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Top 25 Comercial Banks have $201 Trillion in Derivatives but only $7.7 Trillion in Assets

You rarely hear about the true nature of the dilemmas our financial system faces. Only recently, as the real economy begins to implode, do the financial media talking heads even discuss such matters.  Judging by the lack of concern amongst most of the people out there; they probably do not realize just what kinds of sums we are dealing with.

Here is what 1 Trillion dollars would look like, in hundred dollar bills, on forklift pallets double stacked:

1 Trillion Dollars in Hundred Dollar Bills on Forklift Pallets

1 Trillion Dollars in Hundred Dollar Bills on Forklift Pallets

Imagine $201 Trillion Dollars on forklift pallets; because that is the number that our top commercial banks are toying around with on a daily basis. Read the rest of this entry »

Fiscal ruin of the Western world beckons

For a glimpse of what awaits Britain, Europe, and America as budget deficits spiral to war-time levels, look at what is happening to the Irish welfare state.

By Ambrose Evans-Pritchard | UK Telegraph

Events have already forced Premier Brian Cowen to carry out the harshest assault yet seen on the public services of a modern Western state. He has passed two emergency budgets to stop the deficit soaring to 15pc of GDP. They have not been enough. The expert An Bord Snip report said last week that Dublin must cut deeper, or risk a disastrous debt compound trap.

A further 17,000 state jobs must go (equal to 1.25m in the US), though unemployment is already 12pc and heading for 16pc next year.

Education must be cut 8pc. Scores of rural schools must close, and 6,900 teachers must go. “The attacks outlined in this report would represent an education disaster and light a short fuse on a social timebomb”, said the Teachers Union of Ireland.

Nobody is spared. Social welfare payments must be cut 5pc, child benefit by 20pc. The Garda (police), already smarting from a 7pc pay cut, may have to buy their own uniforms. Hospital visits could cost £107 a day, etc, etc.

“Something has to give,” said Professor Colm McCarthy, the report’s author. “We’re borrowing €400m (£345m) a week at a penalty interest.”

No doubt Ireland has been the victim of a savagely tight monetary policy – given its specific needs. But the deeper truth is that Britain, Spain, France, Germany, Italy, the US, and Japan are in varying states of fiscal ruin, and those tipping into demographic decline (unlike young Ireland) have an underlying cancer that is even more deadly. The West cannot support its gold-plated state structures from an aging workforce and depleted tax base.

As the International Monetary Fund made clear last week, Britain is lucky that markets have not yet imposed a “penalty interest” on British Gilts, given the trajectory of UK national debt – now vaulting towards 100pc of GDP – and the scandalous refusal of this Government to map out any path back to solvency.

“The UK has been getting the benefit of the doubt, both in the Government bond market and also the foreign exchange market. This benefit of the doubt is not going to last forever,” said the Fund.

France and Italy have been less abject, but they began with higher borrowing needs. Italy’s debt is expected to reach the danger level of 120pc next year, according to leaked Treasury documents. France’s debt will near 90pc next year if President Nicolas Sarkozy goes ahead with his “Grand Emprunt”, a fiscal blitz masquerading as investment.

There was a case for an emergency boost last winter to cushion the blow as global industry crashed. That moment has passed. While I agree with Nomura’s Richard Koo that the US, Britain, and Europe risk a deflationary slump along the lines of Japan’s Lost Decade (two decades really), I am ever more wary of his calls for Keynesian spending a l’outrance.

Such policies have crippled Japan. A string of make-work stimulus plans – famously building bridges to nowhere in Hokkaido – has ensured that the day of reckoning will be worse, when it comes. The IMF says Japan’s gross public debt will reach 240pc of GDP by 2014 – beyond the point of recovery for a nation with a contracting workforce. Sooner or later, Japan’s bond market will blow up.

Error One was to permit a bubble in the 1980s. Error Two was to wait a decade before opting for monetary “shock and awe” through quantitative easing.

The US Federal Reserve has moved faster but already seems to think the job is done. “Quantitative tightening” has begun. Its balance sheet has contracted by almost $200bn (£122bn) from the peak. The M2 money supply has stagnated since January. The Fed is talking of “exit strategies”.

Is this a replay of mid-2008 when the Fed lost its nerve, bristling over criticism that it had cut rates too low (then 2pc)? Remember what happened. Fed hawks in Dallas, St Louis, and Atlanta talked of rate rises. That had consequences. Markets tightened in anticipation, and arguably triggered the collapse of Lehman Brothers, AIG, Fannie and Freddie that Autumn.

