The Unicorns Of Derivative Deliriums

January 30, 2008

Elaine Meinel Supkis

Time again to talk about history, magic and money. My favorite cocktail. The Europeans who created this wealth fund for the Arabs call it 'Unicorn Investment Bank'. So we must look at a great European painting by the Master, Bosch. We can see in it many lessons for today. This painting was done just as Europe discovered the New World and right after Portugal discovered how to circumnavigate Africa and thus, get through to China. And all the wealth in Europe began to flow to China which led to the Europeans attacking China. And we discuss derivatives. That fabulous mythical beast created by bankers to protect themselves from risk. In the US, it is now 6 times bigger than our entire collective debts. As well as our entire yearly GNP. And indeed, it is now greater than our collective national WORTH! Wow.

Unicorn Investment Bank raises $125m

Unicorn Investment Bank has raised $125 million in a three-year syndicated loan.

This move is seen as a remarkable achievement both for the Bahrain-based bank and for Islamic banking industry.

The bank's move to raise $100m through its first debt financing venture saw global support at a time when Western banks are refusing to lend to each other.

With more than 50 per cent of support coming from financial institutions from outside the GCC, the offer was significantly oversubscribed and attracted investment from Europe and Asia.

Oh, I do so love it when the bankers get fantastical! They often can't help but harken back to their real roots. The Garden of Earthly Delights has many residents. I discovered Bosch's famous, beautiful painting when I was living with a surgeon and his wife while recovering from surgery while my parents were overseas, messing around with history. Not the naked men riding the unicorns, filled with sexual joy. The unicorn is like Pegasus or the three headed hell hounds and a host of other divine critters who dwell on the other side of reality, our dream world. The global growth in magic money which has been fueled by the sudden emergence of the great, ancient empire, China, into the world financial/trade stream is a tremendous historic force. Click on image to enlarge.

This great painting was made at the behest and paid for by the first Northern European secular bankers. Previous to this, the Church via intermediaries such as the Venetian money changers charging fees for shipping crusaders around, were the 'bankers' in the most primitive meaning of the concept. The Venetians did re-introduce money to the former Roman Empire which lost this tool during the barbarian invasions. But to pay for the Fourth Crusade, for example, no money was exchanged. Instead, Venice used the warriors as pirates and instead of attacking Muslims, they looted and burned the biggest and richest Christian city at that time, Constantinople. Which, incidentally, killed the Crusades and destroyed Christian power in Asia but this goes under 'unintended consequences'.

Back to this wonderful artwork: it was painted in around 1500. The New World was discovered at the same time this picture was painted. Religious schism was erupting at the exact same time, no coincidence. Europe was about to be flooded with an epic amount of gold and silver. Trade with China which had fallen to virtually nil during the Dark Ages and the Islamic revolution that cut off direct trade with the Middle East, was now taking off again due to the King of Portugal encouraging explorers who rounded the Cape of Good Hope in Africa to reach the riches of the East. The 1,000 year depression in Europe was ending in a thunderclap!

I updated this painting by suggesting we could read it as a map of today's 'wealth world'. Japan is one stream of wealth and China, the other. Both circumnavigate the planet. The West is pretty much isolated from this since the flow is ONE WAY. Even if the West manages a flow back, it is much, much smaller than the twin flows from Asia. Asia, as we can see, is working hard. There is no sex going on there, no wild Roman orgies, no mass parties, whooping it up. Note also, the bankers and speculators as well as the entertainers, the prostitutes of both sexes and the debtors are all riding around and around in a merry-go-round of new goodies. The top prostitutes and ruling elites stand in the Pool of Wealth itself and admire each other. Note also, they are of all races and religions.

The next panel in this painting is Hell. And we have to recognize how this dream world interfaces with the real world. For they are two sides of the same coin just as the sleeping world is the other side of the waking world. Understanding money, human psychology, history and religion is the key to predicting the future. People who want to look ahead by only a day or a week cannot see beyond the Garden of Earthly Delights.

I look into Hell. The dark underpinnings of wealth lie in this realm. Avoiding falling into this Darkness is important and as humans perfect their demonic abilities to destroy things, avoiding this is of rising concern. The news this year is dark indeed. For the despair and arrogance of the Rulers always is finally expressed via war. The Long Depression of 1873-1912 was resolved in one of the biggest and bitterest of wars. The shorter depression of 1929-1939 was also ended by an even nastier and more vicious war that killed far more civilians than WWI.

Indeed, the painting above was made right on the eve of a long and bitter struggle for power and wealth which came out of the Reformation. And the battle over the Bible was due to the very sudden collapse in the value of gold and silver as the flood of these metals from the New World swamped the just-emerging banking system of Europe.

Kings and Popes had money for killing and used it. The psychotic King Henry VII of England, desiring to slay all those near and dear to him, joined this mad orgy of blood and the equally insane King of Spain and his even more insane children like Pedro the Mad joined in this auto-de-fee of murderous religious sectarianism. One third of the people of the formerly prosperous Bohemian kingdom were slaughtered. The German trading combine on the Rhine and North were destroyed. The Netherlands, where Bosch lived, became a perpetual battlefield between Protestant and Catholic.

