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"Currency Wars "
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Sultans of Swap: Smoking Guns!


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EURO EXPERIMENT: German Steel or Schmucks?

"UR all PIGS from HELL


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Published November 2009

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INNOVATION: America has a Structural Problem!


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PRESERVE & PROTECT:  The Jaws of Death



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"FANG & NOSH" Now the "NIFTY NINE" 21 December
WATCHING “FANG & NOSH” 19 November
FALLING CASHFLOWS: The Catalyst for a Turning Credit Cycle 22 November
DRIVERS: Shifting Confidence & Sentiment 19 November
CREDIT LEADS: Equities Will BE Wagged! 12 October



... A LOT MORE - >






Massive Tax Grab Coming in 2016 at All Levels of Government 06 January
FALLING CASHFLOWS: The Catalyst for a Turning Credit Cycle 22 November
"QE FOR THE PEOPLE" 18 November

















  • 2014 Themes - John Rubino - 21 Dec 2021
  • 2014 Themes - Charles Hugh Smith - 14 Dec 2021
  • Looming US Retail Implosion: A Required Re-Think! - 03 Dec 2021
  • The New Depression and Corruption of Capitalism - 07 Nov 2021
  • The Macro Analytics: A Technical Update - 03 Nov 2021
  • DOW 20,000? or 5,000?? Part IV - 02 Nov 2021
  • DOW 20,000? or 5,000?? Part III - 01 Nov 2021
  • DOW 20,000? Part II - 30 Oct 2021
  • Technical Pattern Watch - 29 Oct 2021
  • DOW 20,000? - 21 Oct 2021
  • The Globalization Trap Part II: Credit Freeze II - 18 Oct 2021
  • The Globalization Trap Part I: Four Points of Evidence - 10 Oct 2021
  • The Fed Shocker: Part II The Consequences - 08 Oct 2021
  • The Fed Shocker - Part 1 - 02 Oct 2021
  • The Macro Analytics: A Technical Update - 21 Sep 2021
  • Global Currencies - Asia Crisis II - 07 Sep 2021
  • Global Currencies Part I - 04 Sep 2021
  • The Secret US Geo-Economic Strategy - Part II - 31 Aug 2021
  • The Secret US Geo-Economic Strategy - 27 Aug 2021
  • Is The US in a Recession? - 20 Aug 2021
  • China Slowdown Crippling Asia - 10 Aug 2021
  • The Macro Analytics: A Technical Update - 26 Jul 2021
  • The Window of Opportunity: BLOWN! - 11 Jul 2021
  • Velocity of Money and the Coming cRaCK-uP BOOM! - 01 Jul 2021
  • The Coming China Crisis - 29 Jun 2021
  • Gold and Silver - 17 Jun 2021
  • Unsound Money Inevitably Means a Corrupt Society - 08 Jun 2021
  • America No Longer Innovative Driven - 03 Jun 2021
  • 'Mr Global' and Gold - 28 May 2021
  • Peak Consumption - 06 May 2021
  • The Kondratieff 'Winter of Discontent' - 04 May 2021
  • What's Happening With Gold? - 02 May 2021
  • The Macro Analytics: A Technical Update - 29 Apr 2021
  • Creating Government Dependency - 18 Apr 2021
  • Something For Nothing Societies - 09 Apr 2021
  • Japan: A New Currency War Front - 07 Apr 2021
  • A Market Clearing Event - 31 Mar 2021
  • Peak Jobs - 29 Mar 2021
  • Cyprus: Crumbling Property Rights - 27 Mar 2021
  • Warren Buffett: Master of the Austrian 'Indirect Exchange' - 19 Mar 2021
  • Hyperinflation: A Currency Event - 14 Mar 2021
  • The Global End Game - 10 Mar 2021
  • China, Japan and Central Banking - 05 Mar 2021
  • A Cyberwar Cometh! - 01 Mar 2021
  • Currency Wars: Part II - Bushfire Battles Blazing - 28 Feb 2021
  • Currency Wars Part I - The Belligerents - 27 Feb 2021
  • The Macro Analytics: A Technical Update - 25 Feb 2021
  • The New Bill of Rights - 13 Feb 2021
  • The Cloward Piven Strategy - 08 Feb 2021
  • RIP: Our Expansionist Central State - 04 Feb 2021
  • A Delusional and Dysfunctional State - 01 Feb 2022
  • Off Balance Sheet Deceptions - 28 Jan 2022
  • Why We Are Un-Governable - 22 Jan 2022
  • Charles Hugh Smith's 2013 Themes - 08 Jan 2022
  • Monetary Malpractice: Dysfunctional Markets - 03 Jan 2022







