Our Downfall is Almost Guaranteed!
Much has been written about how the US is following the classic cycle of historical growth and demise followed by dozens of civilizations in the past. For most of us, these comparisons can be easily dismissed because we cannot relate the parallels between us and ancient Rome or the Myans to give it much credibility. There is, however, a trait of a society that most should be able to agree will almost certainly result in the fall of the society from a position of power and influence in the world. This trait can be described thus:
“When a society allows a class of people to rise to a position of unchallenged power and that class of people have no regard for anyone but themselves, then they will destroy the society from within.”
It is a simple concept and quite logical. You are, of course saying to yourself, “what has that got to do with the US?”. Believing, as you do, that there is no such class of powerful people in the US and certainly none that do not have some interest in the success of the US society. Unfortunately, you are wrong on both counts. There IS a very small group of people (about 15) that have incredible power and influence over the US economy. Much more powerful than the Fed, or Congress, or Wall Street or the banks. These people wield more money and are above the law and reproach from anyone else. They operate in secret and outside of the law – often in direct violation of the law but they are nearly totally immune to prosecution. If I named then, you would not recognize any of them – well, perhaps one. They do things to the economy that are so complex that often the Fed, or Congress, or Wall Street or the banks don’t really know or understand what they are doing.
Here is the true story of our most recent economic collapse. I have simplified it as much as I can but rest assured that this was performed in such a manner that no one really knew what happened and after they did find out, they were so afraid of the consequences of the information leaking out, that they concocted an elaborate cover story that seemed plausible.
A company we’ll call LB was trading at about $64/share in Feb 2008. As with all stocks, the share price was, in part, due to the total number of shares that had been released and sold by LB. As with all stocks, if more shares become available, the price per share goes down. Simple Supply and Demand. “Someone” began selling shares of LB. These were not actually shares but were IOU’s that a share was owed to the buyer. This is something that is allowed on Wall Street to facilitate sales without the burden of slow administration but it was intended to be used only on rare occasions and in small lots of shares. But this time, instead of a few hundred or a few thousand shares, millions of shares were being sold over a really short period of time. The effect on the LB stock price was exceedingly predictable – it went down.
When it went down, someone else made a huge profit on a short position they took out in early Feb on the LB stock. They were able to sell over a million shares of stock at a $4 per share gain in just 7 days. What was unusual about this short selling was that the person that took out the “put” “bought” the shares on margin – meaning that they did not actually take position of the LB shares that they later sold at a higher price when the stock price dipped. This type of transaction is called Naked Short Selling or just naked shorting. Naked shorting is not legal in the US but it is actually a common practice since it is conducted off-the-books and is very hard to identify by regulators.
Whoever the someone was, they had taken advantage of the drop in LB stock price, almost as if they knew it was going to happen. Using non-public foreknowledge to make a profit on Wall Street is also illegal but someone did it and made off with millions of dollars.
Were it to end there, the LB stock would have dropped by about $5 or $10 and then recover and no one would think anything else about it. In fact, the stock did rise some but the sale of unsupported LB shares continued and over the next few months, millions more shares of LB stock were dumped on the exchange by “someone”. In that time, someone else was taking repeated naked short selling positions on LB. Each time, the stock went lower, someone got richer until by the end of Sept 2008, the LB stock was selling for 5 cents a share.
The SEC has positively confirmed that these unbacked stock IOUs and the naked shorting was occurring but they have chosen not to investigate. They could easily identify the culprit but have not. Why? It turns out that there are dozens of companies that have experienced this process of naked shorting on stocks that have been artificially manipulated to decline – making the short positions worth millions. Some of these companies include: VeraSun Energy (VSE), Allied Capital (ALD), Ford, GM, Dendreon Corp., InterMune, Force Protection, to name just a few.
This game can be played as long as investors try to take positions in failing stocks because they have good “fundamentals”. That is, if the company is basically sound and solid, it is an ideal candidate for this kind of fraud. The “someone” sells the IOU stocks and the “someone else” does the naked shorting. Then, because the company is basically sound, investors buy up the lower priced stock – pushing the price back up so the process can be repeated.
OK, so who is doing this. The someone that is selling the IOU stocks has to have the complicity of a brokerage firm that is licenses to sell stock on the exchange. They also have to have a huge amount of money in order to repeatedly sell these stocks and buy these short positions. If they take a short position and the stock goes up, they can be stuck with a huge loss but records show that happens rarely.
This someone has to be so powerful that when the SEC finds out who it is, they take no action, despite the fact that all this is illegal. Who could be that powerful. Turns out that the mysterious world of hedge fund managers are the ideal candidates. Hedge funds do not come up normal regulations so what they do to manipulate the market and/or coordinated assaults on businesses is completely off-the-books. Every time anyone tries to setup regulations that might cramp the style of these hedge fund managers, they get fired or removed or eliminated or voted out of office or some other method that will stop their efforts. This has been occurring on a daily basis for the past 40 years but has recently gone global in scale and scope.
The bottom line is that the market is not at all what you think it is. There are players in the market that regard you as fodder to be bilked and discarded without any regard for your misfortunes.