‘Oh, Zeus Be Merciful!’ Forever Yours, Hermes

Most people understand that an economic crisis, wherever it is, means cuts and higher taxes, but what is an economic crisis to those who sit on the top of the global Olympus and how painful is it to take a free fall from that kind of hight?

The Credit Default Swaps for 2011 in the USA were struggling around $32 trillion, considering that the total GDP of the entire USA was $14.6 trillion. The total derivatives were gyrating around $707 trillion plus roughly couple hundred billion more. That means the amount of credit default swaps held by the banks overshadows the economic output of the whole country. That also means there is no imaginable way for banks to pay these sums back simply because there is not enough money in the world. And this is the interesting part, the very same banks that would have to pay the money back, are in position to declare if their credit event is a default. The whole system is a magic circle. Unless the banks announce themselves defaulted, they don’t have to pay.

This is what brought down the MF Global which was speculating in the European bonds. The idea was to have risk-free speculations due to the CDS bought from the ISDA banks, and MF Global would be able protect itself if its bets in Europe had gone bad. When the crisis stroke in Greece the agreement in Europe was reached – the investors would take a write-down of 50% of Greek bond debts. Ultimately, MF Global could not cover its losses and collapsed because ISDA would not declare the Greek credit event default.

As Ellen Brown wrote on February 21:

‘As Aristotle told this ancient Greek tale, Midas died of hunger as a result of his vain prayer for the golden touch. Today, the Greek people are going hungry to protect a rigged $32 trillion Wall Street casino.’

The financial gods of Wall Street do not answer to any government or to the people. The profit from derivative sale are now the huge bonuses on Wall Street.

Basically, the system is so extremely leveraged that even tiny Greece is a real threat that can give Wall Street a free ride to financial underground. In fact, this is only a tip of an iceberg because European crisis is threatening the whole global economy. 2011 was marked by the spread of financial crisis in Euro zone countries and investors might have to take write-down of 70% of some European debt, will that be declared a default? Probably not, because that would drive 5 most powerful banks of ISDA to insolvency and the end of their rule.

There is another issue to consider, whether or not euro crisis will compromise Democrats’ chances in the forthcoming elections.

“This is of huge importance to our own economy,” Obama said last week after meeting Herman van Rompuy, European council president; José Manuel Barroso, European commission president, and others. “If Europe is contracting or if Europe is having difficulties, then it’s much more difficult for us to create good jobs here at home.”

Will Barrack Obama give away his place on the Olympus to the Republican candidate and declare that his administration has lost the fight?

By  Ksenia Solovyova, Crystal Blankenbaker, Juliana Milanesio, Irina Czako


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