'Biggest world bankruptcy, yet to come'
Sun Dec 11, 2011 6:1PM
Interview with Greg Hunter of USAWatchdog.com from North Carolina
The biggest economic collapse and bankruptcy in the world would be the loss of the world's reserve currency for the United States, an American financial analyst tells Press TV.
Press TV has interviewed Greg Hunter of USAWatchdog.com from North Carolina.
What follows is a rough transcription of the interview:
Press TV: Greg Hunter, the Fed has once again saved the world; it's bailing out Europe, your thoughts.
Hunter: Well, I think the [European Central Bank] ECB played chicken with the fed and they were flubbing around with what they were trying to do with this [European Financial Stability Facility] ESFF fund and they had enough money and they were going to get enough money and they couldn't get enough money.
And finally the Fed stepped in with of course 5 other central banks including the ECB and said we're going to start printing money; we are going to start with dollar swaps. Of course, the stock market goes shooting up: Yey the bankers are saved.
This is a banker savior thing. This is not good for the common guy. If you're in the stock market, great. You're making the inflation play.
But if you're in the real market, the world market, you're buying fuel and food and you're struggling- this is death to you. This is terrible to you because you can mark this day as the day they turned the turbochargers on for inflation.
Press TV: Alright just for the sake of the international audience that watches the show can you just explain dollar swaps?
Hunter: Basically we give them the dollars and they give us Euros. We are the world reserve currency so we can produce massive amounts of currency.
So far nobody is running into the US treasury, we can get away with it. I think we're sure what this exchange will produce is inflation because we are basically producing more currency to bailout European banks.
And remember there is- 8 of the 21 US treasury dealers are European banks in Great Britain and Europe so part of this- this play is all about the bankers. This is all about bailing out the guys that caused the world global financial meltdown.
They're not only being shielded from prosecution, they're being bailed out and there'll be some fat bonuses because of this. Because look at the stock market, Look at their stocks.
Press TV: All right Greg Hunter, you mentioned inflation but it's not really inflation because inflation, or that term as it's generally understood, means a rise in both income and prices in a self feeding loop, an inflationary loop of rising wages, rising prices.
But clearly wages are stagnant to deteriorating so it's not inflation really; it's something else; it's asset price inflation.
Hunter: Well, yes, it's- listen what [American economist] Milton Friedman said, always and everywhere- inflation is a monetary phenomenon, it's always and everywhere.
He didn't say it was a labor phenomenon. Of course you want to know about peace price for that and you look at the price of oil…
Press TV: Ok, but let me cut in for a second because the mandate of the Fed is full employment and price stability.
So the fact that the unemployment number keeps going up no matter how much money they through at the system means that there is something very broken about the system, the Central Banking system.
They keep throwing money at a broken system and wages are collapsing. People are unemployed and yet the price of food and energy keeps going higher.
Correct? So we can't really call it classic inflation. It's something else. It's a kind of a reword of criminality. It's a criminal inflation- I guess you could call it.
Hunter: [laughs] Yes, a criminal inflation, they have a dual mandate. They don't really care about people, employed or unemployed. Politically they care.
They care for their power structures that people don't find out that in the last wake of the last crisis 16 trillion dollars, which a lot of people don't really know.
A lot of the mainstream media doesn't even bring that up. It's like, uh, 16 trillion to save the world. They saved the world. They saved the bankers. That's who they saved first and foremost and that's what all these actions really are.
There is going to be price increases; I say inflation, inflation in energy, in food. There will be deflation because interest rates rise. There will be deflation in everything tax to loans, mortgages, things like that.
Technically, in housing, we haven't seen the bottom in housing by a long shot. I was reading one report where they think the bottom won't happen until 2020 here in the US.
That is about right, because as rates go up, prices will have to go down, cause you know, in America we live in times that 'What are the payments man?' that's the question everybody has 'What are the payments?'
Press TV: We've been down this path before Greg Hunter, you mentioned the deflation in house prices versus the inflation in money supply.
And there is this back and forth that's going on between the two, every time there is an event like we're discussing here, a massive injection of cash; it sounds good; it's a sugar high for a few days.
And then on the other side of this we hear that the banks are actually sitting on much more debt than they told us last week.
In fact, the banking system or the shallow banking system might have another ten or twenty trillion in bad debts they just found, they just discovered and they were back to a deflationary spiral again and this goes ad infinitum between pillar and post.
