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 President Bill Clinton signed into law the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act.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.
I’m quite surprised at some of the stuff I’ve been seeing lately. Well, not particularly surprised, but at least intrigued. The bees are swarming around the honey-pot at quite the rapid pace. It’s almost as if NAFTA and LOST are around the corner or something (lol).
Loans that they never have to pay back. LOL!
Yeah.....almost.
fofl!
Oh, and of course, the immigration rider as well...
Why don’t you stop trying to BS on these threads. You have half the facts and act like you have all of them. I get my information direct from people in the markets. It is direct information, yours is a reading from who knows where. You obviously don’t know how the markets work from your misguided comments.
Private equity groups are indeed allowed access to the discount window when they are affiliated with a member bank, and most are because otherwise they would not be holding that worthless bank paper.
Those affiliations are part of the problem. Banks have allowed hedge funds to buy their paper. Those funds are unregulated and are used by banks to unload debt much as Enron created SPEs to offload debt. The Bear Stearns hedge funds went out of business because they held subprime MBS that Bear unloaded on them.
Bear crafted their own bailout but never followed through. The mark to market valuations on the paper they unloaded were zero because there were no buyers for the paper. That caused margin calls throughout the sector. Those margin calls caused a huge selloff in equities causing such giants as Countrywide Financial to talk of bankruptcy. That is when and why the Fed stepped in.
To unload the worthless paper held by affiliated unregulated private equity hedge funds, the Fed cut the rate at the discount window. Those hedge funds got in line at the window with their margin call letters from member banks. That’s all they needed.
This is what the phony manufactured "housing bubble" is all about. Just another foot-in-door shot at creating the NAU.
SENATE ATTEMPTS TO STUFF AMNESTY DOWN THE THROATS OF THE AMERICAN PEOPLE AGAIN THIS WEEK
Yep, I’ve been watching those threads...
The sub-prime loan 'problem' was manufactured by media muscle. There was no problem; interest rates were holding low enough that refinancing was working smoothly until the drive-bys started screaming "housing bubble," and the sheep started to believe them. Keep on worshipping the liars.
Where have you been?
Uhhh, working.
Is that what you call it when I point out your errors?
Private equity groups are indeed allowed access to the discount window when they are affiliated with a member bank
Yes, only banks can borrow at the discount window. I'm glad I could point you in the right direction.
and most are because otherwise they would not be holding that worthless bank paper.
That's funny!
Banks have allowed hedge funds to buy their paper.
Allowed?
That doesn’t surprise me in the least. : )
A liquidity crisis occurs when you have sufficient assets, but cannot liquidate them fast enough to prevent a default.
Insolvency means that insufficient assets exist, regardless of liquidity.
Hey there...just a quick note to...note your wisdom and intellect. Ok, sorry to bother :)
Do you ever just want to crawl away from all the government stuff and just find some “news”? True and disappointing story here...I was doing some research on on government agencies, etc. a couple days ago and stumbled upon a media arm. I found a link to VOA. I didn’t realize that’s a government sponsored news outlet. Interesting.
Well, a lot of things happened, but overall, you saw lower prices for many asset classes, particularly real estate and stocks. There was some measure of deflation. A small number of institutions went under, and a large number of them consolidated. Non-performing loans (NPLs) were considerable, and were considered for a while to be the greatest systemic danger.
Many of these loans eventually began to perform again --- a circumstance that I don't think we would see here in the U.S. since we are far faster to clamp down on a non-performing loan than the Japanese.
Other things happened, such as the government borrowed a lot of money; however, they wisely also pushed interest rates very low, and thus borrowed money at very low interest rates (often at 0% in nominal terms) and thus weren't paying a lot in interest on the large sums they borrowed.
The Bank of Japan bought a lot of U.S. dollars to keep the yen down, and now holds around USD $800 billion in foreign reserves, which are held at much higher interest rates than any JGBs are paying.
The Japanese continued their massive acquisition of foreign assets, and continue (as they have since 1991) to have the world's largest international net asset position.
Yes, and the problem with picking when a bubble is going to burst, is that it can keep on expanding for years and if every early warning is heeded, much money is left on the table.
This could, but probably will not end like 1929.
The media have been screaming "housing bubble" since early 2006.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.