The Real Reason for the Global Financial Crisis…the Story No One’s Talking About

Part I of a three-part series looking at how so-called “credit default swap” derivatives could ignite a worldwide capital markets meltdown.

Are you shell-shocked? Are you wondering what’s really going on in the market? The truth is probably more frightening than even your worst fears. And yet, you won’t hear about it anywhere else because “they” can’t tell you. “They” are the U.S. Federal Reserve and the U.S. Treasury Department, and they can’t tell you what’s really going on because there’s nothing they can do about it, except what they’ve been trying to do – add liquidity.

At the exchange rate yesterday (Wednesday), 35 trillion British Pounds was equivalent to U.S. $62 trillion (hence, the 35 trillion Pound gorilla). According to the International Swaps and Derivatives Association, $62 trillion is the notional value of credit default swaps (CDS) out there, somewhere, in the market.

Read moreThe Real Reason for the Global Financial Crisis…the Story No One’s Talking About

US: Conservative congressmen urge Bush to cut off aid to Wall Street

Frustrated by the US government’s rescue of AIG, Fannie Mae and Freddie Mac, a group of 100 conservative congressmen today urged the Bush administration to stop keeping Wall Street afloat.

In a letter to the treasury secretary and Federal Reserve chairman, members of the conservative Republican Study Committee (RSC) lamented the abandonment of free-market principles.

Rescuing failing financial firms has “set a dangerous and unmistakable precedent for the federal government both to be looked to and relied upon to save private sector companies from the consequences of their poor economic decisions,” the RSC members wrote.

Read moreUS: Conservative congressmen urge Bush to cut off aid to Wall Street

Capitalism in convulsion: Toxic assets head towards the public balance sheet

In the space of just two momentous weeks, the landscape of global finance has been dramatically transformed. President George W. Bush’s administration has mounted a multi-billion-dollar rescue of the financial system at the cost of inflicting severe damage on the US model of free- market capitalism.

Heavy costs will be inflicted on the American taxpayer, who is now subsidising Wall Street – and indeed financial institutions around the world – in a bail-out of unprecedented size.

Read moreCapitalism in convulsion: Toxic assets head towards the public balance sheet

CNN: Will the rescue plan work?

Kirby Daley of financial brokerage Newedge Group on emergency measures to help rescue banks from bad debt.


Hinzugefügt: Source: YouTube

The burden is shifted from the shareholders to the taxpayers.

This is socialism for the rich as Ron Paul and Jim Rogers said before.

Will the rescue plan work???

If not it is the financial system and the US who will fail.

I say the rescue plan will not work but it will destroy the middle class and it will concentrate

power and wealth in fewer and fewer hands.

Why the government rushes to ‘save’ money-market funds

First have a look at the following two articles:

Rushing to save money-market funds

In effort to calm critical part of the broader financial system, Fed and Treasury take three-pronged measure to stabilize troubled funds.

NEW YORK (CNNMoney.com) — Coming to the rescue of a bedrock of American investing, the Treasury Department and the Federal Reserve took three big steps Friday to shore up the $3.3 trillion U.S. money-market fund industry.

Investors have been fleeing money-market funds after a week of chaos on Wall Street that included the bankruptcy of Lehman Brothers, an $85 billion government bailout of American International Group and a sweeping plan for the federal government to buy up financial companies’ troubled mortgage debt.
……………..
Experts: No need to cash out

Money-market experts say investors shouldn’t panic. They felt most funds were safe even before Friday’s government action, which will only add more confidence in the investments.

By Tami Luhby, CNNMoney.com senior writer
Last Updated: September 19, 2008: 1:13 PM EDT
Full article here: CNNMoney

Money-Market Funds Get $50 Billion Backstop From U.S.

Sept. 19 (Bloomberg) — The U.S. will insure money-market funds against losses for the next year as it seeks to prevent a run on $3.35 trillion of assets that average investors and institutions rely on as a safe alternative to bank deposits.
…………….

“They’re putting up a firewall,” said Paul McCulley, managing director at Pacific Investment Management Co., which oversees $830 billion including money funds. ``It’s the ultimate nightmare to have a run on the money markets — that is truly the Armageddon outcome — and they’re not going to allow that to happen.”

By Christopher Condon
Full article here: Bloomberg

Imagine what a run on the banks would do to the financial market.

