Guest Post: Interview With J.S.Kim

Tyler Durden's picture

Submitted by Ilene of Phil's Stock World

Introduction

J.S. Kim is the founder of
SmartKnowledgeU™, an independent investment research and wealth
consulting firm. J.S. accurately called the recent global financial
crisis, sharing his thoughts on his investment blog, to his subscribers, and in a series of YouTube videos. His
articles have been reprinted online by Reuters, the New York Times, USA
Today, the Wall Street Journal, the Financial Times and the
International Business Times. He recently authored the timely book, “Confessions of a Wall Street Insider, a Zen approach to making a fortune from the coming global economic crisis.”

Recently, J.S. Kim and I have
been speaking via Skype and email about the banking industry, the
Federal Reserve, fixes for the economy, and current investment trends.

Interview

Ilene: Hi J.S., thanks for
speaking with me and showing me how to use Skype; this is pretty
easy. Can you tell me a little about your background and what led you
into the financial field?

J.S.: I studied neurobiology at University of Pennsylvania and then
earned two masters at the University of Texas, in Public Policy and
Business Administration. After graduating, I began working in the
Private Wealth Management division of Wells Fargo. Subsequently, I
worked for several years at Smith Barney. In 2005, I launched my
company, SmartKnowledgeU™.

Ilene: What did you learn while working in the banking industry?

J.S.: I was seeing an unsettling picture of industry excesses. I saw
problems developing, for example, with mortgages – no document loans or
liar loans. If the loan application didn’t support a mortgage, the loan
might be denied at first, but then it was sent through a special
process to convert it to a no document loan. Every bank did it. This
was not specific to Wells Fargo. All the major U.S. banks had this
“don’t ask, don’t tell” policy, so they could say they didn’t
know. They either should have known from the start that the mortgages
couldn’t be paid back, or they didn’t care because they were making
huge commissions up front. So they would make the loans and then slice
and dice them up and quickly sell them off.

Ilene: The banks knew what they were doing and knew they’d be bailed out as well?

J.S.: Yes, this happened before in the 1920s and I believe they knew
it would happen again. The process of taking the clients’ money and
making loans that are gambles (heads I win, tails the taxpayer pays)
has a history that goes back to the Great Depression. They have the
best of both worlds. The reward for risks stays with the banks top
executives, but losses are shifted to the taxpayers.

This is a pattern that happens over and over again – the robbing of
a nation’s wealth for the benefit of the elite banking oligarchs. This
is nothing new, and nobody should have been surprised by ex-Goldman
Sachs CEO and then US Treasury Secretary’s bait and switch with the
$700+ billion bailout plan in which he promised to use the money to
help American homeowners stay in their homes. Paulson promptly reneged
on the deal as soon as Congress passed the bill and gave the money to
his banking buddies.

Ilene: So do you believe it was a conspiracy to rid the population of wealth and transfer it to the bankers?

J.S.: I really don’t subscribe to conspiracy theories. Rather the
system enables the bankers to do what they do. The banking industry and
the media take the tactic of calling people who believe that cycles of
boom and bust are intentional, “conspiracy theorists.” It’s the
simplest way for the bankers to keep their power by calling everyone
that exposes their immorality and greed as crazy conspiracy loonies. As
Simon Johnson said in his article, “The Quiet Coup
(The Atlantic, May 2009), the bankers have taken over all major world
governments so the public never receives the truth. Instead, we have to
look for it.

Education has been taken over by the moneyed elites as well.
Keynesian economics, not the Austrian theory, is the predominantly
accepted theory and the one taught in every major economics school
today. I graduated from the University of Texas at Austin with my MBA,
but in that time, I hadn’t learned anything truthful about
economics. What I learned since is in almost direct opposition to what
my school taught.

The central bankers’ reach extends to academia and permeates the
field. There was a good article on this recently in Huffington Post.
This is not conspiracy. This is stifling of an opposing viewpoint, the
one that would enlighten the world to the fraud of our global monetary
system and our global banking system.

J.S.: Yes, that’s the one. A journalism professor of mine, Professor
Mercedes Lynn de Uriarte from the University of Texas, once told me
that if I only read the mainstream newspapers or watched the mainstream
TV news channels, I would never understand the truth about any major
political event. When I asked her what she meant by this, she told me
that all major media outlets frame stories by excluding relevant facts.
Therefore, one must dig for these relevant facts that would be reported
through independent media channels.

Our education about the economy, the monetary system and the banking
system is the same. Government and academic officials continually
exclude and withhold relevant facts from us. If one truly wants to
consider oneself “educated” in matters of our monetary system, one must
dig for the truth. I guarantee what one discovers would be shocking to
most people.

Ilene: When you say “they,” who do you mean?

J.S.: The government officials that have allegiances to bankers and
the private individuals that control the world’s most important central
banks.

Ilene: What do you see as the source of the problems caused by the banking system?

J.S.: Central banks are the original creators of the collapse. For
instance, the bankers have caused problems inherent in a fractional
reserve lending system by allowing much less than 10% to be kept in
reserve. A ten percent reserve was way too much for the bankers, and
over time, the member banks of the Federal Reserve system lobbied the
U.S. Federal Reserve (through Chairman Alan Greenspan back then) to
ensure that today, the real requirement is less than 2%, and in many
cases, incredibly, zero percent. The central bankers run the economy,
not the government.

