Humpty Dumpty sat on a wall,
Humpty Dumpty had a great fall.
All the King's horses, And all the King's men
Couldn't put Humpty together again!

The Federal Reserve Corporation of the United States, which contrary to popular belief is a private institution whose shares are held primarily by European banks, is trying to save the US economy by pumping trillions of dollars into the banking system via the US Treasury to free up lending, vital for business in a capitalist economy. This money comes out of thin air and is simply electronic data on a computer screen and is effectively DEBT.

The US Treasury issues US government bonds (that is debt and has to pay interest) to cover and honor the money lent to the US economy by this consortium of private banks under the guise of the Fed. This, up to now, has been ostensibly to keep the financial system afloat and cover losses and write-offs by the banks due to the toxic (a smart, in vogue word for “worthless”) sub prime mortgages on their books.

However, there is an atomic time bomb hidden in the financial morass now exposed to public view. This is the bombshell of derivatives losses related to the trillions of dollars of junk mortgages still out there - not only in the US but also in other countries.

The derivatives market, based on mainly on US mortgages, allows the buying and selling of Mortgage Backed Securities Packages (MBSP), which have been strewn round the global banking system like a viral pandemic which no one can cure. To trade in these MBSP on a speculative basis, high leverage was employed to facilitate the casino logic that banks love to indulge in. 

The problem with the MBSP is that this market, created by the banks themselves in the wake of the millions of sub prime mortgages granted, was in no way regulated either by the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) or any other regulatory body. In the case of speculating in the silver futures market as an example, the CFTC specifies the margin requirement to prevent defaults and excesses of greed driven by risk. Not so in the unregulated MBSP market.

The result has been that the expected US$5 to US$6 trillion losses forecast in the real mortgage market will be multiplied in this paper market. No one knows what the losses could be. By way of explanation, look at the oil futures market. The world needs approximately 82 million barrels of oil per day to keep running. In the oil futures market around 300 million barrels of paper oil contracts are traded on the NY Mercantile Exchange and on the Oil Futures Exchange in London. It may be “paper”, but as in any casino, someone loses and has to pay the losses. The same applies to the MBSP derivatives market.

The question is when will these derivatives start to unwind? As I understand this, it will be when the real market price of foreclosed homes is finally established - that is when they are sold or auctioned off at what prices? In real dollar terms the losses will be astronomical and will be multiplied hundreds of times due to the high risk leverage inherent in derivative trading, which was completely unregulated.

There are several examples of stock market derivative traders bankrupting banks. Barings Bank in the 1990’s is the best example, but rogue traders have also plunged the French Societe Generale into huge looses and there was another famous example in Japan, involving Sumitomo Corporation.

With the MBSP potential derivatives losses the situation is not limited to a rogue trader or an individual bank, but the whole world banking system is at risk due to a “rogue system” of trading based on greed, ambition and downright recklessness. Almost all countries tied into the protocols of international banking are involved. 

Losses mentioned in articles I have read on various web sites range from US$600 trillion ($600,000,000,000,000), up to US$1.2 quadrillion ($1,200,000,000,000,000), since no one knows what losses they hold in the Mortgage Backed Security Packages they purchased - not even the banks. However, the banks will soon know after the corresponding property has been auctioned off and the mortgage behind it is identified in one of the billion dollar packages they purchased, and which could be worth only 10% - 20% of their face value – i.e. if a buyer can be found at all. 

With this sort of debt, there is not enough money in the world to pay even the interest on the losses, never mind the losses themselves. To contextualize these numbers, the US GDP is short of US$15 trillion per year. World GDP is just over US$65 trillion. ($65,000,000,000,000). Can anyone correlate the relationship between these paper losses which are 100 times greater than the real global GDP defined as goods and services? Bankers, brokers, the Fed, the IMF, the World Bank, the Cato Institute, the London School of Economics, Harvard Business School and any institution you care to mention do not want to touch this problem or even think about it. Their time will come.

The situation is exacerbated even more by the fact that the currency system after 1971, when Nixon abandoned the backing of gold for the dollar, is based on "confidence in the US dollar, and hence the US economy", as the backing for the world’s reserve currency used for international transactions and international currency reserves. When this confidence is completely "shot", then the dollar and related currencies just become pieces of paper or data on a computer screen. Zimbabwe comes to mind in this context not even mentioning the Weimar Republic.

Such huge numbers are hardly comprehensible and if you take into account the US$7 trillion Bernake has said the US government will spend to “save the system” - which is a drop in the ocean - plus the US$50 trillion of unfunded liabilities for Social Security and Medicare in the US, plus the recognized national debt of the US will is now over US$10 trillion, the situation looks completely unsustainable as well as the world financial system.

The solution of the Illuminati will probably be to ditch the dollar, probably the euro and the yen and create a new global currency at some point in the future. This has been done many times in recent history - France in the 1970's, Brazil and Argentina 3 times each since the 1980's, Peru and this year Venezuela. President Sarkozy spoke about this when he met Bush at Camp David recently and last week, President Zelaya of Honduras came out recommending the same strategy. 

There is evidence that the North American Union, signed between US, Canada and Mexico in 2005 and almost a carbon copy of the EU, could create a new currency replacing the US and Canadian dollars and the Mexican peso by a new currency called the "Amero". This new currency is destined to replace the US and Canadian dollar and the Mexican peso and come into existence in 2011. There have been suggestions to the effect that one amero will be equivalent to five US dollars – hence significantly reducing US overall debt by 80%.

Ask yourself, if there is a “world currency”, who will mange it? The logical extension of this is a “world government” - Shades of the New World Order and the Illuminati?

Is it feasible for these losses to be hidden in some way and all these crazy derivative debts forgiven? Wipe the slate clean and start over again? Well, anything is possible but if these debts are written off and we start over, will this not destroy the power of debt slavery on the world population, built up over centuries by the Illuminati bankers and their willing cohorts?

Currently more money and power is being concentrated into fewer hands using the “money out of thin air mechanism” invented by the international banking conspiracy going back to the Knights Templar almost a thousand years ago.

Have the modern architects of the New World Order overstepped themselves this time? The huge losses in the MBSP derivatives market would seem to indicate this.

Time will tell but historically the world could take 15 – 20 years to overcome this disaster according to the Kondratieff Long Wave Theory based on more than 200 years of economic analysis. This crisis will unfortunately cover most of the growing years of our fledglings thanks to the irresponsible criminals who knowingly or unknowingly nurtured this economic catastrophe now upon us in the name of “free market neoliberalism”.

Finally, a rhetorical question: what will happen to the US dollar when the cracks break open as these derivative losses are known? You guess is as good as mine but you can be sure of one thing – physical gold and silver will explode to unprecedented historical levels as the world currency system vanishes down a timeless black hole.

© Copyright 2008 by AxisofLogic.com

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