Is there actually someone out there gloomier than yours truly? If so, then Matterhorn’s von Greyerz surely takes the prize.

First, let me credit the man with accurately calculating ”OTC derivatives held by US banks of at least $400 trillion”. While that amount certainly fails to underscore the lunacy of total global derivative risk exposure, at least he’s close on the actual U.S. OTC amount, which few other “economists” estimate correctly.

Though I concur with his foregone conclusion of a ”long decline of the west”, I cannot possibly agree that this will precipitate “a total collapse of ethical and moral values, as well as a breakdown of the family as the kernel of society.”

One simply cannot ascribe such broad cultural shifts to collapsing economic conditions. I would be more apt to agree that a collapse of ethical and moral values among the intellectual elite and world bankers–has already occurred, culminating in the long decline we are already nearly three years into.

For many of those participating in the moral hazard, the family unit may have already broken down. But how western culture, as a whole, adapts to the necessary and inescapable correction of decades of excess is difficult to predict. Dynamic leadership can provide a moral compass during such times, which people can rally around, but unforseen complications, like war, or sanctions, or other globalist interventions cannot be predicted, especially in the uncharted territory into which we are headed.

Important realizations, which I agree with, worth pointing out:

… hyperinflation arises as a result of money printing leading to a currency collapse and not from demand pull. The slight deflation that we are experiencing currently is a prerequisite for hyperinflation. 

Many “experts” make the analogy between the deflationary period in Japan since the 1990s and the US today. In our view the US is in a totally different situation for the following reasons:

• In the early 1990s Japan could still export their production to the rest of the world.
• In the current downturn all countries (even China and India) will suffer and there will be no one to export the problems to.
• The ability to export made Japan a creditor nation with major payment surpluses.  The US is a major debtor and has been for 25 years.
• Japan had a very high personal savings ratio at the time (which has now disappeared). US has had a declining savings rate for years.
• The balance of payments and the personal savings surpluses made it possible for Japan to finance their budget deficit without resorting to QE. Very soon the US will only be able to finance their deficits with QE and so will most of the Western world.
• Japanese unemployment in 1992 was 2% and went slowly up to 5% by 2000 where it is now. Real US unemployment is 22% and increasing.
• Many major sovereign states are now virtually bankrupt and the financial system is on life support. This was not the case in the 1990s.

The above are some of the reasons why the current US situation is totally different to Japan. QE will accelerate in the US and worldwide.

… the financial industry has developed into a fractal wealth creation machine for the benefit of its participants. Many players have become billionaires in the last 10-15 years just by shuffling money around. In the past, fortunes were created by building industries. But today any employee working in (high finance) will, by just showing up, make hundreds of thousands to millions of dollars. This is proof of a world totally out of balance. Since this activity contributes very little to the prosperity of a nation (but very much to its participants) it is not sustainable.

The entire article is spot on, and worth reviewing. Very close to my assumptions on all key points. Not enough focus on the mathematical impossibility of the global interest rate derivative bubble (both over the counter, and “under”) as the inevitable elephant teetering upon the matchstick foundation.

Will the States prevent their self-destruction before, or even by, issuing sovereign credit not pegged to the dollar? Does that really matter? No, not really. All that matters is that States restructure their economies to become completely self-reliant, regardless of any turmoil occurring all around them. We cannot say at which degree of decline States will finally be convinced to assert economic sovereignty, what matters now is that some act before it’s too late.

Those States which do take action may be salvageable–those which do not, may perish. And we can perhaps see that some division may be an outcome of what was formerly “united”. This division could come under the globalist structure of a North American Union, or be more chaotic–more Panarin-like.

The States cannot save THE PEOPLE if they are under seige by opposing forces many times more powerful. We cannot predict the future, but we can safely say that every wasted moment draws us perilously closer to a future in which the sovereign State solution is no longer viable.

If or when globalism completely eradicates sovereignty, as it has sworn to do, then all is lost for a revitalized American economy. In such a future, the traditional American ideals and values currently under attack could one day resurface, but probably not during the lifetime of anyone reading this today … that is, if history continues its present trajectory.

In the continuing saga of the rapid deconstruction of the traditional America, and it’s transformation into the aggrandized state of socialized failure, yet another piece of deplorable legislation get’s put forth by the numb skulls on Capital Hill (including the traitor, Scott Brown).

This one aims to shift more power away from States and over to public labor Unions (what a surprise).

