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Tom Robertson, Moderator, EnergyResources Group
(39°53'N 76° 59'W) Item A. Dow Jones Industrial Averages from 1900 to
2002 Item B. Dow Jones Industrial Averages for the period 1970
to the present. Item C. Dow Jones Industrial Averages for the past five
years. Item D. U.S. Energy Consumption from 1950 to 2000.
Conclusion: And as for that, "It's in our genes," business: Tom Robertson, Moderator, EnergyResources Group (39°53'N 76° 59'W) |
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Speculating About the Speculators Some individuals at the EnergyResources group at Yahoo! like
to speculate. This email contained three different takes on what's happening
with financial markets. The first one is by John Hoefle of EIR. The second one
is by someone called Journeyman. The third one is by someone called Tai. Which,
if any, of these do you think makes sense? Derivative schmerivative. TPTB?
FUBAR? We can't make heads or tails of it. 1.) Have The Big US Derivatives
Banks Exploded? Executive Intelligence Review, by John Hoefle, July 28,
2002 (EIRNS) -- Indications are growing that the top three U.S. derivatives banks--J.P. Morgan Chase, Citigroup and Bank of America--have been pushed to, if not over, the brink of "technical" bankruptcy by problems in the derivatives markets. (See end section for background on what derivatives are.--Mark) We say "technical" because the top U.S. banks have long counted hundreds of billions of dollars of fictitious assets on their books, making them bankrupt in reality, and solvent only by perception. Both Morgan Chase and Citigroup have shown up with uncanny frequency as the top lenders to the current crop of exploding corporations and are clearly facing huge losses on their loan portfolios. With corporations and individuals going bankrupt at record rates and defaults soaring, the loan problems at Morgan Chase, Citigroup and Bank of America go far beyond what has publicly surfaced, but their loan problems pale in comparison to the dangers lurking in their derivatives portfolio. J.P. Morgan Chase, the world's largest derivatives bank, is a prime example; a loss equivalent to less than 0.2% of its $24 trillion derivatives portfolio would be enough to wipe out every last penny of the bank's equity capital. {EIR} believes that Morgan Chase actually collapsed in mid-2001, and is being secretly run by the Federal Reserve, similar to the way the Fed took over Citicorp in 1989. Morgan Chase is the result of the acquisition of J.P. Morgan & Co. by the bigger Chase Manhattan. The deal, which closed on the last day of 2000, has been an absolute disaster as measured in ordinary--and therefore misleading--market terms. The market capitalization of the combined Morgan Chase is now less than that of Chase alone on the day before the merger, with Morgan (or at least its equivalent value) having simply vaporized. This is not surprising, as it was likely a bankruptcy at Morgan, and perhaps Chase as well, which led to the takeover of Morgan by Chase. Citigroup may again be under Fed control as well, as rumors of major derivatives losses circulate. Citigroup is the result of the 1998 takeover of Citicorp by Travelers Insurance, creating what is now the largest bank in the U.S., with just over $1 trillion in assets and $9 trillion in derivatives. Former Treasury Secretary Robert Rubin revealed on July 15 that he was retiring from his position as vice-chairman at the bank, and three days later it was announced that Saudi Prince Alwaleed bin Talal, Citigroup's largest individual shareholder, had invested another $500 million in the bank, raising his holding to $10 billion. Alwaleed, a nephew of Saudi King Fahd, obtained his initial stake in the bank shortly after the Fed took it over in 1989 and began arranging a bailout. The latest cash infusion raises suspicion that Alwaleed is performing a similar service for Citigroup. Not to be left out is Bank of America, whose $620 billion in assets puts it third behind Citigroup's $1 trillion and Morgan Chase's $713 billion. Bank of America's $10 trillion in derivatives puts it solidly on the hot seat in any financial crisis, and it has also loaned heavily to bankrupt companies. Rumors are flying that Bank of America has applied to the Fed for a secret bailout. Banking sources in Europe have confirmed to {EIR} that a major derivatives crisis is underway, centered around the giant U.S. derivatives banks, Morgan Chase and Citigroup in particular. Were one of the big derivatives banks to explode, it could overwhelm the Fed's ability to cover up the losses, triggering a chain reaction which could blow out the entire global financial system. Financial derivatives are gambling instruments. Actually, they are side-bets on future interest rates, exchange rates between currencies, and a host of complex and obscure financial relationships. Unlike insurance companies, the operators who play in this $400 TRILLION a year casino, are almost totally unregulated. Derivatives