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May 31st

It was the perception of getting something of value without any meaningful sacrifice that initially fostered the EU Monetary Union. Though the countries of Europe were fiercely nationalistic they were willing to surrender minor sovereign powers  only if it was going to prove advantageous to them.  They were certainly  unwilling to relinquish sufficient sovereignty to create the requisite political union required for its success. After a decade long trial period it is now time to pay the price for Monetary Union.  I suspect that the EU membership is unwilling to do so. Though they likely will see the price as too high to do so, the price to not do so has become even greater.  They have unwittingly been trapped by a well crafted strategy. more>>>

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May 27th
CURRENCY WARS: The Economic Death Spiral Has Been Triggered

For nearly 30 years we have had two Global Strategies working in a symbiotic fashion that has created a virtuous economic growth spiral. Unfortunately, the economic underpinnings were flawed and as a consequence, the virtuous cycle has ended.  It is now in the process of reversing and becoming a vicious downward economic spiral. One of the strategies is the Asian Mercantile Strategy.  The other is the US Dollar Reserve Currency Strategy. These two strategies have worked in harmony because they fed off each other, each reinforcing the other. However, today the realities of debt saturation have brought the virtuous spiral to an end. more>>>

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Apr. 27th
CURRENCY WARS: Debt Saturation & Money Illusion

Most of the clearly evident financial problems that surround us today stem from one cause - Debt Saturation. Most, intuitively, sense this to be a correct assessment but few can either prove it or articulate it to the less sophisticated. Let me arm you to be the "Nostradamus" amongst your friends and colleagues in explaining the problem and what the future therefore foretells. However, let me make it very clear, this will not make you popular. Smart maybe, but highly likely to make you unwanted at the social gatherings of the genteel.  more>>>

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Mar. 14th
CURRENCY WARS: RIP Shadow Banking System, Long Live QEx!

We have unwittingly become trapped in the snarled net of years of bad Public Policy. Like corporations that look no further than this quarter's results, our politicos never stop campaigning to start the tough task of ruling responsibly. A winning election simply represents 'rewards' and 'spoils' to all before quickly resuming the next campaign. Image has become reality! As a result the never ending political pandering has led to false expectations, undeliverable entitlements and false optimism in the electorate that rejects the immediate and obvious realities.  The result of a degenerated political leadership process is we are on the brink of a massive and sudden reduction in the US standard of living. more>>>

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Mar. 8th
CURRENCY WARS: Flash Points in the "Age of Rage"

The conflict in North Africa was a predictable outcome of the US Monetary Policy of Quantitative Easing. It is not plausible that the US Federal Reserve, as the manager of the world's Reserve Currency, did not fully recognize the global ramifications of such monetary inflationary actions well in advance. Quantitative Easing like the Intercontinental Ballistic Missiles (ICBM) of the cold war era has had the same devastating pre-emptive impact on Libya.There can also be little doubt that the bi-monthly meetings of the Bank of International Settlements (BIS) board of directors, which specifically meet to discuss coordinated monetary policy outcomes, did not consider this eventuality. The board of directors of this global power center includes all G7 Central Banks chiefs, with the conspicuous absence of a single member of the Arab League not receiving US military financial aid. more>>>

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Oct. 27
CURRENCY WARS: Debase, Default, Deny!

In September 2008 the US came to a fork in the road. The Public Policy decision to not seize the banks, to not place them in bankruptcy court with the government acting as the Debtor-in-Possession (DIP), to not split them up by selling off the assets to successful and solvent entities, set the world on the path to global currency wars.

By lowering interest rates and effectively guaranteeing a weak dollar, the US ignited an almost riskless global US$ Carry Trade and triggered an uncontrolled Currency War with the mercantilist, export driven Asian economies. We are now debasing the US dollar with reckless spending and money printing with the policies of Quantitative Easing (QE) I and the expectations of QE II. Both are nothing more than effectively defaulting on our obligations to sound money policy and a “strong US$”. Meanwhile with a straight face we deny that this is our intention.   more>>>

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Oct. 16
CURRENCY WARS: Misguided Economic Policy

The critical issues in America stem from minimally a blatantly ineffective public policy, but overridingly a failed and destructive Economic Policy. These policy errors are directly responsible for the opening salvos of the Currency War clouds now looming overhead.

Don’t be fooled for a minute. The issue of Yuan devaluation is a political distraction from the real issue – a failure of US policy leadership. In my opinion the US Fiscal and Monetary policies are misguided. They are wrong! I wrote a 66 page thesis paper entitled “Extend & Pretend” in the fall of 2009 detailing why the proposed Keynesian policy direction was flawed and why it would fail. I additionally authored a full series of articles from January through August in a broadly published series entitled “Extend & Pretend” detailing the predicted failures as they unfolded. Don’t let anyone tell you that what has happened was not fully predictable!