The misleadingly named “Public Safety Employer-Employee Cooperation Act” (originally H.R. 413; S. 1611, 3194) would unconstitutionally abrogate all states’ sovereignty, subject state and local public-safety workers to compulsory union “representation,” eliminate local government control over the labor relations of their own workers, lead to a rise in labor strife, and further damage fragile state and local government economies by imposing unfunded federal mandates.

What else can we possible do wrong in this country? We have outsourced our production economy, and replaced it with a fantasy speculation economy that just imploded. Whatta we do? Bail it out and pump it up for an even bigger bang this time.

We are literally at war with an Islamic religious / ideological oppressor, and our President, and his primping mannequin, Pelosi, are literally embracing Shari’a—the law that calls for stoning women to death for adultery—as a Constitutionally protected religious expression – let’s build a monument to it over the ashes of 3000 murdered Americans as a salute to tolerance.

But let a single solitary man, peacefully and quitely pray in front of an abortion clinic and civil authorities arrest him. Let children sing a patriotic song, or pledge allegiance to our flag on government property and they are admonished to “cease and desist”.

Atheists, who interpret “freedom of religion” as “freedom from religion” have successfully co-opted our judicial system to contemplate removing highway cross memorials to fallen state troopers because they are “offensive”. 

The rights of Terrorists are more carefully preserved than those of patriots.

The so called “justice department” willlfully dismisses charges of reverse discrimination, incitement to murder and voter intimidation. 

The liberties of illegal aliens are protected at the expense of life and liberty to generations of American citizens.  

Liberal judges overturn majority opinion in States.

Federal mandates usurp the sovereignty of States and create unfunded health care obligations impossible to meet.

And in a collapsing private sector, where real unemployment is between 18 and 22%, predatory labor unions receive full government endorsement to continue bankrupting States, and the private sector, in return for votes, and an ominous power grab to shift America’s workforce to an aggrandized public union-government alliance, ruling over a defeated middle class, and reducing it to a dependant class of debt slaves, subsisting on entitlement crumbs.

This absolute FREAK PARADE of anti-American sentiment is quickly bubbling over into a self-fulfilling train-wreck as it meets the outrage of American Patriots. At this rate, riots, extreme violence, martial law and military coups are certainly not out of the question for America, as government rushes to embrace it’s newly adopted 3rd world character, led by it’s anti-American apologist and anti-leader.

There’s still a small chance that States could turn this around, but it’s waning fast. The president of the United States of Failure refuses to act as the President of the United States of America. As such, how can the States follow him, unless to agree to fail? How can any American patriot follow his government, unless choosing the rewards of failure over the rewards of individualism, liberty, independence and freedom?

We have reached an ideological impasse where vulnerability, and weaknesses are laid bare – they will be exploited, and not only from within. The pace of the ideological train wreck continues to signal that the turning point is here. If there was ever a time a take action, that time is now.

One of the more interesting bailout-payer (formerly taxpayer) rackets is the Fannie, Freddie, Ginnie bond bailout that will cost American bailout-payers a cool TRILLION (at least). But the beauty of the trap is to keep milking you dry under the auspices of, “If we don’t rob you to prop up mortgage-backed securities, your home value collapses further, so we can take it out of your pay now, or we can take it out of your home later, but either way, if you own a home, have a job and are current on your mortgage … we’re taking it, comrade.”

Well of course you are, Big Brother Bailout. After all, if it sounds like we’re successful individuals, we’re ripe to rob as punishment for being solvent until we’re finally all sucked into your “collective” of Nanny State losers, rewarded for being loyal-but-useless debt-serf dependants.

And the money, just like with AIG, goes ”round the horn” to the investment banks holding worthless securities, and hedge funds holding worthless GSE bonds like Bill Gross’ PIMCO - of course they want these private bonds to be backed by a taxpayer guarantee – otherwise they’ll take a huge BATH, as will the Too Big to Fail owners of the FED (and the FED laundry book) along with their shareholders–and the losers in the system would take the loss on the fraudulent MBS and CDO’s on their balance sheets. GOD FORBID that global debt bookies be put out of business when they’re running such a wonderful Ponzi scheme to prop up the value of the bailout-payer’s homes.

Ohhhh, you naughty debt serfs. There’s a slave born everyday. You say you’d rather let the failures fail, go bankrupt, screw the shareholders and hedge funds–damn it all, let my property value find it’s real world beta?

Not a chance, little man … not a chance. Not until every one of you realizes there isn’t a chance in Hell to bring these property’s back to 2004 levels … not even  in your kiddie’s lifetime. With employment collapsing, foreclosures spiraling, bailouts of any and all forms of failure at every turn—you’re not gettin’ outta this scam until you’re all bled dry, so … step in line slave and watch the amazing world wide bailout. There’s a new pea, under a new shell every day. And when all the hands have slighted and all the smoke clears and the mirrors go back behind the curtains, it’s the “too corrupt to fails” that celebrate the big payout with your CONfidence payments.

