The Greatest Economic Secret in America

[keep_it_real]

Not only is virtually the entire money supply created privately by banks, but a mere handful of very big banks is responsible for a massive investment scheme known as "derivatives," which now tallies in at hundreds of trillions of dollars. The banking system has been contrived so that these big banks always get bailed out by the taxpayers from their risky ventures, but the scheme has reached its mathematical limits. There isn't enough money in the entire global economy to bail out the banks from a massive derivatives default today. When the investors realize that the "insurance" against catastrophe that they have purchased in the form of derivatives is worthless, they are liable to jump ship and bring the whole shaky edifice crashing down.

http://www.webofdebt.com/

In my opinion this book is worth every penny.

[virgogal]

1. Is it easy for the average person to read or is it one of those

books that would require a financial background to understand?

[keep_it_real]

3. S**T Yea

I don't recommend books easily but this one I have to. I have read several books on this subject but I still did not get it, with this book I GOT IT! And when you get it you will know what a REAL revolutionary IDEA is. And it is so simple. If you told this to a Jr High School or High School student they would not only get it but would spend their whole life trying to make it so. This is deep stuff be easy reading. The author breaks it down. Got for it!

[virgogal]

9. After reading your response I just reserved it at my public library.

FYI,there is a waiting list.

Thanks for your post.

[keep_it_real]

16. When you get it email me and tell me how you like it.

[virgogal]

17. Will do.

[Warpy]

2. There is little place for them to jump to, which is why it won't happen like that

but it's true that when the derivatives market crashes into the nothingness it always was, the banks will be screaming for more replacement cash.

At that point, the prudent thing to do will be to nationalize them temporarily so that they can remain open with illegal asset to debt ratios and while the whole system is restored from the bottom up.

Executives going to prison will have to be part of this scenario.

[DJ13]

4. The scenario you described was what many economists wanted Obama to do

Im afraid that wont happen until its too late when we have a WH that thinks its beholden to Wall Street.

[Warpy]

6. They always have to try the wrong things first

to placate the conservatives and to be able to point to them and say they didn't work.

Nationalization isn't off the table completely and will likely happen when the finance industry's need for cash is beyond the country's ability to pay, even with funny money and promisory notes on taxing people not born yet.

[izquierdista]

11. How to placate conservatives

I'd let them have the choice of which executive they got for a cellmate.

[keep_it_real]

5. Nationalize Forever

Read the book; the founding founders NEVER wanted private banks to create money out of thin air, they wanted the creation of money to be the right of the Congress and ONLY the congress.

[JackRiddler]

7. Part of the irony is the myth that Congress...

is elected by the mob of people and will therefore be outrageously irresponsible, whereas the banks when in control will remain conservative to preserve their assets.

Not that Congress is the good guys, but it's an absurd comparison - even at their well-known levels of corruption they're incomparably more transparent and responsible than what the banks show in their good years. Take the money out of elections and let the people vote, Congress would be just fine.

It's the banks who will happily burn the world for the slightest advantage, if that's what their analysis tells them, or if that's what their executives believe will result in the highest individual compensations. No institution is more divorced from reality, more hateful of it in fact, more hateful and contemptuous of YOU the people, more reckless, heartless, or blindly self-interested to the point of self-destruction. There is no room for the private banking system of capitalism as we have known it on this planet. They will burn the world on a bet. They will. They have.

[Octafish]

8. Would that I could recommend your reply, JackRiddler.

Every word, I'd recommend.

[NoSheep]

10. I second that.

[JackRiddler]

13. Thank you! Please do.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x5658112

[JackRiddler]

12. Thanks! Here's your chance...

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x5658112

Of course, I usually feel that way about your posts. You are close to the last remaining original individual scholarly resource on this site!

[undergroundpanther]

15. Jack I agree with you

We both despise the same sort of evil people.
My question is,how to we get rid of their scam?
Or take the power away from them?

[keep_it_real]

18. EXACTLY what the book says

You are on point.

[ControlledDemolition]

22. No 'born again' believes that money is the root of all evil. n/t

[ControlledDemolition]

23. JFK was on the founders'path. n/t

[JVS]

24. Prison is too risky. They could get back out eventually.

I think they'll have to be deported for terminal rendition.

[undergroundpanther]

14. Yep

Money is what it always was,alot of paper.
The real definition of consumer CON fidence is,Do we still believe slips of paper handed out by private parties are worth anything?

Money is a psychological tool.A big bait and switch,man on a box thing,

Money is used to keep us bound to obligations,even unfair ones(usury) To keep us controlled and busy bees serving the creators and hoarders of said paper that they turn into wealth by buying it from under us..When does having paper equal the right to eat food?
When everything is determined by whom has paper and who has less, or none.
Starvation and poverty will cease when we cease believing that greedy assholes with too much paper are somehow privileged to being treated better ,get more, are smarter more secure,or worth more than ourselves.Psychopathy,power and wealth together are NOT a good thing.

[snot]

19. Just heard MacNeil Lehrer or whatever it's called tonite and they totally

Just heard MacNeil Lehrer or whatever it's called tonite and they totally ignored the WORST aspect about derivatives, one that could and should easily be ELIMINATED.

