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Kelly
26th September 2008, 11:13
This is an incredibly sobering article...

http://news.goldseek.com/GoldSeek/1222371331.php

The Impending Receivership of the U.S.A.


By: Rob Kirby

My, how times have changed? As Bloomberg News reported Tuesday, September 24, 2008,


Eighteen months ago, U.S. Treasury Secretary Henry Paulson told an audience at the Shanghai Futures Exchange that China risked trillions of dollars in lost economic potential unless it freed up its capital markets.

``An open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention,'' Paulson said.

Suddenly, it’s now become blindingly evident that “what’s good for the goose isn’t regarded as being so good for the gander”. It is exactly these types of conflicted pronouncements that hint at the true nature of what really afflicts America – treasonous deceit.

Portrait of a Financial Coup d’Etat

There’s been a growing consensus that the financial quagmire the U.S. is currently facing is wholly the result of the sub-prime / credit default swap [derivatives] issues plaguing financial institutions.

This view, although widely held, is only partially correct and constitutes a very narrow view; more akin to a discussion of cleaning a train-wreck up rather than why the train left the tracks. There are much deeper systemic issues affecting what we refer to as Free Market Capitalism.

The derailment process began with blatant and egregious economic revisionism at the behest of the Federal Reserve. In the real world, we know this as officialdom purposely lying about real inflation through falsified CPI and PPI inflation reporting.

Falsified inflation reports have served as the backdrop against which the gold price was capped and J.P. Morgan’s interest rate derivatives book – a stealth, black hole for bonds – effectively corralled the now extinct bond vigilantes.

This is when the system of usury became fallacious. Everything ensuing, from asset bubbles to assorted price management schemes, it all hinges from this. You see folks, interest rates are supposed to be the ultimate arbiter of where and how capital gets efficiently allocated.

We can demonstrably see that interest rates no longer perform this function, and indeed, have categorically not been performing this function for at least the past 15 years.

From the early 1990’s onward, running concurrently with the economic revisionism and the rise of derivatives warfare – a complicit / harmonizing Wall Street and Treasury executed the familiar “strong dollar policy” skit – even in the face of worsening and unprecedented fiscal and trade imbalances - this ‘theater’ provided masterful cover for the high crimes being committed on the American people.

The real enemy of the American people and State is unquestionably CENTRAL BANKING.

That’s right folks, the Federal Reserve, the deceitful private bank that was chartered in 1913 under the most dubious and connived circumstances - to protect the integrity of the U.S. Dollar and U.S. financial system has seemingly, finally achieved it’s true but never publicly declared goal of “the complete economic surrender of the Republic.”

The American leadership has been co-opted, bribed and bought to the point where a sitting American President, last night went on national television to “bully” the American public into this “surrender of economic sovereignty” – veiled as the further acquiescence to the “twelve-headed hydra” known as the Federal Reserve.

The President wants to pass a bill that, asking for what amounts to a blank check and in Section 8 states,

"Decisions by the Secretary [Paulson] pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."


Minutes after the President spoke, reports began circulating on the internet [from credible news outlets, I might add] that Chinese regulators have instructed domestic banks to stop lending to American banks in the inter-bank money markets:

China asks local lenders not to lend to U.S. banks:report

By V. Phani Kumar
Last update: 10:28 p.m. EDT Sept. 24, 2008


HONG KONG (MarketWatch) -- Chinese regulators have asked domestic banks to stop lending to U.S. financial institutions in the interbank money markets to prevent possible losses during the financial crisis, the South China Morning Post reported Thursday. The China Banking Regulatory Commission's ban on interbank lending of all currencies applied to U.S. banks, but not to lenders from other countries, the report added, citing a source.
By morning, Chinese officials began singing a different and much more-dire tune, as reported by Jesse and Bloomberg:

Asia Needs Deal to Prevent Panic Selling of U.S. Debt, Yu Says

By Kevin Hamlin


Sept. 25 (Bloomberg) -- Japan, China and other holders of U.S. government debt must quickly reach an agreement to prevent panic sales leading to a global financial collapse, said Yu Yongding, a former adviser to the Chinese central bank.