And after we’ve cleaned you out, then and only then will we let your little houses sink to their new normal–after you’ve bailed out the fantasy values we sodomized you with, and you take all the losses on the scam instead of us.

And don’t think you’re little State banks are gonna save the day either, with their 2% mortgages and 6% CDs. We’re never gonna let that happen. You just don’t know who you’re dealing with here.

We’re the 25 old farts who resurrected the debt Dominatrix that rules the world, and we got you by the short and curlies, so … step right up and play into our sordid bailout CON like the bubble-sucking wannabe’s you really are. That’s right, make way, make way, plenty a room for more slaves to kneel right here. Don’t push, don’t crowd, just step into that long, long line of losers on the way to our beautiful new compound and get your free shower tickets from Frau Bailout here.

Don’t worry about that funny smell, there’s plenty of fresh hot water coming outta those shower heads, so step in line now … there’s a good boy. Lick it first … There ya go now.

While the ground zero mosque controversy may not have been designed to specifically distract the media, and the public, from the global economic crisis, it nonetheless serves that purpose, so I should at least try to provide a fresh perspective while the focus is there.

We talked about the anti-American president in depth several posts ago. Well, he has weighed in, and his anti-American rhetoric was levied at the American people by way of a lecture, to presumably include the families of the murdered in the 911 tragedy, to be more tolerant of Islam.

So this is nothing new. What would be refreshing would be some acknowledgment that Obama’s lecture was a back door vindication of “911 Truther” and green jobs Czar appointee Van Jones, as well as Imam Feisal Abdul, who states that:

I wouldn’t say that the United States deserved [the Sept. 11 attacks], but the United States policies were an accessory to the crime that happened. [W]e have been an accessory to a lot of – of innocent lives dying in the world. In fact, it – in the most direct sense, Osama bin Laden is made in the USA.

This is basically the same vague and unsubstantiated accusation made at the 911truth.org website. You can search the site for some shred of concrete evidence that some clandestine operation backed by the Bush government had an actual hand in the senseless murder of 3000 Americans, but the best they can do is about the best Feisal can do. To claim that U.S. policies were an “accomplice” to 911.

This is not to say that the U.S. did not have a cozy relationship with the Saudi royals who ultimately helped finance the atrocity, but the point is that Obama, Van Jones, Feisal, and a long list of anti-Americans, all with something to say, all have one thing in common–they want Americans to accept that America is somehow partly to blame for 911. So Feisal, the great bridge builder, seems more motivated to build a bridge OVER the American culture, for the Islamic culture to tred upon, such as to awake the infidels to their own treachery, and the superiority of Shari’a law.

Which brings us to another grave realization, one which American women should be OUTRAGED over. And that is the tolerance of Shari’a law:

To the average western mind, Shari’a is no more than a medieval, barbaric code that somehow survived to the 21st century. It flies in the face of western law, philosophy, liberty and freedom. However, it is the vehicle used to call for the complete destruction of the west and in particular the United States of America, which then will be replaced by Shari’a dictatorships. 

Many rulings handed down by Shari’a courts have shocked the western world, for instance:

• The December, 2007 “teddy bear” case in Sudan, where a British teacher was sentenced to 40 lashes and a year in jail for allowing her students to name their teddy bear “Mohammad.” Islamic mobs demonstrated in the streets and called for her execution.
• The November, 2007 case where a 19 year old gang-rape victim in Saudi Arabia received a sentence of 200 lashes for riding in the car with her rapists.
• In 2006, a 34 year-old mother was forcibly raped and ultimately tried and convicted of adultery, and was ordered to be stoned to death.  

And of course the more recent atrocities and civil rights violations that have been cited in the media, too cruel to repeat here.

So we have this anti-American cleric, who believes in the superiority of anti-American, anti-civil rights, anti-women’s rights laws, who refuses to be cornered into condeming Hamas (an anti-American supporter of militant Islamic factions). He is also a prominent member of a group that helped sponsor the pro-Palestinian activist flotilla that initiated a deadly clash with Israeli forces in May, and was a key figure in the Malaysian-based Perdana Global Peace Organization, ”the single biggest donor ($366,000) so far to the Free Gaza Movement, a key organizer of the six-ship flotilla that tried to break Israel’s blockade of the Hamas-run Gaza Strip.

