Fractional reserve: The private fabrication of our "money" by way of a never ending series of simple bookkeeping entries by banks . . is how fiat money (i.e. money created from nothing) originates. Example: Holding 100,000 dollars of depositors' money allows a bank to lend out 1,000,000 dollars that it creates out of thin air, by simply making bookkeeping entries in the bank accounts of loan recipients.
However, in the court case referenced in the quote at the beginning of the article, Justice Mahoney ruled against a bank acting in conjunction with the Federal Reserve Bank of Minneapolis, in the bank's efforts to foreclose upon and "buy" a US citizen's house by simply creating (out of thin air) "the entire $14,000 foreclosure purchase money (credit) within its own books, by means of nothing more than a simple bookkeeping entry." Further, "Mr. Morgan (the plaintiff/bank representative) admitted in court that no United States Law or Statute existed which gave him the right to do this." (Click here)
Stage two: Delusional, unregulated value assignment, manipulation, and expansion
After money is created out of thin air, other market mechanisms magnify, funnel, and package this value-from-nothing further still, creating financial vehicles that add yet more numbers (money) without adding more value.
Leverage: The practice of arbitrarily multiplying the alleged value of one's holdings, in order to acquire controlling interest in a given property. This mechanism is a favorite of now-discredited corporate raiders and leveraged buy-out (LBO) firms that are currently referred to with the euphemism, "private equity firms." This claimed private equity can be a kind of fictitious multiplication of a self-assessed asset value that is then used to buy a controlling interest in a productive company.
Typically the acquired company is put into debt, its real assets hollowed out and harvested, and then the acquired company is allowed to go bankrupt, thus providing a killing (from the hollowing out and harvesting) for the raiders, while destroying the ability of the thereby displaced workers to make a living. (Unhinged: When Concrete Reality No Longer Matters to the Market (and What to Do About It)). (Click here)
Over the counter (OTC) derivatives: Purely unregulated, non-transparent, and malignant uncollateralized bets and hedges on market movements, requiring no assets or stake in assets. Of the over 700 trillion dollars of "notional value" in OTC derivatives disclosed by the International Bank of Settlements for 2011, the majority were supposedly "benign" interest-rate and currency swaps, not the more toxic credit default swaps. However, it was a Goldman Sachs currency swap with "a fictitious exchange rate" that sunk Greece, nearly doubling its liability on just one deal, from about 2.8 billion euros to over 5 billion euros. (How Goldman Sachs Helped Corrupt Politicians to Screw the Greek People). (Click here)
Also remember the undisclosed OTC derivatives market may easily be bigger than the disclosed market.
Rehypothecation: The process of recycling or repeatedly using the same collateral in multiple deals and with multiple entities. England has no legal limit on how many times collateral can by rehypothecated (i.e. used in this repetitive way). (Shadow Rehypothecation, Infinite Leverage, And Why Breaking The Tyranny Of Ignorance Is The Only Solution) (Click here)
MF Global exposes the 2011 equivalent of the 2008 AIG, in that virtually unlimited leverage via the shadow banking system (in which there are practically no hard assets backing the infinite layers of debt created by the means just described). This shadow banking system will eventually lead to a cataclysmic collapse of all financial institutions. Why? Because every bank is daisy-chained to others, courtesy of multiple layers of "hypothecation, and re-hypothecation." (Why The UK Trail Of The MF Global Collapse May Have "Apocalyptic" Consequences For The Eurozone, Canadian Banks, Jefferies And Everyone Else) (Click here)
For a concise explanation of the related mechanisms of collateralized debt obligations (CDOs), synthetic CDOs, credit default swaps (CDSs), naked short selling, and high frequency trading (HFT), see When The Market Has Cancer.
Stage three: Usurping democracies and cannibalizing functioning capitalism
A cartel of international wealth counterfeiters have boldly made claims on Greece's national wealth through supra-national entities like the European Central Bank. These claims are not backed by clear legal authority or logic, but they are being enforced anyway, administered by unelected technocrats, and then "agreed to" by complicit politicians acting against the interests of the citizens who elected them.
Greece (with more countries to follow) is being treated like a company town where "costs" (i.e. social services) are to be cut, worker productivity milked through ever greater taxation, and debt servitude reinforced. The cancer of corrupted capitalism thereby continues to metastasize: And now that phantom paper profits are collapsing for the counterfeiters, real assets must be taken over so as to fill in the gaps.
Greece's national assets have therefore essentially been put up for sale, thereby endangering its national sovereignty and its right to control and keep its own property. Thus a new form of colonialism is born. Greek well-being is being systematically diminished through the austerity programs that this new kind of colonization requires. Counterproductively for Greece, this has caused the economy to contract at an accelerating rate. Seizing control of productive assets, and cannibalizing real wealth, so as to feed illegitimate demands, seem to be the primary (but unstated) goals of these strategies, because the empirical results of these strategies clearly run counter to stated objectives.
Disaster capitalism (The Shock Doctrine): The intentional infliction of insecurity, suffering, and scarcity on a population, so as to cause panic, compliance, and "amenability' to exploitation and wealth extraction. Here is a thoroughly vicious business model that operates in plain sight. When abuse no longer has to be organized and covered up by conspiracy, it confirms that capitalism's illness is in an advanced stage. It is amazing how easily assets can then be "acquired' (stolen) and individual rights denied (as with fraudclosure), when people are overwhelmed by corruption on all sides.
Stage four: Implosion of the body politic -- or necessary transformation and redirection?