Saturday, August 16, 2008


From the Free Market News Network

Last week, Fannie Mae and Freddie Mac had just announced record losses, and so had most reporting corporations. Unemployment was mounting, the foreclosure crisis was deepening, state budgets were in shambles, and massive bailouts were everywhere. Investors had every reason to expect the dollar and the stock market to plummet, and gold and oil to shoot up. Strangely, the Dow Jones Industrial Average gained 300 points, the dollar strengthened, and gold and oil were crushed. What happened?

It hardly took psychic powers to see that the Plunge Protection Team had come to the rescue. Formally known as the President’s Working Group on Financial Markets, the PPT was once concealed and its very existence denied as if it were a matter of strict national security. But the PPT has now come out of the closet. What was once a legally questionable “manipulator” of markets has become a sanctioned stabilizer and protector of markets. The new tone was set in January 2008, when global markets took their worst tumble since September 11, 2001. Senator Hillary Clinton said in a statement reported by the State News Service:

“I think it’s imperative that the following step be taken. The President should have already and should do so very quickly, convene the President’s Working Group on Financial Markets. That’s something that he can ask the Secretary of the Treasury to do. . . . This has to be coordinated across markets with the regulators here and obviously with regulators and central banks around the world.”

The mystery over what was going on with the dollar the first week in August was solved by James Turk, founder of GoldMoney, who wrote on August 7:

“[T]he banking problems in the United States continue to mount, while the federal government’s deficit continues to soar out of control. . . . So what happened to cause the dollar to rally over the past three weeks? In a word, intervention. Central banks have propped up the dollar, and here’s the proof.

“When central banks intervene in the currency markets, they exchange their currency for dollars. Central banks then use the dollars they acquire to buy US government debt instruments so that they can earn interest on their money. The debt instruments central banks acquire are held in custody for them at the Federal Reserve, which reports this amount weekly."

“On July 16, 2008 . . . , the Federal Reserve reported holding $2,349 billion of US government paper in custody for central banks. In its report released today, this amount had grown over the past three weeks to $2,401 billion, a 38.4% annual rate of growth. . . . So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit. The logical conclusion is that they were intervening in currency markets. They were buying dollars for the purpose of propping it up, to keep the dollar from falling off the edge of the cliff and doing so ignited a short covering rally, which is not too difficult to do given the leverage employed in the markets these days by hedge funds and others.”

Just as central banks manipulate currencies in concert, so gold can be manipulated by massive selling of central bank reserves. Oil and any other market can be manipulated as well. But markets can be manipulated by only so much and for only so long without fixing the underlying problem. There is more bad news coming down the pike, news of such magnitude that no amount of ordinary manipulation is liable to conceal it.

For one thing, roughly $400 billion in ARMs (adjustable rate mortgages) have or will reset between March and October of this year. Assuming 3 to 6 months for strapped debtors to actually hit the wall with their payments, a huge wave of defaults is about to strike, continuing through March 2009 – just in time for the next huge wave of resets, in option ARMs. Option ARMs are loans with the option to pay even less than just the interest on the loan monthly, increasing the loan balance until the loan reaches a certain amount (typically 110% to 125% of the original loan balance), when it resets. The $800 billion credit line recently opened to Fannie Mae and Freddie Mac may be not only tapped but tapped out, at taxpayer expense. The underlying problem is little discussed but impossible to repair – a one quadrillion dollar derivatives scheme that is now imploding. Banks everywhere are facing massive write offs, putting the whole banking system on the brink of collapse. Only public bailouts will save it, but they could bankrupt the nation.

What to do? War and threats of war have been used historically to distract the population and deflect public scrutiny from economic calamity. As the scheme was summed up in the trailer to the 1997 movie “Wag the Dog” --

Michael sez: And the article goes on to say that there is a war being started that can cover up this mess we are about to inherit. I know that some of you have been watching the so called recovery this last couple of weeks and maybe are scratching your heads in wonder. Well, nothing has changed and it still looks like hard times are going to come upon us. The fedgov is trying like crazy to cover the mess but the mess is still there, only maybe with a little perfume poured on it so it doesn't stink so badly.

But the game is on and we are all in the game together except for some obscenely rich folks who could just care less. And if we had a 10,000 acre farm and a company of Blackwater guards as our security staff, and a hundred million ounces of silver and other goodies we not not care much either. Unless of course we really did give a damn about our fellow man.

So the game is on. How do we play and what are the stakes? We play by going along with the system, however it runs. We prep and stock up and get ready for the disaster. The best player will not have any cash money on the day of the crash. He will have converted all of his money to TANGIBLES. He is the guy who gets out with all that is possible. Let other folks go to the store with wheel barrows full of cash to buy a loaf of bread. You just drop a load of hard Wheat into your grinder and crank it a while. You'll have bread shortly and you won't have to make that awful trip.

The stakes in this are your life and the lives of your loved ones. They may eat if you have done your job well. They may starve or be relocated to labor camps if you haven't. They might be protected from harm by an independent and fully armed man and his friends, or they could become the victims of marauders and freebooters. This is the stakes of the game. Play well, my friends, play well. And stay alive!


1 comment:

Riverwalker said...

They don't want people too upset before the elections.