My own ancestors were sent out into the world due to all this. The Pettits were bankers/traders in Paris who became Huguenots. When the Cathollic Queen from Italy took over the Throne, she decided to kill all of them. My ancestor was in Brussels on business with the bankers there when the St. Bartholomew's massacre happened without warning. This was my own family's early 'Holocaust.' Why did this happen?

Well, the Crown needed money. And my ancestor had gold in his bank vaults. And he had picked up the knack of charging INTEREST on these loans and the Crown was reckless with wars and wild spending so they...they took it the usual way: by taxes or murder. People seeking shelter today wish this weren't so but I must warn everyone, it is certainly so. Right now, the wars we are seeing here are being paid for by the Chinese and Japanese. But not for much longer. Our rulers will turn on us suddenly when they need to and the best excuse is to let someone attack us and thus, trick us into supporting the looting of our reserves by war mongers.

Back to the Pettits: my ancestor got funding from Protestant bankers in Amsterdam to outfit his ships with cannons. He then joined the looting of the rulers and became a pirate protected by the Dutch. He specialized in raiding shipping in the Caribbean. When he amassed enough wealth, he settled down with his new wife and their offspring flourished. In the Americas, not Europe. Where the Long Arm of the Law could not reach them. They believed in separation of Church and State for obvious reasons. All the settlements of my Pettit ancestors are named either 'Peru' or 'Lima' and there a number of towns and cities in America that bear that laconic reference to our founding ancestor, the pirate of the Caribbean.

As I was writing all this, I was crying. The woman that should have been my ancestress died when she was rudely yanked from her bed in her fine home as soldiers ran through the house, her servants screaming as they were either cut down or raped. She was probably raped, too, and forced to watch her babies and children dismembered. Then their bodies were thrown into the Seine. The new trade with China opened up a fountain of chaos in both Europe and China. For China didn't have ships with cannons. The long collapse of China dates from this time. Even as gold and silver poured into China from the newly opened trade with Europe, China's power base eroded. China refused trade as usual and wanted only gold, silver or fabulous raw materials. As the gold hoard grew, the eyes of Europe were upon China and from 1600 onwards, they plotted China's destruction and looting. This was every bit as violent and ugly as the attempt to exterminate my ancestors. Lord alone knows how brutal my ancestor, the pirate, was. He hated Catholics with a passion that was understandable, he knew how his wife died. I suppose he showed little mercy. Alas, I think, knowing how I can be vengeful, he probably took certain pleasure in his new occupation.

He was also not stupid. He kept on the good side of Queen Elizabeth I. And in turn, she let him into the English colonies as a reward and gave him lands in the Northeast where the shipping was and the clan ended up doing the Europe/Caribbean/New York/Boston shipping lanes.

Back to the news at the top, the news from today: the Europeans hired by the Arab kings have an obvious sense of magic and humor. I don't see 'Unicorn Investments' lasting any longer than 'Pirates LLP' which sank with all hands aboard last fall. When the names of these organizations hove too close to the misty shores of magical beings, they often don't last long. Also note that this new entity was OVERSUBSCRIBED. When I see this, alarm bells go off. Everyone, evidently, hopes they can latch onto the Arab oil overlords and use them as a life raft. Note also, much of this over-subscription to this strange bestiary of fabulous magical animals is a sign of yet another bubble that leads to more panics. The price of oil is set to drop due to the inability of Americans to use infinite energy forever. We are being forced to cut back, reluctantly.

The pool of cheap energy is now a burning lake and it is eating up our financial resources. So far, we paid for this since 1970 by piling on endless debts or fighting oil soaked wars featuring rapine and murder most awful. We have done all this quite ineptly. Now we are back to trying to make money deals with the Muslims in the hopes that this will allow us to continue to import the manufactured wealth of the East while not trading with them much at all.

The Asians know from history that one-way flow of trade and wealth means they end up on top so long as they have the guns to protect their wealth. The Chinese are handling this by strengthening their military, their space programs and nuclear arms. Japan has dealt with this by using the US itself as its shield and weapons. But this will backfire on them when the wealth drains from the US and we go bankrupt and our military is mothballed. Japan can't support both Europe and the US in this regard. Europe, of course, is being simply cynically lazy and using the US as their military arm but unlike Japan, have taken care to pile up some of their own nuclear missile forces. Which they control.

Back to the banking mess in the West and how reckless our own bankers are as they seek to profit from this one-way trade:

The Trillion Dollar Secret
By John Riley

According to the Comptroller of the Currency, total Derivatives in the top 25 banks in the US amount to about 180 Trillion dollars. Not billion, trillion. 1000 times a billion.

To put this in perspective, the US GDP for the 3rd quarter of 2007 was about 11 Trillion dollars. So they are playing a game with a pool of fictional money that is 16 times bigger than our economy.