Ilene: They lobby the Federal Reserve?

J.S.: Yes, that’s correct, Ilene. The banks lobbied the Fed chairman directly.

Ilene: So you’re saying that
those who control the banks have enormous political power, due to
controlling so much of the world’s wealth?

J.S.:  Yes, look at how U.S.
Congressmen Mel Watt (NC-Dem) has recently tried to gut Ron Paul’s bill
to audit the Fed and its monetary policy. The bankers have people in
their back pocket throughout government that work for their own
interests and against the rights of the people.

The owners of the central banks direct policy decisions. Men like
Ben Bernanke and Alan Greenspan are just the face of the U.S. Fed but
ultimately not the real decision makers. The owners of the central
banks influence global economic policy at meetings such as the G-8,
G-20 and Bilderberg group meetings. They get together and make
decisions that affect the entire global monetary system. Collectively,
the original founders of the U.S. Federal Reserve held 20% to 25% of
the world’s wealth in the early 1900’s. I believe their wealth is
greater now.

In fact, I loathe using the term the U.S. Federal Reserve, because
the founders of the US Federal Reserve purposefully placed the word
“Federal” in the name of the U.S. Central Bank to fool the people into
believing that the U.S. government is running this institution. It’s
actually a public-private hybrid. They felt that the people would trust
a government monetary institution but not a privately held one. And
they were right. So they misrepresented themselves in the assignment of
this name. A more accurate name for the U.S. Federal Reserve would be
something like “The Most Powerful Private Bank in the World.”

Ilene: I’ve read that no one owns the Fed, on its website,
but entities have stock in the Fed and get 6% in dividends. So what
does “ownership” mean? It’s not clear. It would be interesting to have
an audit of the Fed to get a better idea of what it is doing and
why. It also says on the website that the Fed is regularly audited. If
this were true, why do we need Ron Paul’s audit the Fed bill?

J.S.: It’s audited, but not by an outside independent auditor. Not
worth much in my opinion. It hasn’t been audited by an outside
independent auditor since it was founded in 1913.

They say the twelve regional Federal Reserve Banks control the Fed
because they issue stock to member banks, but the stock is stock in
word only because it carries no weight normally assigned to stock – no
voting rights, no ownership rights. The only regional bank with true
power is the NY reserve bank.

Ilene: Do you believe these bankers, or groups, control the elections and ultimately the politicians?

J.S.: Yes. President Obama owes the central bankers because they
contributed to his campaign and they were responsible for his present
position. Obama pulled his cabinet members from Wall Street. His
cabinet consists of more power players from Wall Street than any
administration in the past several decades. That’s how the political
system is built. If you’re backed by a certain element, you have to do
favors for them. It’s also hard to get factual information out because
the moneyed elites also control the media.

Ilene: Why do you believe there’s no free market?

J.S. It’s impossible to have free markets and central banks at the
same time. The free market will dictate what the interest rate should
be, but central banks keep altering it and causing boom bust
cycles. They created the housing bubble because interest rates were so
low for too long. Whenever central banks artificially suppress interest
rates to serve their purposes, a real estate or stock market bubble is
inevitable. And a bubble always bursts. Without a central bank, the
fed-induced cycles would be very much muted. Artificially set interest
rates cause bubbles and are clearly not consistent with a free market.
When we put an end to the central banks, people will have a chance to
have free markets. In my mind, the greatest gift in the world would be
to have a free market and to shut down all of the world’s central banks.

Ilene: How can some of the problems with our economy get fixed?

J.S.: Implement sound money again. All people, no matter where in
the world we live, are debt slaves to the central banks. If you have
strong moral opposition to the concept of slavery, then you should be
strongly opposed to the very idea of central banks. We have little
power in retaining our wealth, since the banks devalue our wealth at
will. Alan Greenspan himself stated in 1967 that “gold and economic
freedom are inseparable,” and that “under the gold standard, a free
banking system stands as the protector of an economy’s stability and
balanced growth. When gold is accepted as the medium of exchange by
most or all nations, an unhampered free international gold standard
serves to foster a world-wide division of labor and the broadest
international trade.” Of course today, a dual bi-metal gold/silver
standard is probably more realistic to implement as a sustainable
solution than a gold standard. But Alan Greenspan’s former comments
grant a narrow window into the mentality of central banker’s today.
This is why the U.S. and the U.K. are always denigrating gold. Gold is
the anti-US dollar, the kryptonite to central bankers per se. In order
to keep people slaves to a fraudulent monetary system, people must not
own gold or silver, for it is the only means people have to protect
themselves against the theft of their wealth by central banks through
inflation and devaluation of paper currencies.

Ilene: Can you tell me about the Worldwide Initiative to Prevent Financial Fraud?

J.S.: This is a collective project run by various people of
different ages and professions, running the gamut of students to
professional career men and women. I’ve agreed to participate in it and
contribute articles but those that run the project wish to remain
anonymous and I respect their wish.

Often the greatest most truthful dissent in history has originated
under conditions of anonymity. For example, the Federalist papers, a
series of 85 articles advocating the ratification of the US
Constitution were written under anonymity by Alexander Hamilton, James
Madison and John Jay. Writing under conditions of anonymity spared
Hamilton, Madison and Jay from acts of retaliation from the intolerant
elites currently in power at the time. The same can be said of
Subcomandante Marcos, or Zero Delegado, in his struggle to reinstate
the property rights of the poor in Mexico, of his decision to never
show his face in public.

