Readers, personally I would have entitled this article differently, more on the order of Don't Forget Greece, But Look At How This Derivative Collapse Is Spreading To Other Countries. In about a year the economic landscape is going to look much worse. Neo-Classical or as William Black likes to say, Theo-Classical Economics, is essentially as massive criminal conspiracy, some times also described as corporatism.

“Yet on a wholesale basis, Goldman Sachs and others not only had the inside information, they had created it. That is why Goldman started trading against the the interests of its clients to whom it was selling mortgage backed securities that were designed to fail”

“Both the investor and the borrower would have understood that sometimes very little of the investors’ money was actually being used to fund mortgages, with the rest being sued to buy insurance, credit default swaps, pay fees, profits, kickbacks and commissions.”

Comments: Everyone now has heard of credit default swaps but very few people understand what they mean and fewer still understand their importance in connection with the securitization of residential mortgage loans and other types of loans.The importance of understanding the operation of a CDS contract in the context of foreclosure defense cannot be understated.

Readers, this is a fairly basic article, accessible to all. It brings home the same set of patterns of ignorance and criminality that has been seen time and time again. Also note that GS set up these derivatives and then bet via other derivatives, credit default swaps, that the whole process would crash and burn. And Robert Scheer also notes that the very same set of interests is bribing the political process in the US such that no reform is even possible in the near term. So really, all we get to do is to describe the scenery as we plummet to another major economic jolt downward.

Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules. At some point the so-called cross currency swaps will mature, and swell the country's already bloated deficit.

Greeks aren't very welcome in the Rue Alphones Weicker in Luxembourg. It's home to Eurostat, the European Union's statistical office. The number crunchers there are deeply annoyed with Athens. Investigative reports state that important data "cannot be confirmed" or has been requested but "not received."

Readers: this is a long article so be prepared to consume it in more than one visit. Mr. Liu, as I have mentioned before is a major macro-economist who also operates an investment consultation firm in New York City. His economics is generally impeccable and thoroughly grounded upon historical analysis. Why his material is not also published in book form, I have never understood. It could be very well be that he uses his columns at the Asia Times On Line site to demonstrate and validate his perspective as a consultant.

http://www.guardian.co.uk/business/2008/sep/20/wallstreet.banking
The Guardian, Saturday 20 September 2008
Article history

This article was amended on Monday September 29 2008

www.chinaview.cn 2009-11-29 21:05:36

Reader: this article is categorized under "derivatives" because it was by the guaranteeing supposedly provided to insure that the money/credit invested is this project would be protected. This insurance is also known as credit default swaps. Predictions are that this collapse is going to take down a lot of other activities in the hustle to pin the debt onto someone. It will be a larger version of the AIG collpase. Stay tuned.

Readers: I hate the title of this article, because "Cassandra" as a label has generally negative connotations. So I placed quotation marks around it and added "Prophetess." Brooksley Born should be lionized and described as the heroine that she was, held up as a role model, and have her detractors deliver personal apologies. It is the crew who attacked her in the interest of their patrons and theo-classical economics that should be taken to the woodshed.

original url: http://247wallst.com/2009/05/06/secs-salvo-in-the-new-war-against-inside...

Insider trading has a new face. Credit default swaps, long one of the least understood and least regulated sets of financial instruments can be used for insider trading in a similar manner to stocks, but the government has never brought a case about illegally gotten CDS profits. That changed yesterday and it could be the beginning of a new wave of investigations by the SEC.