Derivatives Beast Is Over Half A Quadzillion

May 23, 2008

Elaine Meinel Supkis

Last night, we examined the concept of 'floating currencies'. This was supposed to be a one-time temporary thing because of the Vietnam War and the Arab Oil Boycott. This bizarre, unstable and dangerous system was made semi-permanent in the mid-1970's despite the obvious downside: raging inflation. Then, it was proven to be a huge easy money-maker for the bankers so they excitedly expanded on this system until it became totally and fatally entrenched. Now, it is collapsing along with the banking system that hatched this bizarre and stupid system. In today's news, we get to revisit the Cave where the Derivatives Beast dwells: this creature grew by over 44% in just one year! It now dwarfs all wealth on earth, by far. It is the baby of the Floating Currency system created under Nixon. It is a symptom of what went wrong and why we have to fix the system by anchoring the monetary system to either gold or oil or both.

The Wikipedia entry for floating currencies has this important information:

In most cases, each country has monopoly control over the supply and production of its own currency. Member countries of the European Union's Economic and Monetary Union are a notable exception to this rule, as they have ceded control of monetary policy to the European Central Bank.

In cases where a country does have control of its own currency, that control is exercised either by a central bank or by a Ministry of Finance. In either case, the institution that has control of monetary policy is referred to as the monetary authority. Monetary authorities have varying degrees of autonomy from the governments that create them. In the United States, the Federal Reserve System operates without direct interference from the legislative or executive branches. It is important to note that a monetary authority is created and supported by its sponsoring government, so independence can be reduced or revoked by the legislative or executive authority that creates it. However, in practical terms, the revocation of authority is not likely. In almost all Western countries, the monetary authority is largely independent from the government.

Just before WWI, the US public was assured that if the government had no control over the bankers who launched the Federal Reserve, they would have two good things: no wars since the government couldn't simply print money like in the Revolutionary War and the Civil War. Secondly, there would be no more boom/busts in the economy which would be wisely regulated by disinterested bankers. HAHAHA. Right after ceding control of the currency to a bunch of pirates, we had WWI, WWII, the Cold War, the Korean War, the Vietnam War, more Cold Wars, a host of endless smaller wars, the Gulf War I, Gulf War II and now heading towards WWIII. Except for the 1920's, the US has been continuously at war or preparing for major global warfare. This, in turn, has slowly bankrupted our government. In 1907, when the Fed was created, the government had no debts.

Now, it is approaching $10 trillion and rising at record rates. On the other front, we had the Roaring Twenties, the Great Depression, the ending of the gold standard, floating currencies, an endless rise in the trade deficit, raging inflation and the total collapse of savings as well as the entire banking system! Way to go, guys! I posted old newspaper articles from back when the Fed creation was being debated. It was perfectly clear that the central bankers were going to use gold as a guardian at the Gates of Death where the Cave of Wealth lies. The gold was to prevent inflation, floating currencies, wars, depressions and bubbles. It took the Federal Reserve pirates less than 20 years to wreck total damage on the banking system. Then another 20 years to destroy the Golden Guardian at the Gates. Libra was murdered in cold blood in order to pay for defeat in Vietnam. Then, the floating currency was introduced in Her stead.

The world was assured that the paper Scarecrow placed on Her throne at the Gates of Death would perform every bit as well as this sere and grave daughter of the Gods. The fiat dollar Scarecrow then sat there and grinned stupidly as the denizens of the night entered and exited the Cave of Death with armloads of wealth. So here we are today, the portals swing wide open, the transfer of wealth from industry and communities by speculators who play financial games using the weaknesses of the fiat currency floating system. The weakest parts of this goofy system are protected and expanded by the regulators who set up the Scarecrow. Instead of ruthlessly eliminating these problems, they are happy about this because exploiting these hazards, they all make lots of money! Without any labor added aside from hiring a few geeks to run computer systems that locate and then run programs that tap into these cracks and flaws! So they WIDEN.

For all wealth that is Funny Money™ is controlled by the same laws of Nature as all living things. If we exploit cracks in a system, this creates roots that take ahold of the rocks of the walls set up to protect something. These roots grow bigger and bigger and pry apart the stones until they destroy the entire building. So it is today: like an abandoned temple deep in the jungles, the global banking system has been shattered by a thousand trees that have torn it asunder with their roots. The bank building is barely recognizable as a stable structure! It is falling down. The Guardian is dead and no longer pruning back the relentless growth. And each leaf of these parasitical trees is fiat money.

