The entire world is being forced into a huge debt trap of austerity. And so it is that the living standards of ordinary people in the US and Europe must continue to fall, if the bad loans of banksters are to continue to be paid off. Understand, however, that this is one gigantic scam in which the banksters are slowly milking the rest of the world. They are doing this with an ongoing scheme that involves bad derivative bets and toxic loans, which are insured by the government -- a government that the banksters and other Wall Streeters essentially own and control, and hold steady so that the extraordinarily lucrative milking process can continue for just a while longer. How much longer? Until our economy collapses under the burden of this diabolical and very complex scam, which, at their peril, most people don't want to take the time, or make the effort, to understand. But be advised: For every winner (e.g. the banksters), there is a loser (e.g. the taxpayers of the US and Europe).

(As for the banksters' ownership of our government, let's remember what FDR said: "The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in essence, is fascism -- ownership of government by an individual or by a group.")

The ongoing derivatives debacle engineered by banksters like Goldman Sachs (who have made, and are planning on making ever more of a killing off of it) is largely responsible for the bankruptcy of the European banks. (Derivatives are essentially bets between two parties with the losers going bankrupt and the winners going into hiding. See a simple explanation of derivatives in the next section of this article.)

The bailouts themselves represent money eventually paid out to the winners of these bets, in which the bailout payoff comes in the form of an interest-free loan from the Fed, which is then immediately gambled (i.e. "re-invested') back into the very same scheme that funneled the money back to the winners in the first place. In this scam, the money going to those who _claim_ to be acting in the interest of the bankrupt is in reality being funneled into the pockets of the winners themselves. The scam is that the supposed losers (banks), and the winners, are the very same individuals, while the losses are systematically being passed on to the suckers, i.e. the government -- especially to the hard working citizens who must eventually pay the government taxes that repay the loans of the money that ultimately fund the bailouts. Convoluted? Yes. To understand the details and get the whole picture, read on.

First, some circumstantial evidence

During our recent and ongoing financial crisis, at least 18 former and current directors from federal reserve banks worked in banks and corporations that collectively received over $4 trillion in low-interest loans from the Federal Reserve. (Remember: a trillion dollars could be put into a million trucks full of cash, with a million dollars stuffed into each truck!)

To learn the names of some of the perps in this part of the stunningly massive heist, and understand what they've done, go here. Then see the first comment in the discussion that follows this article for the full story, with evidence.

Some derivatives are perfectly harmless to society, even beneficial

The beauty of derivatives, originally, was (and often still is) that they act like insurance: If you're a company (like, say, an airline) that uses a lot of fuel, you can arrange a derivative contract that locks in the price of fuel a year or two in advance so that your costs don't abruptly rise to the point of causing great difficulty to the operation of your airline. The person on the other side of this contract is betting on energy prices to fall, in which case they would book a profit when selling you the fuel next year at the agreed-upon price. All that's fine and good, though the insurer can get in trouble if they don't have enough money to pay up should the bet go against them, which is essentially what happened with AIG and the hundreds of thousands of mortgage securities it so profitably insured -- profitable until the bottom fell out of the housing market and all their customers tried to cash in on their insurance policies (known as credit-default swaps, or simply "swaps' for short).

The idea behind a credit-default swap (sometimes referred to as a credit derivative) is that if you buy a bond and the seller of the bond defaults, you can recoup most of your losses from an insurance company if you've had the foresight to purchase a credit-default swap (insurance policy) on your purchase of that bond. What's more questionable is when financiers place bets on the price of assets they don't own and have no intention of acquiring. These so-called "naked' bets are in many ways tantamount to simple gambling, and were a prominent feature of the recent financial crisis, the lasting effects of which are still dogging us. For example, many investors bought insurance policies on mortgage securities they didn't own as a way of betting on the price of the securities to fall. However you feel about the social utility of this practice, it's not something that deserves government backing. Yet in many cases the government then had to bail out these investors when it bailed out the likes of AIG. Hence the possibility of sharing in the cornucopian rip-off proceeds when you buy CDSs, i.e. credit-default swap insurance policies. Many experts tell us that the solution to this problem is to require that derivatives (such as CDSs) be traded on exchanges, the same way we trade stocks. The great benefit of this would be transparency: We could all see who was trading and insuring what.

According to Dylan Ratigan, one of the greatest obstacles in resolving the financial crisis in 2008 was the need to pay all the $600 trillion in swaps [a type of derivative] because central bankers couldn't see which swaps served as useful insurance for energy and commodities -- and were therefore essential to the smooth functioning of the economy -- and which had only to do with speculation and simple gambling. So, because the central bankers couldn't see the difference, they were forced to pay off everybody, including the reckless speculators.

In light of this problem, Richard Grasso (former chairman of the NY Stock Exchange) has a radical proposal: Reclassify all the naked derivatives as online gaming. As Grasso tells Ratigan: "I believe regulators should require the product to be " monitored globally to prevent contracts being written in excess of the debt obligations they are designed to insure. " Any contracts written outside these requirements would be deemed null and void by regulators as simply online gaming."

I'm not sure I understand every implication of this--could the bet still be made, just not through a derivative contract, or could it not be made at all? -- or maybe just where gaming is legal? Once again consider the dicey financial innovation (scam) of naked bets. Naked bets are, as previously stated, in many ways pure gambling and were a prominent feature of the recent financial crisis. "For example, many investors bought insurance on mortgage securities they didn't own, as a way of betting on the price of the securities to fall. This is not something that deserves government backing. Yet in many cases the government then had to bail out these investors when they bailed out the likes of AIG." Source article

Behind the Euro crisis: Goldman Sachs playing both sides of the bets.

Let's start with the perpetrators of the fraud: the institutions of Goldman Sachs and J.P. Morgan. It is important to emphasize that it is becoming ever more apparent that Goldman Sachs is involved in an engineered fraud wherein the trillion dollar profits being generated by the fraud are being funneled to private individuals. It seems that Goldman Sachs was involved in a scam wherein it intentionally sold derivatives that were designed to lose for the client and win for the undisclosed other party of the bet (a typical Goldman Sachs set-up). Goldman Sachs also scams governments by selling them sure-to-lose derivatives disguised as sure-to-win, and pockets huge fees in the process, as they systematically milk this-country-and-the-world for all it's worth.

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