Archive for the ‘Tyler Durden’ tag
by Jim Willie
Events in the last decade displayed a vigorous effort to defend the USDollar. The rogue nation of Iraq sold crude oil in Euros for three years, until they were liberated. Its tyrant was a scourge to be sure. Weapons of financial mass destruction seem to have replaced the traditional type, the new variety being derivatives, mortgage bonds, and even sovereign bonds from weak nations. Newer weapons from the United States feature extended hands from clearing house fronts that snatch and grab segregated private accounts, and backdoor raids of exchange traded fund precious metal. Let’s not overlook the more frontal assault weapons deployed like unseating Qaddafi and capturing his gold held in foreign accounts, along with all that cash. Liberation has its benefits. The confrontation with Iran would be comical if not so dangerous. The claims have been silly in my view for years, in the perception of Iran as a serious threat to the West. They have been subjected to cut communication lines on the Persian Gulf seabed. They have been subjected to Stuxnet viruses to obstruct their nuclear refinement process, via the Siemens rear door. They have been subjected to an influx of heroin from the north, where the USMilitary manages the Afghan situation and locale.
To be sure, Iran’s clergy qualify as a bunch of clownish fools with a tight grip on power and security forces. The shock here is that the relatively educated Tehran crowds have not disposed of their corrupt class of leaders. The clergy has been skimming from oil revenue for years, complete with hidden Swiss accounts. The same goes for the American corrupt class of leaders, with their USDollar control levers, their failures to deliver USTreasury Bonds (aka naked shorting by Wall Street firms), their hidden mechanisms behind Quantitative Easing to Infinity (QE never stopped), their insider trades to exploit financial markets (flash trades with a peek), their ETF dampers on numerous individual markets (regular inventory raids by Wall Street), their nationalization of Fannie Mae & AIG in order to put the fraud records in a warehouse (bond counterfeit, duplicate income stream usage), and their absurdly positive economic drivel data (more like chronic 10% CPI and chronic minus 3% GDP).
The big events in the last several weeks focus on the inability for US combined forces, both military and financial, to put Iran on a leash. The Tehran mongrel still roams and shares meals with neighbors. The Hat Trick Letter does not delve much into geopolitics and military weapon analysis, but the next generation Sunburn and Onyx missiles that Russia has supplied to Iran stand out as significant in their ability to neutralize great opposite forces. These two missiles are a step ahead of the Cruise, something perhaps not 5% of the US population is aware, but something that 95% of the USMilitary brass is aware. The US Fleet in the Persian Gulf might be rather easy vulnerable targets. The annual August belligerent war posturing against Iran invited my dismissals from 2004 to 2005 to 2006 to 2007 to 2008 to 2009 to 2010. But in 2011 the posturing and siren calls seemed more serious, yet still worthy of dismissal since waged battle would render massive damage to both sides. See Sunburn & Onyx again. The military maneuvering behind the scenes is not so easily tracked, which lately has extended to Syria with a Russian shadow. The entire reduced theater seems chock full of standoff factors. China might have sounded off threats of retaliation if Iran were attacked, but Russia delivers the same threats in more subtle private tones.
The USGovt has attempted to isolate Iran. To some extent they have succeeded. Price inflation inside Iran has turned acute, with numerous stories seeping through the information curtain. The pain, just like in Cuba, has been handed to the people and hardly to the leaders. One can be very certain that the mullahs continue to enjoy the good life, work little, eat well, enjoy ample time to pray, while skimming $million every week from oil revenues. However, a defiance seems more successful at the higher levels. The trend of bilateral trade deals fashioned by China has been growing, made popular by the same grand holder of over $3.2 trillion in US$-based debt securities of dubious value. Behind the trade deals are agreements to continue in crude oil purchases from oil-rich Iran.
INDIA CAUGHT IN CROSSFIRE
The Ironic, Prophetic Nature of the MF Global Bankruptcy Filing and It’s Potential Ramifications of Lehman 2.0!!!
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Forthose who do not know, I was a real estate investor between 2000 and2006. By 2006, I came to the realization that there were no longerprofitable deals to be had on a sound risk/reward basis, and the entirePonzi scheme looked to be ready to do the Humpty Dumpty thing. So, Itook a year off to raise my brand new baby girl, and came back to pursueplans to start a hedge fund that focused on shorting the FIRE sectorand European banks – basically any and everybody who ever did businesswith me and my colleagues in real estate – the writing was evidently onthe wall for anyone who bothered to look at walls.