Now after the charade of Extend & Pretend has run out of momentum and more money printing is again required through Quantitative Easing (we predicted QE II was inevitable in March), the responsible US politicos have cleverly ignited the markets with QE II money printing euphoria in the run-up to the mid-term elections. Craftily they are taking political camouflage behind an “undervalued Yuan” as the culprit for US problems. Remember, patriotism is the last bastion of scoundrels.        more>>>

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Mar. 2nd
PRESERVE & PROTECT:  Mapping the Critical 2011 Themes

The conclusions of our "2011 Thesis - Beggar-thy-Neighbor" was that the world is on a glide path towards a global Fiat Currency Failure and the emergence of a New World Order. We are unclear whether it is planned or happenstance, but what our regularly conducted abstraction mapping process clearly indicates is that it is presently a high probability outcome.

The paper (which will be made available to non subscribers March 11th, 2011- sign-up) uses the Process of Abstraction to avoid the media noise, abstract the facts, synthesis key macro drivers and then arrive at the highest probability outcomes. In the recent article "2011 Tipping Points" we laid out the 37 major Tipping Points we are presently tracking. These Tipping Points are show on the left hand side of the two charts below, which are the basis upon which our ongoing analysis process is conducted.  These highly simplified representations of the process gives the reader a graphical perspective on what leads us to our conclusions. MORE>>

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Feb. 26
PRESERVE & PROTECT:  2011 Tipping Points

Throughout my 2010 article series "Extend & Pretend" and "Sultans of Swap" I stressed that we were rapidly moving from the Financial Crisis of 2008, through the Economic Fallout of 2009 - 2010, towards a Political Crisis in 2011 - 2012. We are now clearly beginning to see the early emergence of the final part of this continuum.  From North Africa to Wisconsin all are fundamentally based on the single insidious underlying problem - excessive global debt and credit levels. MORE>>       




Sep. 18
PRESERVE & PROTECT:  The Jaws of Death

The United States is facing both a structural and demand problem - it is not the cyclical recessionary business cycle or the fallout of a credit supply crisis which the Washington spin would have you believe.

It is my opinion that the Washington political machine is being forced to take this position, because it simply does not know what to do about the real dilemma associated with the implications of the massive structural debt and deficits facing the US.  This is a politically dangerous predicament because the reality is we are on the cusp of an imminent and significant collapse in the standard of living for most Americans.

The politicos’ proven tool of stimulus spending, which has been the silver bullet solution for decades to everything that has even hinted of being a problem, is clearly no longer working. Monetary and Fiscal policy are presently no match for the collapse of the Shadow Banking System. A $2.1 Trillion YTD drop in Shadow Banking Liabilities has become an insurmountable problem for the Federal Reserve without a further and dramatic increase in Quantitative Easing. The fallout from this action will be an intractable problem which we will face for the next five to eight years, resulting in the “Jaws of Death” for the American public.       more>>>

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Aug 20
PRESERVE & PROTECT:  Mapping the Tipping Points

The economic news has turned decidedly negative globally and a sense of ‘quiet before the storm’ permeates the financial headlines. Arcane subjects such as a Hindenburg Omen now make mainline news. The retail investor continues to flee the equity markets and in concert with the institutional players relentlessly pile into the perceived safety of yield instruments, though they are outrageously expensive by any proven measure. Like trying to buy a pump during a storm flood, people are apparently willing to pay any price.  As a sailor it feels like the ominous period where the crew is fastening down the hatches and preparing for the squall that is clearly on the horizon. Few crew mates are talking as everyone is checking preparations for any eventuality. Are you prepared?        more>>>

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July 8,

EXTEND & PRETEND: Stage 1 Comes to an End!

Both came to an end at the same time: the administration’s policy to Extend & Pretend has run out of time as has the patience of the US electorate with the government’s Keynesian economic policy responses. Desperate last gasp attempts are to be fully expected, but any chance of success is rapidly diminishing.   We can safely conclude either:

  1. The administration completely under estimated the extent of the economic crisis, even though we were well into it when the ARRA was introduced.
  2. The administration was unable to secure the actually required stimulus amount which was likely 4-5 times that approved.
  3. The administration failed to implement the program in a timely manner.
  4. The administration failed to diagnose the problem correctly and that in fact it is a structural problem versus a cyclical and liquidity problem, as they still insist it to be.

I personally believe it is all four of the above.     more>>>

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Jun. 6

EXTEND & PRETEND: A Matter of National Security

There is something seriously wrong in America. We all sense it, but few in the mainstream media are willing to touch it or can effectively articulate it within the public’s sound-bite oriented attention span.

It isn’t just about the remnants of the financial crisis; it isn’t the protracted jobs recession and slow recovery; it isn’t the trillions of dollars in deficit spending; it isn’t the degree of rampant financial malfeasants. It is something deeper which reaches into the soul of who we are as a people and society. It will soon be the central theme to your investment strategy and financial security.

