Things to remember when drawing up the indictments.

Excerpt from;

http://www.businessspectator.com.au/bs.nsf/Article/A-tsunami-of-hope-or-terror-LHRJP

………About a decade later, a team working within JP Morgan Chase invented credit default swaps, which are contractual bets between two parties about whether a third party will default on its debt. In 2000 these were made legal, and at the same time were prevented from being regulated, by the Commodity Futures Modernization Act, which specifies that products offered by banking institutions could not be regulated as futures contracts.

This bill, by the way, was 11,000 pages long, was never debated by Congress and was signed into law by President Clinton a week after it was passed. It lies at the root of America’s failure to regulate the debt derivatives that are now threatening the global economy.

Anyway, moving right along – some time after that an unknown bright spark within one of the investment banks came up with the idea of putting CDOs and CDSs together to create the synthetic CDO.

Here’s how it works: a bank will set up a shelf company in Cayman Islands or somewhere with $2 of capital and shareholders other than the bank itself. They are usually charities that could use a little cash, and when some nice banker in a suit shows up and offers them money to sign some documents, they do.

That allows the so-called special purpose vehicle (SPV) to have “deniability”, as in “it’s nothing to do with us” – an idea the banks would have picked up from the Godfather movies.

The bank then creates a CDS between itself and the SPV. Usually credit default swaps reference a single third party, but for the purpose of the synthetic CDOs, they reference at least 100 companies.

The CDS contracts between the SPV can be $US500 million to $US1 billion, or sometimes more. They have a variety of twists and turns, but it usually goes something like this: if seven of the 100 reference entities default, the SPV has to pay the bank a third of the money; if eight default, it’s two-thirds; and if nine default, the whole amount is repayable.

For this, the bank agrees to pay the SPV 1 or 2 per cent per annum of the contracted sum.

Finally the SPV is taken along to Moody’s, Standard and Poor’s and Fitch’s and the ratings agencies sprinkle AAA magic dust upon it, and transform it from a pumpkin into a splendid coach.

The bank’s sales people then hit the road to sell this SPV to investors. It’s presented as the bank’s product, and the sales staff pretend that the bank is fully behind it, but of course it’s actually a $2 Cayman Islands company with one or two unknowing charities as shareholders.

It offers a highly-rated, investment-grade, fixed-interest product paying a 1 or 2 per cent premium. Those investors who bother to read the fine print will see that they will lose some or all of their money if seven, eight or nine of a long list of apparently strong global corporations go broke. In 2004-2006 it seemed money for jam. The companies listed would never go broke – it was unthinkable.

Here are some of the companies that are on all of the synthetic CDO reference lists: the three Icelandic banks, Lehman Brothers, Bear Stearns, Freddie Mac, Fannie Mae, American Insurance Group, Ambac, MBIA, Countrywide Financial, Countrywide Home Loans, PMI, General Motors, Ford and a pretty full retinue of US home builders.

In other words, the bankers who created the synthetic CDOs knew exactly what they were doing. These were not simply investment products created out of thin air and designed to give their sales people something from which to earn fees – although they were that too.

They were specifically designed to protect the banks against default by the most leveraged companies in the world. And of course the banks knew better than anyone else who they were.


As one part of the bank was furiously selling loans to these companies, another part was furiously selling insurance contracts against them defaulting, to unsuspecting investors who were actually a bit like “Lloyds Names” – the 1500 or so individuals who back the London reinsurance giant. !!!!!!!!!!

Except in this case very few of the “names” knew what they were buying. And nobody has any idea how many were sold, or with what total face value.

It is known that some $2 billion was sold to charities and municipal councils in Australia, but that is just the tip of the iceberg in this country. And Australia, of course, is the tiniest tip of the global iceberg of synthetic CDOs. The total undoubtedly runs into trillions of dollars.

All the banks did it, not just Lehman Brothers which had the largest market share, and many of them seem to have invested in the things as well (a bit like a dog eating its own vomit).

It is now getting very interesting. The three Icelandic banks have defaulted, as has Countrywide, Lehman and Bear Stearns. AIG has been taken over by the US Government, which is counted as a part-default, and Freddie Mac and Fannie Mae are in “conservatorship”, which is also a part default – a 'part default' does not count as a 'full default' in calculating the nine that would trigger the CDS liabilities.

Ambac, MBIA, PMI, General Motors, Ford and a lot of US home builders are teetering.

If the list of defaults – full and partial – gets to nine, then a mass transfer of money will take place from unsuspecting investors around the world into the banking system. How much? Nobody knows, but it’s many trillions.

It will be the most colossal rights issue in the history of the world, all at once and non-renounceable. Actually, make that mandatory.

The distress among those who lose their money will be immense. It will be a real loss, not a theoretical paper loss. Cash will be transferred from their own bank accounts into the issuing bank, via these Cayman Islands special purpose vehicles.

