Thursday, December 24, 2009

Rigged betting parlor

Goldman Sachs is coming under increasingly close scrutiny for having created billions in CDOs (collateralized debt obligations) to sell to their clients and then betting against them with derivatives. Incredibly this is probably legal unless it can be shown that they systematically picked the debts most likely to fail to sell to their clients. Your pension fund lost billions buying these worthless pieces of paper but the chances of you ever seeing any of your money are slim at best.

Not only did Goldman make billions from this scheme but certain hedge funds that apparently knew what was happening also bet heavily against these worthless debt bombs and made billions as well. In fact Goldman and the few hedge funds were the only people allowed to place bets against the debt funds that Goldman itself was selling. Goldman is using as a defense that investors did know that Goldman itself was betting against its own investment funds but they chose to keep buying into Goldman’s ponzi scheme anyway since it continued to go up in value.

But the investment banks were also advertising the historical record of low default rates of consumer debt when they sold CDOs even though they knew the historical data was really ancient history from a day when what they were doing to the real-estate and mortgage markets was illegal. They knew it would blow up and they structured ever more complex derivatives to harvest as much money as possible from the system when it did.

So far this collapse has cost 14 trillion Dollars although much of this money is just paper printed by the Federal Reserve to keep the banks worldwide from going under. The theft has really been going on for forty years or more as the debt has piled up and the wealth of the middle class has disappeared. Americans that haven’t lost everything already don’t realize that what they do have isn’t worth much. With a dead economy real wealth disappears very quickly

Monday, December 21, 2009

Rats leaving the oil tanker

Have you heard about the Gulfo, no it’s not another old Volkswagen being built in Mexico. It’s the new Petro Dollar or rather not Dollar. The Arab oil states have announced the creation of their own joint currency to get them off of the USD and just in case we decide to go all Iraqi Freedom on them they’ve announced a joint response task force as well. Okay so these guys are bluffing more then not but you didn’t hear a whisper about this in the US media.

Most western newspapers that did cover it dismissed it as unlikely because of squabbling among the parties but its probably more that everybody who consumes oil is just whistling past the gas pump. The rest of the world is even more dependent on Arab oil than the US is and the fact that they are moving ahead with this new currency at all is reason for concern if you are outside the US and hold Dollars.

It isn’t that they are really going to be issuing a lot of new currency but rather that they are pooling their foreign cash reserves and gold to make them a major player in the international banking community. We’ve been embargoing Iran to keep them from banking on a big scale so what will the US response be to this?

You have to wonder who is really behind this? Has anybody seen Dick Cheney lately? It wouldn’t be the first time the Saudis helped out the Bush Crime Family or are the rats just leaving the oil tanker while they can? We’ll just have to wait and see how this oil well burns.