On the surface it might appear we have lost our optimism about the future and our confidence that America is still the ‘beacon on the hill’ that countries around the world admire and look to for leadership. Though our children mouth the platitudes taught by older generations, they ring hollow in the hallways with video surveillance, motion detectors and metal detectors when recite by them. The high minded ideals seem misplaced in unemployment lines where they stand with freshly minted advanced degrees in hand, huge education debts and little hope other than the faint possibility of a non-paying internship position.

It isn’t that the American people have changed.
Our government has changed.

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Jun. 10

EXTEND & PRETEND: A Guide to the Road Ahead

It will likely surprise you but like a trolley car we are now locked into economic tracks that determine our financial destination. Unfortunately, it isn't a place anyone would choose knowingly other than possibly the Bilderberg elite.

Financially and economically we are lurching along, rocking from side to side with the occasional unexpected jarring flash crash jolt. But unlike a trolley line, for some reason no one seems to know what the destination is. Many are asking but few are willing to tell.

This road is well traveled and documented if you were to take the time to study the maps and not rely on the happy face media spin doctors for directions. Since the route of the current global economic path is now locked in, we need to either accept the ride or hastily exit. 

I’m up from my seat and headed for the door. What are you going to do?      more>>>

Jun. 3

EXTEND & PRETEND: Confirming the Flash Crash Omen

The highly discussed and quickly forgotten Flash Crash was an omen of what lies ahead for the financial markets. It was a uniquely distinctive occurrence relative to anything we have ever experienced. Likewise, what we are about to witness will be startling and never before observed by this generation of investors. After only thirty days the Flash Crash signal has become unambiguous and historians will wonder why the public didn’t react sooner to its clarion call.

Over the last ten years we have systematically accelerated the shifting of risk through the advancement of three new strategies; Dynamic Hedging, Capital Arbitrage and Regulatory Arbitrage. Individually they may seem sound but when pyramided as we have done over this period of time, they set the stage for systemic instability. The underlying bedrock of this shaky pyramid is Dynamic Hedging.      more>>>

May 28

EXTEND & PRETEND: Its Either RICO Act or Control Fraud

We are entering the Age of Rage.

It is presently most visible in Europe as austerity programs that potentially could shred a half century of social entitlement advances are met with increasingly violent street demonstrations.  It is seen in the US Tea Party rallies with their fury that the very fabric which the US capitalist system is based on is being destroyed and discarded. Unfortunately these demonstrations of rage are focusing on the effects and not the cause. The cause is a systemic plaque of unenforced financial control fraud.     more>>>

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May 7

EXTEND & PRETEND: Shifting Risk to the Innocent

Markets never repeat themselves but they often rhyme. This rally feels like the same sonnet we experienced in 1987.  As in a sonnet, it is following a strict rhyme scheme and specific structure.

In 1987 the rally began gaining steam in the spring when it already seemed overbought and extended. The rally had initially started in October 1986 at DOW 1400, but during the spring of 1987 it began to accelerate. It not only didn’t correct, but continued to gain momentum. Despite all the pundits saying it was about to correct, it just kept going up. By early fall the bears had capitulated and the public was scrambling to avoid missing further gains. They were quickly rewarded as the market moved even higher.  No bad news, overextended fundamentals or technical warnings could stop the rise. The DOW was soon over 2700 for an approximate 93% rise.    more>>>

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Apr 30

EXTEND & PRETEND: Uncle Sam, You Sly Devil!

The modus operandi (MO) of deviant behavior aids investigators in doing criminal profiling. Forensic accounting takes a similar approach and leads us to some unnerving conclusions about Uncle Sam. As Tax Payers we place our sacred trust in our elected officials and government. Is that trust being handled similarly to how Goldman Sachs apparently has been handling its fiduciary responsibilities?

Has our government been playing accounting games like European tax payers discovered in Greece and like many angry tax payers are now discovering in local, city, state and sovereign governments across Europe and the US? All are now learning how the use of off balance sheet accounting and cleverly structured Interest Rates Swaps have been applied to obscure visibility to toxic debt levels from the very tax payers who will be responsible for the debt obligations.

Is our government playing the role of Jack Nicholson in “A Few Good Men” when he condescendingly justified his behavior yelling in the courtroom: “You can’t handle the truth!”

If you can handle the truth then let me explain some very suspicious behavior of our trusted Uncle Sam.   more>>>

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Apr. 22

EXTEND & PRETEND: Is the US Facing a Cash Crunch?

The US Government is caught in a cash vise and is being squeezed between too slow a rebound in tax revenues and the limitations on how quickly it can realistically take its funding requirements to the US Treasury auction. The US Treasury was saved in March by what the government reports as “proprietary receipts”. Those receipts require an explanation that is not well publicized since it begs the question of what happens next month without the $117 BILLION journal entry.

