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FISCAL CRISIS IN BANKRUPT NATION? |
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CEDOMIL VUGRINCIC, M.D., Ph.D. |
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WAKE UP Beloveds,
Cabal's Corp.U.S. Government has already indebted M-Paper 18 on www.LighttoParadise.com)
and now wants additional 350 billions plus of dollars to continue its illegal
and immoral global wars !? http://www.FinancialSense.com/FSU/Editorials/Martenson/2007/130.html
As the author Upton Sinclair
famously remarked; "It's difficult to get a man to understand something,
when his salary depends on him not understanding it." Which is a fancy way of saying
that roughly zero congressmen "understood" what Bernanke
was saying, although at least a few probably possessed the requisite
intellectual candlepower to ‘get it'. Bernanke
began his testimony by restating what we already know: "Dealing with the
resulting fiscal strains will pose difficult choices for the Congress, the
administration, and the American people," Bernanke
said. "However, if early and
meaningful action is not taken, the Breaking out our handy-dandy
central banker decoder ring we can decipher his statement as follows:
Which
is why all the congressmen resembled dogs listening to white noise. But
Bernanke was probably quite comfortable with their
feigned puzzlement as long as he was able to deliver the real message,
possibly of the CYA variety, a little later: He said the worrisome outcome
taking no action would be what over indebted corporations call "the
death spiral": "Thus, a vicious cycle may
develop in which large deficits lead to rapid growth in debt and interest
payments, which in turn adds to subsequent deficits," Bernanke said. Ah! Now we see. Bernanke is actually worried about what will happen to
our monetary system once the era of ‘free money for everyone' that congress
has grown so accustomed to over the years lurches to a halt. The
virtuous cycle of ‘more borrowing leading to more money chasing fewer
economic opportunities leading to lower interest rates' will someday morph
into it's evil twin the vicious cycle where (1) more borrowing leads to (2)
higher interest rates which lead to (3) higher debt payments which the lead
back to (1) more borrowing, which leads to (2), then (3), then (1,2,3 - real
quick), then (123123123123123) so fast you find yourself running to store to
spend your money only to find they ran out of wheelbarrows a long time
ago. In short, he's worried about how
his particular private industry, the Federal Reserve and its member banks,
are going to fare under this scenario. And he's not the only central
banker out there hitting the pavement and making dire statements. First, Paul Volcker,
the legendary (and deservedly so) former Federal Reserve Chairman stated in
2005 that there was a 75% chance of a dollar crisis in
the next 5 years and that ‘we are skating on increasingly thin
ice". I know these quotes come from nearly two years ago but
they set the stage and everyone should be aware of them. When Volcker says such things, it is best to listen.
It's like the fire marshal telling you to exit a crowded movie
theater...knock people over if you have to but get out of there! Next, Timothy Geithner, a Federal reserve Governor,
had this to say about derivatives in September of
2006: The same factors that may have
reduced the probability of future systemic events, however, may amplify the
damage caused by and complicate the management of very severe financial shocks.
The changes that have reduced the vulnerability of the system to smaller
shocks may have increased the severity of the large ones. What Mr. Geithner
is saying here is that derivatives have ushered in a period of relative calm,
which is a good thing, but like a geological fault line storing up energy,
this could instead translate into a larger financial earthquake in our
future. The longer the period between seismic tremors, the worse
they tend to be. Personally I'd rather have small and more frequent
tremors than one gigantic one, but I'm not calling the shots here and it
certainly wasn't my advice to lower interest rates to 1% and hold them there for more than a year. Further, I
have no say in setting investment margin requirements, managing hedge fund
leverage, or setting back reserve or bank capital sufficiency ratios.
Those would be Mr. Geithner's job. Then, on January 26th 2007 it
was reported that Alex Weber of the European Central Bank (ECB) sternly told
the Davos participants that
"If you misprice risk, don't come looking to
us for liquidity assistance" meaning that he wanted everyone to know
that the Central Bank would absolutely not bail them out if they got into
trouble, and that the wealthiest market players in the world would have to
accept their losses just as you or I would. However, this must have
been entirely too unthinkable an outcome for the Davos
participants because Alex immediately softened that harsh rhetoric by saying
that of course "systemic threats to financial stability" would be
treated ‘differently' which, - let me access my banker decoder ring thesaurus
function here - turns out to be an alternative spelling for ‘to a
bailout'. While Mr. Weber took many words to convey his true message, I
managed to encapsulate it in a single short memo: "If you'd like to be
eligible for the ECB bailout program, please endeavor to be sure that your
bets are large enough to possibly ruin the system. Thank you. A.
Weber". And finally, reinforcing the
comments above was the head of the ECB
Jean-Claude Trichet who stated that conditions in
world financial markets appeared "unstable" and that participants
should brace themselves for a risk re-pricing event. Again, this is
bank-speak which, translated, means "things could get real ugly when
(not if) you all figure out that you overpaid for your junk grade assets and
used too much leverage while doing so". And what are we to make of all
this banker hand wringing? Are there any steps we should take? Yes. All of this
talk of systemic risk means that you need to consider your exposure to
the banking industry. Are 100% of your monetary assets tied up in a
bank somewhere? If the answer is ‘yes' you might want to consider
buying physical gold and/or silver, which you can hold outside of the banking
system. As well, I am a proponent of holding several weeks
worth of cash on hand, a lesson reinforced by the lessons of Katrina. The theory here is that you
would be able to utilize those assets for your daily living expenses and
would be able to carry on where others would struggle if the banking system
suddenly had to shut down for a while to ‘figure things out'. On a smaller scale this
happened in Argentina in 2001 (for 2 weeks), but I remain concerned by the
lessons of Fannie Mae, a single company whose derivative books were so
confusing that it took 1,500 accountants 2.5 years and $800 million dollars
to answer the simple question "How much did Fannie Mae make/lose in
2004?" Should the "risk
re-pricing" event that is currently worrying the ECB officials come to
pass, how many accountants, years, and dollars would it take to untangle the
resulting mess? And while they were sorting things out, how would banks
know which checks to honor? In all likelihood the system of domestic
and international money transfers would have to cease operations until we
approximately knew who was bankrupt and who was not. I would expect checks, debit
cards and credit cards to be non-functional during this period. I would
expect the period to be pretty lengthy because there simply aren't that many
accountants in the world. Under this scenario your cash
would tide you over and your gold/silver would skyrocket in (paper dollar)
price as the people who lost faith in the paper money system turned to the oldest
and most trusted stores of value that remain among the very few monetary
assets that are not somebody else's liability. "Paper money eventually
returns to its intrinsic value - zero." ~ Voltaire – 1729 As for me, I am going to bring
a dog whistle to Bernanke's next congressional
hearing to see how many representatives I can get to turn my way when I give
it a toot. All the best, Chris 2007 Dr.Chris Martenson Editorial
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