More Unconventional Ways The Fed Can Add Liquidity

Nobody expects the Spanish Inquisition!

Our chief weapon is surprise. Surprise and fear. Fear and surprise.
Our two weapons are fear and surprise. And ruthless efficiency.
Our three weapons are fear and surprise, and ruthless efficiency and an almost fanatical devotion to the Pope.

Our four...no...amongst our weaponry....amongst our weaponry are such elements as fear....I'll come in again.

-- Terry Jones, Monty Python's Flying Circus

Here are my top five guesses as to how the Fed plans on increasing liquidity, countdown from five to one.

5. Forget the loans, just buy the collateral. Last week Jeffrey Lacker, President of Federal Reserve Bank of Richmond, re-iterated that the Fed's discount window is wide open and it will take mortgage backed paper, auto loans, even boat loans as collateral.

4. Break out the comfy chair. Ben Bernanke, a great student of the Spanish Inquisition, has used its chief weapons to perfection.

3. Buy it Now on eBay. If the Fed really wanted to put money in home owner's hands, it could use its eBay account ("HelicopterBen") to raise the bids on all kinds of stuff. Underwear, unused wedding dresses, keys to my old car, mac and cheese (hmm-hmm good). That would put cash dollars right into the hands of consumers who have to sell all their belongings to meet the higher mortgage payment from their reset ARMs.

2. A new Bravo reality show. Five Fed Governors go head-to-head trying to save the financial system, one foreclosure at a time. These deeply flawed, yet lovable characters race against the clock (and each other), trying to flip a house before the foreclosure auction ends and another hedge fund blows up. Ben is the brainy academic who tries to lead his team of talented but socially misfit governors, Don is the cranky and stubborn bank veteran, Kevin is the naive one who can't ever stand up to the others, Randy is the cocky one who knows his mad central banking skillz trump all the others, and Fred just tries to make it to the next round by not doing anything too daring or too stupid. Find out whose left after this weeks episode of "Property Bailout".

1. Carpet bomb the US with cash. Screw the helicopters, bring out the big guns. Instead of dropping wads of cash on Iraq, Bernanke should direct our commander-in-chief to fire bomb cash dollars onto the worst areas of the housing recession - Florida, Arizona, Nevada and California. Bernanke, a great student of dropping things out of helicopters, has stated that, while unconventional, carpet bombing money is also an effective monetary policy tool. The government already tested this technique in 2002 by sending every parent in the US a $400 "tax credit". This averted a more serious recession and only had the minor side-effect of raising the CPI from 1.2% to 3.0%. Bernanke speculates the only side effect of carpet bombing bags of money is inadvertently killing some of the intended recipients.

This Article is from contrahour.com

The Business Cycle And the Future

The Business Cycle And the Future

The Domino Effect

The events that followed 1987 were all too easy to foresee. The G5 talked the dollar down by 40% between 1985 and 1987 essentially telling foreign capital to get out. The Japanese obliged and their own capital contraction led to the next bubble top at the peak of the 8.6-year cycle that was now due 1989.95. As the Japanese took their money home for investment, the value of their currency rose as did their assets thereby attracting global investment as well. Everyone was there in Tokyo in late 1989. Just about every investment fund manager globally was touting the virtues of Japan. As the Japanese bubble peaked, capital had acquired a taste for foreign investment. That now savvy pool of international investment capital turned with an eye towards South East Asia. Right on cue, the capital shifted moving into South East Asia for the duration of the next half-cycle of 4.3 years until it too reached its point of maximum intensity going into 1994.25. At this point, international capital began to shift again turning back to the United States and Europe, thus causing the beginning of a new bull market in a similar manner to what had happened in Japan. In fact, 1994.25 was once again the precise day of the low on the S&P 500 for that year. As American and European investment returned home, the steady outflow of capital from South East Asia finally led to the Asian Crisis in 1997. In both cases, Japan and South East Asia blamed outsiders and sought to impose punitive measures to artificially support their markets. In Japan, these interventions have left the Postal Savings Fund insolvent as public money was used to support the JGB market. Financial institutions were encouraged to hide their losses and even employees from the Minister of Finance were installed in some cases engaging in loss postponing transactions of every kind. Major life companies were told not to hedge their risks for fear that this would make the markets decline even further. Thus, the demise of Japan that would have been complete by 1994 was extended by government intervention that has most likely resulted in a lengthening of the business cycle decline into 2002.85.

