On March 6th, 2008 Alan Greenspan admits we don’t have a free market. He also admits there was a free market under the gold standard!

This is a great article explaining the current condition of the Western monetary system. It was written by Thorsten Polleit who is honorary professor at the Frankfurt (Germany) School of Finance and Management.

By Bob Chapman
The International Forecaster
September 18, 2008

Losses and bankruptcies of the major banks that we predicted, trouble for the taxpayer who now shoulder a trillion in debt from bank failures, Why do we have to bail out Wall Street fraud? Lehman Brothers left to expire, We are watching our Zombie economy implode, Buy-outs are just throwing good money after bad, Toxic waste eats your equity capital, eats your stocks, your bonds, and eats your retirement funds. 1929 all over again.

The business end of Hanky Panky Paulson’s bazooka is glowing red hot as it continues to fire round after round of high explosive moral hazard contains an up to 85 billion dollar, two-year bridge loan from the Fed to the world’s largest insurer, AIG, to be guaranteed by the US taxpayer via the US Treasury.

Warrants convertible to up to 80% of the common stock of AIG will be pledged as collateral to secure the US Treasury’s loan guarantee to the Fed, with proceeds from the sale of AIG’s now virtually worthless assets being supposedly used to pay down the loan. It’s just Bear Stearns mixed with Fannie and Freddie. You have a loan from the Fed guaranteed by the US Treasury being used to bail out AIG directly instead of being used to facilitate the assassination of BS by a predatory lender (i.e. JP Morgan Chase), and you have what will be ultimate taxpayer ownership of AIG’s toxic waste by having common stock pledged as collateral instead of being purchased through equity injections, as with Fannie and Freddie.

The Treasury’s potential 80% ownership greatly dilutes the value of the existing common shareholders, and the Treasury has been given the right to stop dividend payments on both common and preferred stock of AIG shareholders, which means basically that they have both just been vaporized. The Fed’s Fascist Follies continue.

You, the US taxpayer, will now not only end up owning nearly worthless stock in these corporate cesspools, you have assumed all of their liabilities up to the amount of the loans/capital injections. Remember, the bondholders are still ahead of you!!! BS was $29 billion (plus), Fannie and Freddie are $300 billion just for openers, soon to grow into a loss in excess of one trillion, perhaps even as much as two trillion or more, and now we pour another 85 billion into the pot of boiling moral hazard for AIG. As we inhale the radioactive fumes from the detonation of this latest round of DU laced moral hazard, the stock markets and the dollar rally, while gold and silver decline, all thanks to the manipulation of markets that are rigged daily by the same scum who are bailing out the fraudsters. It is nothing short of surreal.
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by Bill Holter

To all; we are now entering uncharted territory. The government seizure of FNM and FRE opens up the next and terrifying chapter of the credit crunch. As I have posited many times before, this has NOW ENDED UP IN THE LAP OF THE U.S. TREASURY! The Treasury is now the backstop to all things paper. This will be a real life “Atlas shrugged”. There are huge implications to this step. The Treasury will now have between $5-6 Trillion of mortgage loans added to its balance sheet. The Treasury is in a huge deficit already to the tune of $10 Trillion of funded liabilities and over $70 Trillion of unfunded future liabilities. It is over. The U.S. Treasury is broke. This will take the entire banking system with it. The banking system will need to writedown $36 Billion of Fannie and Freddie preferred stock that is carried as core capital. This means at a 6% reserve ratio, that another $500 Billion of credit must be withdwrawn to keep capital ratios from collapsing. The Treasury stimulus plan was $140 Billion [remember those $600 checks]. Now 3 times that amount will have to be withdrawn from the credit pool unless Treasury doesn’t magically credit these banks with $36 Billion.