are hidden or totally absent from that big annual report you can get from your bank, even though the bank has much more risk from them than from all its listed assets. Have you hugged your bank today? It may be gone tomorrow? Lyndon LaRouche warned that a derivatives collapse endangered the entire U.S. banking and financial system. EIR staffers briefed every office in Congress, including face-to-face education sessions with over 200 of them. He sought increased vigilance, and a tiny tax on them, which would stop their volume from increasing. Congress, including the likes of senators Joe Lieberman (D-Connecticut) and John McCain (R-Arizona) who are now hyperventilating about "corporate corruption," went the other way. The "bank reform" passed almost unanimously last year, ripped up the protective regulations which Franklin Roosevelt had enacted during the previous Great Depression, and left it up to the "free market" to police itself. Major American banks have become so addicted to derivatives that many of them have exposures 100 times bigger than their capital and reserves. That means that a 1% loss on their gambling would bankrupt them. The amounts involved in the crash of even one of these big banks is many times greater than the total reserves of the Federal Deposit Insurance Corporation (FDIC). And, as LaRouche warned in 1974, one big collapse would likely produce a chain-letter insolvency of the whole globalist financial system. Banking correspondent John Hoefle, wrote an in-depth study, "The Downfall of J.P. Morgan Chase," which anticipated the headlines in Saturday's Financial Times and other London media. Another Hoefle article will be posted on our weekly Electronic Intelligence Review (EIW) on Monday. A subscription to EIW is the best way to keep informed on the death rattles of the financial system. But, there will be no security for anyone without the victory of the political battle, lead by Presidential candidate LaRouche, for restoring the kind of relative economic sanity which prevailed from the Roosevelt period until 1965. 2.) J.P. Morgan, GW Bush's 9-11,
whence Ag/Au -- journeyman, 07:19:43 07/28/02 Sun Hi ALL! The following is a re-post of a May 20, 2002 message. Given Auspec's insightful posts regarding J.P. Morgan and it's unlikely public demise -- until the last card is turned -- and the gold and silver price fluctuation, I thought this repost might help lighten spirits here at the ranch. Sign on my bathroom mirror: IT'S ONLY A FLUCTUATION, STUPID! All the elements in the header to this message have a uniting underlying theme. Care to guess what it is? It could be a long wait for J.P. Morgan's public demise. Remember: [In the CFR simulation] The regulators [a simulation team]
approached blue-chip J.P. Morgan and discussed the Fed secretly guaranteeing a
huge line of credit to the two funds [that were in trouble]. Morgan would take
excess collateral, but it wouldn't be taking the credit risk of the mutual fund
companies [about to be forced to liquidate huge amounts of stocks] themselves.
That would be borne by the Fed. Fed Chairman [Alan] Greenspan is uncomfortable,
but agrees to the deal. `All the public will see,' says one regulator
reassuringly, `is that the Fed's volume of loans to banks has gone up.' ...
Furthermore, former World Bank Managing Director and Treasurer Jessica Einhorn,
who played vice-chairman of the Fed during the simulation, reported at the
conference that, in the simulation, "We kept the main markets open, and let
other things go. We lowered rates and put in liquidity. The main thing was to
create the perception of confidence." -Excerpted from: CFR Bankers Plan for
Financial Crash, Richard Freeman, Executive Intelligence Review, July 28, 2000
And in line with playing the CONfidence Game, by bailing out in-trouble funds thru J.P. Morgan (and using Morgan as key-"man" in the gold price manipulations via it's incredible gold derivatives position -- no doubt also similarly guaranteed by the FED in a manner similar to the manner suggested in the above simulation), like the Japanese Gubbmint buying the Nikkei, it's fairly clear the U.S. Gubbmint has been buying the DOW. Maybe in desperation, the NASDAQ as well: There's been a rumor around the markets all week that there's one really big buyer in the markets buying the techs, particularly the NASDAQ Triple Q's -Bob Pisani, CNBC, May 16, 2002, 17:06:51 Now this expected economic turmoil plays directly into the question Ag_Eagle asked: What possible gain would GW Bush get from attacking his own people -- or allowing them to be attacked? First we can point out a couple "fringe benefits." 2. It gave he and his cronies an excuse to execute the attack on Afghanistan, planned in advance of 9-11 [1] ]} for pipeline? opium? who-knows-what real power-politic/business reasons. But it's my contention that the main reason for allowing or
engineering 9-11 is similar to the reason F.D. Roosevelt was willing to
sacrifice what turned out to be about 6,000 U.S. servicemen to get the U.S.
