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Billionaire Issues Chilling Warning About Interest Rate Derivatives

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WarningWill rapidly rising interest rates rip through the U.S. financial system like a giant lawnmower blade?  Yes, the U.S. economy survived much higher interest rates in the past, but at that time there were not hundreds of trillions of dollars worth of interest rate derivatives hanging over our financial system like a Sword of Damocles.  This is something that I have been talking about for quite some time, and now a Mexican billionaire has come forward with a similar warning.  Hugo Salinas Price was the founder of the Elektra retail chain down in Mexico, and he is extremely concerned that rising interest rates could burst the derivatives bubble and cause “massive bankruptcies around the globe”.  Of course there are a whole lot of people out there that would be quite glad to see the “too big to fail” banks go bankrupt, but the truth is that if they go down our entire economy will go down with them.  Our situation is similar to a patient with a very advanced stage of cancer.  You can try to kill the cancer with drugs, but you will almost certainly kill the patient at the same time.  Well, that is essentially what our relationship with the big banks is like.  Our entire economic system is based on credit, and just like we saw back in 2008, if the big banks start failing credit freezes up and suddenly nobody can get any money for anything.  When the next great credit crunch comes, every important number in our economy will rapidly start getting much worse.

The big banks are going to play a starring role in the next financial crash just like they did in the last one.  Only this next crash may be quite a bit worse.  Just check out what billionaire Hugo Salinas Price told King World News recently…

I think we are going to see a series of bankruptcies. I think the rise in interest rates is the fatal sign which is going to ignite a derivatives crisis. This is going to bring down the derivatives system (and the financial system).

There are (over) one quadrillion dollars of derivatives and most of them are related to interest rates. The spiking of interest rates in the United States may set that off. What is going to happen in the world is eventually we are going to come to a moment where there is going to be massive bankruptcies around the globe.

What is going to be left after the dust settles is gold, and some people are going to have it and some people are not. Then the problem is going to be to hold on to what you’ve got because it’s not going to be a very pleasant world.

Right now, there are about 441 trillion dollars of interest rate derivatives sitting out there.  If interest rates stay about where they are right now and they don’t go much higher, we will be fine.  But if they start going much higher, all bets will be off and we could see financial carnage on a scale that we have never seen before.

And at the moment the big banks have got to behave themselves because the government is investigating allegations that they have been cheating pension funds and other investors out of millions of dollars by manipulating the trading of interest rate derivatives.  The following is from an article that the Telegraph posted on Friday…

The Commodity Futures Trading Commission (CFTC) is probing 15 banks over allegations that they instructed brokers to carry out trades that would move ISDAfix, the leading benchmark rate for interest rate swaps.

Pension funds and companies who invest in interest rate derivatives often deal with banks to insure against big movements in the ISDAfix rate or to speculate on changes to interest rate swaps

ISDAfix is published each morning after banks submit bids for swaps via Icap, the inter-dealer broker, in a number of currencies. The CFTC has been investigating suggestions that the banks deliberately moved the rate in order to profit on these deals.

Given the hundreds of trillions of dollars worth of interest rate derivatives trades that occur annually, even the slightest manipulation can have a substantial effect. The CFTC, which started to investigate ISDAfix after last summer’s Libor scandal has now been handed emails and phone call recordings that show the rate was deliberately moved, according to Bloomberg.

Essentially they got their hands caught in the cookie jar and so they have got to play it straight (at least for now).

Meanwhile, it looks like the Fed may not be able to keep long-term interest rates down for much longer.

The Federal Reserve has been using quantitative easing to try to keep long-term interest rates low, but now some officials over at the Fed are becoming extremely alarmed about how bloated the Fed balance sheet has become.  For example, the following was recently written by the head of the Dallas Fed, Richard Fisher

This later program is referred to as quantitative easing, or QE, by the public and as large-scale asset purchases, or LSAPs, internally at the Fed. As a result of LSAPs conducted over three stages of QE, the Fed’s System Open Market Account now holds $2 trillion of Treasury securities and $1.3 trillion of agency and mortgage-backed securities (MBS). Since last fall, when we initiated the third stage of QE, we have regularly been purchasing $45 billion a month of Treasuries and $40 billion a month in MBS, meanwhile reinvesting the proceeds from the paydowns of our mortgage-based investments. The result is that our balance sheet has ballooned to more than $3.5 trillion. That’s $3.5 trillion, or $11,300 for every man, woman and child residing in the United States.

