Wednesday, June 30, 2010

Balloon Pricks

By Phasma Scriptor

As of yesterday, the 10-year bond yield hit the yearly low of 2.93% just a few ticks above the crash lows of the fall of 2008; although the yield had bounced off 3.1, as soon as it traded below that, 3% provided no resistance whatsoever. As I’ve noted before, a decisive move below 3 would signal 30-year mortgage rates at about 4.5% for ordinary mortgages with jumbos down to about 4.3. The idiotic decision by the Euro states to move to “austerity” measures will mean those economies, led by the PIGS, have a downturn ahead. Ben Bernanke, Chairman of the Fed, forecast a sluggish economy here because of the idiocy going on over there; of course, he didn’t say Euro-dummies, but the most successful bond fund investor, for some time, has been Bill Gross of Pimco, who agrees, mostly, with Nobel-Prize-winning economist Paul Krugman, of the NY Times, that cutting sovereign debt is the wrong move, by 180 degrees, and that more, not less, governmental spending is in order. In fact, both have been recommending that the budget deficit be much, much larger for some time. My own fear about The Balloon goes back to my experience in the derivatives markets going back over 35 years.

Bernanke, whose decision to go against the wishes of the super-rich (that is, the Rockefeller family and the Rothschild family, or R&Rs) is the main reason the US economy didn’t collapse last year, has maintained the ZERO% interest rate for months and keeps saying that ZERO is the rate of the foreseeable future, despite the call of the Amer-idiots who, with the trinkle down marching orders of the R&R rulers of the financial world, persist in braying about the need for reducing deficits and raising interest rates right here, right now. The R&Rs do NOT want Obama to succeed; they’ve ordered their lackeys amongst the Rs (gee, we could play Glenn-Beck-stupid and say that the Rs go with the R&Rs), with help lately from the Teabaggers, who want to fill as many boxes with their dum-rox as they possibly can. The reason is as simple as the color on Obama’s face, meaning, he’s not white AND a trustworthy super-Mason, as are, for instance, the senior members of the Family, like Sen. Tom Coburn [R-OK] (white male), Sen. David Vitter [R-LA] (white male), and Sen. John Ensign [R-NV] (white male) and, of course, Glenn Beck (as a high-ranking white male Mormon, he’s a super-Mason).

For those of you who are stupid (that’s you, Teabagger), the super-Masons are above the 33rd Degree and are all Satan-worshippers … excuse me, that’s Lucifer to you, dumshit Teabagger.
The reason that the reformed Bernanke has kept interest rates as low as he can go (if he could, he’d go one better and make them negative) is that we continue to have a severe deflationary problem, not even a whiff of inflation. Why?

Quick/dirty review:

Derivatives - financial instruments, limited by time, which enable the participant to control a much larger piece of the pie (a much larger asset) than they otherwise could afford, for a fairly short period of time.

Hedgers - individuals or organizations that have actual skin in the game of derivatives; that is, they’re either producers/originators of the underlying assets or users/investors in such assets.

Speculators - individuals or organizations that participate in derivatives markets purely to make a profit, that is, are not hedgers. Most of the participants in the derivatives markets are speculators.

Effect of speculation - by large multiples, book-entry-only assets (imaginary assets) are increased.

World’s most significant derivatives market participant - The Federal Reserve Banking System, a private corporation, for which the term “reserve” refers to the variable percentage of available funds which each member bank must keep on hand (that is, not loaned out) of the total amount of demand deposits held by a particular bank; the time element as to reserves is that unseen factor, the velocity of money, the speed with which money that’s loaned out circulates throughout the economy.

The amount of imaginary money available to an economy dominated by a reserve system is simply (demand deposits)/(reserve percentage); for example, where a member bank has $100,000,000 in demand deposits with the reserve requirements, dictated by the Fed, set at 5%, the amount of imaginary money created out of thin air by that bank is $100,000,000/.05=I$2,000,000,
000, where I$ stands for imaginary dollars and the amount of funds kept in reserve, available for withdrawal, is 5% of $100,000,000=$5,000,000. Although technically, the reserve amount ($5,000,000 in this example) reduces the I$ amount, for practical purposes, the combined derivatives trickery not only erases that 5%, but forms the basis for so many other derivatives instruments that the reserve amount is laughably irrelevant.

Effectively, the I$2,000,000,000 is created over the period of time that it takes for the imaginary dollars to be completely loaned out, which is based upon the process of the 1st bank making a loan, having the borrower re-deposit the loan amount in that same or another member bank, having that 2nd bank re-loan the money, having the 2nd borrower re-deposit that 2nd loan amount in that same or another member bank, etc. Each loan incident reduces the original amount loaned out by the 1st bank by the 5% reserve amount. So, the 1st loan amount would be $100,000,000 less $5,000,000=$95,000,000. The 2nd loan amount would be $95,000,000 less $4,750,000=$90,250,000. And, as they say, so on and so on and so on … The velocity of money, the time limit in the reserve system, equals the amount of time, usually measured in days, that it takes for the loan amount to be reduced, effectively, to zero. The sum of all the loan amounts, in this example, works out to I$2,000,000,000. The velocity of money, due to the long-ago complete transformation of all financial systems to kung-fu-fighting fast, that is, “fast as lightnin’”, or speed of light, takes any and all equity reducible to electronic bits to the full monty within a few seconds. That would be nanoseconds were it not for the problem of the globe being about 27K miles in circumference. Hmm. If only the R&Rs could put a communication cable through the center of the Earth …

That is, of course, an enormous swindle, enormous benefits accruing to the reserve system of banks, but the system has been in place for over 90 years and has generated unparalleled prosperity since the reserve system encourages profligate lending (because banks’ profits geometrically increase by the reserve loan process). Thus, the general populace, having enjoyed the generations of good economic times of the past century had very little reason to squawk.