The reality of derivatives is a topic that puts most people to sleep but it is the makings of a massive nightmare that already is lurking near the waking world, about to burst through the time/space continuum. When this monster rips apart the fabric of our economic belief system, out will come a genie, a demon of vast proportions that can devour not only all wealth on earth but much of the future wealth. Wealth can disappear!

This means everything. When the Roman Empire fell, Rome and Greece were both filled with fine artwork, many hundreds of thousands of books of the highest quality literacy. The greatest libraries on earth were in China and Egypt. The accumulated knowledge of thousands of years. The temples and statues and paintings were of the highest quality. Virtually unsurpassable, in the case of Greece.

It wasn't just destroyed, the destroyers thought all this was WORTHLESS. The collapse in value of all these precious assets that emperors and lords paid the highest prices and compliments to all became ashes and broken arms and legs. The active destruction of once-precious assets is astonishing to see. Anything which was possibly approachable was smashed or burned. And not in one spasm. For 1,000 years, this went on.

When Bosch painted his charming pictures, the broken remains of these art pieces were being dug up and examined and copied by people like the young Michelangelo, for instance. Even as the greatest artists of the West began to rediscover the great art of the past that was considered worthless for 1,000 years, there was an orgy of destruction of equally great artwork: the Medieval arts. All over Europe, stained glass windows were brutally smashed, paintings adorning Churches were whitewashed away or smashed. Every sort of lovely art work was cruelly destroyed.

In the West today, we revere all the past artworks and even the works of 'primitive' people who were destroyed by Westerners who sailed over and gave them diseases or shot them dead or enslaved them. But we also have the power to destroy all our museums and great holdings of humanity's treasures.

These charts show not only how derivatives have grown at an astonishing rate, look at the numbers! Just in the US alone, the nation with the greatest amount of debt in the world, bar none, look at it! 20 years ago, derivatives were less than a trillion dollars. During the years the US economy, government and populace amassed $9 trillion in government debts and over $30 trillion in other debts, derivatives grew from $1 trillion to...$180 trillion??? What the literal hell is this? Derivatives went from less than 5% of our debts to 6 times our collective debts? And each year, has grown more than the year before at an astonishing +10% rate? Talk about insanity! This is IMPOSSIBLE. I am more likely to look out the window here and see a unicorn instead of my old horse, Sparky.

These damn, stupid derivatives are hedges set up by the same people putting us increasingly into debt to the East. They are translating our entire culture from wealth into debt and to protect themselves while doing this, they constructed an alternative economy that grows TEN TIMES FASTER than our own. In about 2003, this alternative, this shadow world, this Garden of Earthly Banker's Delights overtook the Real World and now dwarfs it in size.

This, dear readers, is the REAL BALLOON. Understanding how the streams pouring out of Japan and China and the other Asians are feeding this balloon which is PURE SPECULATION AND PURE DEBTS is key to understanding how to fix things so we don't die in WWIII when this stupid bubble pops. As it inevitably shall.

Derivatives are private contracts (bets) between financial institutions. They can be on the direction of commodities, the stock markets or currencies, but the banks’ favorites are interest rates. (You can go to the Comptroller of the Currency website to get their quarterly reports and see for yourself what Wall Street hopes you never see.)
*snip*
Derivatives have barely any regulation on them. For years, Congress tried and Greenspan stood in the way. Banks barely mention them in the annual reports except for a footnote.

Thanks to the lack of regulation, derivatives have grown dramatically. There has been a 473% increase in the Notional Value of derivatives at the top 25 banks since 1999.

The numbers make the mind reel. Is this fact stopping our bankers? HAHAHA. Nope. Not only are they trying to continue this, they are desperate to transfer this derivative bubble to the Arab kingdoms, Japan and China! The efforts in this regard are hysterical at this point. Both China and Japan are very, very big on the concept of Fortresses. They like lots of protection from the Western invaders. They have long institutional memories going back many centuries. They also don't like what we did to them in the past. Then there are the other banking entities who are international. Just as my own family has a group memory of much of the past which colors our thinking today, so it is with the Jewish community. They were, after all, during the Dark Ages, the only ones who were forced to survive by their wits alone and who could not do normal business or normal farming and so they kept alive the embers of banking knowledge. For this, they were persecuted.

Today, the hedges and evasions created by Jewish bankers due to anti-semitism and especially, Hitler, has driven them into creating this golem we call 'derivatives'. This shadow banking world is a way of moving in and out of markets and banking systems in emergencies. Unfortunately, like all shadow worlds with no rules or restrictions, this one grew into a monster that no one in Asia, Europe or America can control. Strangling it once and for all is required by impossible. So instead of controlling it or stopping it, the rulers of the world have held meetings this year, increasingly hysterical meetings. The latest Davos meeting had them literally screaming at each other. They are in a total panic worthy of the Great God, Pan.

They have no way of slaying this beast. It amuses me that they are all calling on the bankers of the world to make this beast more visible. One thing about money and the Outer Darkness: when the demons there are revealed, they scare people to death. Already, our bankers and speculators are so frightened, they are jumping at their own shadows! If even they can see the Beast they created, they will scream and run into walls. And outsiders, seeing this newly-hatched monster slip out of the cracks of Doom will try to hid their own wealth from it.