The next peak on the 8.6-year business cycle came in at 1998.55, which was precisely July 20^th, 1998. While the intensity was defined rather well by the model’s forecast of 6,000 on the Dow by the quarter-cycle target of 1996.4 followed by 10,000 for 1998, the development of highly leveraged hedge funds created a trap that was not fully anticipated. It was clear that the European markets had captured the greatest intensity between 1996 and 1998 and that Russia too had reached our target for maximum intensity. However, the excessive leveraging of funds like Long-Term Capital Management had significantly created the peak in volume as well. Thus, the spread trades were so excessive, that the collapse that was to be expected, took on a virus type of affect. As Russia moved into default, and LTCM moved into default, the degree of leverage caused a cascade of liquidation that was spread around the world. Everything became affected causing the collapse in liquidity and credit to further undermine the global economy as a whole. Despite the new highs in US indices into 1999, the broader market has failed to keep pace and the peak in both liquidity and volume remains clearly that of 1998.55.

The Future

While this business cycle can be calculated on quarter-cycle intervals of 2.15 years into the final peak for this major wave formation of December 24^th, 2032. Though this is long beyond my life expectancy, there is so much more behind the true understanding of the driving forces within the business cycle. I have learned that it is easy to claim coincidence and ignore the telltale signs of a hidden order. It is easy to argue that there is no basis for such a model without ever making an effort to test results. If everyone stopped with such criticism, most of ancient Greece would still be buried and Homer would still be considered a book for children. Man would not fly or travel to the moon. A cure for cancer would not be sought and progress would simply not exist. But furthering our understanding is part of humanity. Like law, that when strictly enforced deprives society of justice when circumstances are ignored, it is also the sin of ignorance toward new concepts that deprives mankind of progress and ultimately our posterity.

The Economic Confidence Model in 2.15-year intervals

1998.55... 07/20/98

2000.7.... 09/13/00

2002.85... 11/08/02

2005.... 01/02/05

2007.15... 02/27/07

2009.3... 04/23/09

2011.45... 06/18/11

2013.6... 08/12/13

2015.75... 10/07/15

2017.9... 12/01/17

2020.05... 01/26/20

2022.2... 03/22/22

2024.35... 05/16/24

2026.5... 07/11/26

2028.65... 09/04/28

2030.8... 10/30/30

2032.95... 12/24/32

By Martin A. Armstrong

Princeton Economic Institute
© Copyright September 26, 1999

Economy of USA: 5 more years of crisis

Экономика США: еще пять лет кризиса
21 октября 2007, воскресенье

If you want to read this article, you have to understand Russian

В течение пяти ближайших лет США будут не лучшим местом для инвестиций. Так прокомментировал недавние события вокруг ценных бумаг этой страны эксперт в интервью Bigness.ru.

Эта неделя стала временем грустных событий для Белого дома. Неделя началась с того, что Иран договорился с японскими компаниями о расчетах за поставляемую им нефть в иенах. Ранее же расчет велся в долларах США. В принципе, еще раньше иранским властям удалось договориться с небольшими японскими НПЗ о расчетах за нефть в национальной валюте. Однако в вторник к соглашению примкнули две ведущие японские компании по переработке нефти.

Япония – заметный потребитель нефти на общемировом фоне. Переход в закупке нефти на её национальную валюту – серьезный намек всемирному нефтяному рынку, где десятилетиями властвовал американский доллар.

