"Whoever controls the volume of money in our country is absolute master of all industry and commerce...and when you realize that the entire system is very easily controlled, one way or another, by few powerful men at the top, you will not have to be told how periods of inflation and depression
originate." - President James Garfield, 2 weeks before his assassination.
Most people in the United States have long suspected that a "shadow government" exists and that the real power in the country resides in that dark location, not in our elected government. The citizens instinctly know that our elected officials are really nothing more than the hired servants of the money masters and are beholden to them if they wish to retain their positions of power.
If you look at the highlighted area, you will see that the total value of Credit Default Swaps for 2011 is a staggering $32,409 BILLION dollars! That is $32 TRILLION, with a "T"! To put this into perspective the gross domestic product (GDP) of the United States in 2010 -- the total value of all the goods and services generated in the entire country that year -- was $14.6 trillion. The amount of credit default swaps held by the banks dwarfs the entire economic output of the United States. There is no way in hell that these banks could ever pay even a small fraction of these claims. The TOTAL amounts of derivatives is a staggering $707 TRILLION plus a measly few hundred billion more. This entire system is a house of cards just waiting for a single card to fall. There is not enough money on this planet to cover these contracts.
A report by the Comptroller of the Currency has the nation's five largest banks -- JPMorgan Chase, Citigroup, Bank of America, HSBC, and Goldman Sachs -- holding nearly 95 percent of the industry's total exposure to derivatives contracts. This means the 5 largest banks are on the hook for over $30,000 billion for just the CDS they issued.
This is where it starts to get interesting.
Remember earlier in this article I stated that one of the purposes of the ISDA is to determine if a "credit event" is actually a default? If a "credit event" is declared to be a default, then Credit Default Swap (CDS) contracts come into play. Think about this, the very same banks that would have to pay the claims by those who bought these contracts, are in the position of determining if a "credit event" is really a default. All the banks have to do is to NOT declare any default and they do not have to pay! If they did have to pay, and then the house of cards would collapse. The big banks would immediately be insolvent and the money masters live in fear of this.
This lack of a declared default by the ISDA is exactly what brought down MF Global which was speculating heavily on European bonds. What ultimately happened was that an agreement was reached in Europe that that investors would have to take a write-down of 50% on Greek Bond debt. Now MF Global was leveraged anywhere from 40 to 1, to 80 to 1 depending on whose figures you believe. Let's assume that MF Global was leveraged 40 to 1, this means that they could not even absorb a small 3% loss, so when the "haircut" of 50% was agreed to, MF Global was finished. It tried to stem its losses by criminally dipping into segregated client accounts, and we all know how that ended . MF Global may well be just the tip of the iceberg on what still awaits us.
However, MF Global thought that they had risk-free speculation because they had bought these CDS from these big banks to protect themselves in case their bets on European Debt went bad. MF Global should have been protected by its CDS, but since the ISDA would not declare the Greek "credit event" to be a default, MF Global could not cover its losses, causing its collapse.