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THE GLOBAL FINANCIAL MELTDOWN
#51
CREDIT CARD DEFAULT- THE DOMINO CRISIS POST SUB-PRIME OVERFLOW

ATCA

Now that homeowners are increasingly unable to use the collateral of their homes as an easy
to reach hole-in-the-wall, they are likely to dig into the next best alternative they have available, their arsenal of credit cards. Fears are mounting that credit card debt could soon spark a fresh crisis in the global financial system. Households struggling to meet the soaring interest costs on their mortgage payments are increasingly using their credit cards to service and to pay their debts in the short term. This could put credit card repayments under pressure alongside mortgage payments.

Hundreds of billions of dollars, euros and pounds in credit card debt run up by every major card provider have been sold off to the capital markets in recent years. Many of these securitised debts are held in Collateralised Debt Obligations (CDOs), the controversial securities that have been involved in the recent credit crunch associated with the sub-prime mortgage market. If consumers begin to miss payments on credit cards, many of these CDOs could begin to lose their value and have their credit ratings significantly cut as well. Given that those CDOs have been used as collateral against other debts in the market, that could spark a fresh bout of further loss-of-trust domino effects and unwelcome contagion in a jittery market.

The latest figures from the US Federal Reserve show that consumers increased their amount of outstanding revolving credit -- mostly credit-card debt -- by USD 6.3 billion in June to a total of USD 904 billion. Total c onsumer debt in Britain exceeds USD 2.7 trillion (GBP 1.3 trillion) -- a number comparable to UK's GDP -- including more than USD 100bn (GBP 50bn) on plastic credit cards. Clearly, the subprime market is not the only unstable sub-section of the credit market. Once consumption slows, there is a crisis likely in credit card and car finance CDOs amongst other securities. In both cases, defaults on payments have already risen sharply. Further, o nce corporate bankruptcies start to rise again as the cycle turns downwards, both in the US and in Europe, we are likely to note problems with Collateralised Loan Obligations (CLOs).

Bank of England data last week showed that British banks have written off USD 18bn (GBP 9bn) in bad debts in the past 12 months, a year-on-year increase of 20 per cent and the highest figure since records began 16 years ago. Research last week from Moody's, the credit rating agency, suggests that American credit card companies have seen bad debts jump by 30 per cent year on year. Late payments have also risen significantly. The omens are not looking good as credit conditions in money markets tighten enormously. M any credit card companies are responding swiftly by raising their interest rates from 9+ percent
up until recently to 15+ percent annually . In many cases, the new rates are much worse at 20+ percent. This significant ratcheting up of interest rates on credit cards by 5 to 10 percent impacts the disposable income of consumers and families considerably, and by a much greater margin than originally envisaged by the borrower.

Since the concatenated risks in credit markets are deeply intertwined, they display significant potential for black swans, ie, unknown unknowns, and the unruly manifestation of systemic risk without notice and with wide contagion. Fasten your seat belts, the heightened market volatility is far from over and may climb further.

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#52
BUSH'S BOGUS BAILOUT: INTRODUCTION TO TONY SOPRANO ECONOMICS 101
Carolyn Baker
http://carolynbaker.net/site/index2.php?option=com_content&task=view&id=109&pop=1&page=0

We have only begun to see the reverberations of the mortgage meltdown. They will be as sweeping and mindboggling as global warming or an earthquake measuring 10 on the Richter scale. I'm an historian, not an economist, so anything about economics-macro, micro-whatever, has been as foreign to me for most of my adult life as soil samples from Mars. But several years ago I had an epiphany that shattered my then-left-liberal/progressive world. I awakened from decades of delusion that I could adequately grasp world and national events without understanding the essential nature of how money works in the capitalist economy in which I live. I realized that until I acquired that understanding, all of the other subjects I preferred to talk about-war, social justice, race, gender, environment, energy depletion, civil liberties, globalization, and many more were inextricably connected with the financial machinations of the imperial beast within whose belly I reside. Today, I do not claim for one moment to be an authority on economic issues, but I have studied the works of some folks who are, such as Catherine Austin Fitts, Michael Panzner, Michael Hudson, John Crudele, Paul Grignon, and Hazel Henderson.



From them I have learned to more skillfully read the tea leaves of the current economic upheaval that is brewing within the United States and is now rippling into the global financial markets. Furthermore, I have realized that my government and the economy of the United States is being run as a criminal syndicate, and that the most useful way to understand the subprime mortgage meltdown and its implications was to familiarize myself with the economics of Tony Soprano, that infamous main character of the HBO TV series "The Sopranos", Mr. King of New Jersey "waste management" and proprietor of the Bada Bing.



On Friday morning I opened an email from a friend who sent me an article by an old "leftie" I've admired since my college days, historian Gabriel Kolko, entitled "The Predicted Financial Storm Has Arrived." Writing about the subprime mortgage crisis, Kolko noted that, "What the subprime market did was unleash a far greater maelstrom involving banks in Germany, France, Asia, and throughout the world, calling into question much of the world financial system as it has developed over the past decade." After explaining the international ramifications of the crisis, Kolko concludes:



We are at an end of an era, living through the worst financial panic in many decades. Now begins global financial instability. It is impossible to speculate how long today's turmoil will last-but there now exists an uncertainty and lack of confidence that has been unparalleled since the 1930s-and this ignorance and fear is itself a crucial factor. The moment of reckoning for bankers and bosses has arrived. What is very clear is that losses are massive and the entire developed world is now experiencing the worst economic crisis since 1945, one in which troubles in one nation compound those in others.



But later that day, President Bush stepped up to the cameras and declared that the U.S. government would provide assistance to borrowers in the U.S. who had been hit by the subprime crisis. Knowing full well that anything this government promises in the way of "relief" or "assistance" is almost guaranteed to be as "helpful" and "assisting" as that which it provided New Orleans in the throes of Katrina, I wanted to put this so-called bail out under the microscope and comprehend its actual substance.

You Mean This Didn't "Just Happen?"

I started with Catherine Austin Fitts's statement on her Solari site that "As we work to mitigate investment losses in the mortgage market and the harm done to communities through the fraudulent inducement of debt, we are well served to understand what has happened, who is benefiting, and why." And what is fraudulent inducement? Nothing more or less than inducing people who cannot pay their debts to borrow huge sums of money. The subprime crisis has now revealed the myriad "creative" methods used by lenders to make this happen. Tony Soprano would not only be proud of them, but would promote them.

In a CNN Money article "Mortgage Meltdown: Here Come The Judgments" from August 21, a California real estate attorney speaking about the many lawsuits that are resulting from the mortgage meltdown, stated that "Most claims will be against mortgage brokers for putting them into loans where they shouldn't have been." A property law professor at the University of California added that "...overly exuberant brokers and loan officers told clients not to worry about concerns like their ARMs (adjustable rate mortgage) resetting; they could always refinance and, anyway, interest rates were bound to fall." The end result, of course, has been millions of people with houses, which as one Florida real estate law attorney stated, they can't refinance, they can't sell, and they can't afford. For many of those borrowers, class action suits are the only way they can find some sort of remedy for their nightmare.

I was now getting clearer on what fraudulent inducement really means and the tragic ramifications for borrowers victimized by it. None of this, obviously, "just happened." Or as Fitts asserts:

Recently, we have seen numerous press accounts of bank and hedge fund losses from sub-prime mortgages. Remarkably, these reports imply that the losses are the result of a market downturn or contracting credit cycle. But there has been no mention of the extraordinary profits that were generated or who reaped them. There is no mention of who is poised to make a fortune on the bubble collapse. Even the most sophisticated commentators of our day are describing this financial coup d'etat as the unintentional consequence of "market forces".

But how exactly did this work? And how exactly does the "bail out" serve the interests of lenders, not borrowers?

My research has led me to conclude that the bail out will unfold in the following manner:

The Federal Reserve is lending money-that is, digital entries into accounts payable to hedge funds based on worthless mortgages, meaning that the these funds can borrow money cheaply in ways that will enable them to make huge profits. This is essentially a back-door subsidy from the Fed. At the same time, the Fed is most likely pumping credit into the market to pull it up because while feigning calm and cool, the Fed is terrified about the markets tanking. As Steven Weisman wrote in the New York Times on August 31, "Despite the assertion that affecting the markets is not the goal, one administration official said concern about Wall Street's reaction did affect the timing of the briefing. He said there was a fear that if the White House announced in the morning that Mr. Bush would be making an announcement on housing, there could be confusion as buyers and sellers of mortgage securities guessed what the announcement would be." As a result of Bush's announcement, of course, the markets spiked.

Or perhaps it wasn't just as a result of the bogus "bail out." After all, John Crudele has been writing profusely about the Wall St. Plunge Protection team, euphemistically referred to as the President's Working Group On Financial Markets which was established on March 18, 1988 by Executive Order 12631. In a June 8, 2006 New York Post article, Crudele stated:



Back during a stock market crisis in 1989, a guy named Robert Heller - who had just left the Federal Reserve Board - suggested that the government rig the stock market in times of dire emergency. ..... Proposed as an op-ed in the Wall Street Journal, it's a seminal argument that says when a crisis occurs on Wall Street "instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thus stabilizing the market as a whole." Had Heller been any other schmoe who writes op-ed pieces for The Journal this would have been long forgotten. But he had served for three years as a governor at the Fed and this proposal had the look of a trial balloon since stocks had just fallen sharply on Oct. 13, 1989, and memories of the 1987 crash were still fresh. Over the next few years people like me ... suspected that Heller's plan was indeed in effect. Whenever the stock market was in trouble someone seemed to ride to the rescue. Often it was a Wall Street firm that seemed more courageous than fiscally responsible. Often it appeared to be Goldman Sachs, which just happens to be where Paulson and former Clinton Treasury Secretary Robert Rubin worked. ...For a while I thought something called the Currency Stabilization Fund - which actually exists at the U.S. Treasury but is meant for currency stability - was the slush fund used for this venture. I was told by people who claimed to know that this part of the theory wasn't so.



WWTSD? (What would Tony Soprano do?)

The Bush bail out means that the Federal Housing Administration (FHA) will refinance mortgages in trouble, but this put borrowers in debt-yet again. In addition, it's important to understand that the FHA has two funds: The General Fund and the Mutual Mortgage Insurance Fund which provides insurance for single family homes. Essentially, what the bail out will do is create a huge pool of mortgages guaranteed by the FHA which are eligible to be put into a Ginnie Mae pool which will end up bailing out, not borrowers, but mortgage investors! Investors from hedge and other funds, will buy these mortgages, guaranteed by FHA, resulting in both borrowers and investors being defrauded.

Basically, what we have is a scenario comprised of three players: the borrower, the middleman (mortgage lenders), and the investor. The middle man is fraudulently inducing borrowers to borrow, and investors to invest, but the bail out helps no one except the fraudsters.

Government guarantees have become virtually the only priority for the fraudsters. They care little about anything else. For example, some years ago, Dick Ravitch, Chairman, AFL-CIO Housing Trust, Developer of HUD & Mitchell Lama Housing in NYC, said, "As long as I get government subsidies, what do I care if people have education or jobs?" Is this not the crux of the matter--that fraudsters in government and corporate America care about nothing but profits and are willing to sell our souls and even their own for them?

