Warren Buffett Once Called Derivatives “financial weapons of mass destruction.”
Dec. 16 (EIRNS)—This morning a series of bank economists, beginning at Bank of America, proclaimed that the Federal Reserve has finally, after three months, brought the interbank lending liquidity crisis under control, and there will be “no crisis” and “no stress” on banks or interest rates at year-end.
This is very much to be doubted, since simply to get these Pollyanna statements from the big banks, the New York Fed on Friday the 13th had to roughly double, again, the emergency liquidity loans it is making daily to its primary dealer banks. This money-printing liquidity-pumping has constantly expanded and extended since Sept. 17, with no let-up to the process in sight.
On Dec. 9 a Credit Suisse analyst with years of experience working at the Treasury and the New York Fed on the repo market, Zoltan Pozsar, warned that these three months of $50-100 billion daily liquidity bailouts (largely kept secret from the public) were not nearly enough to get the interbank market through the end of the year. The Fed, he said, would have to go to full quantitative easing in weeks, or establish a permanent repo lending facility for the banks, or both.
On Dec. 13, the New York Fed made new announcements, added to its continuing daily, two-week, and 42-day loans and securities purchases:
• Liquidity loans from Dec. 13-Dec. 30: “At least $125 billion”;
• One-day loans on Dec. 30: “at least $75 billion”;
• Dec. 31-Jan. 2 loans: “at least $150 billion”;
• Jan. 3-14, 2020 loans: “at least $120 billion”.
The Fed will now be substituting itself for at least 15% of the $1.1 trillion/day interbank lending market, meaning that 15% of that market is unable to function. The biggest banks can’t, or much more likely refuse to lend that much to some other financial firms and/or banks even for 24 hours, for fear of intraday insolvency of their counterparty.
One analysis, that of the “Wall Street on Parade” website, is that on Dec. 12, “the New York Fed announced that over the next month it would shower the trading houses (primary dealers) on Wall Street with a total of $2.93 trillion in short-term loans … for a Wall Street liquidity crisis that has yet to be explained in credible terms” (emphasis in original). Whatever the Fed chooses to call it, this is really massive, effectively secret, quantitative easing (“QE4”).
It is easy to trace this to hedge funds which are liquidating, to unpayable corporate debts in the $15.5 trillion U.S. corporate debt bubble, and perhaps to one or more major banks ready to go. These all constitute the fuse: The bomb is these banks’ exposure to hundreds of trillions of dollars in derivatives bets, of which the worst exposure is to foreign exchange derivatives.
The American people cannot let President Donald Trump, fighting what is really a British Empire coup d’état, get set up to be hit with a “2008” financial crash or worse. It can be prevented. The four key actions proposed by the late economist and statesman Lyndon LaRouche are the essential means. Break up Wall Street banks with Glass-Steagall and establish a national credit institution, high-technology new infrastructure, a crash Moon-Mars mission for NASA.
These actions mean the U.S. economy can recover instead. If Americans mobilize and force them on the Congress as a way to “rehabilitate” itself, the President is in a position to deal with China, Russia and India for a new international credit and monetary system that extends the new infrastructure and science projects into the developing countries.
Sitting still and waiting for the Federal Reserve to “plug” a vast liquidity hole in the Wall Street banking system, bigger than anything since the Lehman Brothers blowout and being kept almost entirely secret, is not a good alternative.
The American people cannot let President Donald Trump, fighting what is really an intelligence agency coup, get set up to be hit with a ‘2008’ financial crash or worse. It can be prevented. The four key actions proposed by the late economist and statesman Lyndon LaRouche are the essential means. Break up Wall Street banks with Glass-Steagall and establish a national credit institution, high-technology new infrastructure, a crash Moon-Mars mission for NASA.READ MORE
LaRouche’s Four Laws for Economic Recovery and the Four Powers Agreement
Lyndon LaRouche has provided us with the Four Laws which can produce the economic recovery of the United States:
- Re-enactment of the Glass Steagall Act separating commercial from speculative banking and ending public bailouts of Wall Street gambling debts;
- A new national bank or other credit-issuing mechanism, such as Lincoln’s Greenbacks, capable of producing massive amounts of credit for long-term economic projects;
- Use of this national banking mechanism to fund only such projects as will raise national productivity and create high-paying jobs in productive sectors of the economy; and
- A crash program to develop fusion power, the energy source of the future, the energy flux density and power of which allows us to transform raw materials, power entire continents, and power space exploration and colonization.
The most obvious place to invest the financing available through this long-term credit mechanism and participating private banks is in building a modern infrastructure platform for the U.S. economy, while also creating crash programs to develop fusion and explore near space and the Moon. Since we have damaged our physical economy, and savaged our labor force in the last decades, a crash effort in this respect is urgent if we are to raise productivity and ensure long term growth. New programs in classical education and the sciences and programs drawing our youth into rebuilding the country, akin to the CCC, are necessary elements of this economic thrust. The optimism generated by such a national mission is the best antidote to the drug epidemic and mental instability presently haunting our country, although major rehabilitative and interdiction efforts must also be urgently and ruthlessly undertaken in this regard.
None of this is possible, however, if the present financial system is allowed to continue and suffers its inevitable crash. An uncontrolled collapse will mean the certain unnecessary death and suffering of millions throughout the world. Just like we know how to prevent the fires in California, we know what type of stable financial system will allow for a world-wide economic renaissance, namely, a revived Bretton Woods system among sovereign nation states trading between themselves to massively advance each and every economy and human being in the world.
Will you join us in making this the new reality?
PDF of above text or Read our full statement here (PDF linked).
WHY THE UNITED STATES MUST JOIN THE BRICShttps://larouchepac.com/sites/…/2014-lpac-brics-pamphlet_0.pdfFile Format: PDF/Adobe AcrobatDec 1, 2014 … the U.S. should continue to enhance dialogue and … Concrete Opportunities for the U.S. to Join the BRICS. IV. …… man-hours of manual labor.