[[Additional insight may be gleaned by researching a couple of
topics. Purple currency (or rather, blue), Purple Report, radioactive,
dust. Those are the key words I've gotten recently and have not been
able to track down much. Supposedly printed by the Treasury and stored
somewhere. A currency that would provide minute monitoring far in excess
of the "new" bills with stripes. Back in the mid-'80s or so.
"If I had access to a scanner, I would scan my new residence permit, which
I got from the police today. It takes an entire page in my passport, and next
year I'll have to get a new passport because with six years' permits, a Romanian
visa (also full page) and a hell of a lot of stamps, there's almost no room
left, even with the extra pages inserted. The permit is printed on pink
and blue currency paper seeded with various holograms, diffraction gratings,
threads, watermarks, fluorescent and radioactive markings. It has a
lion (symbol of Finland) and a bull with some stars around it (probably symbol
of the EU). It is magnificent. I feel like I should get a medal to go with
it."
Does anyone else remember an odd report in the last couple of months that a
crop duster owned or contracted by the fed-gov was lost or crashed somewhere
near Florida on a trip back from down south-ways? IIRC, the oddity
was related to the department -- Defense or something like that (not
agriculture). According to a tip I got recently, seems the fed-gov has
been spraying radioactive dust on particular areas in order to track certain
movements. Don't know if that specific plane was involved, but it was
coming back from a certain part of the world which is targetted.
In any event, the reader will see why I mention this after seeing the full
article below. Hey, I don't know if all this stuff is real but I don't
make it up, either; decide for yourself. You will certainly be affected by
the elephant feet when they really stampede -- right now, the afermath of Day
911 is still a cupcake.
P.S. Radioactive dust has a "mark".]]
#######################################
Dear What Matters...
The message from the Central Bank Oversight & Monitor Committee below
is clear. JP Morgan is considered to be in the early stages of
crashing.
For background, I refer you to WHAT MATTERS-9 of September 19. [[see
copied below]]
In friendship,
Boudewijn Wegerif
What Matters Programme
Folkhogskola Vardingeby
-----------
From: Central Bank Oversight & Monitor Committee
Wednesday,
November 21, 2001 6:03 PM
JP Morgan in Early Stages of Crashing
To:
Central Bankers, Secretariats, Governors, and Concerned Others
Sirs:
As we've been reporting JP Morgan is the key player in the financial
derivative markets. What we could be seeing right now are the early
tremors going through their common stock, reflecting in part a plunging US bond
market, and massive debt repudiation by Enron and Dynegy.
The entire derivative pyramid will come down around this institution and
other players having extreme risk exposure. The US Federal Reserve will be
powerless to prevent this unraveling. To attempt a remedy would be to
threaten the recovery of the entire world economy, and the political
institutions of same.
As you can clearly see the Relative Strength Index (RSI) and Moving Average
Convergence/Divergence (MACD) are sounding the alarm bells for the collapse of
JP Morgan.
Be certain your institutions are not caught in the vortex with nearly all
your foreign reserves in US dollars.
Sincerely, CBOM
WHAT MATTERS-9 September 19, 2001
Please prove me wrong, but I think the world’s top banks will be let off the
hook on the gold and other derivatives losses that are now inevitable.
--------------------------------------------------------------------------------
Dear list members,
On the day of the 9.11 disaster, in fact, as the planes were tearing
into the twin towers of the One World Trade Centre, I was working on the hereon
following review and summary of an important essay by market analyst Adam
Hamilton, ‘The JPM Derivatives Monster’.
I have been reluctant to post my review and summary till now, eight days
later. Even now I hesitate. Because now when I read the original and what I have
written about it, I have a sinking feeling in my stomach that it is too
late to normalise the market.
I SUSPECT THAT THE INSIDERS KNEW
THAT THIS WOULD BE THE CASE
ALL
ALONG. AND I DO NOT
REALLY WANT TO ACCEPT THAT.
