The Worst Crisis Since the Great Depression is Unfolding – Slowly But Surely

July 18, 2010

http://www.munknee.com/2010/07/draft-worst-crisis-since-the-great-depression-parts-1-2/

It’s easy to lose perspective on where the global economy stands – to be confused by the daily deluge of information – so let’s look at the big-picture of where we are today. As an investor it can mean the difference between making and losing a lot of money. So let’s take a look and see where we are at and what events are unfolding - slowly but surely.

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com, provides below further reformatted and edited excerpts from the Bryan Rich’s (http://www.moneyandmarkets.com) original articles for the sake of clarity and brevity to ensure a fast and easy read. Rich goes on to say:

We have endured the sharpest fall in global economic activity since the Great Depression and one of the most threatening financial crises ever and, according to studies by the IMF, recoveries of past recessions with these dualities tend to be longer and slower than normal recoveries — typically around five years until economies sustainably resume trend growth. That means, if you mark the start of the recent crisis as late 2007, we’re less than three years in! Therefore, we should expect more bumps in the road ahead. Furthermore, history also shows us that financial crises are generally followed by sovereign debt crises, which is where we are now.

The 4 Stages of Sovereign Debt Crises:

Stage #1 - Burgeoning Deficits:

In a financial crisis government spending increases dramatically in attempts to stabilize the financial system and stimulate economic activity. Tax revenues fall, fiscal surpluses turn into deficits and economies with existing deficits keep piling it on – and that is just what is unfolding now.

The leading economies of the world have all seen their deficits shoot higher, some to record levels. In fact, the deficit spending that’s gone on in recent years can be summed up as follows: Over 40 percent of world GDP comes from countries that are running deficits in excess of 10 percent.

Stage #2 - Ballooning Debt:

When economies are contracting or even growing slowly, bringing these deficits back down to earth becomes an unenviable challenge. Governments have to make ends meet by turning to the markets. Then those burgeoned deficits turn into growing debt loads – and that is just what is unfolding now.

When debt reaches 80 percent of GDP threshold, the borrowing costs for governments starts ticking higher and so does the market scrutiny. The IMF says five of the top seven developed countries in the world will have debt levels exceeding 100 percent of GDP in the next four years.

Stage #3 - Credit Downgrades:

When deficits and debts rise and economic activity appears unlikely to curtail fiscal problems, the credit worthiness of the government falls under intense scrutiny. That’s when we see downgrades – and that is just what is unfolding now.

Greece’s sovereign debt rating has been downgraded to junk status. Spain has lost its AAA rating and the UK could lose its AAA status if its deficit isn’t addressed. Japan’s outlook has been cut to negative and rating agencies have even warned the U.S.

Stage #4 - Sovereign Debt Defaults:

This is the final and most deadly stage because downgrades only make the vicious cycle of weak economic activity and growing dependence on debt worse. When investors see more risk, they require more return [and, as such,] the borrowing costs for these troubled countries rise. Then it becomes harder to finance spending needs and harder to finance existing debt and that’s when we see defaults – and that is on the verge of unfolding.

When S&P downgraded Greece to junk status, it warned debt holders [that they] should be prepared to receive just 30 cents on the dollar… [in spite of the] $1 trillion rescue package committed by the EU and IMF. [Then there is] Spain, an economy that represents 12 percent of GDP for the euro zone, [which is] rumored to be next in line for a massive funding request.

In sum, a sovereign debt crisis has arrived – the fuel for contagion is fear – and unless governments can demonstrate they’re willing to take tough steps to reign in debt this crisis can spread quickly.

Currenncy Crises Are Likely Next:

History shows us that financial crises tend to be followed by sovereign debt crises – and that sovereign debt crises tend to lead to currency crises, i.e. a loss of confidence in countries’ currencies which is something we’ve seen very clearly in recent months with the euro. A study from MIT on historical currency crises lays their progression out as follows:

The Three Stages of a Currency Crisis:

Stage #1 - Loss of Confidence:

The number one cause of a currency crisis is when investors flee a currency because they expect it to be devalued – and when the euro zone stepped in and threatened to cough up $1 trillion dollars in an attempt to save the euro monetary union, it was a conscious decision to devalue the euro.

