RECESSION PROFIT SECRETS : MODULE 2 2... · 2020. 10. 27. · A derivative is a financial security whose value is dependent on an underlying asset or assets such as commodities, currencies,

2 RECESSION PROFIT SECRETS : MODULE 2

RECESSION PROFIT SECRETS MODULE 2: THE BANK BUSTER


CONTENTS

INTRODUCTION ..................................................................................................................................................................... 6

PART 1: THE ROAD TO LEHMAN ....................................................................................................................................... 8

BANKSTERS UNCHAINED ............................................................................................................................................................ 8

GLASS-STEAGALL ..................................................................................................................................................................... 8

GLASS-STEAGALL REPEALED .............................................................................................................................................. 9

DEREGULATION OF DERIVATIVES TRADING .................................................................................................................... 10

THE NEW MILLENIUM ............................................................................................................................................................. 10

WHAT IS A DERIVATIVE? ........................................................................................................................................................ 11

MANNING THE GATES ............................................................................................................................................................ 11

CANARY IN THE COAL MINE ............................................................................................................................................... 12

FOXES GUARDING THE HEN HOUSE .............................................................................................................................. 13

DEREGULATION OVERDRIVE ................................................................................................................................................... 13

BANKSTERS UNSHACKLED .................................................................................................................................................. 13

BUBBLES RISING ........................................................................................................................................................................... 15

SUBPRIME MORTGAGES ...................................................................................................................................................... 15

THE DESCENT ................................................................................................................................................................................. 17

2007 .................................................................................................................................................................................................... 17

Q1&Q2 .......................................................................................................................................................................................... 17

Q3&Q4 ......................................................................................................................................................................................... 17

2008 ................................................................................................................................................................................................... 18

Q1&Q2 .......................................................................................................................................................................................... 18

Q3 ................................................................................................................................................................................................... 19

PART 2: TOO BIG TO FAIL ............................................................................................................................................... 20

FINANCIAL WIZARDRY AND THE PRINTING PRESS ....................................................................................................... 20

BAILOUTS ................................................................................................................................................................................... 20

THE OBAMA WHITE HOUSE ............................................................................................................................................... 22

QE 1 ............................................................................................................................................................................................... 22

DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT ................................................. 23

AMERICAN FAILURE AND BANK CONSOLIDATION....................................................................................................... 23

CONSOLIDATING CONTROL ............................................................................................................................................ 23

AWAKING FROM THE AMERICAN DREAM ................................................................................................................... 25

PART 3: BUILDING A TIME BOMB ................................................................................................................................. 26

THE QUANTITATIVE EASING PROGRAMS ......................................................................................................................... 26

US QE ........................................................................................................................................................................................... 26


THE FED AND TRUMP ............................................................................................................................................................. 27

QE 4 .............................................................................................................................................................................................. 29

EUROPEAN QE ......................................................................................................................................................................... 29

LIFE AND DEATH BY QE ....................................................................................................................................................... 30

THE INSTABILITY OF THE EURO ......................................................................................................................................... 31

THE DEATH OF THE SOUTHERN EUROPE .................................................................................................................... 32

NEGATIVE INTEREST RATES ............................................................................................................................................... 34

MEET THE NEW BUBBLE, SAME AS THE OLD .................................................................................................................. 35

THE HOUSING BUBBLE ........................................................................................................................................................ 35

THE STOCK MARKET BUBBLE ........................................................................................................................................... 38

THE STUDENT LOAN BUBBLE ............................................................................................................................................ 39

THE AUTO LOAN BUBBLE ................................................................................................................................................... 40

THE NATIONAL DEBT ............................................................................................................................................................. 41

GLOBAL BUBBLES ....................................................................................................................................................................... 43

BUBBLE PUSHERS ................................................................................................................................................................... 43

THE GREAT BUBBLE OF CHINA ........................................................................................................................................ 44

THE RISE OF THE ZOMBIE COMPANIES ............................................................................................................................. 46

GLOBAL BOND BUBBLE ...................................................................................................................................................... 47

THE GLOBAL DERIVATIVES BUBBLE ............................................................................................................................... 48

PART 4: BLACK BAT OR BLACK SWAN? .................................................................................................................... 52

CHINA IN A BULL SHOP ............................................................................................................................................................ 53

ORIGINS ...................................................................................................................................................................................... 53

PATIENT ZERO .......................................................................................................................................................................... 53

CONTAGION ............................................................................................................................................................................ 54

QETERNITY ...................................................................................................................................................................................... 56

Q5 .................................................................................................................................................................................................. 56

BAILOUTS AND THE FISCAL CLIFF ...................................................................................................................................57

THE GREATER DEPRESSION .................................................................................................................................................... 59

RETURN TO NORMALCY? ........................................................................................................................................................ 60

BULL TRAP? ............................................................................................................................................................................... 60

REOPENING ................................................................................................................................................................................ 61

POST-MORTEM ............................................................................................................................................................................ 62

DEBTOR NATION .................................................................................................................................................................... 62

A WORLD IN DESCENT ........................................................................................................................................................ 63

PART 5: SOUNDING THE ALARM .................................................................................................................................. 65

RECESSION FORECASTS .......................................................................................................................................................... 65

THE WRITING ON THE WALL ............................................................................................................................................. 65


THE MEGABANKS.................................................................................................................................................................... 66

ANALYSTS .................................................................................................................................................................................. 68

PROMINENT FIGURES ........................................................................................................................................................... 70

MAJOR INDEXES HISTORICAL REVIEW ............................................................................................................................... 71

KING DOLLAR’S RISE AND FALL ............................................................................................................................................. 71

DOLLAR CROWNED ............................................................................................................................................................... 71

BRICS ............................................................................................................................................................................................ 72

THE INTERNATIONAL MONETARY FUND ....................................................................................................................... 72

PALACE COUP? ....................................................................................................................................................................... 73

GOLD ........................................................................................................................................................................................... 74

SILVER ........................................................................................................................................................................................... 76

GOLD AND SILVER MANIPULATION ................................................................................................................................ 77

CRYPTO ....................................................................................................................................................................................... 77

PART 6: RECOVERY OR DESCENT? ............................................................................................................................. 80

THROUGH THE LOOKING GLASS ......................................................................................................................................... 81


INTRODUCTION “The money powers prey upon the nation in times of peace,

and conspire against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy. I see in the near future a

crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have

been enthroned, an era of corruption will follow and the money power of the country will endeavor and prolong

its reign by working upon the prejudices of the people, until the wealth is aggregated into a few hands and the

republic is destroyed.”

Abraham Lincoln, 16th President of the United States

ince the financial crisis reverberated around the globe in 2008, leaving devastation in its wake, the global economy had been on the slow road to recovery. The international financial system teetered on the brink of collapse as

integral multi-billion dollar institutions failed worldwide and nations scrambled to contain the crisis. The private megabanks at the centre of the crisis promised the major governments of the world that if they were bailed out the economy would be saved, prosperity would return, and life would continue as it always had. In response trillions in taxpayer funded bailouts were doled out to multinational corporate giants by the private central banks, chief amongst them the US Federal Reserve. But what had those trillions wrought? The majority of major nations saw their national debts skyrocket while economic growth remained stagnant and standards of living flatlined. Instead of reforming the reckless and corrupt practices that had brought ruin to the global economy, the “too big to fail” banks shunted their losses onto the public and unabashedly persisted in their ways which has seen them grow larger and even more integral than before. The underlying problems of the last crisis were not addressed but papered over with quantitative easing programs that showered failing corporations with trillions, while the citizenry faced austerity and the harsh economic realities of a depression. A dozen years later the unaddressed problems have resurfaced with a vengeance as the COVID-19 coronavirus pandemic swept across the globe and engulfed the planet in a crisis of even greater magnitude. The debt and asset bubbles of the past have been inflated to even greater heights, while the tools to keep the collapse at bay have been all but spent. The major central banks have slashed interest rates down to near zero or below and set their balance sheet targets to the stratosphere with even trillions more in “quantitative easing”. There is nowhere left to go.

S


As the global coronacrisis unfolds many are looking to protect their assets and position themselves to take advantage of the opportunities that downturns present. However, before taking the field one must familiarize oneself with the strategies of the enemy to have any real chance of victory.


PART 1: THE ROAD TO LEHMAN “Blaming speculators as a response to financial crisis goes back at least to the Greeks. It's almost always the wrong

response.”

Larry Summers, United States Secretary of the Treasury (1995-1999)

BANKSTERS UNCHAINED GLASS-STEAGALL

The 1920 ́s were known as the “roaring twenties” in American history because the country's economy was booming and the “easy money” policy of the privately-owned central bank, the Federal Reserve, had fuelled speculation sending the stock market to record heights. Stocks ballooned during this period because it was profitable for investors to borrow money at low interest and purchase stocks. The party was great until 1929, when the Fed tightened the money supply causing the stock market bubble to burst in October, wiping out thousands of investors.


The collapse caused a chain reaction in the economy that led to an avalanche of bankruptcies and bank failures that ushered in a depression. Public sentiment against the big wall street banks was understandably hostile during these years and large segments of the public demanded that they be reined in before they dragged the Republic to further ruin.

In June 1933, President Franklin Delano Roosevelt signed the Banking Act of 1933, also known as the Glass-Steagall Act. The Act prohibited commercial banks from carrying out investment banking activities; while investment banks were prohibited from accepting deposits and undertaking commercial banking activities. The Act also created the Federal Deposit Insurance Corporation (FDIC) that insured bank deposits with money contributed by the banks, to prevent depositors from losing everything in future bank failures. As a result of the legislation several major banks had to separate their commercial and investment activities into new entities.

GLASS-STEAGALL REPEALED In 1999, President Bill Clinton signed into law the Financial Services Modernization Act, which essentially repealed large tracts of Glass-Steagall. The new legislation allowed the creation of financial holding companies (FHCs) that could own subsidiary institutions engaging in both investment and commercial banking activities, effectively ending their near seventy-year separation. These new entities were to be directly regulated by the private Federal Reserve System. The rejoining of these banking activities enabled the FHCs to speculate and make tremendously risky investments with customer deposits, which was a major cause of both the Great Depression and the 07/08 Financial Crisis.


DEREGULATION OF DERIVATIVES TRADING

THE NEW MILLENIUM The entry into the new millennium was a turbulent one for U.S. markets as the dot-com bubble imploded and the record heights set came crashing down to reality. As billions in unfounded electronic wealth disappeared the Fed led by Alan Greenspan, cut interest rates and began expanding the nation’s money supply. This cheap money policy fuelled speculation and inflated asset prices, particularly in housing. The Fed had simply replaced one bubble with another. And at the center of that sordid bubble were the infamous mortgage-backed securities that brought the global economy to its knees in 2008.

The Fed’s cheap money enabled loans to be issued via predatory lenders to hundreds of thousands of people, with low credit scores that could not afford to repay the loans. These risky loans were then bundled into deceptive and opaque financial instruments (derivatives) and sold onto banks, pension and investment funds, and other guibble investors worldwide after being highly rated by “reputable” for-profit ratings agencies. When the underlying loans began to fail, many holders and insursers of these derivatives followed suit and it soon cascaded into a full-blown global crisis. But what were these derivatives that had wrought such economic devastation and caused trillions in losses worldwide?


WHAT IS A DERIVATIVE? A derivative is a financial security whose value is dependent on an underlying asset or assets such as commodities, currencies, bonds etc. This security is formed by a contract between two or more parties and the price is derived from fluctuations in the underlying assets. There are several types of derivatives and they usually entail an advanced form of trading such as hedging, speculating and trading in the prices of the underlying assets. The most common types of derivatives include futures contracts, forward contracts, options contracts and swaps.

Derivatives can be purchased through a broker (standardized) and over-the-counter (OTC) (non-standard contracts). The standardized contracts are called exchange traded derivatives and are traded on regulated exchanges where their value is based on the value of another asset, and the underlying assets and their settlement are specified on the exchange. OTC derivatives on the other hand, are private contracts between counterparties that are traded directly without middlemen. This allows the derivative to be customized and tailored to suit the exacting risk and return levels required by the participating parties. However, there is a counterparty risk involved in OTC derivatives, as the opposing party may not honour the contract.

Knowledge of these financial instruments gained wider purchase in the wake of the subprime mortgage implosion, in which mortgage-backed securities (MBS) played a central role and exhibited their potentially destructive nature when deployed recklessly. Derivatives however, like most tools or instruments can be used beneficially when deployed in a conservative and appropriate manner. An example is the use of oil derivative contracts in the airline industry, where the largest operating cost centre is typically fuel and its related expenses. Airliners purchase oil derivative contracts as an insurance policy against the fluctuations in the price of oil. The purchase of these derivatives will ensure that the airline does not suffer too severe financial shocks if the oil price rises in the future. A similar scenario is an individual purchasing their year ́s quantity of fuel in advance instead of as they need it, believing that the price will rise in the future.

MANNING THE GATES The potential dangers posed by an unregulated derivatives market was long foreseen in the halls of government and it led to the establishment of an independent agency in 1974 with the mandate to regulate the market, called the Commodity Futures Trading Commision (CFTC). The agency had regulatory oversight over exchange-traded OTC derivatives but not derivatives that traded off listed exchanges. In 1998, the agency was headed by Brooksley Born and she had grown concerned over the “dramatic” growth and complexity of the OTC market since the early 1990s.


Fearing that if the market remained unchecked it might pose a threat to the stability of the financial system, she lobbied Congress and President Clinton to grant the CFTC new regulatory powers to oversee this burgeoning market.

Born was met with fierce resistance from other regulators at an April 1998 meeting of the President's Financial Markets Working Group (FMWG), with then Treasury Secretary Robert Rubin warning that the financial community was staunchly against the proposed CFTC oversight and was in fact “petrified” at the very idea. Federal Reserve Chairman Alan Greenspan and the Securities and Exchange Commission (SEC) head Arthur Levitt, were also against the CTFC ́s regulatory push. Greenspan worried that CFTC regulation would “suppress” the OTC market and the business would flee to foreign markets such as London. But Born argued that to leave the OTC market unregulated would be acting counter to the law of the land.

Born ́s CFTC pursued the issue despite the pushback but was hamstrung by the combined efforts of the Fed, the SEC and the Tresuary Department who managed to delay any regulatory action until the FMWG could more closely “study” the issue. But the writing was already on the wall.

CANARY IN THE COAL MINE Long-Term Capital Management (LTCM) was a hedge fund that traded heavily in OTC derivatives and was valued between four and five billion dollars in early 1998. The firm followed a complex investment program that had reaped them subustial rewards in the preceding years, so confidence at the firm was high. Their winning track record emboldened them to make riskier and more leveraged bets in the OTC derivatives market, until their luck finally ran out during the summer of ´98 and by September they faced collapse. In the face of total disaster the firm scrambled to raise funds to rescue the business, but rejected “lowball” offers from Goldman Sachs and Berkshire Hathaway to buyout the partners. Failing to find any suitable offers the firm teetered on the brink, until the New York Fed decreed that LTCM was essentially “too big to fail” due to its interconnectedness to major financial institutions and organized a private bailout from a consortium of firms to the tune of $3.6 billion. The Fed feared that LTCM ́s collapse would trigger a system wide financial crisis and organized the rescue that would set a dangerous precedent.

CTFC ́s Brooksely Born had feared just such an event but her efforts to address the problem were overpowered by other more influential regulatory heads and the financial community, who succeeded in passing legislation that restricted the CTFC ́s ability to regulate the derivatives market. Born resigned in defeat in June 1999 and the financiers grew even bolder in their ambitions.


FOXES GUARDING THE HEN HOUSE Until 2000, large segments of the derivatives market were heavily regulated and restricted but this changed with the passing of the Commodity Futures Modernization Act. The Clinton administration continued their deregulation of the banking sector with this Act that “effectively shielded OTC derivatives from virtually all regulation or oversight” and repealed an eighteen-year old ban on trading single stock futures. The move essentially lifted the lock off the bankers ́ collective scabbard, resulting in an exponential increase in the speculation of these previously tightly restricted financial instruments. As a result the global OTC derivative market exploded from just over $80 trillion in December 1998 to nearly $600 trillion by December 2008. The bankers were running wild in their ivory towers.