Regular readers of my e-letters know that I seldom use block letters. Here
they are warranted. Because my gut feeling tells me that the banking fraternity
and major world treasury departments have known since 1995 at least that the
dollar's days are numbered, and they have been propping it up through the gold
carry trade and other means related to derivatives trading. For a coming moment
in time when it will not matter anymore. For a coming moment in time when the
gold loan and derivatives slates of the banking system will be wiped clean. Just
like that. In the national interest.
Not the debts of the people wiped clean; nor even the debts of the nations.
No, just the derivatives debts wiped clean and all gold debts to the central
banks cancelled. Something like that. In the national interests of the U.S.,
Britain and Germany mainly.
In justification, it will be claimed that the derivatives markets have come
unstuck because of the disaster that struck at the heart of the world's
financial system. This will involve a major deception.
The review and summary of Adam Hamilton's essay, which I was working on
when the disaster struck, shows clearly that the derivatives trade was ready to
come unstuck of itself, and that very soon.
The ramifications of this line of thought are too much for my head. I hope
I will be proved wrong. You decide whether I am on to something after reading
what follows, and the original at Adam Hamilton’s web site,
www.zealllc.com. And if you think I am, for
God’s sake do something to make it not happen. Lobby, lobby, lobby, lobby and be
active in other ways for a just, clean slate outcome for all the people of the
world.
--------------------------------------------------------------------------------
The review and summary of Adam Hamilton's essay has been approved by
him. He thinks I did "an excellent job" summarising "a tremendously complex
hypothesis." He does not know about the content of this introductory letter. So
I don't know whether he shares my suspicion.
Anyway, now I am posting the
review and summary. It is necessary to do so, if only because of what it tells
about the serious trouble the banks involved in the derivative markets and the
gold price suppression that underpins those markets were in BEFORE the 9.11
disaster already.
Only God and a few insiders close to the FED Chairman Alan Greenspan know
about the far worse trouble the banking giants must be in NOW.
One must assume that they care. At any rate, they are going through the
motions of caring.
I have just heard from a Midas offering at the James Joyce Table of the Le
Metropole Caf� – http//www.lemetropolecafe.com - that Alan Greenspan, who has
been in Switzerland for a meeting with the BIS, Bank for International
Settlements, has reportedly asked the Swiss Government to sell its gold in
accelerated fashion, or lend more of it out.
The price of gold rose by 5 percent within two hours of the 9.11 disaster!
Then in came the gold cartel giants and today gold is still selling at 5 percent
up on the price of September 10. In other words, every rise in price above this
last week’s level of $286 an ounce has been hammered by J.P.Morgan Chase and
probably also Deutsche Bank, Goldman Sachs and City Bank.
These giants of the gold cartel are buying small amounts and borrowing
tonnes of gold from central banks and the future production of mining companies
like Barrack and Anglogold, and they are throwing this gold at the market. Yes
indeed: they are successfully selling mainly borrowed gold real cheap to a lot
of eager buyers around the world, and especially in Asia. Note, they are selling
borrowed gold. Gold that has to be repaid. They are doing it because they are
already over the top with their gold borrowings to such an extent that a rise of
over 10 percent in the price of gold will occasion enormous losses on
repurchasing gold for return to the central banks – losses that could well
bankrupt them and lead to the demise of the dollar. A careful reading of the
review and summary below will show why!
There already is a move against the dollar, towards gold.
You may recall that in WHAT MATTERS-3 I compared the price of gold and
dollars in Russia in 1988 to those of today and established how, thanks largely
to the suppression of the gold price, the dollar was still scoring over gold as
a hedge against inflation. “However,” I wrote, “the moment the dollar starts to
slide down the pyramid that has been created for it by the western money
masters, there will be a rush from dollars to gold by every small and big-time
saver in the world.”
