The System is Going Fast

Pix: Badfinger, the Magical Christian

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If you want it, here it is, come and get it;
But you better hurry, 'cause it's going fast;
The system's going and it's going fast.
There should be no talk about how the crisis of system is “coming”—it’s already here. The crash of the dollar system will cause an explosion of the entire international financial system. Already, pieces of the exploded planet are flying around like asteroids—but only a fool would say that the asteroids are “going to cause” the explosion!

The vast, estimated t hundreds of trillions of financial derivatives contracts held by the banks, along with "leveraged losses" on credit assets, are the new locus of the losses. For instance, the giant reinsurance company Swiss Re acknowledged that it had sustained a $1 billion loss, coming from just two derivatives contracts known as "credit swaps." Swiss Re refused to name the counterparty, undoubtedly another bank.

On November 16, Goldman Sachs chief U.S. economist Jan Hatzius had issued a chilling estimate of the fall in the banking system. He forecast that direct U.S. bank losses in the next year or so would be $400 billion (a very similar estimate had just been made by Deutschebank's chief economist). Just assuming that half of these losses are in highly leveraged assets (where there was a 10:1 ratio of borrowed dollars in the money used to buy the assets), Hatzius forecast that the total drop in the ability of the banks to lend, will be $2 trillion. For comparison, in 2006, the total lending of U.S. banks to households and non-financial corporations was $3.24 trillion. So that is about it, unless you want to do the cash in the wheel barrow thing.

So, dear reader, do not panic. There are still solutions. The start is to continue to get state legislators, and then Congressmen to back the HBPA, the Homeowner and Banking Protection Act, and to create a firewall to protect the US Banking System from these endless financial derivative contracts. First, that starts with freezing the mortgages and real estate payments and re-adjusting them.