In Her place, Libra is gone and the Scarecrow has fallen down and has been torn to shreds by this queer creature who was born the day Libra was murdered: the Derivatives Beast. It feeds on the leaves of the trees that are prying apart the banking system. It lives in the Cave of Death where wealth is made. It only comes out on moonless nights. It is silent and hard to see. If you look at it, you might see its bulk outlined by the dim light of the stars. It was called forth by the wizards of finance to deal with the first cracks in the banking structure. It is the child of the Floating Currency.

Baby has had 40 years to grow. It grows faster than anything on earth. Good years, it grows. Bad years, it grows. Indeed, being a Child of the Outer Darkness, the worse the banking system is, the MORE the Derivatives Beast grows. For years, I have sought to explain this thing using various tools. But in the end, only the mythical tools can explain this thing! And each year, I see it clearer and clearer. I wish our bankers could see it so well.

Derivatives Market Grows to $596 Trillion on Hedging

The market for derivatives expanded at the fastest pace in at least a decade last year as the global credit crisis spurred trading in contracts used to hedge against losses, according to the Bank for International Settlements.

Derivatives, including those based on debt, currencies, commodities, stocks and interest rates, expanded 44 percent from the previous year to $596 trillion, the Basel, Switzerland-based bank said in a report today. The amount of credit-default swaps protecting investors against losses on bonds and loans more than doubled to cover a notional $58 trillion of debt.

``The credit crisis supported growth'' of the market, Naohiko Baba, an analyst at BIS who co-wrote the report, said in an interview. ``Fixed-income markets experienced big turmoil so had more hedging needs.''

It is hard to understand the importance of this news if we just stare at the page with a blank mind. But if one looks at this via the magic lens of mythology, it becomes tragically clear that the attempt at fixing the hazards of risks caused by floating currencies attached to nothing and guarded by no one has led to the creation of a monster that is far, far more dangerous than the hazards of a floating currency! How simple can this be?

Why does this happen? It is also simple: people love to take risks but hate risks because risk leads to DEATH. They want to go to the Cave of Death and get wealth while not dying or risking death. So they created this system as a form of armor. The paradox is, the safeguards leads to more risks and going deeper into the Cave of Death and in the end, the armor itself kills the person using it. Like a knight who puts on heavier and heavier armor to fight the Dragon is finally defeated when his horse can no longer move and he can't lift his sword or lance to throw a blow. The Dragon then picks him apart at its leisure without battle.

This means, inflating everything to fix flaws in the float which are exploited by bankers to make wealth out of thin air leads to either a depression or hyperinflation. Libra isn't really dead, by the way. She was evicted from the Gates of Death but She is still there. We may not see Her but SHE sees us! And being a numbers freak, She keeps tab on what we take out of the Cave of Death and She will make us pay for every penny in the end. This is because She has this dynamic need to balance the books. Since the dawn of time, this has been Her only task. This is why She carries the scales. And in Her hand is the Sword of Death. We can, if we stand in the dark night, look up at the stars and see the edges of this sword glitter.

The Bank for International Chaos in Basel runs a lot of this floating system that is falling apart. Here is this week's report about the Derivatives Beast:

1. Strong growth in credit default swaps Notional amounts of CDSs continued to expand by 36% in the second half of 2007, although the growth rate slowed from the 49% recorded in the first half of the year (Graph 1, left-hand panel, and Table 4). At a cumulated $6.0 trillion3 in the second half, multilateral terminations of CDS contracts almost doubled from $3.2 trillion in the first half, and shaved approximately 14% off the growth rate in this market.

Growth in the notional amounts of multi-name CDSs (40%) again outpaced that in single-name contracts (33%). By credit rating (single-name instruments), CDS contracts on firms with ratings below investment grade and without ratings increased by 54% and 24% from the previous half’s 31% and 9%, respectively, while growth in contracts on firms with investment grade slowed to 32% from 49% (Table 5).

