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Currency Wars - The Worst Is Yet to Come
The following article explains another reason why the sub-prime meltdown is only beginning, and further clarifies why the crisis is global…
In recent years the US economy became a vast sinkhole for international finance and savings. Like some giant vacuum cleaner, the beast crept into every nook and cranny of the world's economy, sucking up any loose funds that weren't nailed down.
The money was used to balloon already gargantuan Federal and State deficits, and to maintain an orgy of consumer spending at home. Americans are encouraged to spend every last penny they have, and to borrow to the hilt, and spend still more. This includes the American government, with its increase of military spending to levels that exceed the rest of the world combined, all to “defend the Homeland” from shadowy Muslims in faraway places (that coincidentally have oil, or are needed by Israel as a "threat.")
The sub-prime meltdown happened because the vacuum cleaner (the U.S. economy) could not locate and suck up enough funds to meet its exponentially expanding needs. Foreign hosts got tired of being sucked dry. Realizing they had been conned, and will never be repaid for the sub-prime losses, they have started to choke off the supply of funds. Therefore the Fed has taken emergency measures to prop up the banking system. These measures have only been partially successful. We will continue to see a credit gridlock and major banks failing.
The Fed’s emergency measures consist of injecting more debt into the system, the catastrophic consequences of which will emerge later. This injection is the reason for the collapse of the US dollar.
A devalued dollar is not all bad news. It gives two key advantages to the United States. First, it diminishes the real debts owed to creditors overseas. Second, it makes other economic power blocs, such as the European Union, much less competitive in world markets.
For example, EADS, the makers of the Airbus aircraft, has always had its production centered in Europe, but might partially relocate its factories to dollar zones, or even the US itself, because labor will be cheaper here. So, one reason why the Fed allowed the dollar to devalue is to weaken the euro, the only currency that presents a serious alternative to the US dollar.
A low dollar will make US business (or what's left of it after outsourcing) suddenly competitive. This will turn up the heat on Europe. Faced with a suddenly plunging dollar, other countries and power blocs are scrambling to pump up their own money supply in order to weaken their own currencies and maintain a competitive advantage. Everyone is now devaluing his currency. This is a new war with huge inflationary implications.
If you owe the bank a large amount of money you have a problem, but if you owe the bank a HUGE amount of money, the BANK has a problem. color = red> This sums up the situation between the world’s only remaining superdebtor, the United States, and the rest of world. By suddenly ramping its money supply still further, and by dropping interest rates in an effort to avert a credit crunch, the US has thrown down a gauntlet to the rest of the world and said, "The collapsing dollar is your problem. If we go down, we'll take all of you with us, so you'd better help out, or it's your funeral" The US is testing the resilience of the world economy to the limit, and the world economy is starting to crack.
Example: two weeks ago the Abu Dhabi fund partially bailed out the ailing Citigroup. This ignited the US stock markets. The Abu Dhabi fund was forced to do this because the U.S. stock market was about to collapse. Mid-Eastern fiefdoms have vast amounts invested in the London and US stock markets. If the U.S. stock market goes down, the Mid-Eastern fiefdoms lose too. Big time. Therefore the USA forces them to come to the rescue.
Germans realize they have been conned. The money they stashed away for years has been sucked up by the giant U.S. vacuum cleaner and blown by the US government on war and military expansion, and by US consumers on property speculation, giant flat screen TVs, SUVs and the good life generally.
The Chunese are like a truck driver with a cargo of perishables who finds that his refrigeration has failed. They are stuck with trillions of dollars of US financial junk in the form of currency, Commercial Paper, T-bonds etc. The Chinese are scrambling to convert this worthless paper into something tangible before its value disappears. For example, they want to buy the mining giant RTZ. The US message to China is also clear - if we go down, you lose your biggest export market. So sorry.
A major complication for the US financial system, specifically for major US banks, is an impending tidal wave of lawsuits by overseas banks and financial institutions seeking redress for their massive losses. They bought huge quantities of Commercial Paper –those sub-prime mortgage loans that were packaged, spliced and diced to make them more palatable to naïve and trusting foreign buyers.
US rating agencies were in on the scam. They presented sub-prime garbage as being of much higher quality than it really was. The problem for US banks is that they can be legally forced to buy back the garbage at face value if it can be shown that fraud was involved in the origination process. If that happens, the banks will be ruined. Game over.
US banks could tell the world, “F**k you. We’re beyond international law. You bought our trash. Too bad. We’re not buying anything back. Get lost. It’s your problem!” Unfortunately this won’t work, because overseas investors and banks will quarantine US banks, which (once again) will destroy U.S. banks.
So the big banks are damned if they burn the USA, and damned if they don’t. There is no way out of the enormous hole they have dug for themselves, the towering sides of which are now starting to collapse in upon them.
For the moment, everyone is procrastinating. This includes His August Majesty (Bush). The chief purpose of this delay is (1) to give rating agencies and Wall Street firms enough time to cover their tracks and destroy as much evidence as possible. (2) To hatch some new scam to renege on the contractual obligations pertaining to the original loans, perhaps by issuing "updated" versions whose small print protects the issuer from liability relative to the original loans, in the hope that foreigners won't read it.
Of course, lawyers will feast on the carnage, producing documents extending to thousands of pages and dragging the whole sordid business out for years. This will further help the banksters, most of which will die of old age before the legal process is concluded (if it ever is).
Here’s the twist…the US stands to gain the most, or rather lose the least, from a global economic meltdown in the near future. OPEC wants to sell oil in euros only? Fine, we’ll devalue the dollar, thereby laying economic siege to Europe and crippling the euro. We did it to Saddam, and we’ll do it to you.
Meanwhile China will continue to become more powerful. Therefore the USA will pull the plug out from under China’s economy before China has weaned itself off dependence on the US as a primary export market.
In this sense, there are good reasons for the banksters to let the world economy implode now rather than later. Things will become chaotic, but hey, the USA will just send armies to deal with problems. If necessary the USA will have a military draft, which can easily be arranged, and will send the troops to a vast network of military bases around the world, particularly in Asia. Those bases are there for a reason.
Venezuela will certainly be invaded. Probably Iran too. There’s too much oil for it not to “liberated” from those evil Muslims. A false flag or two will put the game in play. Russia cannot be attacked directly, so it will be encircled and placed under prolonged economic siege, sort of like Cuba and Iran. The anti-Russian propaganda is all over the place. CNN recently aired (many times) a program by Christiane Amanpour titled "Czar Putin", which depicted Russia as a dictatorship with a tightly controlled media.
With the US dollar collapsing, the vast US debts will simply evaporate. The currency crisis and general confusion will open the door to ram through the North American Union, with the dollar being ditched in favor of the Amero. The U.S. Constitution will be dumped. (No one in government pays any attention to it anyway.)
The banksters knew all this would happen, so why did they do it? Either they were guilty of short-termism - let's party today and to hell with tomorrow - or it was all planned. We don’t know if the Federal Reserve will (1) continue to expand the money supply, and continue to drop interest rates in an effort to bail out the major US banks, or (2) will cause the dollar to collapse further, leading to hyperinflation, or (3) will suddenly and unexpectedly ramp interest rates in the not too distant future, purportedly to support the dollar, causing credit gridlock and an economic meltdown.
No matter which option they choose, we’re headed for rough times.