Stage #2 - Herding Mentality:

When it’s thought that investors are moving out of a currency, others follow. [A case in point is the euro which] currently is being shorted [moreso than ever before in history] and when the market is heavily positioned one way — and the fundamentals support it and an intentional devaluation appears underway — big institutions have to react. Put simply, they have too much to lose by getting caught the wrong way. As such, for example, Iran’s central bank has announced they will be diversifying euro exposure by trading into gold and U.S. dollars while China and the UK have shown a significant increased interest in owning U.S. dollars as opposed to euros.

Stage #3 - Contagion:

Contagion is a phenomenon in which a currency crisis in one country triggers crisis in other countries with similar weaknesses. A crisis that started in Dubai now confronts Greece, Spain, Portugal … and will likely spread to the UK, Japan and even the U.S.

Conclusion:

The day-to-day ebb and flow of economic data and news can be distracting. That’s why it’s important, especially with all that is going on, to keep the big picture in perspective. History shows us that a global recession when combined with a financial crisis tends to stifle economic activity longer than normal recessions. History also shows us that financial crises tend to lead to sovereign debt crises, which tend to lead to currency crises so, with that in mind, it’s fair to say that a V-shaped economic recovery has always been very unlikely.

We are going to see more shocks to the global economy, more challenges and more investors fleeing risky investments in favor of safe havens. [Got gold?]

The Biggest Shock of All:

http://day-trading-the-stock-market.blogspot.com/biggest-shock-of-all.html

Weiss Research Group - Martin D. Weiss, Ph.D. - June 07, 2010

Why did the specter of collapse in far-away Hungary help sink the Dow by 323 points on Friday ?

And why did similar scenarios in Greece, Spain, and Portugal trigger the Dow’s 1,000-point Flash Crash one month earlier ?

Is it because those countries are so important to the future of America’s blue-chip corporations ?

Not quite!...



http://www.cnbc.com/id/15840232?play=1&video=1511573004

It’s because investors around the world are finally waking up to some shocking realities:

Shock #1 is that these countries are canaries in the coal mine — the first of many that could suffer the wrath of investors fed up with runaway deficits.

Shock #2 is that, in the UK and the US, federal deficits and total debts, as a percent of GDP, are similar to — or even larger than —those of Greece, Spain, Portugal, or Hungary.

Shock #3 is the recurring revelations of official deceptions. Investors suddenly discover that unemployed were counted as employed … that government debts were disguised as capital … that far bigger federal deficits were camouflaged. And it is these revelations that trigger the biggest selling panics, that are the final nail in the coffin for companies and entire countries.

But Shock #4 is the biggest and most dangerous of all — not just random deceptions by a few companies or a few countries, but a global deception in the credit ratings that investors rely on for nearly ALL companies and countries!

With gathering momentum right now, investors are beginning to realize they can’t trust the ratings issued by established agencies like Moody’s, Standard and Poor’s, and Fitch.

But this is not merely bad news for the agencies themselves. It’s also a powerful force that can drive global stock and bond markets into a nosedive.

When companies are downgraded, their share and bond prices automatically fall.

So think about what it means when the grading system itself, encompassing thousands of ratings on trillions of dollars in securities, crumbles!

It implies, in effect, a collective downgrade of nearly ALL the securities in the world — every rated corporate bond, municipal bond, and even government bond in existence!

Needless to say, this transformation is too massive to happen overnight; it will progress in three phases...

Phase 1: Widespread Loss of Confidence in The Leading Rating Agencies...

In the first phase, regulators, analysts, and investors begin to raise serious questions about the validity of ratings:

Is a bond really triple-A? Or is the rating agency just maintaining the high grade because it wants to protect a good client that’s paying fat fees for its ratings?

Beyond triple-As, what about the hundreds of thousands of corporate, municipal, and sovereign bonds that currently boast other “investment grade” ratings? How many are really speculative grade — junk — in disguise?

Right now, Congress is asking these questions daily, attacking the rating agencies and getting ready to take action against them as part of the upcoming regulatory reform.