The breakdown by counterparty showed that CDS contracts with insurance firms recorded a high growth rate (46%), along with contracts with banks and securities firms (44%), although the share of insurance firms was still very small (0.8% of all trades). Insurance firms sold $319 billion of the protection bought, and purchased $166 billion of the protection sold by the reporting dealers. In the second half of 2007, insurance firms showed a high growth rate (89%) as purchasers of the protection sold by the reporting dealers.

Gross market values of CDSs recorded a growth rate of 178% in the second half of the year, much higher than the 53% from the first half (Graph 1, right-hand panel). This unprecedentedly rapid growth presumably reflected a substantial increase in insurance prices on CDS contracts as measured by CDS spreads in the second half of the year. This increased valuation of existing CDS contracts, amid the turmoil in global financial markets. By counterparty, CDS contracts with insurance firms expanded at the very high rate of 597%, followed by 225% for contracts with banks and securities firms.

Anyone who pretends to be Libra and a regulator has to face facts. Whenever these stupid humans pretending to be the dire Goddess of Balance see the numbers the BIS staff sees, they should rise up in rage and stop this madness. They should be running around with swords in hand, screaming at the bankers, the politicians, the speculators, 'Stop it right now or else we will kill you!'

But of course, they do the opposite. They desperately tweak and shove around the present system to allow this to continue. They justify it and 'normalize' it by pretending that this is natural and should continue. The BIS has made a small stab at forcing the bankers and investing houses to correctly value their crummy loans and crappy CDOs and other bizarre instruments of capital destruction. But the minute this had to be done, the banking structure completely collapsed. So now, everyone is trying to put it back together WHILE LEAVING ALL THE FLAWS AND CRACKS INTACT. In other words, they are not stopping the failures of the floating currency regime, they are protecting the FLAWS!

So even the wane attempt at pricing to market has been a total failure. This is being papered over because they have to keep this flawed, dangerous and useless system going no matter how many humans die thanks to the global surge in inflation of all things needed for survival!

BIS report:

2. Solid growth in FX derivatives

Notional amounts of OTC foreign exchange derivatives showed a solid growth rate of 16% in the second half of 2007, slightly below the 21% recorded in the first half of the year (Table 2). By instrument, activity in outright forwards and forex swaps and currency swaps remained relatively robust, expanding by 19% and 17%, respectively, while the growth rate of options slowed to 8% from 23% in the first half of the year. By currency, contracts with one leg denominated in US dollars, euros, Japanese yen or Swiss francs showed robust growth, ranging between 16% and 21%, while contracts in sterling slowed to 3% (Graph 2, left-hand panel). By maturity, contracts with maturities over five years increased substantially by 104%, while the growth rate of contracts
with shorter maturities slowed significantly (Graph 2, centre panel).

Gross market values of OTC foreign exchange derivatives in total recorded a high growth rate of 34% in the second half of the year, significantly above the first half’s 6%. By instrument, all the categories (outright forwards and forex swaps, currency swaps and options) showed rates of growth higher than 30% (37%, 32% and 34%, respectively). By currency, the euro, sterling and the US dollar recorded high growth rates (73%, 50% and 32%), while the Japanese yen showed a negative growth rate of –5% (Graph 2, right-hand panel).

'Solid growth'??? This is a false use of words! 'Solid' gives us visual images of strength. When the banking building is 'solid' it means the foundation is whole, the walls are not leaning outwards, the facade is sound, not collapsed. If I were in the BIS and writing this alarming report, I would have said, 'Growth in FX derivatives BALLOON OUT OF CONTROL!' The widdershins thinking of the staff at the BIS is deliberate. Up is down and in is out and big is small. And crucially, evil is good. The derivatives market is pure evil. It arose due to the collapse of the US gold standard. Since the value of the US dollar no longer is 'solid as a rock' but rather is a floating feather or a sinking piece of rotted timber, guessing its value vis a vis all other floating/sinking currencies is great fun and very lucrative. But also creates inflation via the creation of Funny Money™ from this system of betting on future values of these floating/sinking currencies. The vapid nature of all this has been called 'smoke and mirrors'.

One of the aspects of the Cave of Death where wealth is created is the widdershins nature of this place. All human magic is done by making things backwards. During the last Ice Age, shaman would wear clothes backwards, wear a mask to hide their human faces, and talk/walk/draw backwards. This innate understanding of the nature of lightning and reversal/polarities is very deeply embedded in human minds. I wonder about the evolutionary forces that made this possible. Perhaps it comes from the beginning of fire use by humans? I better not go there right now, this story is already way down deep in the dark already.

