Planet Ponzi.

by Jerry Alatalo

Alphabet Former hedge fund manager and author of “Planet Ponzi” Mitch Feierstein talks to Tariq Ali on “The World Today”. Mr. Feierstein believes a better option in 2008 would have been to allow “too-big-to-fail” banks to fail, instead of propping them up with massive taxpayer bailouts. He sees no real difference between conditions or regulatory measures from the worldwide financial crisis of 2007-8, a global crisis still being experienced today, and now in 2015 where the financial sector can still pronounce “heads I win, tails you bail me out”. His view is the financial sector is in worse condition now than in 2008, after considering comparative levels of leverage, credit and debt.

Feierstein points out that Cyprus-like actions have recently been adopted in Europe, the United States, along with the other G20 nations. This includes the phenomenon of “bail-ins”, where bank customer deposits in savings and checking accounts etc. are at risk of confiscation by troubled or bankrupt banking organizations, while parties to complex derivatives contracts hold first place among those who seek legal remedy for losses from any bank failures.

G20 nations:

Argentina

Australia

Brazil

Canada

China

France

Germany

India

Indonesia

Italy

Japan

Mexico

Russia

Saudi Arabia

South Africa

South Korea

Turkey

United Kingdom

United States

European Union

It is worth noting that during the recent passage of the United States “Cromnibus” spending bill, a provision written by Citigroup which placed American taxpayers “on-the-hook” for certain derivatives trade losses – in essence repealing one of the main regulatory measures of Dodd-Frank legislation – became included in the must-pass bill, despite strong objections from a number of legislators, most visible being Senator Elizabeth Warren of Massachusetts.

Mr. Feierstein notes that, in connection to the 2008 economic crisis, people have “short memories”. He shares the statistic that 60 cents of every tax dollar which comes to the U.S. Treasury goes toward servicing interest on the national debt. He sees the examples of people-powered movements “from below” in Greece, Spain, Italy, and perhaps even soon France as reason for optimism in such movements’ potential for bringing about real reform which could become international.

He sees so-called deficit cutting measures by governments as “spending money they don’t have, but less of it”. He shares the analogy of his wife coming home from a high-class clothing store with an expensive dress, telling him that she “saved” 100,000 euros because the price had been reduced by 100K, but that he didn’t have the 100k she paid for the dress.

According to Mitch Feierstein, democracy is “vaporized”; it’s an illusion”. Whenever the economy goes down, extreme right-wing parties spring up, along with more acceptable alternative third parties whose success is directly linked to the people’s no longer being able to vote for people “who have lied to you”. Feierstein tells Tariq Ali about illegal manipulations of LIBOR (London Inter-Bank Offer Rate) interest rates, the interest rate banks charge each other for loans.

Mr. Feierstein considers the LIBOR rigging scandal as the largest financial crime in history, LIBOR rates connected globally to $300 trillion dollars worth of contracts. If such massive rigging at the highest levels of bank management of LIBOR weren’t disturbing enough, some now view manipulations of currency rates and prices for precious metals as even more damaging to the world economy.

The world’s combined GDP (gross domestic product) is an estimated $67 trillion. Some of world’s largest banks hold more than the world’s GDP in complex financial instruments contracts becoming more commonly known as derivatives. Thanks to the “Citigroup Provision” passed along with America’s Cromnibus spending bill, the American people could face the situation where their tax dollars will “cover” losing derivatives bets that Mr. Feierstein early in the interview termed “…tails you bail me out”.

He tells Mr. Ali that these are “incredibly bizarre times”, and that governance has become a stepping stone to great wealth instead of an honorable profession where speaking the truth and trying to make life better for fellow citizens is the one and only focus. Using the example of former British Prime Minister Tony Blair, Feierstein concludes: “If you’re a good boy, and you toe the line and keep the narrative, you’ll do just fine. Get out (of political office) and become very wealthy”.

****

(Thank you to The World Today with Tariq Ali at YouTube)

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2 thoughts on “Planet Ponzi.

  1. I think Wall Street’s riskiest investment was in the fracking industry – the entire explosion of fracking rigs across the US was deficit financed. Even before the drop in the oil price, companies were just surviving from month to month (Richard Heinberg writes about this in Snake Oil). The main reason oil and gas companies keep sinking new wells is because they deplete so quickly. Initially there’s a big burst of oil or gas but after a period of time the return is so slow that it no longer justifies production costs.

    With oil under $50 a barrel, companies are already going bankrupt because they can’t make their loan payments: https://jhaines6.wordpress.com/2015/01/08/rt-200-bn-in-debt-looms-over-american-oil-and-gas/

    Like

    1. Stuart,
      If the Wall Street operators act as usual they’ll probably bet against fracking companies and come out ahead. Who knows, maybe the part of the plan to lower oil prices included placing wagers against the perceived losers from $50 oil, among other reasons. Kind of like the put options on airlines before 9/11. Nothing surprises anymore.
      Thanks,
      Jerry

      Like

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