Fisher has compared the current Fed balance sheet to a “Gordian Knot”, and he hopes that the Fed will be able to unwind this knot without creating “market havoc”…

The point is: We own a significant slice of these critical markets. This is, indeed, something of a Gordian Knot.

Those of you familiar with the Gordian legend know there were two versions to it: One holds that Alexander the Great simply dispatched with the problem by slicing the intractable knot in half with his sword; the other posits that Alexander pulled the knot out of its pole pin, exposed the two ends of the cord and proceeded to untie it. According to the myth, the oracles then divined that he would go on to conquer the world.

There is no Alexander to simply slice the complex knot that we have created with our rounds of QE. Instead, when the right time comes, we must carefully remove the program’s pole pin and gingerly unwind it so as not to prompt market havoc. For starters though, we need to stop building upon the knot. For this reason, I have advocated that we socialize the idea of the inevitability of our dialing back and eventually ending our LSAPs. In June, I argued for the Chairman to signal this possibility at his last press conference and at last week’s meeting suggested that we should gird our loins to make our first move this fall. We shall see if that recommendation obtains with the majority of the Committee.

But of course it should be obvious to everyone that the Fed is not going to be able to reduce the size of its balance sheet without causing huge distress in the financial markets.  A few weeks ago, just the suggestion that the Fed may eventually begin to slow down the pace of quantitative easing caused the markets to throw an epic temper tantrum.

Unfortunately, the Fed may not be able to keep control of long-term interest rates even if they continue quantitative easing indefinitely.  Over the past several weeks long-term interest rates have been rising steadily, and the yield on 10 year U.S. Treasuries crept a bit higher on Monday.

At this point, many on Wall Street are convinced that the bull market for bonds is over and that rates will eventually go much, much higher than they are right now no matter what the Fed does.  The following is an excerpt from a recent CNBC article

The Federal Reserve will lose control of interest rates as the “great rotation” out of bonds into equities takes off in full force, according to one market watcher, who sees U.S. 10-year Treasury yields hitting 5-6 percent in the next 18-24 months.

“It is our opinion that interest rates have begun their assent, that the Fed will eventually lose control of interest rates. The yield curve will first steepen and then will shift, moving rates significantly higher,” said Mike Crofton, President and CEO, Philadelphia Trust Company told CNBC on Wednesday.

If the yield on 10 year U.S. Treasuries does hit 6 percent, we are going to have a major disaster on our hands.

Hugo Salinas Price is exactly right – the derivatives bubble is the number one threat that our financial system is facing, and it could potentially bring down a whole bunch of our big banks.

But for the moment, Wall Street is still in a euphoric mood.  The Dow is near a record high and many investors are hoping that this rally will last for the rest of the year.

Unfortunately, I wouldn’t count on that happening.  The truth is that the stock market has become completely divorced from economic reality.

Since March 2009, the size of the U.S. economy has grown by approximately $1.3 trillion, but stock market wealth has grown by an astounding $12 trillion.

And the stock market has just kept on rising even though GDP growth forecasts have been steadily falling.

It doesn’t make any sense.

But Obama, Bernanke and the wizards on Wall Street assure us that there is no end to the party in sight.

Believe them at your own peril.

The people at the controls are completely and totally clueless and we are rapidly careening toward disaster.

Perhaps we should do what one little town in Minnesota did and put a 4-year-old kid in charge.

That kid certainly could not be much worse than our current leadership, don’t you think?

  • davidmpark

    Glad I prepared already. Providence is lovely!

    • 68Impala

      Rhode Island?

  • Rodster

    I encourage everyone to listen to that interview as it’s quite chilling. As he said in the interview, the global economy will not end well and many will NOT survive what will be coming our way. He refers to those who run the Govt’s around the world as barbarians who don’t know what they are doing and they are just winging it on the fly.

    • 2Gary2

      why do they keep getting elected. People can vote green etc, We have 31 parties in the USA yet the same 2 are always in power.

      • Rodster

        Because you’ve been hoodwinked. Both parties are one and the same. It’s Diet Coke vs Diet Pepsi. And both parties have rigged the political process so everyone else is a non factor.

        • Graham

          Good analogy. I note you chose the “Diet” variant, which of course contains poison, as in aspartame.

          Perhaps the party’s need to get back to the “regular” stuff and start behaving like humans rather than Icke’s slippery lizards.

      • Ralfine

        In 1933, before the Nazis were elected into power, the communists were arrested for the fire in the Riechstag, so they couldn’t stand for election.

        Last election in the US, the green candidate was arrested.

        There is no connection.

        • Hammerstrike

          Communists where responsible for the Reichtag fire.

