Posted by Karl Denninger
Gee, didn’t we see this movie a couple of years ago? (See article posted directly below this one.)
Echoing the kind of trades that nearly toppled the American International Group, the increasingly popular insurance against the risk of a Greek default is making it harder for Athens to raise the money it needs to pay its bills, according to traders and money managers.
Uh huh. I think it looked kinda like this:
Now we get to repeat it, because we have refused to force these abusive derivatives out of the market.
Except this time, instead of destroying a few banks, we’re going to do nations, likely destroy the EU, perhaps destroy the Euro, and there’s a non-zero chance we get a war out of it before we’re all done too.
I’ve been clearly stating for three years that this crap has to be stopped. That these instruments need to be either banned outright or forced onto regulated exchanges where I can see bid, offer, size and last trade, concentration of risk can be monitored, position limits enforced and we can all know that those who place the bets are good for it – nightly – or they get margined out.
As done today, as done since the “Commodities / Futures Modernization Act”, these “contracts” are a scam as there is zero evidence presented that the person who “wrote” the swap is actually able to pay. And as we all know, some of them couldn’t and can’t – AIG anyone? Yet despite what was absolute proof that these contracts were being written fraudulently – that is, without ability to pay – Congress and the Justice Department have done exactly nothing about it.
We can’t “impair” the theft stream, er, I mean “profit stream” of the Goldman’s of the world can we? That would not be fair! We can’t stop them from asset-stripping the entire damn world!
Well CONgress and Mr. President-who-blows-bankers, now you get to deal with what happens when you ignore the “little rumbling” and sit on your ass instead of running – the rumbling was warning of an impending Richter 9 earthquake.
Good luck containing this one folks.
An additional note to Mr. Denninger’s analysis: Remember who now owns AIG. (That would be YOU the American taxpayer.) In addition, the Monetary Control Act of 1980 allows the Federal Reserve to purchase any and all foreign securities it deems necessary to assure financial stability. Such purchases are expressly exempt from any and all audits by the GAO. (See Public Law 95-320 1978)
What do you think the Federal Reserve will do with all that new revenue money they’re going to get free and clear from the passage of the ‘promise of health care,’ the benefits of which are not scheduled to be enacted for three years? Huge tax levy NOW, for benefits ‘promised’ LATER. Where have we heard this before?