Michael Panzner, author of Financial Armageddon writes:

Even assuming that some troubled borrowers manage to hang on, the truth is that enabling more of the same kind of bad behavior that got people in trouble in the first place will only make matters worse.

The hair of the dog that bit them isn't a cure. It merely delays the moment of reckoning.

In reality, guaranteeing loans for homeowners who can't afford the payments, encouraging mortgage-holders to hang on until they've been bled dry, and giving false hope to those who would be better off cutting their losses really only benefits one group: The lenders.

Commenting on "the greedy global financiers", The London Observer's Will Hutton states: "Little people's taxes are underwriting the mistakes of big people, who in the process have made riches beyond the dreams of avarice. Globalisation, it is now clear, is run in the interests of a global financial class which has Western governments in its thrall."

Calling the mortgage meltdown exactly what it is, theft, Hutton continues:

The last few days have seen some recovery in the financial markets and some hopes for a return to normality, but what does normal mean? The system that has delivered hundreds of billions of dollars of written-off loans with a global impact can hardly carry on as if nothing has happened. The banks at the epicentre of the crisis should go bust and heads should roll. The hedge funds which bought the debt, traded it and sold it on to banks globally should also be allowed to go bust and be subjected to much closer surveillance and regulation....

Instead, most central banks and governments across the West are straining every muscle to limit the fall-out, assure banks and hedge funds that there is limitless public money on tap and that governments' first aim is to get back to 'normal'. The explanation is obvious. The Western financial system is too important to be allowed to implode; credit is any economic system's life-blood and if the supply lines get gummed up because of a collapse of confidence and severely punctured balance sheets, everybody suffers. Quite right, but at least we can be careful in future about the terms on which supportive cash and potential bail-outs are made, as well as drawing larger conclusions about the nature of the implicit contract between finance and society.

The last thing borrowers need is more debt! Instead of a refinancing arrangement, the borrower needs a higher income and lower expenses which will allow him/her to pay down debt and improve his/her skills.

In the current George W. Bush-Tony Soprano scheme, every time a corporate player commits fraud, he gets to keep the profits, and borrowers have to pay an inflation tax as a result. Eventually, this results in the fraudsters owning more and more of the nation and world economy until they own it all. Money is simply printed out of thin air to bail out the fraudsters which causes all of our expenses to rise because we don't have the rigged income to hedge those costs as the fraudsters do.

The REAL Ownership Society

One of the key fraudsters for more than a decade has been Goldman Sachs which not only fraudulently induced a plethora of borrowers and investors, but promoted the outsourcing of millions of jobs during the Clinton administration so that lucrative jobs that could have employed borrowers and enabled them to pay off their mortgages were moved offshore. Goldman Sachs has given us two Secretaries Of the Treasury in the past 15 years: Robert Rubin (Clinton Administration) and Henry Paulson (Bush II).

It appears that the primary fraudsters are New York Federal Reserve member banks such as J.P. Morgan Chase, Goldman Sachs, Citibank, and AIG (American International Group) which has also been deeply connected with drug trafficking and money laundering. These are also the same players involved in the housing bubble of the 1980s and other scandals and such as Enron, World Com, and the shady Harvard Endowment Fund.

In his August 7 blog, Charles Hugh Smith asks "Is the USA a Giant Enron?" noting that our financial system is based on cooked books, lies and deceptions such as: Bogus inflation numbers; unemployment statistics manipulated downward; a GDP back-adjusted every quarter; balances sheets of corporations, pension funds, and government agencies massively understating liabilities and egregiously overstating assets and future earnings; and visible, laughable lies from the mouths of top officials, all spoken with a straight face.

Economist Peter Schiff forecasts that:

"Issued by government agencies, interpreted by spokespersons for the Government and the financial community ... the information we get has been manipulated to mould a public understanding favourable to the agenda of the powers that be." Schiff's prediction of economic doom has everything to do with the US mortgage and housing meltdown, a prophecy he made in the book before the latest market turmoil.

"The collapse of consumer spending, associated with higher mortgage payments and vanishing home equity, will plunge the economy into severe recession, further exacerbating the collapse in real estate prices, worsening the recession and continuing the vicious cycle," he says.

We have only begun to see the reverberations of the mortgage meltdown. They will be as sweeping and mindboggling as global warming or an earthquake measuring 10 on the Richter scale. Tony Soprano economics aren't necessarily noisy, but they are gargantuan in their reach and ramifications. Global economic meltdown, initiated by the ruling elite of the United States with full knowledge of omnipresent, pervasive global resource depletion-or as some have called it "Peak Everything", will obliterate the American middle class and result in the ownership of the planet by a voracious ruling elite.

Tony's predecessor said it best decades before Tony was even a twinkle in his father's eye:

Capitalism is the legitimate racket of the ruling class.

Al Capone








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#53
GLOBAL CREDIT FROZEN: TOP BANKER CALLS IT " HEART ATTACK"
http://larouchepac.com/news/2007/09/05/g...ttack.html

The interbank lending system has come to a virtual halt, reports the London Financial Times in a front-page story headlined "Tough Test for 'Heart Attack' Markets."

A leading banker echoed words previously only heard from LaRouche, saying that if credit stays frozen, "the patient is going to die."

Banks will not lend to each other for fear that the collateral being put up is next to worthless. The phenomenon is global, says an analyst from UniCredit. Parts of the interbank lending market "have frozen as institutions scramble to raise capital--and hoard it" the Financial Times reports London bankers as saying.

The banker and chairman of International Capital Markets Association described the situation as a financial "heart attack."

"If we stay stuck, the patient is going to die." said Hans Joerg Rudloff, who is also chairman of Barclays Capital.

Even the famous "helicopter money" which Federal Reserve chief Ben Bernanke once said he could sprinkle down to solve any crisis, is not working. Last month, the Federal Reserve announced it would accept any sort of junk commercial paper as collateral from banks to issue them new credit. But the market value of such paper has collapsed, and with it the amount the banks can borrow from the Fed.

The London Interbank Rate (Libor), which sets the rate for interbank lending worldwide, has risen to 6.8% for three-month lending, a record 1 percent higher than the prime rate. But, in reality, no money is being lent at any rate. To try to stem the crisis, the Bank of England today offered to pay interest on reserves which commercial banks keep in its account.

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#54
WE NEED A NEW PRESIDENTIAL CANDIDATE IN THE MOLD OF FDR TO DEAL WITH THE UNFOLDING FINANCIAL COLLAPSE
http://larouchepac.com/news/2007/09/06/l...al-un.html


Today, Lyndon LaRouche delivered a harsh assessment of the profound failures of all of the Presidential candidates, and the overwhelming majority of Members of Congress to deal with the already onrushing financial collapse. "In my view,'' LaRouche told associates on Sept. 6, "none of the present crop of Presidential candidates, including the latest entry in the race, are making any sense, when their words and actions are held up against the greatest onrushing financial crash in modern history. We need a new candidate, one in the mold of Franklin Delano Roosevelt, to deal with this grave crisis. The country is in jeopardy, and without an FDR, we shall not survive.'' LaRouche added that, at age 85, he is too old to run for President, but the sad fact of the matter is that he is "the only person on the scene qualified to be President in these times of dire crisis.''

LaRouche continued, "Maybe some of the present candidates have some good points, and might even do a respectable job as President under normal conditions, but we are not living under normal conditions. The next 30-45 days are going to be decisive, if we are to avoid totally losing control of the financial system and our real economy. I have been totally right about the systemic nature of this collapse. All of the Presidential candidates have failed miserably, to date, to meet the standards required to solve this grave national and global crisis.'' LaRouche had even more blunt words for Congress. "On both the housing/banking collapse and the war in Southwest Asia, Congress is not fooled. They, for the most part, know the situation. But they are behaving, collectively, wittingly, like fools. They are so worried about their money, and the threat from Wall Street types, led by Felix Rohatyn, that their money will be cut off if they act in the genuine interest of the American people, that they are, under current circumstances, worse than useless. Are they trying to prove that membership in Congress is the oldest profession?''

LaRouche directly addressed the issue of Vice President Dick Cheney: "The present Congress, in its present mood--including the would-be Presidential candidates--is not prepared to do a thing. How can anyone in Congress tolerate Speaker of the House Nancy Pelosi's pronouncement that impeachment of the Vice President is off the table? What does that say? It says that there will be no action against the war in Southwest Asia, because the only action is to remove Cheney from office--for starters. As long as Pelosi is Speaker of the House, there will be no action against the war,'' LaRouche declared. LaRouche next addressed the issue of his Four Powers approach to ending the war in Southwest Asia and setting the world on a new policy course, reminding Congress that Russian President Vladimir Putin put an offer on the table in early July, when he met with President Bush and former President Bush in Kennebunkport. "That Putin proposal,'' LaRouche said, "offers an opportunity to establish a Four Powers cooperation, involving the United States and Russia, with China and India. That is the only hope for Southwest Asia. A solid alliance of those four great powers is the only combination that can stop the British from spreading chaos throughout that part of the world.'' LaRouche asked, "Doesn't anyone remember that the British are an empire, and will do everything in their power to sabotage any kind of U.S.-Russian partnership, any kind of Four Powers cooperation? Without solid cooperation among the United States, Russia, China and India, there is no possible end to the permanent war in Southwest Asia. Without that core, the neighboring countries will never get together and end the conflict. The British have been playing games in this region since Sykes-Picot and earlier, and nothing short of Four Powers intervention is going to end that.'' LaRouche added, "Our only advantage over the British is that we have a solution to the onrushing financial collapse. That is our strength, and we must take full advantage.''

LaRouche concluded that Congress has it within its power, to draft and pass the emergency legislation he put forward, to prevent mass home foreclosures and the collapse of the chartered banking system in the U.S.A. Will Congress act? Will they stop behaving like a bunch of fools and put the needs of the American people above their petty considerations? "I believe,'' LaRouche said, "that the American people can and must deliver a clear message to Congress: Stop kissing Felix Rohatyn's posterior, and act now, this month, to pass the legislation I have prescribed. By October, it may be too late.''


TESTIMONY OF CONGRESS: MONETARY REFORM ACTION MUST PRECEDE  TAXES IN FINANCIAL CRISIS
http://larouchepac.com/news/2007/09/07/t...taxes.html


The following testimony was submitted by Executive Intelligence Review, to the House of Representatives Committee on Ways and Means hearing held on Thursday, September 6th, 2007 --


This testimony of Executive Intelligence Review, asserting that U.S. policy must ``Start With Protecting Homeowners, Banks, and Economy From `Foreclosure Tsunami'," was presented on Sept. 6, 2007, to the U.S. House of Representatives Ways and Means Committee Hearing on Fair and Equitable Tax Policy.

Proposals to require private-equity and hedge-fund managers to pay taxes at the fair rate of other corporate managers and employees, are needed and justified; but the super-profits they would tax, are disappearing in the ongoing credit crisis and ``financial disintegration.'' By far the worst of this credit crisis, and of the mortgage bubble collapse which triggered it, is yet to come.

