Evil Kerviel Jumps $73 Billion Sharks
January 27, 2008
Elaine Meinel Supkis
More details about Evil Kerviel's high-flying motorcycle act. Turns out he made really good bets in the SG betting parlor only he broke into other people's computers to do this. Then, when the bank had to balance the books, he panicked and sold things at a deliberate loss in order to balance things out. Then this sorcerer's apprentice caused a REAL panic and this cascaded until billions were lost, many billions, across the entire planet. I see some moral in this story. The hard working young man doing things for the sheer fun of it? Shows how destabilized the system is, by the way. Many horrible panics start this way, as a game. Time to talk about the Panic of 1893! The one that killed my great granddad.
In a five-page document released Sunday, France's second-largest bank also sought to counter the notion that it had disrupted markets by hurriedly selling off the massive positions that Kerviel allegedly built up without authorization.The bank took three days last week to sell off the contracts on the Eurostoxx, DAX and FTSE indices, but said Sunday it had done so in a ''controlled'' way.
''He had a very good understanding of all of Societe Generale's processing and control procedures,'' the statement said.
The bank said Kerviel had built up a position worth some $73.5 billion -- which was eventually closed or hedged by last Wednesday with a loss of $7.21 billion.
''The position was unwound over three days in a controlled fashion,'' it said.
Several things rise to the surface here: one is, the Societe Generale found out their little squib of an apprentice magician was out of control and had played a huge game, the biggest magic trick any apprentice ever has made in history. So did they tell the markets and try to correct it the proper way? HAHAHA.
Nope! They panicked and tried to undo it AS FAST AS POSSIBLE. And incidentally, as sneakily as possible. The President of France was busy with his fancy mistress and didn't notice the chaos unfolding. She is pretty, isn't she? Voila! But the ensuing chaos caused a cascade traders call 'a waterfall'. I was up that night watching it and posting about it, it happened so fast, I posted mainly headlines for several hours.
Now the big shots want all the blame put on this kid. But they are the ones who tried to secretly undo his secret magic spells. In the most liquid of all markets, no less! I keep saying, even small changes in the flow of money can trigger vast changes in the landscape if conditions are right. Everyone has been scared to death for a long time now, since August. In the last 6 weeks, the fear has been quite intense. But it wasn't a panic. This event is most definitely a pure panic trigger. Like the stock crash of 1987.
It was so intense, the Fed had to meet in the middle of the night for all of us, watching this panic, saw that stocks were going to drop in the US by at least 500 pts and if they fell 7% like the other markets, it would have been by over 650 pts! At sunrise, the shocking and I think, utterly dangerous drop in rates was in place and the panic turned into a simple bear market chewing off our limbs. Asia responded happily to the prospect of a flood of easy money enabling US consumers to buy Asian goods and their markets took off.
But our overall economy took a very bad hit. The rate drops showed weakness and weakened our own industry as well as finances and has now set the stage for further panics. For this is far from done!
Bouton said Kerviel had been betting throughout 2007 that markets would fall -- a winning position. But the trader had overstepped his authority and was wagering much more money than he should have, Bouton said.So at the beginning of January, Bouton said, the trader voluntarily created losing positions, to neutralize his earlier gains and cover his tracks.
But this month's quickly dropping markets turned ''this sad affair ... into a Greek tragedy: His virtual losing position became huge,'' Bouton was quoted by Le Figaro as saying.
Despite the bank's losses, which Bouton called ''enormous and abnormal,'' he insisted Societe Generale's viability was not at risk.
He was undoing almost $80 billion in trades???? Wow. This is pure insanity. The whole system that has grown up around fiat currency/interest rate malfunctions is now a hideous monster in size and gets worse every cycle. At this rate, it will eat up all the financing of the earth. Betting on variations in rate differentials and projections of future values of bonds and reserves is making many people rich but it is utterly useless. It causes panics and wild swings and can't be easily contained. Also, these panics are eating up greater and greater sums. If we get a multi-trillion dollar crash, this is ever harder to undo via simple manufacturing/trading/value-added/commodity economies. This is like building a very high wall of bricks which crash down and crush everything when the earth trembles. Eventually, the wall will be higher than the Tower of Babel and longer than the Great Wall of China. And it will crush everything when it falls.
