JP Morgan Is Main Benefactor Of Financial Crisis

The NYT has an interesting series of articles that try to explain the collapse of international banking systems.  These articles even dare to mention the Derivatives Beast to some small degree.  But the Times does us all an immense favor by showing who won in this last financial convulsion: JP MORGAN.  I have targeted JP Morgan for a lot of ire because it operates like Japan in the US news media: it is mostly hidden from view.  Just like most academic pundits like to focus mainly or only on China while ignoring Japan, many pundits focus on the badly exposed idiots running Goldman Sachs and huge parts of our VISIBLE government systems while ignoring JP Morgan.  

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Editorial – Reforming the Financial System – NYTimes.com

The multitrillion-dollar market in derivatives was a major catalyst of the financial crisis. Derivatives are supposed to help investors and businesses manage risk, but after a 2000 law largely deregulated them, they also became tools for vast speculation, creating and amplifying risk instead of reducing it.

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The reason they were deregulated in 2000 was simple: this allowed ‘free markets’ to operate and these always end up being opportunities for ‘freebooters’ to go crazy. That is, pirates take over and use something as a tool for looting banks and exploiting trade for themselves.  I get a LOT of flack for supporting regulations, rules and restrictions.

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There are a lot of people who imagine that ‘freedom’ leads to good things only.  I wish this was true.  But alas, it isn’t true at all.  Freedom works only if one restricts it, often severely.  For example, we are free to drink hard liquor and then jump off a cliff.  Should we do this?  Of course, self-restraint is important.

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But in SOCIAL SYSTEMS there is no possibility of ‘self restraint’ since individuals have little power over large groups!  Being individualistic is loads of fun but it can’t operate any large systems, indeed, it can’t operate even in small families.  The agony of many families is when one member decides to do as they please and don’t give a hoot about the rest of the family.  For example, someone in a family decides to be an alcoholic or drug user. They then cause immense suffering and turmoil within the family usually leading to the collapse of the family and death.

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Individuals can make bad choices.  So can institutions and organizations.  All organizations need counter organizations to keep them from doing stupid things.  When the Constitution was devised by our Founding Fathers, they worked very hard to prevent all power being held by only one authority which is why they restricted the powers of the Presidency so greatly.

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In banking, the role of the central bank is to counteract the power of the political realm as well as the private banking system.  Frankly, private bankers don’t want ANY restrictions on their activities and work tirelessly to prevent this.  By 2000, they had managed to corrupt Congress and the Presidency so badly, they got all the freedoms they wanted and we had the biggest credit bubble in our history.  Which is still causing future problems.

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In general, the administration’s plan to regulate derivatives is serious and far-reaching. But, unfortunately, it is marred by loopholes that would protect banks’ lush profits in derivatives while leaving the system and taxpayers vulnerable to renewed instability.

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The remaining giant bankers are bigger than ever as their rivals went under.  These handful of powerful bankers are very easy to identify.  They have poured money into the government to insure that the Goose with the Golden Eggs is not regulated.  That is, the darling Derivatives Beast will continue to grow ever bigger.  As I correctly figured out 2 years ago, this entity is the most dangerous thing to ever be created by investment bankers.  It looms over the entire planet’s financial systems.

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It is no surprise that the Chinese may have ( this is still not official at all) toss the derivatives market under the bus and run it over a couple of times.  If anyone can kill this creation of the big international bankers, it is China.  This may even end up being part of the rescue package China will use when the US empire finally goes bankrupt.

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I also predict that the tool used to kill the derivatives deal making will be forcing world finance to be done on the basis of gold/SDR restrictions.  There is not a 100% chance of this happening, only about 20% chance.  But the possibility of this causes great fear in the international banking for profit community.  Their bread and butter and caviar bonus money comes nearly entirely from the derivatives markets.

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The basic flaw in the plan is that it splits the derivatives market in two. Standardized derivative contracts would be traded on regulated exchanges. Customized contracts would continue to be privately traded — which could open the door to some of the same below-the-radar transactions that have already proved so disastrous. Beyond an odd contract here or there, derivatives should be standardized and exchange traded, period.

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The administration’s proposed legislation also would exempt some derivative investors, like many hedge funds, from the requirement to trade standardized contracts on an exchange. This major exception could undermine the entire objective of lowering risk, increasing transparency and fostering efficiency.

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As I have often pointed out, most of the derivatives market is a ghost market.  Unlike commodities derivatives, the greatest growth in derivatives are the various ‘game’ derivatives.  Bets on all sorts of deals of varying quality and quantities.  The bankers use the brains of the wizards who often physics experts, astronomers and others who work in quantum theories and are accustomed to thinking in infinite numbers.  These mighty minds are hired to do one thing: figure out schemes to create infinite profits doing the least work possible.