Leads to this;

From James Turk at; http://www.kitco.com/ind/Turk/turk_dec122008.html

The 3-day backwardation in November indicates that a shortage of LBMA bars seems to be developing. The implication is that the gold cartel is about to lose its grip on the gold market, and can no longer cap the gold price at current levels.

The second possible answer is more ominous. If gold does trade in backwardation against US dollar for a protracted period (again, barring a very short-term and ephemeral event like the first two instances noted above in which a temporary demand for physical gold disrupts normal market activity), it will mean that a collapse of the dollar has begun. Think about it. How could gold go into backwardation for any prolonged period? If it does, it would mean that no one is willing to take the risk of selling their hoard and instead hold US dollars. It would mean that no one is willing to accept the risks that come with holding dollars while waiting until they can be used at a future date to exchange back into gold.

I can think of earthquakes different than the ones pushing rocks that George Ure thinks about.

http://www.kitco.com/ind/schoon/dec082008.html

Thanksgiving Cheer From Obama
He's assembled a first-rate economic team
Bits By Karl Rove

“Mr. Obama … picked as Treasury Secretary Tim Geithner…Mr. Geithner has been a key player with Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke in confronting the financial crisis. Every major decision in the rescue effort came only after the three agreed.

The National Economic Council director-designee, Larry Summers, is another solid pick. Mr. Summers has been an advocate for trade liberalization, he was the Clinton administration's negotiator for the financial deregulation known as Gramm-Leach-Bliley”…

Obama appointee Lawrence Summers’ 1999 support of the Gramm-Leach-Bliley bill is indeed noteworthy as Gramm-Leach-Bliley repealed the Glass-Steagall Act, specifically passed in 1933 to prevent another depression.

Clinton’s signing of the Gramm-Leach-Bliley bill in 1999 directly led to the financial deregulation responsible for the decimation of financial markets in 2008. Former Bush advisor Karl Rove is right. Acknowledgment is due both Summers and Clinton for their collective contribution to today’s “free” falling markets.

In 1988, Summers co-authored a paper, Gibson's Paradox and the Gold Standard, wherein he postulated that by fixing the price of gold, interest rates could be stabilized; an assertion as absurd as believing fixing the temperature of thermometers can prevent global warming.


Clever boys
Far too clever
For their own good
And others

Hmmm… What else should we take note of to remember?

There are elements within society and the net that do inhibit my desire for engagement. However more folks are now turning towards incredulity rather than the more emotive self-righteousness of the past. Many are starting to wonder how a leadership with such serious flaws can continue in power. Because my answer tends to indict all of us with blame it can be a challenge to see the implications of this presentation. The ideas expressed here seek to create a more formalized place for intuition within a mentality that heretofore has been limited to the integration of rationalism and empiricism.

Intuition is stifled by all the things that are thought to have been put their proper place. If the places they have been put are not proper then a conflict exists between the conscious and unconscious elements of the mind, and the concurrent need to deny ones cognitive dissonance limits the depth of our conceptual structuring. If the loud voice of the ego is spouting off, then the still small voice will not be heard.

My opinion is that because we seldom examine the origins of our criteria for understanding and how they shape our psyche, we are then shaped by society rather than finding the leverage whereby we may better participate in the shaping of society.

Why is the general psyche of humans so malleable to the will of psychotic actors? I submit that our psyche has been unduly shaped by the one-iota of the Consul of Nicea and the clever speculations of Descartes. These two seminal events served to put everything in its “proper” place, with an imperial power structure progressively more immune to the intuitional, enthusiastic impulses of G-ods lesser creations. We will only realize the depth and negative implications of our conditioning when a person or people can clearly present a fresh set of criteria for understanding that illustrates both the misguided appeal of current expressions, and a path towards a more productive relationship to reality.

The greatest hurdle in the attempt to create and promote any novel criteria for understanding will be to get the elites on board. In regard to this, two reasons for their inhibition come to mind. First, the more conventionally intelligent a person is, the harder it becomes to accept that most everything one knows is based on false premises. Second, because the intelligencia create apparent value by telling others which end is up, they do not listen well if you try to illustrate how their thinking contributes to social pathology.

Leaving aside those elements that so trouble the bought and paid for intelligencia, - MSG, Fluoride, Mercury, ad infinitium… I will instead present a novel truth in a highly condensed form. No, not the Truth, simply my best effort at using symbols to express an understanding that, I claim provides the basis for a more healthy relationship to reality.