Now you know why the government and ‘the experts’ panic that the investors might panic.

Watch this video to understand more about money and why a run on the banks would be so devastating.

Money As Debt

Source: Google Video

Read moreWhy the government rushes to ‘save’ money-market funds

Australian Troops Kill Afghan Governor, Two Guards in Botched Raid

Just days after General David McKiernan announced his “revised tactical order” designed to reduce the number of civilians killed in NATO raids, Australian special forces surrounded a house in the Afghan province of Oruzgan and opened fire, killing district governor Razi Khan and two of his bodyguards, and injuring two others.

Afghan President Hamid Karzai referred to the killings as a “misunderstanding,” and said Governor Khan had been a close associate of his. The incident occurred at the house of a friend of the governor, who believed his house had been surrounded by Taliban, not Australian troops.

Read moreAustralian Troops Kill Afghan Governor, Two Guards in Botched Raid

Comex Raises Margin Rates on Gold Contracts by 47%, Silver 20%

Sept. 19 (Bloomberg) — The Comex division of the New York Mercantile Exchange raised margin payments on gold and silver futures by as much as 47 percent after price swings accelerated.

The margin rate for Comex members advances to $5,500 a gold contract from today, from $3,750, the exchange said in an e- mailed statement late yesterday. The new rate for non-members is $7,425, from $5,063. One contract represents 100 ounces.

For silver futures, members will pay a margin rate of $6,000, compared with $5,000 previously. Non-members will pay $8,100, from $6,750. One silver contract represents 5,000 ounces.

The rates represent the cash traders must put aside when buying and selling the commodities. Gold surged the most in nine years on Sept. 17 while silver rose the most since 1979.

Read moreComex Raises Margin Rates on Gold Contracts by 47%, Silver 20%

China: Tests find chemical melamine also in liquid milk


A child receives an ultrasonic inspection for kidney stones at a children’s hospital in Chengdu, in southwest China’s Sichuan province Friday, Sept. 19, 2008.

BEIJING (AP) – China’s tainted milk crisis widened Friday after tests found the industrial chemical melamine in liquid milk produced by three of the country’s leading dairy companies, the quality watchdog said.

Singapore suspended the sale and import of all Chinese milk and dairy products because several tested items were contaminated.

Tainted baby formula has been blamed for killing four infants and sickening 6,200 in China since the scandal broke last week. Some 1,300 babies, mostly newborns, are currently in hospitals and 158 of them are suffering from acute kidney failure. Thousands of parents across the country were bringing their children to hospitals for health checks.

Read moreChina: Tests find chemical melamine also in liquid milk

The United States may be “days away from a complete meltdown of our financial system”

Key lawmakers promise fast action on bailout

WASHINGTON (AP) – Senate Banking Committee Chairman Chris Dodd says the United States may be “days away from a complete meltdown of our financial system” and Congress is working quickly to prevent that.

Dodd said Friday that Democrats and Republicans on the Hill are coming together to support the Bush administration’s developing plan to buy up bad debt from financial institutions and get the credit system working again. Dodd told ABC’s “Good Morning America” that the nation’s credit is seizing up and people can’t get loans.

The ranking Republican on the Banking Committee, Senator Richard Shelby, predicts the new bailout plan will cost at least half a trillion dollars.

Shelby says the nation has “been lurching from one crisis to another.” Both veteran lawmakers say this is the most serious financial crisis they’ve seen in their years in Congress.

Read moreThe United States may be “days away from a complete meltdown of our financial system”

‘U.S. may use Georgian air bases to strike at Iran’


AFP Photo/US Navy/ Peter Scheu

The U.S. military could have plans to use Georgian air bases to launch air strikes against Iran, according to Russia’s envoy to NATO Dmitry Rogozin. He pointed out that Georgia would be the perfect base for a potential U.S. operation in Iran.

Speaking in Brussels, Dmitry Rogozin said:

“What NATO is doing now in Georgia is restoring its ability to monitor its airspace, in other words restoring the whole locator system and an anti-missile defence system which were destroyed by Russian artillery. Now these systems are being restored as soon as possible. We have unconfirmed information that American ships under cover of himanitarian aid have delivered all the equipment  necessary for the restoration of these systems.”

He noted that there it is impossible that these preparations are designed for Georgia’s protection against Russia, since the war in the Caucasus is over and all the security measures in South Ossetia and Abkhazia are being pursued.