Thirty-five percent of zero, is no greater tax revenue than 15% of zero. The entire hedge fund sector, at best available estimate, has lost money for the past two months, and is rapidly approaching a losing position for the year to date.

Private-equity funds are a more important problem, having taken control of companies employing many millions of workers. While their profits have not yet disappeared--the Blackstone Group claims that its taxes would increase by $525 million under proposed Senate or House legislation--their leveraged debt financing has. In just one example: The inability of Cerberus Capital Management to finance its takeover of Chrysler, combined with its losses in other, previous auto-sector takeovers, threatens severe consequences for employment and business activity of the whole auto sector, in the midst of national auto contract negotiations.

The "off-shoring" strategies of these funds and other corporations have cost the OECD countries $1.7 trillion, and the United States over $100 billion in annual tax revenue, according to the Tax Justice Network.

The offshore centers have overwhelmingly been shielded by registration under United Kingdom sovereignty fostering unregulated "tax competition."

Thus the decision Aug. 30 of the Bankruptcy Court of the Southern District of New York, in the matter of the Bear Stearns hedge funds, is a very important one for Congress. Judge Burton Lifland's decision struck down the Cayman Island monetary authorities' claim of jurisdiction in the liquidation of the Bear Stearns funds, and ruled that the burden of proof is upon anyone claiming foreign registration for a corporation or partnership whose evidence of economic activity is in the United States. This juridical reaffirmation of United States sovereignty over firms and funds claiming offshore registration, is an important basis for Congressional action.

But this action cannot be expected to provide significant new tax revenues in a financial collapse crisis. Congress has to take the kind of action Franklin Roosevelt's Administration took in the worsening banking collapse in 1933: protecting the economy, homeowners, and chartered banks themselves with a "firewall," from the storm of collapsing mortgage securities; and issuing Federal credit to generate real new economic activity and public works--not to attempt to bail out the mortgage bubble.

Despite many earlier official claims of "containment," the U.S. mortgage bubble meltdown--soon followed by those in the United Kingdom, Spain, Scandinavia, and elsewhere--is a financial disintegration spreading and taking down the entire financial system. Denials cannot change the fact that 49% of the assets of the U.S. banking system are mortgage-based, more than 30% of them based on the collapsing residential mortgage bubble, according to Federal Reserve data; and the entire banking system is threatened. The timing of this collapse cannot be precisely predicted, but its impact on the real, underlying economy is global, and cannot be stopped without urgent steps to reorganize and protect the banking system and reform the monetary system.

These should begin immediately with Congressional action to protect millions of American homeowners from the mass foreclosure wave under way, and to protect Federal and state-chartered banks from failure as a result. The principles of a ``Homeowners and Bank Protection Act of 2007" are below.

This Committee and Congress face the tax-revenue consequences which will now follow: from the wipeout of value of ``structured'' debt instruments, which have become the basis of most activity of the financial services sector; from the continued decline in home values and assessments which are the basis of county and local taxes; from the losses of firms throughout the consumer industries; from the sharp drop which began in July in flows in foreign net investment into the United States, and so on. Shortfalls are already appearing in the Fiscal 2008 budgets and Fiscal 2009 plans of states around the country.

The Congress's planning for increased tax revenue from increased real economic activity, must turn to Federally issued credit to expand that activity in new infrastructure and industry, to raise productivity, and to replace with real economic value, large volumes of financial "value" which are disappearing in the collapse of mortgage and related bubbles.

A 'Firewall' for the Economy Against Mortgage Bubble Collapse

Three million or more American households are being foreclosed or are threatened with foreclosure in the near future, due to highly inflated home prices, unsustainable and unamortized mortgages, and escalating real estate taxes during the speculative mortgage bubble of recent years. Over 800,000 homes are likely to be lost to foreclosure in 2007, after 625,000 were lost in 2006. There are 9-10 million subprime/ARM mortgages outstanding; even before this spreading credit crisis hit, 20% of subprime/ARM mortgages were winding up in final foreclosure within four years. Now, there are nearly 3 million ARM mortgages due to ``reset'' to higher rates and higher payments between September 2007 and March 2009, the bulk of them by May 2008. There are already an estimated 4 million residential properties whose owners owe more debt on their mortgages, than they have equity at the property's current market value; and average home prices are falling. State mortgage ``refinancing''/bailout plans such as that of Ohio, have admittedly failed to work; the falling market, with growing margins of negative equity, have made these plans fail. These facts make a wave of millions more homes lost to foreclosure a certainty, unless Congress acts to stop it.

The General Welfare of the United States and its citizens requires that the nation's households be protected from this growing wave of foreclosures, which must be stopped by securing them in new mortgage titles at fixed and lower interest, and at uninflated, sound home values. Mortgage borrowers paying equivalent rent can be a transitional situation, while these new mortgages are being worked out. This requires a Federal agency capitalized by long-term bonds to insure and, where necessary, to extend these mortgages. (See Appendix A.)

The speculative securities and loans derived from these over-inflated mortgages have flooded the bank asset books of the world, making these banks unsound in the rapid deflation and collapse of this mortgage bubble, and threatening the international financial system with collapse.

The General Welfare and economic recovery also require the sound operation of local and regional banks all over the country, including operations dedicated to origination of sound, fully amortized home mortgages. Congressional intervention to halt the mass foreclosures should also protect Federal and state-chartered banks from liquidation as a result of the collapse in value of inflated mortgage instruments. Congress should prevent a repeat of the widespread liquidation and wholesale disappearance of Savings and Loan banks by Federal intervention in the credit crisis of the 1987-89 period. (See Appendix B.)

Principles of the Homeowners And Bank Protection Act of 2007

1. Congress must establish a Federal agency to place the Federal and state chartered banks under protection, freezing all existing home mortgages for a period of however many months or years are required to adjust the values to fair prices, restructure existing mortgages at appropriate interest rates, and write off all of the cancerous speculative debt obligations of mortgage-backed securities, derivatives, and other forms of Ponzi schemes that have brought the banking system to the point of bankruptcy.

2. During this transitional period, all foreclosures must be frozen, allowing American families to retain their homes. Monthly payments, the effective equivalent of rental payments, shall be made to designated banks, which can then use the funds as collateral for normal lending practices, thus recapitalizing the banking system. Ultimately, these affordable monthly payments will be factored into new mortgages, reflecting the deflation of the housing bubble, and the establishment of appropriate property valuations and reduced fixed mortgage interest rates.

It is to be expected that this process of shakeout of the housing market will take several years to achieve. In this interim period, no homeowner shall be evicted from his or her property, and the Federal- and state-chartered banks shall be protected, so that they can resume the traditional functions, serving local communities, and facilitating credit for investment in productive industries, agriculture, infrastructure, and so on.

3. State governors shall assume the administrative responsibilities for implementing the program, including the ``rental'' assessments to designated banks, with the Federal government providing the necessary credits and guarantees to assure the successful transition.

From September-October, unless this legislation is enacted as a first order of business of the 110th Congress in September, many millions more Americans will be evicted from their homes, setting off a process of social chaos that must be avoided. The freezing of foreclosures is the vital first step in a thorough reorganization.

Under this plan, the Federal Reserve System will itself be put through bankruptcy reorganization, and transformed into a Third National Bank of the United States. As developed in Lyndon LaRouche's just-released draft platform for the Democratic Party, these actions shall be complemented by the creation, by treaty agreement among leading nation-states, of a new Bretton Woods System, based on fixed exchange rates, and long-term treaty agreements for large-scale development projects on a global scale. (See Appendix C.)



Appendix A
Franklin D. Roosevelt

The President's Message to Congress on Small Home Mortgage Foreclosures, April 13, 1933:

To the Congress:

As a further and urgently necessary step in the program to promote economic recovery, I ask the Congress or legislation to protect small home owners from foreclosure and to relieve them of a portion of the burden of excessive interest and principal payments incurred during the period of higher values and higher earning power.

Implicit in the legislation which I am suggesting to you is a declaration of national policy. This policy is that the broad interests of the Nation require that special safeguards should be thrown around home ownership as a guarantee of social and economic stability, and that to protect home owners from inequitable enforced liquidation in a time of general distress is a proper concern of the Government.

The legislation I propose follows the general lines of the farm mortgage refinancing bill. The terms are such as to impose the least possible charge upon the National Treasury consistent with the objects sought. It provides machinery through which existing mortgage debts on small homes may be adjusted to a sound basis of values without injustice to investors, at substantially lower interest rates and with provision for postponing both interest and principal payments in cases of extreme need. The resources to be made available through a bond issue to be guaranteed as to interest only by the Treasury, will, it is thought, be sufficient to meet the needs of those to whom other methods of financing are not available. At the same time the plan of settlement will provide a standard which should put an end to present uncertain and chaotic conditions that create fear and despair among both home owners and investors.

Legislation of this character is a subject that demands our most earnest, thoughtful and prompt consideration.

Appendix B
Former Rep. James Wright

Former Speaker of the House "Jim Wright Was Right," wrote Harley Schlanger in EIR, Sept. 7, 2007, referring to the protection of savings banks in the 1980s foreclosures crisis. Here are some of the main points:

"Understanding and forbearance from regulators'' on foreclosures, and against shutting down local troubled banks, was House Majority Leader James Wright's approach to the 1986-89 foreclosures crisis triggered by the collapse of traditional Savings and Loan mortgage lending. Wright, a Texas Democrat, was hounded out of Congress in 1989 by scandals pushed by Rep. Newt Gingrich (R-Ga.), and charged with ``cronyism and corruption'' for defending Texas banks from seizure and shutdown.

From 1986-88, the foreclosures crisis in the Southwest, driven by Federal regulators taking over troubled Savings and Loans and pushing them to foreclosure on delinquent borrowers, was evicting 30-40,000 households a year in Texas alone. Deregulation of banking had damaged the S&L "thrifts." The S&Ls with their traditional 6% fixed-rate mortgages had been squeezed out, in the high-interest-rate 1980s, by money market funds and other unregulated funds paying 6-7% to investors and selling the first ARM mortgages, that quickly reset to 8-9% or more.

Blackstone Group managing partner Lawrence Fink declared in 1987, "It would appear that the thrifts have outlived their usefulness." Major commercial banks and investment groups like Blackstone bought up S&Ls and local commercial banks to get their deposits, and direct those deposits into commercial real estate deals, foreign investments, corporate takeovers--anything but the steady local mortgage and business lending those banks had done since the New Deal. The Federal Home Loan Bank Board and FDIC seized 225 Texas S&Ls in less than a year, forcing mass foreclosures of their mortgage borrowers and causing the price of home real estate to plunge--and then losing 200% more money on those banks than the banks had been losing before the seizures.

Wright responded to constituents, and in January 1988, said, "It's a natural instinct to want to salvage something rather than see it torn down and destroyed, to protect citizens from unreasonable exercise of power by appointed agents of government." He warned, "I believe I can see a conscious government policy to concentrate wealth in fewer and fewer hands."

Speaking in Houston the following month, Wright said, "What we are seeking is some understanding and forbearance from regulators. Don't be so premeditated that you encourage lending institutions to adopt arbitrary policies that force homeowners to vacate their homes. "People who want to earn their own way should not be forced into bankruptcy."