We battle against powers and principalities. The static principle represents the idea that you will do as you are told; this is to follow Ahriman, more popularly known as
Satan. This is order without liberty. The other side of this coin is the principle of indiscriminate change, or liberty without order, otherwise known as Lucifer. We always have the opportunity to be "saved" by the Christ principle, which happens by bringing balance to order and liberty; and hence removeing the garbage from our minds. Until that point we worship idols and replace G-d's will with ego driven constructs.
> So be it. With Love to all.
>

Many experiences and perceptions are stored within ones sub-conscious mind. It may be both unnecessary and inconvenient to integrate these elements into the conscious mind. Cultural standards limit and define much of this conscious activity. Violations of these standards can produce cognitive dissonance if one attempts to try to integrate some event into a framework that cannot inherently contain that event. My own frustration with cognitive dissonance has been the motivation to propose or (create?) a model that is able to contain and explain a wider variety of events and experiences. I do appreciate any comments, more so if they stick to the concepts being discussed, and please, neither your own cognitive dissonance or your keyboard give you the licence to be rude.

The varied expressions and reflections of writers have always impressed and inspired me. Still we must be clear, the imagination betrays both profundity and ignorance. While I enjoy many subjects, I am often troubled by the lack of an overarching perspective.

Back in high school my science teacher said that the time between the first presentation in scientific journals of a given scientific idea, and its public acceptance was about fifty years. This led me to think that understanding of reality was driven by social rather than rational considerations. We seem stuck by our need to graft fresh ideas onto older models, so as to gain more credibility. The compromised idea is then as likely to enforce the conventional thought, rather than overturning it. The truly brilliant largely do their work outside of and without the validation or crutch of social convention. No, Einstein and Darwin do not make the grade. People like Tesla, Reichenbach, Reich, and Naessens will continue to be ignored as long as the stature of mildly intelligent people is measured by some popularity contest. One big “reality” show. Whoop –ee.

Human beings have a unique ability to change the nature of their consciousness, yet this seldom happens, perhaps because of the existential terror involved with having to confront ones ignorance. For most, psychic stability is more important than an open and dynamic relationship to reality. Some will even assert that reality is, as I perceive it. Oh really? Did the sun and stars revolve around the Earth back when that was the common perception? And yes, the Pope does shit in the backwoods of our minds.

A system for understanding reality that provides both psychic stability and an open relationship to future possibilities must eventually become a welcome element within the human project. Science, with its notion of provisional truth and experimental method has been a step in the right direction. Yet, within science there is no provision for knowledge and/or elements of reality that may exist outside the boundary conditions of current models. This illustrates how science is also a social project that limits its rationality to material that falls within the boundary conditions of the existing puzzle, and thereby produces resistance to the questioning of its foundational statements.

Science as a central cultural element has only a three or four century history. We maintain many original foundational statements, as having Absolute Truth value, such as the Inverse Square Law of Gravitation, or that the spiritual has no extension in time and space. Also why do we stand so stiff necked behind Darwin? The ego perhaps? Burnished by the notion that we exist at the pinnacle of evolutionary development? Why do we consider that these original shots in the dark are such a sure bet to express Absolute Truth? If examples of prior developed civilizations were admitted to, the authority of our current experts might come into question. To consider that there other pinnacles lost or yet to be reached is not to denigrate where we currently find ourselves. The collapse of the roof may not be so bad if it lets us then see the sky.

It is a basic rule in philosophy that a consequent cannot prove an antecedent. The result is that foundation strength will largely determine the life of the building. It makes sense to plan for our next ‘foundation’ while our current ‘building’ is still standing. Therefore, a system of understanding that contains elements that redefine certain words and concepts may be worthy of consideration. New systems will likely challenge both faith and our concepts of rationality. At this point in the human project we must be brave so as to deepen and put flesh on the skeleton of our conceptual structures. My sense is that the greatest limitation of current foundation structures lies in their applications being limited to the gross physical aspect of existence.

Our modern structures are built on the hard dualism of Descartes and circumstances. Their came a time (17th century) when it was deemed prudent to establish a division of authority. This division has led to better analytical tools for use in the various sub-specialties. While the declaration that the physical and the spiritual are fundamentally different encouraged excellent progress within the physical sciences, we are wrong if we consider this duality to be an Absolute Truth.

Consider the wave-particle paradox. It may be the case that any particle is the agglutination of sub-particles that exhibit the proper combination of velocity, vector, and a cyclical balance between electro-magnetic attraction and static repulsion characteristics. It is reasonable to assert that particles may exist, that are even orders of magnitude smaller than the resolution powers of current instruments. These particles would still be physical yet so small that they may be driven by resonance relationships and may be kin to consciousness itself.

How do we relate to, and bring material from out of the ineffable? We have “visions”, and then we interpret the vision into prosaic terms so that others may understand it. This social compact (or inevitability) feeds back into the questions that we ask of the ineffable. Our knowledge is not the recognition of a pre-existing ideal (Plato); our knowledge is not a new discovery (sophists). Our knowledge represents answers that are arrived at, always within the terms of the questions asked (Aristotle).

Has the era of dualism served its function and are we ready to move towards new sets of questions? Only when good people admit to the error of their acceptance of relative truth as being Absolute Truth, will we as a society advance to a stage where our perceptions of reality and reality itself will exist within a more dynamic and healthy relationship.