Destruction of the US Dollar II
POSTED BY: SignyM
UPDATED: Thursday, February 19, 2026 15:30
VIEWED: 12130
PAGE 2 of 10
FALL is the Time for HARVEST...
This article is quite old by now , but it is only More True due to the time elapsed since it went to publication :
8500 US Banks : Many Will Die Soon
http://cryptogon.com/?p=2994
" How bad is this going to get?
Bear Stearns got bailed out ‘cause they were highly visible (read: failure would have exposed aforementioned funny money to the average Joe), Freddie Mac and Fannie Mae are Government Sponsored Entities who now have their sickly balance sheets backstopped by the U.S. Treasury (read you & me), but all the commercial banks have is the Federal Deposit Insurance Corporation.
Great! All accounts are insured to $100,000! We’re saved!
Way wrong. The FDIC is an insurance operation. They make an educated guess as to how many banks will fail and what the total exposure is, then they collect insurance premiums from them. They’ve got $51 billion … and Indymac alone sucked up 10% of that. If a big one lets go, like Washington Mutual or Wachovia, then the FDIC will look just like FEMA did facing down hurricane Katrina. Don’t go and look at the scoreboard on the Bank Implode-O-Meter unless you’ve got a very strong stomach. Oh, and do note that a good bit of those write downs are investment banks - the FDIC does not cover their activities.
OK, very scared now, so what do I do?
Run, don’t walk, to your bank and get the funds you have clear of this mess before it gets any worse. The safe deposit box … isn’t. There were rules during the Great Depression such that a treasury agent got to paw through any that were opened before the owner got to touch their stuff; gold, silver, and cash could easily be confiscated in an emergency. "
There's More bad news , besides the foregoing :
" This can not be stopped. The losses have already occurred. It isn’t an “if”, it’s a “when” and I was expecting it around 4/1/2008, but they held it off for another quarter. It looks for all the world like July is the lucky month with the Indymac stuff coming down right next to Fannie and Freddie’s corpses hitting the mighty U.S. Treasury Reanimator. Someone, somewhere is going to pull a joker out of this house of cards – some innocuous bond sale somewhere will fail, a monoline insurer will get pushed over the edge, and then the rout will begin.
The Ginormous Banking Enema has begun with the first little squirt from Indymac Bancorp’s failure. It won’t end until we’re all up to our nostrils in an alphabet soup of make-believe financial instruments and newly-created federal agencies conceived to clean up the mess. "
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This just came to my inbox , and it confirms what I've been saying in this thread , and the previous one :
" This is the greatest Silver and Gold buying opportunity of all time , or is it the end of a bull market?
The bull market is far from over. To say the precious metals bull market is over is as foolish as saying there was never a bull market in the first place. It's a documented fact, throughout history , all bull markets last 14-19 years. This bull market has been going since 2001. So we still have at least , another SEVEN years to go. Commentators , who believe that the commodity bubble in silver and gold has popped , don't understand what drives them in the first place.
Remember , if the fundamental reasons that drive a market don't change... The market direction has No reason to change.
The fundamentals have not changed! High energy prices , government over spending , the under-water banking system, the credit-mess , inflation and especially the mass production of the FIAT-based U.S. Dollar.
The key fundamental reason that drives Gold and Silver is the mass production of the U.S. Dollar.
Silver , especially Gold are not commodities ; they are money and nothing else.
Intelligent investors and main street people , whom have piled into gold and silver , have done so for protection.
They are not buying metals because they think that the demand for electrical conductors or jewelry is going to go through the roof. They are buying it for protection against the devaluation or outright devastation of the U.S. Dollar.
Ask yourself ; is the devastation of the U.S. Dollar over?
Not even close! Wall Street has always used the old smoke and mirror trick of currency index markets , where they trade one currency against the other.
Think of it like a wrestling match , they pin two equally bad FIAT-based currencies against each other to see who's worse off.