“It’s done for logistical support of some air operations either of the alliance as a whole or of the United States in particular in this region. The swift reconstruction of the airfields and all the systems proves that some air operation is being planned against another country which is located not far from Georgia. What country could it be? Which country is in the spotlight now? Of course it’s Iran, there are no other countries,” the envoy said.

Read more‘U.S. may use Georgian air bases to strike at Iran’

Stocks rally on report of entity for bad debt

Stocks end sharply higher on report that government will create entity to hold banks’ debt

NEW YORK (AP) — Wall Street rallied in a stunning late-session turnaround Thursday, shooting higher and hurtling the Dow Jones industrials up 400 points following a report that the federal government might create an entity to absorb banks’ bad debt. The report also cooled investors’ fervor for the safest types of investments like government debt.

The report that Treasury Secretary Henry Paulson is considering the formation of a vehicle like the Resolution Trust Corp. that was set up during the savings and loan crisis of the late 1980s and early 1990s left previously solemn investors ebullient. Wall Street hoped a huge federal intervention could help financial institutions jettison bad mortgage debt and stop the drain on capital that has already taken down companies including Bear Stearns Cos. and Lehman Brothers Holdings Inc.

Read moreStocks rally on report of entity for bad debt

Ron Paul on the Global Financial Crisis 9/18/08


Added: Sept. 18, 2008

Source: YouTube

FDA Considers Engineered Animals For Food

Agency Will Accept Industry Proposals To Sell The Public Animals With Mixed DNA


Two featherless chickens peck around in some grass at the Hebrew University in Rehovot. Israeli scientists at the Agriculture department of the university have genetically engineered bare-skinned chickens as part of a research project to develop succulent, low fat poultry that is environmentally friendly. (AP)

(CBS/AP) The U.S. government will start considering industry proposals to sell genetically engineered animals as human food.

The U.S. Food and Drug Administration said Thursday a government review will ensure that such animals are safe to eat.

Genetically engineered animals are created when scientists insert a gene from one species of animal into the DNA of another animal to reprogam some of its characteristics.

Read moreFDA Considers Engineered Animals For Food

Need a Job? $17,000 an Hour. No Success Required.

Are you capable of taking a perfectly good 158-year-old company and turning it into dust? If so, then you may not be earning up to your full potential.

You should be raking it in like Richard Fuld, the longtime chief of Lehman Brothers. He took home nearly half-a-billion dollars in total compensation between 1993 and 2007.

Last year, Mr. Fuld earned about $45 million, according to the calculations of Equilar, an executive pay research company. That amounts to roughly $17,000 an hour to obliterate a firm. If you’re willing to drive a company into the ground for less, apply by calling Lehman Brothers at (212) 526-7000.

Read moreNeed a Job? $17,000 an Hour. No Success Required.

Money Market Funds Enter a World of Risk

Money market funds have been among the few places that investors could put their cash and sleep peacefully.

At the moment, that is not necessarily true.

On Tuesday, the Reserve Primary Fund, a giant money market fund whose parent helped invent that investment, said its customers would lose money. Instead of each share being worth a dollar for every dollar invested, it said its customers’ shares were worth only 97 cents. In Wall Street parlance, it “broke the buck,” a rare occurrence.

So far, it appears that no other money market funds have fallen below a dollar a share. And other money market managers have hastened to reassure investors that their money is safe. But the Primary Fund’s announcement did raise this question: What, in today’s world, is truly safe?

Read moreMoney Market Funds Enter a World of Risk

U.S. Senate passes $612 bln defense spending bill

WASHINGTON, Sept 17 (Reuters) – The U.S. Senate on Wednesday overwhelmingly approved a $612.5 billion defense spending bill for fiscal 2009, including $70 billion for operations in Iraq and Afghanistan.

As passed on an 88-8 vote, the measure would authorize $103.9 billion for Pentagon procurement, $1.2 billion more than President George W. Bush’s request. Overall, Bush had asked for $611.1 billion for national defense.

The bill shifts more of the costs of Iraq’s reconstruction onto Baghdad. It also puts further restrictions on contractors working in Iraq, including prohibitions on interrogations and the performance of “inherently governmental functions” in combat.

