Skip to comments.Rigged rates and interest rate swaps
Posted on 03/29/2012 4:59:24 PM PDT by varmintman
Ellen Brown is a sort of an expert on banking and theory and history of money type issues. She was claiming we were still experiencing deflation in 2010 while Kudlow and others were claiming something like 1% inflation when the fed admitted we were still in a deflationary economy. She notes:
"Greg Smith wrote that at Goldman Sachs, the gullible bureaucrats on the other side of these deals were called muppets. But even sophisticated players could have found themselves on the wrong side of this sort of manipulated bet. Satyajit Das gives the example of Harvard Universitys bad swap deals under the presidency of Larry Summers, who had fought against derivatives regulation as Treasury Secretary in 1999. There could hardly be more sophisticated players than Summers and Harvard University. But then who could have anticipated, when the Fed funds rate was at 5%, that the Fed would push it nearly to zero? When the game is rigged, even the most experienced gamblers can lose their shirts.
"Courts have dismissed complaints from aggrieved borrowers alleging securities fraud, ruling that interest-rate swaps are privately negotiated contracts, not securities; and a deal is a deal. So says contract law, strictly construed; but municipal governments and the taxpayers supporting them clearly have a claim in equity. The banks have made outrageous profits by capitalizing on their own misdeeds. They have already been paid several times over: first with taxpayer bailout money; then with nearly free loans from the Fed; then with fees, penalties and exaggerated losses imposed on municipalities and other counterparties under the interest rate swaps themselves."
Long article, well worth reading. We all pay for this stuff since we all live somewhere and, apparently, all the somewheres are experiencing the same problem.
Sadly it's at least as bad as it looks, and most likely far worse. Our government, at all levels, guarantees the worst possible outcome by simply ignoring the problems and kicking the can down the road. We've already missed the last exits that could have lead us away from this dead end we're on.
ShadowStats tells us the wheels come off by 2014.
Others suggest we have a bit more time, perhaps not fully crashing until 2016. In any case, it only gets uglier from here, folks.
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