Thus, I have no problem with the fact that the Worldwide Initiative to Prevent Financial Fraud
is run by people wishing to remain anonymous. Some of history’s most
important changes critical to freedom were only possible due to the
cloak of security and assurances against retribution by those in power
that can only be afforded through anonymous dissent.

Ilene: From the site:

As truth is always censored
from the top down, this unique initiative to educate the world’s
population about the true roots of this global financial crisis must
originate momentum from the bottom up in an organic fashion. The
inspiration for this project is the deafening silence that exists in
the mainstream media regarding the true originators and the real story
behind this global economic crisis. The fact that global stock markets
can rise at the same time when the world’s leading economies are
deathly ill is a symptom of this fraud, and this situation will not end
well for the world’s citizens unless we take action now…

In our estimation, less
than 1% of the world understands the central role central bankers have
played in our current global economic crisis.

In your estimation, less than
1% of the population understands the role the central bankers have
played. Can you tell me what you wish people understood about the
central bankers that they don’t understand? What do we need to
understand?

J.S. Sure. But I want to be clear that I am answering this question
not on behalf of the Worldwide Initiative to Permanently End Financial
Fraud but as JS Kim, Chief Investment Strategist for SmartKnowledgeU,
LLC.

In a free market, market forces would dictate interest rates, as the
forces of supply and demand would dictate the flow of money into
various investment opportunities. When a central bank continuously
interferes in this process by artificially cutting or increasing
interest rates, it disrupts free market forces and creates artificial
bubbles and collapses.

In a sound money system (i.e. money backed
by silver or gold, or best yet, one backed by a dual gold and silver
standard) there would be no need for central banks. Though this is a
complex process that could take 10 pages to explain, I’ll try to
explain it in as simple terms as possible. If money supply becomes too
great, the people turn in their paper money for gold and silver, and
interest rates naturally increase as bankers do not wish to give up
commodities of value (silver and gold) for commodities with zero
intrinsic value (paper). If money supply is too small and is stifling
economic growth, interest rates would naturally fall to stimulate
growth. Thus gold (or gold and silver) naturally regulates the monetary
supply to provide sustainable economic growth and to regulate interest
rates. In the absence of central banks, there would also be an absence
of capital bubbles and bursting bubbles. However, the purpose of a
central bank is to allow its owners to manipulate currency supplies,
valuations, and to control the wealth of a nation at the worst possible
outcome to its citizens.

The U.S. Central Bank, the U.S. Federal Reserve, states on its
website that one of its primary missions is price stability. Since the
U.S. Federal Reserve was formed in 1913, the US dollar has lost 98% if
its value. Price stability would mean that the U.S. dollar would have
lost 5% or less of its value since 1913. People do not understand that
central banks are formed solely to enrich its owners and that they
cause great harm to all citizens of the nations in which they operate.
Central banks are a scam a million times greater than Bernard Madoff’s
ponzi scheme.

Ilene:  Can you tell me a little about your innovative, proprietary system in managing money?

J.S.: Today, people analyze opportunities in the stock market
through two primary means of analysis – fundamental analysis and
technical analysis. Fundamental analysis in certain industries, such as
the banking industry, is practically useless, since mark to market
principles have been suspended and banks are allowed to hide bad assets
that literally would expose many of them as bankrupt off-balance
sheet. Under honest financial reporting conditions, fundamental
analysis, of course is useful, but requires a lot of forensic
accounting analysis to really get to the core of a corporation’s true
economic condition and growth prospects.

Technical analysis is definitely useful, but in my opinion, only as
an auxiliary tool and in conjunction with other analysis. Alone,
technical analysis will cause many wrong decisions.

I start with “fraud analysis” to decide what assets offer the best
low-risk, high-reward opportunities. I look for strong connections that
exist among corporations, banking, and governments to understand which
companies and assets are best primed for growth. Then I look for
legislative support as well, to narrow down these opportunities.
Finally, I’ve studied the mechanisms by which central banks and
governments rig capital markets, to determine the best times to enter
and exit certain investments. Once identifying a narrow core of
investment industries, I use technical analysis, or conduct deeper
forensic fundamental analysis, to decide which investments should
perform the best.

I use this system to build investment portfolios that should not
only rise regardless of whether the major global stock markets are
rising OR falling, but that should also outperform developed stock
markets. I have proven the benefits of selecting investment
opportunities this way with my investment newsletter, the Crisis
Investment Opportunities newsletter. My newsletter has aptly
demonstrated the validity of my system. For example, in 2008, when the
Australia ASX 200 lost 41.29% and the US S&P 500 lost 38.50%, my
newsletter returned +3.21%. Not outstanding, but still a 40%+
outperformance of these indexes. Most people, I imagine, would have
been happy to have stayed even that year. This year, when the US
S&P 500 was up YTD 22.84% as of December 3, 2009, my investment
newsletter had returned 73.69% over the same time period.

Ilene: What is your system saying now for current investment opportunities?

