence instead of larceny.
I think it likely that both these scenarios were in play with different individual companies and for both the reasons outlined above.
But this bomb is a time bomb and these institutions (and also private investors) are loaded up with these explosive bad loans, we need a trigger to set the chain reaction off. This was supplied by the banks tightening up consumer credit causing an economic slowdown and with it increased unemployment which then caused the CDOs to start popping off and then . . .
“the raters rushed to downgrade them to junk status. This occurred suddenly with more than 4,000 CDOs in the first quarter of 2008 - the financial community now regards them as "toxic waste."
To top it all off, JP MorganChase and others delivered the “coup de grace” by freezing interbank lending with instantaneous catastrophic results.

Part one of the scam was complete by this stage. The fiasco had now entered the public arena through the media coverage. And Part Two was about to start.
The Fed went to Congress to appeal for funds to ease the “credit crisis” which had been deliberately created, of course. After initially baulking, Congress handed over the funds and the Fed promptly gave it to the insurers such as AIG who almost certainly turned this money over to the derivative holders, the anonymous “counterparties” i.e. the scammers and builders of this massive operation. This has to be be part of the original plot because AIG and other insurers simply had nowhere near the capital to pay out on the derivatives and the whole operation only makes sense if the scammers can collect which means the government was meant to pay and pay big right from the beginning. This was the prize, the goal of the whole exercise And the government did pay up and is continuing to pay up, what's more. The scam is still in operation.
In the tight monetary conditions i.e. tight lending practices of the banks to average people, loans are continuing to fall over and derivatives are continuing to be triggered and are continuing to be payed out and Congress, via the Fed, is continuing to fund it all. The strugglers out there in mortgageland will not be helped in any meaningful way because that would lessen the number of subprime loans going into default and this would stop this process that provides the continuing shower of funds down on the pigs at the trough. All this is to say that the bailouts give massive dollar amounts to the already wealthy and every one pays for it because, for one, the value of the dollars everyone else is holding goes down through inflation and two, the taxes that will inevitably follow to cover the government “bialout” to accommodate and facilitate this shift of wealth.

The US Federal Government together with Wall Street (which includes the Federal Reserve Bank) are engaged in a conspiracy to massively defraud the American public.

James: Will China or The Bankers Crash The US/ World Economy

I'm revisiting an ongoing topic with a general sort of a question. Reports that China and other countries have too bigger stake in the USA to call in their US dollars seem to make sense. I am wondering though If the international Bankers who appear to have engineered the whole collapse are talking to these countries behind the scenes with a view to a short crash with their american money now backed by US property. Arrangemets might have already been made with these countries with the international bankers for a short crash and transition. Why would the US keep borrowing from China? Perhaps one reason might be that they are still attempting to bring all the oil producing or pipleline countries into the fold either by millitary force, covert cia operations, threats or complicity.
What do you think is happening James or anyone else.

Chinese Cheques

Hi Sally, a short reply to start with-
what do you mean by, "with their american money now backed by US property"?

"Why would the US keep borrowing from China?" -
because it keeps the Chinese owned $US off the international market and so not competing for trade goods especially strategic resources and technology. This also helps to keep the value of $US up. This would be of prime interest to the various bankers around the world who have received the hundreds of billions of bail-out money. At least it is of interest until the stolen money is converted into real wealth, real assets. So they don't want the Chinese competing with them and flooding the world market even more with $US.


I heard that China had stopped lending to the US but has resumed with a deal negotiated by Hillary Clinton. That deal somehow entails swapping the worthless securities ( or whatever is being used to back the loans ) with real US land and assets and is apparantly secret ( or just another bullshit rumour ). I don't read financial columns and may have a few terms wrong here but hope you can understand my drift.

Will the Economy Crash & Burn????

OK this looks like old news sorry James. [see cited text below] I'm a little more brain dead than usual right now. I don't think loans from China can cover the copious issuence of US currency anyway. I'm talking with zero knowledge of the financial sector here but trying to get a basic handel on the different lines of spin about what is happening to the US and world economy. Have heard a lot of people say that no one can afford for the US dollar to collapse and their reasons do seem to have some merrit. I've also heard a rumour repeated at that American embassies have been told to buy enough foreign currency to last them 1 year with crash date predicted to be early september 2009.

