Money Matters: Everyone Operates In the Dark In Finances

October 17, 2007

Elaine Meinel Supkis

The privateers and pirates operating out of Queen Elizabeth's islands are in a bad mood. People are demanding they open their books! Ahoy, slash their throats, maties! We have a world banking system that is very much operating in the dark. The occult abilities to produce lots of money depends on keeping things in the dark. Countrywide's Mozilo the Gorilla is being investigated by the SEC and I learn that Demcratic Senator Dodd is running for President and hedge funds and banks are pouring money into his pockets because he now heads the Banking Committee. And Hillary gets even more pirate cash then even any Republicans! Time to arrest everyone!

From Bloomberg:

Amid a clamor for more rules governing the funds, if regulators and trade groups in the U.K. get their way, we may soon find out more about how the funds work. We'll know their strategies and the companies they are investing in.

But hold on. Is that really fair, or wise? After all, a certain amount of secrecy may well be what made hedge funds so successful. If you get rid of that, you will either drive the whole industry offshore or kill it.

Astonishing, isn't it? Even after the first salvos of economic cannonades punch holes in our banking Titanic, there is still a debate defending opacity in our multitude of off-shore funds? True, our pirates and howling hell beasts made lots of loot while operating totally in the dark. For example, if I wanted to dig a tunnel to the bank vault at my local bank, I wouldn't want the authorities to know what I was doing. The mantra that we should let capitalist speculators maxium freedom and minimum oversight is now being replaced by increasing cries for someone to take control of this evolving mess.

Of course, right now, the same people who created our devious, dark system are now screaming at Russia and China to open their books and let us see what they are doing. The yin/yang of dark systems versus light systems lies in the heart of our economic mess that is unfolding. The darkest heart here is in Japan: far from embracing free trade or even modern banking, Japan has set up this bizarre system whereby they can have a fake economy while running a totally different system just under the surface. Since their system is totally occult and is set to undermine all other economic systems, they are successfully destroying the European sectors of the American empire as well as wrecking the American system itself.

The Chinese imitate the Japanese in some key ways but one: they are trying to set up the pre-bubble/collapse system of Japan. That was where the executives and the workers were closer in status and pay and the factory system was paternalistic, not exploitive. The Japanese dumped that system as being unprofitable and are running the serf system whereby the nobles crush the lowly workers and keep them in perpetual poverty while the nobles play interesting international intrigues.

From Bloomberg:

They aren't the only ones who think the funds should be telling the world more about what they are doing. According to a report in the Financial Times, the U.K.'s Financial Services Authority, which regulates the nation's financial industry, may allow companies to force disclosure from hedge funds that have built up a stake in the business, even if they have done so through derivatives contracts rather than by buying shares.

Likewise, German Finance Minister Peer Steinbrueck has been trying to get the Group of Seven industrialized nations to demand more transparency from the funds. And, in September, Joseph Yam, chairman of the Hong Kong Monetary Authority, said in a lecture he was unhappy with the levels of disclosure from the funds.

Germany seems to be increasingly agitated about the world economy. They have a cultural doctrine of strong currency and socialism which is breaking down due to the weak currency/serfdom for workers system being imposed on the entire planet by the world's #1 and #2 economies. In the past, I have marveled over the noxious mess of having the top two nations pursue obvious depression-type dynamics while at the same time, boasting about being great economies. Whenever another country begins to grab increasing market share and has a higher growth rate than the previous leaders, we see these sorts of tensions. When Germany and the US were surging past England 100 years ago, these tensions caused open warfare.

For the last week, transportation workers have been conducting a series of strikes that are increasingly paralyzing Europe's two key nations, Germany and France. Both nations voted into power right wingers who hate socialism and who want to imitate Japan and the USA. At first, the European people thought their economic doldrums could be solved by enhancing their alliance with the Empire in the US but the payoffs are not as good as they thought. For instead of being an industrial power or agricultural giant, they are both struggling to keep afloat. The strong euro has sheltered them from global inflation but it is now killing export trade and they are now running increasingly in the red and rapidly losing market share.

Like good players in a bad game, they have opted for aping Japan and the US and are now blaming China for problems created by the world's #1 and #2 economies. As worker unrest rises in Europe, I expect the right wing to flounder and fall. For the last 50 years under the American nuclear umbrella, the anti-communist, anti-socialist ideology of the US has permeated Europe and the flush of wealth there was due to imperialist actions by the US. We spent wildly on military ventures which Europe got to ride along and make money off of while not paying the big bills this created. Now the US is in financial trouble and is desperate to make money even as we lost the means to gain wealth via classic capitalist ways: by exploiting labor but not crushing labor.