    • Mudpie

      Well said. The USA used to be different in that we KNEW govt. was comprised of barbarians. That was the basis of our federalist, tripartite system. Now we believe govt. is a sort of God.

  • markthetruth

    Go Figure a Mexican billionaire !.. Retail chains selling Cocaine to the U.S.

    the end…

    • jsmith

      Could you explain how you came to this conclusion? Hugo Salinas Price is probably one of the most ethical and honest persons I know.

      • markthetruth

        The U.S. goes all over the world fighting wars for Less then what the Drugs from Mexico has caused the U.S in Lives, Crime and Money. And all we do is Pitty Pat with situation .

        the end…

        • Yasha

          You’re dodging the question. A rant about Mexican drug lords doesn’t prove that Salinas is one. C’mon, “the end”, get some objectivity.

          • markthetruth

            Never mentioned his name or Joaquin El Chapo Guzman.


            The secret world of teen cartel hit men

            came out today.

            the end…

    • Ralfine

      Can’t sell anything without demand.

    • Hammerstrike

      Cocaïne should be sold free of charge, the number of welfare addicts would drop by 80% after a year.

      • Ralfine

        And so would the number of Wall Street Bankers. LOL

      • Graham

        It might also drop “black budget” funding by a similar percentage.

  • A D

    NO problem 0bama and his minions will just print more paper money. Meanwhile, he demonizes anyone who works hard and builds a small business.

    • Graham

      You are a bit off target. Being a “minion” himself, Obama does as he is told whilst playing a role in a “make believe” democracy.

      Divide and conquer tactics keep the citizens readily distracted so they have little time to consider, let alone research the truth of alone what’s really going on. It’s one drama after the next which helps maintain a “two week memory span” at most.

      In the very near future, it will not be votes that count (which has long been surpassed by polling corruption anyway), it will be bullets. Note whose buying in bulk!

      The true masters will come forward and announce themselves in due course. Unfortunately, gun control isn’t going too well for them so there will be a delay until they have “created” enough mayhem in your cities to soften folks up.

      In the meantime, there will be plenty of freak accidents that continue to remove “perceived” threats from your society. They are sometimes referred to as “whistleblowers”. Others are first class journalists that remain “old school”

      Watch October.

      • chilller

        Right on Graham. Your part, “mayhem in your cities” is spot on. And who’s the bulk of city residents? None other than the same people who were conned into Hope and Change, progressive liberals and those receiving the most handouts. Never in history have there been so many handouts distributed…and never in history have those entitlements ever been removed without civil unrest exploding. This will be a water into acid event for the big cities with clashes between city dwellers and country folk as they try to flee the mayhem of the city for refuge in the countryside.

        • dan

          the useful idiots will find that their final disposition will be as cannon fodder.

      • James Godson

        One form of ‘gun control’ the government is using is prosecuting/persecuting more felons for violating an innocuous financial law. The ‘too-big-to-fail’ banks are only fined which just becomes a deductible ‘business expense’ for promoting worthless mortgage-backed securities.

        • Graham

          The whole system is rigged senseless. Blogs like this need to keep going strong so as more people are brought up to speed.

          One problem that I believe to be obvious, is having agenda’s, policies or whatever in place that appeals to targeted sectors of the population.

          People or groups that are being favoured one way or the other are highly unlikely to point a finger at the very system that sustains them.

          I’m certain this is why so many remain “asleep”. As we have learned from other countries, huge numbers have to “uprise” in order to be heard.

          What happens thereafter can go in various directions, especially when the West seem to endlessly pull strings, in their own interests of course.

          People must learn to “see”. Perhaps I’m expecting a “miracle” of old. You can be blind visually… and consciously.

          The last thing the elite want is an overly conscious public, so they have taken multiple steps to chemically repress it and purposely disseminated information to ensure very few research what consciousness is.

      • blah

        a millions likes !

    • lois752

      just as Martha said I am impressed that a mom can get paid $7793 in one month on the internet. did you look at this web page w­w­w.K­E­P­2.c­o­m

  • A D

    Over 50% of Americans and MILLIONS of ILLEGALS getting trillions in freebies. Watching cable tv and talking on free Obama cell phones. Do you think they care???

    • Ralfine

      Cell phones are free anyway. They are dirt cheap in production, and providing connection is just providing electricity once the infrastructure is in place.

      And all this infrastructure should be paid for times over.

      So, any income coming now from people who pay for telecom contracts and Internet connection fee is 75% profit and more.

      The trillions of freebies go from the taxpayer to arms manufacturers to “protect” you from a threat.