DEREGULATION OVERDRIVE

BANKSTERS UNSHACKLED The unchecked growth of the derivatives market reaped huge profits for the private banks and with the dot-com bubble unravelling the Fed led by Alan Greenspan slashed interest rates from over 6% in 2001 to under 2% by 2002, signalling a new era of cheap money. The low interest rate environment fuelled borrowing and speculation during the decade which resulted in the rise of asset prices during these boom years, particularly in the housing sector. The big banks, however, were not content with this already highly speculative environment and sought the removal of SEC restrictions that limited the amount of debt that they could hold. The SEC regulations at the time limited the banks net capitalization at about 12 to 1 on their leverage.


In April 2004, under intense lobbying from the large investment banks the SEC unanimously voted to loosen the debt restrictions for firms which had assets greater than $5 billion. This only applied to five firms at the time namely, Morgan Stanley, Goldman Sachs, Lehman Brothers, Bear Stearns and Merrill Lynch. These megabanks could now keep much less capital as reserves in their vaults to guard against any losses incurred, thereby freeing up billions in capital to invest in a wide range of financial instruments that included mortgage-backed securities and other derivative instruments. The banks had been truly unshackled to make gargantuan bets on highly risky financial instruments that would reap large rewards but also equally large losses. The stability of the banks was not in danger if their risky trades were profitable but any significant loss could almost instantly wipe out their relatively tiny reserves.

Lehamn Brothers ́ bank leverage ratio for example, was believed to have reached as high as 44 to 1 before its demise. In such a scenario, if the firm had $1 of its own capital or equity and borrowed $44 and made a total investment of $45; if the value of the investment fell by a mere 1% or $0.45, the firm ́s remaining capital would only be $0.55. That would mean that the firm will now be leveraged at 80 to 1 because they only had $0.55 against $44 in borrowed funds. A few percentage points drop in the value of the investment would wipe out all the bank ́s capital. This was the precarious position the megabanks had created for themselves. As long as their investments stayed in the black they would reap all the rewards for their risky ventures but if they ́slipped into the red...well, let's just say they had an alternative plan for who would pay for the losses.


BUBBLES RISING

With the chains tying down the megabanks safely removed by a compliant governmental class, the boom cycle of the banks boom-bust strategy would accelerate at an unprecedented pace.

SUBPRIME MORTGAGES The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 enabled the growth in mortgage loans to low income neighborhoods. The rationale behind the Act was to combat the development of ghettos that had expanded during the 1970s by reinforcing the Community Reinvestment Act of 1977. The banks were receptive to this previously financially risky practice because the government agencies Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie MAC) had agreed to securitize these loans.

In the wake of the dot-com bubble collapse and the 2001 recession the Fed lowered interest rates sharply which also lowered the adjustable-rate mortgages that were tied together indirectly.


The low interest rates meant that many who could not previously afford conventional mortgages could now qualify for these interest-only loans, where the debitor only pays the interest rate for an introductory period of a few years before reverting to conventional mortgage rates. Many homeowners were roped in by the promotional rates, some presumably thinking that their prospects would improve in the future allowing them to afford the higher rate. Others hoped to sell the house before the conversion period during the boom years. While some unfortunately were simply unaware of the later higher rates altogether.

The bankers then packaged these loans into derivatives instruments like the infamous collateralized debt obligations (CDOs) and credit-default swaps (CDSs) and had the private run-for-profit credit rating agencies rate them highly (AAA). They then sold them multiple times over to unwitting investors worldwide thereby spreading the contagion.

The banks in the runup to the financial crisis had sold thousands of subprime loans to aspiring homeowners only for many to get a rude awakening when interest rates began to rise between 2004 and 2006, climbing from 1% to 5.25%. The interest rate hikes crushed the housing market, with tens of thousands defaulting on their adjustable mortgages during the period. By the time the dust had settled on the crisis an estimated 10 million Americans lost their homes to the big banks.


THE DESCENT

2007 Q1&Q2 By early 2007 the warning signs were already flashing. In February, Freddie Mac announced that it had ceased purchases of highly risky subprime mortgages and mortgage-related securities. Then major subprime mortgage lender New Century Financial Corporation filed for Chapter 11 bankruptcy in April, while June saw credit rating agencies Moody’s and Standard & Poor downgrade over a hundred bonds backed by subprime loans.

Q3&Q4 July, saw megabank Bear Stearns liquidate a couple of its hedge funds that had invested heavily in the fraudulent subprime mortgage-backed securities. While in August, American Home Mortgage Investment corporation became the next lender to file for bankruptcy protection. Shortly after credit rating agencies Fitch Ratings and Moody’s downgraded the giant mortgage lender Countrywide Financial.


Meanwhile in Europe, the French megabank BNP Paribas froze three of their funds citing problems valuing their CDOs (and hence their exposure) becoming the first major bank to do so. In September, the British bank Northern Rock found itself overextended and facing a liquidity crisis after seeing a drop in international demand for the mortgage backed-securities they were selling, sparking the first run on a British bank in over a century. The bank was bailed out by the Bank of England (and would eventually be nationalised) but the event panicked global financial and political systems, as many wondered if this was a harbinger of things to come.

In December, the Fed created the Term Auction Facility (TAF) program which enabled institutions such as banks, loan associations and credit unions to borrow from the Fed at below the discount rate. The Fed also established currency swap lines with the European Central Bank (ECB) and the Swiss National Bank (SNB) which paved the way for billions and later trillions in foreign loans.

2008 Q1&Q2 2008, began with Bank of America purchasing embattled mortgage lender Countrywide Financial for $4 billion, in what would be the first of many such acquisitions during the crisis.

Meanwhile, the housing market was beginning to unravel, as January home foreclosure figures were up 57% from 2007 and existing home sales reached 10-year lows. In February, President Bush signed a tax rebate (the Economic Stimulus Act of 2008) to cushion the impact of the deteriorating housing market but it was far from enough.

In March, the banking giant Bear Stearns was purchased by JP Morgan Chase for a fire sale price of $236 million as the Fed agreed to fund upwards of $30 billion of the bank’s less liquid assets. March also saw the Fed extend the TAF program and introduce the Term Securities Lending Facility (TSLF) that loaned billions in treasury securities against federal agency debt and mortgage-backed securities. They later declared in a press release that they would “continue to provide liquidity as necessary to promote the orderly function of the financial system."


Q3 In July, IndyMac Bank failed and was seized by Federal authorities marking the latest in a series of bank failures. Market fears rose in the wake of this collapse and Treasury Secretary Henry Paulson was dispatched to make the media rounds to ensure the nation that the banking system was sound and to advocate for a bailout of Fannie Mae and Freddie Mac. This was later secured with the Housing and Economic Recovery Act at month's end but by September the two giants had been nationalized.

September however, proved to be the tipping point. On the 15th, Bank of America purchased the planet’s largest retail brokerage firm Merrill Lynch for $50 billion after it underwent a liquidity crisis. On the very same day, the country’s fourth largest investment bank Lehman Brothers, filed for Chapter 11 bankruptcy after failing to secure a buyer or bailout. That triggered a 500-point plunge of the Dow Jones Industrial Average (Dow Jones) and sent shockwaves through the global financial system.

On the 16th, the planet’s largest insurer American International Group (AIG) received a $85 billion federal bailout in exchange for 79.9% stake. While the 25th saw Washington Mutual with $310 billion in assets and $900 billion in deposits shut down by federal regulators and its assets sold off to JP Morgan Chase for a paltry $1.9 billion. By month’s end the Dow Jones was in freefall. The global financial crisis had begun.


PART 2: TOO BIG TO FAIL “Looting is the only way left for the Western financial

system to make money”

Dr. Paul Craig Roberts, United States Assistant Secretary of the Treasury for Economic Policy (1975-1978)

FINANCIAL WIZARDRY AND THE PRINTING PRESS BAILOUTS Engineering TARP

WIth the economy in freefall and major banks and institutions failing the government was under public pressure to address the situation engineered by the greed and avarice of the private banks. In September 2008, a bill was introduced into the House of Representatives to bailout the collapsing institutions and “save” the economy. This was initially shot down in the House of Representatives because the money demanded was around $700 billion and parameters of its distribution were vague and unclear.


The resistance to the bankers bill initiated an aggressive campaign by the bankers’ allies in the White House that were led by the then Secretary of the Treasury Henry “Hank” Paulson. Paulson was a former head of Goldman Sachs who had left the firm with a reported $491 million of liquidated Goldman stock when he joined George Bush’s Cabinet in 2006; and thanks to a convenient loophole in the legal system Hank was not required to pay any capital gains tax on this income.

Secretary Paulson was incensed at the audacity of Congress to reject issuing his banker friends a multi-billion dollar taxpayer bailout and reportedly directed threats to be made to the most resistant members. According to Congressman Brad Sherman, members of the House were told “that the sky would fall, the market would drop two or three thousand points the first day, another couple of thousand the second day, and a few members were even told that there would be martial law in America if we voted no.” The terror campaign led to the House passing an even more draconian bill a few days later which granted the Treasury Secretary immense powers to direct the purchasing of assets into what would be known as the Troubled Assets Relief Program (TARP).

However, contrary to Congress’ belief that the bailout money would be used to purchase the toxic debt that was threatening to bring down the financial system, Paulson used his dictatorial powers to issue money directly to the banks essentially giving them a “blank check”. Furthermore, the funds were issued in secret with Congress unaware of their destinations. Paulson’s gambit had worked spectacularly. He used the threat of economic collapse to secure a blank check for the private banking cartels, thereby propping up their failing system to the detriment of the taxpayer. The bankers would then loot the nation far in excess of the $700 billion TARP demanded. A figure which a Treasury Spokeswoman told Forbes was “not based on any particular data point” but because “we wanted to choose a really large number”.

The Bailouts Revealed

With Congress effectively subdued, the private Federal Reserve led by Ben Bernanke announced the Quantitative Easing (QE) program in November 2008, in which they would buy up billions of mortgage-backed securities and other “direct obligations of housing-related government-sponsored enterprises” such as Fannie Mae and Freddie Mac. The Fed however, went further than its mandate and began issuing trillions of dollars backed by the taxpayer, to several entities with no Congressional oversight. In a mere three months of the TARP bill passing, the Fed expanded its balance sheet from around $800 billion in September 2008, to over $2.2 trillion by year’s end. History’s greatest robbery had begun.

According to a 2011 partial audit of the Fed by the Government Accountability Office (GAO) the Fed issued more than $16 trillion in “financial assistance” to banks and corporations around the planet.


While a 2011 study out of the University of Missouri-Kansas City, put the Fed’s commitments in the intervening years at an estimated $29 trillion! The Fed was completely out of control and handing over trillions to banks and institutions they were allied with. Under pressure for their secretive looting, the central bank revealed in late 2010 that not only domestic firms were the recipients of the bailouts but foreign banks and failing multinationals. Morgan Stanley was reported to have received nearly $2 trillion; Citigroup $1.8T; Merrill Lynch $1.5T; while the foreign British bank Barclays received over $200 billion. Royal Bank of Scotland and HSBC among others also got billions.

The private banks in control of the Federal Reserve issued money backed by the American taxpayer to essentially bailout the entire world. As a result the Republic was saddled with an untenable debt burden that would smother the prosperity of the nation and the economic freedom of its progeny.

THE OBAMA WHITE HOUSE The American economy began to unravel at the tailend end of the 2008 presidential election that saw the veteran Republican Senator John McCain take on the political newcomer, Illinois’ Democract Senator Barack Obama. The state of the economy became the main focus of the campaign that Senator Obama won comfortably, vowing to rein in the big banks and bring radical change to the status quo after the turbulent Bush years. He lied. Upon taking office President Obama, in direct contradiction to his campaign promises, packed his White House with the very same big bankers he railed against. As Treasury Secretary he appointed Timothy Geinter who headed the New York branch of the Federal Reserve. For Chair of his Presidential Economic Recovery Advisory Board, he chose Paul Vocker, a former Chair of the Fed. While Larry Summers, a key figure in the deregulation of derivatives that directly led to the crisis, was appointed the Director of the National Economic Council. To those watching the message was clear. Wall Street had captured the White House in broad daylight and a new era of bankster rule was about to begin.

QE 1 With the White House populated by the big financiers the QE program draining the Republic continued unabated. During Obama’s first year the Fed cut its interest rate from 4.25% to 0.25% in an attempt to stimulate the economy but to no avail. The Republic officially entered recession1 in Q4 2008 after the GDP growth rate fell to -2.1% in Q3 and plunged further to -8.4% in Q4.

1 Two consecutive quarters of negative GDP growth


QE 1 ran until March 31st 2010 and in its duration the Fed purchased $1.5 trillion in bonds, including over a trillion in US agency debt and MBS, in addition to $300 billion in US treasuries. The Republic had climbed out of recession by Q3 2010 registering a weak 1.5% GDP growth after four consecutive quarters of negative growth. In the interim millions had lost their jobs and homes, whilst trillions were sent to bailout foreign banks.

DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT The Republic was shell-shocked after the housing bubble burst and reeling from the economic devastation it had wrought. Never ones to let a good crisis go to waste, the private banking interests got the Dodd-Frank bill introduced into Congress in December 2009 under the guise of protecting the average consumer from the predatory financial sector and stripping them of their “too big to fail” status. President Obama signed the bill into law in July 2010, proclaiming that the system would no longer be rigged to favor the big banks. In truth, the Act was a major power grab by the federal government, assigning it powers to completely change the regulation of the financial sector echoing the failures of the Roosevelt New Deal era. Instead of stabilizing the economy and reducing the dependency on the “too big to fail” banks, the banks grew much larger in its wake. The private Federal Reserve even admitted that they were directly responsible for “issuing a number of rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act”. The megabanks were regulating themselves. What followed was an all too predictable historical pattern of when private banking cartels gain control over a target nation.

AMERICAN FAILURE AND BANK CONSOLIDATION CONSOLIDATING CONTROL During the 1920’s the Fed had kept interest rates artificially low and its monetary policy loose, which facilitated cheap loans, fuelled investment and rampant speculation. These conditions led to inflation in asset prices and the stock market as speculators rode the rising bubble up. The bubble peaked in 1929 when the stock market was at record heights, prompting the private Fed to tighten the money supply and creditors to call in debts. This crashed the market and the economy which led to thousands of bankruptcies and millions of job losses. Thousands of commercial banks also went belly up due to the tightening of the money supply, enabling the big banks to further corner the market.


The 21st century bankers had learnt from the machinations of their predecessors and inflated the housing bubble, initiated its crash and in the fallout proceeded to consolidate the financial sector further into their hands. Hundreds of commercial banks failed in the wake of the crisis.

Year Bank Failures

2007 3

2008 25

2009 140

2010 157

2011 92

2012 51

2013 24

2014 18

2015 8

2016 5

2017 8

2018 0

2019 4

In addition to the above, between 2008 and 2013 an estimated 1,400 smaller banks failed; in comparison to the 10 total bank failures in the five years prior to 2008. Whilst, between 2008 and 2013 the six largest megabanks2 grew over 37% and accounted for 67% or $9.6 trillion of the $14.4 trillion worth of assets within the American financial system. In 2020, these megabanks had assets worth over $10 trillion. Whilst the bankers grew rich and gained even greater control of the economy, the average American faced the full brunt of the crisis.

