Credit Default Swaps: Evolving Financial Meltdown and Derivative Disaster Du Jour

by Dr. Ellen Brown

Global Research, April 11, 2008

Author’s website www.webofdebt.com/

When the smartest guys in the room designed their credit default swaps, they forgot to ask one thing - what if the parties on the other side of the bet don’t have the money to pay up? Credit default swaps (CDS) are insurance-like contracts that are sold as protection against default on loans, but CDS are not ordinary insurance.

Insurance companies are regulated by the government, with reserve requirements, statutory limits, and examiners routinely showing up to check the books to make sure the money is there to cover potential claims. CDS are private bets, and the Federal Reserve from the time of Alan Greenspan has insisted that regulators keep hands off.

The sacrosanct free market would supposedly regulate itself. The problem with that approach is that regulations are just rules. If there are no rules, the players can cheat; and cheat they have, with a gambler’s addiction. In December 2007, the Bank for International Settlements reported derivative trades tallying in at $681 trillion - ten times the gross domestic product of all the countries in the world combined. Somebody is obviously bluffing about the money being brought to the game, and that realization has made for some very jittery markets. (more…)

The Dollar is being crashed into the dirt by design. Lets look for a moment at how the Dollar has performed against the Euro since 2002. You could buy 1 Euro for 70 cents in 2002. Today it’ll cost you 1.41$ to buy 1 Euro. Here is how that could be a good thing. Lets say you bought 100$ worth of Euros in 2002. Today you can cash it out for over 200$. Unfortunately I did not do that.

Why you may ask, is the dollar being crashed? Well, it’s because the era of Nation states is going the way of sailboats in the steam era. The powers that be are in the process of globalization where Nations are no longer needed. We will have regions for a time, and then a total global convergence. After the hyperinflation process is over, and Americans are using Dollars as firewood, we will have to combine ourselves into a super-state, with the new super-currency the “Amero” in order to compete with the other super-currencies.

The question is “will it blend”? We can have Canada’s socialist medicine system, and Mexico’s super-corruption, make a North American smoothie, open the lid of the blender, and you will be able to see “North America Smoke“…

So the real question is when should we have a hostile revolt?

Using guerilla warfare tactics to crush our bloated government.

Some people like Alex Jones think we should wait till the government starts the hostilities. I think they already did, and we should have hung them in 1913 when they instated the federal income tax.

Our Constitution has been vaporized, the Dollar is evaporating even as we speak. The last shreds of sovereignty are disappearing with each passing second. I’M AS MAD AS HELL AND I’M NOT GOING TO TAKE IT ANY MORE!!!!!

When they try to take our guns, it is game over. They have this new plan to take away guns from all Military Veterans that suffered from PTSD, and anyone who has been diagnosed with any type of Psychological disorder. If this passes we need to revolt. IT’S THAT SIMPLE. YOU COME FOR MY GUNS YOU DIE THAT SAME DAY!!!

Presidential candidate Ron Paul laid down the law and directly asked private Federal Reserve chairman Ben Bernanke how it could ever be morally justifiable to deliberately depreciate the dollar all while pointing out the recent depreciation was a deliberate move by the Fed. Bernanke can’t even speak straight when Paul is done with him. Of course this is not Paul’s first encounter with the Fed, let’s hope it is not the last.

By Steven Smith and Aaron L. Task Staff Reporters 8/30/2007 3:23 PM EDT URL: http://www.thestreet.com/newsanalysis/optionsfutures/10377063.html Updated from 7:07 a.m. As if the mortgage-market meltdown wasn’t enough to spook investors, some market players expressed concerns about unusual options bets that some observers have dubbed “Bin Laden Trades.” The blogosphere and options trading desks have been rife with speculation about these trades, which are unusually large bets that the market will make a huge move in the next month.

Some entity, or entities, has taken a large position on extremely deep in the money S&P 500 options, both puts and calls, that won’t pay off unless the market undergoes an extremely large price move between now and the options’ expiration on Sept. 21. However, Dan Perper, a Partner at Peak 6, one of the largest option market makers and proprietary trading firms, has confirmed that the trades are part of a “box-spread trade.” “This was done as a package in which the box spread was used [as a] means of alternative financing at more attractive interest rates” explained Perper.

Simply put, two parties agree to trade the box at a price that essentially splits the difference between current rates. For example, the rough numbers would be that given the September 700/1700 box must settle at a value of 1,000 — it is currently trading around 997 — that translates into a 5% interest rate. For the seller it is a way to borrow money at a slight discount to the prevailing rate, and for the buyer, it is a way to lend money at a low rate of return, but it’s better than nothing at a time when others are scared and have painted themselves into a box (ha ha) because they have run out available funds. Currently there are about 63,000 700/1700 boxes open. (more…)

(Art added by Downtown) August 15, 2007 By Derry Brownfield derrybrownfield@learfield.com

The Common Sense Coalition

Centertown, Missouri

http://www.derrybrownfield.com

572-893-8255

I consider Wayne Hage one of the most intelligent men I ever met. On our very first visit he was explaining the World Bank, the International Monetary fund and how the world bankers planned on collateralizing the world debt with land. Not just the U.S. national debt, but also the “WORLD” debt. A listener sent me a copy of a report of the FOURTH WORLD WILDERNESS CONGRESS, which was held in Denver in 1987. Over 1500 people from sixty countries were told that wilderness lands were to protect the reindeer, the spotted owl and other endangered species. Ninety percent of the group consisted of conservationists, ecologists, government and United Nations bureaucrats. The other ten percent were world banking heavyweights, such as David Rockefeller of Chase Manhattan Bank, London banker Edmund de Rothschild and the Secretary of the U.S. Treasury, James Baker, who gave the keynote address. George W. Hunt, an investment councilor, served as official host and sat in on all the meetings. It was George Hunt that wrote the report from which I have gleaned much of my information.

During the first three days, the group was told that the WILDERNESS CONGRESS was about beating the ozone deterioration and bringing the rain forests back. The following days were closed to the public. With only the bankers in attendance, the topics discussed centered on the creation of a “WORLD CONSERVATION BANK” with collateral being derived from receipt of wilderness properties throughout the world. This bank would have central bank powers similar to the Federal Reserve. It would create currency and loans and engage in international discounting, counter-trade, barter and swap actions. Rothschild personally conducted the monetary matters and the creation of this WORLD CONSERVATION BANK. This bank would refinance by swapping debt for assets. A country with a huge national debt would receive money to pay off the debt by swapping the debt for wilderness lands. The plan was to swap one trillion dollars of Third World Debt into this new bank. In the long term, when the countries won’t be able to pay off the loans, governments from around the world will give title to their wilderness lands to the bankers. (more…)

In these last days of free speech, I would like to use the most powerful weapon ever invented to bring you the truth.  Our founding fathers understood very well the concept of bankers, and control of the money supply. In their time they saw the corruption that had taken place.  The whole point of leaving the corruption of Europe and starting a new country was to avoid double and triple taxation.  The concept of the "Federal reserve system" is not new, and has happened over and over again throughout history.  Here is a conversation that took place between a representative of the Fed, and a taxation truth activist.

The following is a conversation with Mr. Ron Supinski of the Public Information Department of the San Francisco Federal Reserve Bank. This is an account of that conversation. (more…)