into WWII. The main reason for this current "war against terrorism" is the same reason they're manipulating the gold price: It's just another attempt to save the fiat-FUBAR'd (F***ed Up Beyond All Repair) economy. We know TPTB are a touch worried: Public and side discussions made clear that the eventsstemming from the misnamed "Asian financial crisis" of 1997-98, the Sept. 17, 1998 declaration by the Russian government of a moratorium on payment on its GKO Treasury debt, to the Sept. 23, 1998 blowout of the Long Term Capital Management hedge fund, which carried more than $1.25 trillion in derivatives bets, and subsequent events, terrified people in CFR circles. -Ibid. CFR Bankers Plan for Financial Crash (above) "This is the biggest financial challenge facing the world in the last half-century." -Bill Clinton to CFR, 14 Sep 1998 Mr. [Albert] Friedberg [famed Austrian economist, currency specialist and head of Canada's Friedberg Mercantile Group] points to the monetary policy of the Federal Reserve as the fundamental cause of the currency debacle. He notes that since the early 1990s, the Fed has backed a credit expansion policy that it has exported abroad. He also predicts that "the crisis will widen. It will travel from Asia to Russia, Greece, Brazil. Eventually it will come back to the United States." -TORONTO GLOBE AND MAIL (January 10, 1998) "It's certainly the worst international monetary crisis since the founding of the system, the Bretton Woods [paper money] system in 1944. ... And I know that the authorities in Washington are most concerned about this spread, and properly so -- because it seems to be happening." -Roger Altman, EVERCORE PARTNERS CHAIRMAN, former Deputy Secretary of Treasury, CNBC, 14 Aug 1998, ~7:37:21 AM EDT Fear of the current economic circumstances and the notion
that "War is the health of the state," pretty much explains the reasons for
governments instituting what has become Standard Operating Proceedure in
getting the U.S. -- and other countries -- into wars. But what's this have to do with silver? Well, derivatives are largely, if not entirely, a consequence of fiat money, particularly because of fast, unpredictable moves in relative foreign exchange rates -- and uniform, though unpredictable interest rate changes (which also vary across borders.) The thing is, derivatives have become the tail wagging the dog: They are now more important, read more profitable, no read, apparently but temporarily more profitable, than producing real things in the real economy. This wasn't intentional I don't think, it's just the way the underlying rules worked it out. The result is that it becomes more profitable to play the financial markets than it does to produce real goods and services in the real economy. As a direct result, we have weird anomalies like the largest container manufacturer in the U.S., American Can Corporation, transitioning to Primerica, a financial services and insurance company -- etc. As the line blurs, companies even forget what they are, as when American Can Corporation, the nation's largest maker of containers, transformed itself under the leadership of Jerry Tsai into Primerica, a financial products and insurance company. Or when Ford Motor Company's profits are sustained not by its manufacturing prowess but by the health of its Ford Credit Corporation, which is a big player in the speculative financial markets. Or when General Electric Corporation, one of the nation's leading manufacturers, sells off its consumer electronics subsidiary to concentrate more heavily on building General Electric Credit Corporation into a major financial player. These machinations must make managers wistful for the 1950s and '60s when money, prices, and interest rates were stable. -Joel Kurtzman, THE DEATH OF MONEY, (New York, NY: SIMON & SCHUSTER 1993), p. 68 In fact, we have GE Credit now producing 45% of GE's bottom line. The irony is a company called General Electric making the largest share of it's bottom line selling financial services. Intel, Cisco, Lucent and Microsoft are other companies that count heavily on the markets for their bottom lie, sic. Naturally many companies don't quite successfully make the transition from real-economy producer to hedge fund: Ashanti and Cambior gold miners come to mind. Meanwhile out in the markets, the way this works in practice is that the gamblers who are willing to go "naked short" -- that is they agree to sell something they don't currently have in anticipation of a price drop -- FUBAR things. Unintentionally for the most part. First their short contracts act as if they were actual physical supply of