We have 3 bad events looming for Ponzi scheme operators in November. The G-20 summit in France, the unwinding of that phony European debt deal and a US debt rating downgrade. It could be that things just go from bad to worse over the next couple of months but do not explode until after the US 2012 elections. I do sort of hope we have 14 to 20 months left before it all hits the fan.
A CDS (Credit Default Swap) is a hybrid between a derivative and insurance. A derivative is a bet on the future value of a commodity of a bond.
What you need to be thinking about is CDS guarantees. You might ask politicians why they have not regulated a 1.4 quadrillion dollar insurance market. The world GDP is a mere 60 trillion dollars a year. Politicians like Obama, Romney and Cameron must be hoping that their taxpayer-voters would willingly accept a 100% tax rate until 2035. But that assumes politicians are capable of dividing 60 into 1,400.
A CDS insures you not only against a complete loss like an auto policy would for a total loss on a car but also for a partial loss on the value of the bond you insured. The USA has been put on credit watch along with France and a lot of other nations. The bond rating agencies are waiting for the Super Congress to pass a trillion plus dollars in budget cuts and another trillion plus dollars in tax increases. If America’s rating is cut, then the value of those almost ten trillion dollars in US bonds held by the public would decline. That means the people who sold the CDS insurance on those bonds have to pay for the loss of value. Supposing CDS buyers suffer a 10% loss on ten trillion dollars in US Bonds. They are eligible for a trillion dollar pay out.
Actually, that payout would be greater than that. Please underscore the fact that there is only a little over 100 trillion dollars in stocks and bonds in the world but 1.4 quadrillion dollars in CDS. The average bond should therefore have at least ten CDS policies on it so that an actual loss of a trillion dollars could mean the banks in Europe and the US would lose 10 trillion dollars in the CDS they sold. Or more accurately their taxpayers would have to pay double on sales and VAT taxes and their income taxes as well.
Financial experts will tell you the situation is even worse than that because thousands of other bonds are pegged in rating to US credit worthiness. Those bonds could suffer losses covered by unregulated CDS. Like I said. November looks like a cruel month.
France and a lot of other nations in Europe are also on credit watch for Bailouts. Belgium and France bailed out Dexia bank. Belgium added as much debt in proportion for its small population as America would have for a 2 trillion dollar loss. Since the Big five US banks have 250 trillion dollars in CDS exposure, the American taxpayer could soon have an opportunity to experience a doubling or tripling of their taxes.
The European debt deal that temporarily sent the markets up last week has been analyzed by a financial expert at the London Telegraph who says it will begin to unravel in 2 weeks. It relies on leverage and CDS.
One reason why I am opposed to fractional reserve banking apart from the fact that it will inevitably create an Unpayable Debt Bomb is that everyone and his brother wants to make piles of quick and easy money using leverage on the way up. But when that Bubble bursts margin calls and leverage are real bitches on the way down. An analogy would be a man who bought 20 million dollars in stock with ten million dollars in cash and the other 50% on margin. On the way up he makes 2 million dollars instead of a measly million. On the way down he loses 2 million dollars instead of a million. And that borrowed money can send him into instant bankruptcy.
From November of this year to November of 2012 taxpayers will have to pay for the deleveraging of 100s of trillions of dollars in bets with leverage of 20 and 30 to 1.
As I said, the big five US banks have 250 trillion dollars in CDS exposure and all of those CDS are guaranteed by the FDIC and the US taxpayers.
We have entered the Terminal Down Phase of Deleveraging and Margin Calls Big Time. The End is Nigh for Ponzi Scheme Operators.
Is there one journalist left in America? Maybe the People of the Resistance will gather together through the Internet and demand an answer from every politician in the world. When will you treat CDS like the insurance policies they are? Require sellers of CDS to set aside cash to pay for the expected losses like any other insurance carrier. That will end them all before the sun sets.
Silver Update: I have not issued a silver update for some time. Things are not looking good for markets other than gold and silver bullion and shares.
I said some time ago I had limited resources and put them into silver as I think it will go higher percentage wise than gold though diversification would be better for wealthier people. I said a few months ago I expected silver to go up in November.
I stand by my earlier prediction that the FED will continue to manipulate gold and silver. They will sell unlimited amounts of paper gold and silver shorts when they reach critical price levels. I have seen screen shots of the banks knowingly selling 10 billion dollars in losing silver shorts in just one minute to drive prices down.
Gold and silver manipulation drives prices down with taxpayer money while billionaires buy bullion by the ton for their personal accounts with money they stole from you.
The Fed wants to keep silver below the historic high of $50 an ounce. I have said that at $53 an ounce the FED will be defeated. There is very little silver out there and a lot of paper. Too much paper to cover. There will be no resistance at $53. There will be selling at higher prices but silver will go up long term until the corruption stops.
People are heading for the exits from these markets and will pick up bullion on the way out.
The only people who should be in the stock market are those persons who monitor the markets 24 hours a day and can liquidate in seconds. Even then they would be better off with silver and gold.
Please be advised that I am not a qualified financial expert. In any event I do not know your unique situation so do not construe this as investment advice.
Please consider this message:
If you really want to change things, take a look at this article:
Hit The Media At Their Weak Point: Pull Their FCC Licenses