Jim Willie: My source from Europe wrote, “An event driven chain reaction has been triggered deep inside the system, with Interest Rate Swaps at the center. This has already gone viral. They will have to trigger some mega-crises, most likely in Europe & Greece, as a diversionary tactic. They need to have something to blame things on. Once Greece implodes, so will the big French banks and likely some Italian banks. It is all so obvious and predictable.”
ENGINEERED FLIGHT TO SAFETY
The hidden tool to maintain the 0% interest rate when supply grows by $1.5 trillion annually, and when dependence on the USFed for bond monetization picks up the slack, is the Interest Rate Swap contract. JPMorgan would prefer that the public not learn about it.
The IRSwap setbacks were the underlying cause of the JPM losses. The giant bank does not want attention give to this derivative tool which controls the bond market in a devious artificial manner. As far as debt is concerned, the United States is Greece times 100. It is Italy times 20. It receives a pass from the bond market, precisely because the nation prints the money and controls the vast Interest Rate Swap support mechanism. But the tower is finally exposed.
The IRSwaps act like giant buttresses to support the evergrowing USTreasury Tower of Babel that stretches to the sky. Every year, the expansive tower grows another $1.5 trillion higher. Every year, the challenge grows exponentially for the JPMorgan master financial engineers to apply their control panel magic to achieve equilibrium. Every year, the degree of difficulty becomes more arduous. Every year, the tower must withstand the high winds from Europe, where the bond market is doing more than undergoing stress. It is crumbling before our eyes. In a way, Europe helps to conceal the great strains from the broken USTreasury Bond market, held together by interest derivatives. Few analysts connect the failure of the Draghi LTRO funds to the JPMorgan losses. They do not grasp the gravity of the USTBond problem.
What the Interest Rate Swap does is to create artificial demand for the end product USTBond, no real buyer, in a magnificent display of 50:1 leverage, sometimes as much as 100:1 leverage. Repeat that — no real buyer of the USTBond, all artificial, all coming from the IRSwap device. Few bond experts even realize this fact of bond life. (…) the USFed is stuck at 0% forever, due also to a very different hidden market force. Any rise, even a moderate rise, in the USTBond yield would result in multi-$trillion losses from the derivatives hidden at work. The vast Interest Rate Swap would deliver massive blows like a machete across the entire financial sector. Every big US bank involved in heavy IRSwap enforcement as bond market intervention would suffer losses in the multiple $trillions.
At the end of this current cycle is a massive implosion of the big US banks, followed by global isolation of the USDollar, ending with an inevitable USGovt debt default. The implosion of the big US banks has begun, with JPMorgan making its defensive deceptive admissions of serious loss and worse, lost control.
Read the COMPLETE article HERE:
http://www.marketoracle.co.uk/Article34819.html – First published on May 24, 2012
(c) 2005-2011 MarketOracle.co.uk
Related information – DO NOT MISS!:
- Listen to Jim Willie’s latest and excellent radio interview
with TURD FERGUSON here:
”The JPM derivative fiasco has come into sharper focus and, of course, the global financial condition has continued to deteriorate. In this podcast, Jim has a forum to discuss these issues at length. Though it’s about 55 minutes long, at least 50 minutes are of Jim talking in a stream of consciousness that will keep your attention. Please make time over this 3-day weekend to listen to the podcast in its entirety. You won’t be disappointed.’‘ tfmetalsreport.com
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