2 JP Morgan Chase & Co.; Bank of America Corp.; Citigroup Inc.; Wells Fargo & Co.; Goldman Sachs Grp.; Morgan Stanley


AWAKING FROM THE AMERICAN DREAM Despite the trillions that flowed into American banks as a result of QE 1, the banks drastically cut their lending, which resulted in several thousand business failures, as many saw their credit lines evaporate. The folding businesses then caused exponential job losses. 2009, alone saw over 1.4 million Americans file for personal bankruptcy, up a staggering 32% from 2008. The official unemployment rate nearly doubled from 4.6% in January 2007 to 9.4% in July 2010 when the Republic climbed out of recession. Even more alarming was the number of working-age Americans who were not in the labour force i.e not actively seeking employment and hence not included in the official employment data. This number grew from an already massive 77 million in January 2007 to 85 million in January 2011, representing a shocking 7 million person increase. This was reflected in the 53% increase on Federal welfare spending which climbed from approximately $468 billion in 2007 to $717 billion by 2011.

The employment losses predictably created a chain reaction of home foreclosures as average Americans struggled to make payments, while many had their rates jacked up due to predatory and deceptive mortgage lending practices. Between 2007 and 2014 over 5 million homes were repossessed by banks, displacing more than 10 million Americans. Not content with the personal suffering they had wrought, several megabanks were implicated in a conspiracy to illegally foreclose on people's homes, some of which they never even owned! JP Morgan, Wells Fargo, Bank of America among others were hit with several lawsuits and had to pay billions in fines for the widespread mortgage fraud. But the banks had made trillions building the bubble and in the resulting taxpayer funded bailouts. In 2008 alone an estimated $1.6 billion of the bank bailout funds went directly to top executives in salaries and bonuses. The paltry tax deductible fines we suspect were greeted with pleasure in their corporate boardrooms.

The megabanks had created the 2nd Great Depression and the consequences for the citizenry were more devastating than first, whilst the riches reaped were even greater for the culprits. A 2013 study by the Government Accountability Office (GAO) estimated that the crisis had cost the economy upwards of $22 trillion in just five years. But the banksters had only just begun their campaign against the prosperity of the Republic.


PART 3: BUILDING A TIME BOMB “An economy that lives by QE, will die by QE”

Peter Schiff, CEO of Euro-Pacific Capital

THE QUANTITATIVE EASING PROGRAMS US QE (1 graph insert, Dow Jones with QE markers)

When QE 1 ended in March 2010, the Fed’s balance sheet stood at approximately $2.3 trillion and the Dow Jones, fuelled by cheap money from the Fed, had regained about half of its pre-crisis value. However, the underlying causes of the crisis had remained unaddressed and the “solution” of monetary stimulus simply papered over the problem and essentially kicked the can down the road. Within a month of QE1’s termination the Dow Jones began to fall precariously, shedding nearly 1,000 points from an April 2010 high of 11,204.28 to 10,303.15 on August 9th.

The central bankers grew worried that the market would crash again in the historically precarious months of September and October without the cheap money of QE propping it up. In response, on August 10th the Federal Reserve Open Market Committee (FOMC) announced a QE 1 rollover program to “help support the economic recovery in the context of price stability” by continuing to hold onto Treasury securities after they matured. Fed Chair Bernanke went on to hint at the introduction of QE 2 in late August before it was finally announced on November 3rd, where the FOMC declared its intent “to purchase a further $600 billion of longer-term securities by the end of the second quarter of 2011, a pace of about $65 biilion per month”.


The market embraced the program enthusiastically and the Dow Jones climbed from 11,188.72 on November 2nd 2010 to 12,261.42 on June 29th 2011. The Fed’s balance sheet expanded from $2.30 trillion to $2.86 trillion during this period and was maintained at roughly this level before Operation Twist was launched in September 2011. On September 21st the FOMC announced its intent to purchase $400 billion of Treasury securities (that would end up running to the end of 2012) in response to the Dow Jones shedding over 1,500 points since July, initiating another market rally into the new year. QE 2 was officially ended on June 29th 2012.

The Fed’s QE programs had propped up the markets but real economic data showed that the country was in the midst of a severe depression. Going into September 2012 President Obama faced a difficult reelection campaign against Mitt Romeny due to the poor state of the economy as rising food prices and costs of living hit the Americans hard. On September 13th, the FOMC announced QE 3 and immediately began purchasing about $40 billion per month of MBS bringing its purchases to a total of $85 billion per month to the year’s end as a result of Operation Twist. Obama went on to win reelection and QE 3 was expanded in December with no end date set, earning it the nickname of “QE-Infinity”.

The $85 billion per month QE 3 program continued unabated during 2013 before the Fed reduced its purchases in December by $10 billion per month for a new $75 billion monthly total. The Dow Jones had a strong year as a result, surpassing the pre-crisis peak and setting new record heights. By year’s end it was hovering at around 16,500 points. QE 3 ran through to October 29th 2014 and the Dow had exploded to well over 17,000. The Fed’s balance had expanded in tandem to a staggering $4.5 trillion by year’s end; a level at which it maintained until it began to slowly unwind its balance on the eve of the 2016 Presidential election.

THE FED AND TRUMP (1 graph insert, Dow Jones with QE and rate cut markers, Fed Balance Sheet)

Under the Obama administration the Fed pumped trillions into the economy, the majority of which went to private global megabanks. Candidate Donald Trump ran on a pro-business platform and repeatedly called the stock market a “bubble” which had been inflated by the monetary policies of the Fed. In October 2016 the Fed launched a “balance sheet normalization program” and slowly began to unwind its balance sheet, offloading $10 billion by month’s end. The Fed kept interest rates at zero during the vast majority of Obama’s tenure and raised them for the first time in December 2015 and again in December 2016 by 0.25 percentage points both times. Upon Trump’s ascension to the Presidency, his attitude towards the Fed shifted as he sought to grow the stock market and the economy to greater heights in a low interest climate.


The Dow Jones post-election, recorded massive gains on increased consumer confidence and business optimism, growing from 17,888.28 on November 4th 2016 to 19,827.25 on January 20th 2017, the date of President Trump’s inauguration.

The Fed then headed by Janet Yellen, proceeded to raise interest rates three times during 2017 to 1.5%, much to the chagrin of President Trump who wanted a low rate environment to bolster his economic program. In Trump’s first year the Dow Jones had grown exponentially, shattering records along the way and ended the year at over 24,700 points.

Unsatisfied with the leadership at the Fed, President Trump appointed Jerome Powell to succeed Yellen at the helm in November 2017 and he took office in February 2018. Going into 2018 the Fed began accelerating the unwinding of its balance sheet, reducing it from approximately $4.4 trillion in January to $4 trillion by year’s end. In addition and much to the dismay of the President, the Fed under Powell’s leadership continued upon the course set by Yellen and raised rates four more times during 2018 to 2.5%. The tightening environment caused tremors in global markets, hampering economic growth and the stock market’s record rise. This earned the wrath of the President who repeatedly and publicly criticized the Fed’s actions, calling them “crazy” in October 2018.

The Fed held interest rates at 2.5% during the first half of 2019 and continued to unwind their balance sheet at an accelerated pace, ending it on July 31st and by September it stood at just over $3.76 trillion. President Trump in the interim had been publicly advocating for large rate cuts and the return of QE to aid his economic programs and the economy’s vitality. In June 2019, the Fed delivered the first interest rate cut of the Trump era, when it reduced the rate from 2.5% to 2.25%, to be followed shortly by two more 0.25% rate cuts in September and October. As market fears mounted of a crash and a larger crisis in October, the Fed under continued and relentless criticism from the Trump White House, launched QE 4.


QE 4 (1 graph insert, Dow Jones with QE marker)

On October 11th 2019 the Fed launched a program of $60 billion per month Treasury bill purchases to run until at least Q2 2020, that would expand its balance sheet by over $500 billion to roughly $4.4 trillion. The Fed insisted however that it was “Not A QE” but a completely different program that cociendentally had identical characteristics. The demand to convert treasuries into liquid cash was immense as institutions flooded the Fed with sell requests. The private megabanks and institutions were once again being flooded with capital to prop up their unsustainable system which could only survive on monetary life support. The Fed’s balance sheet had ballooned to nearly $4.16 trillion on the eve of the coronavirus global selloff in February 2020, up from just $3.76 trillion in September 2019. The Dow Jones predictably soared from around 26,700 points in mid-October to over 29,000 in February 2020 as “Not-QE” propelled it to new record heights.

EUROPEAN QE Meanwhile in the technocratic European Union, similarly nonsensical programs were being undertaken by that unelected3 supranational government’s central bank, the European Central Bank (ECB). In March 2015, the ECB launched their own QE program as they struggled to overcome the effects of the eurozone debt crisis that engulfed nations like Greece and wrecked several southern economies. Between 2015 and 2018 the ECB spent approximately €2.6 trillion purchasing mostly government but including corporate debt, covered bonds and various asset backed securities. The ECB had already cut their interest rate to zero by 2012 to help deal with the sovereign debt crisis and as a result took a step further than the Fed, in an attempt to stimulate economic growth, and instituted a negative interest rate of -0.10% in June 2014, which gradually fell in -0.10% increments over the years until it stood at -0.50% in late 2019.

The ECB’s QE purchases peaked at 80 billion euros per month in 2016 when it launched its Corporate Sector Purchase Programme (CSPP) that March, enabling the Bank to buy up corporate bonds. Many of these corporations were falling, rated junk and were only being kept alive by taxpayer funded subsidies provided by the CSPP. Under the program the ECB could also buy global corporate bonds and not just European ones, leading it to be popularized as “QE for the Entire World”. A July 2017 report by Bank of America Merryl Lynch estimated that 9% of listed non-financial companies in Europe were being kept afloat by the CSPP.

3 The European Commission which proposes legislation and manages the day-to-day business of the Union is unelected.


The central bank ended its QE program in December 2018, however it was restarted in September 2019 at €20 billion per month in asset purchases and the Fed followed suit a month later with QE 4.

Between 2015 and 2018 the ECB nearly doubled its balance sheet from €2.5 trillion to over €4.7 trillion. However, the economy remained stagnant and job growth weak, as the euro neared parity with the dollar and several mediterranean nations continued to struggle with high unemployment rates. Eurozone GDP growth rate registered 2.1% in 2015; 1.9% in 2016: 2.5% in 2015 and 1.9% in 2018.

LIFE AND DEATH BY QE Historically excessive money printing has almost always ended in hyperinflation and economic disaster. The Weimar Republic in the 1920’s; Hungary in 1946; Yugoslavia in 1994; Zimbabwe in 2008 and of course most recently Venezuela in 2016. Increasing the money supply over time diminishes its value until it is worth less than the paper it's printed on. The central banks of America, the EU and Japan have embarked on a course that has seen their balance sheets expand to several trillion. But we have not seen the exuberant economic growth that one would expect for such ludicrous sums.


In the U.S. we saw a record rise in the stock market and other assets, fuelled by QE, but even though nearly half of American households owned stock shares either directly or indirectly, the top 10 percent owned over 93% of all stocks and mutual funds. So who did QE really benefit?

The QE programs of the Fed and the EU have not benefited the majority of the citizenry as they were championed to do but have gone to enriching large multinationals and private megabanks. This was always its intended purpose. It's a corporate welfare program. Have you ever asked yourself how does the Fed giving trillions to foreign megabanks help struggling American families? Where were the bailouts for the millions of Americans who lost homes in the recession engineered by predatory banking practices? Why were bank executives rewarded with billions in taxpayer funded bonuses for wrecking their companies? Because the global economies are being looted. The citizenry are being looted. The private megabanks are using economic crises as an opportunity to transfer the wealth of the citizenry into their hands. The national debts of the major nations are exploding upwards. America’s national debt sits at over $25 trillion4 and nearly $5 trillion of that is held by foreign entities. The Republic currently holds the world reserve currency and accounts for the majority of global transactions, keeping it in high demand, but when confidence is eventually lost in the currency of the bankrupt nation, there will be a rush to dump dollar assets causing inflation.

THE INSTABILITY OF THE EURO The Euro is in an even more untenable position than the dollar as it does not have the economic clout or the military might of the Republic backing up its fiat currency. But more than that the currency is built on fundamentally unstable ground. The eurozone encompasses a whole host of diverse economies of varying strengths that are governed by different political systems. The weaker economies in the

eurozone cannot maintain adequate competitiveness in the production of goods and services compared to the stronger economies. This leads to a deficit in their balance of payments that results in lower growth rates and unemployment.

4 As of May, 2020.


The countries trapped within this monetary union do not have the advantage of possessing a weaker currency that would make their goods more attractive on the international markets. As a result you have jobs and trade migrating to the more robust economies like Germany and the Northern countries as the weaker economies like those of Portugal, Spain and Greece diminish.

Due to the diversity within the Eurozone, the one-size fits all monetary policy of the ECB is inherently problematic. The different economies require monetary policies catered specifically to the nature of their operating environment. The politics in the EU are also quite different to the U.S. The ECB, unlike the Fed, is not beholden to one country and must gain political approval for monetary actions directed toward one nation as we saw during the euro crisis. The U.S. relies on the Fed to meet all its financial obligations no matter how exorbitant the demands become as contemporary history has shown. Can Spain or Italy say the same? One eurozone nation defaulting on its government debt could cause a flight of capital out of euro which could lead to its spectacular demise.

THE DEATH OF THE SOUTHERN EUROPE The implementation of the euro exacerbated the trade balance problems of several nations. Spain and Greece for example saw their trade deficits further deteriorate, while France and Italy became net importers when they were net exporters beforehand. Meanwhile the economic heart of the EU, Germany, saw its trade surplus increase greatly, clearly benefiting from the monetary policies and high productivity it boasts. The euro inflated the purchasing power of the southern economies whose comparatively weaker curriciences it replaced. The southern nations used that temporary illusion of purchasing power pre-crisis to boost their imports, while their now more expensive and thereby less competitive exports lagged in growth. Post-crisis, their imports plunged and their exports subsequently suffered leading to trade deficits. The euro helped create a giant “sucking sound” of jobs out of the southern economies to more economically productive nations like Germany which was bolstered by having a comparatively weaker currency from its previous Deutsche Mark, making its goods more competitive on the markets.

Without the benefits of a weaker currency the southern economies struggled post-2007 and events came to ahead during the eurozone sovereign debt crisis as Portugal, Ireland, Greece and Spain (PIGS) nations saw their government debt and budget deficits soar past acceptable EU levels. Greece was the first to buckle under the economic pressure which resulted in a series of EU directed austerity measures aimed at reducing government spending which sparked a social backlash of mass protests and riots. As the situation deteriorated the EU and IMF agreed on several bailouts for Greece, while similar bailouts were doled out to Ireland, Portugal, Cyprus and Spain.


However, contrary to popular belief the majority of the billions of bailouts did not go to the Greek government and its people but to bailout German and French megabanks that held Greek debt. The Greek economy was trashed causing unemployment to skyrocket and asset prices to collapse. Then in typical predatory fashion the foreign capital backed by the international banking cartels swooped it and scooped up assets at fire sale prices. Greece had to resort to pawing off islands to meet its financial obligations. Like a plague of locusts the megabanks looted Greece like a conquered enemy, setting a precedent for other vulnerable nations.

The euro and the ECB’s monetary policies had wrought devastation on the southern economies with unemployment figures reaching record highs, while youth unemployment soared to terrifying levels, sparking an exodus of the nations’ young brain trust to better northern and international pastures, further hindering their road to recovery. The eurozone was designed to fail. It was designed to transfer the participants’ wealth, through a series of economic crises, into the hands of the banking elite that controls it. This is economic warfare in the 21st century.


NEGATIVE INTEREST RATES The sovereign debt crisis had ravaged the continent and the EU struggled to recover with its political union intact. The ECB had to resort to extreme economic measures to stay above water. They introduced negative interest rates. This meant that the ECB charged banks for parking their money in the central bank. Using their Keynesian logic, they argued that if keeping money in reserves had a negative return, the banks would loan out more money, thereby stimulating demand and increasing spending within the economy. While this can be made to sound reasonable in a theoretical context in practice it is completely ridiculous. Charging depositors on their deposits would make holding cash a much more attractive option because while the return on cash is zero, it is higher than holding an asset that has a guaranteed depreciating value.


