Financial Armageddon or Reform?

December 1, 2010

Consider this:

Corporation Tax and Jurisdictional arbitrage

“German banks set up subsidiaries in Ireland. These subsidiaries were often registered as completely Irish companies. Back in Germany the German regulator (BaFin) had strict and enforced rules. Very good rules for the most part. Far, far better than Britain or Ireland. But these good rules, properly enforced meant German banks could not do many of the most lucrative and in hind sight reckless kinds of deals.

So the German banks would do the figures and work it all out in Frankfurt, then send a banker over to Ireland, get them to sit at ‘their’ desk in Ireland, in the Irish bank, and do the deal there. The legal registration of the deal and the ‘oversight’ were all Irish. This is known in the financial world as jurisdictional arbitrage. You and I would call it cheating if we were feeling charitable and lying if we weren’t.

The Banker flies back to Germany, where the German bank hasn’t done any deal, and therefore has done nothing wrong. The deal was properly overseen and approved by the appropriate Irish financial authorities and the profits would be banked at a very happy Irish bank. If any management of the ‘deal’ was required an Irish company would be hired, there are many, and an Irish manager often living not far from Cork, would ‘manage’ the money in and out. I have spoken to such people. Usually I can hear the sweat coming off them as they ask how I got their number and where did I get my information. To which I would reply that the Internet is a very large place and never, never forgets.”

So we have IFSC doing almost €2 trillion in business with loose regulation such as the above mostly around CDO derivative trading and it would appear loose Bermuda style regulation. The CDO/CDS trading that brought the Landesbanks under the microscope vis a vis Hypo transaction losses see link above.

Was it not therefore less than unusual to see the troika of Clown, Suds of Giant Squid and Bruton head of the IFSC suddenly appear all over the media
telling us every penny had to be repaid to Anglo senior bondholders (to protect the CDS exposure of GS and the whole of the IFSC) plus to ensure the scams around Corporation Tax eg Double Irish CT scam similar to ‘jurisdictional arbitrage’ scam above.

Perhaps Primetime would like to take a look at IFSC and activities such as the above. They might be encouraged to do so in the wake of future shortfalls from the state in funding because of our ‘rescue’ torpedo aimed at the Irish economy from IMF/EFSF.

Time we began to defend the real citizens of Ireland in the financial war being waged against us

“ACA Financial Guaranty sold protection totaling US$69 billion while having capital resources of around US$425 million. When ACA was downgraded below “A” credit rating, it was required to post collateral of around US$ 1.7 billion. ACA was unable to meet this requirement. The banks have agreed to a “forbearance agreement” whereby the buyer of protection waived the right to collateral temporarily. ACA subsequently has been downgraded to “CCC” reducing the value of the CDS contract and the protection offered. The problems at ACA are not unique.”

Not unique, eg GS controversy regarding CDS exposure to AIG

Of the €34 bn taxpayers are liable for because of Anglo, how much of that was hedged against CDS loan guarantees that should have protected the Irish taxpayer?

If not, why is Seanie not before the courts for financial mismanagement if not downright fraud. Are there any off the balance sheet Anglo loan losses we have not been told about?

‘None so blind as those who don’t want to see’

We hear from Ajai Schopra and Honahan they are continuing to go through the Anglo loan book, but don’t expect to find any financial black holes. If so, why hasn’t a full account disclosure been given by Anglo on its CDS transactions?

If Anglo had CDS insurance, why hasn’t it been triggered?

Probably because it took out no such guarantees to protect its own loan book, instead betting in the market selling CDS to cover speculative gamble dealings of its own.

We need full disclosure.

Failed Rescue Bailout

Meanwhile a failed and hopeless ‘Rescue’ has done a deal with a political cronies of FF behind the backs of citizens.

Before Ajai Schopra and crew came, some said this would be great, IMF would sort the place, sort out outrageous high salaries draining the public expense, introduce a fairer system of taxation.

Some went as far as to believe they would insist on a reduction of td’s and other political and social improvements.

They left only after extracting support from their incompetent political stooges, with the message, we don’t care what shit you do, once you meet the quarterly repayment schedule for the IMF Sheriff of Nottingham Mr Scrooge….

They’ve made the mess a whole lot bigger!

We can never hope to pay back all the money. Secondly, our banks are on life support from Europe with low interest rates that we cannot do without. Thirdly, with the bailout money comes a democratic deficit that takes away any autonomy we might have to build us into an escape ship.

“Due to the opposition, the Irish government has decided not to have general elections before the budget is passed. The budget includes an increase of the sales tax from 21 percent to 23 percent. Effectively, the Irish population is forced to assume the debts of banks and then pay them back over the years. No democratic vote on the bailout is allowed because the Irish would most certainly vote it down.

…When Germany or Brussels tells Spain, Greece, or Ireland to reduce their deficits, the result for people living in these countries may be a reduced size of the government in the short run. But such centralization of power in the EU will likely prove to be disastrous for liberty in the long run. The European interventionists now claim that because there is one central bank we need one economic policy.

Once fiscal policies are harmonized, there will be a tendency toward an increase of power in Brussels and then toward an increase of tax rates throughout the eurozone.

The euro might be saved, but at the cost of building a strong, central European state, as national policymaking is transferred to Brussels in exchange for bailouts. The turmoil produced by the euro will then have served as an instrument for the development of a centralized state in Europe.”

We are already a vassal satellite state similar to similar USSR states back in the Cold War.

What we will be like in 5 years with this erosion of democracy?

Like an alcoholic that has run out of money, Ireland’s IMF/ECB/EFSF €85 bn rescue package has promised further lending to a country hooked on uncontrolled binge lending. In return our democratic sovereignty has been bartered away.