At a fundraiser that MF Global threw in Rockefeller Center’s rollingskating rink, I sat down with the then CEO of MF Global and his wife andinformed them of my plans. They sincerely wished me luck and told me tolet them know when I got started (I would speak to them on and offannually at the skating rink event or over lunch). I said nothing then,but I was highly suspect of the firms prospects going into what I sawwas a risky asset firestorm of a correction. As it turned out, itappears I may have had a point. Even more interesting is the fact that Iwas the only one that I knew of who proclaimed that Fed ZIRP policy wastruly poison laced in Myrrh. Contrary to that espoused by ink stainedivory towers of academia and those who so often correct in the SellSide, ZIRP is killing the banks while regulatory capture is hiding themetastizing tumors. I also now a few who used to work in the riskdepartments of MF (yes, they did have one) and they said thatGoldman/governer guy was the one that ran MF into the ground.Accordingly, MF was a good brokerage, but he came in and tried to makethem bankers and traders, which they were not (at least they weren’tgood ones, anyway). By forcing the firm to carry inexperiencedproprietary risk, he doomed the firm (according to this insider).
Hmmmm… Up is down, and down is up, I bendeth you over if you spilleth my cup! Again, as excerpted from There’s Something Fishy at the House of Morgan“:
Again,I have warned of this occurrence as well. See my interview with MaxKeiser below where I explained how the Fed’s ZIRP policy is literallystarving the banks it was designed to save. Listen to what was a highlycontrarian perspective last year, but proven fact this year!
Provisionsand charge-offs: I have been warning about the over-exuberant releaseof provisions to pad accounting earnings since late 2009!
Declinesin provision was one of the major contributors to bottom line. JPMorganreduced its provision for loan losses to $1.2bn (0.7% of loans) in Q12011 from $7.0bn (4.2% of loans) in Q1 2010 and from $3.0bn (1.8% ofloans) in Q4 2010 while charge-offs declined to $3.7bn (2.2% of loans)in Q1 2011 from $7.9bn (4.4% of loans) in Q1 2010 and from $5.1bn (2.9%of loans) in Q4 2010. Although banks delinquency and charge-off rate hasdeclined, the extent of decline in provisions is unwarranted comparedto decline in charge-off rates. As a result of higher decline inprovisions compared to charge-offs, total reserve for loan losses havedecreased to 4.3% in Q1 from 5.3% in Q1 2010 and 4.7% in Q4 2010. At theend of Q1 the banks allowances to loan losses is lowest since 2009.
Althoughthe reduction in provisions has helped the banks to improve itsprofitability it has seriously undermined the banks’ ability to absorblosses, if economic conditions worsen. As a result of under provisioningfor the past five quarters, the banks Eyles test, a measure of banks’ability to absorb losses, has turned to a negative 7.7% in Q1 2011compared with +6.4% in Q1 2010. A negative Eyles test has seriousimplications to shareholders – the losses from banks could not onlydrain entire allowances for loan losses which are inadequate but canalso wipe off c7.7% of shareholder’s equity capital. The negative valueof 7.7% for JPM’s Eyles is the lowest in this downturn.
MF Global Holdings filed for Chapter 11 bankruptcy protection in New Yorkon Monday morning, after an effort to sell itself to Interactive BrokersGroup failed.
MFGlobal [MF 1.20 --- UNCH ] had a tentative deal to sell assets toInteractive Brokers [IBKR 15.55 0.33 (+2.17%) ] as of late Sunday, butthe agreement fell apart as talks continued overnight, said peoplefamiliar with the matter. Discussions ended around 5 a.m. ET, one ofthese people said.
MFGlobal had been considering filing just its holding company forbankruptcy protection and then executing the sale. That plan is now offthe table, one of the people said.
Thisperson said MF Global’s parent company would be included in thebankruptcy filing. Voluntary bankruptcy petitions for MF Global Holdingsand MF Global Finance USA hit the docket in a U.S. bankruptcy court inManhattan mid-morning on Monday.
TheChicago Mercantile Exchange said on Monday that customers ofbroker-dealer MF Global were limited to liquidating their positions. Theexchange, which owns the Chicago Board of Trade, said it would nolonger recognize MF Global, which has filed for Chapter 11 bankruptcyprotection, as a guarantor for floor trading.
…”It was quite difficult to get our money out on Friday, because theyhad a lot of redemption calls,” a trader, whose firm used MF Global as abrokerage said. “The company is not initiating any new position. Theyare trying to close down positions that they already have with clientsthat are open.”
At MF Global’s London office, in Canary Wharf, staff were coming and going from the office as normal at Monday lunchtime.
There was a tense atmosphere and most declined to speak to CNBC.com.
“We’re not allowed to speak to you; so you can probably read into that what you will,” one MF Global worker told CNBC.com.