      And whenever your consciousness slips there is a new safety threat.
      Somebody talked to someone about a HUGE threat to YOUR interest 10,000 miles away, or maybe somewhere else, or maybe some other time.
      And that’s why we need to increase the tax and buy more aircraft carriers and bullets and guns from Generals Mechanic, Electric, Dynamic, Biologic, and Physics

      And yes, you can continue to buy your guns from us, the more the better.
      (lol, laughing all the way to my bank in the Caymans)

      • jaxon64

        the US has spent–inflation adjusted–approximately 40 trillion dollars on “the war on poverty” since the 1960’s…so in answer to your incredulous and disbelieving question, the answer is a simple, Yes.

        • Ralfine

          So maybe Americans are not very efficient? Lots of money spent but nothing reached the target?

          Just like GM cars? 10mpg ?

        • kala

          its not 40 trillion where do you get your numbers from and they also stole even more than they gave out.

    • WeRThrough

      They will when the “freebies” are no more. Then we will have to exercise our right to bear arms to keep our families safe…

      • AS55423

        When the freebies are gone you best be out of these cities next stop is prison style riots.

        • Mudpie

          I believe so. But this time the rank and file citizens will push back. Violently. For the first time in decades if not longer. The worm is turning and fast.

  • Wizard of Aus

    I am all cashed up waiting for the big collapse. Then I will go in & buy,buy,buy. I cannot believe that in Australia, after the China economy has gone downhill & the mining boom has ended, that some people are still optimistic about the economy. We have an election coming up & the current Labor govt. is just throwing money around.

    • Sparkie

      Me too. Getting a bit frustrated waiting to be honest. Sold up early 2011. The election is doing my head in already. Neither side can fix what’s coming IMHO.

    • 68Impala

      What if there is a massive global financial collapse. Your cash goes POOF

  • K

    Price is correct in what he says about derivatives. Yet at the same time he would have you believe this is caused by totally bungled policy decisions. Sorry this is all part of the plan. The only thing that has ever stood in the way of the bankers, and the so called elite. Was the vast size of the American middle class. When they are done, the middle class will be a good deal smaller. It will no longer have the ability to get in anyone’s way. So why try to convince you that bungling idiots are causing it? Simple, you will just replace them, with someone you think is smarter. Nothing will change because that next person, will just do as he is told. But if for one moment, the people even started to think this was being done on purpose. They might actually object. Can not have the sheep getting upset, as you are leading them to the slaughter.

    • Graham

      I believe you have a very realistic idea of what is going on and why.

      If you don’t mind me asking, how many years of in depth research have led to your conclusions?

      • K

        I claim no in depth research. I listen, and I watch. I have been doing that since the seventies. People see the world as a series of unrelated events. But not all the events are unrelated. All I can say is I see a pattern, in many of the events that are happening. These patterns are leading me to draw some very disturbing conclusions.

        • jaded

          DEVO – Patterns. This song led me on that on way of thinking.

  • Douglas M. Green

    Bernanke and his successor cannot let rates rise very much. If he tapers, he will soon reverse course as the markets get devastated and may end up having to buy more than total new issuance and rollover if China, Japan and/or the Saudis sell, which would be a currency crisis as the fed indeed monetizes the debt (Bernanke lied!). Seems like the endgame is fast approaching one way or the other.

    • Rodster

      The Fed reminds me of the NY Jets QB Mark Sanchez and the infamous “Butt Fumble”. That’s what the Fed’s have done to themselves, they have in essence “Checkmated” themselves. They thought this scenario would not play out so they took a chance, denied it would ever happen, but it will.

      The economic system is at a point of no return. If they “Taper” the economy crashes then collapses. If they don’t Taper then the Bubble just gets bigger and bigger and the global economy collapses. Either way they it a losing proposition.

    • Tim

      Good point, Douglas. Foreign holders of U.S. Treasuries have reduced their holdings in recent months. And if they begin selling en masse, that would wreak havoc.

      I don’t see how the Fed can ever stop monetizing. Sure, they may temporarily reducethe amount they’re purchasing each month, but I don’t see how they’ll ever be able to stop purchasing altogether. There is no way out of the situation they’re in. This is a very dangerous game they’re playing. But the implosion probably won’t happen on Bernanke’s watch, so what does he care?

  • 2Gary2

    Another example of free market failure–South Korea has Internet speeds up to 200 times faster than the average speed in the U.S., at about half the cost. Customers are charged about $30 a month in
    Hong Kong or Korea or parts of Europe for much faster service than in
    the U.S., while triple-play packages in other countries go for about half of our Comcast or AT&T charges.

