Signs of the Economic Apocalypse, 8-6-07

From Signs of the Times:

Gold closed at 684.40 dollars an ounce Friday, up 1.8% from $672.30 at the close of the previous Friday. The dollar closed at 0.7260 euros Friday, down 1.1% from 0.7337 at the previous week’s close. That put the euro at 1.3774 dollars compared to 1.3630 the Friday before. Gold in euros would be 496.88 euros an ounce, up 0.7% from 493.25 for the week. Oil closed at 75.48 dollars a barrel Friday, down 2.2% from $77.12 at the close of the week before. Oil in euros would be 54.80 euros a barrel, down 3.2% from 56.58 for the week. The gold/oil ratio closed at 9.07, up 4.0% from 8.72 at the end of the previous week. In U.S. stocks, the Dow closed at 13,181.91, down 0.6% from 13,265.47 for the week. The NASDAQ closed at 2,511.25, down 2.0% from 2,562.24 at the close of the week before. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 4.69%, down seven basis points from 4.76 at the end of the previous week.

The sharp drop in stock prices toward the end of last week coming on the heels of the sell-off of the week before last indicates a growing sense of panic.

U.S. Stocks Drop on Credit Woes; Bear Stearns Leads Banks Lower

By Eric Martin

Aug. 3 (Bloomberg) -- Stocks tumbled on evidence losses in the mortgage market may slow the economy and reduce bank profits, sending the Standard & Poor’s 500 Index to its worst three-week retreat since 2003.

Bear Stearns Cos., the manager of two hedge funds that collapsed last month, helped carry financial shares to their biggest decline in five years after S&P cut the company’s credit outlook. Energy shares fell to the lowest since May, led by Exxon Mobil Corp. and Chevron Corp., on speculation weaker job growth and falling oil prices will hurt earnings.

The S&P 500 erased its gain for the week, falling 39.14, or 2.7 percent, to 1433.06 in its worst day since Feb. 27. The Dow Jones Industrial Average slumped 281.42, or 2.1 percent, to 13,181.91. The Nasdaq Composite Index sank 64.73, or 2.5 percent, to 2511.25.

The sell-off exacerbated a rout last week that wiped $2.1 trillion in value from global equity markets. Shares declined in Europe, with benchmark indexes dropping in all 18 western European markets except Luxembourg. An index of market volatility in the U.S. rose to a four-year high.

“We’re just seeing more and more credit problems,” said Michael Strauss, who helps manage $40 billion at Commonfund in Wilton, Connecticut. “It’s going to be difficult for the market to trade with any confidence.”

Almost 12 stocks fell for every one that rose on the New York Stock Exchange as all 24 industry groups in the S&P 500 and all 30 members of the Dow fell.
The yield on the benchmark 10-year Treasury note fell 9 basis points, or 0.09 percentage point, to 4.68 percent. The dollar fell the most in almost a month against the euro, trading within a cent of its record low. Some 2.1 billion shares changed hands on the NYSE, 29 percent more than the three-month average.

Stocks opened the day lower after the Labor Department said employers added fewer jobs than economists forecast in July and a private report showed growth in U.S. service industries slowed.

Bear Stearns

Bear Stearns had its credit-rating outlook cut to negative by S&P on concern declining prices for mortgage-backed securities will decrease earnings. The perceived risk of owning the New York-based company’s bonds rose to the highest in at least six years.

Stocks fell to their lows of the day after the firm said its return on equity in July may be close to the lowest ever and borrowing costs may slow mergers and acquisitions.

‘As Bad as I’ve Seen It’

“I’ve been out here for 22 years, and this is as bad as I’ve seen it in the fixed-income markets,” Chief Financial Officer Samuel Molinaro said on a conference call with analysts. He compared the crisis to 1998, when hedge fund Long-Term Capital Management collapsed and Russia defaulted on its debt. Bear Stearns fell $7.28, or 6.3 percent, to $108.35, the lowest since 2005.

The S&P 500 Financials Index fell 3.8 percent, its steepest loss since 2002, and contributed the most to the drop in the overall S&P 500. An index of brokerages and money managers in the S&P 500 has fallen 15 percent since reaching a record on May 30.

Countrywide Financial Corp., the largest U.S. mortgage lender, sank $1.77 to $25. CIT Group Inc., the biggest U.S. independent commercial finance company, lost $1.87 to $36.68. Lehman Brothers Holdings Inc., the largest U.S. underwriter of mortgage bonds, dropped $4.67, or 7.7 percent, to $55.78.

