(snip)"The yen continues to rise against both the dollar and the euro. The entire universe of the FX trade complex is in a roaring collapse as the old status quo of the Japanese carry trade violently unwinds. This is exposing all the hedge schemes and other monetary games to greatest destruction which is why world markets are reeling. The fundamental basis for all global lending has been the Japanese carry trade. 'Restarting liquidity' has required greatest efforts on the part of all central banks working with governments basically de-privatizing all banking systems WHILE STILL LEAVING ALL THE ORIGINAL GNOMES IN CHARGE OF EVERYTHING. This, of course, is dangerous and stupid.(snip)
(snip)The losses are global and piling on top of each other. The headquarters of the gnome universe is in that old pirate hold of Switzerland. Back, when banking was born in Europe, the top mercenary bands were the Free Swiss. They took their loot to the Alps and lent against it via the northern Italian bankers who promised them compound interest returns. This fueled merchant bankers who were taking huge risks to bring to Europe, the trade goods of India, China and all of Asia as well as African commodity wealth like ivory, ebony, jewels and slaves.
The 'toxic assets' in the above story [ today's banking system failures - sic ] are not 'assets' but banking 'assets': namely, DEBTS. And above all, the interest profits in lending. The banks don't want the principal paid off, they hate that! They want the precious compound interest due to be returned to them, this is their profits! Savings are not assets, these are things the banker has to share the wealth with: the savers get their cut of the deal. This is why we are in trouble today: thanks to the Japanese 0% carry trade mess, savers were unnecessary. Debts ballooned far above even the minimal 10% reserves required of banks.
The great 'investment banks' like Goldman Sachs and JP Morgan, etc, all began to run on a 30-1 or worse, ratio. So when these assets ceased to cause money to flow into these banks due to no one paying the interest due, the entire value of the banks collapsed and there was no foundation to form a bottom. What we are seeing is a classic Outer Darkness business:
THERE IS NO BOTTOM. This is a classic 'bottomless pit.' If we read any stories about the world of warlocks, wizards, vampires, etc, if we look at all stories about that dream world of nightmares, the worst nightmare is to fall into this bottomless pit. This pit is the Cave of Wealth and Death, of course. When I was hit by lightning as a child, I fell into this place. It was very terrifying. The only thing that saved me was Pegasus came tearing past like a burning comet and I grabbed at him and was yanked upwards.
This is all dream metaphors, of course. My human mind grasped at concepts and pictures that helped me not despair as I struggled to breath again in the real world. So it is with money: it is magical yet it has to have a connection with real things. The only way out of this mess is to take away all the magic money from the bankers and turn it back into real things. This is what 'mark to market' is all about: making these imaginary values real again. And the banks hate this with a passion and are now unloading all of this into the central banks who are using the governments of Europe, Asia and the Americas to restore value by having the tax payers, not the bankers, eat the losses.?(snip)
(snip)"Why does compound interest work better than the 0% system? Many of my readers wonder about this riddle. Compound interest encourages savings and the use of capital gains to be put into banks and then 'farmed out' as loans. All savers wish to have a fair interest paid on savings. Otherwise, they buy gold and hide it under the mattress. The present collapse of the banking system has shown how this works: gold climbs rapidly as interest rates drop.
The present price of gold is dropping, you say! And yes, it is: this is due to hedge funds using gold as yet another way of making funny money. They took Japanese carry trade loans and bought gold futures. We know the real price of physical gold has not dropped nearly as fast as the price of fake gold, the paper futures. The mainstream media shows little interest in this little riddle.
Back to the collapsing systems and attempts to prop it up: the US is at the center of the entire rescue operation going on right now. The ruling elites are desperate to prop the dying US dollar up and propping up the US stock markets. They don't care if Argentina, Brazil or Iceland die. The humans living there can die! But the real rulers use the US military arm to control the planet and they, in turn, own our 'democracy' which has been totally undermined by bribes to the point, our 'representatives' rarely vote for anything that is popular with the masses anymore. If the vast majority of US citizens want an end to wars, they do NOT get it. "(snip)
(snip)"Everyone is forced to sell at the same time because everyone followed the same plans, made the same deals and had the same thoughts. Anyone who truly hedged the upside of the bubble were spurned by investors. Everyone who was making money in the bubble were rewarded. Since few or no one was really hedging, the hedges all vanished into smoke since all were feeding the fire, not acting as water on fire. This is the 'herding instinct' and this is why governments have to regulate markets. A regulator prevents everyone doing the same thing all the time. People who are really hedging have to be protected.
Over the Counter Derivatives are just one appendage of the Beast. So are the much nastier 'Credit Default Swaps' which are CDS for short. These things are bets: the bet is, the insurer will never have to pay out. There will be no asteroid hit or San Andreas earthquake. Then, when the inevitable happens, all falls apart! DUH. To have to keep buying at a loss is the reverse of making money. Money vanishes as more and more players default. There is no final pay off except if governments wish to support the system by paying all the losses. Note that this is choice #1 for these goofy gnomes. Instead of all of them going bankrupt, they keep on going while driving all governments into bankruptcy. Cute of them, isn't it?
The Japanese yen is now 97 to the dollar and 124 yen to the euro. Last August, the yen hit record weakness against the euro at 162 yen for one euro. August, one year ago, the yen was fetching 120 to the dollar. So the rise in value of the yen is very significant and ongoing. This is a key event. All the previous FX positions that expected to make money were predicated upon a weak yen and 0% loans from Japan. This is dying rapidly! Japan is in hysterics over this. The strengthening yen has killed the Nikkei and is troubling the export industries. They are very fearful of being undercut in world trade. Japanese cars are more expensive in America! Yikes! This means people will buy Fords! "(snip)
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