Some five thousand years ago and change, a brave group of three hundred Spartan soldiers stood on the grounds of Thermopylae determined to protect their homeland and the city states of Greece from the onslaught of Xerxes and his army. Despite the bravery and valiant efforts of those souls, they were slaughtered. This lesson in history should not go unheeded as futility can some times bring hope, renewal and the ability to turn defeat into a rallying cry for victory.
This week’s financial markets are under the category “none of the above.”
“Molon Labe” was the answer the Greeks gave to Xerxes when he demanded their surrender and it I have the feeling the answer from the hedgies this week was “Molson Golden” and a lot of it. You see, there was another stand of the “300” this week yet to the average person it went un-noticed, ignored and unbelievably thought of as just that another one of those events that involves the wealthy and is nothing to worry about. Yet as the American Idol Fan Club snoozed in front of their Wii or other distraction of the week, they all became fully vested in the largest economic crisis since the Tulips got root rot and John Maynard Keynes said “We will not have any more crashes in our time.”
Each and every one of us were given a taste of the pain this week, but alas, it is just a taste as the sample meal is passing us by and the big kahuna is coming out of the broiler. This injection of liquidity by the Federal Reserve, said to have topped some $88 billion this week, insured that every taxpayer now has a vested interest, although small, in their neighbors not losing their homes. It’s sort of a perverse analogy where if your neighbor smokes in bed and burns their own house down in the process, the government wants to burn yours down also to keep us all together and to distribute the “pain” equally.
In a not so hilarious note, the people who are responsible for the crisis, the “banksters” as I so appropriately named them last year, are going to still sit in their asbestos lined castles, free from the pain and agony they are creating in this world as it burns down around them. This injection of liquidity was designed to fill the need of redemption notices being poured into hedge funds worldwide and to stabilize the banking system by providing short term relief for a long term problem. To give everyone a tad bit of perspective, the amount added just on Friday by central banks worldwide totaling some $300 billion (hereafter referred to as “The 300”) was basically spitting on a five alarm blaze in a fifty story fire to put it out. If you look at the overall structure and liability of the entire notional derivatives market, the estimated risk of everything is around $500,000,000,000,000.00 ($500 trillion for short). To say that this is a paltry amount of reserves added to a crisis which is leveraging itself up daily is an understatement. The problem with the estimates the general public continues to hear from the banksters and our government is that by failing to report the numbers accurately, not one entire soul in the regulatory or private sector community have one iota of a clue of just how much more bad news is about to come down the pike. The 300 was to stem a stock market crash and provide an orderly decline as opposed to letting everyone liquidate and run for the exits all at once. However the stories continue to drip and drab out on a daily basis about hedge funds, mortgage companies and banks losing tens of billions of dollars because of “miscalculations” on these various derivative instruments. The 300 did nothing but postpone the day of reckoning or stretch it out over the next few weeks. The truly severe problems start to hit in October when the third quarter financials are reported by corporate America and shareholders worldwide want one question answered: “How much exposure?”
The 300 will forever be a number that seems to repeat in human history and for my part, I shall keep the stories alive. The monies added last week have done nothing but guarantee that the true flight to safety and stability will begin in earnest and that the rest of the world really does have a reason to lose faith in the ability of our nation to manage it’s financial affairs in a legal, open and transparent manner. The world markets indicated quite openly that gold and silver will make a come back and the first nation to move to a commodity basket base for their currency will be the winner as hyperinflation over takes the former members of American hegemony. The Imperial Senate is not in session and there are no Spartans to protect our shores from this financial barbarism about to invade. On the shores of Thermopylae there is but one monument which states the following:
“Stranger, go tell the Spartans that here we are buried, obedient to their orders.”
Where the Hedge Funds which destroyed America are headquartered, I shall go forth and put a monument on the side of one of the condos in the Caymans which shall state the following:
Stranger, go tell the world that all bank deposits are not guaranteed to be returned….