Saturday, September 3, 2011

We Are Cheated Since 2008 By Derivatives

A 70 Trillion Dollar Counterfeiting Ring (Zeus Y., September 23, 2008)

According to several sources the market for so-called “credit default swaps” last year alone was nearly equal to the total global GDP, around 70 trillion dollars by some estimates. Yet these derivatives have no discernible “origin” or value. People aren’t sure whether they are capital vehicles, insurance vehicles, investment vehicles, all three, or none of the above. However, what is becoming very clear to me is that they, along with many of the other “creative” financial vehicles are nothing more than a bold mass counterfeiting scheme based on a very simple premise and set of conditions that are not at all “complex.” The problem is not that their values are “unknowable,” but that we know what their value is—worthless. Our problem is that we’re not willing to contemplate socially or personally the ramifications of what we know. This is why big lies work-- the bald truth is harder for most to bear.

What if you used cash to pay your groceries, and you found out the money was phony? You provided of labor, goods, etc. and you got worthless paper in return. You offered something that had real value in return for something you thought had value but did not. Either you swallow the rip-off and lose real value or someone covers for you—the government, insurance etc. What happens if this worthless scrip you receive takes the form of digital funny money, concocted out of thin air, without any real assets or capital to back it up? What happens if the global market for this worthless scrip exceeds the world’s GDP? Oops, there is no one who could possibly cover that. No bailout can buy up tens of trillions of dollars of counterfeit currency or phantom assets.

If I promise to ensure you against loss, and I have no actual resources to back it up other than a contract that says I will, I have produced a counterfeit document. My promise has to be backed by an ability to pay, and I don’t have it. What I have is phony assets, “marked to model,” acquired by selling my guarantee off to someone else, who in turn does the same. I take your money and leverage it into risky investments including more exotic vehicles that have no value, but that I think/pretend have value. This is not gambling. This is simple theft. In gambling, money comes and goes, but is essentially conserved somewhere. In this system of massive counterfeiting, I do the equivalent of flooding the monetary system with fraudulent promissory notes, passed off as assets, while skimming off huge fees with each transaction.

Yes, debt has now magically become an asset because it can ostensibly generate interest payment income and fees. So we lower the monthly minimum on credit cards and jack up the interest rate to keep up the charade of huge returns. We allow negative amortization. We promote “balloon payments.” There is no real value there BY DESIGN. There can’t be. No one can possibly pay off a mortgage that is ten times their income with a principal that actually increases over time. But if you can pass off the personal or institutional liability (there is no risk here; risk assumes some possibility of solvency) you may be able to “escape” accountability and profit from this scam. As a system, however, this will inevitably fail, and as we are seeing with both ecological and financial environments that we are all part of a system where even externalized liabilities will return to bite us.

What happens when a country floods its own monetary system with currency or makes money far too cheap through low interest rates. At first rampant inflation in things like stocks or house prices, as demand for goods is driven up. Anyone can buy anything with his or her own credit leverage and a lack of fear of consequences. Then devaluation and deflation emerge as fundamentals catch up, followed by a liquidity crisis due to exposed (fraudulent) leverages— leverages which have an essentially infinite multiplication of pseudo value in exotic financial vehicles. What happens when you flood the global market with toxic debt that far exceeds the ability of any country, and even consortiums of companies or countries to address the issue?

You have a global meltdown, or you try to stave off the inevitable reckoning with 700 billion dollar band-aids that have within their conduct of use no provisions for transparency, because that transparency would expose the far deeper and more widespread fraud under the symptoms. (This is all, of course, to help with an orderly “unwinding” of fraudulent assets.) In the end what you will see, no matter the route, is worthless garbage.

Now our Master Izi posed this question : " Modern man lost their value once they abandoned, denied, rejected, cover up or changed God's true measures of Divine message and laws... now everything is measured by free market values...will eventually debase and destroy humanity in an unjust usurious system . Or call it nihilism, humanist atheism, capitalism, democracy...long gone.... happy are the strangers who found the Way still alive and open.."

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