To explain, credit derivatives are like insurance.

There are laws that say, you can buy insurance for your own house if it's destroyed by fire, etc.
You canNOT buy insurance for your neighbor's house. You're deemed not to have a sufficient interest in it's NOT burning down; in short, your owning insurance against its burning down gives you a positive incentive to commit arson. It's one of the worst forms of conflict of interest.

Owning the house, or whatever you're buying insurance for, is called "having an insurable interest." Like I said, you can't buy insurance against some catastrophe, unless you have an insurable interest in that catastrophe's not happening -- you OWN the property insured, or whatever. You actually have a vested interest in the property or the life's NOT being destroyed, so you're unlikely to abuse the insurance system to, say, merely gamble speculatively on its destruction, let alone commit arson, murder, etc.

Because credit derivatives are unregulated, not only do we have no clear idea of what's out there (although the commonly agreed estimate is $62 TRILLION, which is several TIMES the US's gross national product); but much WORSE, we have no idea whether most of those derivatives actually insure anything owned by the party buying the insurance.

In other words, large portions of the credit derivatives may well be/have been owned by people who were NOT purchasing insurance to protect any insurable interest, but who merely felt like betting that Lehman Bros., AIG, etc., would fail. In fact, they could have been purchased by people who not only felt like betting that Lehman et al. would fail, but who had enough inside info, if not power, to know that it was likely to happen, or even CAUSE it to happen.

SO. The BIGGEST outrage about the bailout, which virtually ALL of the media have failed to discuss, is that the gigantic wads of taxpayer money given to AIG has been used to pay off these bets, many of which were probably made by players with no insurable interest -- i.e., no real NEED for the money -- who may even have helped bring about the failure of the companies they bet against.

The bonuses are trivial by comparison. You and me are sacrificing our retirement, kids' education, etc., to make good on bets we never agreed to, placed by parties who not only stand to lose little if the catastrophes they bought insurance against weren't paid, but who may actually have had the power to bring about the catastrophes they were buying insurance against.

Yes, it's complicated; this is why we need effective government to regulate markets and protect those of us who don't have the time or expertise to figure it out. And government won't work for us unless it's working for US, not Wall St. But for now, Wall St. et al. seem to own even Barack (not to mention the corporate media).

Suggestions about how to make this clearer are encouraged.

[Grinchie]

25. No need to make it any clearer. You did well.

When I explained it, I mentioned that for a trivial sum, a hedge fund could get enormous payoffs if an urelated company got into trouble.

Some drive by Strawman appeared and tried to say that the premiums are not trivial, and could cost a million dollars a year, like that's not trivial to a fund controlling billions of dollars.

I guess he hadn't heard about the 5 Billion that UBS got from AIG after they got their first Bailout. No, you did good.

[JVS]

27. I think unions should fund their pensions by buying those and then encouraging sabotage.

Then they can fund the pensions that the companies so clearly won't

[snot]

28. ha, ha!

[glitch]

20. Great thread. K & R nt

[Holly_Hobby]

21. I listened to the author on Thom Hartman earlier this year

She said congress has the authority to mint coin and said they should mint enough for the debt and pay it off. It was a very interesting interview.

[Grinchie]

26. Now if only Obama would hear about the Mint.

[autorank]

29. Dupe (sorry;)

[autorank]

30. k*r Some have mentioned it well before now

This has been on the minds of intellectually honest economists since the repeal of the Glass Steagall Act 1999 and the passage of the Securities Modernization Act in 2000. But, you're right, it's not been dealt with where it counts, except by Bill Moyers and a few others who have the weight to poke us in the face with the obvious scam, the biggest in the history of 'capitalism," imho.

From the "alternate media" --

May 24, 2008

"Derivatives are a risk filled stock market product allowing investors to "bet" on the future value of a commodities, interest and exchange rates. The face value of over the counter derivatives went from $100 trillion in 2002 to $516 trillion in 2007. As a point of comparison, the gross domestic product (GDP) of the United States was $14 trillion in 2007. Investment genius Warren Buffett characterized their risk when he called derivatives a "financial weapon of mass destruction." Despite an early warning of real risk in 1995, by Buffett in 2002, and others like bond expert Bill Gross, nothing was done to regulate their sales which are widely held by retirement funds.

'The subprime crisis is destroying your home value. Will derivatives and other risky stock market schemes wipe out your retirement? Did you have anything to do with these decisions?"

"Us versus Them"
The Money Party (5)
http://www.scoop.co.nz/stories/HL0803/S00402.htm

April 14, 2009

"Our financial system looks ruined beyond repair. The credit default swaps crisis is 40 or so times bigger than the real estate meltdown over subprime derivatives. The top 25 banks in the United States are loaded down with $13 trillion in credit default swaps and the deal is coming unraveled. If we accept the highly dubious assumption that the debt from the financial meltdown needs to be repaid by us, were looking at $43,000 a citizen right now. And we're just starting. "

Enabling Acts for an Era of Greed
The Money Party at Work
http://www.scoop.co.nz/stories/HL0904/S00140.htm