And the assaults on the rating agencies by independent commentators are even more strident …

In “Answers on Credit Ratings Long Overdue,” Andrew Sorkin of the New York Times puts it this way:

“Raise your hand if you can explain why anyone still believes in credit ratings. … How could century-old institutions like Moody’s Investor Service give their triple-A blessings to subprime junk? … How can we prevent these institutions and their sometimes cockamamie judgments from endangering our financial system again?”



http://www.cnbc.com/id/15840232?play=1&video=1511573004

In his testimony before Congress on Wednesday, Warren Buffett (a major shareholder in Moody’s) said the agencies ought to be forgiven for their sins — particularly for giving junk mortgages triple-A ratings.

But that same evening, on a Kudlow Report segment, “The Future of the Credit Rating ‘Cartel‘,” both the CNBC host and commentator said flatly that …

The ratings issued by Moody’s and S&P are “garbage.”

CNBC commentator Don Luskin added:

“Shame, shame, shame on Warren Buffett for saying the rating agencies are to be forgiven. … We’ve got the Obama administration talking about bringing criminal charges against BP. Why don’t we bring criminal charges against the rating agencies …?”

On the same CNBC segment, I was asked for my solution, which I’ll get to in a moment. But first, let me tell you my forecast regarding the next phase …

Phase 2: Massive Investor Selling...

Here’s what I see happening …

* Until and unless the rating agencies abandon their conflicted business model, extreme doubts about credit ratings will spread like wild fire.

* Investors will scramble to reassess the risk in the trillions of dollars of rated securities they own.

* They will decide, independently, what the true ratings should be, effectively issuing their own downgrades on thousands of securities.

* And, they will SELL.

This forecast takes no particular foresight. As illustrated by the recent barrage of attacks on the rating agencies, the global risk reassessment has already begun. And as illustrated by recent sharp price declines — in sovereign bonds, corporate bonds, derivatives, and common stocks — the selling has also already begun.

Phase 3: Capitulation by the Rating Agencies...

My next forecast, however, does require looking further ahead:

The day will come when, due to overwhelming pressure from regulators, investors, and even some debt issuers themselves, the leading rating agencies will have no choice but to cave in.

Moody’s, S&P and Fitch will announce downgrades for hundreds of major debt issuers in one fell swoop. Or they will seek to wipe the slate clean by revamping their rating scales, effectively downgrading nearly ALL of the bonds they rate.

I have no doubt this will happen. The only major uncertainty is: when?

* Will it be before millions of investors each make up their own minds about what every rating should be?

* Or will it be after investors make up their own minds — when there is such a sorry state of confusion and panic that the rating agencies are FORCED to act to restore a semblance of credibility for themselves and the companies they rate?

Either way, we can now see the makings of an all-out selling panic — first in corporate bonds, then in the most vulnerable common stocks. It is the natural outcome of the global downgrading of ratings and rating agencies themselves. It’s coming very soon. And it’s going to hit hard.

Too Late for Easy Solutions...

At Weiss Ratings we don’t take a dime from the companies we rate. We’re not even beholden to the companies for the supplemental data we request. If they choose not to give us the information, we rate them based exclusively on publicly available data.

However, we also believe that no one should tell our competitors what business model to use. Rather, as we proposed to the SEC more than seven years ago — and as we proposed again to Congress last week — the U.S. government must cease blessing these conflicted rating agencies and stop requiring investors to rely on them.

If this solution had been implemented years ago, the rating agencies might have had time to adjust, the mortgage ratings fiasco might never have happened, and the market debacle I am forecasting would be far less likely.

Today, however, it’s too late for moderate or easy solutions. If the government does not act as proposed, the markets will. There really is no choice.

The Next Big Question…

If even a company’s supposedly “investment grade” bonds are suspect, how can anyone trust their shares?

The answer to this question is about to come very soon. So if you haven’t done so already, be sure to batten down the hatches.