«Ирану по политическим соображениям доллар неудобен: когда расчеты идут в долларах, они корсчетами проводятся через американские банки, - пояснил ситуацию Bigness . ru Евгений Надоршин, главный экономист банка «Траст». - Соответственно, американское правительство, которое причисляет Иран к «оси зла» не только видит, но и контролирует их счета». Были случаи, когда американское правительство блокировало определенные счета, отметил Надоршин. В японском банке американскому правительству технически тяжелее блокировать счета. Экономист «Траста» напомнил, что Иран был бы согласен и на рубль, и такие переговоры велись.

Сам Иран на сегодняшний день сократил долю долларовых продаж нефти до 15%. Львиная доля его поступлений от экспорта (65%) сегодня деноминирована в евро, 20% приходится на японскую иену.

Другим неприятным сюрпризом, которые преподнесла долларовой экономике на уходящей неделе Азия, стал массовый сброс ведущими державами региона государственных казначейских облигаций США. Согласно обнародованным опять же во вторник данным американского министерства финансов, Япония, Китай и Тайвань «слили» из своих валютных резервов $52 млрд.

В принципе, эта сумма незначительна по сравнению с общим объемом золотовалютных резервов этих стран, исчисляющихся триллионами долларов. Однако, важен сам факт: объем вложений этих трех стран в гособлигации США снизился до рекордного за последние пять лет уровня.

Этот шаг вызывает тревогу у американцев, так как на эти три азиатские экономики, а также на Гонконг и Южную Корею вкупе приходится 51% ($1,14 трлн) общего объема иностранных вложений в американские гособлигации.

На фоне продолжающегося финансового кризиса азиатские экономики не спешат, как прежде, кредитовать дефицит американского госбюджета.

По словам Марка Оствальда, облигационного аналитика в Insinger de Beaufort, если инфляцию в США не удастся удержать, то после всех этих событий у американского казначейства могут начаться очень тяжелые времена.

«Азиатские центробанки не планировали избавляться от долларов полностью», - сказал Bigness . ru Евгений Надоршин, отметив, что $52 млрд для резервов этих стран – это копейки. «Совокупные резервы этих трех стран – свыше двух триллионов», - говорит Надоршин. Это укладывается в тенденцию последних лет: количество долларов в золотовалютных резервах снижается.

Вряд ли порадовали инвесторов данные о чистом оттоке капитала из США в августе 2007 г., который, согласно данным Министерства финансов США, составил 163 млрд долл. по сравнению с пересмотренным показателем чистого притока капитала в США в предыдущем месяце в объеме 94,3 млрд долл.

Американские казначейские облигации традиционно считались безрисковыми бумагами, напоминает Евгений Надоршин. Но сейчас инвесторы увидели: они купили активы в дешевеющей валюте, а американской экономике грозит замедление. Вывод средств из долларовых активов стал неизбежным. Напротив, в фонды, инвестирующие в развивающиеся рынки (в частности, в Россию), за последние несколько недель притекло $11 млрд.

Комментируя негативные для экономики США события, получившие огласку на этой неделе, Евгений Надоршин предположил, что это говорит о долгосрочном характере кризиса, в котором сейчас пребывает мировая сверхдержава. «Американская экономика в последний год демонстрирует слабость, не позволяющую ей поддерживать высокий статус доллара на фоне остальных валют, как основной расчетной валюты: она обладает дефицитами, структурными проблемами, которые ей необходимо решать, и которые экономическими методами решить не удалось. Вот сейчас они столкнулись с кризисом на рынке недвижимости, который, может быть, поможет им решить проблемы, с которыми они пытались бороться с помощью повышения ставок», - сказал Надоршин Bigness . ru .