As I leaf through history, I notice something about panics: the conditions will fester for sometimes many months and there is some drops, some wavering in the markets. Banks are nervous and people start hedging their positions and the people in the know begin to shove things to the exits. Then nothing bad happens and people edge back into the markets and things seem normal. Then, some human makes a move: a bank is robbed by the President who flees the country. Or a gold trader admits he really has no gold, after all. Or perhaps a hostile take over fails and there is sudden retaliation. Someone can't meet their margin calls due to spending too much on a prostitute. Or someone at the top is shot by anarchists or jealous boyfriends of prostitutes.
Once a panic happens, the bear market begins in ernest. These seldom last less than 3 years. They stand out in history because the behavior triggering the panic is 'normal' but often very exaggerated. In today's example, the crazy trader on the floor wasn't playing with a billion or 7 billion but 78 billion dollars. The huge size created the perfect windstorm. Even if no one knew what the bank or the clerk were doing as they frantically tried to undo this mess, their actions triggered a panic because they were NOT NORMAL. It is like a herd of cattle. You can throw a stone in the grazing herd and they will ignore it. But if you throw a stone and a pack of wolves howl at the same time, the cattle will raise their tails and hunch their shoulders and begin a thunderous run away from both the rock and the wolves.
In today's case, the rock was about the size of a small meteoroid. Like the one that created Meteor Crater in Arizona. Not like the killer one that eliminated most dinosaurs.
Time to visit the Panic of 1893:
People attempted to redeem silver notes for gold; ultimately the statutory limit for the minimum amount of gold in federal reserves was reached and U.S. notes could no longer be successfully redeemed for gold. The investments during the time of the Panic were heavily financed through bond issues with high interest payments. The National Cordage Company (the most actively traded stock at the time) went into receivership as a result of its bankers calling their loans in response to rumors regarding the NCC's financial distress.A series of bank failures followed, and the price of silver fell. The Northern Pacific Railway, the Union Pacific Railroad and the Atchison, Topeka & Santa Fe Railroad all failed. This was followed by the bankruptcy of many other companies; in total over 15,000 companies and 500 banks failed (many in the west). About 17%-19% of the workforce was unemployed at the Panic's peak.
Before a panic turns into a full panic, people rush into gold. Indeed, most panics also spawn gold rushes. This one was no exception! The Alaskan Gold Rush was born out of the loins of the 1893 panic. This panic didn't start in the US, by the way. All Great Panics are global and start in the most insidious ways as we saw this week. The 1903 panic, for example, the one that gave birth to the Federal Reserve was born in Canada, not the US. The 1893 panic hit my own family rather hard. It led to failures of rivals in the steel-making and railroad business. My own great-granddad lost it all and shot himself. My grandmother was left at the mansion sitting on a small suitcase and the sheriff who came to evict her after her nanny ran off, let her keep her dolly. She said, 'I didn't even know how to unbutton my shoes or change my frock.' She grew up a free spirit with her two maiden grandaunts who were Shakers and over 90 years old. This tragedy actually freed her from the strictures of Victorian morals. She was out in the country, riding horses, swimming, shooting, working in the sun. It was great.
Note the moral here: money isn't always everything or even much of anything in the end. Here are some newspaper clippings from that panic:
Interestingly enough, exactly like the Great Panic of 1873, this panic coincided with the opening of a great World's Fair:this time, not in Vienna but in Chicago. The Columbian Exposition had many technological and geological wonders. The Wizard of Oz was written soon after this panic. It is about this little girl, abandoned and alone, moving in with her great aunt...and living in the country and having adventures....isn't life wonderful? The wild tit-for-tat games of the bankers, the industrialists trying to buy out or undermine each other was quite destructive. They didn't give a hoot, these things may cause panics. The often viewed panics as essays in Darwinian red in tooth and claw survival. This was so hard on workers, some reformers thought, if the government controlled more things, it wouldn't crash and burn every 20 years.
The biggest players in this game didn't want THAT! Unless they controlled the government. No Andrew Jacksons, thank you! Now, with the government firmly in their grip, they want no controls today but when the mess up or cause the eternal 20 year panics, they want the government to fix things. Only this takes at least 3 years to do. In Japan, the fix is to keep things miserable for as long as humanly possible. The 1893 panic led to an election between 'Free Silver, Free Farmer' William Jennings Bryant versus the Miserable Flint Hearted Gold-bug Bankers of New York, William McKinley.
McKinley was shot by an anarchist, by the way. At the Buffalo world's fair. Right before the next panic of 1903. Isn't life interesting? Well, back to today.
