Derivatives, Fascism and the

Almighty Dollar

Chapter 13

By Dene McGriff

There is a monetary time bomb ticking out there – that could go off any day now, blowing up the world economy.  The shaky dollar, a fascist government and a house of cards brings us to the brink of apocalypse!

The Money Casino

You may not realize it but there is a money casino where the stakes are in the trillions!  The world GDP is somewhere around 38 trillion dollars, but there are some high rollers out there gambling with our future.  These are known as derivatives--a $248 trillion-dollar market!  Warren Buffett, the second richest man in the world  believes that "Derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."

What are derivatives?  A derivative is like a bet.  A derivative “derives its value” from another asset.  It is like covering a $1000 bet with only $10!  If you lose, you have to come up with the collateral to cover the 1bet.  Or better yet, you put up a few thousand dollars to make a billion dollar wager.  This is a high stakes game and during the 1990’s there were some notable losses from derivatives. 

Barings Bank was a stuffy old British Bank founded in 1762.  In 1995, a 27 year old trader named Nick Leeson, speculated in derivatives and ended up losing $1.3 trillion, the entire asset base of the bank, bankrupting Barings.  A few years later, a  hedge fund named Long Term Capital Management nearly went broke but was bailed out by the Federal Reserve.  The fund had $4.8 billion in assets but managed a portfolio of over $200 billion and derivatives with a “notional” value of one and a quarter trillion dollars with total derivatives of 4 trillion.  It was run by two Nobel prize winning scientists but they lost control by making some bad bets.  Orange County in California lost two trillion in a derivatives Scandal – this is still small compared to what could happen.

Bailouts are not without precedent as you may recall the $32 billion Savings and Loan bailout in the 80’s.  But the derivative market is nearly 250 trillion – seven times the world GDP and many times greater than all the “money” in the world.  There isn’t enough money in the world to bail out a big player.

Thirty percent of those derivatives are held by just three banks: JP Morgan Chase, Citibank and Bank of America.  The number one bank, JP Morgan Chase Bank has 43 trillion dollars in derivative exposure – more than the entire GDP of the entire world economy!  Chase is in a precarious position.  It lost billions in bad loans to companies like Enron, Tyco, Global Crossing and countries like Argentina.  This sets up a spiral.  The bank’s Standard & Poor’s rating keeps dropping.  As Chase’s fortunes keep falling, the rating drops, it has to put up more cash which makes matters 2worse and causes a liquidity crisis.  Banks are interlinked by various derivative positions so if one falls, it will bring the others down like dominoes.  If you happen to be a bank and your credit rating drops, the bank has to put up more cash collateral to increase the marker (in book making parlance).

The chart shows American bank derivative exposure and almost 60 percent is Morgan Chase!   Their exposure which was only 26 trillion in 2001 and has grown to 43 trillion today!  It is not being alarmist to say that this is a time bomb waiting to go off – enough to bring down the global economy.  If Morgan Chase were to fail, a chain of interlocking commitments would break down and other major banks would topple.  This would bring down not only banks, but your house, retirement, investments, and possibly even your job.  A failure of this size would dwarf any smaller failures that have gone before.   LTMC only had a little over a trillion in derivatives.  Banks the size of Chase, Citibank or Bank of America would be too big to bail out. 

The housing market is also tied in.  It is well known that real estate loan giants Fannie Mae and Freddie Mac are heavily into derivatives.  Fannie Mae is the second largest corporation in America in terms 3of assets and the largest source of home mortgages. Freddie Mac buys mortgages and securities and passes them through as securities and debt instruments to the capital markets.  For every $1 they have on their books, they have a $1.70 in derivatives.  The danger comes if the market moves against them.

Easy money and foreign investment have kept corporate America, including Freddie Mac and Fannie Mae liquid.  In Japan, where the interest rate has been zero for many years, investors borrow for nothing and invest in long term equities which has kept the real estate market booming.  Japan is beginning to raise rates at the same time interest rates are rising in Europe and America as a reaction to the inflation caused by the increase of the money supply (printing money out of thin air).  Other countries take their trade surplus dollars and buy treasury bonds and dollars (to buy oil with).  This comes to about $3 billion a day flowing into the U.S., keeping the 30 year mortgage at record low levels even as the Fed continued to raise rates.  But Japan is beginning to raise rates.  Iran is switching oil to the Euro.  Asian countries which have historically supported the dollar are beginning to diversify their portfolios (meaning they are buying less dollars).   Nearly everyone agrees that it is not a sustainable trend for America to absorb over 80 percent of the world’s savings to pay for our trade and government deficits, now amounting to over a trillion dollars a year!