    Bloomberg notes
    that deregulators in the 1990s anticipated a market-based decline in
    phone and cable bills, an “invisible hand” that would steer competing
    companies to lower prices for all of us. Verizon and AT&T and
    Comcast and Time-Warner haven’t let it happen.

    • Ralfine

      In Hong Kong you have free Internet services in public places, like the Airport, the Airport buses, near public payphones, in coffee shops, hotels, etc.

      In the central subway station you have public terminals with free access to anyone, same in public libraries which are free to anyone.

      And no, all this is not paid for by the government or even mandated by the government. But it is permitted by the government.

      Yes, they also have fraud there, but doing a legitimate business is easy. And if you are smart enough to defraud someone, then doing business is totally easy for you, without the risk of getting arrested when successful, and profit tax is max 17%.

      And, as a computer is now used for payments, computer fraud is treated the same way as forging money and will land you definitely in jail – where you won’t have the chance to get rich.

      So why bother?

    • Bad_Mr_Frosty

      You consider illegal insider trading and illegal monopolies to represent “free-market”.

      Cracks me up when socialists criticize our socialist system as a failure of capitalism, then recommend socialism to fix it.

      • GSOB

        Typical Michael Moore type of perspective.

  • general knowledge

    Let the Derivative Casino close and the losers enjoy their losses. No protection for derivatives, they should be last claim on assets.

    Banks that need to fail, should.

    Establish Public Banks without speculation.
    Any bailout funds should be extracted from tax havens.

  • general knowledge

    Tax the Rich till you don’t need anymore money.

  • 2Gary2

    Lie #1: U.S. corporate tax rates are higher than the tax rates of other
    big economies. Wrong. After deductions and tax credits, the average
    corporate tax rate in the U.S. is lower.
    According to the Congressional Research Service, the United States has
    an effective corporate tax rate of 27.1%, compared to an average of
    27.7% in the other large economies of the world.

    Tax the corporations and spread the wealth

    • Graham

      The change of wording in your last sentence has been duly noted G. Might be beneficial to add in “offshore” somewhere.

      How are you progressing with your computer studies?

      Haven’t seen you around so much in recent months and wondered if you were perhaps virus testing your own setup, or applying stringent stealth mode policies 🙂

      • 2Gary2

        duly noted regarding the offshore addition. I have been going through some personal issues divorce-wife initiating it as she determined after 25 years of marriage and 4 kids that I am not her true soul mate and she is unhappy. I know I am opening up myself to a lot of ridicule by disclosing this but I have broad shoulders. and yes I offered to go to counseling where she can choose the therapist but she declines. This is hard on my kids as 2 are still under 18. This is hard on me.

        • Joe Shmo

          I’m sorry for the pain you must be feeling. Stay strong.

        • GSOB

          Sleep alone.

          Let her go, if that is what she wants.

          It is not like she will vanish and your kids will get the message..

          Most people die alone anyways.

        • Graham

          Sorry to hear that news G and nothing you have said above should invite any ridicule whatsoever.

          You have always been committed to your chosen corner and acted on your beliefs “religiously”.

          You have also stood strong despite the pounding you often receive for voicing openly what you believe in.

  • Bob 74

    The 4 year old kid in MN would do much better than the fools from both parties that are presently leading us down the road to a financial armageddon.

  • GSOB

    “The result is that our balance sheet has ballooned to more than $3.5 trillion. That’s $3.5 trillion, or $11,300 for every man, woman and child residing in the United States.”

    The current POTUS will generate sorely need revenue, no problem. A quick fix, i.e….., pass a reformed immigration policy that addresses our abundant supply of illegal immigrants.

    • Peter

      3.5, 16 trillion makes no difference its a debt based economy. Money is borrowed with interest to be paid back at a future date (made out of thin air) with money that doesn’t exist yet.When the borrowing stops so does the economy.We need to go back to a market economy and not one based on debt.

      • GSOB

        More workers get loans.
        Banks profit.
        They anti up to play the casino game.
        Immigration reform increases the profitability.

        It’s very attractive to make some aspect of it legal.

  • george

    Where can we find the interview?

  • Guest


    • Graham

      The term you use would denote a “single unified basket”. This is totally incorrect. There are numerous “baskets” which happen to contain completely different “groups”.

      Some of those groups are diametrically opposed to one another, hence they are anything but unified.

      The one’s who contain DNA which can be traced back to the biblical tribes should never be confused with the “others”, who have a completely different history and are not of the same bloodlines. They are also known historically to be “converts”.

      The latter “group” are highly dominant and very influential within Europe and the USA.