Well, the slide has begun in Asia. I have just learnt from the same Midas
essay at Le Metropole Caf� that Bloomberg Online reported late yesterday that
buyers in Thailand, where gold demand dropped by half in the last five years,
have led a return to the precious metal as a haven for investment. Last
Wednesday, traders sold as much gold jewelry as they did in an average month
this year. In India the biggest jewelry retailer is reporting a 25 to 30 percent
increase in sales. And note, India makes more than one-fifth of all gold jewelry
and exports more than $8 billion worth of jewelry each year.
The central banks claim reserves of 33,000 tonnes of gold worldwide. This
includes the gold that they have lent out to the investment, commercial and
bullion banks. Conventional estimates place the amount of gold already sold at
5,000 tonnes, while the Gold Anti-Trust Action Committee, GATA –
www.gata.org - places it at 10,000 to 15,000
tonnes. Even at 15,000 tonnes, there is still a lot of Central Gold left to dump
on the market.
Friends, the gold tonnes that are being sold
at rock bottom prices and lent out by central banks in this way belong to the
people. They are part of the national reserves. There is a very good chance
that the gold that has been lent out, or most of it, will not be returned. So
the central banks will be left sitting with dollar reserves mainly – a dollar
that is grossly overvalued and must, must and will, be reduced to the equivalent
of a third world currency, just as the rouble was in the 1990s, sometime soon
rather than later. Or the dollar will go through a phony, pre-planned death and
resurrection experience, into a totally new global currency for the New World
Order that George Bush and company are gunning for.
In friendship,
Boudewijn Wegerif
What Matters Education Programme
Folkhogskola
Vardingeby
--------------------------------------------------------------------------------
‘THE JPM DERIVATIVES MONSTER’ BY ADAM HAMILTON
A Review and Summary
by Boudewijn Wegerif
September 11, 2001
Two of the largest commercial banks in the U.S., indeed the world, J.P.
Morgan and Chase Manhattan merged some months back to form a superbank,
J.P.Morgan Chase and Co., or JPM for short. It is beginning to look as though
JPM may have been formed to play the derivatives markets more forcibly, and
especially the gold and the interest rate derivatives markets, and that it is
now riding for a spectacular fall.
For an easy to follow understanding of the nature of derivatives, an
account of the big derivatives wipe-outs of the 1990s and the extent to which
the folk at JPM are up to the eyeballs in digitised derivatives, I strongly
recommend the newly posted essay by market analyst Adam Hamilton at
www.zealllc.com (or at
www.gold-eagle.com editorials, or the Kiki
Table at
www.lemetrepolecafe.com).
In ‘The JPM Derivatives Monster’ Adam Hamilton reveals that the
illegal gold price suppression, which has been exposed by the Gold Anti-Trust
Action Committee GATA, is not just about upholding a grossly over-valued dollar;
it also appears to be part of a game play by which massive derivatives interest
rate speculations are deemed to be made ‘risk free’.
Hamilton sources an essay by the litigate Reginald Howe in the HOWE vs BIS
anti-trust action. In the essay, about which more later, Howe shows that U.S.
Treasury Secretary Lawrence Summers, by his own writings, was well aware of John
Maynard Keynes’ ‘Gibson’s Paradox’.
According to ‘Gibson’s Paradox’, there is a “rock-solid inverse
relationship between gold and real interest rates in a free market”. And
Lawrence Summers, during his time at the Treasury Department, from 1995 to 1999,
will in all likelihood have encouraged a strong belief in ‘Gibson’s Paradox’ at
J.P. Morgan, Chase Manhattan, Goldman Sachs, et al.
So strong has been the belief in ‘Gibson’s Paradox’, a handful of
commercial and investment banks are now owing the equivalent of over several
years of gold production – that is, gold which they have borrowed from the
central banks of the world mainly to keep the price of gold suppressed. The
suggestion is that they have continued borrowing, selling and recycling the gold
loans to underpin interest rate and currency derivatives speculations of
unimaginable magnitude.