And on May 5, 1989, Wright spoke about where credit needed to go: "We need to rebuild America and rehabilitate its basic public infrastructure. We need to invest in the modernization of American industry and the education of the skilled American workforce. We need to push forward and stay ahead of the curve in the application of new research and new technology to our nation's commercial advantage."

But during the 1990s, nearly all of the remaining S&Ls disappeared, absorbed into regional or money-center commercial banks, brokerages, and other financial institutions, or liquidated.

The United States thus lacking any class of dedicated mortgage-lending banks, mortgage lending in the 2000-2007 mortgage super-bubble (now collapsing), was carried out not by banks, but by largely unregulated ``mortgage lenders'' through completely unregulated mortgage brokers.



Appendix C
Lyndon H. LaRouche, Jr.

LaRouche replied on Aug. 27, to a question from economist Giorgio Vitangeli, director of the monthly Finanza Italiana magazine in Rome:

"The needed action of reform must begin immediately during the rapidly unfolding weeks of September and October.... We are already witnessing the rapidly rising storm presently hitting the mortgage-based securities system and the banking system, that with inevitable global, early, chain-reaction effects hitting all nations, world-wide....

"As I indicated in my international LPAC webcast of July 25, 2007, where I announced the actual opening of the breakdown-phase of the worldwide monetary system, the new global crisis is already under way. That international crisis is a general breakdown-crisis of the present world monetary-financial system, but not necessarily an economic breakdown-crisis. The physical economy can be saved, if appropriate reforms are made in time; the planet's present, ``floating exchange-rate" monetary financial system can not be saved.

"The crisis will proceed in successive phases. We have entered the first phase, which is typified by the collapse of a global real-estate bubble on which the entire current monetary-financial system hangs today. The most immediate of these challenges, is being presented at this time.

"The U.S.A. and other governments must now react to the need for an immediate placing of home mortgages and chartered banks of the U.S. under bankruptcy protection by law. This measure is the indispensable lawful protection needed to prevent an uncontrollable, chain-reaction, hyper-inflationary collapse of the present world monetary-financial system as a whole....

"This emergency reform is indispensable. Without it, other reforms needed could not be implemented successfully.

"We must return immediately, to a virtual reestablishment of a global, fixed exchange-rate mode of the Bretton Woods system of international and national credit....

"The general reform of the world's monetary-financial system must be premised on an underlying physical-economic commitment, expressed in chiefly long-term capital investments in capital-intensive modes, and in a global climate of a simple underlying interest-rate for long-term lending of 1-2%. At least half of the investment would be in long-term modern infrastructure, and the remainder in agriculture and industry. The combination of the elements of this program will represent an investment cycle of about fifty years maturity of new obligations generated."

BANKS SHELL OUT BILLIONS TO RESCUE THE HEDGE FUNDS TO WHICH THEY ARE ENSLAVED
http://larouchepac.com/news/2007/09/07/b...are-e.html


Last week, Germany's state-owned Sachsen LB bank bankrupted itself trying to bail out its Irish-registered "conduit," Ormond Quay. This led to the emergency sale of Sachsen LB itself. Now, Kestrel, an Irish-registered SIV (structured investment vehicle) of Germany's state-owned West LB, has likewise become insolvent on short-term debt, and is dumping assets to try to cover it, the London Independent reports. Will West LB be forced into a similar rescue attempt?

Meanwhile, Britain's Barclays Bank subsidiary BarCap is trying to patch together a $1 billion rescue of one of its SIVs called Mainsail II, according to the Daily Telegraph. Mainsail II is a $4.5 billion vehicle managed by hedge fund group Solent Capital, itself hard hit recently. This follows a previous $1.6 billion BarCap rescue of "SIV-lite" Cairn High-Grade Funding.

A well-informed economic source in France reports that, while the central banks, by pumping in liquidity, seem to have avoided the crash so far, a second phase is coming up which will be worse. At this point, the hedge funds which have lost big on the subprime markets, are going to have to start paying off and restructuring, and that means that the banks which had loaned to them will be in serious trouble.

He laid particular emphasis on the Spanish situation, which he said was the worst in this respect in Europe, along with the British. Losses have been huge, and the large Spanish banks which did all the lending are going to be hit in the coming months. The biggest banks are entangled in this, in particular Banco Santander (linked to the British Monarchy's Royal Bank of Scotland) and Banco Bilbao, now called BBV. Concerning the subprime aspect of the crisis, the worst is still to come, because the majority of the subprime mortgages in the US were taken out in 2006. This will lead to a third phase which will hit the dollar directly.

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#55
"THEY'RE ALL BANKRUPT!"
http://larouchepac.com/news/2007/09/08/t...krupt.html

At the International Ambrosetti Workshop in Cernobbio, Italy, international bankers and economists discussed how much the international financial system has already disintegrated, and which large bank will announce bankruptcy first, the Italian daily Corriere della Sera reports today.

According to Kenneth Rogoff, former chief economist at the IMF, at least 1.3 trillion dollars have evaporated. At least one large bank will go bust, Rogoff says, adding that Moody's could go bankrupt too: "They make 45% of their profits with ratings on high-risk assets." But nobody knows where the largest holes are. "Not even the banks know that," says Alessandro Mitrovich of the Royal Bank of Scotland. "Even if we sat around a table, we would not get a picture of the situation."


YOU CAN'T HAVE YOUR BANK, AND HEDGE FUNDS TOO
http://larouchepac.com/news/2007/09/07/l...ge-fu.html

As the LaRouche Youth Movement drive to save the country's homeowners and banks sweeps across the country, pressuring Congress to enact LaRouche's "Homeowners and Bankers Protection Act of 2007" by the end of September, the international hedge fund cartel--which is run by the British Monarchy out of their Cayman Islands possession--has launched a desperate deployment designed to save...itself! "To hell with homeowners!" they say, "and to hell even with banks" that the hedge fund parasites have taken over and now control.

These locust funds this week brazenly flooded the U.S. Congress with their lobbyists--and their money--to push for their policy. And the evidence was in plain view at the hearings of Rep. Barney Frank's House Financial Services Committee on Sept. 5, and again on Sept. 6 at the House Ways and Means Committe.

Lyndon LaRouche, in discussions on Sept. 7, addressed this situation of the growing polarization in Washington and elsewhere in the country, over the LaRouche policy for resolving the crisis, versus that of the hedge funds.

"There's really one group, which is supporting what we're pushing, which wants to save the banks and the housing. The other group wants to sacrifice the banks and the housing, to save the hedge funds. So we have a fight: Who's on one side, and who's on the other side?

"The point is that, through the hedge funds operation, the banks aren't in control anymore. The banks are controlled by it. So you're trying to find out which banks are behind the hedge fund operations? You've got to find out which hedge fund operations are behind the banks, and controlling the banks. That's the problem.

"This is Rohatyn; this, of course, is also George Shultz, who are behind this. They are saying that you've got to save the hedge funds. Why are they saying you've got to save the hedge funds, and not the banks? Because the hedge funds are controlling the banks! And if you try to defend the banks, you're going to sink the hedge funds, and get the banks back in control of their own business.

"So this has to be made clear. Will you defend your bank, or the international hedge fund cartel? There is a conflict between the international hedge fund cartel, whose headquarters is the Cayman Islands, the British monarchy, as against the banks on the federal and state level in the United States, and in Europe. The banks don't control banking anymore: the international hedge fund cartel does.

"Our view is, the only way you're going to save civilization is sink the hedge funds, and keep the banks. You've got a choice: dump the banks in favor of the international hedge funds--it's called Globalization II--or save the banks and let the hedge funds sink all by themselves.

"We have to make the issue conscious. The reality is there, but the consciousness of the people and institutions is falling way behind the tempo of reality. We have to make it clear, definitive: Which do you choose? You can't have both. You can't have your bank and hedge funds too. You either save your bank at the expense of the hedge funds, or you give up your bank and everything in it, to an international London-centered authority, to a British-centered authority, most of which have offices in the Cayman Islands."

LaRouche went on to explain the urgency of getting Congress to pass his Homeowners and Bankers Protection Act of 2007 (HBPA): "My estimate is that by the end of September, you won't have the United States, unless something is done about this crisis. I know what we're dealing with here. We're dealing with something which is analogous to what happened in Germany in the middle to Fall of 1923. It takes a different form, because what they're doing today is they are monetizing worthless paper, and using that to create hyperinflation in the market. And this hyperinflation is hungrier and hungrier for more rent and things like that. And those inflationary effects are accelerating the breakdown of the housing sector. So that in about 30 days more of this stuff, you are going to have a blow-out of the U.S. economy, comparable to what happened in Germany, going in the direction of what happened in Germany in the Fall of 1923. We're that close."

LaRouche then discussed how to deploy to get the HBPA passed:

"We should not split our effort, between the housing bill and other initiatives. This is the issue. The question of this bill is the only issue. Any other issue is a waste of time. If this issue does not win, everything else will fail. If this issue wins, then we have a chance, the country has a chance. And if we split the effort, we're going to regret it, deeply, within 30 days. There should be only one concentration: on this bill. Period. Because the fate of the nation depends upon it. "The power that makes this legislation go through is not the Congress. The Congress has to pass the legislation, but the driver to convince the Congress to pass the legislation will come from the states, not from the Congress itself. The way this thing will work, is that you go to the people, and you go to the people in the states.

"You see, you don't have a `national housing crisis;' you have a state by state, national housing crisis. People don't live in an abstract congressional form; they live in actual states, and communities within states. Therefore, the pressure is on from the communities who are suffering mass evictions, which are rising at an accelerating rate. And our job is to keep them from being evicted. If they are evicted, then we lose the country.

"So the state legislators and people around them are the ones who will kick the Congress in the rear end, and in the head if necessary, to get the national legislation passed. That's the algebra of this thing. Any other interpretation is wrong, because it's not looking at reality. It's looking at things like objects, like "I want to buy this toy rather than that toy." People have not yet come out of childhood. They're arguing which toy to buy. "It's funny. You know people still have, as young adults and older, they still have this kind of thing they had when they were children, of which toy to buy. And often they look at things in life--they even have mating patterns among young people which are based on which toy do I like better. It's something to play with, you see. It's not serious, which goes especially with the post-industrial society mentality.

"The continued existence of the United States as a nation, over the months ahead, depends absolutely on getting this legislation through, now," LaRouche concluded.

WE HAVE THE GREATEST OPPORTUNITY FOR THE IMPROVEMENT OF THE CONDITION OF HUMANITY, WORLDWIDE

Lyndon LaRouche transmitted the following remarks to the 10th anniversary celebration of the Technological University of Peru, on Friday, Sept. 7, 2007. An audio file of LaRouche's remarks, dubbed in Spanish, was played to the gathering, and a written version of it was handed out to all participants.

Well, this is Lyndon LaRouche speaking, from Germany in fact, and I want to extend my greetings to the Technological University of Peru, and to our host Engineer Amuruz [Ing. Roger Amuruz Gallegos], on the occasion of the tenth anniversary of the Technological University.

