Unfortunately, nothing much has changed in the financial markets since last week. The price of oil has been mainly hovering, edging slightly lower several days. This continues to keep the US dollar artificially stronger for the moment.
News for Freddie Mac and Fannie Mae continue to be bleak. Bloomberg reported today that the two government-chartered companies will fail to raise the equity they need to offset credit losses, prompting the U.S. Treasury to bail out the mortgage behemoths at taxpayer expense. The two tumbled in New York trading to their lowest levels in more than 17 years on concern of the likely government bail out which will wipe out common stockholders. A rescue of the companies, which own or guarantee 42 percent of the $12 trillion in U.S. home loans, would include preferred stock with a seniority, dividend preference and convertibility that would wipe out common stockholders, Barron's reported.
Today, we will begin an article published on August 14, 2008 by Ellen Brown, author of the book "Web of Debt". In this article titled "Wag the Dog: How to Conceal Massive Economic Collapse", she explore how the "Grand Chessmen of the Money Trust" control these market moves from behind the scenes.
Last week, Fannie Mae and Freddie Mac had just announced record losses, and so had most reporting corporations. Unemployment was mounting, the foreclosure crisis was deepening, state budgets were in shambles, and massive bailouts were everywhere. Investors had every reason to expect the dollar and the stock market to plummet, and gold and oil to shoot up. Strangely, the Dow Jones Industrial Average gained 300 points, the dollar strengthened, and gold and oil were crushed. What happened?
It hardly took psychic powers to see that the Plunge Protection Team had come to the rescue. Formally known as the President’s Working Group on Financial Markets, the PPT was once concealed and its very existence denied as if it were a matter of strict national security. But the PPT has now come out of the closet. What was once a legally questionable "manipulator" of markets has become a sanctioned stabilizer and protector of markets. The new tone was set in January 2008, when global markets took their worst tumble since September 11, 2001. Senator Hillary Clinton said in a statement reported by the State News Service:
"I think it’s imperative that the following step be taken. The President should have already and should do so very quickly, convene the President’s Working Group on Financial Markets. That’s something that he can ask the Secretary of the Treasury to do. . . . This has to be coordinated across markets with the regulators here and obviously with regulators and central banks around the world."
The mystery over what was going on with the dollar the first week in August was solved by James Turk, founder of GoldMoney, who wrote on August 7:
"The banking problems in the United States continue to mount, while the federal government’s deficit continues to soar out of control. . . . So what happened to cause the dollar to rally over the past three weeks? In a word, intervention. Central banks have propped up the dollar, and here’s the proof."
"When central banks intervene in the currency markets, they exchange their currency for dollars. Central banks then use the dollars they acquire to buy US government debt instruments so that they can earn interest on their money. The debt instruments central banks acquire are held in custody for them at the Federal Reserve, which reports this amount weekly."
"On July 16, 2008 . . . , the Federal Reserve reported holding $2,349 billion of US government paper in custody for central banks. In its report released today, this amount had grown over the past three weeks to $2,401 billion, a 38.4% annual rate of growth. . . So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit. The logical conclusion is that they were intervening in currency markets. They were buying dollars for the purpose of propping it up, to keep the dollar from falling off the edge of the cliff and doing so ignited a short covering rally, which is not too difficult to do given the leverage employed in the markets these days by hedge funds and others."
Just as central banks manipulate currencies in concert, so gold can be manipulated by massive selling of central bank reserves. Oil and any other market can be manipulated as well. But markets can be manipulated by only so much and for only so long without fixing the underlying problem. There is more bad news coming down the pike, news of such magnitude that no amount of ordinary manipulation is liable to conceal it.
For one thing, roughly $400 billion in ARMs (adjustable rate mortgages) have or will reset between March and October of this year. Assuming 3 to 6 months for strapped debtors to actually hit the wall with their payments, a huge wave of defaults is about to strike, continuing through March 2009 – just in time for the next huge wave of resets, in option ARMs.3 Option ARMs are loans with the option to pay even less than just the interest on the loan monthly, increasing the loan balance until the loan reaches a certain amount (typically 110% to 125% of the original loan balance), when it resets. The $800 billion credit line recently opened to Fannie Mae and Freddie Mac may be not only tapped but tapped out, at taxpayer expense. The underlying problem is little discussed but impossible to repair – a one quadrillion dollar derivatives scheme that is now imploding. Banks everywhere are facing massive writeoffs, putting the whole banking system on the brink of collapse. Only public bailouts will save it, but they could bankrupt the nation.
What to do? War and threats of war have been used historically to distract the population and deflect public scrutiny from economic calamity. As the scheme was summed up in the trailer to the 1997 movie "Wag the Dog".
"There’s a crisis in the White House, and to save the election, they’d have to fake a war."
Tomorrow, there will be more from Ellen Brown's article and how the government continues to use misdirection to accomplish their means. Stay tuned ...
My companion attacks his friends;
he violates his covenant.
His speech is smooth as butter,
yet war is in his heart;
his words are more soothing than oil,
yet they are drawn swords.
Cast your cares on the LORD
and he will sustain you;
he will never let the righteous fall.
But you, O God, will bring down the wicked
into the pit of corruption;
bloodthirsty and deceitful men
will not live out half their days.
But as for me, I trust in you. Psalm 55:20-23 (NIV)
If you have questions or comments, please feel free to contact me at the address below.
Email: DeltaInspire@panama-vo.com
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