Socialists are Everywhere

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Nothing to Bailout – Its all Fraud

Watch the talking heads and government officials use terms like “complicated” to describe the “toxic assets” you are paying for and you probably do what they they want you to do, just shake your head and turn the channel. What they aren’t telling you is that these so-called “complex financial derivatives” are just pieces of paper that have the same value as a Walmart receipt.

Heres the setup:

Bank A borrowed from Bank B.

Bank B bought insurance from Bank C to guarantee their loan to Bank A.

Bank C now guarantees the loan, in case Bank A defaults, Bank C pays off Bank B.

Read it again if you didn’t get it, its not that complex.

Now for the scam (what they are not telling you):

Anyone, including you and me could have bought the very same insurance whether we loaned the money or not. Think like this: You buy a life insurance policy on your 90 year-old next door neighbor (1 million dollars to you when he dies), he doesn’t know it and you are the beneficiary of the policy, this is probably not legal or kosher but the laws are only for us peons, not the Wall Street Wizards. Now you tell 20 friends how bright you are, that it is a sure-fire investment as the old neighbor will certainly die before you do. They all pile in and buy the same policy. Your neighbor dies. You and your 20 friends rejoice and send in the claims, thats 21 million dollars you just collectively won on what amounts to a sucker bet. You can see how quickly the insurance company might be facing a “liquidity crisis” once everyone caught on and started playing.

That is what “mortgage based derivatives” are all about. That is what they are not telling you. Banks, hedge funds, insurance companies, pension funds were all gambling on the demise of others. The problem is it is just like a game of musical chairs, when the music stops, some don’t get a chair and are forced out of the game. We’ve already seen a few big “financial institutions” go bankrupt, no chairs for them. You see, no one can possibly pay for all the “winnings”, they are welshing on their bets.

So now King Henry Paulson is busy in the Government wood shop hastily trying to build chairs for some of the lucky few who still don’t have a chair but are so pathetic and greedy that they are demanding one courtesy of the taxpayer.

That is the scam folks, that is why banks don’t trust each other, that is why the credit market is seized.

No one politically will come out and say the banks have been playing high stakes poker and lost, the status quo will be maintained in the interest of keeping “confidence in the system”.

There is only one problem. Hank Paulson can’t possibly build enough enough chairs for all the financial predators out there who are caught in their own trap. The market will have its way. Those with cooked books, who refuse to come clean will go under, those who ran a tight ship will stay afloat.

There is nothing to bailout, Paulson can’t cover all the bad bets out there, he does have enough funds available to orchestrate an orderly stock market melt down, but not near enough to prevent a meltdown.

Its all a scam.

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October 8, 2008 - Posted by | General | ,

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