This is an interesting time, because we're having a conference, here in Germany, this coming week, which will be an international conference attended by some hundreds of people from various parts of the world: on the subject of the present crash of the international monetary-financial system, and at the same time, on measures for economic recovery worldwide under these conditions. One of these conditions of course, which will be of interest to the faculty and students at the Technological University, is, we are involved in something I've been pushing for a long time--my wife and I--of developing a Land-Bridge across the Bering Strait, from Siberia to Alaska, with the idea of extending that rail connection, and I would propose magnetic levitation, down through Canada, through the United States, into Central America, through the Gap, into South America. This would, in effect, unite three continents: Eurasia, the Eurasian continent in particular; the Americas, North and South; and therefore, Europe. And it would mean, easily, we could extend the same type of line through Southwest Asia, and also directly from Europe itself, where there are plans to run lines, as from Spain, into North Africa and so forth.

This would mean a change, a geopolitical change in the planet. It would mean that no longer would we be depending on shipping, which is slow, nor would we have to use expensive, and inefficient economically, air transport; but we can move not only people, but freight, efficiently, by modern systems of up to the equivalent of 300 miles per hour, or about 500 kilometers an hour. We can move freight from part of these three continents, or mega-continents throughout the world.

This means that whole areas of the world which are less developed, but which contain potential natural resources of value, would now be accessible to humanity in an efficient way.

This would mean a revolution in the economy of the world. Now, as I said, this comes at a time when we face the biggest crisis, the biggest financial-monetary crisis in modern history, since at least the 1648 signing of the Treaty of Westphalia, the Peace of Westphalia. So therefore, we come at a collision point between the worst economic depression, potentially, the worst financial collapse of modern civilization since 1648, and at the same time, the greatest opportunity for physical development of the world economy and its continents, over the same period.

We now have a struggle inside the United States, to defeat what is a presently onrushing financial-monetary breakdown crisis, not only in the United States, but of Europe. Such a breakdown crisis, of Europe and the United States, would have chain-reaction effects on the world as a whole. For example: As a result of outsourcing policy, China depends greatly on sales to the United States of exports; India, more or less, a similar kind of situation, not quite the same. Of course, Africa is desperate. And the already bad conditions in the United States are terrible for Mexico, and for countries in South America.

So therefore, what we're doing now, is, we're now mobilizing an emergency measure, the first of a series of proposed emergency measures, which I have launched with some favorable reception among leading circles inside the United States. As you probably know, the world financial-monetary crisis is reflected most conspicuously in the fact that the large-scale investments in real estate--that is, in mortgages, and the use of mortgages as security for large-scale financial speculation--is the breaking point causing this now-onrushing financial breakdown crisis of the world, which is what we have to think of. So I have proposed, and we've had much acceptance of this, we're pushing for the adoption of the relevant U.S. Federal regulations now, for the month of September--should happen now, could happen now, but we're going to have to fight to make it so. But my proposal, my proposed draft legislation, after its enactment by the U.S. Congress would guarantee that no householder would be thrown out of their home because of foreclosure on a mortgage. We would also protect the chartered banks of the United States, those that are registered as Federal banks, under Federal law, or those which are registered as state banks, under state law; they're private banks, but nonetheless, they are protected because of their status under Federal and state law.

Therefore, this would not solve the crisis, but it would prevent a breakdown crisis of the United States, and potentially Europe. And stopping that breakdown crisis, would give us the room to launch a recovery program, with the same spirit that President Franklin Delano Roosevelt organized the U.S. recovery from the Depression of 1929-1933. That's our perspective.

Obviously, the fate of the nations of South and Central America depend greatly on how we deal with this crisis. Now, there are many opportunities, and there's also something else: As you know, during a period, especially since 1968-1972, there has been a breakdown, coming out of the long U.S. war in Indo-China, a breakdown in U.S. policy, away from the Roosevelt fixed-exchange monetary system. As a result of that breakdown, we had a crisis in international finance and monetary systems over the course of the 1970s. We also had, after 1972, a series of changes in policy, which led to this present policy of globalization, and so forth. This has been a disaster, and has been the real cause of the present crisis.

If we're going to recover, from the onrushing Great Depression--we're going to stop it, and recover--we're going to have to create state credit, which will be emphasized at more than 60%, if we're sane, on reconstruction and improvement of the basic economic infrastructure of the United States and other nations. What we will do, is, use the engineering and production capabilities, which are stimulated by large-scale infrastructure projects, as a way of building up the economy for the production of goods and for agriculture. And thus, have a general recovery, which will remind us in some ways of what Franklin Roosevelt did to defeat the Depression which he faced, when he went into the Presidency in March of 1933.

That means, that for the students at the University, that there are challenging careers opening up, and great needs--not merely opportunities for great projects, but great needs for these projects--if we are to ensure the security of the sovereign states of the Americas, and of other parts of the world. In terms of the cooperation, there was a conference recently held in Russia, to which I was invited--I didn't attend directly, but I had a representative there; and I was in Russia for an event, immediately in the period following. What has been agreed upon, by Russians and others, is the launching of one of the greatest projects that mankind has ever undertaken, in terms of engineering: That, not only the Bering Strait Tunnel project, from the tip of Siberia to Alaska, but this means the greatest revolution in the large expanse of Northern Asia and the Americas so far. This has been agreed to, by Russia, by leading Russians--for example, the former head of the scientific research institute at Novosibirsk, Vladimir Lamin is the key sponsor of this, initiator of this, and head of one of the committees.

People in the Russian government otherwise have supported it. Other countries have indicated their interest. There are proposals from Denmark, for example, for magnetic levitation railway systems, to connect, implicitly out of Denmark, but implicitly aimed across Eurasia. Other countries want this.

So, we are on the verge of the greatest challenge in engineering the world has ever known: And it's coming on your doorstep, if we succeed, by the time you graduate from your studies at the University.

So, let us hope that we succeed. For, if we do, we shall make a better world, for all of us. And the aspirations of the Peruvians which have been there for a long time, could now begin to be realized. And patriotism would mean, not fighting wars--we hope we don't have to fight more wars; we think this would help--but it means that the sovereignty of nations in rebuilding their countries, or building them up, solving the problems of poverty, solving the problems of misery, the management of water, the supply of power, and the development of better health programs, all of things would flow.

So, again, this is our situation, this is your situation. We're at a point of a great divide: We have the greatest financial crisis, worldwide, in modern history, is coming on like an avalanche, now. But at the same time, if we all address this problem, we have the greatest opportunity in the history of humanity, for the improvement of the condition of humanity, worldwide.

Thank you very much.

REBUILDING THE BRITISH EMPIRE
http://larouchepac.com/news/2007/09/08/b...mpire.html

On September 10 a military conference entitled "Defence to 2020 and Beyond," has as it main theme, how the military must address the "breakdown of global order" in the next decade, according to Janes Defence Weekly. The conference is clearly aimed at the "day after" the financial collapse, and warfighting in the "new dark age" that Lyndon LaRouche has been warning of if a new financial system is not immediately implemented.

The conference main sessions have titles such as "Future of Warfare-What Should Be Anticipated- Policy issues; asymmetric conflict..." Another more telling session is entitled, "Protecting freedom of the seas, littorals and choke points if globalisation breaks down." And another, "After Iraq and Afghanistan - dealing with failed and failing states."

Almost all of the speakers are active duty military officers from Great Britain, the U.S., Germany and other NATO countries, as well as Australia., including Lt General David Richards, Commander of NATO's Allied Rapid Reaction Corp; Lt.General James Mattis, Commander U.S. Marine Forces Central Command, Lt.General David Hurley, Australian Dept of Defence, Vice Admiral Gerard Valin, head of plans and capabilities, French Navy. The only non-active duty military named is Dr. Anthony Cordesman of CSIS.

The spiritual father and keynote speaker at the conference is Rear Admiral Chris Parry of Her Majesty's Royal Navy and Director of General Development, Concepts and Doctrine Centre of the British Ministry of Defence.

After implementing a policy to destroy nation states, the British are now formulating a military doctrine to rebuild their empire on the East India company modal.

Reply
#56
FINANCIAL MELTDOWN

http://www.hizb.org.uk/hizb/issues-expla...tdown.html
  
The dominant story in the press these past 2 weeks has been the turmoil in the financial markets. Billions of dollars have been written off of share values. There have been massive hedge fund losses, bank failures seen and threatened, a credit crunch, and the intervention of a central bank in markets to help liquidity and to re-establish confidence. Is the system tottering? And if so, why?

The current problems have been kicked off by problems in the US housing market. Specifically, the constantly growing US house price bubble has come to an end, and this has been reflected initially by problems in the sub-prime mortgage market. Sub-prime is a euphemism for those that wouldn’t normally be given mortgages because they are a poor credit risk! But in the desire to create financial products to meet all tastes, and most importantly to keep the demand for housing strong and consumer confidence high in the US economy, many banks have been only too keen to lend to these high credit risks. Furthermore, via the derivatives markets, the risk in these sub prime loans has been supposedly mitigated via the pooling of risk into vehicles like CDO’s (collateralised debt obligations) and other derivative products. The theory is that by pooling these toxic high risk loans into collective investment vehicles the risk from losses is spread. Spreading the risk across many investors theoretically lessens the risks of widespread collapse.

But what if the whole class of investment, in this case the high risk mortgages to the poorest in society, goes bad? The consequence has been a spread to the rest of the mortgage markets together with the whole “fixed income” credit world. They are now sucked into the rapidly declining value of US homes, with concern over the extent of losses and defaults on these loans and just which banks are over-extended in this market. Lenders are now proceeding with extreme caution, and investors are withdrawing rapidly, provided they can get a price on the funds/investments from which they are now fleeing.

Underlying the seriousness of the crisis, Central banks in Europe, Asia and the US have pumped more than $300 billion (£150bn) of emergency cash into the markets a week ago, and the US Federal Reserve this past week also cut by a full half percent its fund rate (loan rate) to financial institutions. This was aimed to prevent a full-blown financial collapse, effectively to stop a “run” on the financial institutions holding these and other financial assets of dubious quality. Interest rates shot up until the central banks intervened.

What has worsened the crisis has been the effect of ‘leveraging’. Not content with investing in high risk assets, banks and hedge funds make extensive use of lending or ‘leveraging’ to multiply earnings. If an asset can make a net return of say 7% this can be tripled to 21% via borrowing additional funds to invest. But of course the downside is equally dramatic when markets turn in the other direction. Bonds which were rated as high quality, double or triple A, at 99% of par value a month ago are now trading at 90%. If the investor was ‘leveraged’ 3 times they are sitting on losses of close to 30%. Little wonder investors and speculators are running for the exit door.

Compounding matters further is the nature of these pooled investments which are usually traded in secret (“over the counter” or OTC) which means that the market does not really know who is at risk of collapse. Bear Stearns, Banque Paribas and now high profile German Banks are tottering on the brink, and will require massive further support for survival.

Despite several market reforms and legislation over previous years to curb the worst excesses it seems that governments and their central banks still need to intervene periodically to restore order to financial markets. Has the invisible hand of the market been replaced by a great clunking fist of the central banks? In addition to the fact that further “creation” of money to support the excesses of the banking system is inflationary and works against all in society, it cannot be ignored that a system which is supposed to be self regulating to allow the free flow and use of capital still suffers major ripples of insecurity that require massive state intervention. And the full extent of this particular crisis has yet to surface.