The Bond Market Place Independent Of Federal Reserve Action Has Declared An Interest Rate Hike
I. The Bond Market Place Independent Of Federal Reserve Action Has Declared An Interest Rate HikeUS Treasury Bonds bonds have traditionally, and especially over the last seven months, been a 'lifeboat of safety', from the sinking ships of stocks and real estate.
But, in response to reports of surging inflation, the steepening yield curve, the financial troubles of municipal guarantors AMBAC and MBIA, and concerns of the Federal Reserve Chief dropping money onto and into the banks, in helicopter like ways, to preserve their solvency, the bond market place, the week ending 1-25-2008, has declared a defacto interest rate hike, during the same week that the Federal Reserve lowered the central bank interest rate by 0.75%.
This little tidbit of news was issued right before the Panic of 2008. Things are not right. The old debate from 100 years ago over whether we should use gold, silver or fiat paper to issue script for use as money rages onwards. Far from being resolved, it is being retested. Instead of the Republicans being the ones riding into office this time, it is probably going to be a handsome black man, Obama. Like McKinley, he is also in danger due to heightened passions. We have no idea what his economic platform is. At this point in time, the fact that he is more civilized and gracious than the spoiled rich kid from New Haven and Yale, Bush, is enough to give our nation faint hope we might not fall screaming off the cliff. At least Obama knows how to throw a proper State Dinner and understands social graces. He is very much like a classic Victorian in this way. How funny is that?
But the issues surrounding the value of money, the role gold plays in all this, the utility of silver coinage, excessive debts and the need for innovation: all the issues including immigration and the looming wars on the horizon as industrialization radicalizes huge populations in other lands: all the issues are nearly the same as back then. We should be very proud that Obama is running high in the polls for President. 100 years ago, in 1893, a conductor was arrested for letting a black man ride in a white car on the train. The came to the Supreme Court in 1894 in the infamous 'Plessy verus Ferguson' trial that gave narly unlimited scope for the noxious Jim Crow laws.
By Alf Field
Jan 7 2008 10:06AM
Sub-prime problems: The sub-prime problems in the USA, Europe and elsewhere stem from excessive liquidity creation; leading to demand for investment vehicles exceeding supply; leading to creation of new, esoteric products and fraudulent acquisition of business. Losses from the sub-prime area started a chain reaction.Credit Default Swaps (Stop Loss Insurance on credit/financial instruments): CDS’s have grown from $10 Trillion to $46 Trillion (notional value) in the 2 years to June 2007, having mushroomed from $22 Trillion in December 2006, a gain of $24 Trillion in just 6 months. Purveyors and acquirers of suspect AAA paper were attempting tocover their backs by purchasing loss insurance. Major losses will emerge from the CDS area, related to both direct losses and losses occurring as counter-parties in derivative transactions fail to meet their obligations.
Government Sponsored Enterprises (GSE’s) such as Fannie Mae and Freddie Mac face potential bankruptcy as they carry over $4 Trillion of Credit Default derivatives on their books with a capital base of only 1.5% of the liability. The GSE capital base is being eroded by mortgage losses that are escalating daily.
I am including Alf's interesting and in the end, foolish article here just because I want to show that NO ONE has the FAINTEST idea how many trillions are at stake in the Panic of 2008. Quadrupling in just 2 years? To nearly $50 trillion? This is disgusting and obviously impossible. World trade excesses and global savings have not risen by $40 trillion in the last two years! This is why I imagine we will all have a long, hard discussion about our financing systems.
Like back then. Or maybe not. Can the New World Order guys, the Trilateral Commisars, the Buldgeriger Bilderberger parakeets or the Doha Round dopes be able to fix it so we never have madcap global red ink floods and wild panics? HAHAHA. They are dreaming about gaining even MORE control, of course!
Alf again:
Once such a consensus is reached and it is finally accepted that monetary discipline must return, then an international gathering of experts might have a chance of thrashing out a new monetary system based on the principles of sound money. What seems likely is that a new world-wide currency will have to be created, a currency that all nations will use. It must be a currency that cannot be created at will by anyone. It will have to be managed and policed by a totally independent and international body. It will also have to be based on something of real value and be freely exchangeable.It is futile for over 150 countries to each have their own local currency. Globalisation suggests that a single currency used world-wide is now possible. The template is the Euro which replaced a whole raft of different European currencies. Be prepared for the eventual arrival of the “GLOBAL”.
