May 24, 2012

Lindsey Williams explained on May 16 that his insider source told him in early May to watch for the first crack in the derivatives market. This occurred with the JP Morgan derivatives loss, which was announced on May 10. They claimed it was just $2+ billion, then later revised to about $3 billion.

The Wall Street Journal said it was closer to $8 billion. Others said $10-12 billion, and still others said it was $18-20 billion and that over the next year would balloon to $100 billion.

Williams also explained that the final sign of economic collapse would be a rise in interest rates. In other words, when you see the Federal Reserve forced to raise interest rates from its current ZERO rate, it will signal the beginning of the end.

When he said that, neither he nor I understood the implications of this rise in interest rates, or how it could cause such a collapse. But Jim Willie of the Golden Jackass may have provided the answer.

Jim Willie, writes this:

USFED STUCK AT 0% FOREVER

Something happened in March 2012. It is not entirely clear. Perhaps it was simply the stupidity of the Bernanke Fed in declaring the need to embark on an Exit Strategy at some point soon. Once more, Professor Bernanke is a poor economist, unaware that he is stuck in the 0% corner forever. That bears repeating. THE USFED IS STUCK WITH AN OFFICIAL ZERO PERCENT RATE FOREVER, NEVER TO RISE. It can never rise due to the extreme increase in borrowing costs that would hit the USGovt deficit tally. The amount would equal the endless war costs. However, the USFed is stuck at 0% forever, due also to a very different hidden market force. Any rise, even a moderate rise, in the USTBond yield would result in multi-$trillion losses from the derivatives hidden at work.The vast Interest Rate Swap would deliver massive blows like a machete across the entire financial sector. Every big US bank involved in heavy IRSwap [Interest Rate Swap] enforcement as bond market intervention would suffer losses in the multiple $trillions. That process is starting to be seen. The Jackass has warned about the potential losses for three years, explaining the permanent corner the USFed has found itself, a result of its own failure. The USFed talked about an Exit Strategy in 2009, and the Jackass correctly rejected the notion as lunatic wishful thinking. The USFed backed off, and worse, assured the banking sector of zero percent policy almost forever. You see, the big US banks are earning easy money in the USTreasury carry trade, borrowing short and investing long. If the USFed were to hike rates, they would remove the US bank income stream, since they sure are not earning it the old fashioned way, with IPOs and debt offerings. They are not so much investment banks anymore, just plain speculative houses. They love their High Frequency Trades in the stock market too. 

Much of what Willie says is over my head, as he assumes we know all the financial jargon. I have studied his articles and those of other economists for many years now, so I am starting to understand some of these things. There is no way to learn this stuff except by reading things that are over our heads. Even if we don't understand everything we read, we do pick up a certain percentage of it, and as time passes, we learn more and more.

The point is that if we put together the warning from Lindsey Williams and the technical knowledge of Jim Willie, it is not hard to see what could be a real possibility shortly. Willie says that a rise in interest rates would be destroy the system, and so he does not think Bernanke will actually do this. He thinks we are stuck at 0% for eternity, because any rise will destroy the financial system.

Williams says that he will indeed do this, and this will destroy the financial system as we know it.

So it boils down to one simple factor for an average person to watch. Watch how the Fed treats the interest rate. That simplifies things considerably for those of us who are unschooled in the fine art of financial matters.

The best way to prepare for this is to have assets other than dollars or a bank account denominated in dollars. Land, silver, gold, food, dinars, and other assets will retain their value, whereas the value of the dollar will collapse at some point. Right now, the dollar is artificially strong, because investors prefer dollars to euros. It is the "least worst" currency, as they say. But in the long run, the dollar will not survive the currency collapses in the near future.

Of course, you will have to keep enough cash flow in dollars to use for groceries and other expenses in daily life. Do not get rid of all your dollars. It's just that if you have surplus dollars stuck away in a bank account, you would not lose it as such, but it would lose most of its purchasing power if its dollar value collapsed. In the end, those who know nothing about financial matters will be the biggest losers, so educate yourself as best you can, pray for guidance, and act accordingly.