The central bank’s QE programs created trillions out of thin air by buying up assets that would eventually come to sit in their vaults as reserves. The process of charging banks to keep these reserves would either force banks to lend to credit-worthy borrowers or charge depositors for the privilege of holding their capital. Some European banks as a result have resorted to charging the deposits of their top tier account holders. Naturally, these account holders began looking for alternative storage and stores of wealth that would actually give them a return or at least lose them less money.

In this new monetary wonderland there are over $11 trillion of government and corporate bonds globally that have negative yields. Yes, you read that right. These bonds are not only promising to return nothing on your investment but actually less than nothing. While in Denmark, the nation’s third largest bank, Jyske Bank A/S, offers 10-year mortgages at a -0.5% interest rate. Granted this mortgage comes with provisos that mean that the bank doesn’t actually pay you to take out a loan but this is the absurdity that negative interest rates has wrought. Negative interest rates act like a tax on holding cash and as a result has caused a rise in cash hoarding.

MEET THE NEW BUBBLE, SAME AS THE OLD THE HOUSING BUBBLE

The economic devastation wrought by the bursting of the housing bubble during the last financial crisis is still fresh in the minds of many. The cheap money fuelled by the Fed’s monetary policies spurred a boom in the housing market and it was ruthlessly exploited by predatory banks with aggressive lending practices. Similar patterns unfolded in the decade following the market crash as the housing bubble was reinflated to even greater heights. According to the Fed total construction spending exceeded $1.3 trillion in December 2019, surpassing the $1.2 trillion spent at the height of the boom in early 2006.


The S&P/Case-Shiller U.S. National Price Index that tracks the average price of single-family homes rose at a faster pace than in the buildup to the financial crisis; rising to 212.5 in November 2019 from lows of 134 in February 2019, far surpassing the 184.61 in June 2006 at the market’s height. Between 2014 and 2019 the average price of a U.S. home rose by 42% (4.8% in 2019) and in December 2019, home-builder optimism was at its highest level in 20 years. However, cracks began to appear in the market.

Predictably, home price growth outstripped wage growth leading to a fall in the affordability of housing. The Environmental Systems Research Institute (ERSI) Housing Affordability Index fell 21% between 2010 and 2018. The housing supply in December 2019 was at its lowest since records began to be tracked by the National Association of Realtors in 1982, pushing prices even higher. While, U.S. MBA mortgage applications steadily declined during 2019. In New York, a quarter of its new luxury apartments remained unsold and vacant in Q4 2019, while the Bay Area saw home prices fall for the first time since 2012 and home sales fell to 9-year lows in Q3 2019.

Then in alarming fashion, the Federal Housing Finance Agency (FHFA) in November 2019, announced that it would increase the conforming loan limits for Fannie Mae and Freddie Mac in 2020 (the 4th consecutive year increase). The greater the loans taken on by these government entities, the greater the risk of insolvency if the market takes a turn for the worst. Fannie Mae and Freddie Mac were already recipients of another $5.1 billion bailout by the U.S Treasury in February 2018 when their coffers ran dry, highlighting their fragility. The mistakes of the past were being repeated which does not bode well for the future.

A Tale of Two Americas

The rise of the housing market has exacerbated the gap between the haves and the have-nots, as we see many aspiring homeowners being priced out of the market in booming areas. In 2019, the three most expensive homes sold were:

● A 6 bedroom penthouse in New York City purchased by hedge fund billionaire Ken Griffin, that went for $240 million.

● A 25,000 square-foot mansion and 1.3 acre lot in Los Angeles, that was sold for $150 million to Lachlan Murdoch (Rurpert Murdoch’s son).

● And a 56,000 square-foot, 123-room mansion in Los Angeles that was scooped up for $119.8 million by Formula One heiress Petra Ecclestone.

The growing wealth of the upper classes, in addition to foreign buyers, created an unsustainable boom in major cities such as New York, Los Angeles and San Francisco. This pushed housing prices up by double digits since the recession and put a lot of pressure on the middle and lower income classes that live in the affected areas. It became increasingly difficult for millenials to get on the housing ladder in those pricey areas resulting in the market having to respond to this marginalized group.


Hence, we have seen the rise of the co-living industry, which encourages cash strapped people to live in shared spaces in order to bring down their living costs. In cities like San Francisco and Los Angeles people are paying as much as $1,200 per month to rent a bunk bed or “pod” with upwards of 10 other people. In most of these living arrangements there is little to no privacy, no pets and no sex allowed. While these are characteristics one may expect in a boarding school, for many working adults, some of whom may aspire to start families, the idea is a non-starter. But this is a by-product of the boom in asset prices and many are not even lucky enough to afford these rates.

In recent years we have seen the alarming rise in the homeless population which stood at an estimated half a million people according to a September 2019 report by the White House Council of Economic Advisers. And it should be no surprise that the largest proportion of homeless lived in one of the most expensive states, California. According to the report a whooping 47% of homeless live in the Golden State, where the average home price in 2019 was around $1.2 million. The rise in cost of living has undoubtedly contributed to the negative net migration out of states like California and New York, which some commentators have dubbed an “exodus”.

The New Subprime Mortgage Bubble

The megabanks had triumphed in the wake of the previous crisis and emerged larger and more powerful than ever. In pathological fashion they sought to repeat the winning formula that had brought them such riches and influence. History is repeating itself as the subprime mortgages that played a central role in the last financial crisis have been brought back by the megabanks that dominate the economy. Bank of America is financing a $10 billion dollar program that provides mortgages to low income borrowers who have to put nothing down. CNBC reported in April 2018 that the loans are 15 or 30 year with interest fixed at around 4.5% and the approval rating for applications is over 90%. Low credit scores are no hindrance to approval and the scheme predictably attracted thousands of potential borrowers.

The subprime name was tarnished during the financial crisis so lenders have assigned a new name to the loans bearing identical characteristics, calling the “nonprime” loans. Borrowers with poor credit can qualify for these “new” loans from lenders such as Carrington Mortgage Services, Angel Oak and Caliber Home Loans.The market is already worth $27 billion with Bloomberg reporting that more than $18 billion of similar loans have been bundled into bonds during 2019, representing a 44% increase from 2018. These bonds of course being eerily similar to the subprime mortgage-backed bonds that played a crucial role in the financial crisis. While $27 billion is a fraction of the estimated $1.8 trillion subprime mortgage bond market of 2007 it shows the bankers are up to their old tricks again and clearly have no qualms about issuing financial instruments that contributed to the last devastating crisis.


THE STOCK MARKET BUBBLE Prior to the stock market crash during the financial crisis the Dow Jones hit a pre-recession high of 14.164.43 during October 2007. A year later it was hovering around 9,000 before it bottomed out in March 2009 at 6.594.44. In less than 17 months it had been more than halved. Similar patterns have been observed with previous market crashes as new all-time highs are reached before a sobering crash to reality. Since the crisis the Dow Jones experienced an incredible bull run climbing to highs of just over 29,000 by February 2020.That represented an over 10,000 point increase since President Trump’s election and over 5,000 points in 2019 alone. But what fuelled that incredible record breaking bull run? For that we must turn to the obvious candidate...the Federal Reserve.

Just as the cheap money policy in the lead up to the financial crisis inflated the stock market, the low interest rates and QE programs of the Fed fuelled the spectacular rise in the U.S. stock market that peaked at 29,568.57 before the global pandemic selloff in late February. The Fed's balance sheet soared from around $800 billion in 2007 to nearly $4.16 trillion in mid-February 2020. The Trump administration's tax cut program also helped fuel the rise as corporate tax fell from 35% to 21%, enabling corporations to buy back their own stock at record levels. In 2018 stock buybacks exceeded $1 trillion and in 2019 $700 billion.

U.S stocks before the pandemic selloff had not been more overvalued since the 1980s according to the price-earnings to growth (PEG) ratio tracked by Bank of America which sat at 1.8 in January 2020. This measure entails what investors are prepared to pay for stocks in relation to their long-term earnings growth. While, in its 2019 Global Financial Stability report, the IMF warned that the U.S. and Japanese stock markets were the most overvalued markets. However, the market exuberance caused a disconnect between stock valuations and actual company performance and fundamentals. Firstly, the stock market growth was far from evenly spread with just ten stocks accounting for about 25% of the 10-year bull market’s returns. Those stocks included Amazon, Microsoft and Apple. Big tech in particular performed extraordinarily well during the market run. Microsoft stood out. Its stock gained more than 55% in 2019 alone. However, those companies actually consistently earned profits to backup their valuations, unlike firms like Netflix, Uber and Tesla.


These firms burn through billions per annum, some with no profitable end in sight yet boasted market caps in the tens of billions. Tesla in particular was one of the most egregious cases that highlighted the disconnect between the markets and fundamentals. In January 2020, Tesla’s market cap exceeded the $81 billion mark set by Ford in 1999, making it the most valuable car company in American history. Tesla delivered approximately 367,500 vehicles in 2019, generating $24.42 billion in revenue and -$800 million in net income.5 General Motors (GM) on the other hand, sold over 2.8m vehicles in 2019, generating $144.81 billion in revenue and $8.84 billion in net income. Despite General Motors outperforming Tesla in nearly every metric, in February 2020 Tesla was worth more than double GM. Back in May 2017, when Tesla stock was worth less than a third of its February peak ($169 billion), CEO Elon Musk stated in an interview with The Guardian that “I do believe this market cap is higher than we have any right to deserve” and that they were “a money-losing company”. Such overvaluation was rife throughout the market.

The boom-bust stratagem of the bankers was repeated, drawing investors to pile into securities in the hope of earning a quick profit, only to be left holding the bag when the market crashes. Allowing the insiders who hoarded cash and other liquid assets to come in and buy up the assets at fire sale prices.

THE STUDENT LOAN BUBBLE

Student loan debt is one of the foremost issues in American politics today, as several 2020 Democratic Presidential candidates made addressing it central parts of their campaigns. However, America’s growing student loan debt is not just an important political issue but a critically important economic one. In Q1 2020 student loan debt stood at an astonishing $1.68 trillion, having more than doubled during the last decade and tripled since 2006.

5 September 30, 2018 to September 30, 2019


The skyrocketing cost of higher education since the government began backing loans created an enormous fiscal problem that could threaten the economic stability of the nation.

Over 45 million Americans owe student loans and they are so prevalent that 69% of college students in the class of 2018 took out loans, graduating with an average debt of about $29,000 (private and federal). Student loans also happen to have the second highest default rate after mortgages, with an 11% default rate. And of the 45 million Americans with these loans and an estimated 11.5% of those are delinquent by 90 days or more or in default. Most worrying is that 85% of those loans were borrowed from the federal government, which is ultimately the taxpayer. So many Americans are worried about repaying their student loans that a growing number are simply packing up and fleeing the country altogether.

Failed 2020 presidential candidates Elizabeth Warren and Bernie Sanders both called for cancelling student debts with differing plans but you simply cannot make that debt disappear into thin air. What may sound good on the campaign trail does not actually translate into practical economics. “Cancelling” the debt simply means that the taxpayer will have to foot the bill thereby expanding the already bloated national debt by over a trillion dollars. Does that sound like a sustainable solution to you? The student loan bubble is just another in a growing list of time bombs threatening the stability of the financial system.

THE AUTO LOAN BUBBLE

A little discussed economic threat is the one posed by the nearly $1.2 trillion in outstanding U.S auto loans in Q1 2020, up a staggering 68% from Q4 2008 . Millions of vehicles are sold in the Republic every year and an estimated 85% of new car purchases and 53% of used, were done through financing in 2018. Auto loans have grown by over 75% since 2009 with approximately 113 million open auto loans in 2018 according to a report by the U.S. PIRG Education Fund and Frontier Group.


The report estimated that an alarming 7 million people are at least three months behind on their automobile payments. And like subprime mortgages, many Americans with low credit scores have been issued subprime auto loans and are now at risk of defaulting. One of the nation's largest subprime auto lenders, Santander Consumer USA Holdings Inc, has seen their auto loans default at the quickest pace since 2008. And like subprime mortgages many of these loans were packaged into bonds and financial instruments. American household debt stood at an eye-watering $14.3 trillion in March 2020, highlighting the financial pressure that many Americans are dealing with; and with over 40million unemployed in May due to the COVID-19 induced government lockdowns, many Americans may choose to prioritize other bills over their car payments which could trigger an economic chain reaction that threatens to bring down the whole house of cards.

6

THE NATIONAL DEBT The size of the national debt has always been of concern to the federal government and the citizenry since the founding of the Republic. In recent decades the issue has been brought to the forefront as the debt ballooned to $23 trillion in Q4 2019, and over $25 trillion by May 2020 due to the COVID-19 monetary policies. The debt doubled during the Obama administration to $19 trillion and a further $4 trillion was added during the first three years of the Trump administration. However, that $25 trillion did not cover the full scale of unfunded liabilities faced by the Republic.

6 https://www.richmondfed.org/publications/research/coronavirus/economic_impact_covid-19_04-16-20

https://www.richmondfed.org/publications/research/coronavirus/economic_impact_covid-19_04-16-20


According to Boston University economics professor Laurence Kotlikoff the actual size of financial obligations including “off-the-book-liabilities” and debt held by the Fed, is an estimated $200 trillion or about ten times the official figures. 2019 government forecasts estimated that medicare and social security are facing a $37 trillion and $13 trillion unfunded liability over the next 75 years respectively. While social security reserves will be depleted by 2034 and medicare hospitalization reserves by 2026. According to forecasts by the Congressional Budget Office (CBO) just the interest payments, social security and medicare will account for all federal tax revenue by 2041. Granted all these are just projections but in the wake of the government lockdowns which decimated tax revenues because thousands of businesses were forced to close, revised projections may prove far worse.

At the state level the numbers were just as alarming. According to the 2020 “Financial State of the Cities” report by the research firm Truth in Accounting (TIA), 63 of the 75 most populous American cities could not meet their liabilities and are broke. That includes San Francisco, Dallas, New York City and Chicago. The total value of unfunded debt for the seventy-five cities was over “$323 billion at the end of the 2018 fiscal year” . Out of that, $176.2 billion is due to pension debt and other post-employment benefits (OPEB) totaled $149.8 billion. Over half of U.S states are considered to be bankrupt and with tax revenues hit hard in the post-corona world, many will require major economic miracles to be able to meet their future obligations.

The republic is bankrupt. Paying back these ludicrous debts is mathematically impossible. All that is left to be determined is the manner in which the inevitable default happens.


GLOBAL BUBBLES BUBBLE PUSHERS Bank of Japan

In Japan where QE programs have been running for decades, the problem of manipulated market prices is even more pronounced. The BOJ is steathlfully propping up the Japanese stock market by buying a record amount of securities that include stocks. The central bank held securities totalling more than $250 billion in 2019. The BOJ is on track to become the top shareholder of Tokyo-Stock-Exchange-listed companies in 2020 and is already the top shareholder in 23% of those companies and within the top ten for nearly half. This is socialism. This is stealth nationalization. This is a bubble that is not going to end well.

The Swiss National Bank

Switzerland has long been a banker haven or redoubt where trillions can be safely parked away from prying eyes and international reach. Home to the central bank of central banks, the Bank of International Settlements, the small mountainous European nation is a major financial centre. The country’s central bank the SNB also happens to be one of the world’s most prolific stock buyers. The bank, like other central banks, prints fiat money out of thin air and uses it to buy assets globally. Since the demand for its currency the Swiss franc is high (especially after it decoupled from the euro in January 2015) the bank is able to convert its francs into foreign currency denominated securities.

While its global securities holdings are not public, its U.S. holdings are via the SEC and the bank has purchased massive amounts of U.S stocks in recent years. In Q3 the SNB held over $94 billion in U.S stocks, up from around $26 billion in Q4 2015. The bank increased its holdings significantly in the wake of President Trump's election and resulting stock market rally, rising from $63 billion in Q4 2016 to $80 billion in Q1 2017, then to $92 billion by Q4 2017; before offloading some as the Fed raised interest rates and increased market uncertainty. In Q1 2020 the bank lost over $39 billion dollars due to the corona-selloff and the franc’s strength, its largest loss in more than a century. The SNB’s stock buying spree undoubtedly contributed to pushing the U.S stock market to greater heights. We wonder what other securities they are holding.