Many do not understand the functioning of capital markets, its jargon, and purpose. It sometimes helps to picture 2 tables. At the first table people are trading real goods and services. They may buy or manufacture goods and sell them on, or provide services related to their area of work or expertise. This represents the bulk of “business” as it has been known for millennia. The second table is a more recent development it does not directly manufacture goods or services as commonly thought but provides a new kind of service. Rather than work in the real world, participants effectively gamble on what is happening – sometimes on how the first table, or some businesses in that sphere, is performing and sometimes merely providing capital or the money to either the real businesses or to those gambling on real business performance. Debt capital markets, foreign exchange markets, derivatives markets, the stock market and much of what investment banks trade in, now fall into the second speculative table rather than the real business world. This is evident by the weight of transactions occurring in the speculative world. The volume of foreign exchange, stock exchange, derivatives, stock market and related transactions far exceed by large multiples the requirement for capital or foreign exchange needed in the real business world. Additionally via easy credit a boom in the stock market has been seen through leveraged buyouts, the act of buying companies on credit. The derivatives market was once famously described as a 40 pound flea sitting on the back of a 5 pound dog!

The use of derivatives and highly leveraged transactions also means that massive gains and losses can eventuate with even relatively small movements in market prices. One might surmise that this has no real problems in the real world, as there will always be a winner and a loser in any transaction, and if parties want to take such risks then why not let them. But where the risks taken are so large and the counterparty or parties are not known, the risks to the whole system become obvious through the potential for domino effect collapses. Such a collapse can involve the whole banking system.

In 1998 the central banks also stepped in aggressively in light of the collapse of Long Term Capital Management, a hedge fund which had liabilities of $125 billion against its own capital of less than $5 billion. Additionally at the time of its collapse it had off balance sheet derivative positions of $1.25 trillion! With concern over a run on the banking system the Federal Reserve in the US arranged a $3.6 billion bail out in order that the financial markets didn’t collapse. The surrounding furore was capped by much ‘tut-tutting’ and promises of better regulation to ensure that it couldn’t happen again. Yet some now feel a major collapse is almost inevitable given the size these markets have grown to, the extent of high level risks now waged and the lack of transparency in many of the players and transactions. It is also very troubling that the government response to players in these markets over-extending is to pump (print) more money into the system, effectively encouraging further loans on top of the massive over-leveraging that is currently going on. This is both unfair to all those that see the value of their money dwindling via inflation and is counter to their claims to want to keep a lid on inflation.

It is also troubling that many Muslims fail to see the dangers of these markets and blindly step forth into them with little regard to what is actually going on and indeed whether Islam countenances investment within them. The prohibition of investment in interest based investment vehicles is well known across the Muslim world. However, it was not until the 1950’s or early 60’s that Sheikh Taqiuddin an-Nabhani, an Azhari scholar and the founder of Hizb ut-Tahrir set out a clear enunciation of the rules for capital markets including the modern stock and related markets following a process of ijtihad. Nabhani cited the rules of company structure set out by the Prophet (saw) for company set up, governance and ownership. These structures are not new to students of Shariah – Al-Mudharaba, Al-Mufawadha, Al-Abdan, Al-‘Inan, and Al-Wujooh – all including the requirement for investors to share directly in the risk of the real business which includes participation within the business with either direct work or capital participation. This precludes speculation on the performance of the company and also purchase of a company on the basis of borrowed money (debt based buyouts). In comparing to the two tables set out earlier the Islamic approach ensures that participants have a direct relationship with the real businesses, which ensures a full accounting and sharing of profits and losses and hence rewards and risks of failure. Without leveraged purchases and derivative speculation on the movement of markets or currencies, focus moves to the actual businesses and not forms of speculation or gambling on events. Providing a far more stable approach to business and capital markets. And that Islam forbids usury means that people seek a return on investment, not via interest rates managed by banks, but by direct participation in business with the attendant risks and rewards these hold.

The essential problems faced by Muslims, and indeed most of the world, is that this capitalist system not only gambles with billions and trillions of dollars. It gambles with people’s lives, investments and hopes. Muslims, who wish to establish the Islamic economic system in the Muslim world as part of the re-establishment of Islam as a complete way of life are looking to implement Allah’s laws. The fruits of such an implementation would not see such a volatile market, such financial instability and the consequent unseen human misery that inevitably accompanies it.


Reply
#57
THIS NEW MILLENIUM OF OURS
http://www.larouchepac.com/news/2007/09/...-ours.html


During two decades, twenty years, from the February 1763 Peace of Paris, when the British empire was, in fact, born, until that British East India Company's empire-in-fact conceded the establishment of the United States of America's independence, in 1783, a certain world order of what became a see-saw conflict between those two English-speaking systems, has dominated the decisive strategic elements of the history of this entire planet. This conflict was pivoted, throughout the 1783-2007 interval to date, on the conflict between the system of usury represented by the imperial, London-centered Anglo-Dutch Liberal monetarism, on the one side, and, on the other, the American republican system of sovereign national credit associated with the name of the first U.S. Treasury Secretary, Alexander Hamilton, of the new U.S. constitutional Federal republic.

Now, during the recent weeks, the Anglo-Dutch Liberal monetarist system has been engaged with a process of the self-disintegration of its present world monetarist system of global practice of a rampant, and also virtually rabid form of usury. Thus, we are presently pivoting on the anticipated new world system. The question is, will it be the affirmation of the American System of political-economy, or a global form of Hellish chaos, a global new dark age?

During most of the decades of those centuries, the British empire, with its predatory gold standard, dominated the world, until the 1931 formation of the Basel, Switzerland Bank for International Settlements.

So, from the time the associate, Andrew Jackson, of the London-owned traitor to the U.S., Aaron Burr, entered the U.S. Presidency, until the election of President Abraham Lincoln, the Presidency itself was usually ruined by London's assets, such as Jackson, Martin van Buren, Polk, Pierce, and Buchanan. However, after the victory over London's Confederacy assets under President Lincoln, we emerged as a continental power within our own borders, a power which could not be conquered by outside military force.

However, even then, when the fame of the success led by President Lincoln spread the influence of Lincoln's victory into Japan and the Eurasian continent, assassinations of elected Presidents and other subversive activity, repeatedly weakened our political system. Two elected Presidents representing the instincts of the defeated British asset which had been the Confederacy, Theodore Roosevelt and Woodrow Wilson, ruined us, until the election of President Franklin Roosevelt. Immediately on the news of the death of President Franklin Roosevelt, the Anglo-American Liberal party grabbed increasing control over our republic's foreign and domestic policies, despite the grave warning which outgoing President Dwight Eisenhower delivered against those forces of Caesarian reforms in military affairs which he labeled the same "military-industrial complex" which engaged the U.S. in two sets of ruinously long wars (1964-1972 and 2003- 2007), echoes of the ancient Peloponnesian war which ruined Classical Greece's civilization, each, like the ancient Peloponnesian War, engaged on fraudulent pretext of lies uttered from the highest offices of the relevant republic.

Now, we have the presently soaring, global monetary-financial breakdown-crisis of the aggregated, present world monetarist systems. The world is presently seized by what is in fact a global systemic crisis, which has certain internal similarities to the breakdown-crisis which struck Weimar Germany with full force during the second half of 1923, but which is global in scope, rather than one whose effects were susceptible of being confined, at least temporarily, to one nation.

A dollar-crisis, with marked similarities to the Wall Street "crash" of 1929, had already struck, in early October 1987. Unfortunately, for the world at large, a decision made by the U.S.A. and others, then, postponed the reckoning with the foolishness which had brought on that October 1987 stock-market crisis, until a time approximately two decades later. This time, a process called by such names as "'globalization," "post-industrialism," and the anti-scientific, "neo-malthusian" manias called "global warming," have created a degree of John Law-style, hyperinflation in credit markets, such that the actual financial debt outstanding vastly exceeds the means by which any orderly bankruptcy proceeding could resist a general economic-breakdown-crisis of the global system as a whole.

We have already entered a situation, this time on a global scale, which must be seen in terms of its likeness to the so-called "New Dark Age" which struck medieval European civilization during the middle of the Fourteenth Century.

In face of this presently onrushing, global crisis, only a certain, definite kind of reform could succeed.

- The Essential Systemic Reform -

The present world monetary system, with its component monetary systems, must be put into protective custody for general reform in bankruptcy proceedings, over a period of some years or more to come. Therefore, all so-called independent monetary and related central banking systems must be taken into protective custody, and the authority which they had enjoyed given over, entirely, to a concert of treaty-agreements among perfectly sovereign nation-states' authorities.

We must credit a network of sovereign credit- systems, created by sovereign governments, which must employ a nested set of treaty-agreements among sovereign nations, agreements which will, in effect, reestablish a global, fixed-exchange-rate system of treaty-organizations. The immediate intention of adoption of such agreements, must be: a.) To replace the world's present monetary systems with statist credit-systems, as Treasury Secretary Alexander Hamilton defined national banking. b.) To unleash long-term, massive expansion of essential physical-economic infrastructure, to shift employment back toward emphasis on capital-intensive modes of technological progress in manufacturing, independent farming, high-technology mass-transport featuring emphasis on magnetic levitation, global development of fresh-water supplies, and high-energy-flux-density of production and distribution of power and synthetic generation of hydrogen-based fuels produced by nuclear-fission technology, and science-driver programs for economy, and health-care and sanitation.

The visible economic horizon for such a reform spans the two generations of expected economically-active life of young people entering adult life today. Since the great mass of required infrastructure-building and related tasks will be within the range of twenty-five to fifty years maturation, we are presently situated at the point at which long-term treaty agreements among sovereign governments must recognize that what we do, or fail to do on those accounts will necessarily encumber our populations for fifty years and more to come.

Rather than floating currencies, we must allow prices to float within a fixed-exchange-system based on long-term considerations, especially the important of protection of long-term physical capital expressed in forms such as productive capacities and progressive improvements in skill-levels of populations.

If we can muster the resolution to make such emergency agreements among sovereign nations now, we will probably have defined the hopeful future for all mankind for at least a millennium to come.

- In The Meantime -

No effort should be wasted in trying to adjust values of what are essential fictitious monetary claims. At this immediate time, and for some years to come, we must protect what is currently essential, such as occupation of housing by families, the functioning of locally chartered banks by the national or regional governments, and other things. Presently, we do not now have the basis on which to determine what the valuation of a claim to property should be. What that should be will become more or less clear only during the course of a lapse of time of several or more years. In the meantime, life must go on; all essential functions of physical economy and well-being of households, must be protected; real growth in employment in productive, rather than financial-speculative and questionable "services," must have priority. The function of governments, and among governments, must be to ensure that what is essential happens, and that the physical growth of useful output, as physical capital and essentials of the population as a whole, are met.