For all economic systems depend on labor being able to gain purchasing power. This is the real moving mechanism that makes wealth and causes it to grow. Using money to make money while not letting it pass through the hands of workers at some point leads to pointless speculation as we plainly see today. Money breeding money leads to inflation. The Chinese are using their money to buy raw materials and this is driving up the price of raw materials but not for Europe who has money making money. Europe's lack of inflation normally should cause rejoicing but it gives them no trade advantage so they are losing a key part of their economic system: the worker's ability to earn value-added profits from manufacturing and transport of goods.

The dark system for moving money about the planet and exploiting weaknesses in the monetary system has created trillions of dollars of useless money. The schemes to pile on debts has created massive amounts of money and this shows up in all systems. But it has produced very little in the West in the form of classic capitalist goods. It has only created a dark pool of money for buying goods manufactured elsewhere.

From Bloomberg:

For all the criticism they face, there is no real evidence that hedge funds have made the markets less stable. The facts point in the opposite direction: As the funds grow in power, the markets become more stable, not less. In August, when stock prices dropped on concern that U.S. subprime lending was leading to a credit squeeze, it was the heavily regulated banks that got into the most trouble. With a few exceptions, the ``risky'' hedge funds weathered the storm a lot better.

And how did the hedge funds 'weather the storm'? Can we look in their books to see if the high valuations of all that paper in Cayman, Jersey and Bermuda are worth something? Or is their stability totally fake, a fraud? They can't and won't open their books for the simple reason, there is a lot less there than they pretend. If we have a black box on a magician's table and he says, 'There is a trillion dollars in that box' and we say, 'Open it.' And he waves his wand and then says, 'Sorry, it has to remain secret to protect it from losing its value.'

This is called 'Pandora's Box'. If we do open the lid, out fly the demons of economic destruction. So the hedge funds and other off shore tax cheats would like to keep that closed. No way are we to meddle. The heavily regulated banks got in trouble, by the way, because they got stuck out in the open with the exact same worthless paper products held by the hedge funds. Anyone who thinks the hedgies are holding better papers are nuts. Indeed, the list of hedge funds closing their bank windows has been rising. Often, they say, they will 'temporarily' suspend investors ability to remove funds until they 'revalue' their holdings. Only how do they let anyone know the true value if it is $0? They can't. So they try to keep it in the dark for as long a humanly possible.

From the NY Sun:

One of the fastest moving trends on Wall Street has flown under the radar of individual investors and, seemingly, the Securities and Exchange Commission: the rapid rise of "dark pools" stock trading arenas.

As the name suggests, dark pools lack transparency: They are used by institutional investors seeking to trade large blocks of stocks without creating the price wobbles that routinely accompany such moves. The trading is done away from the traditional exchanges, offering unprecedented anonymity.

Recently, more than 20% of all trades in New York Stock Exchange-listed stocks have been funneled through these dark pools, up from just 3% to 5% two years ago, according to NYSE figures.

I know computer programmers who work for the biggest investment houses. They were hired to create trading programs that would cloak the intentions of the selling entities. These programs are very complex and the intentions, basically dishonest. The mass sellers of these instruments are seeking people who are on the outside, chumps, easy hits, to unload stocks at a higher price than they would be worth if they were traded more honestly. People are fooled into thinking these stocks are valuable and are wanted by the sellers who are in the know on many levels. Since our entire government system for running our interface with world economic forces are infiltrated with armies of men and women whose alliance is with these huge banking/finance houses like Goldman Sachs, they are in the know, big time. Having this advantage, they should be happy but aren't. They need the further ability to sell off like crazy while keeping prices as high as possible until the selling is so great, people finally figure out, the stocks are over-valued.

Since computers do this silently and without human intervention, no humans in the system can spill the beans by accident while drinking at local bars that dot lower Manhattan. There is no gossip to trade. One doesn't hear interesting news while riding in elevators (seriously, this was a great source of information years ago!). Everyone has a poker face not from art or skill but from deliberate ignorance. They are playing poker with cards they never see, they just give the poker robot instructions.