Thelast set of statements are teiling, indeed. MF Global is a mini-Lehman,and while many may not be taking MF Global’s demise as seriously, itdefinitely is. They died from the same disease that afflicts much ofWall Street, and most of European banking. They are smaller, that’s theonly real difference – and the asset management company that they werespun off is doing just as bad. I said it before, and I’ll say it again,Europe is housing Lehman Brothers x 4!
From ZeroHedge: Presenting The Bond That Blew Up MF Global
Reaching for yield (and prospectively capital appreciation) while shorteningduration had become the new ‘smart money’ trade as we saw HY creditcurves steepen earlier in the year (only to become the pain trade veryquickly). The attraction of those incredible yields on short-datedsovereigns was an obvious place for momentum monkeys to chase and itseems that was the undoing of MF Global. The Dec 2012 Italian bonds (inwhich MF held 91% of its ITA exposure), as highlighted in today’sBloomberg Chart-of-the-day, appears to be the capital-sucking instrumentof doom for the now-stricken MF. As if we need to remind readers, thereis a reason why yields are high – there is no free lunch – and whilesome have already leaped to the defense of the bet-on-black Corzine riskmanagement process with comments such as ‘He was simply early and willbe proved correct’ should remember that only the central banks havebottomless non-mark-to-market pockets to withstand the vol. It also setsup a rather useful lesson for those pushing for EFSF leverage to buy risky sovereign debt – but given today’s issue demand, perhaps that is moot.
Hmmmm!I remember over the summer, when MF probably put these trades on, Iwarned about Italy sparking France while NEARLY EVERYONE ELSE was stillfocusing on Greece! Reference the following excerpt from Wednesday, 03August 2011 France, As Most Susceptble To Contagion, Will See Its Banks Suffer
Incase the hint was strong enough, I explicitly state that although thesell side and the media are looking at Greece sparking Italy, it isFrance and french banks in particular that risk bringing theFranco-Italia make-believe capitalism session, aka the French leveragedItalian sector of the Euro ponzi scheme down, on its head.
I then provide a deep dive of the French bank we feel is most at risk. Let it be known that every banked remotely referenced by this research has been halved (at a mininal) in share price! Most are down ~10% of more today, alone!
- French Bank Run Forensic Thoughts – Retail Valuation Note - For retail subscribers
- Bank Run Liquidity Candidate Forensic Opinion - A full forensic note for professional and institutional subscribers
So, how accurate was I? Well, we’ll see in a few… In this morning’s headlines:
So, What’s the Next Shoe To Drop? Read on…
Forthose who claim I may be Euro bashing, rest assured – I am not. Just aweek or two later, I released research on a big US bank that will quitepossibly catch Franco-Italiano Ponzi Collapse fever, with the prodocument containing all types of juicy details. This is the next big thing, for when (not if, but when) European banks blow up, it WILL affect us stateside! Subscribers,be sure to be prepared. Puts are already quite costly, but there areother methods if you haven’t taken your positions when the research wasfirst released. For those who wish to subscribe, click here.
Now, let’s refresh the output from And The European Bank Run Continues…and more importantly BoomBustBlog BNP Paribas “Run On The Bank” Models (they range from free up to institutional, I strongly urge those who haven’t to click upon said link and download your intellectual weapon of choice!) where I modeled Greek losses on BNP. Below is sample output from the professional level model (BNP Exposures – Professional Subscriber Download Version) that simulates the bank run that the news clippings below appear to be describing in detail…(Click to enlarge to printer quality)This scenario was run BEFORE the Greek bonds dropped even further in price…
Using more recent market inputs (you know, assuming this stuff was Level 1), we get the following…
Noticehere the base case TEC impairment is now approaching the adverse casefrom just a few weeks ago – and this is using market pricing, not somepie in the sky model!
Ihave not recalculated the adverse scenario in this example, but you cansimply use your imagination, or download the model and run it foryourself.
A Greek default with haircuts somewhat inline with market prices willwipe out 13% of BNP TEC, with a more severe cut (quite likely) takingout nearly 20%. This is not even glancing upon the many problems wediscussed in our forensice reports ( French Bank Run Forensic Thoughts – Retail Valuation Note - For retail subscribers, Bank Run Liquidity Candidate Forensic Opinion - A full forensic note for professional and institutional subscribers).
Now,if the ZH referenced report above is accurate (and I believe it is) thebanks are going to try to delever by selling assets in the open markets(all at the same time, selling the same assets to the same pool ofpotential buyers at the same bad times). This means that the prices usedto populate this model are probably still too optmistic. Even if theyweren’t, look at the capital short fall the Greek default will leave BNPwith assuming our institutional bank run thesis holds true and they seea slight withdrawal of liquidity of 10% this year and 15% next (knowingfull well the numbers for Lehmand and Bear were much, much higher thanthat before they collapsed). First, a refesher on our European bank runtheory expoused 5 months ago…
- The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!
