The Shadow Banking Pyramid

The current spate of fraud on Wall St., and specifically the front-running and market manipulation scams being committed by Wall St. banks on the floor of the NYSE and other market making venues, is finally getting some coverage This would be good news if it weren't meaningless.

Some background: I first started reporting on the rigged markets scandal in the U.S. and the U.K. five years ago in the pages of The Ecologist magazine in the U.K. I predicted that the unraveling of FannieMae and FreddieMac was all but certain due to explicit accounting fraud. I was one of many pointing out the blindingly obvious, but this information was kept out of view from the main stream America for fear it would frighten the sheep into cutting back on their leveraged speculation and consumption; using their homes like ATM machines. In an economy dictated to by the unholy triangle of GE, CNBC, and Wall St. selling their wares of weapons, propaganda and lottery tickets, delusions (and fiat currencies) must never be questioned.

Talking about crooks on Wall St. has been a staple while co-hosting my radio show in London with Stacy Herbert on ResonanceFM 104.4, "The Truth About Markets." Week after week we forensically describe the workings of Wall St. frauds -- drawing on my experience as a former Wall St. trader and inventor of patented financial engineering technologies used on Wall St. today -- to explain how the scams are done in full view of the SEC and CFTC. ResonanceFM is a musicians cooperative listened to primarily by bong smoking squatters in Shordditch who, by virtue of the fact that mainstream American and British media chose not to cover these crimes left open a niche for us to cover, have become preternaturally knowledgeable about fraudulent Collaterized Debt Obligations, Special Purpose Entity Accounts and High Frequency Trading Arbitrage. Many of these pot heads thank me today because many of them put their meager savings into gold bullion as we have been suggesting since 2002 -- which shot up 40% against the British Pound last year.

In 2006 I started making documentaries for Al Jazeera English. Death of the Dollar, Rigged Markets and Money Geyser explained, respectively, the structural weakness of the dollar, the structural weakness of the New York Stock Exchange, and the structural weakness of the global currency grid and in particular the currency and economy of Iceland. A year later, the Icelandic krona and the economy evaporated in a cloud of currency 'carry trade' ice and dust exactly as we predicted it would.

In 2007 the sup-prime scandal and the controlled demolition of Bear Stearns and Lehman Brothers got under way thanks to the Washington-Wall St. revolving door that gave us the Goldman Sachs-Oval Office axis of insider trading; the S&L crash, the 1987 crash, the Long Term Capital Management (LTCM) crash, the crash of Drexal Burnham, Enron, WorldCom and the dot-com crash. America has become the most corrupt empire in history and since the debts that caused each of these catastrophes was never paid off, but simply put off the balance sheet and traded in what Prime Minister Gordon Brown calls the 'Shadow Banking System' or to be more precise the Shadow Banking Pyramid, Americans can expect to live in the shadow of this debt pyramid in perpetuity.

America's debts are bigger than the entire GDP of the world, so unless the whole world decides to bail out America by gifting America 100 percent of their wages and profits for a year or more America can forget about ever digging out of its debt entombment.

In 2008 I produced and presented a series for BBC World News, The Oracle. For ten weeks I hammered away reporting on the rot that was threatening to take down America; the duplicitous spewings of Hank Paulson, Ben Bernanke, and Tim Geithner, as well as the parasitical machinations of the Fed, so I wasn't surprised when Congress appeased financial terrorists on Wall St. and coughed up 700 billion dollars in ransom at the end of last year to ensure payment of Goldman Sachs' bonus pool for 2008 and 2009.

This is why I do not believe that the main stream media's belated reporting on Wall St. scandals is meaningful. It's too late. Like the New York Times sitting on the Bush wire tap story until after the election of 2004, the story of banking buccaneers and vipers in the New York Times reads more like a requiem than a news story.

The Egyptians had the great pyramids in the Valley of the Kings we have the great pyramids of debt created in the canyons of Wall St. These are now permanent features of the American and British financial landscape that have effectively turned Americans and Brits into debt slaves.



http://www.huffingtonpost.com/max-keiser/the-shadow-banking-pyrami_b_245988.html

Satyajit Das ~ Financial optimism 'delusional'

A prominent American risk analyst says optimism about economic recovery is delusional because the economic growth in America and much of the world was a mirage built on debt.

The warning comes as Americans turn to their leaders for reassurance that the chill of recession is giving way to the green shoots of recovery.

US President Barack Obama says he can see "glimmers of hope" on the horizon, despite the country battling its deepest depression in decades.

New figures released today showed US retail sales in March went backwards by more than 1 per cent, after two months of recovery.