Сергей Малинин

Worried foreign funds pull out $1.7b

MUMBAI: Foreign fund managers are a worried lot today. They are also living in uncertain times. Sebi's proposals to change some of the rules how overseas derivatives instruments (ODIs, popularly participatory notes or P-Notes) could be issued by FIIs, have nearly stopped new P-Note issuance by FIIs. And although the proposals are at a discussion stage, FIIs believe there won't be much change in the final draft. The result has been nearly $1.7 billion (Rs 6,600 crore) worth of record FII outflows from the Indian stock market on Wednesday, provisional data showed. While about Rs 2,000 crore went out of the cash market, Rs 4,600 crore was withdrawn through the derivatives segment. Institutional dealers and top foreign brokerage house officials said that there is every likelihood market could witness outflows of similar magnitude over the next few days, said a dealer with a foreign brokerage. JP Morgan, a global financial powerhouse, said in a note that the potential near-term outflow was uncertain. "Still, potential outflows are unlikely to be trivial: the unwinding of p-notes with derivatives as underlying could involve an outflow of around $4-7 billion, while the unwinding of p-notes issued by sub-accounts could well be larger," Rajiv Malik of JP Morgan warned in his note to clients. One of the main points of concern for the FIIs is the Sebi's proposal to put limits on P-Notes issuance. The regulator has proposed that FIIs who are currently issuing P-Notes with notional value less than 40% of their total assets under custody (AUC), will be allowed to issue such instruments "at the incremental rate of 5% of their AUC in India." And for FIIs with notional value more than 40% of their AUC, could issue P-Notes "only against cancellation, redemption or closing out of the existing P-Notes of at least equivalent amount." Now most of the FIIs who issue P-Notes, have are above this 40% limit. So what has happened at the ground level is FIIs are not issuing any more P-Notes. And given P-Notes are high-commission business for FIIs, they are losing out on one of their most lucrative business. "Overnight an important and profitable product offering from out bouquet has just vanished," said a top foreign broking house official. Sebi said 34 FIIs and sub-accounts were issuing P-Notes, up from 14 in March 2004. In terms of investments, till August 2007 notional value of P-Notes was Rs 3.53 lakh crore (nearly $90 billion), which was about 51.4% of assets under all FIIs present in India.

P-Notes problem: BSE Sensex will touch 18,000 today

SEBI has finally taken necessary steps to halt current mad Bull Run in Indian share markets by proposing new rules to curb short term foreign inflows. SEBI proposals to curb indirect foreign investments by proposing new rules on P-Notes will create havoc in the stock markets. There will be a panic selling by FIIs (mainly hedge funds) which makes Sensex fall by 800-1000 points. P-notes are offshore derivative instruments issued by top brokerage houses for foreign investors. P-Notes protect identity of FIIs with easy entry/exit options and are generally short term investments which are responsible for recent Bull Run. Stocks like ICICI Bank, Reliance, Reliance Energy, L&T, RIIL, DLF etc will lose 4 -5% and this phase will continue for another 2-3 days. Hedge funds will withdraw their money by anticipating further curbs on foreign inflows. SEBI has done it; Let us wait for RBI steps.

Targets for Indian Stock Exchanges:

BSE Sensex:

CMP: 19,051.
Target: 18,000-18,200.
Short term target: 16,500-17,000.

NSE Nifty:

CMP: 5,668.
Target: 5,450-5,500.
Short term target: 5,000-5,200.

Why participatory notes (P-Notes) are dangerous for stock markets?

Direct FII investment is generally a long term investment like mutual funds and LIC etc. But investments by P-Notes (participatory notes) are generally a short term investment with easy entry and exit options. P-notes are offshore derivative instruments used by FIIs for investing in stock markets. 50% of foreign investments in Indian stocks are through P-Notes. Investment by P-Notes is not a serious investment and SEBI has taken correct step in the right direction to halt this unreasonable bull rally. Investors in Nifty derivatives will suffer unbelievable losses if don’t exit immediately. Manipulators will move away from Indian stock markets atleast in short term.

What investors need to do?

Investors should wait until clear picture emerges on this issue. Next week may provide ideal opportunity for fresh investments if political conditions are stable. BSE Sensex may touch 16,500-17,000 in this week. SEBI proposals on short term FII investments will once again link stock markets to economic performance.