Read moreU.S. Senate passes $612 bln defense spending bill

Roubini: USA transforming into USSRA


Nouriel Roubini

An economic analyst says by buying out investment giants, the USA had transformed into the USSRA (the United Socialist State Republic of America).

“This transformation of the USA into a country where there is socialism for the rich, the well connected and Wall Street (i.e. where profits are privatized and losses are socialized) continues today with the nationalization of AIG,” Nouriel Roubini said.

Read moreRoubini: USA transforming into USSRA

Russian stock markets closed until Friday

Medvedev calls for more measures

MOSCOW (AP) — Russia closed its stock exchanges for a second day Thursday as President Dmitry Medvedev pledged a 500 billion ruble ($20 billion) injection into financial markets to stem a dizzying plummet in share prices — and quash fears of a repeat of the country’s 1998 financial collapse.

Russian President Dmitry Medvedev reiterated that the government — which sits on the world’s third-largest foreign reserves — is in a strong position to handle the crisis, which threatens to undermine an eight-year economic success story and a resurgence in national pride.

Read moreRussian stock markets closed until Friday

Fed, ECB, Bank of Japan Lead Global Plan to Pump $247 Billion Into Markets

Sept. 18 (Bloomberg) — The Federal Reserve almost quadrupled the amount of dollars central banks can auction around the world to $247 billion in a coordinated bid to ease the worst crisis facing financial markets since the 1920s.

The Fed increased the amount of dollars that the European Central Bank, the Bank of Japan and other counterparts can offer from $67 billion “to address the continued elevated pressures in U.S. dollar short-term funding markets.” The Bank of England, the Bank of Canada and the Swiss National Bank also participated.

Policy makers have struggled to revive confidence in markets this week as investors stockpiled money on concern more financial institutions would fail after the bankruptcy of Lehman Brothers Holdings Inc. and the U.S. government bailout of American International Group Inc. The cost to hedge against losses on U.S. government debt climbed to a record yesterday.

“There’s a complete lack of faith in the markets,” said Jim O’Neill, chief economist at Goldman Sachs Group Inc. in London. “There’s a lot of cash hoarding and people losing trust in banks, so the central banks are acting to relieve that. This might not be the last time they have to act.”

Read moreFed, ECB, Bank of Japan Lead Global Plan to Pump $247 Billion Into Markets

Russia threatens to seize swathe of Arctic

President Dmitry Medvedev said that Russia should unilaterally claim part of the Arctic, stepping up the race for the disputed energy-rich region.


The expedition to plant a Russian flag on the seabed beneath the ice of the North Pole last August Photo: REUTERS

“We must finalise and adopt a federal law on the southern border of Russia’s Arctic zone,” Mr Medvedev told a meeting of the Security Council, in remarks carried by Interfax news agency.

“This is our responsibility, and simply our direct duty, to our descendents,” he said. “We must surely, and for the long-term future, secure Russia’s interests in the Arctic.”

Read moreRussia threatens to seize swathe of Arctic

Nigeria militants threaten broader delta “oil war”

PORT HARCOURT, Nigeria (Reuters) – Nigerian militants threatened on Wednesday to broaden their “oil war” to offshore oilfields and announced attacks on a crude oil pipeline in the Niger Delta and another Shell-operated facility.

The Movement for the Emancipation of the Niger Delta (MEND), responsible for attacks that have cut a fifth of OPEC member Nigeria’s oil output, said it would launch attacks outside Rivers state for the first time since clashes began on Saturday.

Read moreNigeria militants threaten broader delta “oil war”

Wall Street crisis deepens and Banks rush to do deals

NEW YORK (Reuters) – Manic and increasingly desperate dealmaking gripped Wall Street on Wednesday as U.S. stocks plummeted to three-year lows amid new signs of distress in the global financial industry.

Morgan Stanley was discussing a merger with regional banking powerhouse Wachovia, the New York Times reported. CEO John Mack got a phone call from Wachovia on Wednesday but is also pursuing other options, the paper said.

“In this market, anything’s possible. It seems like the market wants the investment banking model to disappear,” said Danielle Schembri, bond analyst covering brokers at BNP Paribas in New York.

Washington Mutual , the country’s largest savings bank, put itself up for sale, sources said, confirming a New York Times report. Potential suitors include Citigroup, JPMorgan, Wells Fargo and HSBC, they added.

Read moreWall Street crisis deepens and Banks rush to do deals