Part 3 of 3:
THE FINANCIAL CRISIS: A LOOK BEHIND THE WIZARD’S CURTAIN
March, 2009, written by Bruce Wiseman
(Before reading this, please make sure you have read Part 1 and 2 of this series which were presented in previous Blogs). Feel free to comment on what you have read at our Discussion Forum on the Silkin Facebook Page.
ODDITIES
It is fascinating to look at the date coincidence of the crash in the U.S. Earlier I noted that the stock market continued to rise throughout 2007, peaking in October of 2007. The dip in October turned to a route in November.
The Basel II standards were implemented here by the U.S Financial Accounting Standards on November 15th 2007.
There are more oddities.
Despite the fact that Hammering Hank dished out hundreds of billions to his banker buddies to “stimulate” the economy and defrost the credit markets, the recipients of these taxpayer bailout billions have made it clear that they will be reducing the amount of money they will be lending over the next 18 months by as much as $2 trillion to conform to Basel II.
What do you think…Hank, with his Harvard MBA, didn’t know? The former Chairman of the most successful investment bank in the world didn’t know that the Basel II regulations would inhibit his homies from turning the lending back on? Maybe it slipped his mind.
Like the provision he put into his magnum opus, the $700 billion bailout called TARP. It carried a provision for the Federal Reserve to start paying interest on money banks deposited with it.
Think this through for a minute. The apparent problem is that the credit markets are frozen. Banks aren’t lending. They can’t use the money from TARP to lend because Basel II says they can’t. On top of this, Paulson’s bailout lets the Fed pay interest on funds it deposits there.
If I am the president of a bank, and let’s say that I’m not Basel II impaired, why in the world am I going to lend to customers in the midst of the worst financial crisis in human history when I can click a mouse and deposit my funds with the Fed and sit back and earn interest from them until the chaos subsides?
But, hey, maybe Hank’s been putting Aspartame in his coffee. No, this stuff is as obvious as the neon signs on Broadway to the folks who play this game. This is banking 101.
So, given, the provisions of Basel II and the refusal of the BIS to lift or suspend the regulations when they are clearly the driving force behind the planet wide credit crisis, and considering the lack of provisions in Paulson’s bailout bill to mandate that taxpayer funds given to banks must actually be lent, and given the added incentive in the bill for banks to deposit their bread with the Fed, one gets the idea that maybe, just maybe, these programs weren’t designed to cure this crisis; maybe they were designed to create it.
Indeed, my friends, this is crisis by design. Someone planned the assassination and someone pulled the trigger.
THE RUBBER MEETS THE ROAD
All of which begs the question…How Come?
Why drive the planet into the throws of fiscal withdraw – of job losses, vaporized home equity, and pillaged 401ks and IRAs?
Because when the pain is bad enough, when the stock markets are in shambles, when the cities are teaming with the unemployed, when the streets are awash with riots, when governments are drenched in the sweat of eviction and overthrow, then the doctor will come with the needle of International Financial Control.
This string of ineffective solutions put forth by people who know better are convincing bankers, investors, corporations and governments of one thing: the system failed and even the U.S. government – the anchor of international finance (which is blamed for causing the disaster) – has lost its credibility.
The purpose of this financial crisis is to take down the United States and the U.S. dollar as the stable datum of planetary finance and in the midst of the resulting confusion, put in its place a Global Monetary Authority - A planetary financial control organization to “ensure this never happens again.”
Sound Orwellian? Sound conspiratorial? Sound too evil or too vast to be real? This entity is being moved forward by world leaders “as we speak.” It is coming and the pace is quickening.
A year ago, I saw an article in which the President of the New York Federal Reserve bank was calling for a “Global Monetary Authority” or GMA to deal with the world’s financial crisis. While I have been following international banking institutions for some time, this was the clue that they were making their move. I wrote an article on it at the time.
By the way, as some may recall, the President of the New York Fed last year was a man named Timothy Geithner. Geithner was very involved in structuring the booby-trapped TARP bailout with Paulson and Bernanke. Of course now, he is the Secretary of the Treasury of the United States. Change we can believe in.
Once Geithner started to push a global financial authority as the solution to the world’s financial troubles, other world leaders and opinion leading voices in international finance began to forward this message. It has been a PR campaign of growing intensity. Meanwhile, behind the scenes, the international bankers are keeping their hands on the throat of the credit markets choking off lending while the planet’s financial markets asphyxiate and become more and more desperate for a solution.
British Prime Minister, Gordon Brown, who has taken the point on this, has said that the world needs a “new Bretton Woods.” This is the positioning. (Bretton Woods, New Hampshire was the location where world leaders met after the second World War and established the international financial organizations called the International Monetary Fund (IMF) and the World Bank to help provide lending to countries in need after the war).