American Home Mortgage Investment Corp., which traded at more than $10 a week ago, sank 76 cents to 70 cents after it became the second-biggest residential lender to fail this year. The last day for most employees will be today, Chief Executive Officer Michael Strauss told the staff in an e-mailed memo obtained by Bloomberg.

Investment bankers cut off credit earlier this week, leaving the lender unable to fund at least $750 million of mortgages.

Mary Feder, a company spokeswoman, didn’t return a call seeking comment.

‘One of the Biggest Bubbles’

The U.S. subprime-market rout has “got a long way to go,” said Jim Rogers, who predicted the start of the commodities rally in 1999.

“This was one of the biggest bubbles we’ve ever had in credit,” Rogers, chairman of New York-based Beeland Interests Inc., said in an interview from Hong Kong.

Credit-market losses stemming from subprime lending are leading to a tightening of funds available for investment, and helping to drive up the cost of borrowing for consumers and companies.

Union Investment Asset Management Holding AG, Germany’s third-largest mutual fund manager, halted redemptions from a fund after clients withdrew $137 million in the past month. The ABS- Invest Fund, sold to institutional investors across Europe, has about 6 percent of its assets in securities related to subprime mortgage loans.

‘Big Logjam of Credit’

“You’ve got a big logjam of credit that can’t clear,” said Brian Barish, who helps oversee about $10 billion at Cambiar Investors in Denver. “Add a lot of fear and rumor, and it makes for a tough situation.”

The bad news at Bear Stearns led to the resignation of the company’s president:

Bear Stearns president resigns

Mark McSherry

August 5, 2007

NEW YORK (Reuters) - Bear Stearns Cos President and co-Chief Operating Officer Warren Spector resigned on Sunday, becoming a casualty of a credit risk crisis at the investment bank.

Spector’s departure follows Bear Stearns’ assertion on Friday that it is weathering the worst storm in financial markets in more than 20 years after a major rating company warned mortgage credit problems could hurt the investment bank’s profits.

Standard & Poor’s warned that the recent collapse of two Bear Stearns-managed mortgage funds could hurt the company’s performance and reputation for an extended period.

The collapse of the funds triggered a downturn across credit markets, put a damper on corporate buyout financing and sparked fears about Wall Street’s trading and banking profits.

Spector’s departure is a blow to Bear Stearns because he was regarded as a possible successor to Chairman and Chief Executive James Cayne.

Cayne said in a statement on Sunday: “In light of the recent events concerning BSAM’s high grade and enhanced leverage funds, we have determined to make changes in our leadership structure.”

Fears are growing of a credit crunch, or a pullback in lending, which could have worse consequences than in previous downturns because recent growth was based on a credit bubble of unprecendented size.

Markets in crisis: will it get worse?

Heather Stewart

August 5, 2007

The Observer - Roller-coaster. See-saw. House of cards. Wall Street watchers’ wildest metaphors were strewn liberally around last week as investors fought to describe the latest ramifications of a global financial scare that began in the homes of overstretched Americans struggling to pay the mortgage.

Share prices on both sides of the Atlantic plunged last Monday; shot back up last Tuesday; plunged again last Wednesday; bounced back last Thursday, and endured another savage sell-off at the end of the week, with the Dow Jones closing 280 points down on Friday.

Ever since it became clear that ‘sub-prime’ mortgage-borrowers with poor credit records, who had piled in at the peak of the US housing boom, were defaulting on their debts in droves, markets have been adjusting to the cruel reality that lending is a risky business.

Several mortgage lenders with heavy exposure to the market have already gone bust, but last week’s sell-offs were a reminder that lax lending has taken place well beyond the housing market. Investors on both sides of the Atlantic waiting for the next domino to fall last week were not disappointed. In Germany, a coalition of banks stepped in with a €3.5bn (£2.4bn) rescue deal for one of their rivals, IKB, after it revealed that it was heavily exposed to the sub-prime sector.

Bear Stearns, the Wall Street bank which has already watched two of its hedge funds crumble as a result of the mortgage crisis, told investors that they would not be allowed to withdraw cash from a third fund - this one supposedly with a less risky strategy - to stem panic withdrawals. Bear’s chief financial officer, Sam Molinaro, said the turmoil in the credit markets was the worst he had seen in 22 years in the business.