The March cash management numbers from the US Treasury’s Financial Management Service are alarming and in my estimation have become perilous. The economy is simply taking much too long to recover which is affecting urgently required tax receipts.     more>>>

Apr. 15

EXTEND & PRETEND: Gaming the US Tax Payer

Today, April 15th, most of us grudgingly settle our annual obligations with the government tax authorities. But for how long will we keep doing this? How long will we support the government’s Ponzi scheme that makes a mockery out of the monies we have annually contributed obediently to our Social Security and Medicare accounts? What I am going to share with you may make this a haunting question for you throughout the next taxation year.

I have been writing extensively about the unregulated $605 Trillion Global Derivatives market along with the ‘Extend & Pretend’ Program that has resulted in an explosive market rally from the depths of the post financial crisis. Despite my reluctance, my writings and research has forced me to some undeniable conclusions. Our government is presently ‘gaming’ the US Tax Payer. Let me explain how.

US Treasury Auction - Speculative Block Diagram #1


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Apr. 8

EXTEND & PRETEND: Manufacturiing a Minsky Melt-Up

A distracted and preoccupied amateur is no match for a determined, organized professional with a strategy. Though the collapse of the shadow banking system was a near mortal miscue for the global bankers, they have been quick to adjust their strategy. With an army of MBAs, quants and lobbyists they have reworked their strategy at the expense of the still comatose and shaken taxpayer.

It is the first anniversary since April 2nd when FASB 157 was suspended and with it the suspension of ‘mark-to market’ accounting. The US congress held a gun to the head of the Financial Accounting Standards Board a year ago. Congress left FASB no choice but to change their guidelines under the perception it was a deferral, to allow time for the banks to adjust to the toxic assets on their books. Where are we a year later with Mark-to Market still ‘on hold’ and Mart-to-Myth endorsed by the Federal Reserve Bank examiners? Frankly, the ‘happy face’ media doesn’t want to talk about it, so I will. As an investor, unlike politicians and the media, I must face reality or I will pay the ugly consequences.     more>>>

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Apr. 2

EXTEND & PRETEND: Hitting the Maturity Wall

How long can the government continue to extend & pretend? How long can public policy endlessly ‘kick-the-can’ down the road without addressing the underlying causes? Such a critical point is often academically referred to as a ‘Tipping Point’ or what newsletter writer John Mauldin refers to as a ‘Finger of Instability’.  I am more pragmatic and as an investor, who is forced to call the timing, I refer to it as the Maturity Wall.

In a recent article entitled "Sultans of Swap: Fearing the Gearing! I outlined the growing amount of debt that will need to be refinanced and rolled over in the coming years. Since releasing that analysis the amount may now have reached a level where it may be too high to be scaled and we will hit the Maturity Wall. This level identifies the critical requisite timing that investors must be fully aware of.       more>>>

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Jan 29

EXTEND & PRETEND: An Accounting-Driven Market Recovery


Beginning in October 2007, the world survived a Financial Crisis like no other in modern times. It was the first truly Global Financial Crisis ever experienced. This crisis brought to light a vast array of financial instruments (CDO’s, CDS’s, CLO’s, etc.) being offered by murky financial entities (SIV’s, VIE’s, SPE’s, QSPE’s etc.) that were completely unregulated, often offshore, always off balance sheet and never traded through any regulated exchange. None of these are regulated nor understood by sovereign governments. Minimally, this is a recipe for fraud. But definitely, it has been a modern day financial “wild west” for the innovative and aggressive!       more>>>

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Jul 22
SULTANS OF SWAP: Gold Swaps Signal the Road Ahead

The news rocked the global gold market when an almost obscure line item in the back of a 216 page document released by an equally obscure organization was recently unearthed. Thrust into the unwanted glare of the spotlight, the little publicized Bank of International Settlements (BIS) is discovered to have accepted 349 metric tons of gold in a $14B swap. Why? With whom? For what duration? How long has this been going on? This raises many questions and as usual with all $617T of murky unregulated swaps, we are given zero answers. It is none of our business!

Considering the US taxpayer is bearing the burden of $13T in lending, spending and guarantees for the financial crisis, and an additional $600B of swaps from the US Federal Reserve to stem the European Sovereign Debt crisis, some feel that more transparency is merited. It is particularly disconcerting, since the crisis was a direct result of unsound banking practices and possibly even felonious behavior. The arrogance and lack of public accountability of the entire banking industry blatantly demonstrates why gold manipulation, which came to the fore in recent CFTC hearings, has been able to operate so effectively for so long. It operates above the law or more specifically above sovereign law in the un-policed off-shore, off-balance sheet zone of international waters.       more>>>

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Jun 30
SULTANS OF SWAP: BP Potentially More Devistating Than Lehman!