Crucial note:

From now onwards, top brokerage houses may not even report P-Notes investments which may halt free fall in stock markets. It is better for normal investors not to make any fresh investments who don’t have enough knowledge on these issues.

Click here to read more about SEBI proposals on P-Notes.

LaRouche's Emergency Address to the Citizens of the U.S.A.

September 1, 2007 (LPAC)--The following statement, below, was recorded this morning by Physical Economist Lyndon LaRouche, to spell out precisely what must be done in the face of the biggest crash in modern history. Referring to the Homeowners and Bank Protection Act of 2007, which he has designed; what has become increasingly obvious, is that if we don't pass this legislation, there will be no protection against what will hit the nation soon.

What has been set forth is the only proposal that will succeed. There are no other options. What LaRouche has set forth, nothing more nor less, is what is required.

LaRouche's Address to the Union (MP3, 1.92Mbytes)

Transcript:

The Emergency Message to the Nation

Lyndon H. LaRouche, Jr.
September 1, 2007

This is Lyndon LaRouche speaking. We are faced with the greatest financial crisis, globally, which has been known to humanity in centuries. This goes far beyond the experience of the immediate period following the World War, such as the Great Depression of 1930s, but we can handle it.

The problem is, right now, that the President of the United States, the office which should have taken leadership in preparing to defend our nation against the most terrible depression in memory, which is now oncoming, requires us to take special measures, through other agencies, to protect the American people, and other things, until the time that we can get the kind of reform we need to get out of this.

Our immediate concern must be to save the United States from being destroyed, and that is really a possibility, by what is now oncoming. This is the greatest financial collapse, of a form similar to what happened in Germany in 1923, that we have known in living history of our time. In my time, as well as yours.

However, we can handle this problem. It requires mobilization of the Congress, to take an action which will create the equivalent of a firewall against the destruction of essential economy, and of the lives of our people. That can be done. It must be done by the Congress within the month of September.

There is a certain amount of receptiveness to the idea of doing something about this, growing and spreading within the Congress, and elsewhere. That's there.

I've produced a piece of proposed conception of legislation, which will do the job. I have proposed legislation by the Federal government, which will go into emergency implementation, which must be passed within the month of September, because the month of October is enormously dangerous: We dare not risk proposing anything beyond the early part of September. The action must occur by both Houses within September, as emergency legislation, with sufficient support from both Republicans and Democrats in those bodies, to create a bill which will resist a Presidential veto, a veto-proof bill.

If we do that, we may find a depression hitting us in October, which will be far worse than that of 1929-1933. But! If we protect our banks, even if they're bankrupt, and if we protect our homeowners, so none of them are evicted because of this crisis, then, in the month of October and later, we can clean up the mess, and start the process of a general recovery. We need to mobilize to do that.

Now, many people are coming up with so-called reforms and legislation. Most of what I've seen is absolutely worthless junk. The most stupid thing has come from the President of the United States himself, with his proposal. We're talking about millions of evictions coming down now.

Now, to understand this, you have to recognize that there has been a collapse, as most of you should have known by looking around you in your cities and towns, and so forth. Our industry and agriculture have been destroyed. Oh, we have some farming done and so forth, but we don't have many farmers left. Our people, as in the case of the collapse of the auto industry, we have lost the ability to produce not only products, but to produce a basis for a decent standard of living for the people in states such as Michigan, Ohio, Indiana, and so forth. And this is characteristic of what's happened around the world as a whole.

This is our problem.

We can fix this, but we must hold the line. We must have immediate emergency legislation--with no funny stuff, with no little simple reforms, with no gimmicks--of the type I've proposed. It must be enacted during the month of September. It must treated as emergency legislation, according it that kind of priority by both Houses of the Congress. It must produce veto-proof legislation from both Houses of the Congress. It must mobilize Democrats and Republicans, alike, without discrimination. No one is out to cut anyone else's throat; we're out to save the nation. And that's the way we must approach this. It must be done.

