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We are Sacrificial Lambs for "The Markets". WAKE UP!!

Do you remember the financial crash in 2008 and the following financial crisis? Do you understand what caused it?
Here’s the fly-by:

Banks are required to have enough “quality liquid assets” to manage and stay afloat (remain solvent) through some disaster that forces a lot of people to have to take a lot of money out at once. The magic math can get pretty complicated but what it essentially comes down to is that their cash should be at least equal to what it would cost to pay off all their debt within 30 days. (If you’re interested in learning more, it’s called “liquidity ratio”.)

Insurance companies have similar restrictions. Insurers are required to have enough quality liquid assets to manage and stay afloat through some disaster that forces a lot of people to file insurance claims at once. An insurance company’s liquidity ratio requirements vary, depending on the types of insurance they provide.

Mortgages have historically been a money-making machine for banks. Most don’t default, and if they do, the house is collateral. However, since they are considered debt (since they lent the money to the consumer) they weigh down the debt column and their liquidity ratio suffers. This is why banks like to offload to “loan servicers” (Fannie Mae, Freddie Mac…). They get the fees, get the big interest payments up-front, then sell them off for someone else to reap the benefits of residual income.

They way they do this (it’s actually why the government created Fannie Mae in 1938) is to bundle them together as investment vehicles called “Mortgage-Backed Securities”. This stemmed from The New Deal, in an attempt to allow millions more Americans to afford to buy a house and allow the banks to remain solvent, by selling these rolled-up mortgages as investments.

Some genius (honestly, he is a genius, just a sociopath – friend of a friend, actually) devised a machine around Credit Default Swaps (CDS’s). Under a CDS, a bank could sweeten the deal on Mortgage-Backed Securities by assuring the purchaser if someone defaulted on their loan (again – historically low risk) that the bank would cover those losses. It was, essentially, a guaranteed investment for the purchaser.

This is where the genius comes in. Since a CDS is converted from a debt on the lender’s balance sheets to an “investment” on the buyer’s balance sheets, the big banks started selling Mortgage-Backed Securities as CDS’s to insurance companies.

The banks dump billions of debt, fixing their liquidity ratio (on paper) and the insurance companies pick up billions in “quality liquid assets”, fixing their liquidity ratio (on paper). This effectively allowed the banks to lend hundreds of billions of dollars in mortgages (leading to the housing boom). Only that money they were lending didn’t really exist, except for in their (legally) doctored books. Insurance companies were able to insure many more millions of people than they could afford to actually cover, because they were backed by fake money. All the while, both were raking in hundreds of billions of dollars in actual, real money profits off these hot air balloons. Since they were raking in the cash, and saw little risk, they dramatically lowered their lending standards (predatory lending) and just used grossly overpriced adjustable interest rates – with the right to ratchet up the interest rate at any time – to hedge that added risk.

The genius mastermind pulling the strings behind the scenes in the federal government and corporate boardrooms (and left his name off everything) knew Wall St and Congress wouldn’t be able to control their greed, and would let the hot air balloon inflate until it exploded. They didn’t care because they were making real money off this scam, so would be fine. It would just blow up in the faces of all those they fleeced, and they’d walk away filthy rich. So, he watched closely, made an ungodly amount of money, and walked away just before the pop.

The world economy collapsed. We bailed out the criminals who pulled off the greatest heist in history. Congress FINALLY made the scheme illegal, but wrote the bill in such a specific, targeted, way that it’s still completely legal to pull a very similar scam on America. If I recall correctly, several of these machines started back up within six months of the collapse.

I wanted to explain this for two reasons…

First: This wasn’t just this single scam that was pulled off. This IS “The Markets”. This is the basic state of being for the markets and how they exist. Wealthy investors get and stay wealthy by blowing up all these hot air balloons of fake money and make real money off the interest and returns. THIS is “The Economy”. IT’S ALL FAKE.

Second: This is what we’re struggling to maintain and sustain, at the expense of the working poor and shrinking middle class. People can’t meet their basic human needs, all in service to these fleecing machines. We’re sacrificing real people to fill these balloons of fake money so billionaires can reap real money off their broken backs.

WAKE UP! IT’S ALL FAKE!

March 25, 2020, 07:41:32 am

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