Mortgage-lender American Home, which lends to mainstream homebuyers with healthy credit scores, not sub-prime borrowers, saw 90 per cent wiped off its value, and announced thousands of redundancies, after admitting that it was facing a cash squeeze.

It is not only the direct losses from sub-prime defaults that are troubling investors: it is the fear that lenders, jolted by the scale of defaults, would take a long, hard look at their portfolios. Since mortgage debts are now often bundled together, repackaged and resold in complex new financial instruments such as ‘collateralised debt obligations’ (CDOs), no one is quite sure where the buck stops. Many US banks - more than at any time since the recession of the early 1990s - are already tightening their lending criteria (see chart), but the fallout is likely to spread well beyond households looking for a mortgage.

Charles Dumas, of Lombard Street Research, speculates about the frenzied conversations that will have been taking place in bank boardrooms on both sides of the Atlantic since the fallout from the ‘toxic waste’ of sub-prime lending began to spread.

Chairman/CEO: ‘How much of this stuff do we own, and what’s our exposure - to hedge funds owning toxic waste, as well as to the waste itself?’

Chief credit officer (I paraphrase): ‘I haven’t the faintest idea.’

Chairman/CEO: ‘You’ve got two weeks to sort it out, and meantime no more lending.’

So the credit business closes down while the bean-counters work 24/7. What gets caught? Huge leveraged buyout deals that have little to do with mortgages.

A bottleneck of deals has been held back since the borrowing taps were tightened. Toby Nangle, fixed income investment manager at Barings, reckons 13 deals, worth $43bn (£21bn), have been postponed or cut back in the past two weeks - and banks are sitting on a total backlog of up to $400bn (£200bn) of incomplete deals, which are financed with short-term borrowing, and stuck on their balance sheets, waiting to be sold on. The latest casualties were the banks backing KKR’s £9bn takeover of chemist Alliance Boots, which conceded on Friday that they had been unable to sell on any of the debt that funded the takeover.

Debt-backed buyouts have been a key source of demand for equities, so if the lending tap is turned off, share prices will suffer.

Stephen Lewis, of Insinger de Beaufort, says it’s too soon to call what’s happening a full-blown ‘credit crunch’, but lenders that have spent the past few years lavishing cash on eye-wateringly leveraged deals are likely to be seriously wary in the months ahead.

‘A “credit crunch”, properly understood, occurs when would-be borrowers with plans for productive capital expenditure are denied access to loans,’ he said. ‘Not when lenders are leery of meeting the demands of any speculator who would like to gear up.’

Central banks, including the Bank of England, are likely to be mightily relieved if lenders start being a bit more wary. They have been shocked by the rapid pace of credit growth despite repeated interest rate rises in recent years, and have warned that CDOs and other new-fangled financial instruments may simply be hiding risk, instead of helping to spread it around.

Any sector that has flourished as a result of cheap, few-questions-asked lending (‘covenant-lite’ is the City parlance for loans with few conditions) is likely to suffer if sub-prime ushers in a stricter financial era. Analysts say that everything, from commercial property, to fine art to Britain’s overvalued housing market, could be vulnerable.

And if the supply of super-leveraged megadeals starts to slow, a whole industry of advisers, lawyers, ratings agencies and bankers will see their fees decline. Consultancy Oxford Economics warned last week that because of the UK’s reliance on its rip-roaring financial services sector, the knock-on effects of the sub-prime crunch could depress GDP growth by up to 0.4 per cent.

As David Brown, chief European economist at Bear Stearns, says: ‘For a number of years financial markets have partied on the liquidity as asset prices surged and financial innovation boomed. After the party comes the hangover and, as the market is finding out, the bigger the party, the worse the hangover.’

The people saying that the bursting of the housing bubble can be contained are getting fewer and fewer. Those who see it as the beginnings of much wider and deeper economic trouble were once on the fringe but are now the mainstream. The lack of confidence in mortgage debt is leading to questioning of all sorts of debt, including the hyperdebt of derivatives and hedge funds.

Stock Market Meltdown

Mike Whitney

Information Clearing House

08/04/07

It’s a Bloodbath. That’s the only way to describe it. On Friday the Dow Jones took a 280 point nosedive on fears that that losses in the subprime market will spill over into the broader economy and cut into GDP. Ever since the two Bears Sterns hedge funds folded a couple weeks ago the stock market has been writhing like a drug-addict in a detox-cell. Yesterday’s sell-off added to last week’s plunge that wiped out $2.1 trillion in value from global equity markets. New York investment guru, Jim Rogers said that the real market is “one of the biggest bubbles we’ve ever had in credit” and that the subprime rout “has a long way to go.”

