Back to finance. Poland did exactly what I and a few others have been warning about for years with regards to private retirement accounts and pensions. Poland confiscated 50% of all private pension funds last week. PRIVATE pensions.
As Warren Pollock and I have been screaming, one of the largest chunks of collateral left in the system is private retirement money, both in the form of 401(k)s and IRAs and in private pension accounts. In the U.S., the latest data for 2012 shows that there are now $10.5 Trillion in private 401k and IRA holdings, with another $9 Trillion in pensions and annuities.
The regime has been fairly open about its plans to “nationalize”, read CONFISCATE, this collateral and implement a system of “mandatory retirement savings accounts”, which will be just another confiscatory redistribution into the hands of the oligarchs and their cronies. This what Poland just did. This is what MF Global was in its essence. This is what Cyprus was, except the Cypriot confiscation was done to demand deposit accounts instead of retirement accounts, which is now termed a “bail-in” – but it is all of the same stripe, namely the utter destruction of the notion of private property and the redistribution of all wealth into the hands of the oligarchs. In Poland, the private pension paradigm has now also been destroyed because no one will want to put money into a private pension after this knowing that it can and will be stolen by the government at any time with zero redress.
ZeroHedge has a piece up on this that is very good, but allow me to riff on it a bit. Poland has a “debt ceiling” that prevents it from issuing debt over 55% of GDP. By confiscating and stealing (“nationalizing”) the Polish citizens’ private pension money, they are now booking that money as a straight-up cash asset on the government’s balance sheet, thus “freeing up room” against the GDP-to-debt threshold so that the Polish government can … issue more debt and spend, spend, spend.
Now here’s the terrifying part. The US debt-to-GDP ratio is over 100%. $15.5 Trillion dollar economy; $16.0+ Trillion in debt. The day Obama usurped in January 2009, that ratio was 70% or so. This massive increase in debt is 100% intentional, being executed will full malice of forethought, and is called the “Cloward-Piven Strategy”.
As I have written recently, the Obama regime is already using pension money to manipulate the so-called debt ceiling, namely the Thrift Savings Plan money, which is the government 401(k) equivalent for government employees, government retirees and the U.S. military. Yeah, all of these US military officers who are “going along to get along” so they can “make it eight more years until I get my pension” are chasing money that is already gone. Morons. The regime has already taken it, and all that is sitting in those accounts are worthless IOUs issued by neo-Stalinist oligarchs. They’re just too uninformed and deluded to understand this. This is why the national debt figures published by the government have not changed in months and months. They are using the TSP money to fraudulently offset public debt on the balance sheet.
Now let’s tie everything together. Let’s talk about DETROIT.
If you have watched my 8-part YouTube presentation on the economy, you already have a working knowledge of what I am about to discuss. If you haven’t, I really do recommend it. A time investment of 2.5 hours is not a lot to ask in order to understand how and why your civilization is about to collapse. Really. My YouTube channel link is at the top of the page. It’s right there.
Because of the zero interest rate policy (ZIRP) forced upon us by the Federal Reserve, pension funds are holding an enormous amount of derivatives, namely Repurchase Agreements (“repos”) and credit default swaps (“CDS”). I explain what these instruments are in the YouTube presentation. The reason pension funds and everyone else are holding these derivatives is because these are the only instruments that are actually quoting a return. Since interest rates are at zero, traditional top-level instruments generate almost zero yield.
Now, for every derivatives contract, there must be a counter-party. Someone is selling these derivatives to these pension funds, brokerage firms, state and local governments and other smaller banks. It is basically FOUR banks selling these derivatives: JPMorgan, Citibank, Bank of America and Goldman Sachs. These FOUR BANKS are carrying on their books $208 TRILLION in notional value derivatives contracts. All US banks together are holding $223 TRILLION, so these FOUR banks are holding 93% of the total.
To put this in perspective, it is estimated that the total of all assets in the US, public, private and corporations, the total value of absolutely everything in the United States is $217 TRILLION. These FOUR banks are holding on their books notional value in derivatives contracts roughly equal to 96% of ABSOLUTELY EVERYTHING in the United States of America. Even if you give the value of these derivatives held by these FOUR banks a 90% haircut, these FOUR banks are still booking 135% of the US GDP ($15.5 Trillion per year GDP vs. $21 Trillion in derivatives after the haircut). Are we feeling this?
As MFGlobal proved, derivative counterparties (in that case JPMorgan and Goldman Sachs) now enjoy a bullet-proof, legally protected but utterly morally illicit super-priority. The derivatives counterparties go to the front of the line BEFORE THE LINE EVEN FORMS. Bankruptcy doesn’t even begin until AFTER these counterparties move on a failed company, government, bank or fund and have looted it for any remaining collateral AND have terminated all non-beneficial contracts with said entity completely outside the conventional Rule of Law. Dodd-Frank is what set this up. THIS is what Dodd-Frank is all about and why it exists. Everything else is window dressing.
Not only does this benefit the big banks qua counterparties, is massively incentivizes them to knowingly go after and sell these derivatives to extremely weak parties. When a failure happens, the big banks have carte blanche to go in and loot everything they can. They are ROOTING FOR and now ACTIVELY FOMENTING DEFAULT among their counterparties. Not only do they have essentially zero risk, the big banks actually MAKE OUT BETTER if their counterparty defaults!
Note that I said that state and local governments are a huge holder of these derivatives. Detroit is the poster child for this dynamic. Detroit was massively allocated into interest rate swaps which were marketed to them as a hedge against rising interest rates. We now know that the LIBOR rate has been manipulated for years by these very banks, and we also know that the big banks, especially Goldman and JPMorgan, send their own people into the Federal Reserve and the Treasury Department in order to do their will. So, the big banks sell interest rate swaps as a “hedge” against rising interest rates and then make @#$% sure that interest rates move to and then stay at zero, thus guaranteeing a massive profit on the interest rate derivatives they have sold to their prey. In Detroit, now utterly insolvent, the big bank counterparties are at the front of the line and the Detroit city employee pension funds have been confiscated and sent to the big-bank counterparties who now have statutory super-priority thanks to Dodd-Frank.
Guys, it isn’t just Detroit. Detroit, like MFGlobal, is the first major municipality to go because it was run by psychopaths and imbeciles. This is every major city. This is every state. This is every bank (as I cover in the YouTube presentation), every brokerage house, every pension fund, both public and private. They’re all up to their eyebrows in these derivatives. It’s the only game left in town – engineered with full malice of forethought by the bankster oligarchy. These big banks are the counterparty to all of these entities and they have given themselves a super-priority claim to all collateral via Dodd-Frank, and their agents in the FEDGOV will back their morally illicit “legal claims” until they are PHYSICALLY MADE TO STOP. Yes, that means counter-revolution and almost certainly war. Aside from a truly supernatural Divine Intervention I can see no other possible way out of this. This is math. Only God – ONLY GOD – can trump math. These people are never, ever going to peacably walk away. Ever.
Here is a detailed source citation over at The Automatic Earth.
I’m going to go scrub some calcified fecal matter out of toilet bowls now, and praise God with every scrub.