2022
Europe is in trouble and
America is not far behind:
Senator Tom Coburn (R-OK) believes that unless the U.S. gets its
fiscal house in order, the financial and economic repercussions will be
severe.
“How long do you think before the United States has a financial meltdown?” the Daily Caller’s Nicholas Ballasy asks.
“Two to five years,” Sen. Coburn responds without hesitating.
“Think about what will happen to us. We have $16 trillion worth of
debt right now and we’re paying less than 2 percent on that debt —
that’s 4 percentage points less than our historical average for our
debt,” he said, adding that he is confident interest rates will “come
back up.”
“In 2022, less than 10 years from now, unless we make major changes
that everybody’s saying they know has to be made but none of the
politicians have the courage to make, the entire federal budget will be
made of only three things: interest, Medicare and Social Security,
nothing else,” he added.
[...]
“There has not yet been a republic that did not murder itself. We are in
the midst of committing murder to our republic,” he added.
I'm seriously concerned about our worlds financial structure. Finance, at the level that it is used today, is a relatively new science. This is why we see new regulation every day. The power that our system gives people to control the lives of billions is dumbfounding. I don't really know what to make of it. Regulation seems to constrict efficiency but financial freedom induces risky betting with other people's money.
ReplyDeleteThe crisis seems to be boiling over in Europe. Interesting test for the future in that the policy of austerity is under heavy fire. People hate when their free stuff is taken away.
ReplyDeleteIt's a no-win situation over there, which they made for themselves. Let's see whether America learns the right or wrong lessons from it.
In regards to ToeJamm, part of the problem was The Glass-Steagall Act.
ReplyDelete"In 1933, in the wake of the 1929 stock market crash and during a nationwide commercial bank failure and the Great Depression, two members of Congress put their names on what is known today as the Glass-Steagall Act (GSA). This act separated investment and commercial banking activities. At the time, "improper banking activity," or what was considered overzealous commercial bank involvement in stock market investment, was deemed the main culprit of the financial crash. According to that reasoning, commercial banks took on too much risk with depositors' money. Additional and sometimes non-related explanations for the Great Depression evolved over the years, and many questioned whether the GSA hindered the establishment of financial services firms that can equally compete against each other. We will take a look at why the GSA was established and what led to its final repeal in 1999.
Read more: http://www.investopedia.com/articles/03/071603.asp#ixzz1v5LgmK5L"
So now commercial banks like Bank of America, Citigroup, Wells Fargo, U.S. Bank, J.P. Morgan, etc can take our deposited money and use a leverage of 10x on that deposited money and either loan it out at interest or go buy securities in tradeable markets.
As we have seen over the past four years, (let's look back even to 1999)... there has been over a decade long bear (declining) market for equities like stocks with severe peaks/valleys.
In 1999, the dotcom bubble started and soon bursted, but with all this easy funny money it had to go somewhere and that led to the housing market bubble that soon bursted, and that money had to go somewhere and that is leading to a bond bubble that will burst like all the other bubbles and that will be the day fiat money is in trouble.
Bankers and Wallstreet have been allowed to leverage up our money (while knowing they will get bailed out) and have gotten so bored with just stocks and bonds that they have started to create financial weapons of mass destruction with the intentions of them going bad with their counter party.
The recent 2 billion+ JPM trading loss was from their CIO(Chief Investment Office) unit in London (where all the financial crimes take place due to the laws over there) trading "synthetic credit securities" to "hedge/gamble" against another portfolio position. They were using depositors money to buy electronic contracts and leveraging them probably 30-80:1 (London thing, MFGlobal etc).
With the European situation and the US situation, the credit markets (bond market) are going to fail because it has gotten too big with too many bad assets created by the Banking Cartel. There are starting to be bank runs in Greece and the trust in credit for countries and big companies will continue to fall due to failed policies. There is a lot on this subject to put together but its definitely worth the time because its currently happening and will be ending soon and is going to affect every single one of us.
