The Beginning Of The End
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How Is The U.S. Economy Supposed To Succeed When Our Politicians And The Big Banks Are Making Billions Of Dollars Betting Against It?

Most people around the globe think of America as a great "capitalist" economic machine, but the truth is that the U.S. financial system is essentially one massive betting parlor at this point.  In fact, there has been a whole lot of easy money made in this betting parlor over the past several years by our politicians and by the big financial players down on Wall Street.  So how did they make all of this money?  They did it by betting against America.  By betting that the U.S. economy would do badly, a lot of very powerful people have gotten insanely wealthy.  Literally billions of dollars have been made over the past five years simply by betting that the U.S. housing market would go into the toilet.  But is all of this "short selling" and are all of these "side bets" actually good for the American economy?  How is the U.S. economy supposed to succeed when the big banks and so many of our politicians are actively making bets against it?

Just take a moment and check out some of the folks that have been betting against America....

*A Wall Street Journal analysis of congressional disclosures shows that 13 members of the U.S. Congress or their wives were engaged in substantial short selling during the financial crisis of 2008.

*An individual by the name of Jeff Greene made hundreds of millions of dollars during the real estate collapse by making huge bets against the residential housing market.  Now he wants to use some of that money to run for the U.S. Senate in Florida.

*Goldman Sachs openly and brazenly bet against its own clients as the housing market began to implode back in 2007 and 2008, and they made a TON of money by doing so.

*John Paulson (with the assistance of Goldman Sachs) has quickly become one of the richest men in the United States by betting against America.  Shorting the subprime mortgage market enabled his firm, Paulson & Co., to make 15 billion dollars in 2007.  John Paulson alone made approximately 4 billion dollars that year.

*Legendary investor Warren Buffett said on Saturday that he's bearish about the ability of all currencies to hold their value over time because of massive deficits being run up by governments in the wake of the global financial crisis.

*The Federal Reserve holds credit-default swaps on the debt of Florida schools, and on debt owed by the states of Nevada and California.  So the Federal Reserve would profit if one of those states defaulted on its debt.

*JPMorgan Chase, Bank of America, and Citigroup are offering "municipal credit default swaps" that enable investors to make big money if U.S. states and cities end up defaulting on their debts.

It is one thing to make a legitimate profit on an investment.  It is another thing entirely for the biggest financial institutions in the United States and our politicians to be making massive amounts of money off of the economic collapse of America.

You see, those making huge bets against the U.S. economy also have an incentive to do what they can to make those bets profitable.  So for those who have the power to do so, does there come a point where they give the U.S. economy a little "push" in the wrong direction so that their bets will pay off?

The reality is that we have created a financial environment where fear rules.  For example, very few people want to back U.S. home loans anymore.  So now the U.S. government has to do it.  According to Inside Mortgage Finance, U.S. government-related entities backed 96.5% of all U.S. home loans during the first quarter of 2010.  This was up from 90% in 2009.

We should really rethink a financial system where a few people make a ton of money off of the fact that everyone else is doing badly.  Sure a few people are laughing all the way to the bank, but America as a whole is hurting.

Just consider the following charts.  U.S. national income has never experienced such a radically negative change in modern times....

All of these economic problems have caused the revenue of the U.S. government to dramatically decline at the same time expenditures are rocketing into the stratosphere....

As the U.S. economy continues to tank, the U.S. national debt is going to keep spinning wildly out of control.  Back in 1980, the U.S. national debt was approximately 1 trillion dollars.  Today it is accelerating rapidly as it pushes past 12 trillion dollars and towards 13 trillion dollars....

The truth is that the massive deficits being run up not only by the U.S. government, but by governments all over the world, are something that is clearly not sustainable.  In fact, Warren Buffett recently made an interesting remark about how painful it is going to be when the debt party ends....

"How the world weans itself off huge deficit financing is going to be difficult to watch."

In fact, there are some nations that are in bigger trouble with debt than even the United States is.  Japan's gross public debt has reached 201% of GDP, and the only way that the government of Japan can avoid bankruptcy at this point is by borrowing ever-increasing amounts of money.

But the truth is that this game cannot be played forever.

There has never been a time when so many nations around the world have piled up so much debt so quickly.

When the sovereign debt bubble pops, things are going to get really messy and the dominoes will start falling really quickly.

But when that happens one thing is for certain - there will be a lot of people ready to make a lot of money by betting on the financial failures of others.