And you are essential in this. You must organize people to understand this. Forget all this nonsense. Don't try to come up with some complicated gimmick. Don't try to do a reform of housing. Don't try to adjust the mortgages. Do nothing of that sort. That is absolute foolishness under these present conditions.

The only other thing you might do, is get the ouster of the Vice President. We couldn't throw out the President and Vice President at the same time, and we don't want the Vice President to become the President. Therefore, we have to dump Cheney. That can be done, if enough Democrats and Republicans, especially their representatives in the Congress, decide to do that. It can be done. Let's do it. And let's get Cheney out, and proceed to the reform which I propose:

Which means that no householder, under Federal protection, will be evicted from their home, and that no bank, or chartered bank, whether a Federal bank or a state-chartered bank, will be closed down. That does mean also that there is no possibility of tolerating putting valuable resources to bail out any other irregular financial institution. The hedge funds must go. The sooner they're gone, the sooner they're bankrupted, they're eliminated, the better off we're all going to be.

Because we're going to have to rebuild this economy, including the physical economy. We're going to get back our industries. We're going to get back our agriculture, We're going to get back our infrastructure. We're going to get back dignity, and we're going to take our position of respected leadership among a community of nations in the world. And that's what we have to do.

No funny stuff, no tricks, no games. Back to basics. Think like FDR. Act immediately in the month of September. Get the Congress to pass this kind of legislation, which creates a firewall of protection of every essential chartered bank, chartered on the state or Federal level. No matter what their problems are financially, we're going to keep their doors open. And we're going to give them Federal protection.

We're going to give Federal protection to all householders, who are threatened with eviction. They're not going to be evicted. The states will help the Federal government do that. That is, the states will be the administrative arm, which locates the people who need the protection, and makes sure they're protected. But the states will act, through the Governor's office, on the basis of the support of Federal law. That's the way to do the job.

Don't go with the monkey-business. Forget the gimmicks. We're out to save the nation. If we have, in September, the kind of legislation I've proposed, enacted, as emergency legislation, then, we can protect the United States with a firewall against destruction. If we don't do that, we may find a situation beyond recall.

So, let's be patriots. Let's be neither Republicans nor Democrats at this moment. Let's be patriots--let's save our nation. Let's create a firewall to prevent the greatest depression that we've ever known.

LaRouche: "Biggest Economic Crash in Modern History Could Occur as Early as Mid-October, if Not Sooner"

Increase Decrease

LaRouche's Homeowner and Bank Protection Act of 2007 needed immediately with No Amendments

Lyndon LaRouche announced yesterday that he will be recording a message to the American people on Saturday in which he will spell out precisely what must be done in the face of the biggest crash in modern history. Referring to the Homeowners and Bank Protection Act of 2007, which he has designed, LaRouche said that if we don't pass this legislation, there will be no protection against what will hit the nation soon. What he has set forth is the one and only program capable of addressing the crisis. No other proposals or amendments to his program will succeed. Any other agenda should be cancelled. With LaRouche's program, when the crash comes we will still be standing. When the storm ends homeowners and federal and state chartered banks will still be standing. There are no other options. What LaRouche has set forth, nothing more nor less, is what is required.

The biggest collapse in modern history will probably hit in September-October. The only hope is to create a firewall, so when the storm hits, chartered banks will be left standing and homeowners will still have their homes. We must deal with this issue first, otherwise there won't be any country. LaRouche has been proven right and others have been shown to have been wrong on the nature of the collapse. Therefore, what LaRouche has set forth has to be done now. Period.

LaRouche stressed that if you don't have a country standing with banks still there and people not evicted, then you can't save the country. October may be too late. If this legislation is in place in early September, we can get through. If not, hell will take you. The time for debate is over. No amendments. This is the only chance we have.

The issue today is to maintain the existence of the United States under these conditions and there is only one way--LaRouche's federal legislation. This legislation must be pushed ahead of all other legislation. It is very simple. This is the only thing that will ensure we have a nation. Anything else has no relevance to the real situation today.

