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
bet. 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
worse 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
of
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,
patriotic
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.
Analysis
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.
dene@the-tribulation-network.com
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