This is where Wall Street high financemeets the blackjack tables of Las Vegas – both literally and figuratively. This marriage of convenience represents the ultimate fusion of everything that is wrong with the MO of today’s investment bankster and all the ways that the gambling casino is always rigged by the house (aka the guvment). Just as the house fixes every game in town so that it never loses, the fat cats at Morgan Stanley and Goldman Sachs never walk away from the table without a belly full of fish. Even though many of their bets fell right through the floor, they still, somehow, feel entitled to multi- billion dollar bailouts. Experts at privatizing profits and socializing losses (and debts), they are. Also, unparalleled in their ability to turn the entire world into one humongous betting parlor.
Derivatives are thereal megilla in this whole story. You talk about a wild card – man oh man – it doesn’t get any wilder than the card stamped with “D” for DERIVATIVE. This tangled mess has touched every nook andcranny on every continent, in every nation, in every corporation on planetearth. They don’t even know – We don’teven know – No one knows, if thenotional value of the total sum of derivative instruments issued worldwide iscloser to 500 trillion dollars or, get this, ONE QUADRILLION dollars. Can you imagine the high intensity hawking that had to happen to get to a place of
$1,000,000,000,000,000.00 of highfalutin bets.?!?! Oh my gosh! All the gambling casinos in Vegas, Atlantic City, and every reservation in the lower 48 put together couldn’t come close to a mere fraction of that number.
The real challenge concerning this megilla was how to make it respectable, and legal, and salable, and acceptable, all at the same time. But somehow they did it. Of course they set this little charade up completely outside the normal frameworkof: (i) governmental regulation, (ii) monitoring by financial analysts, (iii) legaldue diligence, as well as (iv) scrutiny by the financial news media. How many people have even ever heard of acredit default swap, forward rate agreement, or turbo warrant?
We’re talking aboutthe outhouse of the financial industry here, so one must really give them credit for their ability to turn crap into caviar. And then sell it as such, as we mentioned earlier. These crap conversion factories (aka hedge funds) became the ultimate in new age financial alchemy. The hedge fund lab directors somehow managed to transform pure lead into pure gold. Mind you, we’re talking about the proverbial philosopher’s stone, right here, in the midst of the modern financial marketplace. Wonder who the MERLIN was that thought up this scheme which will ultimately ensure the downfall of an entire civilization? We know who the Federal Reserve Chairman was that aided and abetted the entire plot. Probably ought to start there and follow the trail back to those that conceived the whole plan, so that we might at least confiscate their piggy banks. Never has the phrase – pigs at the trough – been more apropos.
The reality was, is,and will forever be that this instrument of high finance transformed the entire realm of international finance into a Turkish opium den. Anyone who entered had to be high to get in,and would most assuredly be higher when they left. They all smoked the same crack derivative, could never get enough of it, and, like every addict attempts to do, wanted toturn everyone else onto it. They knew that only through widespread addiction would this habit become institutionally acceptable. And do you know that this ploy worked like a charm! Of course, whole national, and regional economies, will never, ever, be the same, just as gambling has always been notorious for bringing total ruination to the home of an addict.
The saddest part ofthis story concerns the referral effect which ensured that the real pain fromthis deliberate stratagem would be referred to the worker or company or entrepreneur or office worker or small business owner who really does work for a living. And who, in the process, produces a real good or service untainted by hedge upon hedge, bet upon bet,swap upon swap. For it always is thesalt of the earth that becomes the unsuspecting fodder, especially in a perpetual war economy that only know how to sacrifice the “weak” for the benefit of the “strong”.
Here again, demolition by derivatives will prove to be the surest way to bring down virtually every corner, of every floor, of every building, of every financial institution on planet Earth. The derivative casino will go down inhistory as the most pervasive, unregulated and ‘successful’ gambling establishment of all time. It broke thebank (the FED, the Bank of England among numerous other central banks), busted up the ‘street’ (Wall Street, cobblestones of the City of London among other national financial districts) and wreaked havoc within the US & UK governments among many others throughout Europe, the Pacific Rim, etc. In time it will prove to be the primary reason why whole populations will find themselves broke, busted and disgusted. Truly the Derivative Death Star will soon glow like a supernova for all future generations to gaze upon.
After this“controlled demolition” runs its course the only logical and natural consequence will be the complete disintegration of the worldwide derivatives market. Trust will have been so thoroughly diminished in the wake of so many derivative caused disasters that they will become not only the pariah of the financial world, but also rejected by any and all who can say or spell the word – D E R I V AT I V E.
IV. DEPRESSION BY DOWNWARD DEFLATIONARY SPIRAL;
DETERIORATION OF NATIONAL ECONOMIES BY DEFLATION
Since the early 1980’s the US economy began to morph back into the same shape as the one that preceded the Great Depression. Only this time the BUBBLE economy became an amalgam of many more, and much larger, bubbles than inthe 1920’s. The dot.com bubble burst at the turn of the century is only a small example of this phenomenon, but also an excellent illustration of what would follow.
The Bubble Burst of 2008, 2009, and 2010 have their roots in the same forces and dynamics of those that contributed to the Crash of ’29. Only this time there exists a conspiracy of circumstances that simply overwhelms the imagination as much as it challenges credulity. For starters the overall economy today is exponentially larger than ’29. The sheer number and variety of financial instruments is likewise so much greater that ameaningful comparison is practically irrelevant. Globalization has created a much more complex world economy that has completely blurred national boundaries, created an imperceptible financial superstructure, as well as an economic infrastructure, which inextricably intertwines the commerce of all nations.
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