Norwegian Wealth Fund

Scandinavian Norway is a country blessed with an abundance of oil and natural gas and is among the world’s top exporters. As a result of their good economic fortune the country has been able to amass the world’s largest sovereign wealth fund whose holdings stood at over $1.1 trillion in early 2020. The fund is also a major purchaser of global stocks and holds an estimated 1.4 percent of stock worldwide. According to its 2018 annual report the fund held about $230 billion in U.S stocks but signalled in August 2019 that it was looking to increase its U.S holdings by an additional $100 billion. However, in October 2019 Norway withdrew $400 million from the fund for the first time citing no specific reason but a slump in oil prices was speculated to be amongst the causes, as well as preemptive profit taking ahead of a possible market crash. Well, that crash came in late February 2020 and the fund lost $114 billion in Q1 2020 as a result.

THE GREAT BUBBLE OF CHINA The growth of modern day China from a largely poor agrarian nation post World War II to an economic powerhouse and the second largest economy in 2020 was nothing short of astonishing. After the nation opened up to the west in the 1970s its growth rates skyrocketed and it became the industrial centre of the world. The country boasts the planet’s largest labor market and some of the lowest manufacturing costs making it a formidable international force; however that growth came at great cost. The centrally planned economy directed by the Chinese Communist Party (CCP) pumped billions into various state funded projects and schemes aimed at boosting China’s competitiveness in international markets (and the wealth of party insiders no doubt) but this led to the creation of unsustainable bubbles in many industries. China is infamous for its ghost cities as billions were wasted on housing for an unexisting demand. However, its problems are far more serious than a corrupted government contract system.

Like the federal reserve, China’s central bank, the People’s Bank of China (PBOC) printed trillions in recent decades fuelling asset price booms across the board. China’s gross domestic product was an estimated $14-15 trillion in 2019 but its debt-gdp ratio was over 300% and accounted for 15% of the world's total. Its debt-gdp ratio more than doubled from the 2008 financial crisis when it stood at 140%.


China’s over $40 trillion government and household debt is a major cause for concern for its financial stability. The country has recorded high growth rates for several years but these have slowed down significantly in recent years as growth falters under the inefficiency of its centrally planned system, a trade war with Trump’s America and a weakened global economy. In 2007 the country boasted growth rates of around 14%, which cratered to about 6% during 2009 but recovered to around 12% by 2010. Since then the rates fell to about 6.1% in 2019 according to official figures but alternative estimates put that much lower. For a country of China’s size such low growth rates can have a devastating economic effect for millions of people, as productivity slows and jobs disappear.

The ballooning debt levels became an increasing concern to its citizenry and as a result the nation experienced a record capital flight in 2015/16 that saw the government lose a $1 trillion in reserves. In response, the government introduced a raft of capital controls including a $15,400 per year cap on overseas ATM withdrawals to stop panicked citizens from withdrawing their money to more stable foreign shores - a process which would inadvertently threaten the stability of the Chinese financial system.

Due to the PBOC’s gung ho attitude toward money printing, the Chinese banking system is a total mess as several banks have overextended themselves funding every project under the sun. China in 2019 was home to the world’s four largest banks with assets of more than $3 trillion each, that accounted for roughly a third of the nation’s $40 trillion financial system. As growth slowed and the debt ballooned, cracks began to appear in the banking system as more than 13% of banks in 2019 were deemed “high risk” by the PBOC, while over half failed its stress test, representing some $20 trillion dollars. The shadow banking sector alone was estimated by the PBOC to have an additional $37 trillion worth of debt.

In May 2019, the Chinese government took over an insolvent bank for the first time, when the 50th largest bank Baoshang Bank was nationalized. This was followed shortly in July by the bailout of the even larger Bank of Jinzhou. And by August a third bank, the Heng Feng Bank, double the size of the Bank of Jinzhou, was taken over by the government. With the PBOC warning that over 500 banks are in the high risk category, China’s banking system is being closely monitored for signs of a breaking point.

These figures, as alarming as they are, represent the official data and may in reality be much worse than the famously secretive Chinese communist party is letting on. The effect of the coronavirus pandemic, which will be covered in part 4 of this book, will further shed light on the great risks the unsustainable Chinese economy poses to the global financial system.


THE RISE OF THE ZOMBIE COMPANIES

“What is a zombie company? It is — in the BIS definition — a listed firm, with ten years or more of existence, where the ratio of EBIT (earnings before interest and taxes) relative

to interest expense is lower than one. In essence, a company that merely survives due to the constant

refinancing of its debt and, despite re-structuring and low rates, is still unable to cover its interest expense with

operating profits, let alone repay the principal.”

Daniel Lacalle of the Mises Institute

A July 2017 Bank of America Merrill Lynch report recorded that “9% of non-financial companies in Europe (by market cap of Stoxx 600) are zombies” and were essentially being kept on monetary life support by the corporate sector purchase program (CSPP) which was integrated into the ECB's quantitative easing program that ended its net purchasing phase in December 2018.


A September 2018 report published by the BIS reported that zombie companies made 12% of firms listed on stock exchanges in fourteen advanced economies7 and as much as 16% in the U.S. While, the BIS Annual Report (June 2019) stated that around 6% of non-listed financial firms are Zombies and that they “sap economy-wide productivity growth not only by being less productive themselves, but also because they crowd out resources available to more productive firms”.

These zombie firms are littering the economy and are being kept alive by central bank policies. A vibrant economy can not be sustained with such parasitic companies siphoning off valuable finite resources. Recessions allow the dead weight of the economy to be excised from the host, enabling productive firms to flourish. The low rates and cheap money proliferated by the Fed since the financial crisis fueled a gargantuan rise in the amount of outstanding U.S. corporate debt, that almost doubled to $6.5 trillion in Q4 2019 from $3.4 trillion in Q1 2008. Alarmingly, according to a 2020 report by Arbor Data Science, zombie firms were responsible for more than 2.2 million jobs in an America already reeling from tens of millions in coronacrisis related job losses, making the scenario even more dire.

The modern QE environment where governments try to stem off recessions with helicopter money, will eventually lead to a point where “cure” kills the patient, as they continue to target the symptoms and not the underlying problems.

GLOBAL BOND BUBBLE “After falling in the initial recovery from the Great Recession, corporate debt to GDP has increased to its highest level in fifty years…

…An economy with 50 percent highly levered companies and 50 percent unlevered companies has the same aggregate leverage as an economy with 100 percent companies at a medium leverage level, but is likely more vulnerable to a negative shock.”

The New York Fed, May 29th 2019

According to the Bank of International Settlements (BIS) at end-December 2019 the outstanding amount of Total Debt Securities (TDS) was $115 trillion dollars, with general governments and financial corporations accounting for $54 trillion and $44 trillion dollars respectively; and this while interest rates are low in many regions and even negative in Japan and several European nations. The U.S. alone accounted for over $40 trillion, while China and Japan hovered between $12-13 trillion. Nations are piling on debt at astonishing levels. In Europe new bond sales for 2019 surpassed $1.42 trillion in early November 2019.

7 Australia, Belgium, Canada, Denmark, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States.


And according to a 2020 Deutsche Bank report there were $11.4 trillion worth of government bonds trading at negative yields globally, having peaked at $17 trillion in 2019. They estimated that they accounted for roughly19% of the market and had actually doubled since October 2018. Governments like Austria and Argentina even launched 100-year bonds in 2017 to high demand. Now, while we cannot begin to predict what the state of the world would be like in 2117 but the idea that a nation like Argentina which has defaulted multiple times in just the last few decades (and again in 2020), will come through unscathed seems more than a bit far fetched.

The global bond bubble’s growth was so alarming that in their October 2019 ‘Global Financial Stability Report’ the IMF warned that the bubble was a threat to the global financial system. They estimated that in the event of a global economic slowdown about $7.6 trillion of debt owed by companies would be at the risk of default. Former Congressman from Texas Ron Paul concurred and called it the “biggest bond bubble in history” and warned that it would burst. The head of J.P Morgan, America’s largest bank, Jamie Dimon also went on record stating that the bubble in government bonds was fuelled by negative interest rates and that it would not “end well”.

THE GLOBAL DERIVATIVES BUBBLE

“We try to be alert to any sort of megacatastrophe risk, and that posture may make us unduly apprehensive about

the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized

receivables that are growing alongside. In my view, derivatives are financial weapons of mass destruction,

carrying dangers that, while now latent, are potentially lethal.”

Warren Buffet in Berkshire Hathaway ́s 2002 annual report

The Global Derivatives Market

The Bank of International Settlements (BIS) is the central bank of central banks and it sits atop the global financial system. According to the bank's latest report on the global OTC derivatives market,8 the notional outstanding amount of all OTC derivatives contracts stood at $559 trillion at end-December 2019, down from $640 trillion at end-June 2019.

8 updated 7th May 2020


From June to December the bank estimated the gross market value of OTC derivatives fell from $12.1 trillion to $11.6 trillion. Some financial analysts dispute the banks ́ assessments. Jeffrey Gundlach and Paul Wilmott for one, estimate that the true size of the global derivatives market to be significantly north of one quadrillion (one thousand trillion) dollars.

25 Largest U.S. Banks ́ Exposure to Derivatives

The “too big to fail” banks that were at the centre of the 2007-08 financial crisis have grown even larger and more reckless than before. Many will say they have learnt nothing from their previous “mistakes” but on the contrary, they learnt how to secure more wealth and power from engineered failures. Before the financial crisis began to unravel the top 25 U.S. commercial banks and trust companies collectively had nearly $180 trillion of exposure to derivatives contracts in Q1 2008. Fast forward to Q2 2019 and that number stood at just over $228 trillion according to figures from the U.S. Office of the Comptroller of Currency ́s (OCC). That's right, in the intervening years the top banks did not reduce their exposure to the dangerous financial instruments that nearly brought down the world economy but actually increased it by over $48 trillion! The total exposure of just these banks is several times the size of the US economy! Does that sound like a sustainable system to you?!

The “experts” on Wall Street will claim that the complexity of the derivatives market is far too great for regulatory oversight, let alone the average Joe to understand and so they should be left to their own devices; but you ́d be a fool to believe them.

The following table illustrates the complete insanity of the top six megabanks ́ exposure.

Holding Company Total Assets (millions)

Total Derivatives (millions) TD/TA

1 JP Morgan Chase & Co. 2,687,379 46,449,106 17.28

2 Citigroup Inc. 1,951,158 40,820,866 20.92

3 Goldman Sachs Group Inc, The 992,996 39,556,430 39.84

4 Bank of America Corporation 895,429 32,513,056 36.31

5 Morgan Stanley 2,434,079 30,395,057 12.49

6 Wells Fargo & Company 1,927,555 12,364,212 6.41


You may be asking yourself why would the bankers be so brazen as to double down on their derivatives investments? Surely, they don't expect the American taxpayer to foot the bill for another round crippling bailouts if these instruments go belly up again, do they? Well, that's exactly what they expect to happen when that day inevitably comes. In fact they guaranteed it. In December 2014 the U.S House of Congress passed a last-hour Omnibus spending bill amid the threat of a government shutdown, that was signed into law by President Obama. The bill quietly stripped a key provision of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act that prohibited the federal government from bailing out derivatives instruments. Without this shield the taxpayer had been put in the direct firing line of future derivatives financial storms. The megabanks reap the gargantuan profits on these investments while the losses are shunted onto the public. With a business model like that it really shouldn't be a surprise that the derivatives bubble had surpassed pre-crisis levels.

Deutsche Bank ́s €37 Trillion Derivatives Problem

It's not just US banks that have massive exposure to derivatives instruments. Germany's largest bank, Deutsche Bank has around €37 trillion of exposure to derivatives contracts according to its 2019 balance sheet. That ranks it fourth behind the holding companies of JP Morgan Chase, CitiGroup and Goldman Sachs. The bank had assets worth only about €1.3 trillion and business had not been going well in recent years. The bank had been in decline since the financial crisis but the trend intensified with the bank ́s stock plunging over 80% from 2014-19. The bank underwent multiple changes in leadership during this period and endured a continual and intensifying savaging in the financial press. The bank also faced a wave of legal troubles. The most recent saw the bank settle a charge of laundering hundreds of millions of dollars that resulted in their headquarters getting raided in November 2019. In typical megabank fashion they paid a tiny $16.6 million fine and no bankers saw any jail time.

The struggling bank began merger talks with German´s second largest bank, Commerzbank but the talks collapsed in early 2019. In June 2019, the bank began a series of layoffs worldwide that they estimate will cut as many as 20,000 of its 91,500 staff by 2022 in the planned restructuring. July 2019, financial reports claimed the bank was looking to sell off some of their unwanted assets and were struggling to find buyers, but more critically was that several of their clients were pulling out their capital at alarming rates, sparking fears of a run on the bank. In November 2019, the bank managed to offload $51 billion of unwanted financial securities to Goldman Sachs as their leadership continued to grow increasingly desperate to shed bad debt off their books. Unsurprisingly, top executives and talent have been fleeing the sinking ship for its more stable rivals and as a result the leadership is aiming to use competitive bonus packages to arrest the turnover.


The bank lost over 5 billion euros in 2019, citing its restructuring but in light of difficult financial times decided to cut its bonus pool of about $2 billion by only 30%. As the bankers rewarded themselves for their spectacular losses, analysts grew ever more concerned about the bank’s stability and the possible repercussions for the global financial system. A 2016 IMF report called the bank “the most important net contributor to systemic risks, followed by HSBC and Credit Suisse” and a threat to the stability of the global financial system. In the intervening years the bank performed even worse and in the wake of the coronacrisis may be spiralling towards ruin. Due to the interconnectedness of the world economy and the financial system, the failure of a bank as integral as Deutsche Bank could have the ability to dwarf the shock to the system that was the collapse of Lehman Brothers.

IMF ́s Risk Assessment of Deutsche Bank


PART 4: BLACK BAT OR BLACK SWAN? “A black swan is an unpredictable event that is beyond

what is normally expected of a situation and has potentially severe consequences. Black swan events are

characterized by their extreme rarity, their severe impact, and the widespread insistence they were obvious in

hindsight.”

Jim Chappelow writing for Investopedia


CHINA IN A BULL SHOP ORIGINS In November 2019, the first reports of the COVID-19 strain of the coronavirus were reported in Wuhan, China and the virus spread rapidly through the 11 million-person city. December saw thousands of cases as the pneumonia-type virus disseminated through the population, hospitalizing and eventually killing thousands. The bustling transit hub that was Wuhan became a perfect vector for the virus that quickly spread within China and around the globe. On 23rd January 2020, the Chinese Government lockdowned Wuhan in an attempt to arrest the spread of the virus, setting a precedent which would be followed by other nations with tumultuous results. 30th January saw the World Health Organization (WHO) declare a global emergency which put many nations on high alert. Following the WHO pronouncement the Trump administration barred entry to foreign nationals who had traveled within China in the previous fortnight. The global pandemic had begun.

PATIENT ZERO China stands a global manufacturing giant and a major international trading hub. The lockdown measures initiated by the Chinese Communist Party (CCP) caused the shuttering of millions of businesses which resulted in severe disruptions in global supply chains across many industries. Chinese manufacturing figures reached record lows in February as significant numbers of the workforce retreated into their homes. The shockwaves in global trade were felt worldwide as Chinese port operations fell by nearly half and over a billion dollars per month was lost in shipping revenue. According to official statistics industrial output fell by 13.5% in January-February from 2019, recording the first contraction in three decades.With large segments of the population lockdowned and unable to work, earn and spend as normal, retail sales fell 20.5% as the saving-conscious nation struggled to adapt to the new realities. Private sector investment also took a severe blow falling 26.4%, while year-over-year (YoY) fixed asset investment plunged some 24.5%. According to former deputy managing director of the IMF, Zhu Min, the cost to the economy in just January-February was an estimated $196 billion.