We are now beginning to feel the first tremors from the massive credit expansion which began 6 years ago at the Federal Reserve. The trillions of dollars which were pumped into the global economy via low interest rates and increased money supply have raised the nominal value of equities, but at great cost. Now, stocks will fall sharply and businesses will fail as volatility increases and liquidity dries up. Stagnant wages and a declining dollar have thrust the country into a deflationary cycle which has---up to this point---been concealed by Greenspan’s “cheap money” policy. Those days are over. Economic fundamentals are taking hold. The market swings will get deeper and more violent as the Fed’s massive credit bubble continues to unwind. Trillions of dollars of market value will vanish overnight. The stock market will go into a long-term swoon.

Ludwig von Mises summed it up like this:

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The question is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” (Thanks to the Daily Reckoning)

It doesn’t matter if the “underlying economy is strong”. (as Henry Paulson likes to say) That’s nonsense. Trillions of dollars of over-leveraged bets are quickly unraveling which has the same effect as taking a wrecking ball down Wall Street.

This week a third Bear Stearns fund shuttered its doors and stopped investors from withdrawing their money. Bear’s CFO, Sam Molinaro, described the chaos in the credit market as the worst he’d seen in 22 years. At the same time, American Home Mortgage Investment Corp---the 10th-largest mortgage lender in the U.S. ---said that “it can’t pay its creditors, potentially becoming the first big lender outside the subprime mortgage business to go bust”. (MarketWatch)

This is big news, mainly because AHM is the first major lender OUTSIDE THE SUBPRIME MORTGAGE BUSINESS to go belly-up. The contagion has now spread through the entire mortgage industry—Alt-A, piggyback, Interest Only, ARMs, Prime, 2-28, Jumbo,—the whole range of loans is now vulnerable. That means we should expect far more than the estimated 2 million foreclosures by year-end. This is bound to wreak havoc in the secondary market where $1.7 trillion in toxic CDOs have already become the scourge of Wall Street.

Some of the country’s biggest banks are going to take a beating when AHM goes under. Bank of America is on the hook for $1.3 billion, Bear Stearns $2 billion and Barclay’s $1 billion. All told, AHM’s mortgage underwriting amounted to a whopping $9.7 billion. (Apparently, AHM could not even come up with a measly $300 million to cover existing deals on mortgages! Where’d all the money go?) This shows the downstream effects of these massive mortgage-lending meltdowns. Everybody gets hurt.

AHM’s stock plunged 90% IN ONE DAY. Jittery investors are now bailing out at the first sign of a downturn. Wall Street has become a bundle of nerves and the problems in housing have only just begun. Inventory is still building, prices are falling and defaults are steadily rising; all the necessary components for a full-blown catastrophe.

AHM warned investors on Tuesday that it had stopped buying loans from a variety of originators. 2 other mortgage lenders announced they were going out of business just hours later. The lending climate has gotten worse by the day. Up to now, the banks have had no trouble bundling mortgages off to Wall Street through collateralized debt obligations (CDOs). Now everything has changed. The banks are buried under MORE THAN $300 BILLION worth of loans that no one wants. The mortgage CDO is going the way of the Dodo. Unfortunately, it has attached itself to many of the investment banks on its way to extinction.

And it’s not just the banks that are in for a drubbing. The insurance companies and pension funds are loaded with trillions of dollars in “toxic waste” CDOs. That shoe hasn’t even dropped yet. By the end of 2008, the economy will be on life-support and Wall Street will look like the Baghdad morgue. American biggest financials will be splayed out on a marble slab peering blankly into the ether.

Think I’m kidding?

Already the big investment banks are taking on water. Merrill Lynch has fallen 22% since the start of the year. Citigroup is down 16% and Lehman Bros Holdings has dropped 22%. According to Bloomberg News: “The highest level of defaults in 10 years on subprime mortgages and a $33 billion pileup of unsold bonds and loans for funding acquisitions are driving investors away from debt of the New York-based securities firms. Concerns about credit quality may get worse because banks promised to provide $300 billion in debt for leveraged buyouts announced this year……Bear Stearns Cos., Lehman Brothers Holdings Inc., Merrill Lynch & Co. and Goldman Sachs Group Inc., are as good as junk.”

That’s right---”junk”.

