Oct 072008
 

A true nature of a person or nation comes to the fore, when it comes under extreme duress. A bankrupt person, corporation or a nation tries very hard to project itself as a person of extra ordinary means, contrary to facts, figures and market rumors, and go on shopping spree

This is why billions of dollars are being paid by one bankrupt bank or corporation to the other in take over process lasting only a few hours. No due diligence, no submission of bid to the board, No minority interest, no news out – just black out.

Today’s scenario reflects “blind game”. No one knows about self or other party. The suitor does not know what he has, and the target does not know what it is worth. The vultures circling on the prey, ask for $700 billions with no questions asked. With worsening scenario being played out every day, no one in right mind will ever buy US dollar. Look at the box under Dollar Up and consider the following:


The President of United States, Senators, and Congressmen are stunned at the attack of unknown origin and extreme brutality. This is an act of extortion of $700 billions. Call it “Blackmail of Greenback” if you like.
  • Fannie/Freddie Mae got $200 Bln,
  • AIG $85 Bln,
  • JP Morgan got $59 billions ($30 Bln for taking over Bear Sterns and $29 Bln given to Bear Stearns itself),
  • Washington Mutual Bank (WaMu) was given $230 Bln in last 3 months, all zero now,
  • $673 Blns flooded into the market on Dow’s fateful day losing 778 points, and
  • Billions of others not yet declared but given to host of banks, brokers and investment banks.
  • $700 billions are now planned to be spent to buy the rotten and Zero value assets of the bankrupt banks.
  • Bernanke opened up the empty treasury and also opened up largest currency printing press in the world, working 247365 or 24 x 7 x 365 (24 hours a day, 7 days a week and all 365 days a year) Never before in the history of United States, the dollar was printed with such intensity and also disappearing with the speed of hurricane category 6 into a giant black hole

No foreigner in right frame of his mind would at this point of time buy US dollar against his own currency, be it Euro, Pounds, Yen, Yuan, Aussie Dollar or any damn local currency.

With Dow falling, bonds collapsing, properties dumping, interbank dealing sine die, who is buying the US dollar? Why Euro, the most suitable alternative currency for US dollar is falling, when it should have gone to almost magic 2.00 figure? If any foreigner wants to buy stocks or bonds or $ class assets, he has to sell his own currency and buy $. Then only $ could go up. But when the foreigners are not buying $, in fact, they are dumping dollar assets, who is buying this bankrupt dollar in that case?


About 10 years ago, whenever Dow rose, dollar also used to rise, because foreigners have to buy $ first before buying stocks or bonds. For the last 5 years, especially in last 3 years, dollar is falling while the Dow and Bond rising. This means that there is no demand for $ from overseas, it is only from within. The dollar so printed by FED is being used to manage (or manipulate) various sensitive commodities like Oil and other foreign currencies like Euro.


Who is Buying Dollars, Why and How?

Of course, the Americans by themselves. Not the ordinary resident Americans. They are just naïve and innocent law abiding citizens. The crooks are in the corporate world. Some US institutions, in US and newly floated off shore corporate entities, under the ostensible authority from US administration, are now buying US$ index and shorting Oil (Light Sweet grade) heavily on NYMEX. They appear to have been commissioned to search and destroy the vicious circle of oil price rise which is the major cause of inflation.


This is similar to the practice being adopted during the days of Clinton Administration when the Rupert Rubin was the Treasury Secretary. He was a proponent of strong dollar policy, and during his administration, the Asian crisis unfolded, Enron was created and busted, LTCM with over $1 trillions of exposure to the market was bankrupted. His policies and practice were known as “Rubinomics”. He engineered the rescue package for LTCM with the help of 14 local and foreign banks and brokers, raising $3.6 billion initially to $26 Billions progressively according to market rumors.


After 12 months, this group was disbanded saying that the problem was resolved. Even the best fund manager in the world, can not generate the return of $ 1 trillions or $1000 billions with meager $26 billions of fresh capital, that is, whopping 3846% return annualized. Show me a single fund manager in the world, including George Soros and Julian Robertson (now dead). The losses of $ 1 trillion are still in the system under various names and disguises.