The first time this sort of blind trade was used, it crashed the market in 1987. So we have had 20 years of refinements to the system which accelerated greatly since 2000. We will still have market panics as the chumps who buy these unwanted stocks all try desperately to unload all at once. But the seeming stability is false just like the hedge funds are not really stabilizing anything, either. The accumulation of danger and loss of faith in the system continues until it reaches a crisis.

From the Federal Reserve, weekly updates of how 'factors' create money out of thin air;

These data are released each Thursday, generally at 4:30 p.m., unless Thursday is a federal holiday, in which case the data will be released on Friday, generally at 4:30 p.m.

Since this is my birthday week, I decided to put up the same week's October data for each year for the last 10 years. This way, we can see how money appears like magic, like clockwork. The numbers to look at are at the bottom of each year's tally. It grows quite a bit over the years. We worked backwards from today out os whim. I like retracing steps from today into the past.

Click on each year's image to enlarge:

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It rose in just one week by $26 billion. The total today is $870 billion. One month after 9/11, the total was only $621.5 billion. A year earlier, just before the fake election of 2000 the total was $564 billion. So in only one year, it rose $57.5 billion. This is in contrast between 1999 and 2000: a $20 billion rise over the course of that year where we had the beginnings of the Dot Com collapse.

In 10 years, it rose from $423 billion to $870.5 billion. This means it doubled. Any system that doubles every 10 years is a classic graph that is a line drawn diagonally straight upwards. If we look at any data of any part of the US banking or Federal Reserve system, we see this great growth in 'wealth'. But the key here is the fact that China and the Arab kingdoms have been able to create huge 'Sovereign Wealth Funds' during this same time frame while we built absolutely nothing like this at all. We built pirate coves at tax havens and splurged on housing here at home.

From Financial Sense:

America has become more a debt 'junkie' than ever before with total debt of $48 Trillion with the highest debt ratio in history.

That's $161,287 per man, woman and child or $645,148 per family of 4 -- an increase of $45,514 more debt per family than last year.

Last year total debt increased $3.9 Trillion, 5 times more than GDP. External debt owed foreign interests increased $1 Trillion; Household, business and financial sector debt soared 9%.

72% ($35 trillion) of total debt was created since 1990, a period primarily driven by debt instead of by productive activity.

And, the above does not include un-funded pensions and medical promises

The huge growth of national indebtedness coincides with a great experiment in banking: Japan's near 0% interest rates. Depressions happen when people can't get loans even at 0%. At first, this was true in Japan but since then, it has been enforced for trade reasons. The Bank of Japan has created this back door to the global banking system that allows them to keep the yen very weak even as they run the biggest trade profit margins on earth. They are #1 when it comes to trade PROFITS. China is #1 when it comes to trade SURPLUSES. Japan has not used its gigantic FOREX reserves to cut down public debt which is one of the highest on earth after the US and England. So I tag this matter as being of primary importance. After pouring over banking data in England and the US going back 100 years, a 0% interest regime has NEVER existed. Ergo: it is either impossible or a fraud. And running one like this for over 10 years is astonishing and amazing and frankly, a fraud.

From Bloomberg:

Hillary Clinton raised more money on Wall Street last quarter than Barack Obama, Rudy Giuliani and Mitt Romney combined.

Clinton beat Democratic presidential rival Obama in donations from employees of the top 10 underwriters of U.S. stock offerings, a reversal from previous quarters. The New York senator brought in $748,896 from the firms in July through September, compared with $177,456 for Obama, an Illinois senator.
*snip*
Employees at the top 10 hedge funds and private-equity firms, whose tax rates are under assault from lawmakers including Obama and Clinton, didn't give nearly as much to White House hopefuls. The leader in both groups was Christopher Dodd of Connecticut, a Democratic presidential candidate who is also chairman of the Senate Banking Committee.

Dodd, 63, took in $78,900 from the top 10 private-equity companies and top 10 hedge funds, compared with $50,573 for Clinton, the only rival to come close. The top Republican to raise money from private-equity firms was Romney, 60, with $13,500.

This is a key story. The news has annointed Clinton as our future President. She got this crown via name recognition, her participation in various New World Order organizations and she represents the biggest banking/investment houses here in New York. The Dodd business is most interesting: he has 0% chance of getting anyone outside of the pirate community, voting for him. But the money guys who want dark pools and occult operations are using his fake and fraudulent 'run for office' to funnel funds to the head of our banking system oversight committee!

Arrest Dodd. Arrest the bribers.

