Posted on 09/20/2007 4:55:46 PM PDT by NYer
"According to some US experts, some US$ 20 trillion in worthless securities exist, putting US and European banks are at risk. Asia should avoid the worse. A new North American currency, the Amero, is making news.">
According to US financial analyst Mike Whitney[1], a mountain of unfunded, unregulated paper worth more than US$ 20 trillion might be out there [2]. Apparently, no one, neither the general public nor professionals on Wall Street, has yet to realise the extent of the hole, a hole of 20 trillion dollars with no market, nor value.
Even if the Federal Reserve were to ease bank reserve and capital requirements, the existing financial system would still be moving towards its worst crisis in 80 years because the problem is not liquidity, but solvency. The situation is such that banks are even scared to lend to one another uncertain about each other’s solvency. Even the London interbank market is not going beyond day to day lending.
Greenspan and speculative financing
The problem arose in the United States where, starting in 1987, the bank lobby—by means of US$ 300 million in contributions—got Congress to do away with the Glass-Steagall Act (officially the Banking Act of 1933) that had been adopted in the wake of the 1929 Wall Street Crisis. President Bill Clinton signed into law the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act.
The original law had been introduced to avoid conflicts of interests between banks and companies that sell stocks and bonds.
Former Federal Reserve Chairman Alan Greenspan was the main proponent of financial liberalisation. Before his appointment to the post, he had served as a corporate director for J.P. Morgan, the first bank to take advantage of liberalisation.
Under his 18-year chairmanship he oversaw the greatest expansion of speculative financing in world history. But now the chicken are coming home to roost like a would-be train wreck that no one can stop, not even the Fed.
If Mike Whitney’s numbers are right, we are on the verge of a meltdown like that of 1929-1930, perhaps worse because of the world’s greater economic interconnectedness.
Lately, the big US financial and banking groups have tried to protect themselves by selling their junk bonds in Europe and Asia.
In Asia equity in most banking and financial institutions is in US securities and US dollar denominations. Most banks are ranked AA or even AAA by so-called independent agencies like Standard & Poors, Moody’s and Fitch. Securities with such ratings are, or perhaps we should say, were considered virtually risk-free.
Theoretically, US pension funds, insurance companies and big foundations are exposed to the uncontrolled offer of atypical securities of the past decades; so should the US financial and banking institutions which created them.
Yet we should not be surprised if those who hold the keys to the corporate are not, nor will ever be, held accountable for their wrongdoing.
Central banks, especially the Federal Reserve, are at the root of the problem because they have known about the overall situation for quite some time. But whomever is in charge of the Fed knows that a solution cannot be had from within.
Amero, North America’s new currency
With a bank crisis looming on the horizon, an odd piece of information is becoming news. As unlikely as it may seem, the United States along with Canada and Mexico, appears to be getting ready to launch a new single currency: the Amero.
With the monetary bubble on the verge of bursting, one solution would be getting rid of the dollar, replaced by a currency, the Amero, to serve a would-be North American Union.
In addition to the United States, Mexico should join such a union and in principle might be even in favour of it. Canada, too, might join, setting aside its aversion to losing its monetary sovereignty, out of concern that its equity in US dollars might simply lose its value.
When US President George W. Bush met then Mexican President Vicente Fox and then Canadian Prime Minister Paul Martin in Waco, Texas, in March 2005, they discussed a North American union.
The idea resurfaced the same year in a report released by the powerful US Council on Foreign Relations, a group that has influenced most US presidents, both Democrat and Republican, and a tri-national task force involving ministerial-level officials.
Wikipedia already sports a page dedicated to the Amero with the photos of prototypes.
A news report on the Amero broadcast on CNBC is also available on Youtube [3].
Similarly, 20 Amero coins can be seen on the Hal Turner Show webpage, with a small D visible, D as in ‘minted in Denver.’ Curiously, the Denver Mint is currently closed to the public, ostensibly for restoration work, till September 28 [4].
Whilst AsiaNews is unable to determine whether there is any basis to such claims, it does seem certain that a plan for a North American union is being developed [5].
Such an entity would have a population almost the size of the European Union, and could adequately respond to the current bank crisis that is bound to end up in a monetary crisis.
However, far from being a simple monetary union, the operation is likely to mean a de facto US annexation of the rest of North America.
For Asia the real point of interest would be economic rather than political since the Americas have been the United States’ backyard for a long time.
Firstly, the Amero would be definitely weaker than the US dollar because it would include the Mexican pesos, which was insolvent not so long ago.
A weaker North American common currency would quickly push the value of the currencies of China and the whole of Asia, which have hitherto been reluctant to do so.