Heed “Our Sixth Warning: Dow in Danger!” Move swiftly. Do not procrastinate.

http://www.moneyandmarkets.com/the-biggest-shock-of-all-39316?FIELD9

Euro Crisis to Set One World Currency?

http://www.thedailybell.com/1084/Euro-Crisis-to-Set-One-World-Currency.html

Friday, May 28, 2010 – by Staff Report

Is Europe heading for a meltdown?... This financial crisis is worse than the sub-prime crash of 2008 because the sums are so much bigger and it is governments that are in dire straits. Edmund Conway explains the dangers. Mervyn King, the Bank of England Governor, summed it up best: "Dealing with a banking crisis was difficult enough," he said the other week, "but at least there were public-sector balance sheets on to which the problems could be moved. Once you move into sovereign debt, there is no answer; there's no backstop." In other words, were this a computer game, the politicians would be down to their last life. Any mistake now and it really is Game Over. Or to pick a slightly more traditional game, it is rather like a session of pass-the-parcel which is fast approaching the end of the line. – UK Telegraph

Dominant Social Theme: The wise men of Brussels and the courageous citizens of the EU will muddle through.

Free-Market Analysis: As the money crisis seems to grow worse in Europe, we have begun to wonder if there are parallels to the 1907 financial panic in the United States that gave rise to the Federal Reserve. The dominant social theme way back then (assuming an active power elite, and we do) was along the lines of "The US banking system is too fragmented and a lender of last resort is badly needed." JP Morgan assembled his rich friends in the library of his exquisite New York mansion and bailed out the market, but only six years later, the Federal Reserve was born, the bastard child of false market-insolvency rumors and a knobby-nosed father (Morgan, himself).

There is, in fact, still speculation today that Morgan's camp planted the initial rumors of instability that swept the market and triggered the crash of 1907. Why on earth would he do such a thing? To generate the eventual result: the creation of the Federal Reserve and its passage by the US Congress. This is one perspective, anyway, the "paranoid one" that you will not find in most mainstream history books or college texts.

Back to our larger theme. We have written in the past (see – IMF Plotting Gold Backed SDRs) that we did not see how on earth the power elite was going to get from fairly abstract monetary concepts like SDRs to an actual worldwide consensus for a more globalized currency (and a global warming – "carbon" – currency seems, as well, to be a non-starter, at least currently). In fact, we have speculated that the elite could decide on a gradualist approach, setting up a thesis/antithesis dialectic between global money and regional money to move the conversation gradually in the direction of a worldwide currency. But perhaps there is a faster way. Let us see ...

The European financial crisis started with Greece and, it's true, Greece's problems are moderate ones for the EU given its size and amount of debt. But this crisis has not been resolved despite the supposed US$1 trillion that has been set aside to discourage "wrong way" speculation in Greek debt. We saw yesterday that the larger market was up because of statements from Chinese leaders that they were not going to sell euros and were perhaps to continue to be a net purchaser. So this is what market confidence has come to: China, a rigid, neo-communist state with a raging property inflation problem is seen by "the market" as a lynchpin of the Western capitalist system. What a hoot. You can't make this stuff up.

Anyway, from our perspective, a hypothetical path to a world currency (with some speed) would involve certain very specific elements. It would include, obviously, a very serious sovereign wealth crisis spreading from country to country thoughout at least the Southern half of Europe. This crisis, hypothetically, would be averted by heroic Brussels bureaucrats but not before a significant amount of financial pain was inflicted – good and hard as H. L. Mencken might say. It might even involve the dissolution of the euro and the shrinking of the EU itself. But the pay-off for the power elite would be the ability to float a scenario that proposes a worldwide currency to avert additional difficulties going forward. Here's some more from the article excerpted above:

Strip away the details – the breakdown of the euro, the crumbling of the Spanish banking system to take just two – and what you are left with is the next leg of a global financial crisis. Politicians temporarily "solved" the sub-prime crisis of 2007 and 2008 by nationalising billions of pounds' worth of bank debt. While this helped reinject a little confidence into markets, the real upshot was merely to transfer that debt on to public-sector balance sheets.

This kind of card-shuffle trick has a long-established pedigree: after the dotcom bust, Alan Greenspan slashed US interest rates to (then) unprecedented lows, which helped dull the pain, but only at the cost of generating the housing bubble that fed sub-prime. It is not so different to the Ponzi scheme carried out by Bernard Madoff, except that unlike his hedge fund fraud, this one is being carried out in full public view.