Facing an economic crisis the CCP enacted a raft of measures to counter the pandemic's brutal effects. The lockdown effects began to be felt in the Chinese markets at the start of February as the Chinese Securities Index (CSI) 300 plunged 7.9% in a single day and further deteriorated before experiencing wild swings in March as the PBOC injected trillions into the system to arrest a crash. The central bank first announced a $1.2 trillion yuan injection and began pumping billions into money markets and the crumbling banking system. The PBOC slashed interest rates from 4.15% in February to a record low of 3.85% by May as the central bank attempted to soften the economic blows caused by the pandemic. In addition a raft of emergency measures were instituted by the CCP to calm the brewing storm which included permitting local governments to sell billions in bonds, relaxing bank loan regulations and extending debt repayment schedules.

The extreme measures taken by the CCP proved enough to rescue the markets which were able to regain much of their pandemic-induced losses but the economic damage done to the real economy was widespread and severe. By March China had flooded its economy with over 5 trillion yuan in credit as the lockdowns were lifted but its economy contracted by a massive 6.8% in the first quarter, registering its first contraction since 1992. According to official data more than 460,000 businesses shuttered permanently during this period and new business registrations dropped 29% from 2019. Prior to the pandemic the CCP had publicly expressed concern about the unemployment rate (5.2%) as economic growth slowed coming off a trade war with Trump’s America. In the wake of the coronacrisis millions suddenly found themselves unemployed as the official statistics put the rate at a record high of 6.2% in March equating to approximately 5 million additional unemployed. However, alternative estimates put the figure of people who want to work but are unable to, as high as 205 million or over 25% of the nation’s workforce. Whatever the accurate figures out of China were, the crisis bore a heavy toll.

CONTAGION The economic troubles wrought by the Chinese lockdowns soon spread across the planet as the panic spread to foreign markets before initiating the greatest global economic sell-off to date. The American markets entered 2020 on a remarkable 10-year bull run, the Dow Jones reaching a record 29,551 points on February 12th. The Trump administration began the barring and screening foreign nationals at the end of January before the virus had taken real hold in the Republic. February saw COVID-19 infections spread across Europe and the US as the number of confirmed cases worldwide surpassed 85,000 by month’s end. As fear gripped the global populace, many governments followed China’s example and began lockdowning affected cities, regions and eventually entire countries. At month’s end US markets were near record highs but the pandemic fear had finally taken hold and there was a stampede to the exits.


The last week of February saw the Dow Jones crash from nearly 28,000 points to 25,409.36 at close on February 28th, recording its worst week since 2008 including the largest single day drop to the date of 1,100 points. The more than 12% decline for the week put the market into correction territory, stoking fears in global markets that had also experienced widespread sell-offs. Then on March 3rd the Fed made an unscheduled emergency interest rate cut9 of 0.5% to 1.25% exacerbating the fear of another crisis. What followed was an extremely volatile week, with the wild swings in U.S equity markets and the Dow recording 1,000 point intraday rallies and declines to close at 25,864 points on the 6th. The volatility stretched into week two which opened with a catastrophic 2,013 point drop on “Black Monday” smashing the previous record of 1,190 set just days before on 27th Feburary. The declines were so severe that they triggered a number of “circuit breakers” that are meant to prevent market crashes and arrest panic selling. Global stock markets were also battered, the UK’s FTSE 100 falling 7.7%, Italy’s MIB (11.2%), France’s CAC 40 (8.4%), Australia’s ASX 200 (7.3%), Germany’s Dax (7.9%), Japan’s NIkkei 225 (5.1%) and China’s CSI 300 (3%).

As fear gripped global markets the Fed cut interest rates again to zero on the 15th and the March madness continued until the Dow plummeted to 18,591 points by the 23rd, representing over $11.5 trillion in U.S equities losses, wiping out all the gains of the Trump presidency.

9 Its first since 2008


In just one month the Dow fell over 35% breaking the record of its quickest decline set during the Great Depression. Global stocks were similarly decimated and were estimated to have lost over $16 trillion in value. With the global financial system experiencing turmoil surpassing the last crisis the major central banks and their governments launched programs to arrest the slide that would dwarf the measures put in place during the last crisis. With the U.S. equity markets in freefall and the Fed having already ineffectively and incompetently cut its interest rate to zero, launched QE5.

QETERNITY Q5 On 15th March the Fed launched QE5 composed of $500 billion in treasury purchases and $200 billion in MBS for a grand total of “at least” $700 billion. The central bank also loosened bank capital requirements to enable banks to dip into their emergency buffer fund. The 17th saw the creation of a Commercial Paper Funding Facility (CPFF) to enable the Fed to buy corporate debt which according to Treasury Secretary Steven Mnuchin could reach as high as $1 trillion. The existing currency swap lines with the central banks of the world were also expanded to unlimited to address the massive demand for the dollar worldwide, sending the currency to record highs.

By the 23rd the Fed had already spent $337 billion of its $700 billion QE program and the Dow had closed on its year low of 18,591 after losing over 4,500 points since the launch of QE5 on the 15th. Fearing a catastrophic collapse of the deteriorating market the Fed launched a variety of measures aimed to “support smooth market functioning”. These included expanding QE5 to include purchases of commercial MBS; creating three new emergencing lending facilities in conjunction with the Treasury Department, to provide $300 billion in liquidity for corporations; and expanding the type of securities that could be purchased under their other programs. The central bank had gone into overdrive.


The markets responded to the Fed’s unprecedented intervention, with the Dow rallying and closing the week on the 27th over 3,000 points higher at 21,636. The volatility in the markets continued unabated and so did the Fed’s expansion of existing programs, loosening of banking regulations and creation of new lending facilities under the newly passed Coronavirus Aid, Relief, and Economic Security (CARES) Act. With the Fed and the Treasury committing trillions of taxpayer backed fiat into the collapsing financial system the markets began to steadily recover with the Dow breaking the 25,000 point mark in late May, regaining over half its pre-corona value.

The Fed in the interim with its multitude of QE programs had expanded its balance sheet at breathtaking speed from nearly $4.2 trillion in late February to over $7 trillion in late May. In just a few weeks QE5 had expanded the Fed’s balance sheet by nearly $3 trillion, something which QE1 & QE2 combined took five years to accomplish. The Fed purchases reached as high as $125 billion per day late March, crushing what had been spent in a whole month in post-2008 Fed programs. The new era had shouldered guartuguan burdens on the American taxpayer once again, many of whom found themselves unemployed and in the need of a bailout of their own.

BAILOUTS AND THE FISCAL CLIFF The collapse of global markets had rattled governments the world over and none more so than the Trump administration. The illusory prosperity of the inflationary boom years was suddenly eviscerated exposing heavily indebted megacorporations (many of which had spent years and billions manipulating their own stock with buybacks) reeling and on the edge of collapse. With governmental lockdowns in place across large swaths of the Republic, normal business activity for many industries plummeted and revenues did likewise, exposing the most leveraged firms to peril. The Trump administration fearing the sudden disappearance of the “greatest economy” their head had been so vehemently promoting during his tenure scrambled to rescue failing businesses falling prey to the new perilous economic times.

The result was the largest bailout bill in American history in the form of the CARES Act. This $2 trillion bill ($6 trillion when combined with the Fed interventions) represented a comprehensive rescue of massive segments of the American economy from the largest multinationationals to the individual American taxpayer, a first in the Republic’s long history. The bill included approximately $500 billion in financial assistance for major corporations, in addition to cities and states hit the hardest financially by the pandemic. The airline industry which had ground to a halt under travel restrictions was allocated $62 billion alone. $350 billion was set aside for small businesses through the Small Business Administration (SBA) and $1,200 each in direct payments for low to middle-income Americans, with an additional $500 per child.


Unemployment insurance payments were also increased by $600 per week, in addition to the existing state benefits. While roughly $117 billion was to go directly to hospitals to soften the financial impact of additional expected virus-related care.

The massive pandemic package had once again bailed out failing multinationals who had continued their fraudulent and reckless behaviour having learnt from 2008 that the government and private Fed will come to the rescue when the music stops. Government lockdowns had forced thousands of businesses to shutter and as a result we saw not just Wall Street but Main Street get a bailout. But predictably it was a mere fraction of what was given to Wall Street and the funds had to go through the parasitic megabanks before reaching their intended destinations. And to no one's surprise the process was rife with fraud and inefficiency.

The SBA loans interest rates were set at 1% in comparison to the 0% rate the megabanks could borrow from the Fed and were guaranteed by the federal government eliminating the risk to banks.And out of the gates the program was wrought with problems as the megabanks loaned capital meant for small businesses to their larger (and in some cases public) commercial clients first, drying up funds for those who required them the most. Then several of the small businesses that were approved for the loans had to wait weeks before they even received the funds creating a cash flow crisis. The megabanks, hedge funds and multinationals had once again been awarded with trillions while main street was forced to scrounge for scraps to keep the real crumbling American economy afloat.

Just as the last crisis empowered and enlarged the megabanks, the new crisis had done the same with JPMorgan Chase, Wells Fargo and Bank of America issuing more than $1 trillion in loans each for the first time. And unlike the last crisis which had people and companies terrified of the stability of the banking system, capital rushed into the banks in Q1 2020 with over $1 trillion deposited and over half in megabanks JPMorgan, Citigroup, Bank of America and Wells Fargo. A crisis had once again proved a boon for the financial elite, growing their wealth and power. US billionaires alone by late May had seen their fortunes grow by $434 billion since March 18th, with Jeff Bezos, Bill Gates, Mark Zuckerberg, Warren Buffett and Larry Elison accounting for 21% of total growth of the six hundred billionaires. While the financial elite feasted in their ivory towers the Republic’s economy was decimated leaving destruction not seen since the Great Depression.


THE GREATER DEPRESSION

The months following the virus outbreak will go down as one of the most spectacular periods in the Republic’s history and for all the wrong reasons. Since the government travel restrictions and lockdown measures began in January and March respectively, over 40 million Americans filed for unemployment benefits by late May, while just over 100,000 were reported to have succumbed to COVID-19. Thousands of businesses shuttered, sending the unofficial unemployment rate over 25%, while the number not in the labour force rose terrifyingly to over 103 million in April. The figures were nothing short of catastrophic. Staffing firms, entertainment, hospitality and sit-down restaurants were particularly hard hit. Not even during the depths of the Great Depression or World War II did the Republic experience such unemployment with the destitution merely masked with trillions in fiat bailouts.

In scenes reminiscent of the Depressionary era, America saw the breakout of massive “breadlines” across the nation as thousands lined up to receive foodstuffs as incomes evaporated in the post-virus world. With business activity ground to a halt, missed mortgage and rental payments skyrocketed and Congress was compelled to put a provision in the CARES Act that offered a moratorium on eviction and late fees for borrowers with federally backed mortgage loans. The coronacrisis had many rethinking their financial priorities so unsurprisingly subprime auto lenders reported steep increases in missed payments, with major lender Ally Financial reporting that a quarter of its auto-loan clients registered for its payment-deferral program.


Due to the economic turmoil many financially pressured Americans were forced to draw on their credit lines and as a result we saw total household debt rise by $155 billion in Q1 2020 to $14.3 trillion.

According to a survey conducted in early May for the National Bureau for Economic Research (NPER) an estimated 100,000 small businesses had closed permanently due to the crisis. While an April survey conducted by Main Street America forecasted that 3.5 million small businesses were at risk of permanently closing if the economic conditions did not improve. The crisis had already forced the bankruptcies of household names like J.Crew and car rental firm Hertz which made national headlines, but millions of small businesses may die off just the same without fanfare.

In May many lockdowned states began the process of reopening the economy and returning to the path of prosperity; however, the Republic bore wounds one might expect after a major war and the road to recovery may be not as surmountable as the corporate media would have us believe.

RETURN TO NORMALCY? BULL TRAP?

For centuries the banking cartels have artificially inflated and deflated asset bubbles, making a killing with strategic exits and entries - and this time proved no different. At the end of Q3 2019 when markets were reaching the tailend of a ten-year bull run, insider stock sales rose to its highest levels since the heights of

the dot-com bubble in 2000. Corporate executives and board members, among others, offloaded $19 billion worth of stock with much of it purchased by their own companies through stock buyback schemes. For the year an estimated $29 billion was offloaded. Interestingly 2019 which was a booming year for markets and corporate profits, saw an astonishing 1,640 CEOs leave their posts, far surpassing 2008 which recorded 1,484 departures when the Republic was in the midst of a financial crisis. January 2020 alone saw another 219 CEO’s abandon ship when markets were setting record highs. Did they know something we didn’t? We can only speculate but they sure picked a convenient time to jump ship.


Following the crash and the unprecedented central bank and federal government interventions, the market roared back and regained half its pre-crash losses by May but were the good times back? Well, perhaps for the corporate insiders who conveniently “bought the dip” and piled back into stocks during the March bloodbath, racking up $1.2 billion in stock purchases that month. But as the stocks rallied in the following weeks many were not convinced of the markets vitality and we saw the “smart money” of the 1% take the opportunity to dump stocks on the bottom 90% or retail investors who had flooded the markets since the lockdowns began and were aggressively “buying the dip”. Perhaps, the record trillions in liquidity pumped out by the Fed may be enough to keep the market afloat but eventually the music will stop and the “smart money” don’t plan to be left holding the bag when it does. Unsurprisingly, due to the colossal damage done to the Republic’s economy, the forward earning projections for the largest public companies predictably plummeted and when compared with their stock prices in April, their stocks were just as expensive as when the market was at all-time highs in February.

REOPENING While Wall Street was showered with trillions in taxpayer backed bailouts, Main Street struggled to regain its feet after being plunged into the depths of depression within just a few short weeks. As America began to gradually reopen its crippled economy, the Republic had seemingly awakened to a whole new reality. Over 40 million Americans filed for unemployment and thousands of businesses had shuttered permanently. And as small businesses began to reopen their stores after being deemed “non-essential” by their government, many found that some of their employees refused to return due to the generous stipends granted to them under the CARES Act. The additional $600/week on top of state unemployment benefits, enabled tens of thousands workers to earn more staying at home, especially in states that had far lower minimum wages and unemployment benefits. A $600/week salary alone translates to $31,200 per year, without the existing state benefits. Which would be fine except according to the Social Security Administration (SSA) half of American workers earned less than $33,000 per year in 2018. In satirical fashion the businesses that the federal government claimed to be helping were being hamstrung by the very same government that was essentially bribing their staff not to return work and thereby threatening their very survival.

As the over 30 million small businesses that employed nearly half the nation’s private workforce in 2018 struggled to survive, the average American worker had been devastated by the coronacrisis. According to surveys by the Mortgage Bankers Association (MBA) between March 2nd and May 17th the percentage of homeowners missing mortgage payments skyrocketed from 0.25% to 8.36%, representing an over four million increase.


April forecasts by CoreLogic predicted that depending on the severity of the unemployment crisis, we could see between 1 and 5.5 million homeowners falling behind 90 days or more on their mortgages. And if 2008 is anything to go by, millions of mortgages possibly defaulting does not bode well for the economy. However, it is just not mortgages that are at risk of default but commercial loans and corporate debt are in the crosshairs. According to analysis from Moody’s and Goldman Sachs, the Republic expects to be flooded with a wave of bankruptcies in the 2nd half of 2020 and beyond.

As for the student debt-ridden college graduates and the next generation, they were preparing to enter the worst job market since the 2007-08 global financial crisis, while the dust was far from settled and the worst yet to come.

