Chris,
I found your analogy to not only be entertaining reading, but also incredibly accurate. By the way the information on your site is refreshingly prepared and I’m pleased to see that there is a growing number of us researchers who are communicating the deeper understandings that are so necessary at this time of monumental and exhilarating times.
Your videos in fact mirror many of the videos that I have created for my own members . And great use of graphics by the way - keep up the great work!
For those who perhaps seek a more literal (and perhaps graphical) account of "the crisis explained" I offer the following account…
While the U.S government begins its global “sell” on the US$700
billion bailout plan, another untold story missed by the mainstream
media is quietly unfolding. While the Fed and the mass media continue to
divert public and investor attention to the housing market bubble as the crisis, another three
bubbles are bursting at the seams (and popping) without barely a
whisper.
What isn’t being addressed are the exponential problems of
outstanding U.S. interest-bearing debts to the tune of $51 trillion as
well as derivatives held by U.S. banks totaling $180 trillion.
A large section of the banking and financial sector in the U.S is
hanging by a thread. Over 1400 U.S. banks and more than 150 U.S.
thrifts are at risk of failure, with total assets of $3.6 trillion.
Over 60 banks and more than 20 U.S thrifts with more than $5 million
in assets are extremely exposed to poor or non performing mortgages.
And to illustrate how significant the shortfall is, the Federal
Deposit Insurance Corporation’s (FDIC) only has less than 3% of the
value of assets of banks on the troubled institutions list.
And that means that if all the troubled banks went into bankruptcy
tomorrow there is only enough insured savings to return capital to 3
people in every hundred. And these are not tiny banks.
According to thestreet.com, you’ll see that among the 20 largest,
are banks with assets of over $300 billion. So these aren’t small
banks. And these are just the 20 largest. As I mentioned earlier, when
you add up the total assets of all these banks you get $3.6 trillion at
risk - and no trillion dollar bailout plan is going to stop that bubble
from bursting.
The most likely effect of a further injection of funds to rescue failed corporate fat cats is a hike in interest rates as the U.S government proposes to purchase bad privacy-sector debt at above fair market values, rather than a significant discount due to the poor liquidity those assets represent.
First There Was The Housing Debt Crisis
According to the Federal Reserve and the FDIC, private sectors and
local governments also own residential mortgages in substantial
quantities, so the bailout plan would also have to cover:
The issuers of asset-backed securities who currently hold $2.1 trillion in mortgages,
- Nonbank finance companies with $426 billion
- Credit unions with $332 billion
- State and local governments with $159 billion
- Life insurance companies with $61.6 billion, plus
- Private pension funds, government retirement funds and households
Then Came The Commercial Debt Crisis
Then you have to take into account commercial mortgages. There are
$2.6 trillion worth of commercial mortgages and they’re now also going
bad. And some are also held outside the banking sector.
- $644 billion held by issuers of asset-backed securities
- $263 billion held by life insurers
- $65 billion at nonbank finance companies and
- $37 billion at Real Estate Investment Trusts (REITs)
While the mortgage crisis in the U.S began with home mortgages they
have quickly spread into commercial mortgages, credit cards, car loans
and almost any other kind of loan that the private sector could
service.
There are now $14.8 trillion in residential and commercial mortgages
in America. But beyond mortgages, there is another $20.4 trillion in
consumer and corporate debt. This means that mortgages represent less
than half of the private sector debt in America.
What else?
How About Local Governments?
Local governments might be an even bigger concern. You see, the Fed
currently estimates $2.7 trillion in municipal securities outstanding,
most of which have been dependent on a bond insurance system that
remains on the brink of collapse.
And is There A Bigger 'Time Bomb' Secretly Ticking Away?
At the root of the global panic after the Lehman Brothers crisis is
the derivatives time bomb – the biggest, baddest bubble of them all.
And the most feared! Here’s why…
-
It’s the biggest – commercial banks hold over $180 trillion in derivative debt.
-
JP Morgan holds $90 trillion of that – over half of it. It’s no
wonder they were so quick to get involved in the other Fed-assisted
bail outs.
-
But that’s nothing compared to the total notional value of
outstanding derivatives, which according to
Congressman Ron Paul, now
stands at $1.1 Quadrillion - that’s 1000 trillion dollars. Now I don’t
know
about you but I don’t think that number has ever been used in
financial circles – this is a first!
What Will Happen When This Time Bomb Explodes?
The honest truth is that no-one knows for certain…but what we do know for certain is that if we want to understand how to predict a market we first have to understand that a market is simply a body of human beings - emotional human beings!
And what psychologists and neurologists have learned about how humans behave is that beyond the neural mapping that occurs by the age of two, human beings at the core emotional level don’t change much throughout their lifetime.
Well, they’ve learned that virtually everything that determines how we think and feel was hard-wired, through our conditioning, by the age of two. And that since that age (at the core) people don’t change very much over a lifetime.
What happened when Bush and the Fed proposed its $700 Billon dollar bailout and told the world that if this Bill wasn’t passed the entire global financial system could collapse?
What happened was that gold soared $98 during trading that day, to finally close $84 higher – the single-biggest jump in the price of gold in one day - in history!
Now Congressman Ron Paul isn’t an investment analyst but even he has echoed what investment analysts have known for decades. That, in times of fear and uncertainty people move out of risky investments into the old safe haven – Gold!
Perhaps that’s a clue…of course only time will tell.
Are We On Track For The Black October Crash of 2008?
And isn’t timing an interesting thing?
We are now into the month that
brought about the Crash of ’29 and the Crash of ’87, so I see it as no
coincidence that we are entering another possible Black October – I guess, again, we’ll have to wait and see. The writing is however, well
and truly on the wall and this government bail out attempt plus
everything that doesn’t exactly spell good news for the month.
Right now the world’s paper-money system is risky. It depends on
faith and trust. And because there is no trust in banks, financial
institutions or government leaders, what we can inevitably expect is a
bust!
People in the U.S are angry. And so they should be. Each U.S tax payer will have to carry an additional tax burden of just over $5,000 simply because greedy, failed bankers couldn’t run their companies properly.
The extra ‘bailout-burden’ is about what the U.S. has spent so far in direct costs on the entire Iraq war – which tax payers are also paying for. And to put that into perspective, that’s equal to the combined annual budgets for the Departments of Health, Education and Human Services.
That’s where the current financial system is headed and I don’t
believe any miracle can prevent it. Bailouts may stall the inevitable
but the system is in need of a major overhaul and it must fail for the birth of a new
system to come into being.
I certainly don’t see the Fed cartel having a “mission-impossible-moment” and picking the
right colored wire, one-second before the bomb goes off. The fact that
they still have time to stall and distract with these smaller bailout
strategies seems to be clear evidence that the real time bomb is still ticking.
Senen Pousa
CEO
Echelon Research Limited
http://www.echelon-research.com