The recent rise in the dollar index does not mean inflation has slowed or stopped , nor does it mean the Federal Reserve stopped printing money. Bottom line , inflation is caused by a devaluating dollar. The devaluating dollar is caused by the mass production of paper currency.
The un-Federal Reserve can never stop printing money. More and more worthless paper money has to be pumped into the system in order to keep the " ponzi scheme " going. Like all schemes, they always come to a devastating end.
The real question is , how close are we to that end? You can do the math , since the 1913 inception of the Federal Reserve ; the U.S. Dollar has lost over 97% of its purchasing power. Every time the Federal Reserve bails out another bank and " adds liquidity " to the tune of Trillions of dollars; it creates money out of thin air , creating more inflation. In turn , the purchasing power of your money lessens , despite what the U.S. Dollar Index is saying.
Currency index markets are manipulated. Don't believe it?
Look at the Japanese Yen; everyone knows it's artificially suppressed by its internal government in order to make their goods more affordable for the rest of the world to buy. Japan is a net exporter... They need the income!
The recent drop in gold and silver, resulting in the rally of the U.S. Dollar , is nothing but a short term manipulation caused by the unwinding of hedge funds and central banks that are notably walking away from the U.S. dollar.
The U.S. Dollar is now seen across the world, as a liability , not an asset.
All markets swing like pendulums. Many times , they swing too far one way and then too far the other. Gold and Silver prices became overbought , they went up too high , too quick. The same market funds that were short dollars , betting the dollar down, were long silver and gold. Once major hedge funds started unwinding their short dollar positions , they also took profits in their net long metals positions.
This created a snow ball effect. Meaning, the drop in gold and silver were " technically- based ". Futures traders who leverage the market price of gold and silver , saw the volume a
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" A centralised democracy may be as tyrannical as an absolute monarch ; and if the vigour of the nation is to continue unimpaired , each individual , each family , each district , must preserve as far as possible its independence, its self-completeness , its powers and its privilege to manage its own affairs and think its own thoughts. "
--James Anthony Froude
(1818-1894) Author and historian
Source: Short Studies on Great Subjects
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" Although economists have pontificated over the decades about this or that cause of the Great Depression, even the current Fed chairman Ben S. Bernanke, agrees with Friedman's assessment that the Fed caused the Great Depression.
At a Nov. 8, 2002, conference to honor Friedman's 90th birthday, Bernanke, then a Federal Reserve governor, gave a speech at Friedman's old home base, the University of Chicago. Here's a bit of what Bernanke, the man who now runs the Fed – and thus, one of the most powerful people in the world – had to say that day:
' I can think of no greater honor than being invited to speak on the occasion of Milton Friedman's ninetieth birthday. Among economic scholars, Friedman has no peer. …
Today I'd like to honor Milton Friedman by talking about one of his greatest contributions to economics, made in close collaboration with his distinguished coauthor, Anna J. Schwartz. This achievement is nothing less than to provide what has become the leading and most persuasive explanation of the worst economic disaster in American history, the onset of the Great Depression – or, as Friedman and Schwartz dubbed it, the Great Contraction of 1929-33.
… As everyone here knows, in their "Monetary History" Friedman and Schwartz made the case that the economic collapse of 1929-33 was the product of the nation's monetary mechanism gone wrong. Contradicting the received wisdom at the time that they wrote, which held that money was a passive player in the events of the 1930s, Friedman and Schwartz argued that "the contraction is in fact a tragic testimonial to the importance of monetary forces. " '
After citing how Friedman and Schwartz documented the Fed's continual contraction of the money supply during the Depression and its aftermath – and the subsequent abandonment of the gold standard by many nations in order to stop the devastating monetary contraction – Bernanke adds:
… ' Before the creation of the Federal Reserve, Friedman and Schwartz noted, bank panics were typically handled by banks themselves – for example, through urban consortiums of private banks called clearinghouses. If a run on one or more banks in a city began, the clearinghouse might declare a suspension of payments, meaning that, temporarily, deposits would not be convertible into cash. Larger, stronger banks would then take the lead, first, in determining that the banks under attack were in fact fundamentally solvent, and second, in lending cash to those banks that needed to meet withdrawals. Though not an entirely satisfactory solution – the suspension of payments for several weeks was a significant hardship for the public – the system of suspension of payments usually prevented local banking panics from spreading or persisting. Large, solvent banks had an incentive to participate in curing panics because they knew that an unchecked panic might ultimately threaten their own deposits.