Due to financial accounting wizards of the R&Rs (against whom finregs have become almost meaningless) and with the advent of the overarching reserve system, overarching the globe, that is, which has been on steroids and meth via the proliferation of newly fabricated derivatives instruments over the past decade, the era of maximum free market criminality has lately come to dominate the Fed and all other central banks combined, despite the bedrock that these banks provide for the most prolific fraudsters of all time. From an intrinsic feature of the reserve banking system to an extrinsic feature of almost every piece of paper representing somebody’s equity in property on Earth, the baggy-pants economic slack in the Western world that could be filled up by the phunny money of derivatives traded mainly on exchanges in this country, was pretty well overinflated as of June 2008.

The awful secret about the AIG/Lehman-Bros. debacle of that summer of the historic Obama stretch-run is that it was all under control, more or less; overinflation, nay, hyper-hyper-inflation, is the norm for the new regime of the Mad Max super-derivatives in the worldwide Thunderdome, overseen by the new gorilla on the block - Goldman Sachs - where there is no sheriff able to bring the bad guys to heel. Bigger and more important than the Federal Reserve? Yes.

As gang members of GS, et cie, AIG and Lehman Bros. were both in deep trouble, but, again, the condition of being in deep trouble is the new normal for the financial markets and its major players, because their methods of accounting aren’t exactly AICPA-approved; in fact, most CPAs would blanche at the bookkeeping abracadabra that’s parties hardy at GS, et cie. The ability of Goldman Sachs to instantly create ultra-hordes of I$, way, way beyond what the Fed and all other central banks combined can do, has been proven via the spike-y looking market moves over the past several weeks.

As I’ve repeatedly warned (with the NY Times well out in front on this issue, but even the NYT is still ignored), GS, et cie, has been criminally front-running these spike moves (the so-called flash-crash, accompanied by several trading sessions of super-whipsaw action, that is, where the stock market flashes upward in minutes and then crashes with equal rapidity downward); with high-frequency trading to put a kind of derivatives-variety supercharged crotch rocket under the markets, front-running is the ultimate in insider trading. Add that to the insider-trading-via-PIGS maneuver (where GS, having structured the sovereign debt of the PIGS - Portugal, Ireland, Greece and Spain (Rothschild pawns all) - has inside knowledge of what’s going to happen to the bonds of the PIGS because GS, et cie, advises the PIGS’ finance ministers what to do with their bonds and because GS, et cie, has two puppet ratings agencies, Standard & Poor’s and Moody’s, to downgrade bonds whenever GS’ Chairman Lloyd Blankfein snaps his fingers, or maybe gives the CEOs of S&P and Moody’s wedgies.

This enables GS, et cie, to amass immense mega-fortunes; using the techniques perfected by Michael J. Riconosciuto during the S&L hyper-embezzlement, those mega-fortunes can be hidden from view (kinda like invisible electronic casino chips that can be thrown into any pot, at any table, at any time GS, et cie, click on “Go”), Bernie-Madoff-like, but at the ready whenever GS, et cie, want to bludgeon the global economy … such as during the so-called bailout of US and Euro banks during the summer of 2008. In fact, GS, et cie, can effectively manufacture mega-fortunes by the methods described above virtually at will, stealing, in a new-fashioned nano-heartbeat, from everyone else with an old-fashioned Clydesdale heartbeat on the planet.

While GS, et cie, are loyal to the Rothschild side of the R&R equation, they, at least temporarily, cooperate with the Rockefellers in the classic “community of interest” of the super-rich (of which there used to be more, but all the lesser lites were just that - super-rich-lite), what was formerly known as the “robber barons” with the emphasis on the “robber” part. When President Dwight Eisenhower gave his famous exit speech in the Oval Office, the Robber Barons had morphed into the “military-industrial complex” (actually, the military-industrial-
Congressional complex in his original speech). In other words, by that time, the R&R takeover of the world (apologies to Pinky & the Brain) was already just about fait accompli. But, I digress.

When the pundit-analysts of R&R saw the Obama forces had out-foxed the FOX-NEWS pols (including, John McCain and Hillary Clinton) by reaching youthful voters doing the political thing for the 1st time, and utilizing the flash-mob techniques of street organizing before the term “flash-mob” was ever a twitter-term in someone’s tweet, they decided that they would destroy the economy and leave the black-boy nothing to work with. At that time, Bernanke was the stooge of the super-rich, as had Alan Greenspan been before him, and Paul Volcker before him, ad nauseum.