JPM’s SUPER-COLOSSAL DERIVATIVES POSITION
It is very hard to believe that the total notional derivatives positions of
U.S. commercial banks and trusts is $43.9 trillion dollars. That figure does not
include investment banks like Goldman Sachs, which do not have to supply figures
to the OCC Office of the Comptroller of the Currency, a bureau of the US
Treasury. The total U.S. derivatives position could be over $80
trillion, and according to some estimates, the total world derivatives position
is now well over $150 trillion.
Whichever of these figures you choose for comparison purposes, you will
agree, I am sure, that JPM’s control of $26.3 trillion worth of derivatives in
notional terms has to be read as super-colossal!
To underscore the comparisons, just one trillion dollars is about
equal to $3,700 per every man, woman and child in the U.S. The sum total of all
recorded, money measured economic activity in the U.S. is a little over $10
trillion, and in the world around $40 trillion. The market value of the 500 best
and biggest companies in the United States, the S&P 500, is now around $10
trillion, and the total U.S. debt is now well over $18 trillion.
[[according to Michael Hodges, The Grandfather Report, total
debt in the US is $30 trillion.
Adam Hamilton explains in very easy to read terms in his essay ‘The
JPM Derivatives Monster’, how we are to understand the ‘notional value’ of a
derivatives contract. The notional value or ‘notional amount’ is not the amount
of money that changes hands in a derivatives transaction. It is “a
quasi-fictional number that illustrates how much capital a given derivative
effectively controls,” and it is used to calculate the actual payments that must
be made.
WHAT IS AT STAKE?
How much has JPM put on the line, so to speak, to cover a derivatives
position by which it effectively controls ‘capital’ of $26.3 trillion? I should
think just about every asset it possesses, including the silver cutlery in the
directors’ dining room. For $26.3 trillion ($26,376 billion to be more precise)
represents $621 for every single dollar of JPM’s $42 billion equity balance, and
$43 for every dollar of its mainly loan assets.
Leverage of that order is mind-boggling even for already boggled minds.
You may recall how the derivatives debacle of one rogue trader,
Nick Leeson, brought down the 223 year-old Barings Bank in 1995. The capital of
Barings was not $42 billion, but 28 times less at under $1.5 billion; and the
notional value of Nick Leeson’s failed derivatives bets, that the Japanese
Nikkei index would rise by a few percentage points, was not $26,376 billion but
a comparatively paltry .09 percent of that, at about $21 billion!
[[However, this little "venture" may have more than meets the
eye.]]
The Nick Leeson derivatives misadventure was just one amongst several
derivatives debacles in the 1990s. The most spectacular was at Long Term Capital
Management in 1998. It took a $3.6 billion bail-out, engineered by the U.S. Fed
to prevent the LTCM collapse from 'dedigitalising’ the entire global financial
system (which is a perhaps a more with-it way of saying, ‘shaking Wall Street to
its foundations’).
[Later note: The foregoing is as I wrote it on September 11, not knowing
that Wall Street was being shaken to its foundations as I wrote - BW, 9.19]
Note, amongst those helping to build the sophisticated derivatives
trading models at LTCM were two Nobel-prize winning economists who, as Adam
Hamilton puts it, “understood more about markets and volatility than pretty much
everyone else on the planet.” Yet, as liquidity around the world began to dry up
following on Russia’s default on its debts in August 1998, the LTCM capital base
of $3 billion eroded away by $100 million to $500 million A DAY! In no time at
all, the entire capital base was wiped out to honour failed derivatives bets of
$1,250 billion – a ‘notional amount’ equal to not even 5 percent of JPM’s
derivatives position.
“In financial circles10 to 1 leverage is considered very
aggressive,” writes Hamilton, “100 to 1 is considered to be in the kamikaze
realm, but we don't ever recall hearing about large-scale leveraged operations
exceeding 100 to 1 outside of the horrible example of the doomed super hedge
fund Long Term Capital Management.” Not before JPM, that is.