J.S.: With my fee services, we stay aggressive. By aggressive I
don’t mean risky. You can be aggressive yet make large returns with
relatively little risk as long as you truly understand the economy. A
lot of people, most people in fact, have listened to the junk their
investment advisors have told them for the past 30 years. They believe
that diversification is safe, when diversification will ruin
you. Concentration is a much better strategy as only a few assets will
perform well over the next several years. They believe that the dollar
or the Euro or the pound is safe and gold is speculative, when gold is
safe and all fiat currencies are truly speculative. Currently, I’d look
at commodities, oil, agriculture, precious metals. But again, there are
many ways to buy all of these items, and some are risky and some are
safe, though usually Wall Street tells you all the wrong things about
these investment areas. I think junior gold and silver stocks are going
to make a lot of people rich in the coming years, but probably nine out
of 10 junior resource stocks are junk. If you don’t know what you are
doing, you will destroy, rather than create, capital.

The single best thing people can do at this point to preserve their
wealth against future shocks is to buy physical gold and silver and to
stay away from the gold and silver ETFs. You might be surprised in a
couple of years how difficult it will be to get ANY physical gold and
silver. Own it outside the United States and the UK, if at all
possible. And finally, when looking for guidance of how and when to buy
physical gold and silver, find someone that has a track record of
specializing in gold and silver for at least five years. Don’t go with
an advisor that has just jumped on the gold/silver bandwagon because it
is hot. The gold/silver markets experience great volatility due to the
price suppression schemes of the US Treasury and US Federal Reserve.
Someone that just entered these markets within the last year cannot
fully understand the complexities of price behavior in this area.

Ilene: Thank you, J.S.

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Objective Soul's picture

Exellent interview.

It puts into written word much of what I have come to realize over the course of time.

Merry Christmas to Zero-Hedge, contributors and readers.

 

10044's picture

FANTASTIC!

Merry Christmas

Zippyin Annapolis's picture

Glad I got those Canadian gold bars for Xmas!

Zippyin Annapolis's picture

Note that under the new Treasury FBAR rules holding assets offshore without reporting them to the US Treasury, including physical gold, precious metals can result in sever tax penalties down the road. A real trap for the unwary.

Anonymous's picture

Hmmmm....

I respectfully disagree with the author for this simple reason....Accounting for time.....gold could have been a miserable investment for over a decade ....or more....as well as commodities....

Also the means to wealth is currency.....like it or not....

And the Central Bank is not going to change .....like it or not....

The CB operates like a core business.....Its business is to create currency flow....

All businesses rise and fall.....everything in nature rises and falls....

One does not fight MOTHER NATURE....

Anonymous's picture

oh gold was a bad investment in the decade? oh really? so if i had bought a car load in 2000 and sat on it until now, i would be losing my ass off, is that about it?

harde har har har ......its gold bitches.....its gold....

greased up deaf guy's picture

"And the Central Bank is not going to change..."
"The CB operates like a core business..."
"All businesses rise and fall..."

you sound like you are disagreeing with yourself; not the author.

also, any investment "could have" been a poor one over the past decade. how has the dow performed since 2000? the s&p?

Anonymous's picture

always love it when someone from the fed opines...

all businesses rise and fall except for those
favored by central banks. economies and businesses
rise and fall due to the intentional expnasion
and contraction of credit and money
by the central bank.

Hephasteus's picture

Keep teaching J.S.

Merry (Currently Religious Hijacked Celebratory Time Period) Everyone.

eroc66's picture

Wow!  A beautiful gift of well thought, well spoken and well intentioned truth!  Thank you Zero Hedge.  Blast off time, out of this "Winter of Discontent" on to the next Decade.  Time to stop the Decay.

Scooby Dooby Doo's picture

"showing me how to use Skype" LoL. I know 4 year olds who could achieve this in about 15 seconds...

The H1N1 paranoia that this chick(Ilene) displays in Mayham's posts makes her uniquely qualified for the nut house.

If I provide ZH with an article about a trip that I took with Shaggy to a haunted house would it be publish this weekend?

"Can you tell me a little about your innovative, proprietary system in managing money?"

Can you tell me more about your super awesome, brilliant, innovative, no-risk, sky-rocket profit proprietary system in managing money?

Spam much Marla? Scooby needs to go eat some green shoots so he can barf.

ilene's picture

SDDoo,

I'm so glad you read my article(s) on the H1N1 flu.  However, "paranoia" is not what I was trying to convey.  If you explain why you disagree with anything in particular, I'd be happy to respond to your points.  

Ilene

Anonymous's picture

H1N1 paranoia comes from alexander bullhorn jones of austin texas....:)

Anonymous's picture

so now we know. the bankers run the world and we should go out and buy lots of physical gold and silver. finally, the truth comes out after all these years.....:)

Mac1492's picture

Has anybody ever read or seen the sec documents on a company called eagle tech?

Anonymous's picture

Great interview!

There'e an error with the Worldwide Initiative to Prevent Financial Fraud hyperlink. It should be http://www.endfinancialfraud.org/

Zippyin Annapolis's picture

Arrogance and or/ hubris of Tim Geithner--interview on NPR---wind him up and watch him spill out inane platitudes.

 

Here is the Transcript of the interview with Michelle Norris. Some snips follow ...

