A Smokescreen (reprise)

A smokescreen is used to hide things. In war, you hide the movements of troops and equipment by the use of smokescreens. It is a device of subterfuge and concealment; A red herring; A sleight of hand. In large and small military operations, keeping the enemy guessing is the difference between victory and defeat. In business as well, a smokescreen is a necessary implement. It may serve as a diversion to keep attention focused on a false objective or threat. In the “Art of War” written by Sun Tzu, subterfuge is described as being essential to victory. Sun Tzu writes: “The wise general makes his plans dark, and unfathomable, and strikes as the lightning”. In 1941, the Japanese were in Washington, D.C. delivering peace medals to gullible politicians, while the the Japanese navy steamed silently and malevolently toward Pearl Harbor. We all know the rest of this story.  I believe we are seeing one of the most artful and calculated uses of this strategic weapon that has ever been employed.

What would you say if I were to suggest that the same major catalyst for the Revolutionary War, The War of 1812, The Civil War, and World War One was at work right now? What if I stated that every major recession and depression that this country and frankly the whole world has ever experienced was caused by the same factor? Would you believe me? Ok, I throw down the gauntlet. I say that historically banks and most specifically a foreign central bank or in our case the Federal Reserve Bank (controlled by foreign interests) have been the cause of major market reversals and wars.

I guess it is time for a quick history lesson. Let’s start with the Revolutionary War. We all know that the colonists were sick and tired of paying the King’s tax on tea and other necessities. “No taxation without representation” was the phrase of the day. That is only half of the story. Prior to the start of hostilities, the colonies had been thriving and prospering because they had been printing their own money to facilitate commerce. The colonial government printed these notes that weren’t backed by anything (i.e gold), other than the word of the government that they were proper and authorized money or notes. The currency was called “Colonial Scrip” and the use of it eliminated the need for complex barter transactions. More importantly Colonial Scrip eliminated the need for gold. Gold was minted in England, and under the control of the King. Scrip was printed here and under the control of the colonial government (We the People). Fearing a strengthening giant on the far side of the Atlantic, the King prohibited the use of Scrip, and forced the colonies back to gold coin, which he then limited its quantities available. It is important to note that the King would only accept tax and goods payments in gold.

This action caused inflation on the order of nearly 5000 percent, and almost immediately the colonial economy was plunged into chaos. The patriots of the day were saying: “if you are going to give me very little gold, and then make me give it back to you in taxes, then you are going to have to give me a say in how it is distributed”. Knowing the King would never agree to such a demand, it paved the way for what the colonies really wanted: control over their destiny by having control over the currency that was used to conduct commerce. Of course, it took a war to finally wrest economic control from the King. Are you getting this? A robust and healthy economy was brought quickly to its knees by the simple action of reducing the amount of currency in circulation, and then taxing goods heavily. This action forced the colonies into a declaration of war with the King. Similar factors were at work in future conflicts and market reversals. Bankers in England and other places in Europe were at work consolidating their influence over the young country.

Now fast-forward to our present day. Anytime bankers have sought to consolidate their holdings, or increase their power and influence, they have accomplished these goals by simple economic terrorism. Reducing the amount of cash/credit distributed by their daily machinations always caused businesses and families to fail. This is called “bursting the bubble”.  This action also caused weaker banks to fail, allowing them to be grabbed up at fire-sale prices. When the consolidation frenzy was over, banks simply increased the money supply again, and consumers breathed more easily. The bankers were seen as their friends, instead of the villains that they actually were. Bankers in times past have actually threatened the President with causing a depression if he and the congress didn’t accede to certain demands that kept them in control over the nation’s economy. They have attempted assassinations. Pillars of the community? No. Goodfellas? YES!

Now you say “what about all the massive interest rate reduction that has been accomplished at the Federal Reserve over the last few years? Although prime rates are at historical lows, the amount of business lending and personal lending by banks is also at a very low level as well. The money is cheap, but the banks aren’t lending it out. Except to each other. Big banks have received quietly over the last 12 months over $13 TRILLION dollars in emergency FED loans. Congressionally approved? Nope. Criminal? Yes.

Read the news. Money is tight, banks are failing, and big banks are buying little banks with our bailout money. The government is calling it a bailout to prop up bank balance sheets while actually empowering them to consolidate the industry, reduce competition and prepare the market for banking profits and enslavement at levels never seen before.

What is the smokescreen? Subprime mortgage loans. The assault on the economy wrought by the failures in the subprime markets is complete and total. Bankers knew that these loans would fail. They had decades of data to show what happens when loans are made at higher debt to income ratios, when credit scores are below a certain threshold, and when down payments are lower. Why did they make the loans then? Is it because they were forced to facilitate the desires of special interests in congress and comply with the Community Reinvestment Act? Were they doing their best to avoid red-lining and discriminatory lending? Nope. Not a chance. The lion’s share of subprime loans went to buyers that were purchasing really big houses or rentals, or second homes, or third homes… not to poor people that couldn’t pay. Banks did this to cause this crisis. It was time. The bankers knew that all they needed to cause failures or defaults on these loans would be to dry up the credit; reduce the cash in the market just a little bit… and once the bloodletting started, it would be hard to stop. The big boys just stood around and watched it happen, blaming the entire debacle on subprime lending, congressional policies, George Bush, Barack Obama (I still don’t like him, but cannot lay this at his feet) and a host of others. People are so uneducated and apathetic that they accept the lies served up on a platter by every news organization on the planet without the first question.

When you look closely, the subterfuge is blatantly obvious. Banks are planning a move, and need to cover their tracks. The failing economy is a perfect smokescreen. Congress and our president (little p, he isn’t a Natural-born U.S. Citizen, so he can’t have a big “P”) is taking the bait and ramping up regulation while pouring billions and maybe even trillions into financial institutions in a rescue effort. Regulation is being enacted; not on the banks that created and securitized these products, but instead on the originators and mortgage brokers who made the loans according to the guidelines drafted by the large investment and mortgage bankers. The banks have found ways to avoid vilification even here! Mortgage brokers who worked hard to find the best deals for borrowers are soon to be a thing of the past. They have largely been legislated or regulated out of business in the name of “solving the subprime lending problem”. All of the lending and loan origination will be made by banks in the future, at a much higher profit margin. FNMA and FHLMC are broke. The long-term prognosis for these institutions is uncertain, but you can rest assured that when the smoke clears, Fannie Mae will certainly not have the strength that she did before. Some big bank will. That is something you can count on.

Smoke is pumped daily from the media and behind the haze, banks are taking money from the government and planning the biggest grab in history. There is the “golden rule “ we grew up with as kids, and then the one that we have learned as adults: “The one with the gold makes the rules”. The new rules reduce competition, provide for some nationalization (there is nothing wrong with that as long as the bankers are the puppeteers), and allow the banks to come out of this bigger, stronger and with more profit potential. The bankers wanted and got a big rule change. Their gold is making the rules. We will be even more enslaved to them before it is all over. Watch and see if I am right. Bet I am!