Hamilton goes on, “JPM's management may have effectively created
the most leveraged large hedge fund in the history of the world by using $42b
worth of shareholders' equity to control derivatives representing a notional
value of a staggering $26,276b.”
When push comes to shove, JPM’s derivatives to equity leverage of 626 to 1
is going to be a lot more telling than LTCM’s derivatives to equity leverage of
417 to 1 when it hit digitised dust.
JPM ARE THE UTTERLY DOMINANT DERIVATIVES PLAYERS
J.P. Morgan and Chase Manhattan were both already heavily engaged in
derivatives trading before they amalgamated. Now the merged JPM is the
utterly dominant player amongst the 359 U.S. commercial banks and trusts, with
64 percent of the interest rate derivatives market, 49 percent of the foreign
exchange market, 68 percent of the equity derivatives market, and 62 percent of
the gold derivatives market – while holding just 12.6 percent of the combined
bank assets.
Hamilton writes: “JPM's management, for whatever reasons, has effectively
built up a derivates powerhouse that has almost cornered the entire US
commercial bank and trust derivatives market”.
Why?
I suggested in my introductory paragraphs that the answer may
relate to ‘Gibson’s Paradox’, by which there is an inverse relationship between
the price of gold and real interest rates.
On his way to elaborating on this, Hamilton points out that only a
trivial two tenths of one percent of JPM's total derivatives portfolio is
deployed in the gold market. The $56.8 billion in gold derivatives nevertheless
represents more than the capital value of the entire gold mining industry, at
about $50 billion, and about two and a half years of gold production, at today’s
gold price of from $270 to $275 an ounce – i.e. a total of almost 6,500 tonnes
of gold.
Hamilton asks, “Why is a sophisticated superbank like JPM even
interested in the small and devastated gold market, let alone motivated enough
to maintain derivatives exposure equal to more than 6,400 tonnes of gold?” Or,
putting the question another way: “With Wall Street perpetually telling the
world that gold is a ‘barbaric relic’, why does the premier Wall Street bank
have such large gold derivatives positions? Ever more intriguing questions!”
Then, with regard to interest rates, Hamilton notes that “JPM has an
implied leverage ratio of notional interest rate derivatives exposure to
stockholders' equity of 422 to 1”. That is $17,700 billion.
With that Hamilton is ready to fill in some details about the “intriguing
hypothesis that has recently emerged.”
‘GIBSON’S PARADOX’ WILL FEATURE IN HOWE/GATA LAWSUIT
No doubt the hypothesis, related to Keynes’ ‘Gibson Paradox’ will be
presented in the GATA supported Howe vs BIS lawsuit which was filed on December
7 and which will be heard before a federal judge in Boston, Massachusetts on
October 9, when defendants will present their arguments in support of their
Motions to Dismiss.
In the lawsuit both the pre-merger JP Morgan and Chase Manhattan
are named as defendants with the Bank of International Settlements, other
bullion banks, Lawrence Summers, the former U.S. Treasury Secretary, and Alan
Greenspan, chairman of the Fed. The full text of the complaint is
available for free download in pdf format at
www.zealllc.com/howeplan. htm.
In his complaint, Reginald Howe documents how both ancestor banks of
J.P.Morgan Chase were engaged in well-timed anomalous gold derivatives activity
prior to their merger, and Adam Hamilton comments: “There is no way that JPM
management would have acquired gold derivatives with a notional value worth 1.35
times the total of their entire shareholders' equity base unless they knew and
intimately understood the gold market.”
Hamilton began to get an inkling of the nature of their understanding
through an article by ace researcher and analyst Michael Bolser, ‘GoldGate's
Real Motive?’, which was posted at the Le Metropole Cafe's James Joyce Table on
May 30.