NORRIS: You know that businesses are spending again. The administration has been asking the banks to try to free up more money for small business in particular. And I want you to help me understand something because on one hand the administration is telling the bankers that they need to take fewer risks, that they need to deleverage, that they need to have higher capital reserve. And at the same time you're also telling them that they need to lend more money. Those two things don't seem to square.

Sec. GEITHNER: It is very important that we work with Congress to pass legislation that can put in place financial reforms that can prevent the next crisis. So it's pretty important in the future we build a more stable financial system. We constrain risk taking in the future. But right now the real risk we face is that banks are not lending enough and not going to provide the capital businesses need to grow for the economy to strengthen going forward.

NORRIS: So it's okay for them to take risks right now?

Sec. GEITHNER: Absolutely. Right now the real risk is that the pendulum having been too soft and easy on the lending side. Right now the risk is that banks overcorrect or that supervisors overcorrect. And that's something we need to work against, lean against, because, again, the strength in recovery will depend in part on credit being available to businesses across the county.

NORRIS: You know, pardon me for presenting you with all these doomsday scenarios, but as you know, many people are worried about a second wave of systemic crisis, that either because of commercial real estate or the value of the dollar...

Sec. GEITHNER We're not going to have, Michele, a second wave of financial crisis.

NORRIS: You're that confident? You're certain of it.

Sec. GEITHNER: We'll do what is necessary to prevent that. We cannot afford to let the country live again with a risk that we're going to have another series of events like we had last year. That's not something that is acceptable. And we will prevent that. We will do what is necessary to prevent that, and that is completely within our capacity to prevent.

NORRIS: You're saying you're confident that it won't happen. What levers can you press or pull to make sure that does not happen again?

Sec. GEITHNER: As people saw, when you have the will to act, we have substantial ability to prevent that, and we'll do what's necessary. (source:Implode-O-Meter)

Scooby Dooby Doo's picture

Since Tyler is focused on elementary education, another article by Timmy:

HowStuffWorks "How Cooking the Books Works"

http://money.howstuffworks.com/cooking-books.htm

Anonymous's picture

Good commentary but a newsletter writer? Wasn't this the guy pitching structured products to Mom n Pops a mere 1,000 days ago as a retail salesman?

Anonymous's picture

Interesting interview. It confirms a lot of what we already know.

The banking dominance of education/economics to the exclusion of all other approaches (e.g., the Austrian school) is also what has happened in medicine. It is also partialy the reason why our medical system actually kills more patients through medical error than any disease. See, for example the excellent report:
http://tinyurl.com/yd7boc6 .

Note that the AMA was actually set up by John D. Rockefeller in the early 20th century in an effort to broaden out his monopoly in oil and synthetic chemicals derived therefrom and the present exclusive model of allopathic (i.e., patented chemicals/medicines approach to addressing existing disease) medicine to the exclusion of more sane (in many instances) preventive approaches in nutrition/naturopathic/chiropractic, etc. in what has made present practice medicine ten times or more expensive than it has to be. It is also the reason why the absolutely reckless healthcare legislation looks the way it looks after Senate passage.

It is also the reason why we have an autism epidemic (1 in 100 children) caused by mandatory vaccines (in most, though not all instances) and why you can't get a sane person to address this absolutely reckless approach to preventive healthcare. See, for example,
http://vacinfo.org/Viera.htm or the excellent piece by Stephen Lendman from Global Research Canada at http://tinyurl.com/yez6qtc and the excellent interview of Dr. Viera Scheibner at http://tinyurl.com/yc6f9vx .

The monopoly on information and the deliberate attempt to hide/detract from the truth occurs in most parts of our delusional society.

Thank you for posting this great interview which further analogizies some of the more nefarious monopolistic practices in our society.

Segestan's picture

These issues were all spoken of by many : Everyone is a smart critic of the west it seems, when the real problem is the third world having a voice and influence in western policy and industry. Tariffs anyone???

SWRichmond's picture

All people, no matter where in the world we live, are debt slaves to the central banks. If you have strong moral opposition to the concept of slavery, then you should be strongly opposed to the very idea of central banks. We have little power in retaining our wealth, since the banks devalue our wealth at will.

There are many takeaways from this excellent piece, but the above is the inescapable conclusion that anyone who has studied human history through politics and economics cannot avoid reaching.  The ability to control money is the ability to control lives.  No man or group of men is deserving of this kind of power, none are equal to the task, and none are incorruptible.  The central bank model must be destroyed.

SWRichmond's picture

Merry Christmas to you, my friend!

Anonymous's picture

FTFA: "In a sound money system (i.e. money backed by silver or gold, or best yet, one backed by a dual gold and silver standard) there would be no need for central banks. Though this is a complex process that could take 10 pages to explain, I’ll try to explain it in as simple terms as possible."

I would really like someone to do the full 10 page version.

I can almost see how it works in my mind, but there are still flaws in a commodity currency right? There would still exist the ability to manipulate and control. There would still be slavery. Andrew Jackson did great things freeing us from the Second Bank of America, but at that point slavery was still part of the economic model.

Has there been a period of booming economy, commodity standard, no central bank, and no actual slavery? Periods of the original colonization? Aren't emerging markets supposed to grow sort by design? You start a new venture to bring growth in some form.

Happy holiday.

Anonymous's picture

As an American citizen, I am still trying to figure out if Gold Men Sax, is doing its dirty business in order to battle anti-USA forces thus helping me, or, if it working against the survival of the USA and thus against my interests.