As horrific as the gulf environmental catastrophe is, an even more intractable and cataclysmic disaster may be looming. The yet unknowable costs associated with clean-up, litigation and compensation damages due to arguably the world’s worst environmental tragedy, may be in the process of triggering a credit event by British Petroleum (BP) that will be equally devastating to global over-the-counter (OTC) derivatives. The potential contagion may eventually show that Lehman Bros. and Bear Stearns were simply early warning signals of the devastation lurking and continuing to grow unchecked in the $615T OTC Derivatives market.

What is yet unknowable is what the reality is of BP’s off-balance sheet obligations and leverage positions. How many Special Purpose Entities (SPEs) is it operating? Remember, during the Enron debacle Andrew Fastow, the Enron CFO, asserted in testimony nearly 10 years ago that GE had 2500 such entities already in existence. BP has even more physical assets than Enron and GE. Furthermore, no one knows the true size of BP’s OTC derivative contracts such as Interest Rate Swaps and Currency Swaps. Only the major international banks have visibility to what the collateral obligations associated with these instruments are, their credit trigger events and who the counter parties are. They are obviously not talking, but as I will explain, they are aggressively repositioning trillions of dollars in global currency, swap, derivative, options, debt and equity portfolios.    more>>>

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Mar. 25

In Act II of our fictional play before we broke for Intermission, we saw the mechanics of how our Sting might be perpetrated. We saw how our PATSIES were “Fearing the Gearing” and being forced to rewrite their existing SWAP contracts with horrendous fees and collateral requirements. This is money that the public purse didn’t budget for and has no hope of raising. What will our PATSIES do now? They have little choice -either pay the shylock’s usury fees or sue!

Once again our audience was witness to some strange happening when the lights came up during the intermission.

Like a wave, the news of angry PATSIES taking their grievances to the courts surged all along the global shorelines. Let’s take a quick world tour to see the carnage showing up in the court rooms.

COMPLAINT:  Letter to NY Attorney General


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Mar. 19

In Act I of our fictional play before we broke for Intermission, we discovered the players, how our Sting has been set-up, the innovative financing arrangements employed and the trading mechanism that allows our Sting to be potentially perpetrated.

There was a very interesting development however that occurred during our play’s intermission. We had a fight breakout between our DIRECTORS. Our sleepy actors were heard arguing amongst themselves behind the stage curtains as our audience enjoyed a casual libation and pondered the smoking guns unveiled in Act I.

What they overheard was the White House (a DIRECTOR) refusing to support European legislative efforts to stop the apparent deviant behavior of our sinister SPECUALTORS (see Act I for your theater guide).  Angela Merkel and Nicolas Sarkozy emphatically demanded changes in European Derivatives trading and sent Greek Prime Minister George Papandreou to the White House as an example of a vulnerable victim (PATSY) to plead the case. He was quickly rebuked, being informed that this “was a Greek problem”.  The audience once again heard Johnny Depp’s famous quip from the mob movie “Donnie Brasco”, when Brasco was trapped in similar exposing entanglements responding ‘Forget about it!’. 

Without US legislative action any European actions attempted would be knowingly useless in today’s global trading markets. The President is fully cognizant of this, especially when he authorized the $170B of bailouts by the US government on AIG’s CDSs (Credit Default Swaps) which had been headquartered and executed out of London. Who is our President possibly listening to, especially since he was elected on a platform of “Change” in the midst of the financial meltdown?    more>>>

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Mar. 12
SULTANS OF SWAP: Smoking Guns!

There are 7 stages to executing a successful sting operation. Whether this is the modus operandi behind the Sultans of Swap operating in the $605 Trillion OTC Derivatives market or just simple coincidence, I will leave it to you shrewd reader to determine.  The seven stages do however offer us an instructive theater guide to better understanding these murky instruments called Interest Rate Swaps.

For our younger readers The Sting is a 1973 American movie set in September 1936 (an era not too dissimilar economically to present day) that involves a complicated plot by two professional grifters (Paul Newman and Robert Redford) to con a mob boss Robert Shaw.  The story was inspired by real-life con games documented in “The Big Con: The Story of the Confidence Man”. (Not to be confused with “The Confidence Game” by Stephen Solomon documenting today’s Global Central Banking structure and our own Federal Reserve)

The title phrase refers to the moment when a con artist finishes the "play" and takes the mark's money. If a con game is successful, the mark does not realize he has been "taken" (cheated), at least not until the con men are long gone   more>>>

March 24- SENTINEL UPDATE: Ties in the Gears 
Update to Smoking Guns...

The Smoking Guns are showing up almost daily around the world. Our PATSIES clearly have their ties caught in the gears. They are executing desperate acts to free themselves and to minimize the damage. .