Note the last line of this report: the euro, British pound and the dollar have GROWN. Japan's currency has shrunk. Yet the yen is weak against the pound and the euro and desires to be weak against the dollar! The other central banks don't hold much in the way of yen. But the Bank of Japan holds over a trillion in euros and especially, dollars! As does the even bigger Bank of China's FOREX locked box. Also, the BIS should be screaming about Europe and the US expanding their currencies by over 50%. And we wonder why there is global inflation???? Yet, when we read the news, seldom is this hard fact mentioned. I read many an article about inflation in the top news media outlets. Yet this fact is never mentioned!

Indeed, the inability to connect all the roots of all the trees tearing apart the Banking System lies at the heart of being unable to fix the collapsing building!

Committee on the Global Financial System

The Committee on the Global Financial System (CGFS), which is chaired by Donald L Kohn, Vice Chairman of the Board of Governors of the Federal Reserve System, monitors developments in global financial markets for the central bank Governors of the G10 countries.

The Committee has a mandate to identify and assess potential sources of stress in global financial markets, to further the understanding of the structural underpinnings of financial markets, and to promote improvements to the functioning and stability of these markets. It fulfils this mandate by way of quarterly monitoring discussions among CGFS members, through coordinated longer-term efforts, including working groups involving central bank staff, and through the various reports that the CGFS publishes.

The CGFS, formerly known as the Euro-currency Standing Committee, was established in 1971 with a mandate to monitor international banking markets. Its initial focus was on the monetary policy implications of the rapid growth of off-shore deposit and lending markets, but attention increasingly shifted to financial stability questions and to broader issues related to structural change in the financial system. Reflecting this change in focus, the G10 Governors decided on 8 February 1999 to rename the Committee and to revise its mandate.

Never before has the banking system been monitored and run by so many international organizations. But what is the result?

A collapsing system that is global! This is due to these regulators and systems people working for the wrong entities. They are NOT working to fix or save the banks! They are working for the trees that are prying apart all the stones of the bank buildings! So they say, 'Oh, look! The trees tearing apart the bank building are getting bigger! LET'S WATER THEM WITH MORE FREE FUNNY MONEY™!' Arrest them all.

Double-digit price rises are about to afflict two-thirds of the world's population

RONALD REAGAN once described inflation as being “as violent as a mugger, as frightening as an armed robber and as deadly as a hit-man”. Until recently, central bankers thought that this thug had been locked up for life. Thanks to sound monetary policies, inflation worldwide had stayed low in recent years. But the mugger is back on the prowl.

Even though America is close to recession and growth in other developed economies has slowed, inflation is rising. Jean-Claude Trichet, president of the European Central Bank, this week gave warning about the mistakes of the 1970s, when inflation was let loose at huge cost to growth. His words were aimed at rich-country central banks, but policymakers in emerging economies are the ones who should most take heed. In countries such as China, India, Indonesia and Saudi Arabia even the often dodgy official statistics show prices have risen by 8-10% over the past year; in Russia the rate is over 14%; in Argentina the true figure is 23% and in Venezuela it is 29%. If you measure the numbers correctly, two-thirds of the world's population will probably suffer double-digit rates of inflation this summer
*snip*
Rising inflation, like so much of the world economy in recent years, can be explained partly by the increasingly complex links between developed and emerging economies. Emerging economies shared some responsibility for America's housing and credit bubble. As Asian economies and Middle East oil exporters ran large current-account surpluses, they piled up foreign reserves (mostly in American Treasury securities) in order to prevent their currencies from rising. This pushed down bond yields. At the same time, cheap imports from China and elsewhere helped central banks in rich economies hold down inflation while keeping short-term interest rates lower than in the past. Cheap money fuelled America's bubble.