Anonymous's picture

good god....you are why america is doomed....

goldman sachs is an agent of the plutocracy to
further the dominion of the uber elite....the
usa government has been the agent for these
oligarchs who control most of the world. the
usa government is a sock puppet of the elite....
its 2000+ military bases in 2/3 of the world's
countries are its empire....

the usa pursues wars of imperial aggression
as the planetary hegemon to subdue it all for
antichrist.

the patriot act, the incessant scare-frauds (
global warming, global cooling, flu, aids,
terrorism) are the tools for subduing the retarded mind...

the usa is purveyor of terror from the assassinations
of the 1960s to the destruction of the wtc in 2001
and all of the "regime changes" accomplished through
corporate and government jackals throughout the
world. read the confessions of an economic hit man
to get a better handle on the thugs who rule the
world...

Manfred's picture

Merry Christman ZHers

From the WSJ

U.S. Uncaps Support for Fannie, Freddie

WASHINGTON -- The U.S. Treasury said it would provide capital as needed to Fannie Mae and Freddie Mac over the next three years, effectively opening its checkbook to the government-controlled companies in a bid to reassure investors in their debt....

http://online.wsj.com/article/SB126168307200704747.html?mod=rss

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from the Washington Post

U.S. promises unlimited financial assistance to Fannie Mae, Freddie Mac

Friday, December 25, 2009

 

The Obama administration pledged Thursday to provide unlimited financial assistance to mortgage giants Fannie Mae and Freddie Mac, an eleventh-hour move that allows the government to exceed the current $400 billion cap on emergency aid without seeking permission from a bailout-weary Congress.

The Christmas Eve announcement by the Treasury Department means that it can continue to run the companies, which were seized last year, as arms of the government for the rest of President Obama's current term.

But even as the administration was making this open-ended financial commitment, Fannie Mae and Freddie Mac disclosed that they had received approval from their federal regulator to pay $42 million in Wall Street-style compensation packages to 12 top executives for 2009.

http://www.washingtonpost.com/wp-dyn/content/article/2009/12/24/AR200912...

Anonymous's picture

Interesting writing but short sighted. Kim almost gets there but fails to connect the dots. He sees the failures in the exisiting monopoly board and properly predicts the coming implosion of the fiat currency world but simply tells you to own gold as the holy grail to protect from this coming failure.

He tries to tell you that the answer is in rewinding the faux central banks. His main failure is seeing that the monopoly board is simply set up to make the world wide non banking segment reflect the structure of the banking segment.

The real reality is that the world has to break down the Kenesian platform of capitilism which will conclude in the adoption of socialism and then economic communisim as Marx predicted. This can only be done by breaking down the monoploies of capital, labor and business and thereby enforcing the anti trust rules that world wide politicians have sold out to in dropping these rules, ie Rubin and citicorp.

JP Morgan, Goldman Sachs and the likes of Microsoft have to be broken up or taxed to force their seperation so as to create real jobs around the world in place of the socialistic stratgedy that we are now following whereby politicians and governments have to tax wealth and transfer it to those who dont posses it in order to maintain a revolution from happening.

The business world and the CEOs of this world are to focused on EPS as the politicians have sold out their responsibility to balance this focus and provide a even playing field.

We must break up the monopolies of union labor, bank capital and anti competitve business combination immediatley in order to undo the excesses of the world central banks that Kim properly identifies but misses the fix for the situation.

Anonymous's picture

Ok....Let's cut to the chase....

What is the core of wealth in developed countries ?

Answer: Small business

Are the revenues to businesses perfectly distributed over time ?

Answer: No

Thus how could wealth be constant ?

Answer: Trading the opportunities

Is "buy and hold" a feasible concept ?

Answer: No

Thus is the ability to trade efficiently perhaps
the solution to preserving wealth ?

Answer: Yes

Jay's picture

Thanks for the article, Tyler. JS Kim is one of the easiest to understand writers on the subject of financial fraud. The link in the article to the "Worldwide Initiative to Permanently End Financial Fraud" is bad. It points to a non-existent favicon icon. The correct link is:

http://www.endfinancialfraud.org/

Anonymous's picture

Excellent post Zero! Thank you. Since the federal reserve has been buying (something like 2T) mortgage backed securities from the big banks and investment banks would it be safe to assume that the fed will be successful in creating inflation so that the prices of that junk will appreciate. Would it be safe to assume that the housing market will appreciate from here then too? I'm here in Phoenix where the housing market is really beat up and we're at probably 20%+ and rising unemployment. How fast can the fed turn deflation into inflation?
Merry Christmas to all and again excellent excellent work zero hedge!

MarketTruth's picture

Gold... BITCHES (??copyright Chumbawumba??)

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Ok, seriously, i have a feeling the above article might not 'wake up' those who still have too much mainstream education and subject themselves to far too much mainstream media. As such, their comments concerning the above article will be in error due to their belief system based on erroneous information. Seek out the truth as it will not be taught in school or broadcast on CNBSBC.

 

The long journey of 1000 miles begins with the first step...