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Mar. 3
SULTANS OF SWAP: Fearing the Gearing

Ever imagine getting your tie caught in a mechanical set of gears (sorry ladies - but I will spare you). The results are nasty! Now you know what the Sultans of Swap in the $695 Trillion global OTC derivatives market feel like. Every day the slow moving gears of the world economies relentlessly grind, making it harder and harder for the Sultans to wiggle loose or breath.

Financial Gearing is what we non-accountants often refer to as simply 'Leverage'. Whichever your preference, it has the Sultans of Swap tightly caught in a manner that has greatly restricted their options and is now slowly squeezing the liquidity life out of them.

As the economies of the world adjust to the comatose shock of the Financial Crisis, the general public is only now awakening to the fall-out and structural changes resulting from this historic tremor. Some impacts are obvious; the most important are not - yet!    more>>>   

March 21 SENTINEL UPDATE: The Maturity Wall  
Update to Fearing the Gearing ...

How does High Yield Debt survive when credit dries up but magically yields plummet? Refinance & Rollover as fast as the banks can afford to accept the increased risk of default. Enter CDS and Interest Rate Swaps. Extend the maturity with a higher financed payout. The problem? The Wall of Maturity!.

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Feb. 24
SULTANS OF SWAP: Explaining $605 Trillion in Derivatives!

Every parent has had that moment when their child asks them the simplest sounding question but in that instance before you respond, you realize you have never really thought about it and actually don"t know the real truth. To not have an answer would be to lose all credibility as the "all knowing" parent. Like generations of parents before you - you bluff!

When asked why there are $605 Trillion derivatives outstanding (1) how do you articulate an answer to this horrendous and almost unimaginable number? The US is the largest economy in the world but tallies only 2.3% in comparison. Global bank reserves amount to only 1.2% of this accumulation. The gargantuan size appears to defy all logic.

Before some of you experts out there accuse me of sensationalism let me quickly give you the response of the "all knowing" to knock this number down to something that is intended to allow you to once again sleep at night.    more>>>

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Dec. 27


EUROPE EXPERIMENT : ECB's LTRO Won't Stop Collateral Contagion!

I would argue that the problem short term is a shortage of real collateral and that US dollar cash, versus 'encumbered' cash flow, is now king. It is clear that the rampant advancing Collateral Contagion will quickly eat the futile LTRO attempt like ravenous wolves. A well circulated Tweet from PIMCO bond king Bill Gross said it all: " What does LTRO stand for? 1- A shell game; 2-Cash for trash; 3 Three-card Monti; or 4. All of the above." Here is the stark reality of what forced the ECB to offer unprecedented three year loans at absurd rates and most alarmingly, the acceptance of collateral that no other financial institutions will accept. The ECB has sacrificed its balance sheet in yet another EU "kick at the can". MORE>>

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Feb. 1



EUROPEAN EXPERIMENT: Beware of Lurking EU Bank Runs

This is a warning to prepare for potential stealth bank runs cascading from North Africa and Ireland through to EU regional banking centers.

Stealth bank runs are the unrecognized and perilous serpent lurking presently below the European financial surface. They prey on slower moving archaic bond vigilantes and anyone else swimming in these dangerous uncharted waters.

Investors need to fully appreciate that a modern bank run looks and operates  differently than what is depicted in the movies and what we most likely expect to occur.      more>>>

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May 21
EUROPEAN EXPERIMENT: German Steel or Schmucks?

The European Crisis is proving to be more of an unraveling than a contagion.

I have long written that the European Monetary Union (EMU) constitution and Euro currency should be viewed in the context of a risky bet versus a sound regional monetary strategy. The odds of the EMU’s survival are presently reflected in a plunging Euro, despite a historic and unprecedented intervention. This indicates that the EMU’s existence in its current form is now a bad bet.

The good news is that this is becoming obvious and it suggests that the serious governance flaws of the 17 year Euro Experiment may finally be addressed. It took a crisis to see its first test which has been the generally accepted view of when the euro experiment would prove its viability. The established momentum of the EU since its inception and its broad acceptance prove that its survival is presently a matter of European preference with most Eurozone members feeling it an absolute necessity. We'd therefore expect to see the EU constitution reformed. What should concern investors the most however is how the mechanics of what will be a ‘forced reform’ will unfold. The highly visible process will have profound implications to the stability of global financial markets and to a very tenuous global economic recovery.         more>>>  

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May 14
EUROPEAN EXPERIMENT: EU Bullied into $1T Banking Bonanza

Like a chess game, the bankers called ‘checkmate’ against the EU political leaders on Friday May 5th, 2010. Two days later in an urgently called weekend meeting the EU finance ministers hurriedly announced the biggest bailout in history.