This stupid article is typical. Rising inflation is not caused by 'increasingly complex links between...economies'. It is caused by FLOATING CURRENCIES. And the ultimate 'float' is the US dollar. Since everyone tries to manipulate their currencies vis a vis mainly the dollar, as the dollar sinks due to the increasing debts in the US, all the other currencies and relationships shift and change along with it...going down, down, down in value. RELATIVE TO COMMODITIES! We see from the BIS report that Europe and America have created 50% or more Funny Money™ this year so of course, as this Funny Money™ floats around the world, seeking COMMODITIES like crazy, the cost of COMMODITIES climb in all nations. Including in the West where this mad money making is happening. Japan, for example, has tried to kill this by deflating their currency, destroying yen and killing off their workers by starving them of all resources and markets. Even so, COMMODITY inflation is raging in Japan just like elsewhere.

The only way to stop this madcap inflation is to raise interest rates to real levels in the US. And to make Libra visible again so She controls access to the Cave of Death.

U.S. inflation understated, Pimco's Gross says

Gross, the managing director of Pimco, said investors should shun Treasurys, including inflation-protected Treasurys, and put their money into commodity-backed assets, including foreign equities.
Gross argued that inflation rates in the rest of the world have averaged nearly 7% over the past decade, while the U.S. official inflation rate has averaged 2.6%. "Does it make any sense that we have a 3% to 4% lower rate of inflation than the rest of the world?" Gross wondered.

Investors are finally waking up to the notion that "U.S. inflation should be and in fact is closer to worldwide levels than previously thought," he said.
Like a legion of critics of the Bureau of Labor Statistics, Gross identified three major problems with the way inflation is measured in the United States: quality adjustments, "dubious" measurements of housing costs and product substitution.

The consumer price index is being understated by at least 1% per year because of these factors, Gross said. And if inflation is understated by 1%, then gross domestic product has been overstated by that same 1%. Other critics have put the error much higher.

HAHAHA. Since we are the wellspring of global inflation, of course, we must have it here! And we do. Yesterday, I published a picture of a local gas station here. Diesel is now one penny below $5 a gallon! This will cause our entire transportation infrastructure to collapse unless the guys driving goods get price hikes! And since NONE of this can be passed on EXCEPT for food, directly, this means a deadly profit squeeze for anyone manufacturing anything. On top of this, consumers can't buy anything but necessities. This is why inflation is evil: it reduces consumption to the lowest capitalist profit systems. There is little value-added when people struggle to survive on less and less purchasing power.

In Europe, strikes and riots are increasing insidiously. In the US, we see rising despair and hopelessness. This is due to the destruction of socialist writing and thinking. Which means we get more fascism. In England, desperate voters are voting for conservatives who will basically leave the poor and helpless to die while doing what?

Feeding the Derivatives Beast! For they are not proposing to be 'conservative' at all. They just want their turn at the helm so they can be pirates. The US Congress just voted for more war spending. And thus, more debt. Both parties. And all the Presidential candidates are vying with each other to see who can be the greatest Beast, the biggest War Monger of them all. So nothing is being even slightly fixed in this area. Global inflation will continue until all other nations cut off exports to the US. This and only this will slay inflation created by the US overproducing dollars by 50%.

Analyst Bove cuts Goldman, Lehman and Merrill to 'sell'

The ratings for Goldman Sachs, Lehman Brothers and Merrill Lynch were cut to “sell” from “neutral” by analyst Richard Bove, who said the largest U.S. investment banks may perform poorly this summer.

Mr. Bove, an analyst at Ladenburg Thalmann, also cut his 2008 earnings forecasts for the banks, as well as that of Morgan Stanley, which he still rates “neutral.”

The downgrades reflect expectations that brokerage stocks “will do poorly this summer for three reasons... weak earnings, clouded secular outlooks, and the seasonal weakness that seems to impact these issues,” the analyst wrote.

This will be a long, hot summer. But then, Bova miscalled past forecasts. Indeed, all the 'forecasters' have a rather poor record. I have an excellent record but few people listen to me because I hang out with Libra. Of course, we are going into a global contortion of huge proportions! And making more Funny Money™ makes this worse, not better. And the confounded system of jiggering the relative values of everything with the universe and each other is collapsing due to it being a cheat and a fraud. For NO system EVER grows nonstop. If they do, they collapse since NOTHING ever goes to infinity without entering the dread land of reversals, the nature of magic is true to this law just as in Nature itself. Even pretend things have a limit. The imagination can't embrace infinity without going mad [ask Einstein about this]. I used to practice by thinking about infinity when I was a child. Then I recognized it as a deadly occupation and so now I respect the limitations of imagination.