How does this work? The Beast will eat the wealth equal to its size and vanish. This is called 'balancing the books.' The derivatives side of the ledger is NOT balanced at all! So when this happens, it will cause a backlash. As I point out, history is full of such backlashes. And governments have one handy tool for this: war.

Look at this chart, now! Wow. I color in charts and add data to see relationships. Everyone can see how we went through an epic bell curve of interest rates which peaked in 1980. But hark! When I add the information about when oil and gold were shooting up in tandem and then we see how this operates, we see a MIRROR IMAGE! The early, upside of the interest rate bell curve shoots up when oil and gold shot up! Then all three peaked a the same instant!

The downslope featured cheaper and cheaper oil and gold vis a vis inflation. And inflation 'vanished'. Where is it go, anyway? If we compare the second half of this graph with the one above showing how derivatives were born on the downslope of the bell curve, we note that as the curve continues to drop, derivatives shoot up to the levels and higher, relatively speaking, as the previous rising oil/gold/interest rate charts rose! In other words, we bought 'cheap credit' via creating massive derivatives, I might suggest. They are secretly connected via the darker chambers of the Underworld of Money where Death rules.

So we have this FAKE world where oil/gold go up and up and up, massively but interest rates go DOWN! This is not healthy, of course. They should be rising together. But denial is at work here. Note that yesterday, the Fed dropped interest rates again. The 1.25% decline in four days is EPIC. It is HUGE. It is also the hand of the Beast breaking through the barrier that separates the Derivative Monster from the Waking World where we are laughing and drinking and having sex.

S&P Lowers or May Cut $534 Billion of Subprime Debt

The downgrades may extend losses at the world's banks to more than $265 billion and have a ``ripple impact'' on the broader financial markets, S&P said.

The securities represent $270.1 billion, or 47 percent, of subprime mortgage bonds rated between January 2006 and June 2007, S&P said today in a statement. The New York-based ratings company also said it may cut 572 CDOs valued at $263.9 billion.

The downgrades may increase losses at European, Asian and U.S. regional banks, credit unions and the 12 Federal Home Loan Banks, S&P said. Many of those institutions haven't written down their subprime holdings to reflect their market values and these downgrades may force their hands, S&P said.

``It is difficult to predict the magnitude of any such effect, but we believe it will have implications for trading revenues, general business activity, and liquidity for the banks,'' S&P said. The ratings company will start reviewing its rankings for some banks, especially those that ``are thinly capitalized.''

Bond Insurers May Lose AAA Ratings Before a Bailout

The bond insurance industry stands to lose $41 billion on securities linked to subprime and other mortgages, according to JPMorgan Chase & Co. analysts. Efforts by New York Insurance Superintendent Eric Dinallo, 44, for a $15 billion fund to bolster insurers' capital are likely to be overtaken by events, independent research firm CreditSights Inc. said today.

``Given the number of competing interests and levels of commitment of participants involved, we think it is unlikely that an agreement sponsored by Dinallo could be hammered out within the appropriate timeframe,'' CreditSights analysts Rob Haines, Craig Guttenplan and Joe Di Carlo in New York wrote in a report. ``In the offchance that any deal could be solidified, the rating agencies are likely to have already taken action.''

Yikes. They try to fix the widening rift. But there is no magician on earth that can make this overhang of about $350+TRILLION vanish! And it hasn't stopped growing, either. It grows and grows. The Evil Kerviel mess is part of this monster. He could trade more than the entire worth of the entire banking group in France, one of the biggest on earth, using FAKE MONEY he invented out of thin air! He used FAKE everything to make up numbers which were then fed into the system and turned into REAL money! And we wonder why there is inflation? Aside from the other monster no one dares stop, the Japanese carry trade!

We can only arrest the people who set up and ran this system. This is mostly the people at the top these same people will cheerfully shove us into WWIII rather than lose their grip on the fake wealth they have generated for themselves. This is why NO ONE at the top dares talk about reality or explain things. They want us to believe they can keep the Beast at bay via wand waving. We are to sit here and watch the show. And not worry.

The history of banking reserve ratios from the Federal Reserve:

Two Billionaires Describe Our Outlook

Financial speculator and billionaire, George Soros states in his FT.com commentary :

“the current crisis is the culmination of a super-boom that has lasted for more than 60 years.” In June's Higher Rates Reflect Default Risk we described the end of the last credit boom: “In 1928, the U.S. Treasury Bond similarly broke out of the channel and rose to a higher yield. This coincided with the end of ‘easy' money which forced the deleveraging of the economy and concluded with the financial crisis of 1929-1932.” Compare the two Treasury Bond Yield charts below. In 2005-2006 higher bond rates “broke out of the channel” and inflicted damage on the housing market. This marked “the end of ‘easy' money.” Similarly since 2006, there has also been a flight to quality.
*snip*
George Soros explains what happens next: “if federal funds were lowered beyond a certain point, the dollar would come under renewed pressure and long-term bonds would actually go up in yield. Where that point is, is impossible to determine. When it is reached, the ability of the Fed to stimulate the economy comes to an end.” As we described last June, we expect 10 year Treasury Bonds to be sold for cash in the panic, just as occurred at the end of the last credit cycle. Billionaire investor Julian Robertson agrees. As he revealed to Fortune : “the biggest bet that Robertson has in his own portfolio at the moment” is “long the price of two-year Treasury and short the price of the ten-year Treasury.”

