The precariousness of our present economic situation has caused these dramatic changes and strengthened the conjugal relationship between the privately-owned Central Bank, major corporations and the state. The market is more vulnerable now than anytime since the late 1920s, a fact that was emphasized in a statement by the IMF just 2 months ago:
“Financial markets have failed to price in the risk that any one of a host of threats to economic security could materialize and deliver a massive shock to the world economy. It is clear that risks are on the downside of a sharper than expected slowdown in house prices that would produce weaker-than-expected growth that would have implications for global growth and financial markets.” (“IMF: Risk of global crash is increasing” UK Independent)
Risk, over-exposure, cheap money, shaky loans, a falling dollar, low reserves and a confidence deficit; these are the crumbling cinder-blocks upon which America’s Empire of Debt currently rests. The possibility of a major disruption grows more likely by the day. Consider the world's 8,000 unregulated hedge funds with $1.3trillion at their disposal or the wobbly derivatives market and the effects that a sudden downturn might have. Kenneth J. Gerbino put it like this in his recent article “The Big Sell Off” on kitco.com:
“With a global market panic starting in a low interest rate and, so far, low inflation environment, one has to be wonder about the real reason for (Tuesday’s) sell-off. Easy money almost everywhere leads to leverage and speculation. No where is this more prevalent than in the global derivatives market. It is not out of the question that third party defaults and risk aversion designed instruments that collapse and go sour may someday overwhelm the financial markets. Latest figures from the Bank of International Settlements: $8.3 trillion of real money is controlling $313 trillion in derivatives. That’s 38 to 1 leverage. These figures are just for the over - the - counter derivatives and do not include the global exchange traded derivatives in currencies, stocks and commodities which are another $75 trillion.”
“$8.3 trillion of real money is controlling $313 trillion in derivatives!”
This illustrates the sheer magnitude of the problem and the economy-busting potential of a miscalculation. That’s why Warren Buffett calls derivatives “weapons of mass destruction”. If there’s a fire-sale in hedge funds or derivatives, there’s nothing the Plunge Protection Team or the Federal Reserve will be able to do to stop a meltdown. The market will crash leaving nothing behind.
We are reaping the rewards of a lawless, deregulated system which has removed all the safeguards for protecting the small investor. There is no government oversight; it’s a joke. The stock market is a crap-shoot that serves the sole interests of establishment elites, corporate plutocrats, and banking giants. The small investor is trapped beneath the wheel and getting squeezed more and more every day. He has no way to fix the markets like the big guys and no lobby to promote his interests. He must arrive at his decisions by researching publicly available information and then plunking down his money. That’s it. He’d be better off in a casino; the odds are about the same.
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