The Warning Part II: Financial Armageddon, Again - Blood Moon - Trump Trade Policy the Patsy?

"Ultimately, the same financial architecture that surrounded the housing mortgage crisis (almost certainly including 'naked' credit default swaps) has been replicated in the three key areas where debt is growing at a troubling rate: defaults in student loans, auto loans, and credit card debt...

Thus, as the tenth anniversary of the Lehman failure approaches, there is an understanding among many market regulators and swaps trading experts that large portions of the swaps market have moved from U.S. bank holding company swaps dealers to their newly deguaranteed foreign affiliates.  ['off balance sheet' part deux]

But, what has not moved abroad is the very real obligation of the lender of last resort to rescue these U.S. swaps dealer bank holding companies if they fail because of poorly regulated swaps in their deguaranteed foreign subsidiaries, i.e., the U.S. taxpayer.

While relief is unlikely to be forthcoming from either the Trump Administration or a Republican-controlled Congress, some other means will have to be found to avert another multitrillion dollar bank bailout and/or financial calamity caused by poorly regulated swaps on the books of big U.S. banks...

By their own design, large U.S. bank holding company swaps [derivatives] dealers and their representatives have crafted their own massive loopholes from Dodd-Frank swaps regulations, which they can exercise at their own will.

By arranging, negotiating and executing swaps in the U.S. with U.S. personnel and then ‘assigning’ them to their ‘foreign’ newly ‘deguaranteed’ subsidiaries, these swaps dealers have the best of both worlds: swaps execution in the U.S. under the parent bank holding companies’ direct control, but the ability to move the swaps abroad out from under Dodd-Frank.

As history has demonstrated all too well, unregulated swaps dealing almost always ultimately leads to extreme economic suffering and then too often to systemic breaks in the world economy, thereby putting U.S. taxpayers, who suffer all the economic distress that recessions bring, in the position of once again being the lender of last resort to these huge U.S. institutions.

The Obama CFTC tried to put an end to these loopholes through a proposed rule and interpretations in October 2016.  However, those efforts were never finalized
before Donald Trump assumed the Presidency.  There will almost certainly be no relief from these dysfunctions from the Trump Administration or Congress.

However, state attorneys general and various state financial regulators have the statutory legal tools to enjoin these loopholes and save the world’s economy and U.S. taxpayers from once again suffering a massive bailout burden and an economic Armageddon."

Michael Greenberger, Too Big to Fail U.S. Banks’ Regulatory Alchemy


"'We didn't truly know the dangers of the market, because it was a dark market,' says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. 'They were totally opposed to it,' Born says. 'That puzzled me. What was it that was in this market that had to be hidden?'...

'It'll happen again if we don't take the appropriate steps,' Born warns. 'There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience.'"

PBS Frontline, The Warning

While the mainstream media says 'Russia, Russia, Russia' and the Administration says 'Immigrants, Trade, and Deregulate' the Banks may be setting up the US taxpayer for another taste of Financial Armageddon and a multi-trillion dollar bailout under duress.

As Trumpolini says, the US Taxpayer is 'the piggy bank' that is going to be robbed.  But it may not be at the hands of foreign mercantilists, but by domestic predators, wrapping themselves in the Constitution and the flag.

Or perhaps Michael Greenberger and Brooksley Born are just alarmists that don't really understand modern finance.

But maybe, just maybe, the Fed and the regulators are conveniently asleep at the switch, again.  And we are going to be forced to go through that whole, horrible episode of hidden leverage and multi-tiered frauds for the great benefit of a very few and their enablers in the professions and the government again.

Do they really know?  Are the people charged with protecting the public sure?  Will we even care until its too late?  Is all this fear-mongering hoopla about external threats just another misdirection, a distraction from the real crisis unfolding?  Is Trump, and his trade policy, being set up as a patsy for the next crash?

I would say that the probabilities are unacceptably high that another black swan may be coming home to roost.  And that the beneficiaries of this rotten system will do nothing to stop it, again.


Related and h/t for link to this paper:  Wall Street’s Derivatives Nightmare: New York Times Does a Shallow [CYA] Dive

Stocks and Precious Metals Charts - Sea of Uncertainty, Shoals of Risk - Comex Option Expiration the 26th

"For we wrestle not against flesh and blood, but against principalities and powers, against the rulers of the darkness of this world, against spiritual wickedness in high places."

Ephesians 6:12


"The most important problem in the world today is your soul, for that is what the struggle is about."

F. J. Sheen

Stocks managed to get a lift today. I do believe we are setting up another blow off top.