``We are in the same boat, we must cooperate,'' Yu said in an interview in Beijing on Sept. 23. ``If there's no selling in a panicked way, then China willingly can continue to provide our financial support by continuing to hold U.S. assets.''

An agreement is needed so that no nation rushes to sell, ``causing a collapse,'' Yu said. Japan is the biggest owner of U.S. Treasury bills, holding $593 billion, and China is second with $519 billion. Asian countries together hold half of the $2.67 trillion total held by foreign nations.

China, Japan, South Korea and others should meet soon to seal a deal, said Yu, a former academic member of the central bank's monetary policy committee. The talks should involve finance ministers, central bank governors and even national leaders, he said.

``Whether some kind of agreement between them to continue to hold Treasury bills is viable, I'm not sure,'' said James McCormack, head of sovereign ratings at Fitch Ratings Ltd in Hong Kong. ``It would be unusual. If it became apparent that sovereigns in Asia were selling Treasuries the market would take that quite badly, it's something to be avoided...''

China's huge holdings of U.S. debt means it must bear a large proportion of the ``burden of sorting things out'' in the U.S., Yu said. China is not in a hurry to dump its U.S. holdings and communication between the two nations every ``couple of days'' is keeping Chinese leaders informed and helping to avoid a potential panic, he added.

``China is very worried about the safety of its assets,'' he said. ``If you want China to keep calm, you must ensure China that its assets are safe.''

In a related note, back on September 9, 2008 I wrote, The Stars Are Aligning - But For What? Where I highlighted the work of Adrian Douglas, GATA consultant and frequent contributor to LeMetropolecafe.com. Douglas’ work follows the Gold position of Goldman Sachs [a surrogate of the Federal Reserve] on the Tokyo Commodities Exchange [TOCOM]. I stated then:

The activities of Goldman Sachs “shorting gold” on TOCOM [Tokyo Commodities Exchange] was first brought to my attention by Adrian Douglas via Bill Murphy’s daily Midas commentary at Lemetropolecafe.com. on Jan. 10, 2006. Douglas has reported on Goldman’s daily TOCOM gold futures position changes for almost 3 years.

With Goldman Sachs representing a defacto surrogate of the Federal Reserve, it is clear that the Fed is moving from being “overextended short” to flat – or possibly going long gold.

I believe this transition is critically important, much like a fuse burning toward explosives.

When this position crosses over from short to long, as I expect it will sometime this month, I expect that some large deafening bells will be ringing – somewhere.

Well, I’d like to report that last night [as of Sept. 24, 2008], Goldman Sachs has further reduced their “short gold position” by over one thousand contracts on TOCOM to “net” 624 contracts short – from a high water mark of more than 50,000 contracts short a couple of years ago.

I now surmise that the “lit fuse” referred to above, is actually a count-down to the imminent imposition of “RECEIVERSHIP of the U.S.A” by a multi-national group of creditors.

I now expect this RECEIVERSHIP to be fully endorsed by the Federal Reserve and to help implement and enforce the proceedings:

U.S. Army Unit to Deploy in October for Domestic Operations


Washington, September 23 (RHC)-- The U.S. Army reportedly plans to station an active unit inside the United States beginning in October. The deployment marks the first time that an active military team has been given orders to serve as an on-call response unit in times of emergency.

According to media sources, the Third Infantry Division’s 1st Brigade Combat Team has spent 35 of the last 60 months in Iraq, but now the unit is training for domestic operations. The unit will soon be under the day-to-day control of U.S. Army North, the Army service component of Northern Command…..

Can any of you say Martial Law or hear the sound of jack-boots yet?

Pax Awalup
26th September 2008, 13:09
Washington, September 23 (RHC)-- The U.S. Army reportedly plans to station an active unit inside the United States beginning in October. The deployment marks the first time that an active military team has been given orders to serve as an on-call response unit in times of emergency.

According to media sources, the Third Infantry Division’s 1st Brigade Combat Team has spent 35 of the last 60 months in Iraq, but now the unit is training for domestic operations. The unit will soon be under the day-to-day control of U.S. Army North, the Army service component of Northern Command…..

Can any of you say Martial Law or hear the sound of jack-boots yet?