And the BNP results????
Halftrillion euros here, half trillion euros there… Sooner or later,we’ll be talking about some real money! Since the problems have not beencured, they’re literally guaranteed to come back and bite ass.Guaranteed! So, as suggested earlier on, download your appropriate BoomBustBlog BNP Paribas “Run On The Bank” Models (they range from free up to institutional).
On Derivatives Implosions and Debt Destruction…
Just like the US banks and EU leaders have somehow gamed (or at least triedto game) the CDS market into a sham, they look to do the same in thediscorporation of those entities who have been destroyed by the highlydeflationary forces taking hold. To wit: MF Global Creditors Led By JPMorgan
The following are MF Global Holdings’ largest unsecured creditors and shareholders, according to the company’s bankruptcy filing and related court papers submitted today in U.S. Bankruptcy Court in Manhattan.
Unsecuredcreditors rank behind secured lenders in getting repaid in abankruptcy, and are ahead of preferred and common shareholders.
JPMorgan Chase & Co. (JPM)’s JPMorgan Chase Bank, bondholder trustee, $1.2 billion.
Deutsche Bank AG, trustee for $1.02 billion in bonds:
Deutsche Bank Trust Co., bondholder trustee for 6.25% notes, $325 millionbondholder trustee for 3.375% notes, $325 million bondholder trustee for1.875% notes, $287.5 million bondholder trustee for 9% notes, $78.6million.
From ZeroHedge, we are sourced the ISDA “determinations committee“:
Americas Voting Dealers Bank of America / Merrill Lynch Barclays Citibank Credit Suisse Deutsche Bank Goldman Sachs JPMorgan Chase Bank, N.A. Morgan Stanley Société Générale UBS
Voting Dealers Bank of America / Merrill Lynch Barclays BNP Paribas Credit Suisse Deutsche Bank Goldman Sachs JPMorgan Chase Bank, N.A. Morgan Stanley Société Générale UBS
To suscribe to our research services, click here. This will be a very, very profitable quarter!
More from Reggie Middleton…
Jon S. Corzine
One by one, the big banks and investment firms appear destined to go broke. Behind all other crises looms the mother of all bubbles – the derivatives debacle. The worsening situation is simply sped up by the criminal actions of brokerage firm MF Global, so desperate to stay afloat that it sank hundreds of millions of dollars of customers’ money into its losing position and failed. This latest example of crony capitalism will hurt a lot of people, although NESARA will save most of them.
Two articles here, the first one from the New York Times and the second one from Zero Hedge. Someone will have to go to jail, says Zero Hedge. This time I think that very well may happen. Thanks to Luisa and Ramona.
Regulators Investigating MF Global for Missing MoneyBy BEN PROTESS, MICHAEL J. DE LA MERCED and SUSANNE CRAIG
New York Times, Oct. 31, 2011
Federal regulators have discovered that hundreds of millions of dollars in customer money has gone missing from MF Global in recent days, prompting an investigation into the brokerage firm, which is run by Jon S. Corzine, the former New Jersey governor, several people briefed on the matter said on Monday.
The recognition that money was missing scuttled at the 11th hour an agreement to sell a major part of MF Global to a rival brokerage firm. MF Global had staked its survival on completing the deal. Instead, the New York-based firm filed for bankruptcy on Monday.
Regulators are examining whether MF Global diverted some customer funds to support its own trades as the firm teetered on the brink of collapse.
The discovery that money could not be located might simply reflect sloppy internal controls at MF Global. It is still unclear where the money went. At first, as much as $950 million was believed to be missing, but as the firm sorted through its bankruptcy, that figure fell to less than $700 million by late Monday, the people briefed on the matter said. Additional funds are expected to trickle in over the coming days.
But the investigation, which is in its earliest stages, may uncover something more intentional and troubling.
In any case, what led to the unaccounted-for cash could violate a tenet of Wall Street regulation: Customers’ funds must be kept separate from company money. One of the basic duties of any brokerage firm is to keep track of customer accounts on a daily basis.
Neither MF Global nor Mr. Corzine has been accused of any wrongdoing. Lawyers for MF Global did not respond to requests for comment.
Now, the inquiry threatens to tarnish further the reputation of Mr. Corzine, the former Goldman Sachs executive who had sought to revive his Wall Street career last year just a few months after being defeated for re-election as New Jersey’s governor.