It was in large part to improve the management of banking panics that the Federal Reserve was created in 1913. However, as Friedman and Schwartz discuss in some detail, in the early 1930s the Federal Reserve did not serve that function. The problem within the Fed was largely doctrinal : Fed officials appeared to subscribe to Treasury Secretary Andrew Mellon's infamous 'liquidationist' thesis, that weeding out "weak" banks was a harsh but necessary prerequisite to the recovery of the banking system. Moreover, most of the failing banks were small banks (as opposed to what we would now call money-center banks) and not members of the Federal Reserve System. Thus the Fed saw no particular need to try to stem the panics. At the same time, the large banks – which would have intervened before the founding of the Fed – felt that protecting their smaller brethren was no longer their responsibility. Indeed, since the large banks felt confident that the Fed would protect them if necessary, the weeding out of small competitors was a positive good, from their point of view.
In short, according to Friedman and Schwartz, because of institutional changes and misguid
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Trillion Dollar Lie and End of U.S. Dollar as We Know It
http://www.numismaster.com/ta/numis/Article.jsp?ad=article&ArticleId=5
285
Quote:
On Sept. 7, U.S. Treasury Secretary Henry Paulson announced plans for the federal government to seize control of troubled mortgage lenders/buyers Fannie Mae and Freddie Mac.
The two companies will be placed in conservatorship under management of the Federal Housing Finance Agency. As part of the agreement, the federal government will receive some $1 billion of senior preferred stock in each company plus warrants for a right to a 79.9 percent stake in each company. In return, the federal government has agreed to provide as much equity capital as needed to cover all future losses from mortgage defaults.
The two companies together hold over $5 trillion in residential real estate mortgages, roughly half of the entire U.S. market. In the 12 months ended June 30, 2008, the two companies had reported a combined $14 billion in losses.
Fannie Mae and Freddie Mac have almost $200 billion in short-term debt that was maturing in the next four weeks. The prospects of rolling over this debt were so poor that government officials feared an imminent failure of the real estate mortgage market. By taking over the two companies, the federal government is able to prevent the immediate collapse of this market.
Government officials are promulgating the BIG LIE in trying to understate how much this takeover will cost the federal government (i.e., taxpayers). Almost every news report I have heard or read cites the Congressional Budget Office cost estimate of only $25 billion.
Conservatively, that is a TRILLION DOLLAR LIE!
As of June 30, 2008, according to the most recent survey from the Mortgage Bankers Association, 9.2% of all one-to-four family home mortgages were at least one month overdue or already in foreclosure. This is the highest delinquency rate in the 39-year history of this survey.
Even the highest quality debt can only be dumped right now for, at most, 80 percent of face value. This assumes that there is no major disgorging of mortgages from Fannie Mae, Freddie Mac, or anyone else. Any program of massive sales of mortgages would almost certainly increase the discount from face value of all debt.
With Fannie Mae and Freddie Mac holding $5 trillion in mortgages, and under orders to sharply trim their portfolios - each company is to have a maximum of $850 billion by the end of 2009, then keep whittling down until they only hold $250 billion in mortgage - the U.S. government has, in effect, just absorbed $1 trillion in immediate losses.
The federal government already has more than $9 trillion in acknowledged debt plus is on the hook for around $70 trillion in unfunded future liabilities (such as Social Security and Medicare). So where is the federal government going to come up with an extra trillion dollars (and possibly more) to bail out Fannie Mae and Freddie Mac?