But of course, they will skip off and our system will limp along. The GOP ran the banking committee during the Greenspan bubble but I don't expect anything much better with the Democrats running things. They will piously talk about protecting people who shouldn't have bought all those over-priced properties but as usual, no one will say anything about protecting the old-style banking system that used to rest on savers, not spenders.

From the NYT:

The Securities and Exchange Commission has opened an informal investigation into the stock sales of the chief executive of Countrywide Financial, a person briefed on the matter said last night, the latest problem to hit the struggling mortgage lender.

Countrywide’s chief executive, Angelo R. Mozilo, has come under criticism from shareholders who have questioned the timing of the sales, which allowed him to gain more than $132 million in the months before the price plummeted amid the deepening mortgage crisis.

Over 2 years, he cashed out with nearly $400 million. I call him 'Mozilla' because there are lots of online jokes using Mozilla and Gorilla together. Probably dating back to our childhood cartoon character with that similar name. Mozilo is no different from the other CEOs who sell off their stocks. Unlike the old days when people who ran companies held the stocks of these companies because they are valuable, now these things have little value. The idea was to own as much stock as possible, not hold as little as possible.

By making lots of small pieces of stock so they can hold a majority voting share with only 5% or less, the movers of this system don't need to tie up much wealth in order to control wealth. But this is also the back door that let the hedge funds dump tons of debt on top of all businesses. They can buy up a small stake and then literally take over and control the entire organization, usually in order to 'sell' it and pocket the higher price this excites on Wall Street. For stocks soar when a sale is pending.

I noted, when I went through Mozilo's SEC filings, he and the others at the top all sold off rapidly starting at the tail end of 2005. By 2006, they were frantically dumping stocks but timed it so they didn't do it all the same week. So I am betting, they discussed this at their private meetings and set up a schedule for unloading what they knew were bad stocks that would lose value in a matter of months. So even as the price of the stocks were falling, they SOLD. Normally, they buy up stocks to keep the price up, not sell.

This is why the chumps who bought these doggies are talking about suing and are demanding the Banking Committee run by the corrupt Democrat, Dodd, are being hounded to hold hearings that stop this sort of garbage. Good luck.

From Yahoo:

- Bank of America Corp., the nation's second-largest bank, said Thursday its profit fell 32 percent in the third quarter as capital markets losses offset solid revenue growth in most businesses.

Net income declined to $3.7 billion, or 82 cents per share, in the three months ended Sept. 30 from $5.42 billion, or $1.18 per share, a year ago.

When the Bank of America announced they would save Mozilo's millions and keep Countrywide afloat, I said, this was bad news for anyone investing or holding Bank of America stock. Now they are losing money, themselves. Their income dropped by $1.72 billion. This is without them revaluing a lot of the paper they hold, the toxic tranches and trashy CDO's that are killing all the banking and finance systems. The news that Citibank is going to join up in this consortium to save the banking system is similar: sinking ships are trying to bail out sinking ships by funnelling aboard, the red ink that is sinking other ships.

From Bloomberg:

This week, the U.S. Treasury bullied Prince and some of his Wall Street buddies into creating a new fund, the snappily named Master Liquidity Enhancement Conduit. M-LEC is designed to keep the Structured Investment Vehicle waltz upright by reviving the asset-backed commercial-paper market, which has shrunk by a quarter in the past 10 weeks amid a buyer's strike.

It seems the way to reassure investors that it's safe to buy the repackaged junk that has torpedoed credit markets in recent months is to repackage the least-junky bits of the junk into more palatable securities.
*snip*
``The entire scheme seems like one that can work only if banks fully recognized now the losses on their SIV assets -- in which case there is no need for this complex plan as assets can be disposed of at low prices today,'' Roubini wrote. ``If such losses are not allowed to be recognized, the scheme cannot work.''

I can't decide whether the Treasury's willingness to patronize such a misguided effort is evidence that the situation is more desperate than anyone thought, or a positive sign that financial markets will continue to evolve and innovate and might eventually wrestle the subprime demon to the ground.

Ah, the 'let's turn on the lights and see how many cockroaches are in the bank vaults' story! If we could only have an open, honest market system, eh? And the name, 'Master Liquidity Enhancement Conduit.' HAHAHA. Call it the 'Red Ink Funnel To The Tax Payers'. The MLEC will probably have a very short life span. How about naming this 'Junk Asset Investment Liabilities'? JAIL could be the vehicle that saves us from this latest mess that is similar to the 1987 mess which sent top financial wizards to prison.

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