What will we call this currency? Weimar Marks? How about Wizards of Oz Bucks. Or Cowardly Lion Lira? I suspect it will be called 'Yuan't Kidding, Bucko!' Of course, the ruling elites itch to have a currency issued by themselves. They will hide at distant resorts and high mountains or hang out at pirate coves in the Caribbean. And when rioting people attack them, they will have private armies gun down citizen who will be slaves. Charming future, no? And will this stop panics or silly financial messes?
You got to be kidding. All the past ones were caused by the same group that will cause the future ones! Not the little investors. But the biggest bankers.
More Alf:
Historically this type of situation has resulted in politicians and central banker’s throwing newly created money at the problem areas. There is little reason to think that the current crisis will be any different, except that the quantities of new money that will need to be created to attempt to bail-out all problem situations as they occur will be so huge that people will finally realise that the money has become valueless.
Ah, but not all money is 'valueless.' The dollar may be dying, the yen may want to be slain hari-kari bit the euro and the yuan aren't dying at all. Far from it. Maybe we should hand over all our finances to the Germans. So long as they remember 1924.
Dr und Professor Hjalmar Schacht the man who took Germany from 30% unemployment in 32 to irresistable force by 36 while the rest of the world was going through un grande depression.
Posted by: CK | January 27, 2008 at 08:51 PM
In the pursuit of happiness, would be wise to examine the 'sponsorship' of our would be leaders.
If we examine the rolls of the current gang in D.C. and their previous rises, we notice a persistent divider.
From Davos re Con. Rice - http://www.scoop.co.nz/stories/WO0801/S00268.htm
Please note the devotion to world order, America kinda absent, no?
The sponsorship of Obama -
http://www.nowpublic.com/obama-cfr
http://www.cfr.org/bios/11603/barack_obama.html
and how he got where he is -
http://en.wikipedia.org/wiki/Jack_Ryan_(Senate_candidate)
I respectfully submit to your wisdom - the last thing America needs is one who has learded "to throw a proper State Dinner and understands social graces."
Honesty is returning. Time to focus on that which cannot be taken away. .
Posted by: pulse | January 27, 2008 at 09:02 PM
Elaine, it is 8PM on the west coast, and IRIS is still.
Posted by: notgonnatellya | January 27, 2008 at 10:56 PM
The Jews and their subservients gentile ANGLO- American partners (what remains of the Rockefeller Empire after it lost in a infamily, mafia style squabble in WW 2) who lost in the titanic financial battle where the gentile Rockfeller/Morgan/Ford/Bush axis backed hitler and the International Jews (Rothchild/Loeb/Warburg/Kuhn,etc) Axis backed their Soviet comrades.
The Zionist, Sahedrin Jews want to create a SECULAR, MASONIC NWO in Jerusalem under their control
Posted by: pete | January 27, 2008 at 11:23 PM
I've got an idea. Why don't we just launch them into another galaxy they can take their vast wealth with them. Just get out of here. Maybe then, the world can have some peace.
Posted by: CEO Nutcracker | January 28, 2008 at 12:02 AM
I'm starting to smell a rat with this little Jewish "rogue" story. Kerveil, the genius, my ass.
He worked on Sarkozy's campaign and the Jewish Mayor of his little Jewish community, where he grew up, knew him personally & defends him,along with his Jewish attorney, and his many Jewish aunties. "Oye, he was a good boy." "He must have been manipulated. Yaya, that's it!" Pullleeeze, with the Bullshit! The little dope wasn't even qualified for this job.
Here is the article from the TimesOnline, UK.
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3254619.ece
I wouldn't be suprised if that money ended up in Israli bank or Swiss acct.
We'll never know, as this is yet another "untouchbale story" in the Grand Scheme, that our Media will duly ignore.
Posted by: CEO Nutcracker | January 28, 2008 at 12:49 AM
I'll try to post this again as the address above is cut up.
http://business.timesonline.co.uk/tol/business/industry_sectors/
banking_and_finance/article3254619.ece
UH,UH,UH.......The big grab is on, I suppose.
Posted by: CEO Nutcracker | January 28, 2008 at 01:01 AM
Sigh.
The intersection of money, religion and power is very great. I am not an anti-semite. The religious games being played right now may intersect with Mossad. I await more news.
But remember this: ALL money schemes are part of ALL religions in various ways as my new article explains. The Jews are NOT the only ones playing this game, not by a long shot. At all.
Posted by: Elaine Supkis | January 28, 2008 at 09:42 AM
The 'Jews' (please remember 'they' do not all think alike) have taken the brunt of government confiscations and brutality too many times though history. Regardless - it appears the control of all banking will be in the hands of Communist China and the Arab Kings.