      • jaxon64

        you make an excellent point. I was amazed at the global diversification of the “40 umbrella groups.” Essentially–the vast amount of wealth in the world is consolidated under a few hundred corporations–these in turn are actually smaller arms of larger groups–when it all gets to the true base core, there are appx 40+ groups that control 90 to 95% of global wealth.
        The odd thing was that these groups include Saudi, Chinese, Russian, old-euro banksters, US banksters, south american groups with huge wealth in resources ( and yes, not to be stereotyping but the global drug trade -both legal and illegal; is enormous)…it appeared as if only Africa did not have any major Groups listed–but their resources and reserves of fossil fuels, gold and gems have been swallowed up by Euro/American giants and recently Chinese resource barons…interesting..
        Now, the question ( and we can only guess with speculation)..are they truly in collusion???– or are they a bunch of backstabbing megalomaniacs who would just as soon see the world go to war and ruin as to lose this game that they love?
        Definitely makes you think…

  • chilller

    On the up side…should the big banks go under, any debt owed by someone will be gone, says Bix Weir in an interview with Greg Hunter of Watchdog USA. So those in the most debt would benefit the most and those who have paid everything off will not.

    Everything in nature must reset itself. If you hold a circuit breaker in the ON position when the circuit is overloaded…your wires will catch fire. Right now, our wires are smokin!

    • 68Impala

      Your debt is not forgiven in a bank failure. The FDIC has been set up to do two things. Insure some or all of your deposits and collect debts owed to failed banks. Usually they sell those to other financial institutions. Remember back in the 20’s the surviving banks bulldozed houses in foreclosure to remind the neighbors to keep paying.
      The problem I see is the FDIC will not have enough dollars available to insure your money and the debts are still yours.

    • Gay Veteran

      and you actually think a bankruptcy judge is going to let go of all those assets (loans)???

  • Jessi

    Last time I was In usa and I met a family,mother with 4 children, all girls, one pregnant already.
    All they do is texting, chatting in room. No one want go work
    The have everything, tablet, cell phone, TV, play station,… Rent a house(1500$) and have cars. I calculated she need over 4000$/month.
    These people are clueless, they know nothing, they voted for Obama…

    She has no skill, how she can pay that?

    • jefferysikes

      You don’t understand how a reserve currency works do you?
      All countries deal in FIAT currency, which is simply a currency which the countries government deems as the national currency for trade and regulates under the authority of the government for all debts public and private.
      FIAT currency finds it value in transactions, government security and the basis for exchange. The more transactions per printed FIAT currency, the more exchanges it represents, the higher its value becomes.

      The highest being a pool of currency which is the reserve for exchange and which does represent the the highest volume of a ratio or transactions VS printed volume.

      A country who’s currency stands as the reserve currency for all transactions and exchanges is a country who never has to export anything except their FIAT currency. (i.e. America).

      Now to your example, a country who has the previously mention status who has as its government administration Zealot Marxist Leninists, who understand the currencies reserve status is a country ripe for the theft of wealth by the government officials. While the bankers make trillions on interest swaps, the Marxist Leninists sell bonds to keep the interest rates low in order to assist the bankers interest rate swap scam. (imagine 3% of 195 trillion dollars). The Marxits in the government can print all the money it wants (as long as it remains the reserve currency) as its printing only puts downward pressure on other currencies.

      Placing people on the government dole, assures the Democratic-Marxist Party that they hold enough control over the masses to remain in office. a 17-20 trillion dollar long term debt is nothing compared to the Interest its massive banks are making on 195 trillion in interest swaps which allows those banks to manipulate both the currency and precious metals markets.
      Who foots the bill? Tax payers and other countries who exchange currency in the scheme.
      Try to imagine a local municipality who can not get a fixed loan (most of them) due to their credit rating and a huge mega bank who has no problem acquiring a fixed rate loan of say 4.5% Now imagine that same municipality having to borrow money at a floating interest rate (Libor), Since the risk is that the floating interest may go up they municipality enters into an interest rate swap contract with the bank where the Municipality pays the fixed interest and the bank accepts the risk of the floating interest. Try to imagine this being the case for most municipalities in America for the past 20 years and all of them are holding these interest rate swaps.

      Now imagine a situation where the FED keeps the interest rate artificially low, say 0.25%. What happens to the Libor, floating interest rate? (it goes down drastically), now who is making money in the interest rate swap? No amplify that across 195 trillion in interest rate swaps among the largest 5 banks? The Banks are making the difference between the Libor and the fixed interest which is in the several trillions of dollars and all paid by the taxpayers of the municipality, and supported by the FED and the government officials.

