MUST SEE: “60 Minutes” on China’s Ghost Cities

As the article states, always remember one thing: It’s never a free market if the government has to intervene or wishes to manipulate the private sector. However, that’s one of the goals of Communist China: Manufacture the crisis, provide the solution — all of which aims to make capitalism look bad so the population will rally behind the state in times of need and accept the pre-selected alternative.

At present, the Chinese economy is a combination of free markets and bizarre central planning. These ghost cities are heavily financed by local governments and the money that investors use to buy the properties is pumped about by China’s central bank, The People’s Bank of China. So much money has been pumped out by the PBOC that price inflation is starting to cause civil unrest. The PBOC and the government of China are trapped, the only way they can prop up the bubble is by more money printing, but that will cause price inflation to accelerate even more. If they stop printing, the real estate market and stock market will crash. It is possible it will it could result in the greatest crash in economic history. Continue reading

The Unraveling in Europe

Geopolitical expert, JR Nyquist, on the situation in Europe:

How bad is the financial situation in Europe? Greece may be about to exit the eurozone, though not according to everyone. The Economic Times of India has published an interview with Jean Lemierre, the chief negotiator for private creditors in the Greece bailout. According to Lemierre, Greece has too much to lose and “a majority of political parties are in favor of the Euro.” Yet the Boston Globe is reporting that Bundesbank President Jens Weidmann has warned Europe’s central banks not to increase their exposure to Greece on account of political uncertainty.

Is there really danger? For those who live in hope, and for those who cling to economic optimism, there is nothing to fear but fear itself. For those who understand the Leftward drift of Europe’s political economy, and the inevitable bankruptcy that implies, there is no uncertainty whatsoever. Bankruptcy is coming for everyone and Greece is merely first in line.

The optimists, of course, are putting a brave face on it. They have Lemierre’s soothing words – and these words are repeated on every side. Bloomberg News is reporting that the “euro has weathered the worst financial crisis since the Great Depression….” Of course, weathering is nothing to worry over. It makes men and currencies stronger. It is no big deal if the euro has lost value of late. It is still above the dollar, and will probably stay above the dollar. Or is there someone with authority who says that Greece will lead the way for a series of euro-defections?

We are approaching a situation in which economic distress engenders political unrest and revolution. If this happens in Europe it will probably happen in the United States as well. Many people will think such a prediction is farfetched, but revolutions have followed on the heels of economic distress in ancient and modern times. It is safe to say that the present economic unraveling isn’t going to stop. The reason for this may be found in the decadence of our civilization. We ourselves have degenerated from our ancestors. All the signs are present, including signs of impending calamity.

Full Article: The Unraveling in Europe (JR Nyquist)

Credit Default Swaps Remain a Secret Weapon of Economic Warfare

Kevin Freeman points out exactly what is flying over most people’s heads, and what has most likely happened to JP Morgan Chase:

The strategy involved credit default swaps , a kind of derivative that was at the center of the 2008 financial crisis. The swaps were originally used to hedge the bank’s exposure to other investments it owns and included contracts tied to North American investment grade and junk corporate bonds, as well as bonds in Europe and Asia. JPMorgan helped invent the market for such swaps, known as “synthetic” positions because they trade risk without trading the actual bonds. But two things made these particular positions untenable and costly for JPMorgan, according to traders in the market and derivatives experts.

First, as bond markets shifted and forced JPMorgan to realign its hedges, the bank layered swap on top of swap, complicating the structure and increasing the risk that its hedges would fail to offset losses from one swap with gains from another. Second, the sheer size of JP Morgan’s swap position became more than the thinly traded market could easily manage. The lack of liquidity meant the exit door was too small for JPMorgan to fit through quickly once the trades started to deteriorate. Making matters worse, because JPMorgan was so dominant in this market it became clear to hedge funds and other trading entities that it was isolated and at risk—providing opportunities for those who could successfully trade against the bank’s position. The complexity of the trades made it difficult for the bank to stay on top of the risks as its position worsened.

Stop and contemplate this for a moment. No one knows Credit Default Swaps better than JP Morgan Chase. They invented the instruments after all. And, they have long been considered “best in breed” on Wall Street in this regard. Nobody does it better. Yet, this quote is so very significant: “it became clear to hedge funds and other trading entities that it was isolated and at risk—providing opportunities for those who could successfully trade against the bank’s position.” The article went on to say: “But hedge funds and other institutions in the market smelled weakness and dozens took advantage of the bank, according to traders. Reports by the Wall Street Journal and Bloomberg in early April about the bank’s giant positions only made awareness of JP Morgan’s problem and its isolation greater.”

Now, we know that there are players in the world who desired to see JP Morgan Chase brought down. That is motive. Remember a year ago? We wrote a post titled The Invisible Gorilla that had quotes from Stephen Lerner of SEIU and George Soros regarding the need to tear down and remake the financial system. Quotes attributed to Lerner:

“S. Lerner: It seems to me that we’re in a moment where we need to figure out in a much more, through direct action, much more concrete way how we really are trying to disrupt and create uncertainty for capital, for how corporations operate. . . .

And I think the only way we can do that is to think much more creatively, and the key thing I …is we have to say what does the other side fear most? They fear disruption, they fear uncertainty. Every article about Europe says a riot in Greece, the markets went down. The folks that control this country care about one thing: how the stock market does; how the bond market does; and what their bonus is. So I think we weed out a very simple strategy: how do we bring down the stock market, how do we bring down their bonuses, how do we interfere with their ability to, to be rich. And if we don’t do, and that means you have to politically isolate them, economically isolate them and disrupt them. So, it’s not all theory, I’ll do a pitch.

 So, a bunch of us around the country are thinking about who would be a really good company to hate? We decided that would be JP Morgan Chase. …. And so we’re going to roll out over the next couple of months what will hopefully be an exciting campaign about JP Morgan Chase that is really about challenge the power of Wall Street. And so what we’re looking at is in the first week of May, we get enough people together – we’re starting now – to really have a week of action in New York with the goal of … I don’t want to go into any details because I don’t know which police agents are in the room, but the goal would be that we would roll out in New York the first week in May…”

Regarding George Soros:

Two years ago, George Soros said he wanted to reorganize the entire global economic system. In two short weeks, he is going to start – and no one seems to have noticed. On April 8, a group he’s funded with $50 million is holding a major economic conference and Soros’s goal for such an event is to “establish new international rules” and “reform the currency system.” It’s all according to a plan laid out in a Nov. 4, 2009, Soros op-ed calling for “a grand bargain that rearranges the entire financial order.

Soros wrote an Op-Ed in March 2009 that explained how Credit Default Swaps were used as Bear Raid instruments to bring down the big banks in 2008.

Full article: Credit Default Swaps Remain a Secret Weapon of Economic Warfare (Global Economic Warfare)

Germany prepares for ‘inevitable’ Greek crash

The German finance ministry is pushing for Greece to declare itself bankrupt and to agree to a ”haircut” on the bulk of its debts held by banks, a move that would be classed as a default by financial markets.

Euro zone finance ministers meet today to approve the next tranche of loans from the EU and the International Monetary Fund, designed to stave off national bankruptcy while the new Greek government puts the country’s finances in order. But the severe austerity measures being demanded have caused such fury in Greece, and the cuts required are so deep, that German Finance Minister Wolfgang Schauble does not believe that any government would be able to implement them.

Full article: Germany prepares for ‘inevitable’ Greek crash (Canberra Times)