In January and February, real dollar sales were still tens of billions of dollars below the levels of late 2007 - to mid 2008.


http://www.abc.net.au/news/stories/2009/04/15/2543916.htm?section=justin

Risk analyst and author Satjayit Das says despite the rate of change, the aggregate total dollar amounts are still 10 to 15 per cent lower.

"That's 10 to 15 per cent of demand that doesn't exist in the consumer sector which translates into lower investments and therefore lower growth," he said.

Mr Das says one of the main reasons optimism about recovery is delusional is because banks have no capacity to lend on the same scale they did before.

"One way to look at it is banks need to have about $1 of money in terms of capital to create $10 of credit," he said.

"The banking system is now running, after all the losses and even after the recapitalisation, with a shortfall of between $1 and $2.5 trillion of capital.

"That translates into a reduction in the amount of credit available to the global system of somewhere between 20 to 30 per cent."

'Double subsidy'


In turn, this translates into a massive hit to demand, consumption and economic growth.

Markets rallied this week on news that some of the biggest names in American banking were once again making profits, most notably Goldman Sachs.

But for those looking for signs of sustainable economic recovery, the accounts did not bear close scrutiny.

"The first thing, the profits are still down 20 to 30 per cent on last year and if you look at their traditional core businesses, they're all down 20 or 30," Mr Das said.

All the profit growth for Goldman's came from its fixed income, currency and commodities business.

Part of that came from clever but risky trades; and part, it seems, from underwriting bonds issued by other banks, that were already guaranteed by the US Government.

Mr Das says the first factor was all the government-guaranteed banks around the world issued a lot of debt to actually raise money and the second was that corporate could not raise money from bank-issued bonds.

"Traditionally government debt isn't underwritten and the interesting thing here is ... it is being underwritten," he said.

"It's almost a double subsidy. One from the guarantee, then a transfer of wealth from the taxpayer to the underwriters, like Goldman Sachs, and the major investment banks were underwriting the bonds."

"So it's a double subsidy in effect."

Goldman Sachs is worried about its reputation~ LOL

These guys can't handle the truth. They blew it all up, they maxed it all out. They paid themselves massive bonuses out of illusionary gains in asset prices...their cred is blown, they can't save themselves by sending letters to bloggers. I bet five people are mirroring the site already. They are merely adding and abetting the critic with free publicity.

There has been, to use my term a "Mass extinction on planet Finance."

Or as blogger Supkis would say "arrest them all". Only Obama is keeping them from the pitchforks.

"Lawyers for Goldman Sachs are threatening a federal lawsuit against a blog that is critical of the investment bank.

The website "Facts About Goldman Sachs" states that it is an "open forum for facts and discussion about what part Goldman Sachs and their executives played in the current Global Economic Crisis." It is, as you can imagine, extremely critical of the investment bank. Now lawyers from the law firm Chadbourne & Parke have sent a letter to the proprietor, Mike Morgan, claiming that the website's URL, goldmansachs666.com, infringes on the investment bank's trademark.

"Your use of the mark GOLDMAN SACHS violates several of Goldman Sachs' intellectual property rights, constitutes an act of trademark infringement, unfair competition and implies a relationship and misrepresents commercial activity and/or an affiliation between you and Goldman Sachs which does not exist and additionally creates confusion in the marketplace," Goldman's lawyer writes. (The full letter is below.)

The letter goes on to threaten legal action if Morgan does not stop using the name Goldman Sachs.

Morgan has struck a defiant pose, vowing the battle Goldman in court. "Needless to say, we will most likely fight this one in court with Goldman Sachs and now we will expedite adding relevant content to this website," he writes.

We're not experts in trademark law. But it strikes us as extremely unlikely that anyone would think that Morgan's website is affiliated with Goldman Sachs. If the content weren't clearly anti-Goldman, the disclaimer at the top of the website should make that clear:

This website has NOT been approved by Goldman Sachs, nor does this website have any affiliation with Goldman Sachs. This website was designed to provide information about Goldman Sachs direct from the public, and NOT from Goldman Sachs's marketing and public relations departments. You may find the Goldman Sachs website at www.goldmansachs.com.

The unfair competition claim is laughable, since no services are being offered for sale at all on the site. It certainly isn't engaged in any investment banking business. Also, the website does not even appear on the first page of search results for "Goldman Sachs."

It seems far more likely that Goldman is annoyed at the critical website and wants to see it stifled. Goldman declined to comment for this article."

http://www.businessinsider.com/goldman-sachs-seeks-to-stifle-blogger-critic-2009-4