Secondly, converting dollars used outside the United States would raise problems since in Asia as well as in many countries around the world payments in dollars are more common than one might think. In this case the impact of a North American union would also be very significant.
yes, market action implies great confidence that central banks will be able/HAVE been able to keep this from becoming a more general problem. I have no doubt this is something the ECB, the Fed, and others are absolutely trying to do.
Those with dollars will pay the bill. If/when the dollar sinks low enough, it will be replaced with another currency. During the transition period gold will skyrocket as an interim currency.
Get into hard assets while you can.
BUMP
The banks are in charge and the Fed is their lackey.
The Democrats and Rinos in Congress have no control over the Fed.
BUMP
An entertaining but poorly written article.
Not only that but build some capital to take advantage of the enormous opportunties that will be there for the taking.
BUMP
get out of debt and stay out of debt
Not only that but build some capital to take advantage of the enormous opportunties that will be there for the taking.
Put you right foot in. Pull your right foot out. Do the hokey-pokey and shake it all about...
People are not in debt by choice, though their choices may have put them into debt.
It seems to me that Ben Bernanke has made it possible for the hole to be plugged at the discount window.
Your friends have the option of bringing their worthless paper to that window and getting cash at 5.25% in exchange.
Ben has made the market. So what’s the problem other than a slight dollar devaluation?
The problem is with your friends who after holding the worthless paper and trading it for cash, decide to deploy that cash in future worthless paper.
History repeats itself.
Mmm....cheese!
Hey, Mr. Atlanta. I lived there years ago. It is still one of the most beautiful places we’ve been. It’s so green! The traffic made me crazy though. ;o)
Lookit this: News reports say lawyers, accountants and brokers looked like they were busy beavers clearing trades for “investors” in a hedge fund called A.R. Capital
Trouble is THE HEDGE FUND WAS A COMPLETE FAKE. The fund professionals were taking the life savings from pensioners pretending they were investing it-----the money was pouring into hedge fund honchos' pockets.
Investment "reports" to investors were completely fraudulent.
Hedge funders could have been using the monies to prop up their own investments in the market.
BTTT!
So you’re a Ron Paul groupie...
I’m out of here for the weekend.
Enjoy your meetup with the lefties.
Agreed!
Yes, but why can’t I find anybody who personally has that confidence? All I can find is the opposite. Granted my professional and social circles don’t really consist of the clueless masses, but neither am I completely holed up in a sheltered world of bankers and hedge fund managers. I really don’t think I’ve run into a single person who would have any opinion at all on the financial market outlook, who doesn’t see really bad things coming really soon. And the people who don’t have any opinions at all on such things aren’t making their own investment decisions — their meager financial assets are being managed by pension fund managers, mutual fund managers of funds selected by their employer’s 401k plan, banks where they’ve got CDs, etc. I remain puzzled.
There are nearly 500 TRILLION dollars of debt out there backed directly or indirectly by sub prime loans. For ever 1 dollar of sub prime mtg debt, the debt it supports is 20 to 30 times that, as theses bundled mortgages were used as collateral to borrow more money to buy more debt securites etc etc..
To give you an idea HOW big this is... the world wide (not just the USA, but world wide production (the value of everything produced on the planet) is about 60-65 Trillion a year. So that means that if the entire worlds production was dedicated just to pay off this debt, it would take 8 years roughly to do so.
This is a scope and scale that few alive today have witnessed..... its going to be ugly folks.
$500 trillion of debt? Who borrowed the $500 trillion? Who lent it?
So that means that if the entire worlds production was dedicated just to pay off this debt, it would take 8 years roughly to do so.
You are confused. You have a source for this assertion or is it something you came up with on your own?
Look at 1929 to 1955.. was roaring along well in 1929, then the bottom fell out.
The only issue here is whether this will be a slow enough deflation of this enormous bubble that the worldwide economy will be able to mostly handle absorbing it... IE long drawn out minor recession or flatlining.. or if it will be a rapid deflation. If its the later, it will be a global depression.
That’s assuming every dollar of that debt is “bad” and uncollectable, which it is not, not in any way, shape, or form. Subprime loans still only default at about 7% and it probably won’t get much higher than that.
I’m in banking. I’ve never heard anyone, including members of the regulatory bodies or large bank CEOs discuss the Amero. You might want to ask this branch manager where he’s getting his info, but its not coming from the banking system.
Are we headed for an epic bear market?
Pay close attention to the following paragragh:
When you add it all up, according to Das' research, a single dollar of "real" capital supports $20 to $30 of loans. This spiral of borrowing on an increasingly thin base of real assets, writ large and in nearly infinite variety, ultimately created a world in which derivatives outstanding earlier this year stood at $485 trillion -- or eight times total global gross domestic product of $60 trillion.
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