April 10, 2008

The Shadow Financial Markets

Perplexed by the U.S. economy? You're not alone.

If you want hear WHY a lot of us are in the shape we are in and how much worse it could get, check this out. It's nearly 40 min. long but is worth it.

Our Confusing Economy, Explained

Law professor Michael Greenberger joins NPR's Fresh Air to explain the sub-prime mortgage crisis, credit defaults, the shaky future of other types of loans and what we can expect from the U.S. financial markets.

Derivatives
Derivatives are used by investors in any particular industry and speculators as hedges against problem with their investments, or just to make money. It’s like an insurance policy for certain types of upsets in any industry. It’s one of the reasons why the worlds economy is falling apart now, because the derivatives market is unregulated because it’s so complicated the government doesn’t know how to look into how it is being used to build pyramid money making schemes by all of our major and minor financial institutions.

What they do is borrow discounted money from the federal government, then turn around and sell it to us for a profit as loans or credit. But once they have our name on the dotted line, they don’t have to wait for us to pay them back. They simply turn around and use what we owe them as credit to get more money using derivatives to secure what they owe on it in case we don’t pay them back. And they just keep doing it and over and over lending out money that doesn’t represent the amount of product and services available in the economy so we import goods and services using credit that’s supposed to represent what our economy is worth but actually represents what we owe foreign countries in the future, which if they keep doing this, we will never catch up with what we owe sinking further and further into debt, which has now caught up with us and our economy is crashing.

So as their pockets get lined with money, the value of the dollar goes down while the price of everything we import goes up and other countries can better afford to buy what we produce than we can so we’re exporting products that we need here in our domestic economy. They borrow millions of dollars turning it into a hundreds of millions before we’ve made any payments on the money they lend us. And they’re also lending money to themselves investing it on Wall Street to make more money covering their investments from their house of cards portfolios with derivatives, not to create competition in the market place but using multi levels of their fabricated money scams to cover the money they owe back to the federal reserve.

What they’ve done has basically had the same effect as counterfeiters putting trillions of dollars of worthless money into our economy only worse because it was done with the support of our lawmakers and central financial institutions. So now the people that ripped us off are the same ones we have to look to fix what they broke, which wasn’t an accident. It was a bank robbery by the owners of the bank, a most heinous and ludicrous crime.

Credit Default Swap
Hedge Funds
Commodity Futures Modernization Act of 2000

Why is it so hard to figure out what's going on in commodities markets — oil specifically?
Well, the reason it's hard to figure out is about 30 percent of our crude oil energy futures are traded in what is called a dark market — that is a market that was deregulated in December of 2000 at the behest of Enron. Prior to that legislation being passed, all energy futures traded in the United States or affecting the United States in a significant fashion were regulated by United States regulators under a very careful regime that had been perfected over about 78 years and many observers believe that because those markets are not being policed, malpractices are being committed and traders are able to boost the price virtually at their will.

Listen to Michael Greenberger as he discusses Deflating the oil bubble