clipped from livinglies.wordpress.com Posted on November 29, 2010 by Neil Garfield
At the core then is a simple question: which is more important — people or money? I thought the United States Constitution made that clear and gave Americans the 2d, 4th, 5th, 9th and 14th Amendments to make sure they could enforce it. But now the answer has become hopelessly and intentionally obscured. -Neil F Garfield
The mortgage crisis merely kicked off the debate. Mortgage backed securities are now widely regarded as the largest asset class in the world, indeed in world history. Small wonder. According to reports from the industry, they accounted for $125 Trillion in….what?
By allowing banks to create money, the world governments have accidentally created a Frankenstein that under current rules cannot be undone. More than $600 trillion in credit derivatives have been issued which were, until recently, regarded as “cash equivalent.” In plain language the private banks were issuing currency pretending that it was “backed” by government issued currency. But they issued as much as their printing presses could endure.
The problem is that the $600 trillion is vastly in excess of the $50 trillion in currency issued by all world governments. The problem is exacerbated by the fact that we really don’t know the terms of those derivatives since, according to the financial industry, each one has its own characteristics. Nobody knows what they are really worth and nobody knows whether some of them or most of them cancel each other out as “hedge” products.
But what we DO know is that central banks are having very little effect on the economies of the world — because their actions might effect, collectively, perhaps a few trillion dollars worth of currency while the rest of the world is trying to come to terms with a hundred times that amount.
What does this have to do with mortgages? Everything. About a quarter of these “assets” are based upon the presumption that somewhere there are at least $14 trillion in actual loans that are secured by mortgages on real property. If those mortgages disappear — POOF! — the actual value of the $125 trillion in assets becomes recognized for what it always was —- zero. The real question is not who takes that loss — although it is nothing to sniff at —- the real question becomes how do we cover up the fact that there IS such a loss, because with only $50 trillion in world currency, there literally isn’t enough money in the world to pay for it.
So the burden falling on homeowners and investors is that, as we have stated before, emperor never had any clothes but we must pretend that the clothes are real until we figure something else out. In the meanwhile, if 50 million people are ejected from their homes under invalid documents that were fraudulently obtained, so be it.
The media would have us believe that the banks are reluctant to take the loss which is true enough. They tell us that if the foreclosures proceed, the recognition of those losses can be delayed because they still have the property which they acquired in illegal “credit” bids. But the real problem is not whether there are $500-$800 billion in losses sitting inchoate on the balance sheets of megabanks. The real problem is that the true loss figure might be as much as $125 trillion, which will put the rest of the $600 trillion in credit derivatives into question.
Everything was “securitized” and if the mortgages are any indication they didn’t follow normal legal procedure in transferring the obligations or notes. The problem with identification of the creditor and the amount of the actual obligation still outstanding in mortgage loans turns out to be the tip of an even larger iceberg. If the same questions apply to credit cards, consumer loans, student loans, auto loans and other types of credit extended to varying classes of people, and the same defects exist where the creditors are hopelessly obscured and the accounting for the remaining obligation is not possible, the value of the entire $600 trillion comes into question — and the question is whether that represents a world-wide loss and if so, who takes that loss?
So homeowners in America are being used as the scape goat for the excesses of world-wide finance that was conducted in the world of shadow banking, which turns out to be twelve times bigger than the real banking world. The guarantees of due process, justice for all and the American way are put on hold because the governments, who were asleep at the switch for the last 30 years, simply don’t know what to do.
Alan Greenspan who shares a considerable amount of the blame for this state of affairs admitted in interviews that with over a 100 PhD’s at his disposal he still doesn’t understand the content of the derivatives. That is what I mean by hopelessly obscured and it isn’t the fault of homeowners or the investors. They were used as pawns in a much larger scheme.
At the core then is a simple question: which is more important — people or money? I thought the United States Constitution made that clear and gave Americans the 2d, 4th, 5th, 9th and 14th Amendments to make sure they could enforce it. But now the answer has become hopelessly and intentionally obscured.
Get Clipmarks – The easiest way to email text, images and videos you find on the web.