Bush Lying About the Economy:

President George W. Bush stands with Secretary Alfonso Jackson, of the Department of Housing and Urban Development, and Secretary Henry Paulson Jr.,of the Department of Treasury, during a statement Friday, Aug. 31, 2007, in the Rose Garden regarding homeownership financing. Click on image to view the video.

The proposals made by Bush yesterday will only accelerate the collapse of the housing bubble. You can't reorganize the mortgage loans, because writing off debts means blowing out assets, in a reverse leverage chain reaction. LaRouche referred to Bush's press conference yesterday as a "depress" conference. Everyone walked away certain the country was doomed. Even lower forms of life such as journalists left depressed. The only thing which Bush said with which LaRouche could agree was when Bush said that government has a limited role. As LaRouche put it: He is right. Government under his leadership is limited. He is extremely backward. He is mentally sick, but also mentally disabled. His mental state is only less of a danger to the nation than Cheney. He is a stupid, foolish jerk, whereas Cheney, his controller, is evil.

People who know better but who nonetheless call for the impeachment of both Bush and Cheney are ducking the issue. The threat of war against Iran is based on the Revolution in Military Affairs initiated by the Middlebury Monster Felix Rohatyn and George P. Shultz. Moreover, given the nature of the financial and strategic crises the nation and the world are now facing, we cannot go through a replacement of the administration as a whole. We simply have to get rid of Cheney. To go after Bush and Cheney is to create a problem. Whereas by getting Cheney out, Bush can be neutralized. If Nancy Pelosi says no, tell her: "Tighten your screws. Your face is falling."

Bernanke's description of the ongoing collapse of the international financial system as a mere "episode" in his speech at Jackson Hole was laughable. As LaRouche put it, Bernanke is simple minded. He is probably in menopause. His comments were purely boola boola for the local fraternity.

Every day there are numerous "little stories" about the financial and economic carnage. On Friday, we learned that the Finance Minister of the German state of Saxony resigned in the context of the developments surrounding the collapse of the Saxon Landesbank. However, the little story is not the story, but rather a diversion from the real story, which is that we are in the process of a chain reaction collapse of the world system. As LaRouche emphasized this is not a Saxony crisis, but rather a global crisis.

The process described by Lyndon LaRouche's Triple Curve pedogogy is key, especially the second version of the curve, where in the rate of the rate of monetary growth exceeds that of the financial aggregates, as the rate of physical output declines. They are monetizing bullshit, turning fake assets into fake money.

Debt is being treated as an asset--one person's debt becomes another person's asset, which becomes the basis for the second person to take on debt, which becomes someone else's asset--the assets of the system are nothing but a leveraged chain of unpayable debts, which will detonate in a chain reaction. We're seeing grenade-level explosions now, with much bigger explosions to come.

This is a non-linear process, in which you cannot predict trends. You can only predict hypertrends: each time an asset collapses, it increases the rate of collapse of other assets, and accelerates the rate of collapse of the system as a whole.

This is a global collapse, centered in the Cayman Islands--it's the British system.

The only rational policy is to build firewalls to freeze and delay the collapse, to give us time to work things out. We don't give a damn about the fakers, let them go bankrupt.

You can not deal with this as a series of discrete problems, dealing with one at a time. It won't work.

Sachsen LB's Ormond Quay fund is an example. It was full of assets supported by credit guarantees, the assets were considered valuable but were actually worthless.

The rate of the collapse will increase hyperbolically,-- it will be gone by mid-October or earlier. If the system hits a big landmine, it will accelerate the process. The closer we get to the final blowout, the greater the amount of the unresolved debt.

Don't try to quantify this, because you can't; it is worthless, a system full of pieces of crap called assets. Give some functional examples of the process at work. Joe Blow defaults on his debt, which Bill Blow counted as an asset; so Bill Blow defaults, etc.

This is a gambling house. This is Galileo Galilei's specialty. He studied the mathematics of gambling, and created formulae of the laws of chance to help gamblers improve their odds.

Contained in: From Lyndon LaRouche