We’ve never seen an economic tsunami like this before. The dollar is falling, employment and manufacturing are weakening, new car sales are off for the seventh straight month, consumer spending is down to a paltry 1.3%, and oil is hitting new highs every day as it marches inexorably towards a $100 per barrel…

Credit Crunch: Whose ox gets gored?

When money gets tight; anyone who is “over-extended” is apt to get hurt. That means that the maxed-out hedge fund industry will continue to get clobbered. At current debt-to-investment ratios, the stock market only has to fall about 10% for the average hedge fund to take a 50% scalping. That’s more than enough to put most funds underwater for good. The carnage in Hedgistan will likely persist into the foreseeable future.

That might not bother the robber-baron fund-managers who’ve already extracted their 2% “pound of flesh” on the front end. But it’s a rotten deal for the working stiff who could lose his entire retirement in a matter of hours. He didn’t realize that his investment portfolio was a crap-shoot. He probably thought there were laws to protect him from Wall Street scam-artists and flim-flam men.

It’ll be even worse for the banks than the hedge funds. In fact, the banks are more exposed than anytime in history. Consider this: the banks are presently holding a half trillion dollars in debt (LBOs and CDOs) FOR WHICH THERE IS NO MARKET. Most of this debt will be dramatically downgraded since the CDOs have no true “mark to market” value. It’s clear now that the rating agencies were in bed with the investment banks. In fact, Joshua Rosner admitted as much in a recent New York Times editorial:

“The original models used to rate collateralized debt obligations were created in close cooperation with the investment banks that designed the securities”….(The agencies) “actively advise issuers of these securities on how to achieve their desired ratings” (Joshua Rosner “Stopping the Subprime Crisis” NY Times)

Pretty cozy deal, eh? Just tell the agency the rating you want and they tell you how to get it.

Now we know why $1.7 trillion in CDOs are headed for the landfill.

The downgrading of CDOs has just begun and Wall Street is already in a frenzy over what the effects will be. Once the ratings fall, the banks will be required to increase their reserves to cover the additional risk. For example, “As a recent issue of Grant’s explains, global commercial banks are only required to set aside 56 cents ($0.56) for every $100 worth of triple-A rated securities they hold. That’s roughly 178 to 1 ratio. Drop that down to double-B minus, and the requirement skyrockets to $52 per $100 worth of securities held---a margin increase of more than 9,000%”.

“56 cents ($0.56) for every $100 worth of triple-A rated securities”?!? Are you kidding me?

As Mugambo Guru says, “That is 1/18th of the 10% stock margin equity required in 1929”!! (Mugambo Guru; kitco.com)

The high-risk game the banks have been playing---of “securitizing” the loans of applicants with shaky credit---is falling apart fast. There’s no market for chopped up loans from over-extended homeowners with bad credit. The banks don’t have the reserves to cover the loans they have on the books and the CDOs have no fixed market value. End of story. The music has stopped and the banks can’t find a chair.

The public doesn’t know anything about this looming disaster yet. How will people react when they drive up to their local bank and see plywood sheeting covering the windows?

This will happen. There will be bank failures.

The derivatives market is another area of concern. The notional value of these relatively untested instruments has risen to $286 trillion in 2006---up from a meager $63 trillion in 2000. No one has any idea of how these new “swaps and options” will hold up in a slumping market or under the stress of increased volatility. Could they bring down the whole market?

That depends on whether they’re backed-up by sufficient collateral to meet their obligations. But that seems unlikely. We’ve seen over and over again that nothing in this new deregulated market is “as it seems”. It’s all stardust mixed with snake oil. What the Wall Street hucksters call the “new financial architecture of investment” is really nothing more than one overleveraged debt-bomb stacked atop another. Ironically, many of these same swindles were used in the run-up to the Great Depression. Now they’ve resurfaced to do even more damage. When the crooks and con-men write the laws (deregulation) and run the system; the results are usually the same. The little guy always gets screwed. That much is certain.

At present, the stock market is running on fumes. Another 4 to 6 months of wild gyrations and it’ll be over. The NASDAQ plunged 75% after the dot.com bust. How low will it go this time?

Keep an eye on the yen. The ongoing troubles in subprime and hedge funds are pushing the yen upwards which will unwind trillions of dollars of low interest, short term loans which are fueling the rise in stock prices. If the yen strengthens, traders will be forced to sell their positions and the market will tank. It’s just that simple. The Dow Jones will be a Dead Duck.

