Part 4 – Wall Street’s Perverse Logic

Linked with Matthias Chang – Malaysia, with The Real Significance of the Fed’s Zero-Interest-Rate Policy ZIRP, with The Federal Reserve is Bankrupt, and with Bernd Senf – Germany (and with all its english and german links).

Published on FutureFastforwrd, by Matthias Chang, 19 December 2008.

“As more loans are repaid, there is less need for dollars” …

I want readers to read the above quote a few times and really ponder on the implications of the statement made by Robert Sinche, the head of global currency strategy at Bank of America in New York, the third-largest U.S. bank.

Does it make sense to you?

I ask this question because it was only a few months ago, that we were told that banks’ capital base have been depleted to bare bones, that they are all bankrupt, totally bankrupt.

The various assets which they have acquired (the toxic wastes of CDOs etc.) are all junk and fetch at the most ten cents on the dollar. A big chunk have been unloaded onto the FED in exchange for quickie loans under the TARP program.

The banks’ problems have been further compounded when hedge funds and other investors who have leveraged up to 30 times and or borrowed to the hilt have all busted and the securities (CDOs, Mortgage-Backed Securities etc.) have been valued as junk! They have therefore defaulted and the securities pledged to the banks cannot even be sold to reduce the exposures of the bank.

Therefore, these defaulting parties are in no position to borrow elsewhere to repay the outstanding loans. They don’t even have assets to pledge to the bank for further loans. They are dead meat!

Now we have also been told that inter-bank lending has also come to almost a complete halt because banks have no confidence that any security offered by banks who need short-term loans (overnight etc.) are of any value. This is because most banks are up to their eyeballs in toxic wastes. They have been selling to each other and to global investors a whole load of shit.

Such desperate banks cannot borrow in the inter-bank market … // …

… The statements by the Bank of America’s analyst and other so-called experts and economists are nothing but a smokescreen to hide the truth from the people.

The entire global banking system is in a mess. Most Western banking institutions are bankrupt. Their exposures are in the trillions and whatever loans that have been repaid (if any) will not reduce the exposures.

The so-called trillions are all mere digits in the banks’ computers. They are fools’ money.

And as for the US dollar, the paper itself has more value than the numerals printed on it, be it the $1 bill or the $100 bill.

The recent strengthening of the dollar was another con-game perpetrated by Bernanke and Paulson on instructions from the masters of the Shadow Money-Lending system.

And the idiotic rationale for the strengthening of the dollar was allegedly the flight to safety by investors as a result of the collapse of the derivative financial products.

Is this not perverse logic?

The house is burning. The dollar is worthless, mere toilet papers! Real estate has dived and continues to descend to lower depths. These are all dollar assets.

If the dollar is toilet paper and assets are denominated in dollars, what you are having is a load of shit … (full long text).

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