Bill Buckler: "No Freedom - No Money - No Markets"

Tyler Durden's picture

From Bill Buckler, author of The Privateer

No Freedom - No Money - No Markets

The Global Financial Crisis (GFC) became an unmistakable reality in July 2007 when Bear Stearns admitted that two of its sub prime hedge funds had lost nearly all of their value because of the rapid decline in the market for sub prime mortgages. At the end of June 2007, Treasury Secretary Paulson had this to say about the problem: “We have had a major housing correction in this country. I do believe we are at or near the bottom.” When asked specifically about Bear Stearns, he went on to say that any losses had been “largely contained” and anyway, “It doesn’t pose a risk to the economy overall.”

When Bear Stearns hit the wall, there was no talk of a federal government bailout because of what Mr Paulson had stated in public. The other US banks refused to lend because Bear Stearns had refused to participate in the bailout of LTCM in 1998. Bear Stearns was left with two options. It could sell the “assets” in the hedge funds or it could bail them out with its own capital. For the one and only time in the GFC so far, a money centre bank tried to sell Collateralised Debt Obligations (CDOs) on an actual market. That attempt lasted hours. When the auction was closed, the bids were coming in at 30 percent of the face value of the paper. The jig was up, the valuation of the collateral underpinning the entire banking system was revealed as fictitious. Not much more than a year later, that collateral was transferred from the US banking SYSTEM to the Fed, which has maintained its fictitious “value” ever since. Europe dragged its feet, but at the end of 2011 it did the same thing in regard to its own banks.

Ever since that episode of mid 2007, the “market” for pretty well every kind of debt-based financial “asset” there is - up to and including the sovereign debt of governments - has been progressively falsified by governments and their “independent” central banks. Mr Bernanke has now been quoted as describing this procedure as “a work in progress”. It is indeed, and by this time its true nature should be clear to almost everyone. But still Mr Bernanke and all his counterparts in the seats of power all over the world bleat about a “recovery” which is just over an ever receding horizon. What the world needs to “recover” from is the increasingly desperate machinations of governments desperate to retain their power. What it needs to recover is freedom - money - and markets.