This could not be accomplished, presently, under ordinary proceedings-in-bankruptcy. The mere attempt to take that route would be a disaster for all concerned. Instead, we must use emergency "fire walls" of government reform to ensure that physically essential measures of support for normal life and improved physical productivity are taken with what is otherwise a minimal stress and strain upon a population attempting to resume both a stable, understandable, and progressive manner of living in households and running local businesses in their respective communities. We must foster creative initiatives, and, therefore, we must foster, rather than tend to discourage useful private initiatives.

Reply
#58
IN GOLDMAN SACHS WE TRUST
ATCA

John Kenneth Galbraith titled a chapter in his book, The Great Crash: 192 9 , "In Goldman Sachs We Trust."

. US Treasury Secretary Henry Paulson, former Chairman and CEO of Goldman Sachs Group, and his counterparts in Japan, Germany, UK, France, Italy and Canada -- The Group of Seven -- Governments are to ask the Financial Stability Forum (FSF) , housed at the Bank for International Settlements (BIS) in Basel, Switzerland, to give a detailed report on the root causes of the credit crunch to the G7 October meeting of finance ministers . FSF is Chaired by Prof Mario Draghi, Governor of the Banca d'Italia, former Vice-Chairman at Goldman Sachs International.

. Secretary Paulson has conceded the crisis in the credit markets will last longer than any of the financial shocks of the last two decades. He said the US economy would be hurt by the upheaval but the overall outlook remained benign.

. Crude oil rose to a record USD 80+ per barrel in New York intraday trading after supplies dropped the most this year. The inflation-adjusted record is coming close to t he previous record in real terms set post the Iranian revolution in 1979. C ost of oil used by US refiners averaged USD 37.5 a barrel in March 1981 -- that's USD 84.7 in today's dollars. The euro reached its highest point against the dollar since its introduction in 1999. Th is is partially because the US Federal Reserve is expected to cuts its fed funds rate by as much as 50 basis point next week to help relieve economic pressures. A global credit crisis has increased the threat to growth according to the European Central Bank.

. Wall Street investment banks Lehman Brothers, Morgan Stanley, Goldman Sachs and Bear Stearns all report their third-quarter results next week.

. The Financial Stability Forum ( FSF) is a worldwide group of finance ministers, central bankers and regulators from G7 national authorities as well as those of Australia, Hong Kong, Netherlands, Singapore and Switzerland. FSF is . The FSF is going to examine financial institutions' liquidity, credit risk practices, accounting and valuation procedures for complex derivatives, supervisory principles and the role of credit rating agencies in a clear sign that the credit crunch is becoming a trans-national issue with political implications. FSF comprises 42 representatives (Numbers in brackets):

National Authorities (26)


Australia

Reserve Bank of Australia

Canada

Department of Finance
Bank of Canada
Office of the Superintendant of Financial Institutions

France

Ministry of the Economy
Autorité des Marchés Financiers (AMF)
Banque de France

Germany

Ministry of Finance
Bundesanstalt für Finanzdienstleistungsaufsicht
Deutsche Bundesbank

Hong Kong SAR

Hong Kong Monetary Authority

Italy

Ministry of the Economy and Finance
Banca d'Italia
CONSOB

Japan

Ministry of Finance
Financial Services Agency
Bank of Japan

Netherlands

De Nederlandsche Bank

Singapore

Monetary Authority of Singapore

Switzerland

Swiss National Bank

United Kingdom

Bank of England
Financial Services Authority
H M Treasury

United States

Department of the Treasury
Securities & Exchange Commission
Board of Governors of the Federal Reserve System


International Financial Institutions (6)

International Monetary Fund (IMF) (2)
World Bank (2)
Bank for International Settlements (BIS)
Organisation for Economic Co-operation and Development (OECD)

International Standard Setting, Regulatory and Supervisory Groupings (7)

Basel Committee on Banking Supervision (BCBS) (2)
International Accounting Standards Board (IASB)
International Association of Insurance Supervisors (IAIS)(2)
International Organisation of Securities Commissions (IOSCO) (2)

Committees of Central Bank Experts (2)

Committee on Payment and Settlement System (CPSS)
Committee on the Global Financial System (CGFS)

European Central Bank (1)

Reply
#59
PREDICTING THE FUTURE: HOW DOES THE "WISDOM BASED SUPER-SENSITIVE A PRIORI KNOWLEDGE ATCA ENGINE WORK?
ATCA


As the global credit crunch has unfolded, a number of you have enquired how the ATCA engine works so accurately and why is it so reliable in terms of predicting the next steps in the unfolding crisis? For this, many thanks are reciprocated to you and with deep humility we are in a position to share with you the underlying ATCA engine's "wisdom based super-sensitive a priori knowledge" built on the experience garnered by working on supercomputer modelling of complex problems and human interaction.

Imagine a 24/7 knowledge network which is constantly alive. Imagine a n etwork which deep mines the internet and "domain-specific" expertise looking for unique information on uncertainties, risks, opportunities and developing global news themes. Then imagine a human fine tuning system which polls hundreds of members out of a carefully selected set of 5,000 executive decision makers in over 120 countries, representing different sectors of the global economy, to find the one submission which will add something extra to the existing pool of knowledge to help make highly informed decisions at a corporate, government and voluntary organisation level. Imagine ATCA working step-by-step since its conception in October 2001!

It is no accident that ATCA engine models the present and unfolding future to predict the precise direction of future trends based on "wisdom based super sensitive a priori knowledge." It is no accident that it can inform how markets work or what type of government policy should evolve to counter climate chaos, to address search engine dilemmas and to safeguard democracy.

How often have you read an ATCA Socratic dialogue and then a month, a quarter or indeed a year later seen the news on television or in mainstream newspapers that predicted events have actually transpired? This is not accidental, this is part of the design of the ATCA engine.

At the intersection of ATCA members engaged in Socratic dialogue -- 1,000 Parliamentarians; 1,500 Chairmen and CEOs of leading corporations; 1,000 Heads of NGOs; 750 Directors at Academic Centres of Excellence; 500 Inventors and Original thinkers; as well as 250 Editors-in-Chief of major media -- both off-line and online, in published and mostly unpublished formats, lies "wisdom based super sensitive a priori knowledge" and where does it come from?

"Wisdom based super sensitive a priori knowledge" is gained through deduction and feedback loops from current events and expert wisdom input, super-sensitively screened, and not through empirical evidence of future major events or market movements that are yet to happen.

"A priori knowledge" is gained through deduction, and not through empirical evidence. For instance, if we have two Picasso paintings now, and we plan to add three Picasso paintings, we will have five Picasso paintings in the future. This is future knowledge gained deductively. We did not actually need to get the three other Picasso paintings and place them with the first two to see that we have five in the future. To this extent, the term "A priori" is valid for the ATCA engine.

"A priori knowledge" also exists without reference to reality. One example is inborn knowledge. Another example, often used, is mathematics and deductive logic to predict the future. To understand why this second definition -- which is how the term is really used by ATCA -- might manifest itself, we have to look at exactly what is being said and meant.

Let us look at mathematics. It is easy to see, in the Picasso painting example, that mathematics and deductive logic fit under the first, valid meaning of the term. If this were all that was meant by saying that mathematics is a priori, there would be no problem. However, this is not so. Socratic philosophers then go on to say that mathematics is true without reference to reality. The knowledge of mathematics -- as opposed to the knowledge created by mathematics -- is "a priori." It is known without reference to reality. It is claimed that mathematics is a higher form of knowledge. That even if the world around us does not exist, mathematics is still true. That it is a form of knowledge that we can be certain of, even if we deny reality.

How do we make such a statement? First, we see that mathematics is the science of units, and any units are acceptable. We could have said Rodin sculptures instead of Picasso paintings in the example presented. The validity would be the same. It is true without reference to any unit.

This sounds reasonable at first. The problem stems from the method of deriving the mathematical abstractions. If we teach a child to do simple arithmetic, we will recognize that to gain the knowledge of mathematics, one must use some units. Maybe Picasso paintings. Maybe Rodin sculptures. It doesn't matter which units. It does matter, though, that some unit is picked. To grasp mathematics, one needs a foundation. Particulars from which an abstraction can be made.

Calling mathematics "a priori," or knowledge independent of reality, is to undercut its base. This is the essence of the second meaning of a "priori." The meaning that is actually used by ATCA to predict the future and market behaviour. An abstraction is made from particulars. Once the abstraction is made, the process from which it was derived is then ignored. The base on which it was built is denied. The abstract knowledge is then said to exist without reference to reality, since the reference can be ignored.

In this way, certain kinds of "wisdom based super sensitive a priori knowledge" or "ATCA knowledge" sets are said to exist without being dependent on "yet-to-be" future reality. Various explanations for how we are aware of the knowledge are put forward. Some say it is inborn, and we were always aware of it. Others say that although it was inborn, it takes a while for us to recognize the knowledge via expert deduction. Others decide that it is revelation from some higher power, that higher power being the network of 5,000 members of ATCA engaged in Socratic dialogue with super-sensitive filtering along the way of "noise" arguments.

The consequences to accepting the claim that knowledge can be "a priori" is that it leads to faith in the ATCA engine. When it is supposed that some knowledge exists and is valid without our need of deriving it from reality and the events actually happening in the future, it opens the door to accepting most "yet-to-be" knowledge can be extrapolated like this, given enough inputs as in the case of the "Wisdom based super sensitive a priori knowledge" of the ATCA engine.

What are your precise thoughts? Have you been tracking the ATCA engine's capability to predict the future via Socratic dialogue and internet deep mining ?

[ENDS]

The ATCA submissions can be accessed from here . We are grateful to:

* The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK , for " In Goldman Sachs We Trust ;"
. Dr Harald Malmgren , CEO, Malmgren Global, based in Washington, DC, USA , and The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK , for " Currencies Turmoil Ahead: Euro and Sterling Weakness around Point of Inflexion?; "
. Eric Best , Founder and President , Best Partners SC , New York City , NY , USA, for " Captains' Priorities and Requisite Virtues in Deep Financial Storm ;"
. Andrew Hunt, Founder and Consultant Economist, Andrew Hunt Economics, City of London, UK, for " The UK's Non-Bank Banks and High LIBOR;"
. The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, for "
Worst Financial Crisis in 20 Years and the 10 Day Debt Bomb ;"
+ DK Matai, Executive Chairman, mi2g , ATCA, The Philanthropia , based in Canary Wharf, London, UK, for " Breach-of-Trust in Computing Platforms: Systemic Risk & Black Swans ;"
+ The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, for " ATCA QUERY: The Question of Trust ;"
. Dr Harald Malmgren , CEO, Malmgren Global, based in Washington, DC, USA , and The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK for " Central Banks' Intervention and Europa ; "
. Hamid Hakimzadeh, Hedge Fund Specialist, based in Buckinghamshire, England, UK, for "The Physics of Humpty Dumpt y;"
. Nigel Reed, Senior Analyst, Financial Markets, based in Cornwall , England , UK, for " China, Japan & US T- Bond s ;"