Does there seem to be any event that is going to capture or to rectify this trend because if interest rates are near zero as they are now the continuation of flooding the system with more debt via debt-based currency only creates more debt so in fact this will never end. Will it?
Hunter: Ultimately, it will end in some sort of currency crisis because what they're doing with their dollars is they're loaning more money; they're loaning more money to Greece; they're loaning more money to Italy; they're buying bonds.
It's creating more debt. They're really not paying anything off. I don't think the world, the Central bankers ever intended to pay anything off.
I think that they thought that they could keep doing this forever but we know, you've heard of peak oil. Well, there is also peak debt and I think we're running up against peak debt. Ultimately, I think what we'll have is a pretty big currency crisis, a collapse.
And ultimately, I think the biggest collapse; the biggest bankruptcy in the world would be the loss of world reserve currency for the United States of America. When that will happen- I don't know.
Right now with the European situation and the way it was before, before this big money debt, the way it was running into the dollar and running into treasury, the rates were going down and then now we have all this money debt so I'm sure people will be running back into the Euro in this back and forth sea.
But the real problem is the debt and then beyond that the fraudulent debt, I mean correct the default swaps, you know, insurance, I mean the United States banks are exposed to this in a big way; some say more than a trillion dollars just with a few big US banks.
And it's a market where they wrote insurance, but they don't have anything in reserve. I don't understand how that's even a market, How that's an insurance market but there is no money there; things collapse.
Press TV: Let me follow up on this credit default swap question. The bailout flaws and the European zone collapses, as we know it well that this just another ion a line of failed attempts to bailout the banks.
Now what happens to the 85 billion in credit default swaps underwritten by US banks as a nominal value, not the total value.
Just in the first eight months of this year, presumably the mythical US tax payer, most of whom are unemployed and on food stamps will bailout these banks that are on hope for these credit default swaps, Goldman [Sachs], JPMorgan, etc.
What happens to the credit default swaps when this blows up as it most surely will?
Hunter: I've been saying this for a long time, ultimately I think what they'll have to do is they'll have to put tons of money, just to pick the winners, because they can't bailout every single bank in America.
Wendy Stewart, banking analyst said the same thing; she said that they can't bailout every bank; they can't bailout everyone; there is going to be bank failures and they're just buying time so they can figure out who's not a layman. Who can they let go under?
Obviously, they could let [bankrupt leading cash and derivatives broker-dealer] MF Global go under; you don't think the Fed could have bailed out MF Global if it really wanted to?
They don't care about segregated accounts. They don't care about a billion dollars down the tube. They care about saving the banking system, as they know it. That's what they care about. But they don't care- I know that they have a dual mandate- but they don't care about unemployment.
They care- all this is about is saving their bankers. This is a what it's about- not saving the country. This play that we had recently was not about saving sovereign nations.
This was about saving the bankers who were exposed to sour sovereign debt and that's another fraud. That's what's wrong with the system. The fraud in the system and here is the biggest fraud out there with the banks.
The amount of debt is so big they had to change the accounting rules in the US, where [Financial Accounting Standards Board] FASB in 2009 you can value your assets for wherever you think you can get for them in the future. That's mortgage backed securities and actual real estate.
Flip over to the other side of the Atlantic over in the euro zone and what do they pass along to do- Oh, if you have sovereign debt you can count that at par value. Whatever you think you can get for it in the future.
Now these people are holding for example Greek bonds on their debt, what on par? They're holding Italian bonds on their debt, at par? They're holding Spanish bonds on their debt, at par? They think they are all going to get paid off and then the leverage.
We know that MF Global had 40 to 1 leverage, had what 11 billion dollars out, 440 billion in leverage, multiply that overseas where you are in the euro zone.
You think the leverage is in the neighborhood of 40 to 1? Yeah, I think so, I think so and that's what the Fed is really afraid of- the massive amount, the snowballing effect this massive amount of leverage, where you can have big boom, boom, boom. You can have big banks going down right and left.
Press TV: Right, you mentioned [American banker, 74th United States Secretary of the Treasury] Hank Paulsen , he appears to be the biggest fraudster of them all.
And we now know that he disclosed inside information about the forthcoming nationalization Fanny made to his former Goldman Sachs coworkers weeks before that event and they all traded him that information and made huge gains stealing essentially from the public domain. Your thoughts.