Here is an interesting May 15th article from Asia where most of the smarter thinking about money and reality is happening these days:

Managed float or price setting

By Hasaan Khawar

Pakistan claims to be following the Managed Floating Exchange Rate Regime. The foreign exchange rate policy defines the way a country manages its currency vis-à-vis foreign currencies and is closely linked with the country’s monetary policy. If the national unit is tied to any international currency, it is called a ‘pegged’ arrangement but if the exchange rate is left for the market forces to decide, based on supply and demand, it falls under the ‘floating exchange rate regime’.

In the case of floating arrangements, the central banks reserve the right to intervene to check excessive volatility in the currency price, and the policy is termed as managed floating exchange rate regime, though these interventions are not supposed to establish a certain target price level or band for the local currency.

The pegged arrangements on the other hand can be divided into two main classes; hard pegs and soft pegs. Hard pegs either eliminate the local currency altogether and the country adopts another international currency, a phenomenon also termed as dollarisation, as observed in European Monetary Union or have currency board arrangements, where the central bank only undertakes the expansion of monetary assets, by ensuring at least 100 per cent backing by the pegged currency reserves.

In some other cases, these hard pegs are also backed by a basket of currencies, based on the country’s trading profile. In such regimes, the exchange rate either remains fixed for a given time or moves within a very tight band. Soft pegs or pegged floats, on the other hand, come in many forms including crawling pegs, crawling bands or pegged exchange rates within horizontal bands, where the central bank manages to keep the price within a certain range.

The exchange rate policies ranging from hard pegs or dollarisation arrangements to floating regimes form the exchange rate policy continuum, providing many policy options for any country to position itself anywhere on this continuum. Many economists, however, promote the use of floating regimes, especially for countries open to international capital flows, quoting the economic crises of many countries with soft pegged regimes, including Mexico, Indonesia and Brazil, which plunged into economic crises, as opposed to other emerging economies, which did not have pegged exchange rate regimes and managed to survive the crises. Therefore, Pakistan, with a managed floating regime, is supposedly towing the right policy.

The IMF officials however, make a differentiation between the de jure and de facto exchange rate policies of a country, as according to them, despite a country’s claim of having a floating regime, sometimes it might have a commitment for a particular price level - a condition which is not allowed in managed or independent floating regimes.

According to IMF’s website, the last report regarding de facto exchange rate regimes of different countries came out in 2007 and, surprisingly, it ranked Pakistan as one of those countries having different claimed and de facto exchange rate policies. According to the report, in actuality, Pakistan falls under the category of ‘other conventional fixed peg arrangement’.

Back to the stars and Libra: when our ancient ancestors talked about the Gods Themselves dying, they used various images and themes. Across the planet earth, when frightened humans discussed the fading of gods and Götterdämmerung, they used the image of a peg being broken, for example. Loki chained Fenrir the Wolf that eats the world, using odd things such as the roots of rocks, the footfalls of cats and breath of fishes. These are the same chains holding back the Derivatives Beast: nothing at all. Then there is the Nail of the North: the peg that holds the universe together. 'There is a mill which grinds by itself, swings by itself, and scatters the dust....there is a Golden Pole with a Golden Cage on top and this is also the Nail of the North...and a very wise tom cat climbs up and down this pole...singing songs [dirges] on the way down and telling tales [lying] on the way up...' say the shaman of the Ostyaks of the Irtysh River in Sibera. [From Hamlet's Mill]

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[Gary Oppewall]

In Xanadu Did Kubla Khan
A stately pleasure dome decree
Where Alph the sacred river ran
thru caverns measureless to man
down to a sunless sea

Coleridge...Rhyme of the Ancient Mariner (I think)

[Buffalo Ken]

Just a bit of philosophizing here, but why not...its Friday and I'm on my lunch break.

Infinity, just like zero, is a concept fraught with danger, but in my opinion, it is only an idea and exist only in the realm of imagination. In mathematics and physics, zero and infinity cause the relationships to break down and become utterly nonsensical, wildly unpredictable, and quantum-shift triggering. I don't think zero or infinity actually exist (perhaps they did in the "beginning", but not anymore), but they do balance each other off and are the ultimate limits guarded by Libra and never reached by anything. Never ever.