* The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK , for " Credit Card Debt Default - The Domino Crisis post Sub-Prime Overflow;"
* Dr George Feiger, President & CEO, Contango Capital Advisors, based in Berkeley, California, USA for " Responsibility for Credit, Securitisation and Moral Hazard ;"
. Anthony Whitehouse , Founder , Bittiner Whitehouse (now Maitland), Geneva, Switzerland, for "Blame and Sanctions in the Credit Crunch ; "
. Prof Prabhu Guptara, Executive Director, Organisational Development, Wolfsberg (UBS), Switzerland, for " Unique Problems with 1990s Japan ; "
. The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, and Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA, for " Central Bankers, Monetary Policy and Moral Hazard ; "
* William Sturge, Partner, Reinsurance, Lawrence Graham (LG) based in Central London, UK, for "Litigation Exposure and Insurances that may Respond ;"
. Peter Tasker, Founding Partner, Arcus Investment, based in T okyo, Japan, for " Invaluable Lessons from 1990s Japan - Risks of Schadenfreude ; "
. Andrew Leung, CEO, AL International, London, UK, and frequent visitor to China for "The China Dimension of The Global Credit Crunch ;"
* The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, and Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA for " Off-B alance S heet Conduits & SIVs R aise W ider C oncerns ;"
* Prof C harles Calomiris , Columbia Business School, New York & Prof Joseph Mason , LeBow College of Business, Drexel University, Philadelphia, USA for " The Conflict of Rating Agencies and Regulation - We need a Better Way to Judge Risk ;"

. Dr George Feiger, President & CEO, Contango Capital Advisors, based in Berkeley, California, USA for, " Questioning the Views of a Nobel Laureate;"
. Prof Joseph Stiglitz, Nobel Laureate in Economics (2001), Columbia University, New York, USA , for " Day of Reckoning for Americans who lived Beyond their Means ; "
. Dr George Feiger, President & CEO, Contango Capital Advisors, based in Berkeley, California, USA for "Suggestions for Resolving Sub-Prime Dilemma Step by Step ;"
* Dr Harald Malmgren , CEO, Malmgren Global, based in Washington, DC , USA for " Understanding Rating Agencies beyond the Sub-Prime Meltdown ;"
* The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, for " Asymmetric Knowledge Risk -- Insurance Lessons for Sub-Prime Contagion ;"
* Anthony Whitehouse, Founder , Bittiner Whitehouse (now Maitland), Geneva, Switzerland, for " High Credit Ratings and Breakdown of Trust ; "
* John Pickering, Vice-Chairman, Labour Finance and Industry Group, based in London and Tunbridge Wells, UK, for " Role of Auditors ;"
* The ATCA Research and Analysis Wing (RAW), based in Canary Wharf, London, UK, for "ATCA QUERY: Role of Credit Rating Agencies ;"
. Peter Tasker, Founding Partner, Arcus Investment, based in T okyo, Japan, for " Resilience of Corporate Profits & Sub-Prime Fiasco -- Global View from Japan ; "
. Daniel Morler , Head of Middle East, LGT Private Bank, based in Vaduz, Liechtenstein, for " Human Factor, Information Lag, Geo-Politics and Central Banks ; "

. Justin Urquhart Stewart, Director, Seven Investment Management, London, UK, for " Pride Before the Fall -- Those Who Don't Know that they Don't Know;"
. Martin Wolf, Associate Editor & Chief Economics Commentator, Financial Times, London, UK, for "To Cut or Not to Cut: Federal Reserve must Prolong the Party ;"
. The Hon Al McDonald, Chairman and CEO, Avenir Group, from Michigan, USA, for " Balancing The Role of Management in Extreme Financial Turbulence ; "
. The ATCA Editorial Team based in Canary Wharf, London, UK, for " Subprime Crisis Spreads Across Regions and Financial Sectors;"
* Hervé de Carmoy, European Vice-Chairman, Trilateral Commission, based in Paris, France, for "Role of Large Financial Institutions in Fuelling Crisis ;"
* Dr Jim Walker , Chief Economist, CLSA, based in Hong Kong , China, for " China Chaos and Subprime Butterfly;"
. Ashutosh Sheshabalaya, CEO, India-Advisory, based in Brussels, EU, and Bassilly, Belgium, for "India turns History Upside Down ;"
. John Elkington, Chief Entrepreneur, SustainAbility, based in London, UK, and returning from India, for " Mother Convulsion - India's Third Liberation;"
. Stephen Lendman, based in Chicago, Illinois, USA, for " Slow Motion Train Wreck" via Dr Ashok Khosla, Chairman, Development Alternatives, New Delhi, India;
. The ATCA Editorial Team based in Canary Wharf, London, UK, for " Market Convulsions;"

. Dr Harald Malmgren , CEO, Malmgren Global, based in Washington, DC , USA for " Federal Reserve's Changed Focus ; "
. Bill Emmott , Director, UK-Japan 21st Century Group, based in London and Somerset, UK, for " Japan's Strong Yen ;"
* Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA for " The Asymmetric Loss of Trust and Chain Reaction ;"
. The ATCA Editorial Team, based in Canary Wharf, London, UK, for " Public Inquisition of Credit Rating Agencies may Accelerate Downturn ;"
. Dr George Feiger, President and CEO, Contango Capital Advisors, based in Berkeley, California, USA, for " Watch out for Dramatic Winners ;"
* The ATCA Editorial Team, based in Canary Wharf, London, UK, for " Systemic Risk & Sectoral Meltdown: Heightened Correlation and Deleveraging;"
. Rudi Bogni, Chairman, Medinvest, and Director, Old Mutual, from Basel, Switzerland, for, "Non-Stop Central Banks' Intervention ;"
. Dr Ravi Batra, Professor of Economics, Southern Methodist University, Dallas, Texas, USA, for "Towards a Global Economic Crisis? ;"
. Aurora Carlson, Founder, Open One Center, based on the West Coast, Sweden, for " The Coming Storm of Change;"
. The ATCA Editorial Team, based in Canary Wharf, London, UK, for " Large Quake hits Quants as Computer-Driven Quantitative Hedge Funds Short-Circuit;"

* Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA for " Prolonged Credit Market Correction Ahead;"
. Prof Dr Norbert Walter, Chief Economist, Deutsche Bank Group, based in Frankfurt, Germany, for "Economic Consequences of The Sub -Prime Crisis ;"
. Anthony Whitehouse, Founder , Bittiner Whitehouse (now Maitland), Geneva, Switzerland, for " Regulators, Hedge Fund Lending and Cro s s-Selling ;"
. The ATCA Editorial Team, based in Canary Wharf, London, UK, for " Perfect Storm: Credit Freeze and Distress Selling by Hedge Funds;"
. Dr George Feiger, President and CEO , Contango Capital Advisors , based in Berkeley, California, USA, for "Two Faces of the Same Coin ;"
* The ATCA Editorial Team, based in Canary Wharf, London, UK, for " Contagion and Systemic Risk? ECB Injects Record Euro 95bn post Major Disturbance;"
. The ATCA Editorial Team, based in Canary Wharf, London, UK, for " Flight to Quality as Markets finally A ppreciate R isk ;"
. Robert McNally, Chairman, London Chamber of Commerce Property and Construction Group, UK, for " Erosion of Commercial Real Estate as a Solid Asset Class;"
. Alexander Hoare, CEO, C Hoare and Co, Private Bankers, based in the City of London, UK, for "Destructive Creativity, Leverage and The Derivatives Market ;" and
. Dr Harald Malmgren , CEO, Malmgren Global, based in Washington, DC , USA for "The Fear of Central Bankers -- Flight from Illiquidity , Derivatives and Heightened Risk of Contagio n ; "

Reply
#60
MARGIN OF SAFETY AND THE BUBBLE PHENOMENON : DIFFERENTIATING BETWEEN VALUE INVESTMENT AND SPECULATION
ATCA

What do Benjamin Graham, Warren Buffett, Irving Kahn, Walter Schloss, Mario Gabelli, Glenn Greenberg, Robert Heilbrum, Seth Klarman, Michael Price, Paul Sonkin, Charles Brandes et al have in common. They are investment icons whose thoughts, ideas and investment philosophies are described as those of "Value Investors."

After the great crash of 1929 during the depression era, Benjamin Graham, a veteran American investor in the early 1930s said, "Common stocks have one important investment characteristic and one important speculative characteristic. Their investment value and average market price tend to increase irregularly but persistently over the decades, as their net worth builds up through the reinvestment of undistributed earnings. However, most of the time common stocks are subject to irrational and excessive price fluctuations in both directions, as the consequence of the ingrained tendency of most people to speculate or gamble."

Over the last six years ATCA has researched the modus operandi of business leaders and investors in regard to Value Investing. Nigel Gibson in "Essential Finance" describes Value Investing as follows, "An approach to investing best summed up by Benjamin Graham, who urged others to seek a 'margin of safety'; the opposite of growth investing. Value investors ferret out the stocks of companies (that is value stocks) which have solid businesses and balance sheets but which, for one reason or another, are out of favour with the market. Such investors aim to buy low and sell high. Their techniques vary. Warren Buffett, one of the most successful investors of all time, values companies on the basis of the present value of their future cash flows. Others look for companies whose price/earnings ratios are below the average for the market as a whole. Most take a long-term view of investment."

If we survey the financial and property markets today in a number of countries, we can see that safety margins are inadequate amid a speculative bubble where the yields or annual earnings on investments have gone from bad to worse. What does this mean? Investors around the world are not being paid enough for the inherent risk in owning stocks, bonds and real estate. They are, even now, earning little additional yield on higher-risk corporate and developing nation debt than on AAA rated government bonds in highly developed nations. What happens if there is a "hundred year storm?" Although investors are displaying a lot of excitement, however, as in market bubbles of the past, there is "not enough margin of safety." In order to understand the speculative bubble phenomenon and its aftermath, the graphs of the extreme stock market losses from 1929 to 1932 and from 1972 to 1974 are worth examining as indeed is the plunge of oil stocks in 1981 and tech stocks from 1999 to 2001.

When examining a hundred year graph of the market value of US company shares compared with the annual output of the US economy, the present bubble is different from the previous sections of graph showing historical investment bubbles and "irrational exuberance." The graph shows the typical steep upward slope as the value of US stocks went from about 60 per cent of annual economic output in 1990 to nearly 170 per cent in 2000. Then came a steep dotcom decline which was short-lived as interest rates were drastically cut by the US Federal Reserve. As a result, stocks as a percentage of Gross Domestic Product (GDP) did not return to 60 per cent, the average share value ratio dating back to the 1920s. More surprisingly, the percentage never even fell to the level of the highs of 1929 and the early 1970s, and it has recovered in the past four years to more than double the historic average. It is possible, although not certain, that a return to the historic average, or a lower percentage, could yet occur. A further decline in US house prices could set off a chain reaction as witnessed in Japan in the 1990s.

Access to cheap debt has fuelled a boom among the private equity funds that use a high proportion of debt to take over public companies, as in Leveraged Buy Outs (LBOs). The support such deals provide for stock prices could completely evaporate if there is a sudden arrival of another Black Swan -- outlier event -- which sends a shock to the world economy alongside the presently unfolding global credit crunch. A further decline in US real estate prices could trigger a rise in the number of borrowers defaulting on debt that supports some USD 2 trillion worth of securities held by financial institutions. In the event of mass exit from highly speculative property and equity investments, the only recourse may lie in quality government bonds and Treasury bills, ultra-safe haven currencies, or gold.

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