      While the government officials (especially the Democratic-Marxists, project the image they are for the poor and middle class, their actions simply state other wise as they support the huge mega banks by using the FED and printing presses to keep this banks profitable, all at the expense of the tax payer.

  • BlackDog

    I would like to make a suggestion to the group here — if the markets collapse, along with most of the Wall Street economy, all of us will need something to continue commerce with. Paper money will be worth less than toilet paper. With the price of silver down at the moment, buying five-hundred dollars’ worth of one-ounce silver coins will go a long ways when you need something from someone else and they won’t take your paper. Twenty-five ounces of silver is not really an investment — it’s more of a hedge, a hedge against the inevitable, when what you’ve known as ‘money’ your entire life is suddenly worthless. All that sweat for the dollar, and what we call ‘leadership’ has disembowled our currency to the point of ruin.

    This is just a suggestion. Michael writes these great essays and all I ever see is sarcasm and bitching. Nobody ever comes up with a possible solution, a suggestion — anything to really help the rest of us. I don’t care if you buy silver, gold, lead — but get a hold of something ‘money-like’ that you can barter with. Shut the power off in your house and take a good look around — do you see anything you would be willing to trade (and more importantly, something someone else would want) for eight cord of firewood? What’s that Laz-E-Boy really worth?

    • Sam

      We don’t need commerce. Once the system crashes we need to move on to the resource based economy that the Venus project advocates. It’s the only way to have global equality.

    • Ralfine

      You need food.

      If you have potatoes and rice you can get anything you want.
      Add some cigarettes and chocolate. Sweets and spices will come handy, too.
      And don’t dismiss toilet paper, diapers, and female hygiene articles.
      If you have water, you don’t need toilet paper.

      • dan

        saw a hand-pumped pressure- sprayer used as a portable bidet…
        i’d trade a silver coin for a chocolate bar ,so I guess I’d better add that to the list

        • Ralfine

          In Asia, people use their left hand to clean themselves, that’s why they only eat with their right hand.

          In Indonesia you should only use your right hand to give something to other people. Even for giving them money, as the left hand is considered dirty.
          I didn’t have a shower in the cheaper hotels, just a bucket and a ladle.

          • dan

            no stranger to the
            ‘Three sea-shell’ method’ ,then…

    • Dawie

      Just buy Bitcoins.

      • Cannonfodder2010

        How valuable will Bitcoins be when the power grid goes down?

        • Dawie

          Chances of the whole world’s internet failing simultaneously – highly improbable.
          Locally – paper wallets, batteries, generators.. us humans will find a way 🙂

  • SafetyViking

    Agreed….things are going to get a LOT worse for a LOT of people. Get your ducks in a row, people. You might have to eat ’em….

  • mattjerch

    really seems like there is good news reports coming. maybe tptb are smart enough to carve through this!
    if its a slow collapse,its only slow for a %,many seem to be doing really well. So that wud be slow growth,not a slow collapse. either way, we will be checking this site in 5 years reading “another billionaire warns.” Michael you do great job with your articles……and I’ll read them for next 15 years, thx.

  • Dave Webb

    Thank you for a very good article.
    The implications of a crash are so wide that it is nearly impossible to predict it all.
    Always like to see what the billionaire population is doing. Most got that way by being smart financially.
    They do not teach us how to be independent in our school systems. They teach us to become workers in factories. Now that is obsolete.
    So now we need to become independent business people.
    To do this we are going to need to deal with the IRS and other bureaucratic idiots that want to make sure only major corporations survive.
    A good friend suggested the only place to survive is on an independent farm raising everything you need yourself. The Bible says to flee to the mountains.
    Makes sense. The radiation from a nuclear conflict means that only someone in the upper atmosphere is likely to survive. If the economic situation goes bad then we will need to protect ourselves from all the rabble of other nations as well as the street gangs here.
    Rule number one is to be independent of all banks. But that is not possible with direct deposit in effect. The Social Security checks and pensions are all direct deposited into the banks anymore.
    So the banks go into bankruptcy, who pays?
    If the money is tied up in the banks, how do you get to it?
    Might ask people in Houston from 1988 that question. They had a mini-breakdown in the banks there. The banks went under. The people with money in the banks were repaid. In about 9-12 months later.
    The banks foreclosed on their homes even though they went under. These people could not get to their money to maintain the mortgages.
    People are sheep. Some of those bankers are still with us and are still alive today.