The Fed’s doctrine – New Keynesian Synthesis – has let it down time and again in this long saga, and there is scant evidence that Fed officials recognise the fact. As for the European Central Bank, it has let private loan growth contract this summer.

The imperative for the debt-bloated West is to cut spending systematically for year after year, off-setting the deflationary effect with monetary stimulus. This is the only mix that can save us.

My awful fear is that we will do exactly the opposite, incubating yet another crisis this autumn, to which we will respond with yet further spending. This is the road to ruin.

The Worst Case Scenario (Someone Has to Say It)

May 03, 2009 | SeekingAlpha.com

Since the economy began sliding downhill in late 2007, mainstream economic and market experts have consistently erred on the sunny side.

As late as June 2008, mainstream consensus held that the U.S. was heading for a “soft landing” and would avoid recession. Several months later, the slump was acknowledged to have started in January 2008, but we were supposed to see renewed growth by mid-2009, with unemployment peaking in the eight-to-nine percent range. A quick “shovel-ready” stimulus bag was supposed to set us back on the road to prosperity.

In January, recovery projections were pushed forward to late 2009. Today, the consensus is for a mid-2010 recovery, with unemployment peaking at just over 10 percent. Clearly, the mainstream has struggled to catch up to reality for well over one year. What are the chances that they finally have it right this time?

Moreover, the mainstream continues to see what is going on as a plain-vanilla recession that will be quelled with some on-the-fly monetary and fiscal tinkering. Washington, we are told, will pull us out of this slump—as soon as the masses can be enticed back to the shopping malls. Then things will return to how they were before. But what if the experts and politicians are wrong not only on their ever-changing recovery timeline, but also on the nature—nay, the very existence—of a recovery?

America’s reigning political-economic ideology has demonstrably failed. Given that its government is obviously fumbling along without a clue, its foreign and domestic credit is tapped out, and its 300 million people are discovering that their hopes for continuous material improvement will never be met, could the U.S. be headed the way of the USSR?

Instead of a recovery as the mainstream envisions it, what if America permanently bankrupts, impoverishes, and marginalizes itself? What if its cherished institutions fail across the board? For example, what happens when the police realize that their under-funded pension plans cannot support a decent retirement? Will they stay honest, or will they opt to survive by any means necessary? These are questions that the mainstream does not even begin to contemplate. Read the rest of this entry »

Attorney General Cuomo May Break Up Wall-Street/Fed Brothel

It looks like the Attorney General of New York will at least attempt to shut down the Wall-Street/Federal Reserve brothel, in which billions of U.S. tax dollars were stolen by high-level U.S. government and Federal Reserve crooks.

The loot was placed into the hands of large institutions such as Goldman Sachs, formerly headed by the Treasury Secretary Henry Paulson.

This was, of course, one of those action/reaction/synthesis aka problem/reaction/solution enterprises, where those in positions of authority create the problem, then wait for the public to react and demand a solution; then they provide the perceived “solution,” which only goes to further the agenda they had set out with initially.

Cuomo Widens His A.I.G. Investigation

Andrew Ross Sorkin | DealBook Blog

Attorney General Andrew M. Cuomo of New York said Thursday afternoon that he was widening his investigation of the American International Group to examine whether its trading counterparties improperly received billions of dollars in government money from the troubled insurer.

Those counterparties include Goldman Sachs, which received $12.9 billion, as well as Société Générale of France and Deutsche Bank of Germany, which each received nearly $12 billion.

“Our investigation into corporate bonuses has led us to an investigation of the credit default swap contracts at A.I.G.,” Mr. Cuomo said in a statement. “CDS contracts were at the heart of A.I.G.’s meltdown. The question is whether the contracts are being wound down properly and efficiently or whether they have become a vehicle for funneling billions in taxpayers dollars to capitalize banks all over the world.”

Other counterparties that received money from A.I.G. include Barclays of Britain ($8.5 billion), Merrill Lynch ($6.8 billion), Bank of America ($5.2 billion), UBS of Switzerland ($5 billion), Citigroup ($2.3 billion) and Wachovia ($1.5 billion).

The government injected about $180 billion in bailout money into A.I.G. to prevent its collapse after the company found itself on the wrong side of the credit default swaps that it sold. The swaps are insurance-like instruments that allow investors to hedge against bond defaults.