The United States of America has tendered to China a written agreement which grants to the People's Republic of China, an option to exercise Eminent Domain within the USA, as collateral for China's continued purchase of US Treasury Notes and existing US Currency reserves!
On February 11, Bloomberg Business News reported that China was seeking "guarantees" for its US Government debt (Story Here), and it now appears they got it. Well placed senior sources at the US Embassy in Beijing CONFIRM the formal written agreement was delivered by Secretary of State Hillary Clinton during her recent trip to China.

This means that in the event the US Government defaults on its financial obligations to China, the Communist Government of China would be permitted to physically take -- inside the USA -- land, buildings, factories, perhaps even entire cities - to satisfy the financial obligations of the US government.

Put simply, the feds have actually mortgaged the physical land and property of all citizens and businesses in the United States. They have given to a foreign power, their Constitutional power to "take" all of our property, as actual collateral for continued Chinese funding of US deficit spending and the continued carrying of US national debt.

This is an unimaginable betrayal of every man, woman and child in the USA. An outrage worthy of violent overthrow.

Eminent Domain is the power of government to TAKE private property for public use without the consent of the property owner. Under our Constitution, the government can only "take" when providing "just compensation" for what they've taken.

newjesustimes's picture

Sally - this may help?

These articles say it's a hoax (US eminent domain for China). Who knows, but when they come to collect they may as well call it WWIII!

The alleged source, Hal Turner, sounds like a real winner (not)

On the other hand I do agree this fiat currency can only make a mess sooner or later. That and the melting polar caps.

Thanks for the info, Sally.

Thanks for the info, Sally. I figured from your comment that there was something going on that I wasn't up with. Not surprising really as I haven't been keeping up with 'the noos' lately.

I thought at first it would have been the Fed mortgaging off Federal Government property (which they haven't the slightest right to do as they don't own any of it!!). But anyway that's what you expect. Eminent Domain is a different thing though. I know it is regularly abused by government types with property developer mates. I just can't see the Chinese Government collecting on it, though, if that is indeed the case. And anyway it doesn't make a lot of sense to me. If the shit hits the fan, a lot of property and assets, particularly private ones, are not going to be worth much anyway.

Whatever deal the Chinese Government has made with the Fed and their agents, the US government, they will regret it. I can guarantee it. You can't do business with these sorts of people and not get burnt. The Chinese have been burnt all along going back to Deng and his decision to join in on the capitalist binge of the last thirty or more years. They're caught now.
If they keep hanging on to their treasury bills they are gunna lose their shirt. If they try and convert it into US properties and businesses (like GM!), they're gunna lose their shirt because the assets are not going to be worth shit anyway and if they dump their bonds and bills for what ever they can get for them and crash the US economy, then their own economy is going to suffer and their own currency will depreciate making it hard to get value dealing with other third party countries. My thought is that the deal done through Auntie Hillary is for the purposes of placating (for the time being) trouble in the ranks at home in China. I think I would like to play poker with these dudes 'cause they just can't throw in a bad hand wink

The biggest problem for the Chinese (and this really is just my opinion) is their own compatriots who have grown rich and greedy and don't want the gravy train to stop which I bet was in the minds of the international bankers when they started this slow motion train wreck thirty or more years ago. The Chinese economy went the way of exploitation and wealth for the middle class as a way of staving off challenges for the leadership and control exercised by the Party. Now they have the tiger by the tail. They should have developed their own resources for the their own people. They may not have had BMWs to drive around in but the county would have stability and not be worrying about riots and fifth columns working internally for the US.

Contrary to popular thinking, wars are most often fought between countries that trade with each other rather than those that don't. It's always over control of trade and resources.

In my opinion, if anyone crashes the US economy it will be the Federal Reserve Bank. They control everything. Always have. I expect the Chinese will ride this hand all the way to the 'river'.
I don't know which way the Fed will go with it though. I've been expecting the US economy (and much else) to collapse 'any day now' for more than twenty years!