‘Sovereign’ and ‘democracy’ shouldn’t take second place and we shouldn’t keel over and let THEM go!

Unquestioning obedience to banks and unregulated, lawless financial institutions such as Anglo must end.

The banking model the economy follows is ‘Rigged Market Capitalism’, not ‘Free Enterprise Capitalism’.

How do we get out from under the yoke of banks, especially investment banks, who’ve been infected by the RMC model?

We have global accumulations of unregulated debt based on toxic piles of derivatives and cdo’s and currency manipulation to the point the world’s economic model is driven into a state of instability and virtual imminent collapse.

Alongside that, we have Seanie Euro(Anglo?) bondholders lending to the developers, Portugal, Ireland, Greece, Spain who’ve all gone and poured it down the shore building ghost estates like Ashfield Lawns across Europe that now lie empty but still need to be paid for.

On top of that, we have the abysmal failure to address the above problems as in our ‘rescue’ or ‘penal incarceration’ however way you like to put it.

The question is now, is testTube Ireland telling Europe how it will implode just as our economy has done?

We need an economic model and reforms we can trust in.

We need a way to deal with the global debt crisis that threatens to destroy democracy and make us all debt slave minions of G Sucks & Co

You need to lend your support to the following:

Educate others on the content of the above. It defines the terms of the financial war that needs to be waged against derivatives.

Enjoy reading and educate yourself on the terminology of the financial war that is being waged:

Asset Backed Securities
OTC Derivatives

Credit Default Swaps

These are some of the explicit terms of a fight back that could if not victory bring financial Armegeddon to the US and the rest of the world.

I’m not alarmist in acknowledging this, witness our growing mess and the growing mess for the euro and the specific signs from Ireland and its failed rescue that the euro may indeed be about to blow.

“Credit default swaps represent bets on whether a given asset or company will go bankrupt or not. As such, they can be used as insurance against such an eventuality, or else they can be used to make money on the insolvency. CDS are therefore a form of insurance, but they are issued by counterparties who have not registered as insurance companies and who have not met the legal and capital requirements which are necessary to function as an insurance company. It ought therefore to be clear that CDS have been totally illegal all along, and have flourished only because of an outrageous failure by state insurance regulators to enforce applicable laws against the privileged class of financiers.”

“….All Derivatives Illegal under the New Deal, 1936-1982
All kinds of derivatives, be they exchange traded or over-the-counter, were strictly banned and outlawed in the United States between 1936 and 1982 thanks to a wise measure enacted under the New Deal of President Franklin D. Roosevelt. In the wake of several attempts by predatory and sociopathic speculators to manipulate the prices of wheat and corn during the First Great Depression, the Commodities Exchange Act of 1936 outlawed the selling of options on agricultural products. This law had the effect of blocking most derivative speculation, until the counterattack of free-market fanatics gathered steam under the presidency of Ronald Reagan, an ideological zealot of the Austrian and Chicago schools. The very existence of derivatives today and their resulting ability to bring on a new world depression are thus directly attributable to the reckless and irresponsible dismantling of the New Deal regulatory regime. It should be added that derivatives were also banned in many states as a result of laws prohibiting gambling or forbidding bucket shops, which were betting parlors in which side bets could be placed on stock market fluctuations.

If Obama wants to pretend to have something in common with Franklin D. Roosevelt, he ought to be proposing measures to ban at least the most poisonous types of derivatives, and to discourage the others. Notice that he does nothing of the kind. Obama’s Cooper Union speech of April 22, 2010 approvingly cites Warren Buffett’s remark that derivatives represent financial weapons of mass destruction. But Obama then says that derivatives nevertheless have an important and legitimate role to play. So which is it? Some years back, French President Jacques Chirac rightly referred to derivatives as “financial AIDS.” What useful purpose can these toxic instruments possibly serve?

Again: in his 1936 re-election speech in Madison Square Garden in New York City, Franklin D. Roosevelt famously noted that the forces of organized money hated him, and that he welcomed their hatred. Obama, in sharp contrast, called on the Wall Street predators to join him in his efforts, compounding this with the monstrous thesis that Wall Street and Main Street are in the same boat. Nothing could be farther from the truth. The recent Goldman Sachs scandal has underlined once again that the Wall Street investment houses serve no useful social purpose whatsoever. They exist solely for the purpose of pursuing speculative profits through a process of looting and pillaging the rest of the economy. The Wall Street zombie banks are monopolizing US credit, while Main Street goes broke.”

……..”Outlaw Credit Default Swaps
Beyond this, we must urgently address the catastrophic effects and obvious illegality of credit default swaps. More than a year ago, Senator Warner of Virginia asked Fed boss Bernanke about the advisability of creating a “bright line prohibition” against these CDS. Remember that CDS are already illegal, because they always involve an investor masquerading as an insurance company without having fulfilled the legal and capital requirements that would be demanded from a real insurance company. Credit default swaps have cost the US taxpayer almost $200 billion in the case of AIG alone, because of the bankruptcy of the AIG London-based hedge fund which had issued more than $3 trillion of derivatives – a total greater than the gross domestic product of France.

Credit default swaps are also a clear and present danger today, since they are the principal tool being used by wolf packs of banks and hedge funds against Greece and other nations, accelerating the arrival of the dreaded second wave of the world economic depression. Unless credit default swaps are banned now, they will be increasingly used for speculative attacks against the bonded debt of American states like California, New York, Illinois, and all the others. Before long, credit default swaps will be used by international speculators to attack the value and integrity of United States Treasury securities, threatening our country with the calamity of national bankruptcy. If the United States fails to shut down credit default swaps with timely legislation now, credit default swaps will be used to help destroy the United States and human civilization in general.”



One Response to “Financial Armageddon or Reform?”

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