Governments can only obtain resources from the private sector. It can confiscate it through higher taxes, borrow it by issuing more debt, or steal it through inflation by increasing the money supply. To cover the costs of the takeover, the federal government is going to have to take at least one of these steps.
Raising taxes will hurt the economy even further, so I don't expect the costs to be covered by that route. The U.S. government has ramped up its borrowing so much that it can only try to float more debt by raising the interest rate paid on all future debt. That leaves inflating the money supply as the politically easy means of financing the seizure of Fannie Mae and Freddie Mac.
Unfortunately for the federal government, an inflationary rise in the money supply will hurt the value of the U.S. dollar. The largest holders of U.S. government debt are foreign governments and central banks. So far, they have largely held together in not dumping large quantities of U.S. government debt.
I think it is inevitable that the takeover of Fannie Mae and Freddie Mac will be the final crack in the dam thatNOTIFY: N | REPLY | REPLY WITH QUOTE | PERMALINK | TOP | HOME
Another precise analysis , Jayneztown...
People , get ready !
" The mistakes made with excessive credit at artificially low rates are huge, and the market is demanding a correction. This involves excessive debt, misdirected investments, over-investments, and all the other problems caused by the government when spending the money they should never have had. Foreign militarism, welfare handouts and $80 trillion entitlement promises are all coming to an end. We don’t have the money or the wealth-creating capacity to catch up and care for all the needs that now exist because we rejected the market economy, sound money, self reliance and the principles of liberty. "
--Ron Paul , July 4th , 2008
" If the American people ever allow private banks
to control the issue of their money,
first by inflation and then by deflation,
the banks and corporations that will
grow up around them (around the banks),
will deprive the people of their property
until their children will wake up homeless
on the continent their fathers conquered. "
--Thomas Jefferson
Give me control of a nation's money and I care not who makes her laws.
--Mayer Amschel Rothschild
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Meanwhile :
http://news.yahoo.com/s/ap/20080909/ap_on_bi_ge/lehman_brothers_deal
" NEW YORK - Lehman Brothers Holdings Inc. shares plunged to their lowest level in more than a decade amid investor concerns Tuesday the battered investment bank is running out of options to raise capital.
Investors, anxious about the possibility of a bank failure after the near-collapse of Bear Stearns in March, punished the stock in early afternoon trading. The stock plunged $4.16, or 29.4 percent, to $9.99 — the lowest level Lehman's stock
has hit since the collapse of hedge fund Long-Term Capital Management in 1998.
The nation's fourth-largest securities firm has been seeking to boost liquidity after suffering $8.2 billion in write-downs
and credit losses since the financial crisis began last year. "
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Perhaps someone can explain portions of the article to me. While I feel I have a grasp of the macro-economic big picture, some of the actual market mechanisms are beyond my grasp. I feel as if the articles are pitched for thsoe who arleady know. So, here goes.....
Quote:Why? Fannie and Freddie hold mortgages that go back before the housing bubble. Not every mortgage is based on an overvalued home. Is there some sort of automatic devaluation that occurs when mortgages are sold? 'Cause if not, I think the point would be better made with an actual analysis of the quality of the mortgages, rather than painting every single mortage with the current crisis.
Even the highest quality debt can only be dumped right now for, at most, 80 percent of face value.
Quote:True.
This assumes that there is no major disgorging of mortgages from Fannie Mae, Freddie Mac, or anyone else. Any program of massive sales of mortgages would almost certainly increase the discount from face value of all debt.
