Posted on 09/01/2011 9:01:59 PM PDT by blam
Even Goldman Sachs Secretly Believes That An Economic Collapse Is Coming
September 1, 2011
Even Goldman Sachs is doing it again. Goldman is telling the public that everything is going to be just fine, but meanwhile they are advising their top clients to bet on a huge financial collapse.
On August 16th, a 54 page report authored by Goldman strategist Alan Brazil was distributed to institutional clients. The general public was not intended to see this report. Fortunately, some folks over at the Wall Street Journal got their hands on a copy and they have filled us in on some of the details. It turns out that Goldman Sachs secretly believes that an economic collapse is coming, and they have some very interesting ideas about how to make money in the turbulent financial environment that we will soon be entering. In the report, Brazil says that the U.S. debt problem cannot be solved with more debt, that the European sovereign debt crisis is going to get even worse and that there are large numbers of financial institutions in Europe that are on the verge of collapse. If this is what people at the highest levels of the financial world are talking about, perhaps we should all start paying attention.
There is a tremendous amount of fear in the global financial community right now. As I wrote about the other day, the financial world is about to hit the panic button. Things could start falling apart at any time. Most of these big banks will not admit how bad things are publicly, but privately there is a whole lot of freaking out going on.
According to the Wall Street Journal, Brazil believes that "as much as $1 trillion in capital may be needed to shore up European banks; that small businesses in the U.S., a past driver of job production, are still languishing; and that China's growth may not be sustainable."
Perhaps most startling of all is what the report has to say about the debt problems of the United States and Europe.
For example, this following excerpt from the report sounds like it could have come straight from The Economic Collapse Blog....
“Solving a debt problem with more debt has not solved the underlying problem. In the US, Treasury debt growth financed the US consumer but has not had enough of an impact on job growth. Can the US continue to depreciate the world’s base currency?”
Remember, this statement was not written by some guy on the Internet. A top Goldman Sachs analyst put it into a report for institutional investors.
The report also goes into great detail about the financial crisis in Europe. Brazil writes about how the euro is headed for trouble and about how dozens of financial institutions in Europe could potentially be in danger of collapse.
But in any environment Goldman Sachs thinks that it can make money. The following is how Business Insider summarized the advice that Brazil gave in the report regarding how to make money off of the impending collapse in Europe....
Buy a six-month put option on the Euro versus the Swiss Franc, thus betting the Euro will drop against the Franc (the Franc being the currency that an official Goldman report recently referred to as the most overvalued in the world) Buy a five-year credit default swap on an index of European corporate debt—the iTraxx 9. This is a bet that some of these companies will default, and your insurance policy, the CDS, will pay off This is so typical of Goldman Sachs. They will say one thing publicly and then turn around and do the total opposite privately.
For example, prior to the financial crisis of 2008, Goldman Sachs was putting together mortgage-backed securities that they knew were garbage and marketing them to investors as AAA-rated investments. On top of that, Goldman then often privately bet against those exact same securities.
The CEO of Goldman Sachs has even acknowledged that the investment bank engaged in "improper" behavior during 2006 and 2007.
For much more on the history of all this, please see this article: "How Goldman Sachs Made Tens Of Billions Of Dollars From The Economic Collapse Of America In Four Easy Steps".
So will Goldman Sachs ever get into serious trouble for any of this?
No, of course not.
Yeah, they will get a slap on the wrist from time to time, but the reality is that the top levels of the federal government are absolutely littered with ex-employees of Goldman Sachs. Goldman is one of the "too big to fail" banks and they are going to continue to do pretty much whatever they feel like doing.
Sadly, the power of the "too big to fail" banks just continues to grow. At this point, the "big six" U.S. banks (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) now possess assets equivalent to approximately 60 percent of America's gross national product.
Goldman Sachs was the second biggest donor to Barack Obama's campaign in 2008, so don't expect Obama to do anything about any of this.
We have a financial system that is deeply, deeply corrupt and all of that corruption is a big reason why things are falling apart.
Sadly, the 54 page report mentioned above is right - we really are facing a global debt meltdown and we really are heading for an economic collapse.
You aren't going to hear the truth from the mainstream media or from our politicians because "keeping people calm" is much more of a priority to them than telling the truth is.
The debt crisis in the United States is unsustainable and the debt crisis in Europe is unsustainable. Right now we are in the calm before the storm, and nobody knows exactly when the storm is going to strike.
But let there be no doubt - it is coming.
The amazing prosperity that we have enjoyed for the last several decades has largely been a debt-fueled illusion. It was a great party while it lasted, but now it is coming to an end and the aftermath of the coming crash is going to be absolutely horrific.
Keep watch and get prepared. We don't know exactly when the collapse is going to happen, but it is definitely on the way and now even Goldman Sachs is admitting that.
So, how are Canada and Switzerland doing?
US Preparing To Sue Banks For Billions Over Misrepresenting Safety Of Mortgage Securities
BMFL
I’m sure they are, blam. The New world Order cannot be implemented as long as the USA is strong and soverign.
bookmark
If we could just make it legal to merely hang ‘dead beats’ from the nearest lamp post the banks wouldn’t be in any trouble at all.
