#2 The Crash of 2008 - What Did Goldman Sachs Know?

[cri8tor]

We the people need to shut down Goldman Sachs and seize their assets. The time to act is now. Infiltrate their systems and destroy them from within. Stop being good little sheep and make the government fear the people.

To learn more, read Rolling Stone, issue 1082/1083 July 9-23, 2009 "The Great American Bubble Machine" by Matt Taibbi

[AnotherCuppaCoffee]

Read the article entitled "The End," in Portfolio magazine, Dec 08-Jan 09 issue. This article is easy to grasp even though it is in a pub for professional asset managers. Tells how the crash of 08-09 occurred, including the deception led by GS.

[Silberdachs]

What reason other than tax evasion could there be for Goldman Sachs Group to set up three subsidiaries in Bermuda, 5 in Mauritius & 15 in Cayman Islands? Why did Countrywide Financial need 2 subsidiaries in Guernsey? Why did Wachovia need 18 subs in Bermuda, 3 in the British Virgin Islands, and 16 in the Caymans? Why did Lehman Brothers need 31 subs in the Caymans? What do Bank of America's 59 subs in the Caymans actually do? And AIG, why does it have 18 subsidiaries in tax-haven countries?

[TarantulaArms]

Great video

[wdflannery]

How is it that Bear Stearns could have a balance sheet of 396 B in assets, with only 11 B shareholder capital? How did they acquire the assets?

They borrowed money from a bank?

They borrowed money from some other source?

[bassfishers]

Investor confidence is shot. Rallying a market by 500 points on thursday without rhyme or reason does nothing to rebuild confidence, it just demonstrates what a horrible buncha crooks and theives are in charge of our financial futures.

IMHO this is a conspiracy to wrangle away the pensions and savings of the boomer generation with the consent and assistance of washington.

[TYX91101]

What did Goldman know? A lot, I suspect. Like when the Fed was about to spring a surprise rate cut. In spite of this unbelievable advantage, they have finally painted themselves into a corner. Now they'll be fed taxpayers billions in life support.

[louis12346]

bailout would be aimed at the mortgage market, and yet JPMorgan Chase, Bank of America, Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, will walk away with over $125 billion,The shares will not be dilutive to current shareholders, a concern to banking chief executives, because perpetual preferred stock holders are paid a dividend, not a portion of earnings. all current shareholders are protected, unlike Lehman, Bear Stearns, Fannie Mae and Freddie Mac shareholders.

[HPUgrad1]

The world's largest investment bank reported third-quarter profit plunged 71 percent from the year-ago period (AP 09/17). I feel so sad...I think I am going to laugh!!!!! ha ha ha!

America welcome to the rest of the world.

[nakedguyinspain]

thank you for your very credible information about the building risk in our global finacial system.

Two questions:

how does one immunize themselves from this coming crisis since as you point out there are many interconnections and also how does one attempt to profit from it.

[joshrain1]

us dollar is a world reserve currency and by fed lowering rates, makes the dollar worth less and foreigners are less inclined to invest. also due to the fracntional reserve system we just increase the money supply. we also have a huge deficit and are an import nation, we have huge overseas spending that is wasteful, baby boomers are retiring. housing is just following demand/supply. with hyperdeflation you would expect the dollar to rise, correct?

[Crashof2008]

I'd like to refer you to the FT for more info.

Buying Treasuries on margin has been a great trade for a year. Irrespective of the trade-weighted value of the dollar, the key point is that the Fed will not allow its large holdings of Treasuries to deteriorate in value. They will be forced by the markets, and will cooperate to retain their credibility, by raising interest rates.

And raising interest rates in this delicate environment drastically increases risk of a deflationary burst.

[joshrain1]

how can there be hyperdeflation when food, oil, commodities are going up? the fed has made it clear that it will pump more money in the economy and trying to drive up demand. what about the huge spending overseas?

[Crashof2008]

Joshrain-

The Fed is trying to manage the risk of a hyperdeflationary burst, or what Greenspan calls an "unexpected and sharp discontinuity".

If the Fed is trying to manage this risk, does that mean it is non-existent?

I see no mention in your post of the multiplier effects of an accelerating collapse in housing markets coursing through the economy, nor do you address the dramatic impact this has on the wealth effect.

Consumer demand continues to plunge, not soar.

Matt

[joshrain1]

hi matt, so if the cause of this bubble was due to excessive liquidity and bernanke has said in the past that the great depression was caused due to lack of aggressive monetary policy and the fed is currently solving the problem by increasing consumer demand and following and expansionary policy by providing more liquidity. since 1913 the us dollar index has been lowered and the commodities have still not reflected this.

[Yayatv]

Thanks for this video

[davincij15]

So you are saying no inflation? Why is the dollar dropping?

[Crashof2008]

So you are saying no deflation? Why are home prices dropping?

[davincij15]

That's because credit went there people bid up the prices of homes. The prices where artificial. Now that money they took out of there home is in they system and we are printing more to bail out the banks ($1 Trillion in 7 Months so far) and puts pressure on the dollar. Hyperinflation is coming to re inflate the housing market.

[Crashof2008]

The multiplier deflationary effects of the housing price drop are dramatically rippling through the economy. It's the wealth effect in reverse.

There are 450 trillion dollars in derivatives, many subject to margin calls.