Quote:First of all, WHY does the Federal government want Fannie and Freddie to trim their portfolios? It doesn't make sense. Somewhat like the monolines, Fannie and Freddie have "the good stuff" (like munibonds were for the monolines) and "the
With Fannie Mae and Freddie Mac holding $5 trillion in mortgages, and under orders to sharply trim their portfolios - each company is to have a maximum of $850 billion by the end of 2009, then keep whittling down until they only hold $250 billion in mortgage - the U.S. government has, in effect, just absorbed $1 trillion in immediate losses.
bad stuff" (like toxic-mortgage-based bonds were for the monolines.) To trim your portfolio, you have to sell. But Fannie and Freddie won't be able to sell "the bad stuff" because nobody is in the market to buy crap... they've got enough crap of their own. So Fannie and Freddie will have to sell "the good stuff" in order to raise capital to shore up the bad stuff. It would be far better if the government actually managed its way out of the problem: renegotiate the salvagable, foreclose on the irredeemable, and make prudent loans in the future.
Secondly, have I got the math right behind the trillion-dollar loss? For simplicity, let's assume that the Feds own Fannie and Freddie outright, which collectively own $5 trillion in mortgages. If Fannie and Freddie are to sell off $4.5 trillion of their assets at 80% of face value, that represents a 20% loss on $4.5 which is about $0.9 trillion. Since the government own "only" about 80%, that is an actual $0.7 trillion. But since Fannie and Freddie will likely be selling off their "better" mortgages, they might get well more than 80%.
So, is $1 trillion realistic?
---------------------------------
Any idea, no matter how much you may agree with it, can be radicalized and employed as an excuse for violence. There is no such thing as a righteous or untouchable philosophy, and when you start thinking that there is, you have become an extremist.- Finn Mac Cumhal
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Quote:
Originally posted by SignyM:
So, is $1 trillion realistic?
No , probably not at all...
Here's how it was explained to me , in part :
' Only a few short weeks ago Treasury Secretary Henry Paulson was sitting in front of Congress asking for unlimited authority (which in "Washington-ese" translates to money) to back Fannie Mae and Freddie Mac – the two largest mortgage guarantors in the country – possibly even the world. He justified this mind-boggling request by saying the more money they had access to, the less likely a bailout would be.
Well the Bush administration announced yesterday that the government would be taking over both Fannie Mae and Freddie Mac.
The capital reserves of these mortgage giants had fallen dangerously low – due to some creative accounting on their part as it turns out. And now the powers that be (that would be those that spend your tax dollars) have stepped in to restore order.
This move begs two important questions.
First, will they be able to restore order and confidence in such a mammoth market that has taken on so much water?
Second, and more importantly, what implications will this move have for you and your investments?
In answer to the first, while on the surface this move would appear to secure the nearly $5.5 trillion in outstanding mortgage debt, a deeper look suggests it might not.
That's because of the way these giant mortgage beasts operate.
Their main job was to pump money into the banking system that could be lent to prospective home buyers. They injected this capital into the system by buying mortgages that banks had already issued. They'd then securitize these debts and sell them to raise more capital.
BUT there's the catch. In a perfect world – or even a world that simply operates the way it's supposed to – the income from that securitized debt should come from borrowers repaying their loans. If those borrowers default on these loans, the terms of this takeover stipulate the government must guarantee them.
Now you can see the problem.
The reality of the situation will be that all this debt will actually end up being backed by the printing press of the U.S. Treasury. Further inflaming an inflationary, dollar-devaluing spiral that I promise will be attractive to NO ONE...Potentially undermining the very stabilizing effect that their action is supposed to have.
How bad will it end up being? How much all this will cost? Let's take a quick look at the math of the situation.
Those in position to guess precisely how much the bailout will cost us, the taxpayers, won't hazard one at the moment. No surprise there. They'll be wearing down the erasers on their pencils for some time to come.
Earlier estimates suggested as much as $25 billion. But, given the recently revealed accounting "legerdemain" by these government sponsored entities, that number is likely way off.
The media reported this weekend that the total cost is "unknown." They're rounding down to "tens of billions" of dollars. But it only takes a slightly deeper look to come up with a better, and more accurate guess...