Yup, no more Posse Comitatus. The PTB are expecting civil unrest at some point in time. Of course thay have been preparing for a long,long time ala Rex-84, FEMA, and tons of Urban Warfare exercises. The city and state cops are all but completely federalized and have been geared up to the teeth. Not a pretty picture...

Vincent Vega
26th September 2008, 13:42
On the other hand, let's say a bailout of some sort is approved by Congress, and the Treasury buys up a zillion mortgages at a discount. Let's say with the current foreclosure rate of 2.8%, that the other 97.2% of those mortgages get paid on time and the Gubmint gets most of its money back and maybe makes a little on the interest. This would not meet the definition of "on the backs of the taxpayers." It strikes me as somewhat of a good investment, buying securities that generate cash flow.

Having posited that, I am still on the fence. I don't like any sort of government intervention in much of anything in life, yet I'm not convinced this bailout will lead to the doom and gloom some are predicting. Which is not to say I'm not getting prepared for that eventuality. I still believe in my country and my fellow man, no matter how misguided some of them are (Obama kool Aid drinkers spring to mind). I look around me this past few weeks and I see normalcy everywhere. Do people have blinders on? Maybe. Then again maybe most of us are just carrying out our lives while keeping our eyes open and in my case, following the good old Boy Scout Motto - Be Prepared.

The Federal Reserve is another story - it's got to go, no question of that. This wholesale printing of money could very well spike inflation, not to mention that the Fed is unconstitutional.

Pax Awalup
26th September 2008, 15:24
On the other hand, let's say a bailout of some sort is approved by Congress, and the Treasury buys up a zillion mortgages at a discount. Let's say with the current foreclosure rate of 2.8%, that the other 97.2% of those mortgages get paid on time and the Gubmint gets most of its money back and maybe makes a little on the interest. This would not meet the definition of "on the backs of the taxpayers." It strikes me as somewhat of a good investment, buying securities that generate cash flow.

I'm no financial expert and there are minds here that have a far better understanding of the financial markets than I do, but the way I understand it is that it's not "mortages" that are being bought up and if they are being bought then they would be considered assets.

What I undertand the bail out is providing for is all the "derivatives". Derivatives are merely contracts... paper... having no tangible worth. The bailout is buying what has been referred to even in the nightly news as "toxic waste".

Many people on the street have little knowledge of the complexities of these markets (myself included) and are under the assumption that all this money is going towards supporting hard assets, which it is not... at least not directly.

Please correct me if I am wrong...

Kelly
26th September 2008, 15:34
What I undertand the bail out is providing for is all the "derivatives". Derivatives are merely contracts... paper... having no tangible worth. The bailout is buying what has been referred to even in the nightly news as "toxic waste".

Many people on the street have little knowledge of the complexities of these markets (myself included) and are under the assumption that all this money is going towards supporting hard assets, which it is not... at least not directly.

Please correct me if I am wrong...

I think it's both! From what I can tell the bailout is to eliminate ALL bad paper, including mortgages and derivitives that are now being recognized as bad debt. The mortgage end of it is straightforward enough that we can at least understand it, but derivitives are a horse of another color.

I spent a couple of days a few months ago at least trying to familiarize myself with what they are, and as far as I could tell, a derivitive could be just about anything. The one thing I did find out was that they were secretive, generally considered "risky," something cooked up by lawyers who write the contracts up in impossible to understand legaleeze, and nobody seems to be able to come up with a cut and dried explaination of what they are.

Over the counter mutual funds are not allowed to trade in derivitives because they are considered too risky for most mutual fund investors; essentially then, derivitives are owned by hedge funds. Hedge funds that regularly short the futures market fall under the heading of "derivitives" as well.

So I have to wonder, if the bailout package includes bailing the investment banks out of their bad derivitives, are they asking you and I to pay for the money those scum bags might have lost while shorting the silver market?