Sir Evelyn de Rothschild called for improved (international) regulations while the Managing Director of the IMF suggested a “high level of ministers capable of reaching agreements and implementing them.” The former director of the IMF, Michael Camdessus, called on “the global village” to “urgently and radically” implement international regulations.
As the crisis has intensified, so too have calls for a global financial policeman, and of late, the PR has been directed in favor of…surprise, the Bank of International Settlements. The person at the BIS who was primarily responsible for the creation of Basle II is Jaime Caruana. The BIS Board has now appointed him as the General Manager, the bank’s chief executive position, where he will be in charge of dealing with the current financial crisis which he had no small part in creating.
A few well chosen sound bites tell the story.
Following a recent IMF function, discussion centered on the fact that the BIS could provide effective market regulation while the Global Investor Magazine opined that “…perhaps the Bank of International Settlements in Basel...” could undertake the task of best dealing with the crisis in the financial markets.
The UK Telegraph is right out front with it:
“A new global solution is needed because the machinery of global economic governance barely exists…it’s time for a Bretton Woods for this century.” “ The big question is whether it is time to establish a global economic ‘policeman’ to ensure the crash of 2008 can never be repeated.’ …. “The answer might be staring us in the face in the form of the Bank of International Settlements (BIS). The BIS has been spot on throughout this.”
And so you see, this was a drill. This was a strategy: bring in Easy Money Alan to loosen the credit screws; open the flood gates to mortgage loans to the seriously unqualified with the CRA, bundle these as securities, repeal Glass Stegall and waive capital requirements for investment banks so the mortgage backed securities could be sold far and wide, wait until the loans matured a bit and some became delinquent and ensure the media spread this news as if Heidi Fleiss had a sex change operation, then slam in an international accounting rule that was guaranteed choke off all credit and crash the leading economies of the world. Ensure the right people were in the key places at the right time – Greenspan, Paulson, Geithner, and Caruana.
When the economic pain was bad enough promote the theory that the existing financial structures did not work and that a Global Monetary Authority – a Bretton Woods for the 21st Century - was needed to solve the crisis and ensure this does not happen again.
Which is exactly where we are right now.
WHAT DO YOU DO?
Let me preface this section by saying that this is advice designed to help you orient your assets, i.e. your reserves, your retirement plans, etc. to the Brave New World of international finance. It is not meant as advice about what you do with your business or your job, your personal life. Those things are all senior to this subject, which has a very narrow focus. There is an embarrassment of riches of materials that you can use to stay ahead of and on top of this crisis. Use them to flourish and prosper. This article is not a call to cut back or contract. It is to provide you information so you know what is going on and can plan. Enough said.
First of all, while not likely, but just in case Timothy Geithner is shocked into some New Age epiphany and Ben Bernanke grows some real wisdom in his polished dome, what the government should do is:
1. Cancel any aspects of Basel II that are causing banks to mis-evaluate their assets.
2. Remove the provision of TARP that permits the Fed to pay interest on deposits.
3. Mandate that any funds given under the TARP bailout or that are to be given to banks in the future must be used to lend to deserving borrowers.
4. Repeal The Community Reinvestment Act.
5. Reinstate Glass Stegall.
6. Restore mandated capital requirements to investment banks.
7. And in case Congress decides to cease being a flock of frightened sheep and take responsibility for the country’s monetary policy, they should get rid of the privately owned Federal Reserve Bank and establish a monetary system based on production and property.
8. But if a global monetary authority is put in place, it should not be controlled by central bankers. It should be fully controlled directly by governments with real oversight over it and with a system of checks and balances. This you can communicate when this matter hits Congress or the White House or both (which it almost certainly will).
And what do you with your reserves in this Brave New World of international finance?
Modesty aside, please do what I have been recommending for a few years now: get liquid (out of the stock and bond markets) and put some of your assets into precious metals, gold and silver, but more heavily to silver. Keep the rest in cash (CDs and T-bills) and perhaps a small bit in some stronger foreign currencies like the Swiss Francs or Chinese Yuan (also referred to as the RMB, which is short for Reminbi)
We are living in the most challenging economic times this planet has ever seen. I hope this article has helped shed some light on what currently happening on the international financial scene. I didn’t cover everything as I don’t have time to write another book right now. Nor did I cover everyone involved but these are the broad strokes.
If you want to follow these shenanigans, log on to The Road to London Summit. It will all look and sound very reasonable – all about saving jobs and homes – but you have seen behind the wizard’s curtain and the above is what is really going on.
Keep your powder dry.
Bruce Wiseman
Wiseman Management Services
4312 Talofa Ave
Toluca Lake, Ca 91602
bdwiseman@earthlink.net
818-406-9950
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