Most people take more than two days to buy a car, but the frightened EU officials were pressured into reacting before the Asian markets opened Sunday evening. This is eerily the same scenario we saw on the eve of the US $700B TARP ratification, the Bear Stearns takeover, Fannie /Freddie Conservatorship, AIG Bailout etc. A coincidence – Yeh right!

How was this pressure applied, who has such power, who won and who lost? As I explained in EXTEND & PRETEND: Shifting Risk to the Innocent it is all part of the dynamic new market strategy of Regulatory Arbitrage. You had better learn how the game is played or you will be toast.     more>>>

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Feb. 18
EUROPEAN EXPERIMENT: 8 Financial Fault Lines Appear in the Euro Experiment

Tremors were heard across Europe and around the world last week. There was little mistaking the clear fracturing sounds of the European Monetary Union.

Receiving less fanfare than the political hyperbole of EU solidarity, was surfacing evidence of serious fissures that exposed similar financial schemes which took the US to the financial abyss.

Our research has identified eight fault lines now visible in the Euro experiment. Each is serious. As a combination they have the potential to be devastating. They are all now fully in play.        more>>>

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Feb. 16
"UR Pigs from Hell"

Whether you’re in Central Europe, such as Ukraine or Romania, the Med countries such as Portugal, Italy, Greece, Spain, or from Hungary to the Baltic States of Estonia, Latvia or Lithuania, you all have one common problem ---The hell that is the Euro!

“Euro members drew down their benefits in advance – ‘ex ante’ -- when they joined EMU and enjoyed "very easy financing" for their current account deficits. They cannot expect ‘ex post’ help if they get into trouble later. These are the rules of the club” (1)

Jean-Claude Trichet, President, European Central Bank

The Euro is still an experiment. Like any experiment it needs to withstand the results of testing under stress conditions. The present stresses within the PIGS have pushed the Euro and the viability of the EMU onto the global stage with all the attention of “The Emperor has no Clothes”!

Whether the Euro is your domestic currency; or you peg your currency to the Euro; or you are significantly influenced economically by the Euro, you are now infected by the possibility of contagion.         more>>>

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Sep. 8



INNOVATION: America has a Structural Problem

I gave President Barrack Obama six months to roll-out his doomed Keynesian policies, twelve months to discover they were flawed and eighteen months to realize that the solution to America’s problems must lie within a different economic framework. I had hoped by the end of twenty-four months to see new policies closer to an Austrian economic philosophy emerge. I was wrong.

Though, even the Wall Street Journal recently featured an article on the re-emergence of the Austrian School of Economic philosophy, it would appear that President Obama’s administration still neither gets it, nor I am afraid ever will. Key defections by his leading economic advisors, talk of the need for QE II and a Stimulus II, and a political collapse in public confidence suggests a growing awareness that Keynesian policies are not working, as many predicted they wouldn’t. Obama's exciting rhetoric of Hope and Change has left myself and the majority of recent polled Americans disillusioned and disappointed. What I see the administration failing to grasp is twofold:

  1. America has a Structural problem, not a cyclical business cycle problem. Though the cyclical business cycle was greatly worsened by the financial crisis, I would argue that the structural problem facing the US is actually a contributor to what caused the financial crisis.
  2. America has a Credit demand problem, not a Credit supply problem. It isn’t that the banks won’t lend, but rather that few can any longer afford or qualify (on any reasonably and historically sound basis) to borrow.


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Aug. 12
INNOVATION: What Made America Great is now Killing Her!

What made America great was her unsurpassed ability to innovate.  Equally important was also her ability to rapidly adapt to the change that this innovation fostered. For decades the combination has been a self reinforcing growth dynamic with innovation offering a continuously improving standard of living and higher corporate productivity levels, which the US quickly embraced and adapted to.

This in turn financed further innovation. No country in the world could match the American culture that flourished on technology advancements in all areas of human endeavor. However, something serious and major has changed across America.  Daily, more and more are becoming acutely aware of this, but few grasp exactly what it is.  It is called Creative Destruction. 

It turns out that what made America great is now killing her!         more>>>  

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Feb. 4
America - Innovate or Die!

US innovation is plummeting faster than our Financial Markets
did during the 2008 financial crisis!

The future of America is presently in peril, not just because of the “banksters’’ shadowy ways, but because of a sputtering Innovation Engine that has had the fuel “choked off’. It has now gone “critical” and can no longer be left to only the carping of the academic community.

The chart to the right from the Financial Times: “China scientists lead world in research growth” is frightening in its implications. It requires an immediate and serious congressional public policy response. Unfortunately most of those on the front lines are skeptical about Washington’s ability to either recognize the gravity of the situation or legislate any meaningful and appropriate response.    more>>>

Innovate or Die
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