The problem is that this has to stop somewhere, and that gasping noise over the past couple of weeks is the sound of millions of investors realising, all at once, that the music might have stopped. Having leapt back into the market in 2009 and fuelled the biggest stock-market leap since the recovery from the Wall Street Crash in the early 1930s, investors have suddenly deserted. London's FTSE 100 has lost 15 per cent of its value in little more than a month. The mayhem on European bourses is even worse, while on Wall Street the Dow Jones teeters on the brink of the talismanic 10,000 level.

It is obvious that the sovereign crisis can inflict considerable pain. And it seems to have just begun. Yet perhaps our scenario is too simplistic, too conspiratorial. We ourselves have maintained that the problems with the EU and the euro are probably in excess of whatever the elite had expected – and they did expect a crisis of this sort, one that was supposed to drive the EU into a closer political union. The idea, however, that the power elite could engage in cold-blooded manipulations of whole countries is fairly difficult to countenance. On the other hand, there are historical speculations that JP Morgan, at the height of his wealth, controlled in some sense up to half of the profitable enterprises in the United States. Wealth can be concentrated and great wealth begets wealth, especially because the current fiat money system that tends to collapse the middle class.

Assume somehow that the unrolling sovereign crisis is indeed a prelude to a fear-based promotion seeking a worldwide currency (and perhaps some sort of worldwide central bank to go along with it) and one begins to see the outlines of an especially audacious dominant social theme. Perhaps this theme would be buttressed with other fear-based promotions – local and regional wars, even confrontations that utilize small nuclear devices.

We're just speculating here, of course, for our window on power elite activities extends only to a modest comprehension of how elite promotions might operate. Yet even in stating this, we should also point out that these themes are promoted by a vast array of institutions – media properties, think tanks, NGOs and assorted non-profits, not to mention governmental entities. To accept the idea of dominant social themes is to accept that the elite has tremendous influence worldwide and especially in the West. We're past that point of course. We do accept it.

We would also point out that to try to force the issue now of a truly global currency would be audacious in the extreme. Citizens of the Anglo-American axis are up in arms over the poor economy and Europe is smoldering as well. Never has a sociopolitical awakening swept the West as it has now – courtesy of the Internet and its continual truth-telling. There is more and more anger over central banking, the West's serial wars, the over-taxation and the general dysfunction of regulatory democracy.

Does what we have proposed skirt the fringes of reality? If the powers-that-be were ready to tolerate a protracted series of sovereign crises in Europe – and it may be there is not much more to arrange -- alongside perhaps some unsettling wars, it might be possible to traumatize citizens of the West enough to make them amenable to global solution. This solution in our estimation might include the return to some sort of gold standard, but unfortunately not a market-based one. The elite would try to insist on a standard that it could in a sense control and continually manage – at least in our opinion.

Conclusion: All this is no doubt far fetched. But the Panic of 1907 and the subsequent erection of the Federal Reserve – if one accepts the relationship between the two – provides us with a template for the same sort of manipulation on a bigger scale (assuming one believes in the possibility of JP Morgan's market manipulations). However it is also true that this article itself is evidence of the difficulties that the elite would face in implementing the kind of program we have suggested. After all, if we are able to anticipate it, it has occurred to others as well. This is perhaps the elite's biggest challenge in the era of the Internet. It is most difficult to promote an audience, if it comes to that, aware of your intentions and the permutations of your strategies.

The Government as Identity Thieves:

Dr. Ron Paul Tuesday, May 18, 2010

http://www.thedailybell.com/1056/Ron-Paul-The-Government-as-Identity-Thieves.html

The spotlight remains on the Greek sovereign debt crisis as the riots continue. The terms of the Greek bailout from the IMF and Eurozone countries remain contentious with citizens on all sides. Europeans hate having their governments throw public money away as much as Americans do. The Greeks are not happy about having their taxes raised while their pensions and salaries are cut. Meanwhile, it is rumored by the Financial Times, AFP and others that Greece may spend more than it saves from austerity measures on arms deals with Germany, France and the US as a potential condition of receiving bailout funds. If true, it is certainly not unprecedented for the global military industrial complex to benefit from deals made by their friends in the central banking community. After all, war is the health of the state. The last thing big government proponents want is for peace to break out in the world.

