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Bridgewater Associates has issued an apocalyptic warning to clients that bank losses from the worldwide credit crisis may reach $1,600bn (£800bn), four times official estimates and enough to pose a grave risk to the financial system.
The giant US hedge fund said that it doubted whether lenders would be able to shoulder the full losses, disguised until now by "mark-to-model" methods of valuing structured credit.
If Bridgewater is anywhere near correct, governments alone have the wherewithal to rescue the system. This would mean the de facto nationalisation of the banking systems in the US, Britain and Europe.
Originally posted by St Udio
the problem-solution thing is from the Hegelian thought model (i think)
but the choice that is in front of us is to go with a fascist economic model
or a banking system following Sharia law.
i forsee the fascist model, with the Federal Reserve getting the nod,
so there is a 'controlled chaos' and a manageable degree of fraud built into the new economic system,that central planning will permit & encourage.. for the ocassional sacrifical lamb / bread-&-circus dynamic
the masses feel justifed in seeing
Originally posted by jsobecky
So how can all that wealth be lost? Where did it go?
It all existed on paper, I guess. Just some gov't promise to honor a note. Not in the real world.
But most relevant to those of us outside the US is that Gramm – more than any other figure in American politics – made the two great financial scandals of our time possible, and nearly brought the global economy down with him.
How? Gramm says government regulation of the economy is "akin to communism", and must be destroyed. His first great step towards this goal came in the 1990s, when he championed and pushed through the law that exempted Enron from both government regulation and public disclosure, on the grounds these were "unacceptable fetters on the free market". Enron was his biggest campaign contributor, and employing his wife to the tune of a million bucks.
So thanks to Gramm, nobody was watching over Enron any more. As a result, they embarked on a massive programme of fraud and pillage. After taking over the electricity market in California, they deliberately engineered blackouts in entire cities to drive up the price for power. In a surreal move, Gramm blamed "environmental extremists" – the nearest bogeyman to hand – even after it was proven Enron execs had paid the power plants to "get creative" in turning out the lights.
Gramm learned from the Enron scandal – to go further and push harder. He turned his attention (and his fund-raising) to the mortgage companies. Since the 1930s, there had been an unwritten deal in US politics: the government would rescue the banks if they grew sick, but in return the banks had to take the sensible medicine of regulation. Gramm thought this was "crazy": why would banks ever need to be rescued in a free market?
So in 2000, while everybody was riveted by the Gore vs Bush stand-off in Florida, Gramm slipped into a vast 3,000-page bill 268 pages radically deregulating the banking system. A legal textbook later called this "a stunning departure from normal legislative practice"; few lawmakers noticed it was there when they voted. Suddenly, the roles that had been reserved in the US for regulated banks were handed over to a vast network of unregulated financial institutions called the "shadow banking system." They began to offer wildly unsustainable mortgages to the poor at supersonic interest rates. Through accountancy-acrobatics, they then bundled these risky loans into exotic packages of derivative commodities.
All this was only legal because of Gramm's legislative footwork. He swiftly moved on from the Senate to a megabucks job at UBS, one of the banks raking in billions from his changes.
Within a few years, the entire system began to collapse without the support beams of state regulation. Sub-prime mortgages predictably fell apart, with 2 million Americans – mostly black and Hispanic – facing repossession. The state has had to step in with a much heavier hand than before – and even that will not prevent a recession now.
The billionaire Warren Buffet pointed out that Phil Gramm has twice tossed "financial weapons of mass destruction" into the US economy.