Update On Credit Default Swaps And The Great Wall Street Scam
It appears the European Union is attempting to ban CDS contracts. Let's dig into our past and pull up some text from our lengthy post titled "The Great Scam" - a lengthy look at the fraud that is Wall Street and specifically derivatives and other sources of income derived from asymmetric access to information. ie, Lack of transparency. Is anyone really surprised Goldman Sachs entered into a CDS contract with Greece where profits would be derived from the collapse of the country? The only thing that is surprising is that the American government is continuing to allow this fraud to exist. I have seen some ad hominen attacks on the EU for seeking to ban these instruments. You must be kidding. This is the morally bankrupt status quo trying to portray this type of legalized extortion as some type of free market issue or trade dispute by banning predatory financial products. What in God's name do these instruments do to benefit a democratic society? What new capital do they create? None. It's simply a way to prey on the misery of taxpayers often using taxpayer money. I think I would classify that as theft, if not legally then morally.
From The Great Scam, another self-fulfilling prophecy of the future. That would be Greece today:
I saw Jason Trennert comment one time on the ability to create a "run" on a company using CDS contracts. (Applicable to creating a run on Greece in this instance.) He said it was akin to taking out a life insurance policy on someone and then killing them to collect the policy. And, doing it legally. Unfriendly governments attempting to destabilize the U.S. or hedge funds raiding a targeted firm or Wall Street firms attempting to destabilize a competitor could possibly attempt to manipulate the CDS market. It is almost a surety that illegal activity in the CDS market has led to the demise or financial instability of at least one firm. But we don't know because no one knows anything about this market. It is completely deregulated. There were even rumors some of the recent panics created by the CDS market came from overseas locations friendly to terrorists. Legal shorting methods cannot cause insolvency. Illegal shorting coupled with manipulation of the CDS market does have the potential to literally destroy a firm that might otherwise survive. So, what does the SEC do? They leave the CDS market unregulated and ban legal short selling. I wonder what role lobbying played in these decisions.
The CDS market is just a sample of the concerted efforts at removing transparency from financial markets. Lack of transparency extends into nearly every financial market and has fueled remarkable and completely unsustainable profits for Wall Street. Profits that were often achieved at the expense of some legitimate concern be it a municipality, a homeowner, an individual investor, the taxpayer, governments and on and on and on. Even stock trading is being removed from public view. Lack of transparency is systemic and has no basis I can find except for criminal intent. Why? Because it fuels massive profits. Who cares if they are sustainable or even ethical.
One must understand an environment lacking in transparency to understand why firms would spend billions lobbying government and even more billions creating vehicles outside of the scope of transparency. These schemes present tremendous opportunity for profit by anyone who controls the flow of market information - that typically being a monopoly or someone able to distort market forces by subverting government oversight. In this case, that would be Wall Street who has monopoly access to capital. Restricted access to transparency creates an environment where manipulation and substantial profit is possible at the expense of any counter party be it individual investors, governments, businesses, school districts or anyone else partaking in the scam.
I saw Jason Trennert comment one time on the ability to create a "run" on a company using CDS contracts. (Applicable to creating a run on Greece in this instance.) He said it was akin to taking out a life insurance policy on someone and then killing them to collect the policy. And, doing it legally. Unfriendly governments attempting to destabilize the U.S. or hedge funds raiding a targeted firm or Wall Street firms attempting to destabilize a competitor could possibly attempt to manipulate the CDS market. It is almost a surety that illegal activity in the CDS market has led to the demise or financial instability of at least one firm. But we don't know because no one knows anything about this market. It is completely deregulated. There were even rumors some of the recent panics created by the CDS market came from overseas locations friendly to terrorists. Legal shorting methods cannot cause insolvency. Illegal shorting coupled with manipulation of the CDS market does have the potential to literally destroy a firm that might otherwise survive. So, what does the SEC do? They leave the CDS market unregulated and ban legal short selling. I wonder what role lobbying played in these decisions.
The CDS market is just a sample of the concerted efforts at removing transparency from financial markets. Lack of transparency extends into nearly every financial market and has fueled remarkable and completely unsustainable profits for Wall Street. Profits that were often achieved at the expense of some legitimate concern be it a municipality, a homeowner, an individual investor, the taxpayer, governments and on and on and on. Even stock trading is being removed from public view. Lack of transparency is systemic and has no basis I can find except for criminal intent. Why? Because it fuels massive profits. Who cares if they are sustainable or even ethical.
One must understand an environment lacking in transparency to understand why firms would spend billions lobbying government and even more billions creating vehicles outside of the scope of transparency. These schemes present tremendous opportunity for profit by anyone who controls the flow of market information - that typically being a monopoly or someone able to distort market forces by subverting government oversight. In this case, that would be Wall Street who has monopoly access to capital. Restricted access to transparency creates an environment where manipulation and substantial profit is possible at the expense of any counter party be it individual investors, governments, businesses, school districts or anyone else partaking in the scam.
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