This free flow of fiat money from around the globe to Greece will not really save Greece as much as it will grant a temporary reprieve to central bankers from the consequences of their mistakes. Sadly, this will come at the expense of the Greek people and taxpayers in Europe and America. Taxpayers are of no consequence to either European or American central bankers. Even the mere desire for complete information on what they are up to in our name is rebuffed, as we saw last week in the Senate with the failure of Senator Vitter's amendment containing my language to fully audit the fed. The hubris of powerful and secretive central bankers seems to know no bounds.

If someone incurred debts against you as an individual, without your knowledge or consent, you would call it identity theft. You would call your bank for a full accounting of the debts incurred in your name, and after some verification, those debts would be declared invalid and you would not be held responsible for them. Furthermore, if the culprit was found, they would be prosecuted and sent to jail.

Not so with governments and central banks. Governments that are supposed to be of the people and for the people routinely incur debts against the people. Some governments even borrow money to oppress their citizens, and then expect them to pay for their own oppression with interest. With a fiat monetary system, the sky is the limit for how much debt a government can place on the backs of the people.

We have reached the point in the United States where the debt our government has accumulated against us is mathematically impossible to pay off. Harder times, likely due to a wave of hyperinflation, will eventually find its way to our streets and I am fearful of how Americans will react. My hope is that we will come together peacefully and help each other, and that enough of us will be aware that the blame rests securely on the shoulders of the Federal Reserve and the special interests. They should not be looked to for salvation. They should not be given more power. Rather, they should be stripped of the powers that allowed them to create this mess in the first place.

Resistance to public transparency regarding public debts should be denounced in the strongest of terms, and the central bankers that incurred them should be seen as no better than common identity thieves.

High Frequency Terrorism: How the Big Banks and Federal Reserve Maintained Their Death Grip Over the United States:

By David DeGraw & Max Keiser, AmpedStatus Report
Posted on Monday, May 10th, 2010 at 1:11 am

http://ampedstatus.com/high-frequency-terrorism-how-the-big-banks-and-federal-reserve-maintained-their-death-grip-over-the-united-states

The following article is the third-part of a six-part report titled: “The Financial Oligarchy Reigns: Democracy’s Death Spiral From Greece to the United States.” The full report is available here:

http://ampedstatus.com/the-financial-oligarchy-reigns-democracys-death-spiral-from-greece-to-the-united-states

III: Financial Terrorism Operations: 9/29/08 & 5/6/10

In the aftermath of Goldman Sachs’ public flogging before the world in Congress, and while under investigation, on the very day that Congress was voting on the “break up the too big to fail banks” amendment and cutting behind the scenes deals to gut the audit of the Federal Reserve, the stock market had its greatest sudden drop in history, plummeting 700 points in ten minutes - shades of September 29, 2008 all over again.

If you recall, back in September ‘08, as Congress was voting down the first bailout, the big banks made the market plunge a record 778 points in one day, fear and panic then led Congress to pass the bailout. Trillions of our tax dollars, the money that we desperately need to keep our society functioning over the long run, then went out the window and into the pockets of the very people who caused the crash.

What happened on September 29, 2008 will go down in history as one of the greatest acts of terrorism ever.

9/29/08 proved that when you have so much power concentrated in the hands of a few, you can manipulate a computer algorithm and make the market and economy go which ever way you want it to go. So on 5/6/10, just as the power of the big banks was threatened again on the floor of the Senate and a deal on auditing the Federal Reserve was being negotiated, in came a sudden and unprecedented ten-minute 700 point market drop. A precision-guided High Frequency Trading (HFT) attack to show Congress who’s boss.

If you think the massive sudden drop happened because one lowly trader hit one wrong button, if you actually believe that the entire stock market can plunge because of one mistaken key stroke by a low level trader, you are stunningly naïve. I hate to burst your bubble, but this was a direct attack.

In a market where 70% of all trades are executed by computer algorithms via High Frequency Trading (HFT), Goldman Sachs has the power to make the market crash or rise at will. In fact, Goldman has a major Weapon of Mass Destruction in its Program Trading monopoly of the New York Stock Exchange, as Tyler Durden described on Zero Hedge:

“Goldman’s dominance of the NYSE’s Program Trading platform, where in addition to recent entrant GETCO, it has been to date an explicit monopolist of the so-called Supplementary Liquidity Provider program, a role which affords the company greater liquidity rebates for, well providing liquidity, and generating who knows what other possible front market-looking, flow-prop integration benefits. Yesterday [5/6/10], Goldman’s SLP function was non-existent. One wonders - was the Goldman SLP team in fact liquidity taking, or to put it bluntly, among the main reasons for the market collapse….