Soros knows the Beast. He won't talk about it. He wants to prop up the dollar so the Beast won't appear in public. But if they do this, our economy collapses and the Beast will appear. We call this, 'The Horns of Dilemma.' Out of the frying pan and into the fire. Between a rock and a hard place, as desert folk in Arizona liked to say. The 'hard place' is the desert floor. Which has no top soil. All choices are bad. But staying the course is the worst of all choices. The status quo is dying. Changing it in our favor is important. But we can't do it without first seeing and slaying the Beast of Derivatives Past and Future. And we let it grow to a size so big, it will crush us when we kill it.

Wall Street Blocked By Buyout Debt

Wall Street banks have failed to unload $220 billion of debt, which financed a wide range of major corporate buyouts initiated over the past two years, and that backlog is choking the credit markets despite recent efforts by the Federal Reserve and Treasury to invigorate the economy.
*snip*
The institutional loan market, where buyout loans are priced and traded just like stocks on an exchange, has remained frozen far longer than top private-equity investors predicted. Last summer, some of these investors said it would take about six months for the credit markets to clear the logjam of buyout debt.

Instead, loans for deals as old as Clear Channel Communications, which was swung in 2006 for $18.7 billion, are still getting the cold shoulder from debt investors.

"Six months ago, we were saying it's going to take six months to work through this debt," said Christopher Donnelly, vice president of Standard & Poor's Leveraged Commentary & Data. "Well, what happened was none of this paper was sold . . . and now we think it's going to take much longer to clean this up."

The bankers are stuck with the tail of this beast. Remember the excited news about buy outs? This propelled our stocks higher and higher. Since they ended abruptly when China and Japan began their battle over their currencies, these one-lucrative deals are vanishing. The stocks are increasingly worthless which is why markets are falling. As they fall, these useless and stupid bonds that are merely tons of stupid debts dumped onto whatever entity they could find, now these are worthless, too. Eventually, worth $0 if everyone does the Trump Walk Away. Bankruptcy kills these debt beasts. As well as lots of other things.

If interest rates drop to zero, why, these worthless bonds will be worth more than interest rate returns! Even if they are only worth slightly more than zero. Then Soros will buy them up, I suppose. Time to visit Japan:

INSIDE VIEW: Japan's Future Lies In Financial Sector

TOKYO (Nikkei)--Pessimism about Japan's economic outlook appears to be growing among investors around the world as well as Japanese themselves. That is not surprising given the country's demographic decline and tougher competition from emerging economies, but the nation still has the ability to generate decent growth.
**************************************************
Stocks: Up Nearly 2%, Lifted By Carmakers, Eased Credit Concerns

TOKYO (Kyodo)--Tokyo stocks reversed earlier losses on Thursday, closing nearly 2 percent higher as upbeat earnings outlooks for Japanese automakers and a capital infusion for a major U.S. bond insurer lifted market sentiment.
***************************************************
Nomura Profit Tumbles On Global Market Weakness

TOKYO (Dow Jones)--Nomura Holdings Inc. (8604) said Thursday its net profit fell sharply in the October-December quarter as global financial market weakness hurt its securities brokerage, investment banking and merchant banking operations.

They are already the wellspring for much of international debt generation. They want to be our bankers but they are crummy bankers. They bank at near 0%. This is the most wretched level of banking. It is positively medieval. The Jews of medieval Europe didn't give out 0% interest loans. My ancestor in Paris didn't accumulate enough wealth by charing 0% interest, to tempt the D'Medici Queen into a homicidal rage. If a banking system is able to create infinite debts at 0% interest we get a giant derivative monster bubble on the other side of the ledger. So far, very, very, VERY few economics writers can see this connection because it is more mystical and magical than easily traced. But they operate on the mirror principal: one side must balance the other. And if both debt generation and derivative savings schemes are set on 'infinity' both will rise to that level or whatever level leads to a complete break down and the balance 'resets' at zero!

The scheme today is to keep the carry trade from Japan NO MATTER WHAT. I was not invited to Davos to talk about this. Everyone would boo me. They would toss me out. This is not what they want to hear. And many of these same people who tried to crush the gold/oil matrix are now feeding that beast! They WANT higher gold prices! They are buying gold futures to protect themselves from the Beast of Derivatives Past and Future! Which they created and fed.

But then, few people believe me. Time to saddle up my unicorn, Sparky, who grew a horn in the last few hours.

Culture of Life News Main Page

Comments

[Koshka]

Elaine, what do you think of Catherine Austin Fitts's work at Solari.com?