whatever they're short, which, by supply and demand drives the price of the "underlying" down. The real problems with derivatives start when the derivatives market, including the possibility of massive short-selling, becomes a significantly large percentage of the trade in a particular underlying. In the gold market, for example, trade in actual physical gold is less than 3% of the total gold/gold-derivatives traded. Thus the actual gold supply has only about 1/33rd as much effect on prices as do the traded derivatives. True, the theory is that the actual physical supply will reign-in the gamblers and the whole thing will work to the benefit of both suppliers and users of the real-world underlying. But it doesn't necessarily work that way because 1. gamblers (those there to make money rather than to produce or use the underlying) have different goals and priorities than do the users and producers, and, 2. the tail-wagging-the-dog effect oppens the door to manipulation by large, well funded entities. Like for example, the Hunt Bros. Or the FED and ESF. George Soros. Etc. In derivatives of non-real world economy things, like stock certificates, bonds, interest rates, etc. this is less serious than when the real-world underlying is something like silver. Or worse, cotton -- or pork -- as Volavka pointed out yesterday: price of cotton @ .30 stinking cents a lb. less than half what it costs to grow. Cotton used to be king and was considered white gold. 3-4 years ago they destroyed the pork mkt. -your govt @work -- volavka, 04:04:10 05/17/02 Fri This whole gambling process, which drives prices down beyond production costs, or even below profit levels seen in the financial markets, particularly in foods like soybeans or wheat -- food in general -- have particularly ominous overtones. The reason this is more serious is that it takes a lot longer for real-world production to adjust to changes than it does for financial instruments. If the Homestake mine is closed, all the folks who know how to operate the equipment, order the supplies, blast safely underground, etc. drift off to other jobs. They can't be easily replaced. It could take as much as five years to reopen. Same goes for farming. So if we switch businesses from, say producing silver to gambling on the silver price, or from manufacturing general electric equipment to loaning money, etc. 1. there are fewer resources, including investment money, available for producing silver, manufacturing general electric equipment, etc. and 2. to the extent the derivatives (contracts agreeing to deliver silver at a certain price -- or other contracts gambling on these) are, because of the derivatives gamblers, written at lower prices that result in lower real interest returned than would other investments, production is further reduced. Further, a temporarily lower price encourages new and more intensive traditional uses for the real-economy underlying product or service. So we have increasing demand and decreasing production -- but because the contracts to deliver, including the naked contracts, are assumed to be good, and in effect, as good as the actual underlying "in hand," the imbalance doesn't show up anymore in the dominant market. That's because that market is, remember, mostly a derivatives market -- wagging the real economy producers. You can see the inevitable train-wreck coming -- if you understand this process. If you think the market is telling you everything you need to know, you'll be really surprised when TSHTF. And TS will definitely HTF. It must. But until it does, everything will look calm and tranquil on the surface. Just like a tsunami travels, only a few inches high, across the open ocean, but when it rapidly approaches shore, it builds up into a giant wave. I believe we've heard this analogy before from Mr. Puplava. So there doesn't need to be a secret supply of silver somewhere -- there just needs to be a supply of contracts promising to deliver silver and assumed to be good, serving as surrogate supply. Everything works fine and prices stay unnaturally low. Till the existing excess supply is depleted and the-demand-for-delivery tsunami suddenly and unexpectedly (to most) hits. So let's see, we have the U.S. Gubbmint secretly backing J.P. Morgan and buying the DOW and probably NASDAQ Triple Qs to boot because the fiat money system is scaring the bejeezus out of the CFR establishment. In addition, it seems highly possible that same CFR establishment, or at least a clandestine part of it, is using the tried-and-true tactic of starting a war as another similarly intentioned tactic to keep the fiat rip-off system