A.I.G.’s financial products division sold the credit default swaps, and it has faced a wall of public outrage after it paid out $165 million in retention bonuses. Earlier this week, Mr. Cuomo said A.I.G. employees had agreed to return $50 million of those bonuses.

Financial Crisis: Maybe These Fools Just Plain Deserve It

Lately I’ve heard an awful lot of local ignoramuses complaining about the state of the economy, the decline in their investments and just plain how “bad” they have it. They feel so betrayed and have a long list of people to blame and hate.

It seems they will blame anybody, but won’t take responsibility for their own role in their predicament. Its sort of comical to see them all running around scared, acting like this is all a big surprise, but one thing is for certain: if they hadn’t had their heads so far up their asses, they’d have seen this coming years ago.

I would like to tell you the story of one individual, who I have been over-hearing today, who seems particularly deserving of a wake-up call. Read the rest of this entry »

LaRouche Webcast: One Year Later — But Still Not Too Late

It has been a year since economist Lyndon LaRouche announced that world financial system is in the midst of a breakdown crisis. He offered a set of solutions, which were probably capable of repairing the economy and rebuilding the necessary infrastructure.

Although action was taken in many of the localities throughout the USA, the democratic party in CONgress blocked anything that even smelled like a solution.

Here is LaRouche’s latest thoughts on where we are, as well as where we are going. It isn’t rosy at all… he says we only have a few more weeks left before the system, as he puts quite bluntly, dies.

My question is, will they end up putting the USD onto a newly revitalized gold-certificate ratio? I don’t think they will have much of a choice, unless they want to see all-out chaos in the streets…

Download/Watch/Listen One Year Later — But Still Not Too Late

The End of the British Imperial “Free Trade” System

I had once thought it unstoppable, that the system of so-called “free trade” could be halted. This system is the same one that brought you NAFTA, which has virtually destroyed the economy of North America.

If nations can keep their own economies strong, not completely dependent on pillaging and slave labor, then there is not much that the globalists can do to enslave the people and subjugate the nation-states.

The globalists profit most by flooding a nation’s economy with cheap goods; causing the local infrastructure to deteriorate. If this process can be stopped then the globalists are going to lose their power.

“British Imperial Free Trade Doctrine” At a Dead End

The bad news from Rome, is that the FAO conference did not decide on any truly effective remedy for the worldwide hunger catastrophe. The good news, is that the “free traders” were likewise unable to put through their plans, and that the WTO’s Doha Round will, in all likelihood, end in failure. A commentary by Helga Zepp-LaRouche.

“British Imperial Free Trade Doctrine” At a Dead End And Now, for a New, Just World Economic Order!

by Helga Zepp-LaRouche | LaRouchePAC.com

Certainly the bad news from the FAO conference in Rome, is that the measures agreed upon fall far short of what will be necessary to solve the world hunger crisis. The final communique promised a mere $8 billion, without even specifying how it is to be spent. But despite this, the conference’s outcome can be termed a partial victory for the cause of humanity, because the champions of the “British Imperial free trade doctrine,” as Friedrich List once described them, have suffered a decisive defeat.

The so-called developed countries should nevertheless be ashamed that the dividing line between those states whose leaders spoke in favor of food security and protectionist trade measures, and the the partisans of unfettered free trade, ran more or less precisely between the G7 nations on the one side, and the underdeveloped nations on the other. And so, it’s hardly surprising that among the developing countries, the view was widespread, that the G7 is pursuing a neo-colonial policy, and is unwilling to help the world’s poor countries–a view which was already anticipated back in April by FAO Director Diouf. (At least the German delegation, as the conference was winding up, evinced “respect” for the positions of Argentina, Venezuela, and a few other countries.) Read the rest of this entry »

Lyndon LaRouche: FIREWALL – In Defense of Nation State

My friends, we are past the point of no-return, from which we could salvage the current monetary system. The present system is experiencing systemic world-wide hyper-inflation, which will only be stopped when a new monetary system is introduced.

Lyndon LaRouche believes that there is no more future for this monetary system. He says that we are at a cross-roads, where we can choose between two paths.

On the one hand, we could choose to use warfare and welfare to prolong the life-span of the current system. Such an approach would drag our world into another dark-age.

On the other hand, we could choose a new system, in which we have a stable monetary system, which rewards productivity and stability; a system which increases food production instead of fighting over the few scraps that are available.

Like Weimar Germany, the productive capacity of our real economy has been destroyed. However, we have done this to ourselves, through our adherence to the belief in globalization.