Financial Tsunami

The truth of what is happening is overwhelming for many. We wish to be sensitive to people who have lost money in the financial tsunami.

We can and will reach a more peaceful world when we teach peace. In every crisis there is opportunity. In each and every day there is beauty and people to cherish. The below information is provided to help peacemakers understand the bigger picture.

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We are witnessing the end of the one money era and the beginning of another. Unfortunately, rebounds in the stock market and a stronger dollar are temporary as government overspending is destroying the dollar.

This latest round of craziness started when the Commodity Futures Modernization Act passed in 2000. After the new investment products were introduced, Warren Buffett identified them as “financial weapons of mass destruction.” Buffett is correct and what we witnessed in the last month is minor compared to what will happen next.

Early warning signs were everywhere and an especially noteworthy one was the discontinuance of the M3 money supply statistics in March 2006. On February 14, 2008 the Washington Post published Predatory Lenders' Partner in Crime: How the Bush Administration Stopped the States From Stepping In to Help Consumers. The article by then New York State Governor Eliot Spitzer, charged "Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye." This article by Spitzer, with public testimony to Congress, and a national CNBC interview, fell from public attention when his involvement in prostitution became headline news. In March 2008, a secret House session, the first since 1983, was reported to have focused on the current financial crisis under the cover of a Foreign Intelligence Surveillance Act discussion.

Taxpayers started receiving their some of the $150 billion IRS stimulus package, which led to a dramatic money supply increase. On May 30, 2008 the failed Bear Steans was purchased by JPMorgan Chase. On September 7, 2008 Fannie Mae and Freddie Mac went into conservatorship. At this point many people began to realize the seriousness of this financial tsunami as Fannie and Freddie owned or guaranteed half of the U.S. $12 trillion mortgage market. The initial $200 billion for Fannie and Freddie could ultimately exceed $500 billion.

The waves of disaster continued with the Lehman Brothers bankruptcy, a distressed Merrill Lynch, and a failing AIG. AIG is the U.S.'s largest insurer and had it collapsed, the rippling effect on other financial firms would have likely resulted in the U.S. dollar being demonetized by the end of 2008. A demonetized dollar means dollars would no longer be legal tender.

As investors panicked, withdrawals put stress on banks. As a result, the biggest bank failure in U.S. history occurred on September 25, 2008 when Washington Mutual went into receivership. A $700 billion bailout package, best summed up as giving an addict more heroin, was rushed through Congress with little discussion in the media of the deeper problems originating from the Federal Reserve private banking cartel. Like the initial Bush administration Iraq War estimates of $50 billion that I estimated to be $1.9 billion or more in my 2005 American Hiroshima book, I am now estimating the $700 billion is the appetizer of what will likely be a $2 to $5 trillion taxpayer bill.

On September 28, 2008 Congress.org reported that over 91% of Americans opposed the bailout. The $700 billion was initially rejected by Congress. When the stock market tanked the following day, rather than pursue steps to solve the root problem, panicked Americans shut off their brains and went along with anything that would stop losses in their 401(k) and investment portfolios. The bill signed into law by President Bush on October 3, is grand theft for international bankers. This is illustrated by Section 112 where taxpayer funds are buying "foreign troubled assets." Sadly, few Americans know about the Bank for International Settlements, who owns it, and its relationship to the Fed. The infamous Section 8 secrecy language in the proposed September 29 bill reappeared with minor changes in Section 129C. Section 129C states "The information submitted to the Congress under this section shall be kept confidential (upon the written request of the Chairman of the Board, in which case it shall be made available only to the Chairpersons and Ranking Members of the Committees described in subsection (a))."

On October 8, the central banks of seven nations lowered interest rates by half a percent. This was the first time that so many central banks lowered interest rates together. The global stock market officially ended the week below 20% which is the technical definition of a global crash. On October 10, the G7 countries (U.S., Japan, Germany, Britain, France, Italy and Canada) announced efforts to infuse cash to stabilize banks. As a result of renewed investor confidence, the stock market had its best single day in history on October 13 with the DOW increasing by 936.

The bailouts have boosted confidence but soon people will wake up that what has happened is similar to a monetary attack by a foreign enemy. Specifically, the bailout is similar to a CIA operation in Iraq during the 1990s. Iraq was flooded with counterfeit money indistinguishable from Iraqi currency. The fake currency, undermined the entire Iraqi economy. The Nazis planned something similar called Operation Bernhard in World War II. Had they succeeded in flooding the British with counterfeit notes, the British pound would have been devalued undermining Britain's economy.

Long-term, we are on a course to have the dollar demonetized. Two generations of Americans have lived in a world where a demonetized currency was beyond all imaginations. The economy is now positioned to go over the cliff as the bailouts are leading to more bailouts. Misguided actions by Congress, the President, and the Fed have done nothing to prevent the financial tsunami from becoming a financial American Hiroshima. A great depression could be triggered by the combination of declining housing prices and toxic credit derivatives.

As Will Hutton observed, "..the dark heart of the global financial system is the $55 trillion market in credit derivatives and, in particular, credit default swaps, the mechanisms routinely used to insure banks against losses on risky investments. This is a market more than twice the size of the combined GDP of the US, Japan and the EU. Until it is cleaned up and the toxic threat it poses is removed, the pandemic will continue. Even nationalized banks, and the countries standing behind them, could be overwhelmed by the scale of the losses now emerging."

The U.S. is especially vulnerable because we are approaching the time when the interest on the national debt will be unserviceable and this will result in demonetization and the introduction of the Amero. Adding the realistic likely costs of the financial tsunami to the previous national debt puts the national debt to Gross Domestic Product (GDP) ratio at over 100%. This is especially troubling when you realize the $55 trillion in credit derivatives exceeds global GDP. A credit derivative is a security whose price is dependent upon or derived from one or more underlying assets. A credit derivative contract's value is determined by fluctuations in the underlying asset or assets. In the current situation with rising home foreclosures, credit derivative contracts with home mortgages as assets are deemed toxic or very bad holdings.

Congress has done nothing to address the structural flaws of the Fed fiat money system.

The Euro is in the process of replacing the dollar as the world's reserve currency. The Euro and gold will continue to play a prominent role in international oil trades. We will soon see the Euro become the world's default reserve monetary currency.

In conclusion, a new era is upon us. The United States is experiencing unprecedented changes. The financial services political action groups are among the most powerful in the country. The key reason we are now seeing members of Congress support socializing banks is members of Congress and the Executive Branch are preparing to transfer the next round of losses to the American people.

Education is the key to a more peaceful world. Readers are encouraged to access the resources below and take advantage of the this "calm" before the even bigger storm.

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October 13, 2008