POST-MORTEM DEBTOR NATION The devastating economic effects of the coronacrisis have impacted the American economy so greatly that it may take several years for the full extent of damage to manifest and be assessed. US Real GDP cratered from 2.1% in Q4 2019 to -5.0% in Q1 2020 according to the Bureau of Economic Analysis (BEU), the worst quarter since Q4 2008. May 2020 forecasts by Deutsche Bank saw the GDP shrinking by a whopping 40% in Q2 and 8% for the entire year. Goldman Sachs meanwhile, similarly predicted a 39% decline in Q2, while the Atlanta Fed put their estimates at a 42.8% decline. But as the Republic’s economy contracted at an alarming pace, its debt expanded at outright terrifying speeds.

Entering 2020 the Republic’s debt stood at just over $23 trillion and by May it had skyrocketed to over $25 trillion as the treasury and the Fed unleashed unprecedented amounts of liquidity into the system. America’s debt burdens were already untenable before the crisis but in its wake the Republic’s taxpayers and their progeny will likely be engulfed by the fiat tsunami waves crashing upon their shores. Megabank Goldman Sachs estimated that the Republic would need to sell $4 trillion in debt in 2020 alone to cover its deficits, representing a more than 300% increase from 2019. According to the ‘Committee for a Responsible Federal Budget’ US public debt is on track to eclipse the size of the economy by Q4 2021 and exceed the record set after WWII by 2023 - estimates the group warned were conservative. The Fed’s balance sheet meanwhile was projected to grow to an astonishing $12 trillion by the Q4 2021 according to Morgan Stanley’s chief economist, completely blowing all previous QE programs (combined) out of the water. In the interim the Fed pledged in April to keep interest rates near zero until the Republic regains full employment and a 2% inflation target. Will they renege on their pledge and set negative rates as they did in Europe? Time will tell but putting faith in pledges made by the private banking cartels has historically been a losing proposition.


The US is a debtor nation that is on a collision course with the fundamentals of economics. Their total debts are unsustainable. Unpayable. Unthinkable. The coronacrisis wiped out over 40 million jobs in a few weeks, when only 22 million were created in the previous decade. The millions of income earning taxpayers needed to keep Uncle Sam’s head above the fraudulent debt waters are being wiped out thereby hastening the Republic’s demise. Instead of exorcising the rigged economy and letting the dead weight and zombies die out, trillions in taxpayer backed bailouts were once again awarded to the private megabanks that had inflated asset bubbles at the centre of the crisis. Now the bursting bubbles triggered by the corona panic threaten to irrevocably impoverish the taxpayer their entire fraudulent system was built upon.

A WORLD IN DESCENT The coronacrisis wreaked absolute havoc on the world economy. According to a May 2020 report by the Asian Development Bank (ADB) the hit to global GDP for the year could be high as $8.8 trillion or nearly 10%. The UN estimated that GDP growth in developed nations would fall to -5% and to -0.7% in developing nations; while world trade was expected to plunge by almost 15%. Global retail was expected to fare just as badly with a Forrester report putting the total sales losses at $2.1 trillion or a -9.6% decline from 2019 and could take up to four years to recover. In response central banks injected record liquidity into the global financial system in the form of QE asset purchases that could top $6 trillion by end-2020 according to Fitch Ratings.

Before the coronacrisis Europe was already on shaky economic ground, recording stagnant growth and its economic heart Germany was on course for recession. The crisis so ravaged the continent that in early May the European Commissioner of the Economy Paolo Gentiloni, warned that the EU had entered the “deepest economic recession in its history”. Shortly after the European Commission released its spring economic forecasts predicting that the EU’s collective GDP growth was on track to plunge to -7.4% in 2020. In response to the crisis the ECB launched a new QE program on March 18th dubbed the Pandemic Emergency Purchase Programme (PEPP), giving the bank leave to buy up to €750 billion in public and private securities by year’s end. The ECB’s council also proclaimed that if necessary it could increase its purchases “by as much as necessary and for as long as needed”, leaving the door open to QE Infinity. This could see the ECB’s balance sheet topping €6 trillion by end-2020. Then May saw the bank stealthily cut interest rates for banks even lower from 0.5% to -1.0%, while the EU unveiled a planned €2.4 trillion stimulus package to rescue the sinking continent with the details set to be finalised in late June.

With most of the west set to collapse into a debt blackhole, the Japanese who had pioneered modern QE were not to be outdone and the BOJ obliged by expanding their programs QE to unlimited, joining the race to the bottom.


While the private banking cartels looted with aplomb the global populace as per usual faced the full brunt of the crisis. March and April reports by the International Labour Organization (ILO) estimated global labour income losses could reach $3.4 trillion in 2020 and that 1.6 billion people or nearly half the world's workforce were in danger of losing their livelihoods. While a May study by the Boston Consulting Group (BCG) put the figure at closer to 2 billion. ILO estimates that the equivalent of 130 million full-time jobs were lost in Q1 and was expected to rise to 305 million in Q2. India alone saw more than 122 million job losses in just the month of April. The loss of income would inevitably lead to increased poverty levels with charity firm Oxfam forecasting that around 548 million people would be pushed under the World Bank’s poverty line of $5.50-a-day in income. The UN estimated that $2.5 trillion would be required to support the developing economies through the crisis while the IMF reported in April that over one hundred governments had already requested emergency bailouts.

While many of the aforementioned figures are projections, even with more conservative estimates one could say the coronacrisis may prove catastrophic to our civilization and still be considered an understatement. It may prove apocalyptic. According to an April 2020 UN World Food Programme report around 265 million people globally could face acute hunger by year’s end, more than double 2019, while COVD-29 deaths stood just shy of 375K at end-May. The executive director of the programme David Beasly, described the possible famine as a “humanitarian and food catastrophe” and “biblical” in proportion. Whether the lockdown mania was necessary to halt the spread of the virus or not, the economic and social price paid was dire; and coincidentally or not, the neo-feudalistic endgame of the financial elite had finally begun to come into view.


PART 5: SOUNDING THE ALARM “It's going to be worse than anything we've seen and a lot

of institutions, people, companies even countries, certainly governments and maybe even countries are

going to disappear”

Jim Rogers, Co-founder of the Quantum Fund, on the next financial crisis

RECESSION FORECASTS THE WRITING ON THE WALL The uninformed or ardent followers of the corporate media may have been led to believe that the economic destruction caused by the coronacrisis was solely due to COVID-19 and the resulting lockdowns. It wasn’t. They were but the trigger for a crisis that had been building for over a decade, ever since the issues that caused the 2007-08 financial crisis were not addressed but papered over with fiat trillions which merely masked the rotten foundation the Republic and world’s economy was built upon. The banking cartel’s modus operandi for centuries has been the artificial manipulation of the business cycle in order to consolidate a target economy under their control. Since the last crisis the megabanks have grossly inflated asset bubbles globally to prime them for an earth shattering crash that would allow them to further absorb the real wealth of the planet into their offshore corporate combines. What we witnessed during the coronacrisis was the inevitable outcome of decades-old policies of a criminal international cartel hellbent on creating a “world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole” as their instrument Prof. Carroll Quigley once wrote. And with this latest crisis one should not focus on the trigger which could just as easily have been something else but on the root causes of the problem. The writing had been on the wall for sometime and there were many voicing concerns before the majority of us had ever heard of the city of Wuhan. In the following chapter we shall highlight a few warning signs that appeared on the road to Wuhan.


THE MEGABANKS

Morgan Stanley

In June 2019, the bank sounded the alarm to its clients warning of a coming downturn in the US stock market and that the bank had assumed a “defensive” posture in regard to the share of US equities in its portfolio. In August, they went further when their chief economist Chetan Ahnya, warned their clients that the risk of another global recession was “high and rising”.

J.P. Morgan Chase

In September 2018, top analysts at the megabank were already warning of a coming financial crisis going as far as predicting that it would hit in 2020. One of their analysts specifically predicted that the trigger could be caused by “flash crashes” or quick stock dumping by automated trading systems commonly known as “algos”. Going into 2019 the bank’s Asset Management team adopted a “cautious” strategy on domestic and foreign stocks citing a predicted slowdown in global economic growth. And back in 2018 the bank’s co-president Daniel Pinto predicted that the next crisis could hit within five years and see equity markets fall by up to 40% .


The World Bank

In 2018 the World Bank warned that the ongoing U.S-China trade war would slow economic trade and growth which could trigger another global financial crisis. Then in a 2019 report titled ‘Global Waves of Debt: Causes and Consequences' the bank warned that the current rise in national debts significantly exceeded the pre-crisis levels of past financial crises and posed a far greater risk.

The IMF

In their 2018 Global Financial Stability Report the IMF warned of rising threats to the global financial system and the untenable positions central banks were in to deal with a crisis having already deployed very low or negative interest rates. In April 2019, the IMF took aim at world governments, warning them to get their exploding public debts levels under control before the start of the next global financial crisis. In their 2019 Global Financial Stability Report they predicted that if the next crisis was only half as bad as the previous one then $19 trillion of corporate debt owed by zombie companies could be at risk. Finally, in the early days of 2020 the head of the IMF Kristalina Georgieva, warned that the world economy was veering toward another Great Depression, comparing the current state of the world to the “roaring 1920s” that preceded the 1929 stock market crash and global depression.

The Bank of International Settlements (BIS)

The central bank that sits at the top of the global financial system warned as far back as 2017 that the next financial crisis would unfold “with a vengeance” citing building risks in emerging markets, particularly in China. In August 2018, the head of the BIS Agustin Carstens, in a speech pointed to the U.S-China trade war as a potential source of financial turmoil, warning that protectionist measures would “unsettle financial markets” and amplify market risks possibly “creating a perfect storm” for the world economy. In their September 2019 Quarterly Review the bank again warned of a brewing crisis citing $17 trillion in negative-yielding sovereign and corporate bonds exacerbated by negative interest rate policies. The bank’s head of the Monetary and Economic Department Claudio Borio, highlighted the absurdity of an economic environment where investors were willing to pay for negative-yielding bonds and called it “vaguely troubling when the unthinkable becomes routine”.

The most important megabank in the world which coordinates policies with all the member national central banks had been warning of a global financial crisis far more damaging than 2007-2008. No doubt they were in a good position to assess the situation seeing as the bankers that stroll their halls are the chief engineers of humanity’s current predicament.


ANALYSTS Jim Rickards

Rickards is a financial author and former general counsel of hedge firm Long-Term Capital Management (LTCM).10 He has been warning for years of a coming global economic crisis. Rickards is convinced that the growing tsunami of global debt is on track to sink the world economy in what would be a “catastrophic global debt crisis”. Rickards also recommends that we should look for IMF’s SDRs to undermine and replace the dollar causing inflation in the Republic when dollar assets are dumped.

His works include:

The Death of Money: The Coming Collapse of the International Monetary System

The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis

Peter Schiff

Schiff is a financial commentator, author and radio host who has a track record of predicting the housing bubble collapse. He is also the CEO of broker-dealer Euro Pacific Capital Inc. Schiff has warned for years that the central bank’s printing presses have fuelled unsustainable asset bubbles and an exploding global debt bubble that will eventually burst. In December 2019 he warned that the US economy was “the biggest bubble ever” and was driven by the “most reckless combination of monetary and fiscal policy in history”. Schiff continually warned that in the next crisis the U.S will experience inflation and recession simultaneously, the former from when the Chinese and the rest of the world abandon the dollar for alternatives.

His works include:

How an Economy Grows and Why It Crashes

The Real Crash: America's Coming Bankruptcy - How to Save Yourself and Your Country

10 See PART 1: Deregulation of Derivatives Trading - Canary in the Coal Mine


Nomi Prins

Prins was a former managing director at Goldman-Sachs and a Senior Managing Director at Bear Stearns. She has also authored a number of books and articles on finance and banking. Prins works have chronicled the historical influence of the big banks and exposed their looting operations. She repeatedly sounded the alarm on the increasing levels of corporate debt and the inherent risk zombie companies’ presented to economic stability. She blamed the Fed’s cheap money policies and reckless printing for creating unsustainable asset bubbles. Writing on the next financial crisis in December 2017, Prins claimed it was a matter of “not if, but when” and that it would be “worse than the last one”.

Her works includes:

It Takes a Pillage: Behind the Bonuses, Bailouts, and Backroom Deals from Washington to Wall Street

Collusion: How Central Bankers Rigged the World

Gerald Celente

Celente is an author, trends forecaster and founder of the Trends Research Institute and publisher of the Trends Journal. He predicted the market crash in 1987, the dot-com collapse and the 2007-08 financial crisis. Since the crisis, Celente criticized the central banks’ “monetary methadone” as the cause of the “everything bubble”. He highlighted that instead of boosting world economies the banks’ monetary policies enriched the corporate elite and produced a $250 trillion debt bubble that would burst in the wake of global economic slowdown. Celente described QE as only a temporary measure to hold off another market crash that will eventually fail leaving the central bankers’ arsenals empty. He pointed to the central bank's frantic accumulation of gold as a sign that the banks are aware that they could not contain the next crisis. In August 2019, Celente warned that “the Greatest Depression” was on its way and that America was already in “a stage one recession”.

His works include:

Trends Journal (Released Quarterly)


Richard Werner

Werner is an economist, author and professor at De Montfort University. He worked as the chief economist of investment firm Jardine Fleming and was a senior managing director at Bear Stearns. He has written extensively on economics and banking and is credited with coining the term “quantitative easing”. Werner has been warning about the detrimental effects of QE for years which he claims has failed. Werner emphasized that the expanding central banks’ balance sheets were an inherent risk to the global financial system; and that the financial sector as a whole did not add any value but instead extracted it.

His works include:

Princes of the Yen: Japan's Central Bankers and the Transformation of the Economy

The New Paradigm in Macroeconomics: Solving the Riddle of Japanese Macroeconomic Performance

Harry S. Dent

Dent is an economist, author and founder of the investment firm, HS Dent Investment Management. Dent has fingered the growing sovereign and corporate debt bubbles as the most troubling. Dent specifically highlighted coroprate debt in developed countries as the most at risk in the event of a global economic slowdown. In a September 2019 report he estimated that U.S stocks could lose “80% to 90%” of their value.

His works include:

The Demographic Cliff: How to Survive and Prosper During the Great Deflation Ahead

Zero Hour: Turn the Greatest Political and Financial Upheaval in Modern History to Your Advantage

PROMINENT FIGURES Warning about another global financial crisis had become mainstream in recent years and as such was much better received and not merely dismissed out-of-hand as the ramblings of a conspiracy theorist. Russian President Vladimir Putin warned of a future financial crisis in May 2018, the likes of which ”the world has not seen yet”. Not long after, currency speculator and investor George Soros, warned that the world was heading for another financial crisis that could result in the breakup of the EU.


And in July 2019, presidential candidate Senator Elizabeth Warren penned an op-ed piece in the Medium warning of an approaching economic crash and outlined her plan to stop it.

MAJOR INDEXES HISTORICAL REVIEW *insert stock market charts, central bank balance sheets. The everything bubble. Coronacrisis. One combined preferable as per Yardeni research.

KING DOLLAR’S RISE AND FALL DOLLAR CROWNED Since the Bretton Woods Conference in 1944 the U.S. dollar has been the world’s reserve currency. World War II had destroyed the European economies and depleted their governmental reserves, leaving America as the sole economic superpower. Back, in 1944 the U.S. dollar was still backed by gold and nations could safely settle payments in dollars knowing that they could redeem them from the world’s largest gold holder, the Federal Reserve. However, in 1971, the Nixon administration decoupled the dollar from gold and transmuted it into a fiat currency. Yet due to the Republic's international trading status and military might, demand for the currency was still far higher than others enabling it to maintain its reserve status. The Nixon administration also set up the Petrodollar Recycling System that saw the US provide military security to Saudi Arabia in exchange for trading oil in dollars and investing the profits back into the Republic. OPEC soon followed suit. It was the birth of the petrodollar.

Several decades on the Fed had inflated the dollar immensely, reducing its purchasing power, making other currencies look more attractive by comparison. If confidence in the dollar is lost and its demand falls, that could create gargantuan problems. The Fed has issued trillions of dollars and a lot of that resides overseas; if other countries choose to begin settling payments in other currencies a lot of those dollars are going to flood back into the Republic which could trigger inflation and a whole host of economic problems.