[shargash]

Just don't ride Sparky naked; it's cold outside. :)

[CK]

Some years ago, I was lucky enough to spend two weeks in January in Key West, Fl.
On the drive home, I developed my "great plan for freedom for CK when he matures."
So I am building a houseboat. Not a small houseboat either but a liveable sized, full of storage, low on maintainence, attract the babes in droves, floating pleasure palace/working small repair factory houseboat. Some day, I will launch this domicile and make a leisurely passage down the delaware, down the east coast, along the keys and then south into the warm and leisurely caribean. Therein I shall dine on lime chicken, mangos, free fish, and cheap rum. During the day I will repair broken things for whatever the local currency is and then spend same on decadent food, wild women, bad music, and repair parts.
Ocassionaly I will heat up the smelter pot and smelt gold and silver and mithril and other fine goods and trade them for conch shells and sand dollars and decadent women and cheap music and wild booze and bad food. I expect to live to at leat 95 following this regimin and will breathe my last somewhere between small ports on small islands watching the flying fish attack the moon. No more lawns to mow, snow to shovel, debts to pay, neighbours to offend, family to attend, politicians to fend, nanny state nibshits to avoid. Just me and my boat and assorted bad women and decadent food and loud booze and bad music on the open sea repairing computers and washing machines and tractors and fishing reels and mending nets and eating lobsters fresh caught.
Of course I will expect high speed wireless internet and all mod cons while living this solitary freeman lifestyle. this future perfect plan has been brought to you by me, it is copywrit, patented, trademarked, watermarked and in other ways the sole and solitary property of me; but it is in the public domain so enjoy.

[mike]

but "will it float"

[Newbie]

I believe you may be interested in the following story. Maybe you have even seen it.
http://www.alternet.org/story/74510/?page=entire
Very illuminating

[Newbie]

Here part of the quote from the above link just to give an indication of how illuminating it is

"the credit derivatives market has grown from an estimated total notional amount of nearly $1 trillion outstanding at year-end 2001 to over $34 trillion at year-end 2006."

[CK]

Mike: If it doesn't, it will still be liquid.

[Pluto]

I often use details from Hieronymus Bosch to illustrate my own stuff when the topic is money. I wonder why that is?

Elaine, this is a fantastic article and I love the charts you do. Onward!

[EL JOHNNY]

What amazes me the most is the widening divergence between reality and our nations perceptions.

What is reality?

Last night's republican debate illustrates our leaders desire or ignorance, to repress their patriotism, good sense, and desire to grapple with this towering and threatening sunami.

The only candidate who tried to expose this most important threat to our national freedom was RON PAUL.

Look at the effort the moderator, a son of a Vanderbuilt, went to suppress Paul's ideas and exclude his desire to warn the nation that the real issues are being puposely repressed.

Repression leads to denial which leads to EXPLOSIVE, DESTRUCTIVE ERUPTIONS!

[EL JOHNNY]

CK

Is it the booze and broads or just the FREEDOM that is calling you.

GO FOR IT!

[Elaine Supkis]

El Johnny, the debate was a farce. I loved Ron Paul in the few minutes, less than three, he was given. He made Tweedle bomb McCain and Tweedle Pirate Romney look like fools.

Which they are.

Talk about hopeless. On the evening news tonight about the California 'debate' only the two twin warmongers were mentioned. No tapes of Ron Paul. He is nearly as invisible as I am.

[OC]

Gold coming the back door as money:

Barrick trades a pile of gold for 10 years of tires

http://www.theglobeandmail.com/servlet/story/RTGAM.20080130.wbarrick0130/BNStory/energy/home

[OC]

CK,

Absolutely good idea - I plan to do the same in Oz...as they say: Good'day mate!

[Greg]

I watched that debate aswell last night, that mccain really looks like some twisted psycho, he has that maniacal gleam in his eyes, and that twisted sick grin.....

you yanks are in trouble if he's your top guy!!!!!

[OC]

Mike,

Is this your latest article?

Rate Cut as Dagger
America's Teetering Banking System

By MIKE WHITNEY

http://www.counterpunch.org/whitney01312008.html

Great article!!!

[BigBen]

Elaine,

see this article:
www.safehaven.com/article-9358.htm

You mention the accumulation of precious metal money by China from it's earliest periods of trading with the west. I had just read this article yesterday about how they are "plotting" a return to monetary hegemony through their massive silver holdings and manipulation of our silver futures markets. GATA and others have warned repeatedly that some one has been manipulating the gold and silver futures markets and this seems to fit the article.
Given your knowledge of how China is playing our foolishness to their advantage, do you see any truth to these claims or is this just a shill for getting us to buy silver?
I have been reading your articles daily for the last couple of months and would like to thank you for bringing a new perspective to my understanding of the world's money systems and giving clarity to otherwise obtuse happenings (as reported by the lackey American press).

[Elaine Supkis]

Hoarding is a very ancient form of financial control. It goes back to...hmmmmm....the Great Pyramids and beyond. Anyone who has the means, hoards. For example, the US government is hoarding OIL. In the "national reserves'. This, at very high prices! They pump oil out of Mexico and Canada and put it into these huge salt caverns!