Hunter: The reason why we need all these bailouts, the reason why you have to have all this money printing is because the debt instruments they use and the information they use was insider trading and debt instruments. They had no business getting a triple A rating.
Mortgage backed securities, credit default swaps, interest rate swaps; all this stuff doesn't even have a public transparent market. So, what makes a good interest rate swap- whatever you say it is. What makes a good mortgage backed security? Whatever Standard and Poors say it is.
In many cases when it comes to mortgage backed securities which is the first stake in the heart for the banks around the globe was that they were rating debt triple A.
Well we know that they had this signing right which was really nothing but creation of fraudulent documents so US banks could go into a corps in certain states and foreclosed on homes.
So if they had millions of documents, if they were forging then how did they rate that debt. What did they use to rate that debt and if they created security, you think you pay for your house over 30 years, you do not.
When you sign a promissory note just like a Federal Reserve note, a financial instrument that cannot be copied or duplicated, when you sign a promissory note that's your payment. So when they securitize this debt and if they didn't have the paperwork how did they create the security?
Press TV: So Fanny Mae collapsed due to systemic fraud in the banking system, in America. No arrests of major bankers were made but one of the whistleblowers just ended up dead so where do we go from here?
Hunter: Well, they- you know of course detectives say they weren't sure whether it was a homicide, they're- so far they're ruling it out but to your point- somebody ended up dead and that was a whistleblower and she signed what out of 6, 7 documents, just her alone, that were basically fraudulent documents.
We have a name over here Linda Green, her name has been signed at 20 different ways in thousands of documents around the country and there are register of deeds here in the US so you could track your property.
A register of deeds in some cities for example Greenboro where I live, they won't accept any documents that have that name on it. But see that's- the real problem with the system is the massive amounts of fraud.
And even Ellen Green's been in 2010 was talking that you got to trust your counter parties and if you don't exist in world collapse and indeed it did you can't bunch in with fraud. We should take in that right now what happened and what should have happened, what should have happened in the very beginning as we projected all the deposers.
In the US alone you are going to project everybody for 6 trillion. I wrote this in 2009, it was called default option, and at the time, people were like- what 6 trillion dollars? What do we find out in the wake of financial crisis 2008.
According to a government accountability report the Fed pumped out 16 trillion. Now we can't- aren't at the Fed anymore, so we have no idea how big there dollar swaps are? What money they're giving away? What loans they're making at a quarter of a percent or zero percent?
We have no idea what they're doing and how much they're doing. We know what they told us was, you know, 2 or 3 trillion dollars. What they end up doing was 16 trillion.
This is according to Nassim Taleb, the writer of [an article in the Bloomberg Businessweek] “The Black Swan”, according to many other people this financial calamity that is here and getting worse is, is worse than 2008. So what are they goimg to do this time?
Ultimately, it all comes down to the system that is broken. We keep bumping liquidity into it when we ought to have some receivership. The CEOs ought to be fired. They should be stripped of any kind of compensation.
We should take the banks; keep the employees. Keep the banks but get rid of all the echelon that caused this problem. The talent that they have to retain with bonuses. This is the talent that ripped the world economy- that talent? So we should also be prosecuting people.
Here in the US, according to William Black, who is a professor of economics and a professor of law and also a banking regulator who was at the forefront of the savings and loan crisis [of the 1980s and 1990s, commonly dubbed the S&L crisis] cleaning it up and back in the savings and loan crisis there were a thousand financial elites successfully prosecuted, more than a thousand.
The savings and loan crisis is 70 times smaller. Now you think about that: the savings and loan crisis, this crisis is 70 times bigger than the S&L crisis and not one- zero- not a single financial elite has been prosecuted.
Press TV: The lesson from the S&L crisis was that we need to change the law to protect the bankers so when we do the same crimes again none of them will go to jail. So in that respect they were very successful.
Now talking about house prices, you mentioned the deflation going on there; the Case-Shiller index of house prices has just made a new post bubble low.
Do you think there is ever going to be a recovery in the housing market if these fraudsters are allowed to continue roaming the street and perpetrating there fraud, will housing ever recover if there is never any true price discovery and if the system is run by fraudsters?
