NOTE:
I’ve been warning my readers that a planned depression is upon us. Other economists and news media have been parroting the fear of “inflation” and “hyper-inflation.” Some have even gone so far as to use oxymoronic terms like “hyper-inflationary depression.” Apparently they don’t understand the principles of economics and this environment of FED and Usury.
When banks raise interest (as this article explains) the trillions of dollars in low-interest derivatives bank loans will cash out of that market and go into those high interest-bearing investments that are not circulated in the general economy. The interest rate will go even higher, and a larger percentage of the proceeds will go into, and stay in, the pockets of bankers.
The combination of the evaporation of the capital in derivative loans, and the raising of interest (thus, fewer loans created) will cause trillions of dollars to leave the FED money pool (M1). Money will be more scarce, and that will kill American jobs and purchasing. The effect will be a cascade of closing businesses and a jump in unemployment which is already at 1930’s depression levels.
If this author is right (and he sounds very credible) you should hold on to all the cash you may have. In a depression cash is king.
There is an abiding rumor out there that the American dollar is going to be “devalued” … insinuating that over night, at some point in the near future, the government will declare that your money is now worth only a percentage of what it was worth the day before. Thus, the proponents of this theory advise people to buy gold (as if gold isn’t vulnerable to devaluation).
The truth is, a nation’s currency is never devalued in the way described above (as claimed by deceptive economists). Currencies are devalued when a nation’s government is overthrown or loses power for any reason. The value of currency is preserved by the viability of its government. It’s value depends on the faith of those who use it, and by the strength of its military to enforce it.
In America, the purchasing power of the dollar is getting weaker, but not because of devaluation. Neither is it due to inflation. Rather, it is caused by the expansion of government that forces each dollar to buy more than the product of purchase. Each dollar purchase in America has to pay more and more government taxes, fees, bank usury, etc., than ever before. These add-on demands upon the dollar is the reason our dollars buy less today. As more of the dollar goes to supporting government excess, less and less of the dollar is usable for purchasing real products and services. It has nothing to do with inflation. In fact, due to the extra and growing burden of government theft, the economy is weakening and the size of the pool of money available to the public is actually shrinking. This equates to deflation — the opposite of inflation.
(-ed. Ben)
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Quadrillions In Derivatives Is Ready To Blow Up A Magnitude Bigger Than What Happened To AIG. They Are Rate Sensitive. Every Tick Up Brings Us Closer To A Massive Event!
Basel III is going to happen, and the Fed will vote for it, and if they do, then congress will sign off without a peep.
For those of you that have been paying attention to my posts on the coming economic collapse. A MAJOR indicator is about to happen. The Fed is going to vote on Basel III Implementation in the USA on July 2, 2013. Increased capital requirements and decreased leverage requirements can only lead to a slow down in availability of credit.
Buckle up, because here we go…
The Federal Reserve plans to vote July 2 on whether to adopt a year-old proposal to implement a global agreement on bank capital buffers, known as Basel III, a critical step to ensure that large financial institutions are sufficiently cushioned against future financial shocks. Based on the proposal, which implements the international accord agreed to in September 2010, banks will be required to hold the strictest form of common-equity capital at 7% of their risk-based assets, up from 2% currently. U.S. bank regulators may seek to adopt a tougher new leverage limit rule for banks, as a separate proposal. The Fed approved the introduction of the Basel III proposal by a vote of 7 to 0.
If and when Bond Yields go parabolic, banks and hedge funds will begin cashing in interest rate hedges…all in the middle of a liquidity crisis, how’s that going to work out…
The 441 TRILLION Dollar Interest Rate Derivatives Time Bomb
….And yes, if the average rate of interest on U.S. government debt rose to just 6 percent (and it has actually been much higher in the past), the federal government would be paying out about a trillion dollars a year just in interest on the national debt. But that isn’t it. Nor does the primary reason have to do with the fact that rapidly rising interest rates would impose massive losses on bond investors. At this point, it is being projected that if U.S. bond yields rise by an average of 3 percentage points, it will cause investors to lose a trillion dollars. Yes, that is a 1 with 12 zeros after it ($1,000,000,000,000). But that is not the number one danger posed by rapidly rising interest rates either. Rather, the number one reason why rapidly rising interest rates could cause the entire global financial system to crash is because there are more than 441 TRILLION dollars worth of interest rate derivatives sitting out there. This number comes directly from the Bank for International Settlements – the central bank of central banks. In other words, more than $441,000,000,000,000 has been bet on the movement of interest rates. Normally these bets do not cause a major problem because rates tend to move very slowly and the system stays balanced. But now rates are starting to skyrocket, and the sophisticated financial models used by derivatives traders do not account for this kind of movement.
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