Debt Slavery, Serfdom, and a decrease in standard of living is on the way if you're not prepared for the ongoing Greatest Depression.
This comment has been removed by the author.
ReplyDeleteWouldn't the Glass-Steagal act have prevented commercial banks and investment banks from doing what they did in the housing burst?
ReplyDeleteFor what KP said, "Bankers and Wallstreet have been allowed to leverage up our money (while knowing they will get bailed out)" http://www.zerohedge.com/news/guest-post-president-obama-view-and-false-notion-too-big-fail
ReplyDeleteFrom all that I have heard on blogs, news articles, interviews with investors from CNBC, and all that I know about economics from the books that I have read I think the global economy is headed towards a cliff sooner rather than later. Almost everybody including the politicans that have helped to bring us to this point acknowledge that the current system is unsustainable.
A simple summary of the global economic situation can be found here http://www.givemeliberty.50megs.com/An%20Economics%20Lesson.htm starting around the 25th paragraph. "The system’s complexity serves, occasionally, as a temporary cover for the operations of some shady characters. You have all heard of some manipulator who does not work, but lives in luxury by obtaining a loan, which he the repays by obtaining another loan elsewhere, which he repays by obtaining another loan, etc. You know that his policy can’t go on forever, that it catches up with him eventually and he crashes."
This is exactly how the governments of the world finance themselves and it is about to come to an end which in turn will cause a major global economic reset. That is guaranteed. What will emerge out of this is not.
The situation is very complex and due to many different factors. Some of the central problems are the system of central banking that allows governments and politicans to spend more money than they have by creating fiat money backed by nothing in order to buy votes and a public that is addicted to government entitlement programs which makes it impossible for spending to be cut.
From what I have read in several places, it appears that recent events in Europe will be a catalyst for more inflation and most likely massive inflation on a global scale. The central banks of the world are already involved in coordinated inflation. Also a shell game is going on where everybody is buying each other debt.
http://www.zerohedge.com/news/economic-alert-if-you%E2%80%99re-not-worried-yet%E2%80%A6you-should-be
Toejamm said "Regulation seems to constrict efficiency but financial freedom induces risky betting with other people's money."
ReplyDeleteSee what KP said, "Bankers and Wallstreet have been allowed to leverage up our money (while knowing they will get bailed out)" http://www.zerohedge.com/news/guest-post-president-obama-view-and-false-notion-too-big-fail
The risky betting is in large part due to the assumption by the banks and others that they will get bailed out. And the housing market collapse was due to government interference in the free market.
Funny how just a couple days since JPM announced 2 billion in losses they have come out this morning and said 3 billion is the running total...
ReplyDeletehttp://business.time.com/2012/05/17/jpmorgans-london-whale-loss-rises-to-3-billion-as-lawsuits-fly/
From what I can gather about this synthetic credit trade is; Their was a market (for example) S&P500 which is future contracts and there is a S&P500 ETF/Stock that tracks the performance of said market.
If you put the performance of a 1yr/5yr/10yr chart of these two products together they should and most the times due track very similarly.
So a "spread" )2. An options position established by purchasing one option and selling another option of the same class but of a different series.
Read more: http://www.investopedia.com/terms/s/spread.asp#ixzz1vBRgYq9X)
This JPM trader was buying and selling a spread and now hedgefunds and other banks won't let them unwind their "London Whale" position of estimated 70-100billion *on one bet* so they will have to lose more and more money as other trades make the spread more expensive to get out of. Should be interesting to see how this plays out.
Most the stuff from zerohedge is pretty good. I like his site along with SGT.
Everything will turn out great though because sound-money capitalists will be re-educated to love fiat and slavery:
"Fort Leonard Wood Public Affairs director Tiffany Wood has provided the first official response to the shocking U.S. Army document that outlines the implementation of re-education camps, admitting that the manual was “not intended for public release” and claiming that its provisions only apply outside the United States, a contention completely disproved by the language contained in the document itself."
http://www.infowars.com/army-admits-re-education-camp-manual-not-intended-for-public-release/