So far, Japan ‘s monetary manipulations have been a real boon for Wall Street--enriching the investment bankers, the big-time traders and the hedge fund managers. They’re the one’s who can take advantage of the interest rate spread and then maximize their leverage in the stock market. It works like a charm in an up-market, but things can unravel quickly when the market retreats or starts to zigzag erratically. The recent rumblings suggest that the volatility will continue which will push the yen upwards and cut off the flow of cheap credit to the stock market. When that happens, the end is nigh.

The American People: “We’re not a dumb as you think”

It’s always refreshing to find out that the majority of Americans seem to have a grasp of what is really going on behind the fake headlines. For example, The Wall Street Journal/NBC conducted a poll this week which shows that two-thirds of Americans believe that “the economy is either in a recession now or will be in the next year.” That matches up pretty well with the 71% of Americans who now feel the Iraq War “was a mistake”. Americans are clearly downbeat in their outlook on the economy and haven’t been taken in by the daily infusions of happy talk about “low inflation” and “sustained growth” from toothy TV pundits. In fact, the mood of the country regarding the economy is downright gloomy. “Only 19% of Americans say things in the nation are headed in the right direction, while 67% say the country is off on the wrong track”. Iraq , of course, is the number one reason for the pessimism, but the dissatisfaction runs much deeper than just that.

“Only 16% expressed substantial confidence in the financial industry”—”18% in the energy or pharmaceutical industries”—”17% in large corporations and 11% in health-insurance companies”. Only 18% of the people have confidence in the corporate media and only 16% in the federal government.

These are encouraging numbers. They show that the vast majority of people have lost confidence in the system and its institutions. They also illustrate the limits of propaganda. People are not as easily indoctrinated as many believe. Eventually the “bewildered herd” catches on and sees through the lies and deception.

The American people know intuitively that something is fundamentally wrong with the economy. They just don’t know the details or the extent of the damage. Decades of neoliberal policies have inflated the currency, broadened the wealth gap, and destroyed manufacturing. Workers can no longer buy the things they produce because wages have stagnated through a stealth campaign of inflation which originated at the Federal Reserve. When wages shrink, prices eventually fall from overcapacity and the economy slips into a deflationary cycle. This downward spiral ultimately ends in depression. So far, that’s been avoided because of the Fed’s massive expansion of cheap credit. But that won’t last.

Economic policy is not “accidental”. The Fed’s policies were designed to create a crisis, and that crisis was intended to coincide with the activation of a nation-wide police-state. It is foolish to think that Greenspan or his fellows did not grasp the implications of the system they put in place. These are very smart men and very shrewd economists. They knew exactly what they were doing. They all understand the effects of low interest rates and expanded money supply. And, they’re also all familiar with Ludwig von Mises, who said: “There is no means of avoiding the final collapse of a boom brought about by credit expansion.”

A crash is unavoidable because the policies were designed to create a crash. It’s that simple.

The Federal Reserve is a central player in a carefully considered plan to shift the nation’s wealth from one class to another. And they have succeeded. Nearly 4 million American jobs have been sent overseas, the country has increased the national debt by $3 trillion dollars, and foreign investors own $4.5 trillion in US dollar-backed assets. While the Fed has been carrying out its economic strategy; the Bush administration has deployed the military around the world to conduct a global resource war. These are two wheels on the same axel. The goal is to maintain control of the global economic system by seizing the remaining energy resources in Eurasia and the Middle East and by integrating potential rivals into the American-led economic model under the direction of the Central Bank. All of the leading candidates—Democrat and Republican---belong to secretive organizations which ascribe to the same basic principles of global rule (new world order) and permanent US hegemony. There’s no quantifiable difference between any of them.

The impending economic crisis is part of a much broader scheme to remake the political system from the ground-up so it better meets the needs of ruling elite. After the crash, public assets will be sold at firesale prices to the highest bidder. Public lands will be auctioned off. Basic services will be privatized. Democracy will be shelved.

The unsupervised expansion of credit through interest rate manipulation is the fast-track to tyranny. Thomas Jefferson fully understood this. He said:

“If the American people ever allow private banks to control the issue of our currency, first by inflation, then by deflation, the banks and the corporations that will grow up will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.”

We are now in the first phase of Greenspan’s Depression. The stock market is headed for the doldrums and the economy will quickly follow. Many more mortgage lenders, hedge funds and investment banks will be carried out feet first…