In the article Michael Bolser offered the stunning tentative conclusion
that perhaps a suppressed or shackled-down gold price was a necessary
prerequisite to JPM assuming enormous amounts of interest rate derivatives.
He argued that a managed gold price would ratchet down inflationary
expectations and make interest rate positions much less volatile and risky than
in a truly free market. In support of the argument, Bolser pointed out that
JPM’s interest rate derivatives notional amounts had doubled since the middle of
1998, an astronomical increase given the absolute amounts of dollars
involved.
Then, on 13 August, Reginald Howe took up the theme in a fascinating
commentary entitled ‘Gibson's Paradox Revisited: Professor Summers Analyzes Gold
Prices’, posted at
www.GoldenSextant.com.
Adam Hamilton explains how Howe quotes a 1988 academic paper from the
Journal of Political Economy co-written by President Bill Clinton's future third
Secretary of the Treasury, Lawrence Summers. "Among other things, Mr. Howe
discusses Mr. Summers' interpretation of an observation by the famous economist
John Maynard Keynes on the behavior of gold prices and real interest rates. Lord
Keynes called the relationship ‘Gibson's Paradox’.”
For Hamilton, Howe's ‘Gibson's Paradox Revisited’ essay triggered a solid
understanding of Michael Bolser's shrewd earlier hypothesis on JPM's enormous
interest rate derivatives exposure! “Gibson's Paradox helped to reconcile the
puzzle and answer nagging questions about JPM's gargantuan interest rate
derivatives position and how it could relate to the active management of the
price of gold.” Hamilton set down his conclusion in an essay ‘Real Rates and
Gold’, posted at
www.zealllc.com.
In ‘The JPM Derivatives Monster’ Hamilton writes: “Gibson's
Paradox, defined by Lord Keynes, effectively claims that under a fixed gold
price regime real interest rates remain predictable. If JPM top management
was participating in any US efforts to cap gold, they had full knowledge that a
de facto fixed gold price regime had been stealthily established and they would
have had a carte blanche to massively balloon potentially highly lucrative
interest rate derivatives exposure.
After all, if JPM was convinced gold was under control, and that gold
prices were a prime driver of real interest rates, then what better time to
become the king of the interest rate derivates world than when gold was being
quietly hammered down through massive sales of official sector gold from Western
central banks' coffers?”
SO THERE YOU HAVE IT, IN BRIEF
Would Keynes turn in his grave, I wonder, if he realised how belief
in his ‘Gibson’s Paradox’ has turned a supposedly safe conservative blue-chip
elite Wall Street bank into a hyper-leveraged mega hedge fund with over 600
times implied leverage on stockholders' equity? “And what do the shareholders
themselves think about it?” asks Hamilton. “Do they understand how dangerous
large derivatives positions have proven historically for other companies?”
JPM currently has something like 2,700 large institutional
shareholders who hold almost 61 percent of its common stock. Hamilton asks: “Do
the managers of these mutual funds and pension funds understand that JPM
management has built the biggest most highly-leveraged derivatives pyramid in
the history of the world per US government OCC reports? Do fund managers
understand the inherent risks in leveraging capital hundreds of times over?”
[[Or is there a further, deeper level of knowledge of "Things To
Come"? As my last boss used to frequently quote his grand-daughter, "We shall
soon see."]]
Having once suffered the gambling virus, I can vouchsafe that one’s
understanding of risks diminishes in inverse proportion to how well one is doing
when winning and how certain one is that one has finally found the right formula
for breaking the house. I also had a daddy to cover my losses.
It seems that the gambling virus has hit hard at JPM. The inevitable
downfall, when it comes, will be spectacular, to say the least. Who is going to
cover those losses?
[later - September 19: Or are the losses simply going to be cancelled out,
as part of the price to pay for the terrible tragedy of September 11?]
--------------------------------------------------------------------------------
--- End Message ---