Only if we hang the politcians, banksters and loan agents who went along with Clinton’s and Rubin’s scheme to give unqualified people loans for quota “equality”, along with the dead beats.
If that were your goal, the first people to hang would be the bankers... and then the politicians.
.
Republicans and Democrats both. Then the bankers and lawyers.
First is the fact that Freddie and Fannie are not billions in debt, but trillions. They will be fine as long as they are allowed to dribble their problems out for a few years hoping the housing market will improve to the point the collateral will recover to the mortgage debt level. If we have another financial shock or sink into deeper recession, well, a few billion of tax dollars per quarter won't float the boat anymore. Oh yeah, the big banks are in similar shape. Just for instance, BAC has about $800 billion in deposits. If they go under because their debt is called, the FDIC will immediately, without a Congress vote,( I've heard some people say their won't be anymore bail outs, yeah right), have to cover about a $trillion in another broken bank. Does anyone believe BAC is the only one?
Second is the interest rate. We have fought valiantly to keep the 10 year low. The interest rate on the debt right now is around $250 billion-$500 billion a year, depending on how long they finance it for. They are about to move short term rates out to the 10 and 30 year level to keep the can kicked way down the road. No one, and I mean NO ONE, even mentions what happens when the interest rate goes up. For what ever reason, we somehow believe we can control the interest rate on the bonds forever. Just ask a person what sets the interest rate on a bond without hinting why you are asking and they will tell you the bond rate must be higher if you need to raise money in a competitive market. As the risk grows, so does the interest demanded by the buyers. As we see in Greece right now, you could get 60% on a bond if they ever paid it back. In the past, when interest reached above 25% or more, a default was most likely in the cards in the near future. It is an admission you are in trouble and REALLY need the money to pay those rates. Generally you print counterfeit money to pay your unpayable debts back with worthless money which generally pisses off the bond holder sometimes even leading to war.
No just imagine if we suddenly see interest rates rise in a non orderly fashion. The confidence is lost and the spiral begins and interest rates explode. If interest rates went to say, 6%-8%, or so, our debt would rise several trillion dollars over night. America would be over way before the 23% level we reached in the Carter years. We have a $14 trillion debt right now with a $1.6 trillion deficit. The deficit would rise to several trillion per year instead of 1.6 trillion overnight. Would you really believe we would ever pay that back? Would you even want to? Revolution time and a new currency would ensue.
We are balanced on a knife edge with a Keynesian throwing rocks at you and swinging a baseball bat at your head and we just go to work every day figuring the next election will fix everything. We may not have another 5 hours, let alone 5 days or 5 months. If the money people go on strike on American bonds, the the only thing left is Bernanke printing money to pay our debts...........
Oh yeah, he's already doing that.
Didn’t Bill Gross already lose his butt betting big that rates would rise?
Got gold?
I thought he bet just a few percent of his portfolio. I could be wrong, though. I am expecting a crash imminently, during which bonds will rise even more, but then selling bonds will be the “trade of the century”.
Yes, but what does that have to do with free capitalism? He actually bet against Bernanke and lost. At some point, the Fed will run out of ink and the market will set the rates. Bernanke can keep fiddling for awhile, but eventually, someone will stop him from completely destroying the dollar. In a market system, reality always wins in the end.
The point of my post was that at some point, bond buyers will dry up. ( as of 6 months ago, they basically already have. Bernanke has been the largest buyer with QE2). If Bernanke goes ahead with QE3, then the rates will still remain low for awhile longer. There will come a day, however, when you least expect it, that the old idiom "It's never been like this before" will finally be realized. At that point, interest rates will go parabolic. Gold will go parabolic. Stocks will fall off a cliff, no matter what the company's bottom line is.
Someone at some point is going to look at $14trillion in debt now and another $3 trillion was just added in the debt ceiling, and they will say "To hell with this", and just bail out. The market will act as a free market then. Bonds will be offered and there will be no buyers even with a 50% interest rate.
Yes, but what does that have to do with free capitalism? He actually bet against Bernanke and lost. At some point, the Fed will run out of ink and the market will set the rates. Bernanke can keep fiddling for awhile, but eventually, someone will stop him from completely destroying the dollar. In a market system, reality always wins in the end.
The point of my post was that at some point, bond buyers will dry up. ( as of 6 months ago, they basically already have. Bernanke has been the largest buyer with QE2). If Bernanke goes ahead with QE3, then the rates will still remain low for awhile longer. There will come a day, however, when you least expect it, that the old idiom "It's never been like this before" will finally be realized. At that point, interest rates will go parabolic. Gold will go parabolic. Stocks will fall off a cliff, no matter what the company's bottom line is.
Someone at some point is going to look at $14trillion in debt now and another $3 trillion was just added in the debt ceiling, and they will say "To hell with this", and just bail out. The market will act as a free market then. Bonds will be offered and there will be no buyers even with a 50% interest rate.
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