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  • Lenny Pike

    There is only one problem: Americans no longer have the courage, character, or understanding to stand up and fight their abusers. Criminals are in control and destroying the United States. Most citizens of other countries aren’t like us, they just don’t have the means to do anything about it. There is only one solution. The Federal Reserve has to be ended, we have to return to sound money, and the U.S. Constitution has to be enforced. If a default of U.S. and all other debt is necessary then it will be necessary. There is no other solution.

  • Just Some Guy

    Using the phrase “betting against America” is a great way to sensationalize the idea of shorting markets, but you’re leaving out the fact that shorting is just as natural a part of markets as buying.

    Shorting stocks, markets. or anything, is simply selling. It carries the same risk as buying, and isn’t betting against the system in some villanous manner so much as buying perceived weakness.

    Your examples above are morally reprehensible only if there is some insider knowledge on the trade or if the parties involved in the trade were able to manipulate the markets into going down. But that’s an argument for another day.

  • http://lunaticfringe-brian.blogspot.com/ Lunatic Fringe

    I have been a short seller and put option buyer. I believe in free markets.

    However, where this criminal class parted company with fair and free markets is that investment bankers devised instruments that would self destruct. Then getting rating companies to rate **** mortgages as triple AAA, thus duping buyers into buying them and ultimately shorting those instruments.

    That conduct is reprehensible. And the SEC, reminds me of Sergeant Schultz in Hogan’s Heroes. The SEC is simply an accessory to the crime, watching porn and saying “I know nussink!” The SEC has an excellent track record of non performance and failure. They will try to eke out some political victory, a fine perhaps, but in the end Goldman Sachs and Warren own government. They will prevail.

  • movetotheight

    This game was laid to be played and Congress and their circles certainly have the inside knowledge as to what is going to happen, especially when they are the ones who are going to make it happen.

    Take Fannie and Freddie. Everyone in Congress knew what was going on, but wait, first they had to make money on it and then put the taxpayers on the hook.

    The whole story is that since the 60′s a whole new game was being laid out and because most Americans don’t pay attention to our government, they easily put their game into action of thorougly robbing the American People and then herd them in the New World Order. Woodrow Wilson almost had us there, but the people saw it coming and stopped him.

    The Progressive have lain low and waited until everything was just perfect and here we are.

    The question is will we be able to stop our corrupt government before their game is won?

    In my estimation, we only have till the end of this year and then we’re just another Russis, Cuba or Venezuela. Are we ready for this or do we put up a fight?

  • MARCO KLOVANISH

    there is a very special place in hell for all these people as long as we are happy inside as respectable humans with morals and values jesus will settle up with these bastards soon as the day comes this makes me sick

  • http://www.thunderdrake.com/blog/ Aury (Thunderdrake)

    I remember investor Jim Rogers saying that among the fiat currencies today, he’s positive about the CAD, the AUD, NZD, and Yuan. Which is kind of funny. Being Canadian.. I’ve seen my dollar drop in near correlation to the USD. So I don’t know if I can back up Jim on that statement. So I still lack faith in my own paper money.

    For now, I’m hanging out of fiat currency and parking my wealth in precious metals and stocks. Dividend stocks, no less. Blue chips. They’ve always been better than bonds, and there’s ways to hedge against them.

    I’m crackers for Options and Derivatives though. But I wouldn’t go beyond a Married Put with my shares in this economic state. And I’d still keep my eyes open for exit strategies, should they cut dividends.

    Commodities held physically, those of most any sort is a good place to park wealth during these economic failures.

  • http://gardenserf.wordpress.com/ GardenSERF

    This article is an example of why you need to own gold and silver. The paper in the economic system is rigged.

  • karl wegscheidl

    I just like to know how many ounces of gold it will take to buy a loaf of bread?

  • Madge

    This has all be rigged by the evil of the world in order to make people think they have no options except through a very controlled, enslavement program of the worlds population. It’s called the New World Order. Nothing new about it though, the idea has been around since the fall of the Tower of Babel. Notice I said the fall. My question is when are the masses going to wake up? It’s no longer a conspiracy theory when it’s happening right in front of your eyes!!!!!!! By the way Americans you’re all too fat and the Mrs. now wants to control what your kids eat. Hmmmmm, control the money, control the food, and WOW!!!! You control the world. Wake up masses before your considered a useless eater.

  • paul lentz

    All in the name of capitalism!
    It should be obvious to even the people that thoroughly read a business report newspaper once a year that this state of affairs cannot carry on forever.
    Banks and some greedy capitalists living off the poor, should not be allowed. However, getting any sort of law through congress or the Senate, is doomed to fail. This is after all where the money is controlled. They do not want to let go of any dollar they have made and are keeping on making!
    I know I sound like a socialist or communist even, but really what is the solution?

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