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This is due to basic human laziness.  If one can conjure money out of thin air doing various accounting or investing tricks, the less it is tied to the real world, the easier it is to make it suddenly shoot up to infinity.  Nothing is easier to shoot to infinity than to print paper money with ever more zeroes.  Since this is laughably easy, various governments resort to this, over and over again.  Way back in Yuan China nearly 1,000 years ago, inflation of the currency ran rampant nearly immediately after the Song dynasty first dabbled in paper money right before Ghengis Khan invaded and killed everyone.

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The hard work within any paper currency system is to NOT add zeroes and NOT increase the money supply too fast.  Resisting temptation is the entire business of running a paper money banking system.  Derivatives are the exact same equivalent of ‘printing money’.  It is easy to do.  The hard part is figuring out how to attach this magic money making to something real so it looks as if it is part of a real economic system.  But then, being able to detach it from anything real so it can shoot to infinity.

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Look at how it grew after 2000!  Of all the systems on earth, this one is the one that made a beeline to infinity.  The job of any governing system is to patrol for any signs of anything suddenly taking off and heading towards infinity.  This is the alarm bell: the ‘J-hook’ or ‘hockey stick’ graph is a sign of destruction or collapse.  When any system exhibits this characteristic, regulators must shut it down or put up barriers to prevent further growth.  It doesn’t matter if this is population groups, germs spreading, paper money printing, house values: our great enemy to our future happiness is ANYTHING growing at an insane, accelerating rate!

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Obama’s group of goofballs don’t want to stop the Hell Hound Hedge Fund pirates.  Nor do they want to regulate the most explosive part of the Derivatives Beast: the over the counter private deals.  This is because, the ability to make funny money via magic is embedded inside this market.  And the gnomes would rather shave their lower body parts off than part with the OTC markets.

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Unboxed – Creating Quant Models That Are Closer to Reality – NYTimes.com

But the real failure, according to finance experts and economists, was in the quants’ mathematical models of risk that suggested the arcane stuff was safe.

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This is another article wherein the NYT tries to explain the recent total collapse of global profit banking systems.  The quants who I call ‘wizards’ were hired to use the same mathematical systems to describe the supposedly infinitely rapidly expanding universe to create a similar system that would also be infinitely expansionist.

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They managed this, using the exact same models and tools used to describe (I believe, erroneously) the expanding universe. Now, I have questioned this model due to the increasingly powerful information that most, if not ALL galaxies are NOT flying  away from each other but are falling INTO each other.

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This is paradoxical because the size of the universe is growing, not shrinking.  Like all immense paradoxes, one should suggest that the forces at work are not elegant and simple but are complex and dangerous.  One of the lessons I learned in life is, where there is paradox, there is great danger. That is, we have two opposite systems running simultaneously.  And these systems are in direct conflict with each other.

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This is why I mention the Cave of Wealth and Death so much: in this place, zero and infinity are one and the same yet operate exactly opposite of each other.  Just when you think you are looking at infinity it suddenly and very violently becomes zero and vice versa.  Nothingness can suddenly explode into the Big Bang Universe and an expanding Universe can suddenly collapse into nothingness.  We don’t know and CAN’T know for certain because the process eliminates all prior knowledge.

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The risk models proved myopic, they say, because they were too simple-minded. They focused mainly on figures like the expected returns and the default risk of financial instruments. What they didn’t sufficiently take into account was human behavior, specifically the potential for widespread panic. When lots of investors got too scared to buy or sell, markets seized up and the models failed.

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How in the name of the Goddess Libra, can anyone NOT know about the economic elements of ‘panic’?  History has story after story after story going back in time to give us a very good idea as to what happens when a speculative market surges to seemingly infinity only to violently and suddenly collapse in just one short period, days or even hours?

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Only a lunatic could claim that this was unknown and leave this out of economic theories or future speculative systems!  All speculators know about panics.  They think about this all the time!  What they hope for is to FORESEE these panics and bail out before other gnomes seeking to see the panic coming, bailing out.

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Usually, they all bail out at once!  HAHAHA.  This is a PARADOX!  That is, the more these guys focus on being able to bail out of markets before they collapse, they collapse the markets by bailing out early!  Since they all watch and spy on each other and read the same news and use the exact same astronomical wizards to track things, since they all believe in the Horoscope of Charts and Graphs and look for ‘heads and shoulders’ and other goodies, they all do the exact same things at the exact same times!

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Thus, they remain a MOB.  And are uncontrollable when they dump everything and run for the exits as fast as possible.  So, anyone devising an economic model which ignores this reality must be aware of this very powerful force: panic.

. That failure suggests new frontiers for financial engineering and risk management, including trying to model the mechanics of panic and the patterns of human behavior….