… here is the most recently disclosed NYSE program trading data….

What is notable here is that of the 1.4 billion in principal shares, or shares traded for the firm’s own account, Goldman was the top trader by a margin of over 100% compared to the second biggest program trader.

We have long claimed that Goldman is the de facto monopolist of the NYSE’s program trading platform. As such, it is certainly the case that Goldman was instrumental in either a) precipitating yesterday’s crash or b) not providing the critical liquidity which it is required to do, when the time came. There are no other options.”

For further investigation, I turned to Max Keiser, who has written and authored similar Program Trading and HFT computer algorithms. I asked him if he thought this was an attack, here is what he had to say:

“May 6th was an unequivocal act of domestic financial terrorism in America. A day that will live in infamy.

To scare the lawmakers, themselves large owners of the very banks and stocks that they are supposed to be regulating, a financial Weapon of Mass Destruction was put to their head and they acquiesced.

As the inventor of the continuous double-auction, market-making technology (VST tech. US pat. no. 5950176) that is referenced 132 times by program trading and HFT patents since 1996, I can tell you that Goldman, JP Morgan and the gang simply pulled the ‘buys’ from their computer trading programs and manufactured a crash. And when the coast was clear, and it was clear the politicians were not going to vote for anything that would break up the ‘too big to fail’ banks; all the ’sells’ were pulled from the computers and the market roared back.

This is a Manchurian Candidate market where program trading bots start the ball rolling in whatever direction Wall St. wants the market to go - and then hundreds of thousands of day-traders watching Cramer on CNBC jump on the momentum bandwagon and commit the crime for the Wall St. financial terrorists, who then say, ‘It wasn’t us, it was ‘the market!’”

On Friday, the next day, after the “break up the too big to fail banks” amendment was soundly defeated by a 61 to 33 margin in Senate and a deal was struck to eliminate key provisions from the audit of the Federal Reserve bill, Goldman was meeting with the SEC to work out a settlement in their case against them. Once again, Goldman proves that crime pays. Welcome to the New Mafia World Order.

Other than the two major operations carried out on 9/29/08 and 5/6/10, we must also recall a smaller attack on January 21st and 22nd of 2010, when Obama had a press conference and came out in favor of the Volcker Rule, which would have limited these HFT and “proprietary trading” schemes. At that time, the market dropped 430 points. Soon after this attack, all follow up talk on the Volcker Rule faded away and this reform has not been seriously addressed by Obama since then.

The bottom line, the United States has been taken over by a financial terrorism network. Let’s face it, we are all hostages of these financial terrorists and our puppet politicians rather be in on the scam than defend our interests. If these terrorists don’t get their way at all times, they have the power to throw their tremendous weight around and turn millions of lives upside down in a matter of minutes, and as they have shown they have no hesitation in executing that power, no matter how many millions of lives they destroy.

They set off this crisis with a wave of bombings in their initial Economic Shock and Awe campaign two years ago, resulting in massive devastation. Just to name a few of their greatest hits within the U.S.:

* 50 million Americans are now living in poverty, which is the highest poverty rate in the industrialized world;

* 30 million Americans are in need of work;

* Five million American families foreclosed upon, 15 million expected by 2014;

* 50% of US children will now use a food stamp during childhood;

* Soaring budget deficits in states across the country and a record high national debt, with austerity measures on the way;

* Record-breaking profits and bonuses for themselves.

Like other terrorists, they don’t use IEDs, they use CDOs. They don’t use precision laser-guided missiles, they use High Frequency Trading. They don’t have WMDs, they have derivatives. Let’s also not forget that they have toxic assets and dirty debt bombs just waiting to be deployed upon the American public once there is any true growth in the economy. Their nuclear arsenal includes hundreds of Trillions in secretive derivatives and hidden debt bombs, just ticking away, waiting to be set off… at their whim...