going. A result of this, as folks try to adapt to rapidly changing relative economics, is the invention of "derivatives" to spin-off the uncertainties, innate in fiat systems, to gamblers willing to take chances on these uncertainties. The result of the success of these gamblers in terms of the apparent rate of returns on "investment" they initially get seduces real-world companies to give up their real-world production and gamble on the derivatives too. Or at least help support their real-world enterprises with these types of "financial economy" gambles. It's like the guy who goes to Vegas, wins money on the slots, figures he's found the goose that lays golden eggs, and quits his day job to pull slot machine handles. We know where that leads. Cambior, Ashanti, Robert Citron & Orange Co., Nick Leeson & Barings, Summitomo, ENRON, WorldCom, etc. The world is gobbling-up it's own seed corn, and when it's gone, there are going to be a lot of hungry people. So rigging of the POG, DOW, and possibly NASDAQ, by ESF, J.P. Morgan et. al., the persistence of J.P. Morgan despite indications of serious insolvency problems, possible US Gubbmint complicity in 9-11 and the apparent mystery of a low silver price despite short supplies and great demand are all symptoms of the same thing. Moral of Story: NOTES: [1] WASHINGTON (AP) - The White House acknowledged Friday it had a battle plan to topple Osama bin Laden (news - web sites) awaiting President Bush (news - web sites)'s approval in the days before the Sept. 11 attacks. ... A senior U.S. official, speaking on condition of an anonymity, said the options memo was prepared by Bush's foreign policy team as threats of terrorism spiked. It was dated Sept. 10 and sat on national security adviser Condoleezza Rice (news - web sites)'s desk for Bush's review when the World Trade Center and the Pentagon (news - web sites) were struck. White House press secretary Ari Fleischer (news - web sites) said the memo recommended dismantling bin Laden's network "through what you saw put into place frankly, rather quickly in our operations in Afghanistan White House Reveals Pre-9/11 Plan, Fri May 17, 11:17 AM ET, By CHRISTOPHER NEWTON, Associated Press Regards, Journeyman 3.) All The Tools and All the Rules
-- ThaiGold, 23:38:15 07/27/02 Sat It seems to me like DejaVoodoo all over again: Savings and Loan
Debacle-bailout... LTCM Derivitive
Meltdown... Enron Extravaganza... JPM/Chase/Citigroup... It will be just another whitewashed taxpayer expensed Fed bailout, with minimal fake "investigations" and handwringing exhortations by those in Congress bent on reelection. Fluff and Bluster. I said it before. Now again. Anyone who waits as breathlesly as some Gold Pundits for a JPM Meltdown is going to be disappointed. What's at stake here, is the "integrity" of the USA Banking System and the USA Money System itself. They will hear no evil; see no evil; spare no evil to cover it up and make things look and come out "right". The taxpayers have limitless pockets. Because they plunder those as yet unborn taxpayers, into the pool, by forward selling their very souls as Government Bonds, Debt, Faked economic data, and all the rest. Your children will pay. And their children. And GrandChildren. It's the American Way. Corruption at its finest. It's not a power struggle. Not a meltdown. Not a Gold bonanza. Far from it. Those jerks in power, at the top, have all the tools they could possibly need to fix up this, or any other mess. And they have carte blanche ability to make and break any rules in their way. Do not think for one instant, that those market rules
enforcers, CFTC; SEC; and everyone in between isn't part of the Mob in
Control. Lyin' and bulls and bears, continued, Economists in Denial, by Mark Weisbrot, August 4, 2002, Washington Post,
Fortune.com:
Fortune Magazine, Fortune.com THE GREEDY BUNCH, You Bought. They Sold.
"It wasn't just Ken Lay and Gary
Winnick. All over corporate America,
execs were cashing in stock even as
their companies were tanking.
· Full List" "Special Report: Crisis of
Confidence
How has nearly every known check
on corporate behavior seemingly
fallen by the wayside?
· System Failure" "CEO Perks That'll Drive
You Berserk
Here are a few of the
corporate world's most
eye-catching extras.
· Which Perks Cross the Line?" "The Stock Options Solution
Pretending they're free didn't work.
Expensing them may be the silver
bullet we're looking for. In fact, it's the
only option.
· What Would It Cost?" |
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Here's what we
think... Options.
That's what.
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