When he arrived at MF Global — after more than a decade in politics, including serving as a Democratic United States senator from New Jersey — Mr. Corzine sought to bolster profits by increasing the number of bets the firm made using its own capital. It was a strategy born of his own experience at Goldman, where he rose through the ranks by building out the investment bank’s formidable United States government bond trading arm.
One of his hallmark traits, according to the 1999 book “Goldman Sachs: The Culture of Success,” by Lisa Endlich, was his willingness to tolerate losses if the theory behind the trades was well thought out.
He made a similar wager at MF Global in buying up big holdings of debt from Spain, Italy, Portugal, Belgium and Ireland at a discount. Once Europe had solved its fiscal problems, those bonds would be very profitable.
But when that bet came to light in a regulatory filing, it set off alarms on Wall Street. While the bonds themselves have lost little value and mature in less than a year, MF Global was seen as having taken on an enormous amount of risk with little room for error given its size. By Friday evening, MF Global was under pressure to put up more money to support its trading positions, threatening to drain the firm’s remaining cash.
The collapse of MF Global underscores the extent of investor anxiety over Europe’s debt crisis. Other financial institutions have been buffeted in recent months because of their holdings of debt issued by weak European countries. The concerns about MF Global’s exposure to Europe prompted two ratings agencies to cut their ratings on the firm to junk last week.
The firm played down the effect of the ratings, saying, “We believe that it bears no implications for our clients or the strategic direction of MF Global.”
Even by Sunday evening, MF Global thought it had averted its demise after a disastrous week. Over five days, the firm lost more than 67 percent of its market value and was downgraded to junk status, which prompted investor desertions and raised borrowing costs.
Mr. Corzine and his advisers frantically called nearly every major Wall Street player, hoping to sell at least some of the firm in a bid for survival.
On Friday, the asset manager BlackRock was hired to help MF Global wind down its balance sheet, which included efforts to sell its holdings of European debt. BlackRock was able to value the portfolio, but did not have time to find a buyer for it given the other obstacles MF Global faced, according to people close to the talks.
By Saturday, Jefferies & Company became the lead bidder to buy large portions of MF Global, before backing out late in the day.
On Sunday, a rival firm, Interactive Brokers, emerged as the new favorite. But the Connecticut-based firm coveted only MF Global’s futures and securities customers.
While MF Global was resigned to putting its parent company into bankruptcy, Interactive Brokers was also willing to help prop up other MF Global units, including a British affiliate.
By late Sunday evening, an embattled MF Global had all but signed a deal with Interactive Brokers. The acquisition would have mirrored what Lehman Brothers did in 2008, when its parent filed for bankruptcy but Barclays of Britain bought some of its assets.
But in the middle of the night, as Interactive Brokers investigated MF Global’s customer accounts, the potential buyer discovered a serious obstacle: Some of the customer money was missing, according to people close to the discussions. The realization alarmed Interactive Brokers, which then abandoned the deal.
Later on Monday, when explaining to regulators why the deal had fallen apart, MF Global disclosed the concerns over the missing money, according to a joint statement issued by the Commodity Futures Trading Commission and the Securities and Exchange Commission. Regulators, however, first suspected a potential shortfall days ago as they gathered at MF Global’s Midtown Manhattan headquarters, the people briefed on the matter said. It is not uncommon for some funds to be unaccounted for when a financial firm fails, but the magnitude in the case of MF Global was unnerving.
For now, there is confusion surrounding the missing MF Global funds. It is likely, one person briefed on the matter said, that some of the money may be “stuck in the system” as banks holding the customer funds hesitated last week to send MF Global the money.
But the firm has yet to produce evidence that all of the $600 million or $700 million outstanding is deposited with the banks, according to the people briefed on the matter. Regulators are looking into whether the customer funds were misallocated.
With the deal with Interactive Brokers dashed, MF Global was hanging in limbo for several hours before it filed for bankruptcy. The Federal Reserve Bank of New York and a number of exchanges said they had suspended MF Global from doing new business with them.
It was not the first time regulators expressed concerns about MF Global.
By midmorning on Monday, the firm filed for bankruptcy.
Azam Ahmed contributed reporting.
Someone Is Going To Jail For This: MF Global Caught Stealing Hundreds Of Millions From Customers?
Say you are the head back office guy at MF Global, it is the close of trading on Thursday, the firm has already completely drawn down on its revolver, and all the resulting cash in addition to all the firm’s cash at your disposal in affiliated bank accounts, up to and including petty cash, has been used to satisfy margin demands due to declining collateral value, yet the collateral calls just won’t stop, and impatient voices on the other side of the phone line demand you transfer even more cash over immediately or else risk default proceedings commenced against you within minutes.