    So the bankers think nothing will happen to them. And they may be correct or not. I guess it depends on whether they upset the wrong people or not.
    One other thing, those billionaires are probably the wrong group of people to have angry with you.
    And I get the feeling that they are quietly removing their funds from our banks at record numbers.

  • 2Gary2

    Walmart’s owners, relatives of its founder Sam Walton, together control
    more wealth than the bottom 40 percent of Americans combined.

    This is simply unacceptable. This money needs to be taken and redistributed to the workers. Call it whatever ism you want.

    No one can get this wealthy with our exploiting others and most likely doing illegal things.

    • Joe Shmo

      Gary, who do think should do the redistributing? And by what criteria would “they” determine “who” gets “what”? Effort? Contribution to society? Being a “useless breeder”? Just curious as to what you think would be “fair”. A very dangerous proposal, I think.

      • Ralfine

        Well, you could use the money do repair streets and sewerage systems and bridges and the power grid.

        It would be fair to pay the workers so that they don’t need taxpayers money in addition to their wage in order to pay for dentists, annual checkups and vaccinations.

        Would that be a start?

        • Joe Shmo

          Sure. I think we tried that though. Remember “shovel Ready Jobs”? It was a not too successful endeavor. “Shovel-ready was not as shovel-ready as we expected,” Obama said. I can see the good in preventive care, I just cringe at giving the all encompassing power to the government. The IRS used their power to target political opponents. What’s to stop them using healthcare the same way? I trust nothing this administration is doing.

          • SteveC

            Did you know that corporations paid all the taxes before the war and there was 0 income tax in the U.S. and things got along just fine… Not saying it needs to go back to that but a more happy medium between them paying taxes and workers paying taxes instead of us paying for everything and them laughing to the bank!

  • F

    The system will crash for sure, no system can consume more than it produces forever, this is thermodynamically impossible.

  • Wally

    It already is over it just doesn’t seem like it because so many people are clueless that most are just going through life as if their only concern is what to watch tonight. So if you just go through your daily life you think all is well…What a shock it will be when a customer logs into the BOA or Chase account to find out they are either offline or their account is zero. What about going to the gas station in the morning just to find out your debit or credit card has stopped working. Just wait until the people who receive social security in any form go to their mailboxes on the 1st just to discover their isn’t any check and don’t forget the millions who are on direct deposit. How will that work when all of the big banks go under? No where to put the money okay then we will just keep it. It won’t take long. I think in 3 days it will become much much clearer to people. Get out of any major city as soon as you hear about the derivatives bubble bursting. Chaos will surely ensue.

  • Lets not remember, it is not only US banks are drown in interest rate derivative markets. The EU & UK banks are as guilty as charge.

  • Wally

    I am completely amazed that they have kept the system going for as long as they have. I live in a middle class area of San Diego and by the people that are out every night partying and eating out and whatever, you would think everything is okay. I just went to Vegas recently to visit family and there are still tons of people there. Maybe gambling revenues are down but casinos are still bringing in the dough by the millions. I am sure it is mostly credit but by looking at what I see day to day you really would think nothing is wrong.

  • Houtex77

    Hurry up and sell your home because the next housing bust won’t be a bubble, it will be a mushroom cloud.

  • 2Gary2

    I think you conservatives should move to the libertarian utopia
    of Somalia. No oppressive ‘big government’ to worry about there. Even better:
    everyone has at least a dozen weapons. Paradise!

  • Mudpie

    I do not want to know this right now.

  • edrobar2978

    Is the world still thinking about economic growth?

  • Ralfine

    Good news: Recovery is under way in England.

  • jokyjo

    All we can do is prepare for the worst and continue to live our lives. Enjoy what you have now, love your families and spend quality time with them. Nobody knows what the future holds, we can only prepare and hope for the best. I believe that this will all end badly but I’m no prophet so I just prepare as best as possible and enjoy each day.

  • MAL3313

    How about those Yankees and who’s Kim sleeping with now?

  • Dee Walker

    My understanding is that the United States government could replace every single dollar in every account, pension fund and shoe box with United States issued currency if all banks collapsed. If that is true they could re capitalize the banks, this time as strictly savings and loans. Right?

  • Mike Molyneaux

    understandable that if/when interest
    rates & the yield on 10 year U.S. Treasuries start going up rapidly, the
    game is over. But why should there be an upward movement, back to “normal
    levels” when the financial situation today is anything BUT NORMAL? Can
    you guess at some credible reason Banksters will argue to increase the rate knowing
    that they will create havoc in doing so?

  • Hammerstrike

    Yep, really, history have been revised again and again.

    • Ralfine

      By communist agents in western countries?

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