world is being forced into a huge debt trap of austerity. And so it is that the living standards of
ordinary people in the US and Europe must continue to fall, if the bad loans of
banksters are to continue to be paid off. Understand, however, that this is one gigantic
scam in which the banksters are slowly milking the rest of the world. They are doing this with an ongoing scheme
that involves bad derivative bets and toxic loans, which are insured by the
government -- a government that the
banksters and other Wall Streeters essentially own and control, and hold steady
so that the extraordinarily lucrative milking process can continue for just a
while longer. How much longer? Until our economy collapses under the burden
of this diabolical and very complex scam, which, at their peril, most people
don't want to take the time, or make the effort, to understand. But be advised: For every winner (e.g. the
banksters), there is a loser (e.g. the taxpayers of the US and Europe).
(As for the banksters' ownership of our
government, let's remember what FDR said: "The liberty of a democracy is not safe if
the people tolerate the growth of private power to a point where it becomes
stronger than their democratic state itself.
That, in essence, is fascism -- ownership of government by an individual
or by a group.")
derivatives debacle engineered by banksters like Goldman Sachs (who have made,
and are planning on making ever more of a killing off of it) is largely responsible
for the bankruptcy of the European banks. (Derivatives are essentially bets between two
parties with the losers going bankrupt and the winners going into hiding. See a simple explanation of derivatives in the
next section of this article.)
themselves represent money eventually paid out to the winners of these bets, in
which the bailout payoff comes in the form of an interest-free loan from the
Fed, which is then immediately gambled (i.e. "re-invested') back into the very same scheme that funneled
the money back to the winners in the first place. In this scam, the money going to those who _claim_
to be acting in the interest of the bankrupt is in reality being funneled into
the pockets of the winners themselves. The
scam is that the supposed losers (banks), and the winners, are the very same individuals, while the losses are systematically
being passed on to the suckers, i.e. the government -- especially to the hard
working citizens who must eventually pay the government taxes that repay the
loans of the money that ultimately fund the bailouts. Convoluted?
Yes. To understand the details
and get the whole picture, read on.
First, some circumstantial evidence
recent and ongoing financial crisis, at least 18 former and current directors from federal reserve banks worked in banks and corporations that
collectively received over $4 trillion in low-interest loans from the
Federal Reserve. (Remember:
a trillion dollars could be
put into a million trucks full of
cash, with a million dollars stuffed into each truck!)
To learn the
names of some of the perps in this part of the stunningly massive heist, and
understand what they've done, go here. Then see the
first comment in the discussion that follows this article for the full story,
Some derivatives are perfectly harmless to society, even beneficial
The beauty of derivatives, originally, was (and often still is) that they act like insurance: If you're a company (like, say, an airline) that uses a lot of fuel, you can arrange a derivative contract that locks in the price of fuel a year or two in advance so that your costs don't abruptly rise to the point of causing great difficulty to the operation of your airline. The person on the other side of this contract is betting on energy prices to fall, in which case they would book a profit when selling you the fuel next year at the agreed-upon price. All that's fine and good, though the insurer can get in trouble if they don't have enough money to pay up should the bet go against them, which is essentially what happened with AIG and the hundreds of thousands of mortgage securities it so profitably insured -- profitable until the bottom fell out of the housing market and all their customers tried to cash in on their insurance policies (known as credit-default swaps, or simply "swaps' for short).
The idea behind a credit-default swap (sometimes referred to as a credit derivative) is that if you buy a bond and the seller of the bond defaults, you can recoup most of your losses from an insurance company if you've had the foresight to purchase a credit-default swap (insurance policy) on your purchase of that bond.
According to Dylan Ratigan, one of the greatest obstacles in resolving the financial crisis in 2008 was the need to pay all the $600 trillion in swaps [a type of derivative] because central bankers couldn't see which swaps served as useful insurance for energy and commodities -- and were therefore essential to the smooth functioning of the economy -- and which had only to do with speculation and simple gambling. So, because the central bankers couldn't see the difference, they were forced to pay off everybody, including the reckless speculators.
In light of this problem, Richard Grasso (former chairman of the NY Stock Exchange) has a radical proposal: Reclassify all the naked derivatives as online gaming. As Grasso tells Ratigan: "I believe regulators should require the product to be " monitored globally to prevent contracts being written in excess of the debt obligations they are designed to insure. " Any contracts written outside these requirements would be deemed null and void by regulators as simply online gaming."
I'm not sure I understand every implication of this--could the bet still be made, just not through a derivative contract, or could it not be made at all? -- or maybe just where gaming is legal?
Behind the Euro crisis: Goldman Sachs playing both sides of the bets.
Let's start with the perpetrators of the fraud: the institutions of Goldman Sachs and J.P. Morgan. It is important to emphasize that it is becoming ever more apparent that Goldman Sachs is involved in an engineered fraud wherein the trillion dollar profits being generated by the fraud are being funneled to private individuals. It seems that Goldman Sachs was involved in a scam wherein it intentionally sold derivatives that were designed to lose for the client and win for the undisclosed other party of the bet (a typical Goldman Sachs set-up). Goldman Sachs also scams governments by selling them sure-to-lose derivatives disguised as sure-to-win, and pockets huge fees in the process, as they systematically milk this-country-and-the-world for all it's worth.