But I think the Weimar Republic economic collapse is what will be followed. Look up what happened in Argentina. But the best advice is to get out of debt, stock your pantry, learn to live on less and make friends of your neighbours. Pretty lame I know but these shitheads are going to do whatever they are going to do and I don't think there's a lot you can do about it other than this. As a parting point, if the US economy collapses, that doesn't mean that everybody else's will, at least, not to the same extent.

I hope that sorta answers you question(Drunk, Sally.

NJT James

NJT smiling
Thanks for the info. There is just sooo much propaganda and probably quite a few rumours started in hope of influencing markets with an eye to personal gain or whatever.

Yes. The picture is starting to clear a little.

The biggest problem for the Chinese (and this really is just my opinion) is their own compatriots who have grown rich and greedy and don't want the gravy train to stop which I bet was in the minds of the international bankers when they started this slow motion train wreck thirty or more years ago.

It does seem that to enforce unpopular government on the masses it is necessary to create a class system whereby one sector are enriched, and it will thus loyally defend and facilitate that government.

One thing Ive thought of is that the Fed have so much control of Washington that they would not want America in too much pooh. They use Americas massive military and CIA etc to do a lot of their dirty work don't they so surely they want it to continue to prosper? They will have it all sussed. How to effect a move to a world currency and still control a powerful US military which they might need to defend it.

I will say Australians seem to have more guts and have more knowledge than Kiwis in standing up to well just about anything. We have elected a Bush hugger in our PM John Key.
And theres every possibility that Key advised Alan Greenspan on derivatives at a critical juncture when the "Commodities Futures modernisation act" was passed by congress in 2000, effectively removing all government oversight from derivatives. Key at the time was one of 4 invitation only advisors to Alan Greenspan and his specialty was "derivatives".
Key claims innocence of what derivatives would mean for the future however "Brooksley Born" head of the commodities futures trading commission fortold this in a heated battle with Allan Greenspan so I don't see how Key can claim innocence without confirming gross incompetence. It would be very cool if Australian media would take up Keys involvement in all this as the NZ media won't do it. I may give channel 9 a call. Our man "Key" is a smiling lying worm ( Nicknamed The Smiling Assassin in the US ) and I'm considering crossing the Tasman to escape his rule. But then I'm not keen on bugs and snakes either.
Don't panic James Im not planning to land on your doorstep. OZ is a big country as ya know. wink

Snakes in suits and skins

"It does seem that to enforce unpopular government on the masses it is necessary to create a class system whereby one sector are enriched, and it will thus loyally defend and facilitate that government."

Exactly right, Sally.
I think the Fed would be quite happy to return US to the Great Depression. They can still run their armaments industries and, of course, it's good for military enlistments. Think how focused everyone became coming out of the Great Depression and headlong into WW2. "Hey, it's work, man" even if the result of your labour is totally committed to killing innocent people.

The banks do use the US military and CIA (and the IMF etc) to enforce their loans and loan conditions. They make the international bankers' system work. The Chinese have lent the US heaps of course but are not in a position to enforce anything. So in the end they "can go whistle" and will inevitably get worked over even if it is just the Fed creating huge US$ inflation to effectively devalue the debt owed to China.

The terrible irony is that the huge US military machine that enforces the loans and US$ hegemony was paid for by the rest of the world including China. When OPEC in the 70's agreed to only sell oil for US$, this created a huge demand of them. The Fed simply 'printed' this money to supply the new world demand and exchanged it for everyone else's currency. They then used everyone else's currency (and are still using it) to purchase all they needed to build this death machine.

The World has paid for its own servitude. This is repeated at various levels in our society and economy and is the hallmark of a truly evil genius (perhaps the ultimate evil genius), imho.

The essential challenge remains as you point out, Sally; to change over to a One World Currency and maintain dominance to enforce compliance and to do that they need bodies in uniform and supplies from all over the World. And most importantly control over the oil fields one way or another. The fact that US and israel haven't been able to start another major war tells me that all is not going well for them. Let us hope it is all too big a stretch for them.

I can't imagine your beloved Keys is any worse than our last PM, Howard. Well, at least Howard didn't smile when he lied so maybe I'm wrong on that.

Tassie is a little smaller than the north island but you are most welcome, Sally. Though we do have some rather cute ants and, of course, ALL the snakes (unlike the north island) are poisonous here including the ones with out legs smiling