I wouldn't put it past them.

nuslvrkwen
26th September 2008, 16:02
I spent a couple of days a few months ago at least trying to familiarize myself with what they are, and as far as I could tell, a derivitive could be just about anything. The one thing I did find out was that they were secretive, generally considered "risky," something cooked up by lawyers who write the contracts up in impossible to understand legaleeze, and nobody seems to be able to come up with a cut and dried explaination of what they are. - Kelly

I think a derivitive is income that is over what is expected when the loan is paid off. The derivitive comes to be when loan payments are made. It is shadowy and risky because it's money that CAN be made, but more than like WON'T BE. There's all sorts of reasons a derivitive WON'T pay off. One of them is to get a short term loan and pay it within the time frame of the loan. NOT pay it off sooner. And the derivitive amount makes a difference between the entities with the loans and the debts! They can TRADE DEBTS from loans they already have... pay off one debt faster than the other outstanding debt and keep interest payments they would have had to pay if they paid the loan off using regular terms. This is a profit. NEVER MIND it's only PENNIES per thousand dollars traded, its still profit. All this has to do with loans that are considered short term. Loans between banks can be from 3 days to 30 days long.

The more people understand this, the LESS they are likely to approve of this kind of practice. And would balk even more at the bailout. And yeah I know, this kind of trade only takes place between financial institutions. Banks won't do this kind of loan with consumers. BUT in reality, the majority of people who bought the 'toxic' refi's and bundled mortgage upgrades and teaser rate mortgage loans really were buying their mortgage this way! They were using a unit of value WITHOUT AN APPRAISAL of any property to guestimate how much they COULD borrow at a specific rate! Expecting to have made a profit somehow (!) so they can turn around and SELL the overpriced property they bought! This is what the bailout is supposed to paper over - SO THINGS CAN CONTINUE GOING THIS WAY!

So people guess what NO WONDER GOLD AND SILVER SPOT IS GOING SIDEWAYS. And will stay down for longer than any of us could predict. We believe gold and silver ARE money/currency/wealth. But the way the international markets work - DEBT IS MONEY. Debt is made of paper, that's why there's so much around.

Kelly
26th September 2008, 17:27
In other words, one might say that investing in derivitives is an extraordinarily risky form of gambling?

Personally, I for one don't feel the least bit obliged to pay off the gambling debts of wealthy bankers and investment firms.

Ahhhh, but silly me! I must be wrong! For what do I see? Isn't that Bernanke, Paulsen and Bush trying to tell me that the entire economy rests on whether or not we, the taxpayers, agree to pay off somebody else's gambling debt?

They took the gamble, let them pay their own damn debts!

Vincent Vega
26th September 2008, 17:44
In other words, one might say that investing in derivitives is an extraordinarily risky form of gambling?

That is exactly what it is. Welcome to hell, population us.

nuslvrkwen
26th September 2008, 18:25
Not only are WE NOT interested in gambling - but WHO in their right minds would go to such lengths to get THIS KIND OF PROFIT for all the loans you have to manage? I mean, pay off? Accelerating a loan pays it off the quickest and saves money by not having to pay so much interest on the overall amount borrowed.

Round Town
27th September 2008, 10:06
Derivitives are like insurance contracts between 2 parties, they are not regulated. They are private contracts.

The way I came to understand this is, mortgages, credit cards, auto and consumer loans have been collateralized, meaning that they are packaged together and sold as CDOs (Collateralized debt obligations) ie: bonds to investor groups as SIVs (structured investment vehicles) Rating companies, such as Ambac, give ratings on these bonds like the now know bogus AAA ratings which give higher "value" to these bonds than a sub-prime type debt should have. These AAA ratings are based on the insurance guarantees that derivitives, being sold to counter parties, place on them against default.

The worst part is, the parties and counter-parties may or may not have a vested interest in the CDO being guaranteed by the derivitive. With this in mind, for example, I could sell a derivitive based on how a bond would perform. As long as somebody else would take the other position, I don't even need to own the bond.
Notional value of derivitives is compounded over the total amount of debt outstanding because the derivitive I may sell to someone else may have a derivitive sold to another party by the buyer to cover his inherent risk of having to cover the derivitive if there is claim made in case of default. This could carry forward ad infinitum, thus the confusion as to who owes what to whom. Some derivitive holders may hold counter-party contracts guaranteeing what they themselves sold to start with.

Hedge funds are SIVs

This is where these massive losses are coming from, the losses are not caused by defaulted debts.

This is why the Fed and Treasury, Bush and the media keep saying "mortgage related assets". Go to, if you like, and read my thread on this forum titled Subtle nuances of language cause confusion.

Bob, now I'm confused myself
The view from my pile, yours may be different.