Lies, Damned Lies and Statistics

As we pointed out in a previous article, the government has manipulated the figures to such an extent that the economy appears to be robust and growing instead of being in the precarious house of cards it is.  If we used the same reporting standards as we did years ago, unemployment would be 12 percent rather than 4.8.  The real consumer price index (CPI) which measures inflation would be at least 8 percent instead of the 1 to 2 percent “core” inflation the government reports.  The GDP growth would be negative instead of the 3 to 4 percent claimed by the government and the true deficit would be in the trillions rather than the anemic $319 billion reported.  Federal obligations would be measured at 51 trillion dollars instead of the $9 trillion reported (as the national debt).  The on and “off the books” expenditures for wars in Afghanistan and Iraq would have cost in excess of a trillion dollars instead of the $450 billion claimed.

While the wages of the average American have fallen in the past four years straight, the wealth of American billionaires grew to $2.6 trillion, up 18 percent.  Ten percent of Americans control 70 percent of the wealth.   Hearings are going on regarding tax reform again.  The talk is that 3% of salary would go into stock market funds, going up to 6%.  Just like Seymore, the man-eating plant, in the musical “The Little Shop of Horrors” that would be enough to keep the Stock Market and Corporate America pumped up for years to come as real take home pay continues to dwindle.  It should be obvious to Americans that decisions regarding energy, taxes, education, health and war are made for the benefit of corporate America – not the average American!  It is probably no accident that many Science Fiction movies of the past have the world being run by a few powerful corporations. (e.g. The President’s Analyst, the Running Man, Max Headroom, Soylent Green, Logan’s Run, Blade Runner, the Matrix, the Terminator, Farenheit 451, not to mention Brave New World and 1984, etc.).

Another word for corporations running a nation is “corporatism” – better known as “fascism”.    What’s good for big business (Exxon, Shell, Bechtel, Halliburton, etc.) is now seen as good for America.  It doesn’t matter if jobs are outsourced to other countries.  Corporate America makes more than ever with the cheap labor.  They like using Chinese factory labor and Indian help desks, accounts and engineers.  We are talking about greedy global economic elites who don’t care a bit about the American worker.  Who benefits from the wars?  Who benefits from the oil shortage?  (last year the oil companies made a record $150 billion in profits!!!)  What programs are being funded (military) and what programs are being cut (social safety net entitlement programs, health, education, retirements, even veteran’s benefits)?  All you have to do is follow the money to see where the priorities lie – with the individual or the corporate state.

Characteristics of the Corporate State

It is interesting to look at the traditional characteristics of classical fascism/corporatism:

·        It is highly nationalistic with slogans, 4patriotic symbols and mottos which we hear from the administration every day in their “talking points.”

·        It tends to characterize the opposition as enemies.  Bush has declared you are either for him or against him. 

·        There is a disdain for human rights as seen in the Patriot Act, Abu Graib, and Camp Delta in Cuba.

·        The mass media is so controlled, people are led to believe the opposite of the truth (e.g. at one time the majority of Americans were convinced that Iraq had WMDs and was the major cause of 9/11).  Never has there been an administration so skilled at saying one thing and doing another especially when it comes to rhetoric concerning education, social security, Medicare, the environment, etc.  Say one thing and do the opposite!

·        The military is glorified and spends an inordinate proportion of money on weapons and military campaigns (e.g. America spends more on military than all the rest of the world combined and can be found in 130 countries around the world)

·        There is an obsession with “national security” and protection of the public from the “enemy” (in this case terrorists, an amorphous enemy that could be anyone or anywhere).  Please see George Orwell’s “1984”.  There is an obsession with promoting fear.