This is not a fictional tale. This is precisely what very likely happened at MF Global in the past 72 hours. And someone has to go to jail. That someone, if indeed this criminal act is proven to have taken place, should be none other than Jon Corzine himself.
The sad truth of just how low Wall Street has fallen comes to us courtesy of the New York Times:
Federal regulators have discovered that hundreds of millions of dollars in customer money have gone missing from MF Global in recent days, prompting an investigation into the company’s operations as it filed for bankruptcy on Monday, according to several people briefed on the matter.
The revelation of the missing money scuttled an 11th hour deal for MF Global to sell a major part of itself to a rival brokerage firm. MF Global, the powerhouse commodities brokerage run by Jon S. Corzine, had staked its survival on completing the deal.
As for the details:
What began as nearly $1 billion missing had dropped to less than $700 million by late Monday. It is unclear where the money went, and some money is expected to trickle in over the coming days as the firm sorts through the bankruptcy process, the people said.
But regulators are examining whether MF Global diverted some customer money to support its own trades as the firm teetered on the brink of collapse. If that was the case, it could violate a fundamental tenet of Wall Street regulation: Customers’ money must be kept separate from company money.
And just like in the Lehman collapse where tens if not hundreds of international prime brokerage hedge fund clients, due to no fault of their own, found themselves insolvent after their cash ended up being caught at the London Lehman office (the details of how that money was illegally transferred from London to the US is a different topic entirely) and never to be seen again except to satisfy general unsecured claims, so thousands of MF clients are about to realize that money they thought they had, even if completely unencumbered with other assets, read pure cash, read money not at risk, is now gone forever, and they will have to wait years until the bankruptcy process determines if the claim deserves priority status to the unsecured bondholders. Best case: assume a 70% haircut on the money, if it is ever to be seen again at all.
So who can be sued? Who can be blamed for this malicious and purposeful criminal act? Why everyone from the back office clerk presented in the thought experiment above, all the way up to the man at the very top, Jon himself, who, like in every other act of Wall Street impropriety will plead stupidity and deny he ever knew of this crime. Unfortunately, our criminal regulators, who will be just as complicit in clearing him of all wrongdoing, will aid and abet this latest destruction of faith in US capitalism.
What happens next? Why customers at all other brokerages, all other exchanges, afraid that their money will suffer the same fate as MF, even if they transact with perfectly solvent clearers and agents, will proceed to pull their money, as they know they have nobody to trust but their own prudent and forward looking actions. Which in turn will start the kind of liquidity drain that killed not only Lehman, but froze money markets, and with that brought the complete capital markets to a standstill, only to be thawed after the Fed pledged multiples of the US GDP to rescue Wall Street in October of 2008.
And that, dear reader, is called unintended consequences, and how the bankruptcy of a small exchange can avalanche into a crippling Ice Nine of what is left of capital markets all over again, courtesy of crony capitalism, rampant criminality and a regulator and enforcement body that is more fascinated with midget porn than any regulating or enforcing of the very firms it hopes to get an assistant general counsel job from in a few short years.
Here are some semi-random notes on the Occupy Wall Street movement, based partly on some “insider” contacts.
I am honored to have long been in email correspondence with David DeGraw ofAmped Status, one of the key initial organizers of the Occupy Wall Street movement. As a result of our mutual support society/correspondence, I am also honored to be included in an email group of people I consider the leading lights in the movement to restore democracy and fiscal sanity to this nation, people like Matt Taibbi, Barry Ritholtz, William Black, Max Keiser, Dylan Ratigan, Karl Denninger, Yves Smith, Michael Hudson, Nomi Prins, David Cay Johnston, Paul Craig Roberts, “George Washington” and Tyler Durden, to name some whose work you have probably read.
I want to start by saying that David DeGraw has acted under extreme pressure with integrity and grace at every step of this amazing journey. He is an American hero in my book, along with all the other initial organizers of the OWS movement: someone who cannot be bought, someone with the uncommon courage to act (virtually alone at times) against the united forces of oppression, exploitation and thuggery that is the Wall Street/Washington, D.C. Power Elite.
The OWS story appears to begin in late September, but it actually started in March, when David, Anonymous and other activists began organizing a June 14 “occupation” of Liberty Park: Acts of Resistance: What Are You Going To Do To Rebel Against Economic Tyranny? (June 1, 2011), Prepare For Revolution: The Empire State Rebellion Begins on June 14th (March 31, 2011), The A99 social network group, etc.
David has summarized his 19-month experience on the front lines of the movement:Report from the Frontlines: The Long Road to #OccupyWallStreet and the Origins of the 99% Movement.
