Thursday, December 24, 2009

Rigged betting parlor

Goldman Sachs is coming under increasingly close scrutiny for having created billions in CDOs (collateralized debt obligations) to sell to their clients and then betting against them with derivatives. Incredibly this is probably legal unless it can be shown that they systematically picked the debts most likely to fail to sell to their clients. Your pension fund lost billions buying these worthless pieces of paper but the chances of you ever seeing any of your money are slim at best.

Not only did Goldman make billions from this scheme but certain hedge funds that apparently knew what was happening also bet heavily against these worthless debt bombs and made billions as well. In fact Goldman and the few hedge funds were the only people allowed to place bets against the debt funds that Goldman itself was selling. Goldman is using as a defense that investors did know that Goldman itself was betting against its own investment funds but they chose to keep buying into Goldman’s ponzi scheme anyway since it continued to go up in value.

But the investment banks were also advertising the historical record of low default rates of consumer debt when they sold CDOs even though they knew the historical data was really ancient history from a day when what they were doing to the real-estate and mortgage markets was illegal. They knew it would blow up and they structured ever more complex derivatives to harvest as much money as possible from the system when it did.

So far this collapse has cost 14 trillion Dollars although much of this money is just paper printed by the Federal Reserve to keep the banks worldwide from going under. The theft has really been going on for forty years or more as the debt has piled up and the wealth of the middle class has disappeared. Americans that haven’t lost everything already don’t realize that what they do have isn’t worth much. With a dead economy real wealth disappears very quickly

Monday, December 21, 2009

Rats leaving the oil tanker



