"The great masquerade of evil has played havoc with all our ethical concepts.
For evil to appear disguised as light, as charity, as historical necessity, or social justice is quite bewildering to anyone raised on traditional ethical concepts.
But for the Christian who builds his life on the word of God, it merely confirms the fundamental perversity of evil."
Dietrich Bonhoeffer
MF Global, the latest brokerage firm to start slipping under the waves, was using customer funds to back their proprietary trades according to a story from Associated Press.
The CME, the exchange on which the MF Global acted as clearing company, has a reported $4 billion in member contributed funds to cover any customer losses from a member firm. But obviously the guardians of the system cannot risk a run on the exchanges and brokerages.
I fully expect a strong effort will be made to hush this one up and sweep it under the rug. The $700 million was merely misplaced, left it in the other coat pocket, never missing, simple accounting error, completely safe. They will just juggle the books and shift the equity around, increasing the leverage on positions. You don't go to prison for carrying excessive leverage. MF Global should have bought a small bank like Goldman did, and then buried their losses at the Fed.
I obviously do not know if the cover up will succeed. Worldcom, Enron, Madoff, Countrywide, AIG, MF Global. The US financial system is a pyramid of lies. As the system totters, more naked greed and corruption will be exposed.
The bigger driver of today's market action was the news that Greece may hold a referendum on the bail out plan.
The reports on Bloomberg went back and forth on this all day. They dimissed the possibility of a referendum but it seemed like whistling past the graveyard. They asked, 'Why would Papandreou agree to a referendum?' Because he wants to be able to sleep at night without his eyes open and back against the wall, that's why.
The analogy between onerous postwar reparations in 1920 and the bailout for the big European banks in this currency war is striking. Greece may follow Iceland, drop out of the EU, and let the German and French gyros rotate on their own rotisseries.
What has been hidden will be revealed. And this is only the beginning.