There is no telling how much the carried loans are really worth in todays market as even prime loans are only fetching .80 cents on the Dollar. This will cost at least $1 Trillion at a minimum for starters. It will all be printed. The credit rating of the U.S. will be downgraded, the interest rates the Treasury will now have to pay will increase substantially. This is so Dollar negative it goes beyond words to describe it. The borrowing ability of the Treasury is now being hamstrung by the same credit crunch that we were assured last Sept. was “contained”. I’m sorry but the ruse is over. A government running a deficit can only do two things to cover the gap, borrow more or print. They can’t raise taxes because that will implode the economy even worse than it already is. They will find it more and more difficult to borrow the sums needed until the auctions begin to fail. Then the “black helicopters” will be out in full force spreading freshly printed Dollars. The dilutive effect to the Dollar will be astonishing. We are entering the Weimar Republic phase. The Treasury will be crushed under debt and the Dollar [Fed] will be crushed through overissuance of new currency used to buy the Treasury debt.
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by James McShirley

Now we know. The giant black hole of derivatives at JPM is about to become the size of Jupiter. With the utter failure of Fannie and Freddie (a culmination of what I predicted 12 years ago) Fannie and Freddie’s massive derivatives portfolios can now be hidden from public scrutiny. These trillions of derivatives, which in likelihood have already failed, can now be whitewashed with the able assistance of the US taxpayer. Also the true values of their mortgage portfolios gets deep-sixed. This is no doubt the single largest financial failure in the history of the world. The Fed had every reason to previously discontinue M-3 reporting. Can you imagine what is about to happen to the dollar supply once this catastrophe starts getting paid for? Look for wild market gyrations as these derivatives get dealt with by the insiders who will now know both sides of the trade. What a deal, the taxpayer backs you and you know both sides of the trade, how can you lose? The derivatives may now become hidden from view, but the inflationary implications will become VERY evident. Another ominous problem facing FNM and FRE is a collapse in their pension plans and retirement funds. Retirees and current employees holding FNM/FRE stock will get wiped out, however a pension fund collapse would mean open revolt. This is another side-bailout I see coming.

Since FNM/FRE’s gigantic derivatives allegedly hedged against rising interest rates I think it’s safe to say you won’t be seeing any Fed interest rate hikes coming soon. This government takeover of the largest financial entity in America has in one fell swoop put into question ANY guarantee of debt, sovereign or otherwise. With this news gold should be up hundreds, maybe a thousand dollars if free markets were allowed. They will need to throw the kitchen sink at paper gold to prevent it from revealing the truth of what just happened. US Treasury bond prices now look egregiously high. This time it might not work. Next up for the weekend-only government news release program? Bailouts for GM, Ford, the entire banking industry, and who knows, if I’m hearing Bill Gross correctly maybe even PIMCO.

An article in the Sunday Telegraph ( 27 July, 2008) reveals that HM Treasury is planning to bail out U.K. mortgage lenders to the tune of amost £50 billion! The article explains that the Treasury would swap or exchange Gilt Edged Treasury paper for mortgage debt! Basically Gilt Edged Treasury paper is a euphemism for ripping off the taxpayer through the indirect tax called inflation. What else would one expect from a socialist governmet?
The Sunday Telegraph Article

This is President Nixon’s announcement of the end of gold convertibility for the American dollar. It is interesting to note that all the great things Mr Nixon predicted would happen like a stronger dollar, low inflation and a rebalancing of the trade deficit didn’t! In fact with the abandonment of gold as a monetary anchor the dollar has gone from just over 4 Swiss francs to almost parity today against the franc. Inflation was rampant in the 1970’s also as Mr Nixon closed the “gold window” and has remained rampant ever since and as a result created multiple bubbles of which the latest is the housing bubble. As for the trade deficit it has only gotten worse! America nowadays exports roughly $700 billion less than it imports from abroad! One also only needed $35 back in 1971 to buy one troy ounce of gold! The Austrian School of Economics was right that if the dollar was allowed to float versus gold the value of the dollar would plummet against the yellow metal! Milton Friedman and other mainstream economist were completely incorrect as they pointed out that the value of gold would drop precipitously once the gold standard was abandoned.