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HAHAHA. The mechanics of panic are already understood by the gnomes.  They know they are a mob which is why they socialize with each other: this is how they track the most important part of their economic machine which is gossip.  One of the paradoxes of gossip is, everyone loves it and needs it and it is quite valuable but no one wants to learn from gossip.  So we all talk about things but leave them to happen over and over again.  This is why regulators have to exist.  They prevent things from continuing despite everyone knowing it is very naughty to let something continue.  This, incidentally, is why we have laws.

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…J. Doyne Farmer, a former physicist at Los Alamos National Laboratory and a founder of a quantitative trading firm, finds the behavioral research intriguing but awfully ambitious, especially to build into usable models. Instead, Mr. Farmer, a professor at the interdisciplinary Sante Fe Institute, is doing research on models of markets, institutions and their complex interactions, applying a hybrid discipline called econophysics.

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To explain, Mr. Farmer points to the huge buildup of the credit-default-swap market, to a peak of $60 trillion. And in 2006, the average leverage on mortgage securities increased to 16 to 1 (it is now 1.5 to 1). Put the two together, he said, and you have a serious problem.

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Econophysics?  HAHAHA.  This is why I have tried, in vain, to personalize the forces in ‘econophysics’ and express their characteristics using ancient paganistic imagery.  That is, if we look at these impersonal forces as cartoon figures, we can see their shape and form more clearly.  Complex relationships become clearer.  Understanding how the cosmic sisters, Zero and Infinity, interact is easier than looking at complex formulas.  That is, instead of needing to be genius to understand strange universal forces, we can ‘see’ them and make accurate predictions based on these stories.

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There are many levels which one can digest incoming information.  One is mathematics.  This is a core system and is the fundamental basis for all other systems.  Then, there is the Laws of Nature business which sets the rules and regulations as to how physical things interact.  Then there is metaphysics which is all that is inside our brains which evolved over time in very strange ways.  Integrating all of this into some sort of system is very difficult since our emotions are out of control.

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We want to have reality conform to our desires and emotions, not the other way around.  The concept of balance is the bane of our emotions.  Note that when we fall in love, we become emotionally very unbalanced.  And when we fall out of love and it turns to hate, it mirrors the love process.  Often, the more we love something at first, the more we hate it if we turn against it.  All throughout the universe as well as our internal minds, the tension between exact opposites is very powerful.  This paradoxical situation is kept in control by balancing opposites.

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This implies tension.  That is, a system that works is like evolution: nature gets into an elaborate balance.  Then outside forces change this and all is thrown into chaos.  The earth is not stable or simple.  It is a complex balancing act in danger of shifting violently if any one factor is changed.  For example, the sun’s activity rises or falls and life on earth is contorted with changes.  A continent crashes into another continent and the entire planet’s ecosystem is totally altered.  Species and life forms vanish forever and new ones appear out of the mess.

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Below is another NYT special that is pretty interesting and I wish to examine it closely.  These three boxes show the relative size, vis a vis each other, of the financial banking powers starting in 2007.  Watch how some vanish, the entire structure shrinks dramatically in size and then resumes growing with far fewer entities.  And take special notice which one of these entities grew much bigger during all this!

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How the Giants of Finance Shrunk, Then Grew, Under the Financial Crisis – Interactive – NYTimes.com

$1.87 trillion October 7, 2007

$290 billion March 9, 2009

$974 billion Sept 7, 2009

Everything shrank and then doubled in size in just one year.  This is thanks to the US taxpayers recapitalizing these guys at great, great future expense.  We are rapidly using up our credit with the entire planet, trying to restart these guys!  And note who grew the most: JP MORGAN.  Not Goldman Sachs!  Throughout this last 3 years, I have been hammering away at JP Morgan.  It is a fad right now to go after Goldman Sachs.

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I would dearly love to run with the herd but then, what is the point of me existing?  If we all think the same thing the same way, this is a sure-fire sign that we are not thinking at all.  There are many herds online that run this way and that.  Mostly, there are many unwritten rules as to what you are allowed to think or believe.  Since I cross all frontiers and think all sorts of things and look at stuff from my own point of view, this often crosses the mob rule systems.  WELL DUH!

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In this case, the Rolling Stone story about Goldman Sachs was misleading.  That is, it targeted the wrong Beast.  JP Morgan, like the Rothschilds, has been a this for a lot longer than Goldman Sachs.  And wields a lot more concealed power.  This is probably why the Washington Post ran that bizarre story about JP Morgan ‘suddenly’ going to DC and setting up shop there!  Talk about insane!  JP Morgan IS the government and unlike Goldman Sachs, has learned to be far more invisible.

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JP Morgan has many controls within the Federal Reserve, itself.  One might suggest, it IS the Federal Reserve and this is one mighty reason JP Morgan has suddenly gone to DC: to stop Ron Paul’s ‘audit the Fed’ bill!  This bill will open a can of worms.  We will finally get to see exactly how JP Morgan operates!  Wow!  Another reason we should support this bill!

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