What few people know or recall is that the June 14 occupation attracted a total of four citizens: David and three other brave souls: event organizer Gary Roland, Oren Clark and Kevin Dann. (Other sources say 16 people showed up but only these four were prepared to occupy the park.)
Here is David’s statement after the disappointing turnout: Back home from Liberty Park(June 15, 2011).
David does not try to take credit as a leader; rather, he repeatedly states the movement is decentralized and leaderless, mentioning the key roles played by Anonymous, A99 OpESR, US Day of Rage and the NYCGA (New York City General Assembly) among many others:
There are definitely other significant groups that played a key role. In such a decentralized movement, it’s hard to keep track of all the efforts being put forth. We will feature other perspectives in the days ahead.
As Anonymous A99 wrote in response to questions about their movement:
“We are a DECENTRALIZED non-violent movement. If you are looking to contact one of our leaders, go to the nearest mirror and peer deeply into it. It may take some time, but, eventually, one of our leaders will appear with answers to all of your questions.”
This lack of identifiable leaders and shadow financial backers is driving the Power Elites and their Mainstream Media lackeys crazy. Since they are all pimps or prostitutes for one special interest or another, the storm troopers of the Elite cannot believe there isn’t some interest group behind the whole thing. A decentralized, self-organizing mass protest movement against their rule simply doesn’t compute.
I have also been honored to be included in another small email group formed by an anonymous Elite insider who uses the nom de guerre Guy Fawkes. I won’t divulge this list for reasons of confidentiality, but the key point made by Mr. Fawkes is thatWashington D.C. is a bath-house/whorehouse where everyone is for sale and/or hustling:
The key to understanding Washington is to understand that the whole place is for sale. It’s not just politicians. It’s interest groups (right and left), media, foundations, lobbyists, etc.
Companies/foundations/labor all essentially manufacture “public opinion” from thin air simply by routing money to the right mouthpieces — public interest groups, non-profits, academics & universities, analysts. It’s hugely sophisticated and the budgets are enormous.
They are all competing (and paying) to either get the government to screw their competitor or convey some government benefit to them.
The voice of the electorate — the real “grassroots” — gets completely lost in the din. As soon as a “movement” picks up steam (e.g. Tea Party, MoveOn.org) it becomes completely co-opted… Tea Party becomes about “Guns, God & Gays” as Denninger rightly points out. Huge sums of money are dangled in front of the movement’s leaders and the original purpose of the movement is transformed into something that the status quo can tolerate.
There’s no room in this town for anyone who challenges the status quo — be that a Ron Paul, a Dennis Kucinich, a Noam Chomsky, etc. (Republicans ridicule Ron Paul just as much as Democrats do… It’s NOT his ideas that they are afraid of, it’s that he’s a huge threat to their power and perks.)
We all know this, and some try to dismiss it as “business as usual”: politicos have always been corrupt, money is the mother’s milk of politics, etc., but these are excuses, not explanations. A nation ruled by a deeply, pervasively corrupt political/financial class is not a democracy or a haven of free market capitalism: it is a neo-feudal kleptocracy organized along a neo-colonial “plantation economy” model with debt-serfs kept in line by the toadies, lackeys and apparatchiks of government, media and finance–a class of enforcers, propagandists and regulators that constitute a Technocratic Caste, a caste with a taste for power and the big bucks that flow to those willing to sell their souls and bodies in service to extreme concentrations of wealth and power. (All of this is explained in depth in my book Survival+.)
The corporate media is bought and paid for, and “journalists” toe the line or they’re fired. It’s really that simple.
That’s why the Web/blogosphere drives the Power Elites crazy: they can’t co-opt it with cash. You want to buy this site’s content and message? Sorry–I already have enough money. It really doesn’t matter how much money I have–it’s always enough. This is something else the Power Elites and their prostitutes/pimps simply cannot understand: how can someone not be bought? Doesn’t everyone crave the “Elite status” of special passes, big salaries, shiny gew-gaws and luxury possessions? Those who have sold their souls for a few beads and bangles are unable to understand those for whom integrity and independence are the only types of “wealth” they recognize. All that the pimps and whores of Washington value so much–the access to corridors of power, the fancy cars, the costly cozy dinners, and all the other perks of servitude–are meaningless to us, crass, ugly baubles marking depraved, lost souls.
Though it’s early, there are a number of lessons to be drawn from Occupy Wall Street. Others have already filed excellent reports, for example Chris Martenson-Occupy Wall Street: What’s Really Going On, and David Graeber, via Yves Smith (Naked Capitalism): On Playing by the Rules.
Here are my observations.