And he is supported, and funded by, the anti-American president and his anti-American allies in the anti-American movement, through the legal extortion of American taxpayers, to sponsor his fund-raising initiative, through our state department’s outreach to Islamic “believers” in Shari’a, and Hamas sympathizers in the Middle East.

And all they want to do is to erect a 100 million dollar, anti-American symbol, funded in part by terrorists, on hallowed ground less than 660 feet from where 3000 Americans were killed … in order to celebrate their victory in the Islamic tradition of Dawa, as explained to the American people by patriotic American Muslims, as well as noted experts and authors on the matter, in various media outlets not sympathetic to mainstream media’s Obama-inspired infatuation with Islam:

As to the mosque at Ground Zero, there can be no doubt that this is an effort to claim supremacy over that land. If completed what they will be saying is, ‘Islamic warriors destroyed the World Trade Center temple of your capitalism. We have built our mosque on top of those ashes. We are stronger than you. Submit. The purpose of Dawa is to implement, spread and defend Shari’a.

And the best Obama can do is to throw Constitutional principle back into the face of the people in order to accomplish the one thing that all anti-Americans simply delight in: to rub in our faces in our precious Constitution, the flawed relic we make our beds with, so now we have to sleep in. See how it doesn’t work here? Obama the Constitutional scholar, taught by the trilateralist ideology that creeps conspicuously into academia as the criticism of an outdated and obsolete Constitution, inferior to socialism (the Trojan horse of globalism) because it checks and balances the aggrandization of the all-powerful nanny state.

Globalists can twist the literal interpretation of the Constitution in the same manner that Jihadists can twist the literal interpretation of the Bible .. to serve their means. That’s no great feat of magic for a spin doctor of even modest talent.

There is only one remaining obstacle in our dying America that can, and will, prevent this mosque from being built, and that is the American people. As usual, they are the final holdout when common sense and justice all give way to decadence and the perversion of truth.

For how will bulldozers and jackhammers give way to thousands of angry New Yorkers? How many hundreds will Bloomberg’s police cart away before the next thousand line up to take their place? How can construction workers mow down the families of the fallen dead as they line up to block their way? And what anti-American group could ever hope to face off against these New Yorkers, and the families of the first responders, and their survivors and friends, and ever hope to defeat them without literally having to call in the military for back up and to institute marshall law?

Muslim extremists should spend more time in lower Manhattan during rush hour to get some sense of how New York’s version of Shari’a law is gonna come down if they try to build this mosque. It isn’t happening. The people will not stand for it, and that is the the final judgement that the anti-American faction must live with.

THIS with THIS …. you sorta get this:

Special sessions interrupting recess to fund more bailouts. Each payout having infinately less impact, each for a shorter time supporting the house of cards more precariously than the last. Reports of a teenage global unemployment record, and a world-wide unemployment crisis, with each new month revealing “worse than expected” numbers, even as those numbers are severely understated. The FED’s continued monetization of debt now goes public, as the hopelessness of pretense leaves our great economists, academics all, defeated and weary of the recovery charade. High ranking resignations at National Intelligence, Management and Budget, Economic Advisory (Blair, Orszag, Romer) to name only a few of the fallen. Re-revisions of revisions of GDP to levels that completely invalidate all unrealistic estimates of fiscal recovery. Political correctness trumping common sense at ground zero. Ugliness in the character of politics, including accusations of racism coupled with death wish to Palin ”tweets” and increasing tensions among political opinion discussions.

Yes, things do get ugly when the tone of mainstream media edges further toward the brink of reality.

In between vacations and opulent Fiestas, golf outings, basketball, fund raisers and lavish dinners for heads of state, the King’s court lashes out at it’s most ardent support group, the unsatisfiable ”professional left”. Not only is the entire peasantry incapable of comprehending the enormity of the hurdles left by the Bush legacy, but now the serfs refuse to acknowledge or appreciate the “hard work” of passing mountains of legislation written by special interest groups, just because these groups may not completely benefit the hard left. This is politics. Look at all we’ve done for “the little people”. This is the art of compromise and consensus, this is the only change you can believe in and it’s hard work, so BE SILENT … and let us get back to the Villa with our entourage.

So reminiscent of the decadence, decline and decay of so many past empires, but with an exciting new twist –financial INNOVATION. Innovation enabling an unprecedented 1.75 quadrillion mega-ton paper payload of artificial debt, ficticious wealth and fraudulent claims to wipe clean the entire world like a financial ice age, following the impact of the approaching derivative death-star comet.