To promote hatred based on particular religions or personal choices is to pursue the division of motivations. This results in feeding the agenda of those who wish to control us.
Discard all of this left/right, lib/cons, repub/demo socialist/capitalist nonsense and countless other divisions promoted by the establishment.
The 'collectivist' mentality is the aggressive destroyer of freedom. Each 'gov't program' robs us of our responsibility to assist each other, robs us of the joy of helping, robs us of the greatest personal accomplishments of truly impacting lives. There in lies the evil of the collectivists who will remove all freedom of choice - you become worthless as an individual and devolve to a commodity.
We must hold the principle of PERSONAL SOVEREIGNTY as a precious gift. Corruption will not survive in a community of truth, mutual respect and common principle that LIBERTY will be defended at ALL costs. Life is not perfect, nor should it be.
Nutcracker: here is a little twist for you to ponder - http://ezralevant.com/2008/01/whats-this-all-about.html
Posted by: pulse | January 28, 2008 at 10:06 AM
100% correct, Pulse!
I keep pointing this out. Anti-semitism is 'painting everyone with the same brush' and ignoring or minimizing history. I do not do that.
Indeed, ALL religions and ALL cultures do what people accuse Jews of doing! ALL try the dark arts of ethnic cleansing, religious intolerance, theft of 'outsiders' and wars!
This is called BEING HUMAN. I talk a lot about the darker recesses of the human psyche and I use very ancient stories to illustrate modern problems. ALL HUMANS ARE IDENTICAL. Some are collectively more clever but this is due to evolution. Namely, if you oppress a population and cull the weak viciously, they turn into something new.
For example, for many centuries, the Christians cruelly abused the Jews and the only ones that could survive were the smarter ones, they were denied the right to work the land so the peasant parts were bred out of the population.
It is pretty simple. If we want smart children, all we have to do is torment them and starve the less smart to death. If they can outwit the people doing this to them, over the centuries, these children will breed ever-smarter children!
It is very easy. Breeders of animals know this. Lap dogs, for example, are very stupid. Sheep dogs are very smart. A lap dog doesn't have to think, a sheep dog has to outwit WOLVES.
Mountain horses are smarter than plains horses, the environment forces this on them. All domestic animals are stupider than wild ones for the same reasons.
The Jews are NOT the ones at the top of the Pyramid of Power. Not at all. Some Jews are servants, courtiers of the Real Rulers. The Real Rulers WANT the Jews in the Middle East so they can destroy them in WWIII. The dark inner minds of these people is very dangerous.
People blaming Jews for problems these rulers create is a classic trap. Is Queen Elizabeth a Jewish woman? Eh?
Is the Pope Jewish? Indeed! Who endangers us all?
People seeking the union of temporal and heavenly power! And why do the ancients have so many tales of people seeking these powers, being destroyed by whom?
The GODS. Via the Fates and the Furies, the Norns, the lightning bolts from Pegasus who was an early storm god in the ancient city of Ur where all the semitic religions were born.
Posted by: Elaine Supkis | January 28, 2008 at 11:00 AM
It would be very narrow-minded to suggest it is all Jews who are behind this. It is equally naive to suggest they don't play a major role. They own the banks, financial institutions, they control the governments of the US, UK and EU and their laws. They decide which MiddleEast nations need bombing. And, they control the Media to make sure it gets done. What Israel wants, it gets. So do the big bankers who make the laws.
“Allow me to control the issue and the nation’s money and I care not who makes its laws!” — Amshell Rothschild
I'm not an anti-semite either, I'm simply stating some well known facts.
Posted by: CEO Nutcracker | January 28, 2008 at 11:34 AM
Hi, I am contributing a small amount of money to Elaine today, and I mention it here even though it might make me look like a self-congratulating idiot.
I hope it will encourage other people to send some token of the value she brings us by wading through our national and financial morass by the light of her her gigundous (a word according to UrbanDictionary.com) brain, and coming out the other side spitting truth and clarity. These are in short supply right now, especially combined, which is why I start my day here and check back repeatedly.
Posted by: Blake | January 28, 2008 at 02:22 PM
Blake, readers send money spontaneously and I am constantly amazed by this. I can't thank everyone enough for their kindness and generosity. This world is an amazing place, isn't it?
Posted by: Elaine Supkis | January 28, 2008 at 02:29 PM