Hunter: Think about what you just said, the Case-Shiller most recently reported has hit another post crisis level. This is with the Fed pushing down interest rates- and incidentally the thing that happened with the Fed Reserve, you know popping up these dollar swaps, is to hold interest rates down.
It's one of the functions of it. Add liquidity to the banks, hold interest rates down. Think about what's going on with a thirty year mortgage. You can get mortgage for around 4 percent, plus or minus.
And we're heading [towards] post crisis lows, new post crisis lows. What do you suppose is going to happen, when ultimately the Fed will have to stop holding interest rates down and they let interest rates go to 6 or 7 percent.
What's going to happen when they go from 4 percent to 7 percent? Well the question asked here in America is what are the payments? And so the payments are going to have to go down and the prices are going to have to down so people can make the payments as interest rates rise.
I don't see how housing crisis recovers for a long time until the Fed and the government get out of the way and stop with the 8000 dollar tax.
Incidentally if you took the 8000 dollar tax credit in 2009 and 2010, you lost your 8000 dollars. On average you had more price depreciation than the 8000 dollars they gave you. And so that was the engine here in America. We stripped off all our manufacturing.
We decided to manufacture single-family homes and you know self-plumping supplies and copper and windows and paint. That was our manufacturing base, building houses. They went from like, you know, a couple of million a year down to what bout on bouncing to round 500,000.
Anyway, do I think we'll ever recover? Yes, the fastest way to let it recover is to get the government suppressing interest rates and stop coming up with buyer programs and really let the market find its own level.
If they did, the economy would do better. But this is more of the fraudulent government intervention to save their buddies, to save the top of the echelon while the bottom of the echelon will feel the effects of inflation and some deflation in housing and some defaults in for example American airlines.
Just recently: that's it; hoofs up; they are laying down- what? 15, 16 million people and probably more. 15 thousand people or more? They're laying off tons of people.
Press TV: Let me ask you- your theory here, your premise that eventually rates have to go up and this causes more stress in the system but over here in Europe in Italy and in Greece, the democratically elected governments have been replaced with unelected bureaucrats, technocrats, bankers and Europe now is very much in the throws of an IMF-led coup and this is spreading around the world.
You see the IMF and these other outside of any sovereign state powers coming together, creating super natural international banking institutions and working with the G20 that gets together every quarter or so and they are starting to beef up, Greg Hunter.
They are starting to beef up use of this special drawing right, which is the currency of the IMF, just like the dollar is the currency of the Fed and the Euro is the currency of the ECB.
So what prevents another chapter in this tragedy of simply rolling up all this horrible debt into- let's call it- 100 trillion with a number that was proposed at Davos 2 years ago?
A new 100 trillion dollar global credit facility, financed by STR, special drawing rights at zero percent and just loading the world up with another tenfold increase in debt at close to zero percentage just to keep the game going another few years. What stops that from happening?
Hunter: You know what, not a thing. And if that's the case all you're talking about is shuffling the chairs on the Titanic. Because what you're doing is you are going from one fiat currency which is the reserve currency of the US dollar to a group fiat of currencies, a basket of currencies and ultimately I think people will lose faith in the system.
And so ultimately it comes down to- and this is what came up in the G20- gold. The G20 asked Germany to- hey, listen you're the number two holder of gold in the world; you have, what 3400 tons, sadly enough most of it is held- a lot of it is held in the US and why don't we back this bailout facility with your gold.
Of course, Germany went: No and so then later on they had a bond auction that would last a little while ago and it failed. The Italian bond auction did well, but the German bond auction one of the strongest countries in the EU didn't do so well and then nobody hoped yeah, maybe they'll move a little bit.
So I think what you're saying is that the [Federal Debt Relief System] FDRS could replace the US dollar as the world reserve currency. The US dollar is really part of the FDRS but it's still one fiat currency or a group of fiat currencies. It kicks the can down the road.
Ultimately, people want to be paid in something that retains its value. Money has to retain value to be more than just a transaction currency. It has to be something that will actually stand the test of time and the only thing that will…
Press TV: Yeah, but at the same time people are being deprived of their political rights so yeah, people want to be paid with something real but by the way all manner of redress, all civil rights have been removed.
And you're basically on a farm and its back to feudalism and so a lot of people would like a lot of things but there is no way that they're going to exercise their rights because they've all been stripped because of the so-called crisis that has been manufactured.
VG/JR