Maybe all of this is ridiculously obvious, but it seems to me the money tricksters are starting to play with forces they do not understand. Their irreverence will have dire consequences, but perhaps it has to be this way because perhaps it is time for a quantum shift within humanity if you know what I mean. All the energy seems to be building towards this.

Anyhow, enough of my rambling.

Peace,
Ken

[Anthony]

Yeah I have to agree on this.

There is supply, demand, and there is currency.

right now we know "supply" and demand" are stable. But there is excess hot cash floating around wrecking havoc. Prices are going wild.

This has nothing to do with supply and demand. Everything to do with too much funny paper floating around.

Food product doesn't suddenly collapse, nor people suddenly want to eat so much more food. But price of food is driven by "currency" being moved around to make more currency. (same with oil.)

[Elaine Meinel Supkis]

Or as in 'the Meaning of Life' by Monty Python, 'Just one more thin mint....'

[Judy]

As a child I too once meditated on infinity, while gazing at a beach full of sand. The physical sensation was one of falling into a bottomless hole. I too stopped doing that. Equating zero to infinity sounds about right to me. I'm reminded of a philosphy course I took where we read David Hume. He had a discussion about cause and effect and gave the example of a pool cue hitting a ball...the notion being that one could never really isolate the exact cause of the ball's motion when the pool cue hit it because the moment could always be divided by two....into infinity.

[GK]

People are getting philosophical because they subconsciously realize they are going to die.

Let me simplify this for everyone dreaming about sand and heaven and a 'better place'.

YOUR CURRENCY AND YOUR COUNTRY ARE BEING DESTROYED. YOU AND YOUR CHILDREN WILL DIE.

While you were sleeping the US Mint started restricting sales of Silver Eagles, the pure silver $1 (hahaha, worth $17++) that is real currency still..

http://online.wsj.com/article/SB121149011951015323.html?mod=fox_australian

Losing a Mint: Curb on Coin Sales Angers Collectors
By Ianthe Jeanne Dugan
Word Count: 1,142

The government rationed food during World War II and gasoline in the 1970s. Now, it's imposing quotas on another precious commodity: 2008 dollar coins known as silver eagles.

The coins, each containing about an ounce of silver, have become so popular among investors seeking alternatives to stocks and real estate that the U.S. Mint can't make them fast enough. In March, the mint stopped taking orders for the bullion coins. Late last month, it began limiting how many coins its 13 authorized buyers world-wide are allowed to purchase.

"This came out of nowhere," says Mark Oliari, owner of Coins 'N ...

[Gary Oppewall]

Sometimes I wonder whether the world is being run by smart people who are putting us on or by imbeciles who really mean it. -

Mark Twain

[rockpaperscizzors]

"The most formidable weapon against errors of every kind is Reason. I have never used any other, and I trust I never shall.
Your affectionate friend and fellow-citizen," THOMAS PAINE

[don]

Elaine: is this the reason for Chief privacy
officers, to watch over business beast?

[Michael]

Just to remind everybody: Inflation is not "caused by floating currency rates." Nor is it caused by "rising prices." Prices are the visible indicators of inflation, which is the excessive expansion of credit beyond the amount required for the growth of real (non-financial) investment. Both inflation and deflation can and do occur with floating or fixed interest rates, but excess credit creation always IS inflation.

As the total amount of derivates held on the books of various financiers approaches $1,000,000,000,000,000.00 (one quadrillion dollars) - and you know that there is much more out there than is counted in official reports, just like all other bad "assets" - it's fascinating how the danger from this asteroid racing toward our planet is minimized by the financiers and their media: "These are just insurance policies on possible losses on loans which have been made - and the loans' total value is 1/10th that of the derivatives - for the purpose of increasing the safety of those loans as investments."

Talk about reassuring the passengers on the Titanic!!

In the first place derivatives are insurance policies on insurance policies on insurance policies, on...etc,etc, which is why their aggregate value is 10 times that of the underlying loans they are insuring. Why so many policies covering policies convering policies? Because speculation in these insurance policies is now the biggest economic activity on Earth (no exaggeration), and creating more and more such policies allows room for more and more speculation.