See? If someone does this with gold or diamonds or whatever, they are free to do this. Fort Knox used to be the world's biggest gold hoard, you know, until we lost 3/4ths of it.

Seems to me that the US is now hoarding DERIVATIVES. Isn't that stupid?

[Elaine Supkis]

Gold is not truly a serious 'currency' type thing because too much of it is used frivolously. In Saudi Arabia and the oil kingdoms, gold is mostly decorative. If gold went from $35 an ounce in 1970 to $1,000 an ounce, I can counter with this: masterpieces in art went from $1million a painting to $200 million in the same time frame. Gold would have to rise to $7000 an ounce to beat this.

The art market which is like real estate, etc, has seen huge, huge hikes as easy wealth, funny money and no taxes on the rich allows them to bid up Great Works Of Art to the heavens.

Once, a very well-connected young man was courting me and he went to an auction of Rembrant drawings going for over $50,000 back in 1968. He stole one of them and gave it to me and I gave it to Interpol. I was horrified when he dropped it in my mailbox.

Raw materials that are 'rare objects' can't beat man made materials. This is why China got rich exporting silks, fine dishes and other things rather than fur, wood, etc. Or metals. They worked metals and sold that. Value added is always more powerful a force in the long run. Capitalism needs raw materials like gold but its profits come from labor.

Which is why capitalists are always attacking labor! And hilariously, when labor wins, capitalism takes off! When labor loses, raw materials relentlessly climb while manufactured goods fall. Ergo: depressions.

[OC]

Like the Japanese katana; just common iron and carbon.

With the right skill and process, it becomes a thing of deadly beauty and great value to the right owner.

[CK]

@El Johnny: It is both of course, it is impossible to have freedom without booze and wild women. ( or wild men one would not want to shortchange other's preferences too badly )
@OC I understand that Hobart and its nautical environs are wonderful. Envy you having the southern oceans to enjoy.
@ Kate: So a deal has been struck and the Macklowes will now "walk away" from the 7 office properties they purchased on Manhattan for 7.2 BILLION less than a year ago.
http://online.wsj.com/article/SB120181345769733089.html Nice deal too, 50 mill down to swing 7.2 billion. Jingle mail takes on a whole new meaning when there are that many zeros. I am minded of a saying my grandfather used a lot. Owe a bank $100 they own you; owe a bank $1,000,000 they have a partner.
About gold, gold never shows a profit in the long run, gold has only one property, it keeps your purchasing power even over the long haul. Doesn't matter if the gold is in bars, bullion, coins, thread, leaf, jewelry fittings, chains; it keeps its value with reference to whatever other item is used to facilitate commerce. It keeps its value precisely because it is finite. The magic printing presses and the fiat paper money are effectively infinite and thus effectively worth zero sooner or later. Gold abides.

[Elaine Supkis]

"Over the long haul' means, when it loses value RELATIVE to other things, all you have to do is wait 50 to 100 years and it comes back.

The value of gold during its last bubble wasn't regained even now. If finally went past its last peak after 35+ years! Wow. Talk about waiting!

And if we take in account inflation, it still has a long ways to go to equal its purchasing power in 1980.

$800 back then bought a lot more food than today. The depression in wages of workers has made many human-made things much cheaper than back then, of course. This is what really counts: not the price of gold but the VALUE OF LABOR. And if labor is forced into cheaper, below inflation modes, gold 'buys' more.

Gold isn't a thing that saves wealth, killing off the workers saves wealth. But doing that kills CAPITALISM. Gold is NOT capitalism! Gold is just a holding cell for wealth. It is not PRODUCTIVE.

Americans have forgotten what capitalism is! It isn't accumulation of dead wealth, it is exploiting labor to ADD VALUE. Indian goldsmiths were adding value to the gold, people speculating in gold futures are NOT adding any value to anything.

Indeed, they are HIDING capital, not EXPANDING capital. See? Fear propels gold prices, not expectations of increasing capitalist value-added ventures.

[Elaine Supkis]

Also, canceling out inflation is laughably easy: higher interest rates. Volker did this and everyone screamed. The gold hoarders who were removing money from commerce, farmers and speculators hated him for doing this.

Savers loved him for finally paying attention. Banks need savings to survive. NO ONE gets loans if banks don't have savers. The reason we get bad inflation is when the government lies about inflation. It is pretty simple. Think they can't lie about gold? HAHAHA.

They can and they do.

[JSmith]

"Today, the hedges and evasions created by Jewish bankers due to anti-semitism and especially, Hitler, has driven them into creating this golem we call 'derivatives'."

The "Jewish bankers" didn't create derivatives - the rocket scientists did. In the 80s, banks began hiring PhD physicists, mathematicians, etc. to create new investment strategies (i.e., different ways to bet.)