The U.S. dollar is still by far the dominant world currency holding a 61.8% share of global reserve currencies in Q3 2019. Though this share declined in recent years, shedding 4.2% in five years. However, the closest currencies, the euro and the yen registered 20% and 5.6% respectively. The Chinese yuan only had a 2% share of global reserve currencies. However, there has been increasing international activity that threatens the dollars reserve status. In 2018 for example, the european central banks began holding the yuan in their reserves displacing a relatively small amount of dollars, showing the currency’s increased stature. While 2017 saw China and Russia launch a Yuan-Ruble payment system that enabled the nations to settle payments in their currencies and continued to build bilateral trade ties that would reduce their dependence on the dollar.

BRICS The BRICS11 nations have been developing similar currency swap systems and even established a BRICS Development Bank in 2014 headquartered in Shanghai. The bank had a $100bn reserve currency pool at its establishment and was heralded as a major move by the competing block to challenge the hegemony of the dollar and dollar-backed institutions like the IMF and World Bank.

In August 2019, former president of Brazil Luis Inácio Lula da Silva admitted that BRICS was created as an “instrument of attack”, whose goal was to create their own currency and “become independent from the US dollar in our trade relations”. In November 2019, the head of the Russian Direct Investment Fund announced that the BRICS were developing a payment system that would bypass the dollar and its SWIFT system. Russia itself led the way among the nations in de-dollarizing, having reduced their dollar foreign trade payments to 45% in 2019 from 75% in 2018. China meanwhile has signed currency swap agreements with 31 nations since the 2007-08 financial crisis.

THE INTERNATIONAL MONETARY FUND In 1969 the IMF launched the Special Drawing Rights (SDRs) which are a basket of key international currencies that carry different weights. In October 2016, the yuan was added to the basket. The current SDR is composed of the U.S. dollar (41.3%), euro (30.93%), Chinese yuan (10.92%), Japanese yen (8.33%) and the British pound (8.09%). One unit of this currency was worth about $1.36 in May, 2020.

11 Brazil, Russia, India, China & South Africa.


In a 2010 report titled “Reserve Accumulation and International Monetary Stability”, the IMF called for a world currency called “Bancor” that would be issued by a global central bank modelled after the private Federal Reserve. The report saw SDRs becoming “the principle reserve asset” in future but acknowledged that it is subject to the performance of the currencies it is composed of.

In a June 2017 report titled “Fintech and Financial Services : Initial Considerations” the IMF proposed a new global banking system called Distributed Ledger Technology (DLT), which employs blockchain technology like bitcoin. The report calls for the system to be controlled by a “consortium” or one “fully-private” organization. Financial analyst Jim Rickards claimed that the DLT system would be used to make SDRs the world currency.

PALACE COUP? Major moves have been made globally to challenge the dollar reserve currency status. If successful the economic havoc that would be wrought by having trillions of foreign based dollars flow back into the Republic could be absolutely devastating. And calls of the dollar’s replacement have not just come from abroad either but from within the very heart of the American financial system, the private Federal Reserve. In a March 2009 Congressional House Financial Services Committee hearing, the President of the New York Fed and Chairman of the Fed, Timothy Geither and Ben Bernake, both replied in the affirmative when asked by Representative Michele Bachman if they would "categorically renounce the United States moving away from the dollar and going to a global currency,". However, the very next day at the New York based Council on Foreign Relations, when Geithner was asked about China’s suggestion of replacing the dollar as the reserve currency, his response was that “we're actually quite open to that suggestion" and it was an “evolutionary” idea. What is the Fed’s real stance? One can only guess, but seeing as it is but a branch of a private international banking cartel that owes no allegiance to the Republic, we can assume that their interests trump those of the American people.


GOLD

“Shares, bonds and other securities are not without risk, and prices can go down. But a bar of gold retains its

value, even in times of crisis. That is why central banks, including DNB, have traditionally held considerable

amounts of gold. Gold is the perfect piggy bank – it's the anchor of trust for the financial system. If the system

collapses, the gold stock can serve as a basis to build it up again. Gold bolsters confidence in the stability of the

central bank's balance sheet and creates a sense of security.”

De Nederlandsche Bank (DNB), December 2019

As global economic uncertainty grows we have seen a massive resurgence of interest in gold. Gold has a fantastic six thousand year track record of being a stable store of wealth and with trillions in fiat currency being pumped out globally the sunshine metal is making a remarkable comeback.


Central banks in recent years have been buying gold at the fastest rate in 50 years, with net purchases of 651.5 tonnes(t) in 2018 and 650.3t in 2019. China, Russia and Turkey led the race, expanding their reserves at the fastest rate.

And it's not just central banks and institutions buying gold; private holders worldwide have also been stacking up on the precious metal as trillions in fiat swirl around the globe. However, some governments have moved to restrict the citizens ability to accumulate gold unhindered. In China, where the CCP battles to prop up its economy, they instituted restrictions on private gold imports to limit capital fleeing its struggling financial system. In Germany, the government reduced the limit of gold you could buy without disclosing any personal information from 10,000 to 2,000 euros. While in India, the government took it a step further and introduced a “gold bond” scheme via the Reserve Bank of India, which offered Indians paper bonds with paper interest in exchange for physical gold. During the 1930s President Roosevelt confiscated private gold and devalued the dollar. Could we see the same again?

Following the coronacrisis, the demand for safe-haven investments such as gold skyrocketed, with demand for gold coins up 36% in Q1 2020, while global holdings in gold-backed ETFs reached record highs. Why the mad rush for gold? Because gold is money. And it has been for millennia. Article 1 Section 10 of the U.S constitution specifically prohibits the States from issuing money or bills of credit that are not gold or silver. While the 10th Amendment blocks the federal government from assuming powers not delegated to it in the Constitution, thereby prohibiting it from issuing fiat currency. The former head of the unconstitutional private fiat-currency-issuing Federal Reserve Alan Greenspan, went on record in 2014 in a speech at the New York based Council on Foreign Relations and admitted that “Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it”.


SILVER

Silver, similar to gold is money and has a long historical record as a tangible currency and a reliable store of wealth. Silver is still legal tender in many countries around the world and just as with gold there has been an increase in demand for the precious metal in recent years. Global silver investment was up 12% in 2019 from 2018 to 186.1 million ounces (Moz), recording its largest annual growth since 2015; while demand for silver coins and medals increased 13% to 97.9 Moz. Silver-backed exchange-traded product (ETP) holdings meanwhile recorded its largest increase since 2010 rising 13% to 728.8 Moz.

Megabank JP Morgan has accumulated the largest silver holdings in history with over 90 million ounces, while a consortium of megabanks has over 338 million ounces in the iShares Silver Trust. Since the financial crisis the demand for silver skyrocketed with over 1.5 billion ounces purchased by individual investors between 2008 and 2016 alone; and in the wake of the coronacrisis we expect to see even more gains in this safe haven asset.


GOLD AND SILVER MANIPULATION In 2016 Deutsche Bank admitted that it rigged gold and silver prices in collusion with other international megabanks. The megabanks were illegally manipulating the multi-billion dollar markets for huge profits, thereby bringing to question their true value. Gold and silver by many analyses have been found to be significantly undervalued and with the world awash with trillions in fiat currency, many are finding solace in historical safe havens while they still have opportunity.

CRYPTO

“There will be a time – I don’t know when, I can’t give you a date – when physical money is just going to cease to exist,”

Robert Reich, United States Secretary of Labor (1993-1997)

The rise of cryptocurrency in the 21st century has been a fascinating and at times an unpredictable experience. From virtually an unknown commodity a decade ago to a household name today, the total market value of all cryptocurrencies grew to over $250 billion in May 2020, having peaked at an astonishing $829 billion in January 2018. In a global environment where central bank fiat currency diminishes purchasing power and distorts asset values, there was a significant portion of the population dissatisfied with the status quo and sought refuge outside the centralized banking system. The decentralized nature of cryptos like Bitcoin was a great draw to many. However, the enthusiasm and confidence behind the most popular cryptocurrencies fuelled an accelerated rise in prices that bore all the characteristics of a bubble.


Several cryptos delivered incredible returns but exuberance out run fundamentals and massive corrections followed burning the late comers. Nevertheless, the crypto market has proved resilient and consumer confidence has moderated to more reasonable levels.

The electronic nature of the currencies present a raft of conveniences for the modern consumer as the world edges ever closer to a cashless society. Many governments despite their initial resistance have now sought to get ahead of the curb and introduce their own versions of crypto when many realised the futility of suppressing its success in the private sector. However, one of the fundamental reasons many flocked to cryptos was that it was outside governmental control and as a result many governing bodies are trying to influence the evolutionary development of cryptos whilst it's still in its embryonic stage. But that is easier said than done after the distrust the international banking community has earned in the wake of their past engeerined crises. Below are a few developments in government-backed cryptocurrencies.

Venezuela

Inflation-ravaged Venezuela launched a state-backed cryptocurrency called the ‘Petro’ in October 2018 and claimed it was backed up the country’s vast oil reserves. In reality the Petro is not convertible into oil contracts or the tangible commodity, thereby making it just another fiat currency and a desperate attempt to arrest the slide into a complete socialism-induced economic collapse.

India

In April 2018 the Reserve Bank of India (RBI) directed commercial banks to withdraw their services from businesses that dealt with crypto. Then a governmental crypto oversight committee proposed a complete ban on crypto in 2019. As the legal battles continue in India over the fate of private crypto, the RBI revealed in December 2019 that they were considering issuing a digital currency. Whether the government is simply looking to get rid of its competition remains to be seen but India and the RBI have been some of the most active players in global currency wars.

Europe

In northeastern Europe the tiny nation of Estonia has taken big steps toward the introduction of a state-backed cryptocurrency with multiple plans currently being considered. On the wider continent it was reported in November 2019 that the ECB had already begun technical work on a cryptocurrency and the French Finance Minister Le Maire commented on its development duration stating that “the fact that it is for the long term does not prevent us from working and having results next year.”


EU officials were reported to have justified the move citing “high” transactional costs in the private sector.

Russia

In Russia the government is considering a combination of trends by exploring the creation of a gold-backed cryptocurrency. The head of Russia’ central bank Elivira Nabiullina stated that though the bank was “generally opposed to cryptocurrencies” within their monetary system, they were considering a gold-backed cryptocurrency, although they prioritized developing settlements in national currencies.

Iran

In recent years the Iranian government began cracking down on bitcoin miners within the embattled nation where crypto mining activity flourished as miners took advantage of the subsidised electricity costs. Presumably, recognising the opportunity to both mitigate the damage of its failing currency and circumvent international sanctions the Islamic theocracy announced in July 2019 that it planned to launch a gold-backed cryptocurrency.

China

The PBOC made earth shattering moves in the crypto space when they signalled that they had developed a state-backed cryptocurrency. According to a deputy director within the PBOC, the central bank planned to sell the cryptocurrency to a few commercial businesses in the party’s inner circle who would then be responsible for distribution. Then, in April 2020 following the coronacrisis, China began a trial run of a digital renminbi - known as the e-RMB - in the cities of Shenzhen, Suzhou, and Chengdu, which were home to some 38 million people. However, unlike Bitcoin the e-RMB is under centralized control and anonymity, unsurprisingly, is not an option.

Financial pundit Max Keiser has claimed that a future cryptocurrency would be backed by China’s secretly enormous gold reserves and would “kill the US dollar”.

International

On a global scale it was reported in November 2019 that the BRICS nations were in discussions about the creation of a cross-nation cryptocurrency that would reduce their dependence on the US dollar and the American dominated SWIFT system. The IMF on the other hand, has already developed SDRs and has a global blockchain system in the works (DLT) which according to financial analyst Jim Rickards will be a major threat to the US dollar.


PART 6: RECOVERY OR DESCENT? “Will I say there will never, ever be another financial

crisis? No, probably that would be going too far. But I do think we’re much safer and I hope that it will not [happen]

in our lifetimes and I don’t believe it will”

Janet Yellen, June 2017

Chair of the Federal Reserve (2014-2018)


THROUGH THE LOOKING GLASS 2020 will go down as a watershed year in human history. In just a few weeks, years of global economic gains were wiped out and the world economy shaken to its very rotten core. Decades of rule by unelected private megabanks had facilitated the greatest transfer of wealth recorded in the annals of history. Using their control of the issuance of currency the banking cartels have used the artificial boom-bust stratagem to consolidate the world economy under their illegitimate criminal control. A wildly successful attack pattern which they plan to continue exercising into the future. In the wake of the 2007-08 financial crisis the trillions in bailouts were supposedly meant to rescue the global financial system and ensure a prosperous future for all. Yet here we are not a dozen years later with hundreds of millions unemployed and just as many condemned to lives of poverty and scarcity. Where did it all go wrong? Who is to blame? Identifying the people and institutions at the top of the financial pyramid is easy enough but a few thousand criminals cannot dictate the will of billions. History has shown us that societies that value freedom and drink from the fountain of knowledge can and have overcome the machinations of parasitic banking cartels. Ours unfortunately has not...yet.

The private megabanks that sit atop the world economy have conjured trillions in fiat currency and leveraged it to buy up the globe. The total assets of the Fed, PBOC, ECB & BOJ alone exceeded $23 trillion at end-April, while the top twenty-five FHCs in the US had derivatives exposure of over $228 trillion! But insanity only intensifies from there. According to the BIS there were $559 trillion of outstanding OTC derivatives contracts at end-December 2019 and analysts have estimated that the global derivatives total is well north of one quadrillion dollars! The World Bank estimated that global GDP in 2018 was nearly $86 trillion, meaning that if we surrendered the gross domestic output of the entire planet to cover the fraudulent one quadrillion debt created by the banking cartels it would take over eleven years! And that's not including the debts incurred in the interim which are on track to skyrocket in the era of QEternity. The Fed’s balance sheet already stands at over $7 trillion, up by nearly half since the eve of QE4; can they afford to double that again? What would that do to the value of the dollar? In a telling interview to NBC, former Fed Chair Alan Greenspan, stated that the U.S. had “zero probability of default” because it “can pay any debt it has because we can always print money to do that”. How did that work out for the Weimar Republic, Zimbabwe or Venezuela? The truth, in the words of the head of the Organisation for Economic Co-operation and Development, Angel Gurria, is that the central banks have “run out of ammunition”. They have already cut interest rates to the bone (and then some) and are keeping thousands of zombie companies alive on the monetary life support that is QE. We are hurtling towards the edge. How was printing trillions in taxpayer backed fiat currency and giving it to private offshore megabanks supposed to help economies in crisis? It wasn't. We’ve been set up!


Conned. Tricked. Had. The system was rigged and was always designed to fail - and in doing so transfer the real wealth of the planet into the hands of a tiny technocratic and financial elite.

There are extremely rough economic times in our future but remember that in every crisis there is opportunity. The most millionaires in US history were created during the Great Depression as opportunities presented themselves for those savvy enough to spot and take advantage of them. The game is far from lost. After the 2007-08 financial crisis and their brazen looting operations, the banksters were exposed to a large portion of the population for the criminals they are. They may have hidden for a time behind the dreaded spectre of COVID-19 in the latest crisis but as the carnage unfolds and the extent of their looting becomes manifest, there will be nowhere left for them to hide. Nationalism and patriotism are on the rise worldwide, from EU-free Great Britain to communist besieged Hong-Kong, as an organic response to the bankers’ globalizing tyranny. When the megabanks tried to have the Icelandic people sign onto billions in fraudulent debt, the people protested for a year and refused to pay. The bankers were indicted, tried and imprisoned for their crimes. If freedom and prosperity are to reign on earth, the people must ignite their revolutionary spirit, break the stranglehold of the megabanks and lay the foundations for a new renaissance the likes of which the world has not yet.

Documents

RECESSION PROFIT SECRETS : MODULE 2 2... · 2020. 10. 27. · A derivative is a financial security whose value is dependent on an underlying asset or assets such as commodities, currencies,