 

the grateful unemployed's picture

If the Fed is so gosh darn powerful why can't they make the banks lend money? Perhaps expanding private credit doesn't fit the Fed's role in the economy? (Maybe the Fed isn't doing it's job, or upholding their mandate?) The Fed is the bank of banks, they don't have a retail business model. However they are empowered to purchase private debt, through QE operations, but to date they have only acquired mortgages which have been processed through secondary offering, and which have a profound effect on the bottom line of other investment banks. It was only after the private sector debt creation outstripped the Fed's capacity to inflate the money supply, that the system was preemptively brought to its knees. Was the economy collapsing, or was the stock of Goldman Sachs in free fall? While the consumers banks were failing, Goldman took their bailout through AIG. To assume the Fed is genuinely concerned, and committed to the Main Street economy, is to ignore their record. That the Fed hides behind the skirts of the retail banking customer, claiming zero interest rates will stop the tide of foreclosure, when we know it also, and more importantly sets up the carry trade bankers love, so they continue to make money without the nuisance of retail customers, or making loans, which they only did in the first place because they could slice and dice, and take the debt off balance sheet and expand their bottom line. Preserving THEIR bottom line appears to be the sworn obligation of the US taxpayer, and the government deficit machine, which until Obama was squandering money in places like Iraq, and various forms of corporate welfare, for corporations who abandoned the American worker, and now are abandoning the American consumer. So the Fed needs a new mandate, or perhaps a return to the old one.

raindoctor's picture

Bankers scammed the whitehouse by peddling "money multiplier theory": give us $1T, we will lend out $10T. However, this theory is bogus. Banks create credit first, then look for reserves. The best course of action would have been: nationalize these banks,  restructure/write off private debt (corporate and household debt). Bankers are not interested in restructuring private debt: they are finding a way to dump it off of tax payers. To restructure such debt via fed and others is gonna take very long time time. Until then, praise yahweh! Keep your powder dry!

Other factor: the education industry supplies the ammo for banking. Ask any kid about his future aspirations: get into HYP, then GS job; later Harvard B school. In this sense, many centers of learning in the states are part of the problem: they supply the intellectual capital for the wealthy!!

 

 

Anonymous's picture

"The free market will dictate what the interest rate should be, but central banks keep altering it and causing boom bust cycles."

The original rational for the Federal Reserve was to tame boom/bust cycles.

faustian bargain's picture

Ironic, ain't it.

The stated rationale was to tame the cycles, but the actual rationale was to control the money supply, rid the world of the gold standard, and influence government policy by funding spending programs via inflation and money printing.

Fish Gone Bad's picture

The only way to solve this problem is to create a new (non-dollar) currency, much like Lincoln did.

Anonymous's picture

"the rights of the people."

As long as idiots like this oppose the scrutiny regime, the scrutiny regime (see West Coast Hotel v. Parrish--this is the power structure he is talking about, although he is too ignorant to know it), is in NO trouble at all, except, of course, from the starving masses.

What rights? If you asked him, he'd come up with a stew of police state-populist-ignorant-psychotic baloney. Just like the Zerohedge folks. If you put him in power, the wreckage would never stop coming.

His problem is that he will not take the time to understand how the system works. Very bad.

Unscarred's picture

This was a great read.  It seems appropriate that I got half way through, went to see Sherlock Holmes, then finished it afterwards.

Gordon_Gekko's picture

Excellent stuff folks! Keep this up. This is exactly what we need to see more of. BTW, I am profoundly indebted to Mr. Kim for being among the first ones to set me on the path to enlightenment via one of his articles. Thank you sir.

Anonymous's picture

The key premise of that interview was about the grass-roots initiative to destroy the CBs via anonymous worm-wood drilling. Dont get mad, get even. How? Get yourself a gift that keeps on giving, a producing asset - start with a cow, metaphorically speaking. Gold? Silver? Sorry, cannot milk that. Cash flow baby... The only thing that can not be confiscated.

And puleeze do not ask for a revolution. You have no idea how destructive this is to the revolutionaries (the people), and enriching to the smart looking for a cheap entry point. Every idiot with guns and bullets should read about Spartacus, the Civil War, the French Revolution, and find out who came out on top in the end.

faustian bargain's picture

Cash flow baby... The only thing that can not be confiscated.

Incorrect, unless your definition of 'cash' is 'real currency', but I get the feeling it's not.

Hustler Elite's picture

Excellent interview! Keep it up ZH

And thank you Mr. Kim for being one of only a handful of investment professionals to speak the unadulterated truth. 

Mark Beck's picture

I like Kim's modern take on defining intrinsic value. It is clear that we no longer live in the Benjamin Graham world. Many people would like to see a return to sound money, myself included. 

Kim, is right about searching for the truth. However, in many instances it is present in the bills that congress passes or reports coming out of the FED, Treasury, CRS and CBO. Now there are some questions about how the Treasury and FED does its accounting, with emphasis on the FED. But, the information that is available is enough to get a good general picture of potential risks to the US economy. 

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Although the banker's exercise control, their strategies are somewhat flawed and stupid. So they can control bailouts to a certain extent pleading systemic risk. But beyond this safety net, IMHO they are not all that smart.

For example, Lehman Brothers, an investment bank dating back to 1844 with Henry Lehman, filed for bankruptcy on September 15, 2008. If you look at how Lehman may have avoided bankruptcy, it is clear that what tanked Lehman was greed. OK so bankers are greedy, so whats new?, you may ask.