We will be seeing an advance print of 2Q GDP this week, and it may move markets. I have included the calendar for this week below.

Gold and silver fell off a bit.

Although it may irritate some to say so, silver but especially gold are trading as currency crosses now, and with not so much attention being given to their natures as commodities with the dynamics of supply and demand.

This is not always the case, it must be said. When I did regression analyses in the past, the inverse correlation to the dollar would be seen, and could last for many months. But there were also times when that correlation was not observable, and other factors were at work.

As a reminder there will be a Comex option expiration for gold this week.  Silver, not so much.

Let us keep our priorities clear and in their proper order, despite the swirl of hysteria, claims and counterclaims, that may surround us in the coming days.

Need little, want less, love more. For those who abide in love abide in God, and God in them.

Have a pleasant evening.

Shepherd Me O God

"God is my shepherd
So nothing shall I want
I rest in the meadows
Of faithfulness and love
I walk by the quiet waters
Of peace.

Shepherd me, O God
Beyond my wants
Beyond my fears
From death into life."

Marty Haugen, Shepherd Me O God (Psalm 23)

Paul Jay and Real News: The Russian Plutocracy and Its American Cousin

"...we had come to the stage where for our people what was needed was a real democracy; and of all forms of tyranny the least attractive and the most vulgar is the tyranny of mere wealth, the tyranny of a plutocracy."

Theodore Roosevelt, Autobiography


"A few thousand people with families, kids and so on, who are real rulers who concentrate economic and political power. Executive power. They control ruling party, administration of president, and they control main part of wealth of Russia. Seventy percent of Russian wealth is concentrated in the hands of less than one percent of population...

And key resources in the hands of a few families, one hundred, two hundred families. So, the problem is that they have common interests, but they have clans, like in, I don’t know, court of Louis XIV or XV in France, different clans of aristocracy fighting between themselves. But generally speaking, it is one power, one strata of aristocrats who has power."

Alexander Buzgalin, Is Putin’s Rule a Dictatorship?


"“Political decisions helped to create the super-elite in the first place, and as the economic might of the super-elite class grows, so does its political muscle. Surging income inequality is such a strong violation of our expectations that most of us don’t realize it is happening...

Somebody ought to sit down and think about this, because your corporate types are soon going to be a stateless superclass, people who live for deals and golf dates and care a lot more about where you got your MBA than the country you were raised in. It’s the Middle Ages all over again, these little unaffiliated duchies and fiefdoms, flying their own flags and ready to take in any vassal who will pledge his life to the manor...

They are becoming a transglobal community of peers who have more in common with one another than with their countrymen back home. Whether they maintain primary residences in New York or Hong Kong, Moscow or Mumbai, today’s super-rich are increasingly a nation unto themselves.”

Chrystia Freeland, Plutocrats: The Rise of the New Global Super Rich and the Fall of Everyone Else


"Trump represents the latest iteration of a very particular sort of global plutocrat. These super-wealthy elites have a penchant for nationalism, and often xenophobia. They boast authoritarian streaks, and exhibit total shamelessness about mixing business and politics. You often can't tell where one form of power ends and another begins...

Such government-run self-enrichment schemes are classic Putin, too. The economic chaos that followed the Soviet Union's fall created a market ruled by feudalistic Russian business elites.  Putin took advantage to install himself as Russia's permanent leader, enriching himself and his compatriots along the way. "

Jeff Spross, The New Global Plutocracy

Plutocracy is a form of government in which a relatively small ruling class of the wealthy wields extraordinary power over the rest, mingling money and power, politics and business, while bending the rule of law to its own self-interests. 

In that sense it is corporatism without becoming overtly fascist, at least on the surface.  It is not a democracy, although it may mimic that form of government as a facade or mask to cover its true nature.

Here is an interesting interviewed conducted by The Real News with Paul Jay which examines the current form of Russian government which is not a dictatorship but a plutocracy. The transcript can be found at the RNN web site here.

America is heading in the same direction, if not already there thanks to a well-funded campaign of deregulation, campaign finance laws, and court rulings like 'Citizens United.' And it has been here before in prior periods of history with record economic inequality, such as The Gilded Age.

If one looks carefully at what the corporate Democrats do, rather than what they say, and compare it with the GOP t becomes readily apparent that despite the external trappings, the corporatists of both political parties are not so much ideological opponents as they are competing organizations within the same mold and system, like rival crime families.

And the great foe of both are the Progressives, and any other group that wishes to change or reform the system that they themselves have built, and which has richly rewarded them.