Editorial – 26 September 2011

Return to Editorial index

Standing at the edge of the precipice

by James Fairbairn

So here we are at last, standing at the edge of the financial precipice that we have seen coming for 3 years.  The way ahead is not clear however what is clear is that the drop in front of us is huge. But how did we get to this point, and for what agenda?

As we have warned since the collapse of Lehman Brother’s back in late 2008 ongoing financial turmoil, that we at Open Your Eyes News refer to as The Second Great Depression, is occurring as no accident of the capitalist system but as a coordinated asset stripping of the West, in particular the USA and the EU.

As all investors know deep down, playing the market is in essence no different from gambling on sport or in a casino. Your success of failure is dependent upon your smart investment/bet choices which are made from your analysis of the market information that you have to hand. Some of the time you win, and some of the time you lose, depending upon what way the market goes.

However this is one game that is well and truly fixed. The cards are marked, the information controlled, and the house never loses…ever. For today the market is not dominated by a multitude of small investors, but by huge investment banks and hedge funds that literally have trillions of dollars at their disposal. They are the real players, and you are just the source of their own future wealth creation.

So what kind of control can you have with trillions of dollars? Total is the answer. The politicians dance to your tune. The markets can soar or crash at the merest whisper of your plans, as the herd veers from irrational optimism to irrational fear. The media carefully releases the information that you wish to utilise to control the herd’s mood, and does so willingly as you own them anyway.

And then there are the great arbiters of “form”, the credit rating agencies. The problem is that between 3 of them they control 95% percent of the market (Standard & Poors, Moody’s and Fitch). Do you really think for one minute that these 3 commercial entities are actually independent from the power and influence of the big players? Let us not forget that these are the same rating agencies that before 2008 rated some financial instruments as “AAA+”, but in reality turned out to be more toxic than Fukushima. So when they downgrade a company or a currency, you the simple punter have already missed the boat. The players have already sold, and you are left with a big load of red on your profit & loss account.

So where are we now? What has essentially happened since the Tech Crash of 2000, is the the balloon is re-inflated with “cheap money”. So when that balloon burst in 2008 then more “cheap money” was found to re-inflate, this time even bigger. So when the inevitable ballon burst happens next, it will be even more spectacular than before.

The problem is that this time you will find out the hard way that you are the collateral. Because when the banks called for bailouts in 2008, for the crash which they caused, the tame politicians came running with cheque book in hand. Many trillions of dollars later in the USA alone (the exact number is still secret however Reuters stated the figure of $13 trillion of US taxpayers money back in early 2009, and some commentators suspect in excess of $24 trillion) the banks turned off the tap and “normal service” was resumed. The problem is that the politicians paid for the bailouts by getting into debt…. with the banks. However with their credit limits exhausted and tax payers squealing as they are squeezed ever tighter, the inevitable defaults are coming. The problem is that this time, you (and your descendants) owe the money, and the players took their wealth from the casino long before you even knew their was a problem.

So next time you read financial news headlines, like those of last week, which hinted that the smart money is getting out of gold and investing into the “safe haven” that is the US dollar and US Treasury bills, think twice. All that is really happening is the players are looking to drive down the price of one commodity (in this case gold) so that they can buy more of it – essentially with your money – as they have just sold you the currency of the most indebted nation in history at a profit, knowling full well of the crash looming around the corner.

So what about the burst balloon this time? Well they will re-inflate it yet again, and so the merry-go-round will start again, with you ever poorer, and they ever richer. But the value of the money will have fallen yet again. They however will be safe in the knowledge that their gold will always retain its value, and when they decide to re-enter the game they will hold all the cards.

Finally a valuable historical financial lesson: If you had given an ancient Roman a gold coin he would have been able to afford a new toga, a dagger and a good meal out. If you received the same gold coin today you would be able to afford a new suit, a mobile phone and a good meal out. The value of gold itself has not changed, just the currency measure of its value has depreciated, and will keep doing so with each re-inflation of the balloon.