You see if Lehman was as connected as people say, then the safety net would have already been in place between Lehman and the FED. In the end Lehman was allowed to fail. Also, in the case of Bear Stearns, bankruptcy was avoided, but the company was acquired at a fire sale price.

Both of these companies were on the street long enough to forge the "bailout" alliance. If such a thing existed. The point being, you do not engage in risky behavior to the extent of bankruptcy, unless you know there will be "arrangements" to bail you out, or provide access to funds to help guide you through bankruptcy.

Okay, so what do you do if you are the CEO of Lehman, presumably a smart investment banker? Willingly put yourself in the bumbling hands of Henry Paulson? No way, not with his history at GS, and panic method for problem solving.

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Also, I would like to say that the residential and commercial real estate market is not done beating up the banks. I won't even mention unsecured debt default for 2010. 

If residential real estate prices trend down in 2010, to better match mean wages, some of the too big to fail, will fail. Just like CIT, where the tax payer lost $2.33B, and then the company was taken over by its remaining creditors, after the prepackaged bad debt was written off. But, CEO Peek is now looking for work. So how smart was he?

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No, there is a whole lot of dumb in the banking business. In some instances they don't even have a plan to save their own companies, let alone a grand conspiracy.

Now, the FED does what it can to protect its member banks, although the support for the GSEs are easily 2x the bailout. But, even the FED has its limit on stupid for the big banks. The reality is, the FED has enough internal stupid it has to deal with (I tend to lump the FED and Treasury actions together, because the two are codependent).

For example, under estimating the amount of de-leveraged real estate debt loss funneled through the GSEs, and subsequently having Treasury raise their caps indefinitely, because the FED program will end in April, 2010. No the banking mental picture is not one of Chess, it is PinBall. It is reactionary. There must be panic before any steps are taken. This is a bad way to run your business. Just go here to find out why;

http://www.lehman.com/

Mark Beck

Anonymous's picture

A perfect example of government collusion with the banks is slowly being revealed in the case of JPMorgan's takeover of WaMu via the FDIC. This is an unbelievable story (the latest chapter just published by the Puget Sound Business Journal should be readable by all next week on Portfolio.com)...
http://seattle.bizjournals.com/seattle/stories/2009/12/28/story1.html

The Business Journal's extensive investigation has turned up some incredible details & it appears Jamie Dimon and Shiela Bear are going to have serious egg on their faces soon for collusion and fraud...

"The documents also appear to show that regulators were working with JPMorgan to structure the deal well before the bank was seized."

JR's picture

THANKS!! for the update! and the link. Everything's believable now. I posted this on ZH December 22; you might be interested if you haven’t already read it elsewhere.

Quotes from Mike StathisThe Biggest Banking Heist in World History: Washington Mutual on October 1, 2009

…Last year, on October 7th, I sent the SEC a (rushed) formal complaint highlighting my concerns regarding insider trading and other illegal activities associated with WaMu…

…In this complaint, I discussed how the banking cartel took WaMu down illegally and (most likely) conspired via naked short sales, knowing that one of the members of this cartel would be able to buy up their assets at pennies on the dollar.  

As it turned out, the WaMu asset “giveaway” for less than $2 billion to JP Morgan represented the second banking heist JP Morgan negotiated from the FDIC in six months. Strangely, these also happened to be the top two banking heists ever.

…As you might recall, I was the first person in the world (as far as I know) to report on the forced bailout (disguised as a buyout) of Merrill Lynch by Bank of America. My article “Bailouts Disguised as Buyouts” was released within days of the September 2008 deal announcement, just a couple of weeks prior to the WaMu seizure. http://www.avaresearch.com/article_details-86.html

…Remember, several days prior to the seizure of WaMu, the OTS stated that after their in-depth review, the thrift had no need to raise further capital at least throughout 2008. In large part this was due to the $7 billion loan made by Texas Pacific Group in the spring.

…So I wrote up a brief summary of my findings in a complaint to the SEC which included what I believed to be clear signs of massive insider trading. When I looked at the chart, it was obvious insider trading had occurred in a massive scale.  But I knew there was much more to this. I knew it was even larger than the Bear Stearns heist.

After all, the initial naked short ban list in July 2008 left out the three financial firms in most danger of collapse at the time – Washington Mutual (WM), Wachovia (WB), and E-Trade Financial (ETFC).

For the end of the story, go to:

http://www.marketoracle.co.uk/Article13894.html

Mike Stathis is the Managing Principal of Apex Venture Advisors, a business and investment intelligence firm serving the needs of venture firms, corporations and hedge funds on a variety of projects. Mike's work in the private markets includes valuation analysis, deal structuring, and business strategy.

anarkst's picture

"He [JS Kim] recently authored the timely book, “Confessions of a Wall Street Insider, a Zen approach to making a fortune from the coming global economic crisis.”

For his clients sake, I hope he knows a hell of a lot more about Finance then he does about Zen.

 

"Ilene: Why do you believe there’s no free market?"

Hey Ilene, I hate to break this to you, especially on Christmas Day, but there's no Santa Claus either. 

Anonymous's picture

Question (and maybe I missed something):

When he said, "The process of taking the clients’ money and making loans that are gambles (heads I win, tails the taxpayer pays) has a history that goes back to the Great Depression."

What exactly was he referring to, that went on in the 1920's and/or 1930's? Anyone know?