Back when Hank was shaking his tin cup in front of Congress, begging for the rights to bail out these two behemoths, he argued a blank check would negate the need to actually use the money. But Congress covered their backsides and assumed, as usual, a bailout would be coming out of taxpayers pockets. In doing this they raised the U.S. debt ceiling – the amount of debt the government could pile up – by nearly a TRILLION DOLLARS.
THAT trillion dollars is theoretically what the government itself is expecting this bailout to cost.
So will it save the day? Will a government bailout create the illusion that these securities are safe to buy and sell? Will credit markets stabilize and go back to business as usual? Hard to say. But the answer to the second question – the impact on you – becomes infinitely more clear.
Aiming a fire hose of cash at this current crisis will wreak absolute havoc on the dollar. On it's
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Quote:
Originally posted by SignyM:
Perhaps someone can explain portions of the article to me.Quote:
With Fannie Mae and Freddie Mac holding $5 trillion in mortgages, and under orders to sharply trim their portfolios - each company is to have a maximum of $850 billion by the end of 2009, then keep whittling down until they only hold $250 billion in mortgage - the U.S. government has, in effect, just absorbed $1 trillion in immediate losses.
But Fannie and Freddie won't be able to sell "the bad stuff" because nobody is in the market to buy crap... they've got enough crap of their own. So Fannie and Freddie will have to sell "the good stuff" in order to raise capital to shore up the bad stuff. It would be far better if the government actually managed its way out of the problem: renegotiate the salvagable, foreclose on the irredeemable, and make prudent loans in the future.
08/09/08 "CNBC" -- - The nationalization of Fannie Mae and Freddie Mac shows that the U.S. is "more communist than China right now" but its brand of socialism is meant only for the rich, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe on Monday.
"America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich… it's just bailing out financial institutions," Rogers said.
Stock markets jumped after the U.S. government's decision to launch what could be its biggest federal bailout ever, in a bid to support the housing market and ward off more global financial market turbulence.
But Rogers said in the long term the move spelled trouble.
"This is madness, this is insanity, they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents. I'm not quite sure why I or anybody else should be paying for this," Rogers told "Squawk Box Europe."
"Bank stocks around the world are going through the roof, that's 'cause they've all been bailed out. You don't see the homeowners in Kansas going through the roof 'cause they're not being bailed out," he added.
"A Huge Mess"
However, despite the rally in Asian and European markets, the decision to take over Fannie and Freddie is likely to cause more volatility and needs careful consideration by investors, according to Rogers.
Rogers, who is short on U.S. bonds, said these are likely to fall while commodities may rally. The two government-sponsored enterprises don't have good loans on their books, because "everybody else took the good stuff and dumped the bad stuff onto Fannie and Freddie," he said.
From 2010, Fannie and Freddie will have to shrink their portfolios by 10 percent a year until they reach $250 billion, to reduce the risk to the taxpayer, according to the Treasury plan. But this may put additional pressure on the housing market, Rogers said.
"That's going to also ensure that house prices continue to go down. It's going to be harder and harder to get a mortgage."
Investors should not pin their hopes on this year's presidential election for a solution to the problems, as none of the candidates is likely to find one, Rogers said.
"This is a big huge mess and neither one of them has a clue what to do next year. It's going to be a mess."
...
VIDEO : http://www.informationclearinghouse.info/article20715.htm
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This goes right back to the 'Socialization of DEBT , and Privatization of Wealth' , that I noted in our previous thread on this subject...
While none of Us want the 'crap' , as you put it , that's what we're all being forced to buy...And pay for , over and over...
" Comrades Bush, Paulson and Bernanke Welcome You to the USSRA
(United Socialist State Republic of America)"
--By Nouriel Roubini
' Socialism is indeed alive and well in America; but this is socialism for the rich, the well connected and Wall Street. A socialism where profits are privatized and losses are socialized with the US tax-pay
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