Of course, there were so many GS, et cie, agents in the administration of Jr. (including, but not limited to, former GS Chair Henry Paulson, who was the face-plant of GS as Secretary of Treasury), that it was a lock that the terms of economic destruction would be dictated by GS, et cie. Among those who were ordered to walk the plank in order to stick it to Obama were AIG and Lehman Bros. As it later was revealed, AIG was bailed out to provide derivatives loss payback to GS, leaving AIG with less than enough to survive (at least, for public consumption, since GS, et cie, could have used one or more of the many derivatives vehicles available to super-vac AIG, as well as Lehman Bros. back from the brink.

AIG and Lehman Bros., however, were the linchpins to the economic debacle that was and is intended to blow-up Obama’s Presidency, the purpose of which was and is to bring about a financial Armageddon that will end all financial freedom with the imposition of the totalitarian martial law that the dumshit Teabaggers fear, but are helping to bring about with their brainless/clueless/witless agenda to aid GS, et cie, by vociferously backing “pro-business” politics, because, after all, that’s what the toy jesus of the dumshit Teabaggers would do. That would be Christ-Almighty GS Chair Lloyd Blankfein as the Latter-Day Jesus Christ of Latter-Day Saints, using the the Pied Piper of Mormonism, Glenn Beck, to lead the dumshit Teabaggers around by their noses. Actually, Beck doesn’t lead the dumshit Teabaggers around by their noses. No, he’s got ‘em by hairs, lower on the anatomy and not as short as nose hairs.

Why are Teabaggers so stupid? Well, it’s just plain old ignorance, the sort of ignorance out of which “You can fool some of the people all of the time” was originally excreted in the ancient mists of time. It is understandable, though, because, in this instance, “some of the people” is an awful lot of people; the dumshit Teabaggers (you probably get it by now that I think dumshit and Teabaggers are inextricably bound, although that may be putting dumshits into an unfairly bad light) are just philosophically in tune with the R&R elites; they hate Obama, too.

Why do the R&Rs hate Obama? Because he’s got his own cloak-and-dagger guys just like the R&Rs; the Rockefellers have the CIA and the KGB, while the Rothschilds have the Mossad, as well as the Mossad-factions of CIA and KGB, each R paying handsomely for the protection afforded by the cold-blooded killers in Mossad, CIA and KGB. Obama has his own protectors. I’ll leave you to guess whose his are.

In any event, Obama doesn’t really have to do anything political out of fear for his life, despite the danger; he is, unlike, say, JFK, whose daddy didn’t quite get the danger in which he’d put his boys (until it was too late) by having them vie for the Presidency, without his own group of cold-blooded killers to keep him alive. Thus, the R&Rs knew that it would be difficult to get to Obama, because, one, the Secret Service, which organized the “hit” on JFK (see Best Evidence, by David Lifton), would be neutralized by Obama’s “people” and, two, Obama’s “people” have longstanding links to a variety of wet work spooks, none of whom are “patriots” and, thus, willing to assassinate anyone, to and including, the highest echelons of the R&Rs (turn-about being the fairest kind of play with the murderous clans of the R&Rs). So, their best option would have been, and remains, taking the legs out from under the US economy, which would take out the Euro-zone and Japan as well, leaving China’s immense worker’s paradise and the GS derivatives to bring the global economy back, once Obama’s recovery was made to fail, which, because of Obama’s reclamation of Bernanke’s soul, has been less than a sure thing.

There’s never been a hyper-inflated economy like the one that R&R henchmen, chiefly GS, et cie, managed to huff and puff, like a Big Bad Wolf on speed, into an electronic derivatives balloon that required and still requires computers that can handle 18 digits, that is, totals in the hundreds of quadrillions, with velocities of money that are less than nanoseconds. There’s only one of those … computers, that is. It’s the one that Howard Hughes’ techs developed for His Royal Highness and his excuse for progeny … himself (see the blog about the Mormons and their lead dumshit Teabagger mouthpiece, Glenn Beck). The software running the HRH computer is known as PROMIS (ibid, and see blog about Riconosciuto)

Prick this balloon, however, and the consequences would have been and, obviously, were, melt-down vicious. That’s because the subconscious portion of the economy (the global economy has humanoid characteristics), made up of the almost reflexive actions of all the individuals that participate in the economy (which is virtually everybody), reacts in humanoid fashion; thus, when the derivatives markets pump up actual assets worth trillions of $ into assets worth I$ many thousands of times their actual worth in $, any rapid reduction, via the balloon prick (the AIG/Lehman Bros. episode), doesn’t change the humanoid expectation that there are, at least in humanoid terms, hundreds of trillions of I$ available for economic activity with the quadrillions being, essentially, the background imaginary equity stream for the quantum level of derivatives that appear and disappear within nanoseconds.

Meaning, the deflation was, and remains, unprecedented because … oh, this thing is already long enough. You get the picture … unless, you’re a dumshit Teabagger, in which case, flush yourself.

More later.