1. As an old activist myself (circa the early-mid 1970s), I learned that timing is everything but it is out of our control. A well-publicized mass demonstration in June draws 16 people (or four), and one three months later draws thousands of people. The difference is a change of awareness/ consciousness crystallized in the broader culture.
Concepts and phrases that placed me and other bloggers firmly in the farthest fringes of American society in 2005 and 2006 are now mainstream, bantered around on thousands of blogs and social media sites. People usually gain an awareness of propaganda and servitude slowly, and often only when their servitude and the dominance of self-serving Power Elites actually start impacting their own lives. That is now happening to more and more people.
The key to this process is having explanations and models which make sense of what’s happening. As the Status Quo unravels/devolves, the propaganda becomes less and less persuasive as an account of how the world actually works. Alternative explanations suddenly “make sense.” For me, the neo-colonial “plantation” model of financial/political exploitation and oppression neatly explains how America functions in the real world: debt-serfs, a Technocratic Caste of enforcers/managers, etc., just like on a colonial plantation ruled by a distant, cloaked, unreachable Elite. Others have different models, but the key feature is that each alternative explanation disrupts and subverts the Status Quo narrative.
This process cannot be co-opted or stopped. The only question left to be answered going forward is how much pain and suffering the Status Quo Power Elites and their armies of technocrat toadies, lackeys and prostitutes will impose on the nation before their grip on power is finally relinquished.
2. Given the vast armies of toadies, lackeys and prostitutes at their command, the Power Elite likes nothing better than “illegal action” which it can then ruthlessly suppress (truncheon-wielding cops, media smears, financial harrassment via the agencies of regulation/enforcement, etc.)
This is why I favor direct, perfectly legal action by individuals and households to divest themselves of servitude/complicity in the Status Quo. Max Keiser’s campaign to cripple Power Elite speculators in silver is one example: if 100 million households each bought 10 ounces of physical silver, that would completely disrupt the speculative game played by Wall Street.
One way to take direct action is to avoid student loan servitude: whatever it takes, get an education and degree without burdening yourself (and enriching Wall Street) with huge student loans. It can be done, but it means moving outside the Status Quo propaganda and narrative.
There is no law (yet) requiring citizens to have a mortgage, or credit card debt or an auto loan. Imagine what would happen to Wall Street’s ponzi financialization schemes if there were no mortgages to slice and dice and sell. Removing your interest payments and debt from the system is a direct action against servitude and the dominance of the Wall Street/Washington Power Elite.
Debt forces our complicity and servitude. The first step to true independence and freedom is to owe Wall Street and the other systemically dangerous institutions (SDIs) nothing. Owing them nothing is still perfectly legal. Once their income streams collapse, then buying the pimps and prostitutes of Washington becomes much more difficult.
The storm troopers of the Elite in Washington will protect their interests at every turn; that is why “reforming the system” is essentially impossible.
There are three ways not to have a mortgage:
1. don’t get a mortgage
2. pay off your existing mortgage
3. If you are insolvent, declare bankruptcy and dismiss the mortgage debt via the legal process of bankruptcy.
Others have taken the route of strategic default.
Other direct actions include:
–remove your money from Wall Street firms and “too big to fail” banks, opting for credit unions and online securities accounts.
–closing credit card accounts and/or minimizing your use of credit cards, which generate vast fees and profits for Wall Street and TBTF banks–what William Black calls systemically dangerous institutions (SDIs).
– don’t vote for either criminal gang–the Demopublicans or the Republicrats. Vote for an alternative, or the non-incumbent, or at least someone who refuses to play the game (for example, Ron Paul or Dennis Kucinich). Not voting plays right into the Power Elite’s hands: the passivity and complicity of the average citizen is their greatest ally in maintaining their neo-feudal power.
There are other direct actions we can take in the privacy of our own lives and homes. The basic idea is simple: stop being complicit in an exploitative, oppressive Status Quo, and stop passively accepting the governance of prostitutes and pimps and the lackeys they appoint (Geithner, Bernanke, et al.) It is perfectly legal (so far) to be debt-free, to own silver and to vote against the two criminal gangs that run Whoretown (Washington, D.C.)
Demonstrating is a good way to join in common cause and to raise awareness within the passive public, but being debt-free and thus a free citizen is even more powerful. Removing your debt and interest from Wall Street and the other systemically dangerous institutions (SDIs) will cripple their power in a way that toothless political reforms cannot.
Becoming a free, independent citizen won’t solve all our nation’s problems, but it will certainly enable solutions that are now impossible in the current neo-feudal, neo-colonial plantation run by Wall Street and Washington.
NOTE: I am jetlagged, exhausted and under the weather; I owe many of you books and emails, and your continued patience is greatly appreciated.
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