The upper-level people investment at SocGen have doctorates in astrophysics, nuclear physics, etc. According to reports, people "interviewing" Mr. Kerviel indicate that he did what he did for one of the oldest reasons out there: he felt that he wasn't as "good" as everyone else, and wanted to impress his colleagues. According to a transcript, he said "I was held in lower regard than the others because of my educational and professional background."

Smart, hungry, and driven... but a little too hungry, and not enough smart!

"I loved Ron Paul in the few minutes, less than three, he was given. "

Very few people are going to vote for an old crank whose platform consists of dismantling most of the Federal Government. And you gotta love his views on minorities: "I've urged everyone in my family to know how to use a gun in self defense. For the animals are coming."

We all have our little litmus tests, and here's mine: Any candidate I vote for has to believe in evolution.

[aprilzi]

the new credits are declining.
http://www.federalreserve.gov/Releases/H8/current/
The crunch starts now.

[CK]

Yup the long haul is longer than 6 months. Why sometimes it is three generations from shirtsleeves to shirtsleeves.
As for regaining its purchasing power, an ounce of gold today buys you as much food as an ounce of gold did in 1980. It probably buys you more because some foodstuffs are produced and marketed more efficiently now than they were in 1980. Wealth is only created by workers. Without someone making things that others want there is no wealth, there would still be gold but if there is nothing to buy with it then it is not useful as money or as a store of wealth because without workers there is no wealth created to store. SO there is no argument about america having forgotten what capitalism is. They have.

[CK]

Evolution, Like Gaul, Is Divided Into Three Parts

Evolution breaks down into at least three logically separable components: First, that life arose by chemical accident; second, that it then evolved into the life we see today; and third, that the mechanism was the accretion of chance mutations. Evolutionists, not particularly logical, refuse to see this separability.

The first, chance formation of life, simply hasn’t been established. It isn’t science, but faith.

The second proposition, that life, having arisen by unknown means, then evolved into the life of today, is more solid. In very old rocks you find fish, then things, like coelacanth and the ichthyostega and later archaeopteryx, that look like transitional forms, and finally us. They seem to have somehow gotten from A to B. A process of evolution, however driven, looks reasonable. It is hard to imagine that these animals appeared magically from nowhere, one after the other.

The third proposition, that the mechanism of evolutions is chance mutation, though sacrosanct among its proponents, is shaky. If it cannot account for the simultaneous appearance of complex, functionally interdependent characteristics, as in the case of caterpillars, it fails. Thus far, it hasn’t accounted for them.

It is interesting to note that evolutionists switch stories regarding the mechanism of transformation. The standard Neo-Darwinian view is that evolution proceeds very slowly. But when it proves impossible to find evidence of gradual evolution, as for example when sudden changes appear in the fossil record, some evolutionists turn to “punctuated equilibrium,” which says that evolution happens by sudden undetectable spurts in small populations. The idea isn’t foolish, just unestablished. Then there are the evolutionists who, in opposition to those who maintain that point-mutations continue to account for human evolution, say that now cultural evolution has taken over.

Finally, when things do not happen according to script—when, for example, human intelligence appears too rapidly—then we have the theory of “privileged genes,” which evolved at breakneck speed because of assumed but unestablished selective pressures. That is, the existence of the pressures is inferred from the changes, and then the changes are attributed to the pressures. Oh.

When you have patched a tire too many times, you start thinking about getting a new tire.

Stolen from Fred Reed

[JSmith]

"When you have patched a tire too many times, you start thinking about getting a new tire."

I get that you don't buy into evolution either. Do you prefer creationist magic tricks?

[Elaine Supkis]

Mother nature, not some stupid male god, created living things. HAHAHA.

Gads. And we should all sacrifice male organs to her mighty powers on a big rock at night when the full moon rises on the Equinox using a sickle made of gold like in the old days. I am a conservative here.

And Pegasus gets a golden apple for inventing lightning bolts.

[JSmith]

"Mother nature, not some stupid male god, created living things."

Through evolutionary processes, or by waving her magical wand?

[CK]

JS:
I take it you did not like the questions Mr. Reed raised in his essay.

[JSmith]

I got that he didn't really understand what he was on (and on, and on) about. Be that as it may, his best remark was one you quoted:

"When you have patched a tire too many times, you start thinking about getting a new tire."

And that's how science moves on. We have quantum theory because of deficiencies in classical thermodynamics. Life sciences will continue to make progress, but evolution remains the baseline (not Creators, Intelligent Designers, or other supernatural postulates.)

[DeVaul]

Perhaps Mr. Reed should visit the Creation Museum here in Kentucky. He would clearly see how evolution has been debunked by the all the dinosaur exhibits with saddles on them and being used to pull carts and buggies. (Strangely, some dinosaurs were wearing only "English show horse saddles", which obviously means they were bred for show events only and not as work animals, but this was done by man and not evolution.)

He might even give it his endorsement.

[JSmith]

"Perhaps Mr. Reed should visit the Creation Museum here in Kentucky."

I've heard about that; it sounds hilarious.

Where is it, DeVaul? Maybe we'll swing by there on our next trip south this summer.

[Credit Expert]

And now we have the $700 million buyout. What the heck is next?!