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“A rival power strong enough ultimately to overthrow all other forms of government.”

July 11, 2014
“Top Secret” “For American Eyes Only”

Why do economist NOT see it coming?
A
rival power strong enough ultimately to overthrow all other forms of government.”

 WARNING SIGNS-

http://online.wsj.com/articles/occ-report-warns-signs-of-credit-risk-building-in-banking-system-14037

Syndicated leveraged loan issuance reached a record high in 2013 as the search for yield in the low interest rate environment drove an increase in risk appetite across institutional investors such as collateralized loan obligations (CLO) and retail loan funds.

Ah, CLOs! They’re uncannily similar to subprime-mortgage-backed Collateralized Debt Obligations, the toxic waste that contributed to the financial crisis. But they’re backed by junk-rated corporate loans – for example, the “leveraged loans” that private equity firms use to strip-mine their portfolio companies. These overleveraged companies borrow even more money from banks. But instead of investing it in productive assets to create income with which to pay off the loan, they pay it out as a special dividend to the PE firms. It pushes the company deeper into the hole, lines the pockets of the PE firm, and saddles the bank with a dubious asset. The bank then packages these leveraged loans into a lovely CLO and unloads it to institutional investors and retail funds. A business that is booming at record levels, the OCC lamented.
M&A loans are part of the leveraged loan miracle. Last year, they “achieved the highest issuance volume since 2007” – just before the financial crisis brought down the house of cards. The average total-debt-to-EBITDA multiple for leveraged loans increased to 4.7X, the highest, you guess it, since 2007.
Hence the toxic mix: higher leverage, lower yields, riskier borrowers, and tighter credit spreads, nicely packaged in ever flimsier covenant protections for lenders, all to feed “investor demand for high-yield products” that “continued to surge.” A record $258 billion of these new covenant-lite loans are issued last year. Not just a record, but “nearly equal to the total cumulative amount issued from 1997 to 2012.”
That, the report explained, was “ample evidence of increasing credit risk in the leveraged loan market.” And the “quality of underwriting” was “a supervisory concern.”
Fed Chair Janet Yellen may deny it well past her retirement, much like Alan Greenspan is still feverishly denying it, but the OCC simply states it: the Fed-engineered “low interest rate environment” causes banks to make bets and take risks that cause banks to collapse. They did it in the run-up to the financial crisis. And they’re doing it now.
“We fear that, once the effects of monetary stimulus disappear in the US, the weakness of the economy due to income inequalities may suddenly be revealed.” Read….Investment Bank: The End Of US Economic Growth

ADD DERIVATIVES-

Needless to say, these numbers are quite a bit smaller than the trillions
of dollars in At the three largest bank derivatives dealers,
www.occ.gov/news-issuances/speeches/2006/pub-speech-2006-121.pdf – 41k – 2013-11-24
Futures & Forwards Swaps Options Credit Derivatives TOTAL $ Trillions Top
4 Banks All Other Banks Four Banks Dominate in Derivatives
www.occ.gov/news-issuances/news-releases/2012/2012-96a.pdf – 506k – 2013-11-24
$175.8 trillion. In Q2, credit derivatives were $15.5 trillion, making total
derivatives $182.1 trillion. Graph 1 $Trillions Q1 Q2
www.occ.gov/news-issuances/news-releases/2008/nr-occ-2008-152a.pdf – 411k – 2013-11-24

ADD CHINA-

China Bank acquires Plantersbank | ABS-CBN News
www.abs-cbnnews.com › Business
Sep 18, 2013 · China Bank and Plantersbank on Wednesday signed a memorandum of agreement for China Bank’s acquisition of more than two-thirds of Plantersbank’s …
China’s ICBC Moves – WSJ – The Wall Street Journal
online.wsj.com/news/articles/SB…
Jan 22, 2011 · Business China Bank Moves to Buy U.S. Branches ICBC Signs a Deal for Bank of East Asia’s Retail Outlets
Fed approves Chinese bank purchase of US bank – Yahoo News
news.yahoo.com/fed-approves-chinese-bank-purchase-us-bank…
May 09, 2012 · The Industrial and Commerce Bank, China’s largest bank with total assets of approximately $2.5 trillion, is 70.7 percent owned by the government of China.
First US approval for Chinese bank purchase – FT.com
www.ft.com › Companies › Financials
Industrial & Commercial Bank of China has gained US approval to purchase an…


“To allow it to become a source of revenue to private issuers is to create, first, a secret and illicit arm of the government and, last, a rival power strong enough ultimately to overthrow all other forms of government.”

Private For Profit Banks issue sovereign money via loans. As a result of  their issuance (creating money at 30 or 40 times leverage) , the Fed has no choice but to honor that issuance or suffer a ‘systemic failure’
That is a collapse of the faith and credit of the dollar.
How will your children sleep, your grandchildren also knowing
CHINA will have that awesome power: to use their $5.5 trillion to earn $55 trillion by using the legislated privilege we have given to the private for profit banks-“The power to issue our own money and to charge interest for financial gain ?
Thank you for hearing me out.Read more by Justaluckyfool ( http://bit.ly/MlQWNs )
( “You are always welcome to share, copy, plagiarize, improve, etc..any comments.)

Thank you for at least considering the challenge.
May I sign off with a Frederick Soddy quote, from the Preface of “The Role Of Money”:
“… It is concerned less with the details of particular schemes
of monetary reform that have been advocated than with the general principles to which, in the
author’s opinion, every monetary system must at long last conform, if it is to fulfil its proper role
as the distributive mechanism of society. To allow it to become a source of revenue to private issuers is to create, first, a secret and illicit arm of the government and, last, a rival power strong enough ultimately to overthrow all other forms of government.”

 

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