You speak of 1 trillion dollars being printed in 7 months. If I loan you 10 thousand dollars, that is not a gift. Repayment is required. These Fed operations are generally LOANS not gifts. That's why they call them 28day repurchase agreements. LOANS for 28 days.

[davincij15]

I understand but when margin call comes and you cant pay you default so does next person until the fed. The money lost is not gone its in the public. Next that liquidity does not sit at the bank it is used to purchase safer bonds or loans that pay more interest. Thus someone uses the cash thus bringing down the dollar.

[Crashof2008]

However, the Fed is a market maker in Treasuries with 800 billion that they trade with in open market operations. Other players cumulatively are now bigger players.

[davincij15]

That brings us the 200 billion in Treasuries swaps the banks made with the Fed. I an attempt to reduce inflation the Fed is loaning treasuries for other non-liquid assets (possibly sub-prime slime) this move makes no sense to me, is the Fed in the business of collecting rent? It's all ridiculous. Please sell your dollars.

By the way I will stipulate we will see Hyper deflation in the real estate and some other markets. However that money has to go somewhere to earn more money.

[Crashof2008]

The swap facility makes sense because the role of the Fed is to allow the appropriate repricing of risk in a stable and orderly market.

This does NOT mean the Fed is repricing risk. Far from it. It is simply trying to allow that repricing to occur in an orderly fashion.

Short term bridge financing to help smooth the flow of the mountains of derivatives that are being repriced is part of greasing the wheels.

But these are loans, not gifts. 30 day loans.

A 30 day loan is not a gift.

[davincij15]

I understand all of that my original question is doesn't all of this create hyperinflation in the end? As people try to dump there big ticket items for commodities it produces Hyper deflation of the items they dump.

[Crashof2008]

I remain unpersuaded that massive offloading of 455 trillion in derivatives, with its massive impact on the wealth effect, coupled with a sharp downdraft in the housing market will have nominal effects on consumer demand and purchasing power.

Are you persuaded that margin requirements will not be increased in the futures markets? They are already beginning to do that.

Increasing the margin requirements in futures would intensify the downdraft.

[davincij15]

But the Fed is monetizing the debt with the rate cut. Todays sudden spike in the currency index is just a position cover and profit taking. (Sell on roomer buy on fact) Once the monetary aggregates enter the system price on non deflating assets will increase as the fed requires repayment. Since commodities are the last working investment they will be the target of investors. Thus Hyperinflation with real goods.

[Crashof2008]

You need to learn more about the Fed from reliable sources.

Buying treasuries on margin has been hugely profitable, despite the decline in the dollar. If there is a run on the dollar and treasuries crash, interest rates will be forced higher.

Thatcher was forced out of office trying to protect the pound in face of the overwhelming stateless markets.

The sovereigns, including the Fed, don't have nearly the clout they used to. And the Fed won't allow their holdings to shrink in value.

[Crashof2008]

I recommend in good faith and candor that you read everything Krishna Guha writes daily about the Federal Reserve in the Financial Times of London to learn more about the current debates raging inside the FOMC. For example two members, Dallas and Philadelphia, opposed the size of yesterday's cut. This is very newsworthy, but it was woefully underreported in the US press.

Read the FT. And stay tuned to this channel for weekly updates.

Matt

[davincij15]

Will do.

Seems like there may be gaps in me education on bonds.

But the fed can not lose in this Ponzi scam of inflation and deflation. As far as I know lowering interest rates creates inflation because the Fed buys bonds to low the rate. Thus prints the money to pay for them.

[Crashof2008]

Yep, I recommend you read everything Saskia Scholtes writes about the bond market in the FT regularly. The bond market is far larger and far more important than both the commodities and stock markets.

You have to know bonds to figure this out.

[EliseForJoy]

the truth is always woefully unreported in the USA propaganda machine. As one of the first people to report on MTBE, a gas additive, I found AP press articles that had false headlines, and totally fabricated quotes in the articles!

All to support big oil's position that MTBE was safe. And don't forget the massive lies that brought us to the war in Iraq.

[Crashof2008]

Thanks for posting this and congrats on your work on MTBE!

Fortunately the Financial Times of London is widely available stateside and subscriptions are only 9 dollars per month.  And it's much more than a financial newspaper.

Stay tuned. Next video is up tomorrow and weekly thereafter!

Matt

[Mike1977a1]

We have know about this for a months now, i think alot more banks and institutions are going to go bust.

check out this video by a german fellow called jberni1 who saw this coming and created in depth videos explaining the upcoming crisis!

watch?v=WhLaa5pNeok

[MaverickCentricity]

Thanks for the video. We know more people with an understanding of market fundamentals and trends. Keep them coming.

[OCForeclosures]

Very Nice explanation of what happened with Bear Sterns and the problems with these firms being too highly leveraged. I have been following the real estate market for sometime and knew the foreclosure problem was much bigger than subprime borrowers.

At some point it should be obvious that you can't export jobs and import debt over the long-term and prosper. Obviously Goldman figured out how to trade this debt game for a profit.

[osnap757]

What you saying is good stuff but it's a struggle to hear you...Can you put the mic closer next time?

[markymarkuss777]

UK Independent newspaper posts article called "WALL STREET FEARS FOR NEXT GREAT DEPRESSION." Go to this link :

independent . co . uk/news/business/news/wall-str­eet-fears-for-next-great-depre ssion-796428