Will the States take action, and restructure their sovereign economies to protect against the firestorm and economic aftershock? Will they repudiate the mega-swindle and laugh in the face of these silly old men, who put their pants on one leg at a time just like you and me, sending them back behind their curtains, with their vaults full of yellow metal, to cower and scheme up a new way to enslave mankind?

The answer–this way or that–hangs by a thread in the palm of your hand. Happy Friday.

It is amazing what little is written about the looming cataclysm of interest-rate derivatives. You can Google “interest rate derivative black swan” or “interest rate derivative disaster” or any derivation of these terms and you won’t get a fraction of the warnings published on this web site alone. Therefore, I have to write about it yet again in the hopes that an awareness of the coming Armageddon will be heightened.

First of all, one of most important factors most economists miss is the actual utility of interest rates. As fiat currencies become more and more disconnected from their utility and continue to massively lose their worth against anything with intrinsic value, the only remaining utility lies in the multiplier used to repay it.

While most economists focus on the central banker’s power to regulate the supply of currency, this is no match for the power to regulate the discount rate, which applies to every unit in circulation. The huge volume of currency printed by Bernanke’s central bank in the last two years has had little affect on the M1 money supply in circulation, which is still contracting. However a 4 point rate increase, as we experienced between October 1979 and February 1980, would today have destructive financial consequences to bonds, treasuries, almost any security or financial instrument, far exceeding what we experienced in the fall of 2008 (which resulted primarily from the unwinding of credit default swaps, but also, indirectly, from the Fannie meltdown which began as a result of interest rate based derivative losses beginning in July of 2003).

So far, most financial experts, economists and the like, have recognized the systemic risk of the volume of interest rate derivatives, citing the dangers of market makers delta hedging in the same direction at the same time, or the dangers of the financial system being so precariously dependent upon low short term interest rate futures. Others, myself included, cite the sheer volume of notional “at risk” in the interest rate derivative “unknown”. This is the broad concern of the logician, not a financial or market particulars analyst.

I have written about this in the past, citing my concern over both the volume, and exponential growth of notionals, and I maintain that the volume of credit risk remains severely understated by the BIS, and the OCC. I would add that call reports cannot be completely trusted, OTC derivatives are not as large a percentage of the total as estimated, and off-balance-sheet risk miscalculation is endemic. It is the DTCC that will be the final arbiter of the derivative end-game, albeit post-mortem.

I want to keep this short because waning CONfidence in the secondary markets, as well as EU intervention in the German debt markets signal that time is growing short now, and the mathematical certainty of a global financial lose-lose scenario is approaching.

Just remember that the concentration of U.S. risk, at 97%, is in the hands of 5 US banks who are primary shareholders of the FED, and the remaining concentration, internationally, is in the hands of the European banks who are the remaining primary shareholders of this same central bank which independently regulates the interest rate of the world’s reserve currency. Nearly all of the notional credit risk in the system, nearly all denominated in US dollars, all dependent upon short term interest rate futures, all delta hedged by the same market makers in the same direction, all egregiously understated in volume … all of this … is in the hands of a few powerful men who have been granted freedoms and exemptions and diplomatic immunities that very few people realize, or would believe.

These same men, who currently head the families of generational banking dynasties whose legacy reaches back far before the formation of the United States, hold many tons of gold in underground vaults, which no government and no organization has any accounting of, and they have agreements with governments exempting them from any accounting of their wealth, or taxation of it, or any binding laws of any country. A quick summary of their immunity, dating to agrements made in 1931, includes:

• diplomatic immunity for persons and what they carry with them (i.e., diplomatic pouches)
• no taxation on any transactions, including salaries paid to employees
• embassy-type immunity for all buildings and/or offices operated by the Bank for International Settlements
• no oversight or knowledge of operations by any government authority
• freedom from immigration restrictions
• freedom to encrypt any and all communications of any sort
• freedom from any legal jurisdiction

These freedoms far exceed the power of material wealth so treasured by the nouveau riche.

However, though they might presume to act as such, these men are not Gods. They are not infallible. They are not indestructible. And finally, they will never be protected from themselves.

We the People, of the United States of America, can protect ourselves from them – for their power is derived through a financial system of their making. We must not honor it. If we refuse to honor it, they are reduced to mere mortals. If we honor it, they become our masters.

There will be pain in this repudiation of their financial system. I don’t mean to be cryptic, I am just trying to lay the foundation for what will make sense in the coming months.

The People of the United States of America must TAKE ACTION. Only the people have the wisdom, the will, and the courage, to shape their own destiny.