Also, because the underlying loans are inherently unsound (speculative), financiers can't talk anyone into giving them money to make them unless they are "insured" with derivatives - but the derivatives are no more "sound" than the loans they insure, so they try make this speculative game "safer" with more and more layers of derivative "insurance". The fact that "only" 62 Trillion dollars in "real money" (more than all the U.S. Treasuries in existence) is the sum of the underlying loans is not reassuring; that just re-affirms that each bad loan has been further leveraged 10 times (1,000 per cent) it's value in derivative money at risk being carried by someone somewhere.

A DEFAULT ON ANY DERIVATIVE HAS THE SAME EFFECT AS A DEFAULT ON A CASH LOAN - IT HAS TO BE CONVERTED FROM AN ASSET TO A LOSS ON THE BOOKS OF IT'S HOLDER, WHO BORROWED THE MONEY FOR THAT ASSET AND NOW CAN'T PAY IT'S LENDER BACK, WHO NOW CAN'T PAY IT'S LENDER BACK, AD INFINITUM. That's why the greater the leverage, the more distastrous the unwinding when the defaults begin.

Be afraid, be very afraid.

[Elaine Meinel Supkis]

You are half correct, Michael. The floating currencies have introduced a NEW WAY FOR MAKING FUNNY MONEY APPEAR OUT OF THIN AIR. Aside from lending! See? This is very insidious. So, when lending FALLS, the NEW WAY VIA FLOATING CURRENCIES rising or falling rapidly as lending dies, floods even more money into the system which, in the past, would contract.

It is totally weird and the practitioners of this system even express wonder over this new force. We have to understand, classic economics no longer apply. Not even slightly. Read carefully the older news articles that fretted about this.

[Elaine Meinel Supkis]

Thanks, GK, for the silver story! I missed that! Wow.

[Buffalo Ken]

Well, I think the time is coming. I know that I have invested in silver, but not too much because I don't have too much. Anyhow, I don't want too much capital. I just want to pay off my debts, and I'm close. What about you?

Much of the crud out there is probably more trouble than it is worth. Who needs it. Such as plastic. So much is just a waste.

Later,
Ken

[Elaine Meinel Supkis]

Correct move, Ken. If you owe nothing, they can't come and evict you. And as someone who lived for 10 years in a tent in order to get rid of all debts while owning land, I can heartily say, it was well worth it.

[blues]

I think I've come to understand how these derivatives work, maybe. First they sell you a lousy mortgage, which you got because real estate must increase in value forever. Except we know now, it didn't. Then they sell you like a mutual fund or something, I think that would be a derivative. This derivative consists of thousand of things like mortgages, and is "insurance" in the sense that if some of the mortgages fail, the fund will be supported by all the good mortgages. In fact, your own mortgage is in the fund. So first they sold you that lousy mortgage, then they sold it to you AGAIN as part of your lousy mutual fund.

But the "insurance" provided by the fund only works if only a few of the mortgages go bad. But if the price of oil goes up, and the economy tanks, and the price of real estate goes DOWN (how did that happen?), then MOST mortgages fail. So you loose your home AND the mutual fund that you thought was "insurance." Kind of like a flush-toilet effect.

Them Harvard economists were so very helpful!

[Bah]

This amounts to nearly $100,000 of derivatives per every human being. Totally insane! Too bad we can't export the bankers and their magical money games to the Sims or Second Life and let the booms and busts explode there. It is the proper home for such a system so remote from the physical realities it is based on.

[Buffalo Ken]

OK, then. Lets say we are each "worth" $100,000". That is quite a bit and this seems correct to me. We are each of value. We ought then appreciate this value. We ought pay off our debts and then make ourselves of value.

[Elaine Meinel Supkis]

Via what? Slavery?

[Royal Dutch]

http://thisjune5th.com/

[Elaine Meinel Supkis]

OK, Royal Dutch: there are many web sites out there that won't tell the truth. Fact: the gold standard was NOT dropped in 1933, it was ALTERED. From $20 an ounce the dollar was devalued to $34 an ounce. This was the "new standard" until the gold standard was dropped in 1972.

I am very much against this sort of simplification put out by some people online! The gold coins held by savers WERE confiscated in 1933 and this was pure evil! But gold wasn't dropped until the failure of the Vietnam War and Nixon going to Mao for help. We must keep things straight.

[Buffalo Ken]

Listen - none of us know "the truth". None of us.

[Elaine Meinel Supkis]

True. Good thought to keep in mind at all times.

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