·        Civil liberties are curbed as we see in the case of the Patriot Act and other laws which tramp on the constitution and civil liberties.  Read what Congressman Ron Paul has to say about the Unpatriot Act!

·        There tends to be a mixture of “church and state” to provide legitimacy and garner public support for a righteous cause.  God is invoked as America pursues its manifest destiny of bringing economic democracy to the world!

·        Corporate power and perks are protected at the expense of the average citizen.

·        There is an obsession with crime and punishment, law and order.  America has more incarcerated prisoners per capita than any country in the world.  What is the growth industry of the future?  The military, law enforcement and prisons!

·        Cronyism and corruption are pervasive (as we have seen in the case of Enron and other scandals), not to mention influence peddling (e.g. Abramhoff, Tom DeLay), election fraud, etc.  Just look at the number of growing scandals, not to mention the questionable victory of Bush in 2000 when Gore carried the popular majority.


Corporations, dollars and derivatives drink from the same well of avarice and greed.  Derivatives are symbolic of the house of cards our society is built on – currency without value, derivatives without value – just worthless paper and risky bets.  Meanwhile, think about it.  The war in Iraq was not about WMD (weapons of mass destruction) or 9/11.  Think about it!  What was it about?  Oil?  Not exactly.  It was about dollars!!!  Saddam was going to switch the purchase of oil from dollars to Euros and we could not let that happen.  The ONLY thing that keeps the world on the dollar standard is that everyone has to have dollars to buy oil.  You can only buy oil with dollars!  Now the world is getting wise to our game.  If something as important as oil can be shifted to Euros, the dollar is through!  So why are we upset with Iran today?  Does it have anything to do with nuclear weapons?  Not really.  That is just the excuse they want the public to remember.  No, Iran is setting up a “Bourse” or an exchange where buyers can purchase Iranian (and hopefully other Middle Eastern) oil in Euros rather than dollars.  America cannot allow this to happen so if they have to use Israel or do it themselves, Iran must be stopped at all costs!  If the dollar falls, the corporate elite fall.

Meanwhile, the trade deficit reached $804.9 Billion in 2005, and a record 218 Billion in the fourth quarter alone.  Pundits and politicians say it doesn’t matter and, in a sense, it doesn’t as long as the world uses the dollar standard and sends over 80 percent of their savings back into the U.S.  But, don’t kid yourself.  Debts and bets have to be settled!  Derivatives are bets.  They have to be settled.  Barings Bank, Orange County, LTCM, etc. have shown us how fragile the system really is.  Life has taught us all that eventually things come into balance and if something can go wrong, it will.  Bad things happen, as they say.  Good times do not roll on forever and our fortunes can reverse in a heart beat.

I mention all of this because, as a Christian, prophecy tells us that in the last days there will be tremendous upheavals in climate, in earthquakes, economic chaos, and wars and rumors of wars.  There are two major events that bracket the last seven year period popularly known as the Tribulation.  First is the Gog-Magog War – a clash between Islam and a Judeo/Christian alliance focused on Israel which occurs prior to that seven year period (there are numerous articles on the subject on our website).  At the end there is another battle called the Battle of Armageddon where an army of 200 million comes up from the East against the West – again with the land of Israel as the battle field. 

In between is a period of economic chaos, tribulation and trouble – a time when the antichrist will so control the global economic system that people can’t buy or sell without the “mark of the beast” (this probably means there has been a total economic collapse and the antichrist comes along to save the day so to speak).  There is also a great “last days” nation that dominates the world economically and militarily.   As I mentioned in my last article, this doesn’t mean America is going to fall over night but it does mean that the rich are going to get richer and everyone else will get poorer.  Forces are in motion and can’t be stopped.

As I look at these events, I am not afraid but excited with anticipation that because these incidents were prophesied to occur thousands of years ago (please see more on our website www.the-tribulation-network.com) and end with the return of Jesus Christ and His kingdom when everything will be set in order and the earth healed.  There is a happy ending to this story but the events leading up to the end are not so happy and have been revealed in great detail throughout the Old and New Testaments.  Our views are based on an understanding of prophecy, history and current events.  God will give you understanding.  Don’t take our word for it.  Just ask Him.  Seek Him and you will find.


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