However, both future contracts are subject to physical delivery. So on settlement day, these contracts are reversed by covering the short position in oil, and liquidating the long position in $. This is why during September settlement, there was vicious move to cover the “oil shorts” against $ index, with the result that oil prices spiked up by over $25 in a single day, and dollar slumped against the major constituent currencies like Euro. The contracts were rolled over to October/November by selling the Oil futures again, and buying the $ index. Euro weakened on the following day of its steep rise due to such roll over, and oil fell from $130 to $106 again in just under 2 days.

Another ENRON in the making, this time 20 times larger…
In short, Rubinomics is back. The banks used in these cases appear to be same old players who were and are close to the US administration – CITI, JPMC and BOA. The brokers are also same as before, Goldman Sachs except Salomon Brothers this time which has been bankrupted before in LTCM saga.


The similar situation will develop again with OPEC starting to control the spot market by curtailing production. They already reduced by 500,000 barrels per day. At least that part can not be controlled by the US institutions.


Both Rupert Rubin, former Treasury Secretary and Hank (Henry) Paulson, present Treasury Secretary, who just got the blanket authority to spend $ 700 billions whenever and wherever he wants with no questions asked or for any sort of accountability, are from the only surviving Broker – Goldman Sachs. It is obvious that part of this loot will go to his former colleague to cause the collapse of Oil prices and Euro, British Pounds, Commodity currencies like Aussie dollar, South African Rand, Canadian dollars and Russian ruble. This strategy was employed before while engineering Asian Monetary Crisis.


Myth & Reality of Oil Prices…

When the giant economy in corporate world or Central Banks (Fed in USA) or Treasury department, became very creative (manipulative in layman’s terms) in accounting, and they in the name of “financial engineering” go on inventing methods or products and use any means.

It may be noted that –

  • Oil prices started falling from July onwards. US$ too started climbing from July Onwards
  • The oil prices fall and dollar climbs (euro, GBP, Yen, etc falls) in beginning of the month
  • The position reverses on settlement day due to physical settlement requirements
  • This is why there was sharpest rise in Oil by $25 in a day, and $ fall steeply same way
  • After roll over into November settlement, the oil prices fell again and US$ rose
  • Many honest people believe that rise in oil prices Vs dollar was due to rising demand of oil from emerging economies like China and India. They also believed that recent fall in oil prices were due to fears of recession and demand destruction. These are naïve and puritan people who believe that the world is as pure as gold
  • In reality, we are living in a murky world. No real demand or supply – just paper trading of derivatives and futures – that determine the prices. The entire dollar and oil market is dominated by powerful nations in the Middle East and United States.
  • Off shore entities may have been used in more than 50% of cases to avoid any scrutiny. The funding of $ index is arranged by 3 of top 5 banks in United States

In my opinion, there was no reason for oil prices to go to $145 due to excess demand from China and India. Their consumption is a tiny part of what United States consumes. The prices were going up due to some nations’ collective efforts to punish the United States for its crime in Islamic world. Similarly, the recent fall in Oil prices and rise of dollar was due to the game of poker being played by United States.

 

Most of the Economists only know theories. They never had enough education on the front line of the markets. There is a saying that “Everything is fair in Love and War”. In today’s world, we are in the middle of intense financial war of unimaginable proportion. So do not ask any questions.

 

This is why Henry Paulson got the diplomatic immunity for spending $700 billions. It is therefore very likely that a man worth $700 millions, armed with $700 billions, with diplomatic immunity, and his dear firm Goldman Sachs at his service, the world may be facing lot of unexplainable conduct in the financial market like UFO in physical science. Expect huge manipulations.

Only yesterday, the strongman Arnold Schwarzenegger, the Governor of California, having found his budget delayed for several days, raised a demand of $7 billions before Paulson who has $700 billions in his kitty now.

He will ask – why would not you give me $7 billions for the worthy cause of managing my sunny state, when you are trying to pump in 100 times more into the bankrupt banks and brokers? If you can print $700 billions for them, why not print $300 billions more for the states for much desirable cause?


Kalidas,
Hong Kong
6-Oct-2008

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