[A-List] Fwd: Matthias Chang: Global Collapse of the Fiat Money System - Too Big To Fail Global Banks Will Collapse Between Now and First Quarter 2011
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Subject: Fwd: Matthias Chang: Global Collapse of the Fiat Money System
- Too Big To Fail Global Banks Will Collapse Between Now and First
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Date: Sun, Sep 5, 2010 at 1:05 PM
Subject: Matthias Chang: Global Collapse of the Fiat Money System -
Too Big To Fail Global Banks Will Collapse Between Now and First
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Global Collapse of the Fiat Money System: Too Big To Fail Global Banks
Will Collapse Between Now and First Quarter 2011
When Quantitative Easing Has Run Its Course and Fails
By Matthias Chang
URL of this article: www.globalresearch.ca/index.php?context=va&aid=20853
Global Research, August 31, 2010
Future Fast Forward
Readers of my articles will recall that I have warned as far back as
December 2006, that the global banks will collapse when the Financial
Tsunami hits the global economy in 2007. And as they say, the rest is
Quantitative Easing (QE I) spearheaded by the Chairman of Federal
Reserve, Ben Bernanke delayed the inevitable demise of the fiat shadow
money banking system slightly over 18 months.
That is why in November of 2009, I was so confident to warn my readers
that by the end of the first quarter of 2010 at the earliest or by the
second quarter of 2010 at the latest, the global economy will go into
a tailspin. The recent alarm that the US economy has slowed down and
in the words of Bernanke “the recent pace of growth is less vigorous
than we expected” has all but vindicated my analysis. He warned that
the outlook is uncertain and the economy “remains vulnerable to
Obviously, Bernanke’s words do not reveal the full extent of the fear
that has gripped central bankers and the financial elites that
assembled at the annual gathering at Jackson Hole, Wyoming. But, you
can take it from me that they are very afraid.
Let me be plain and blunt. The “unexpected developments” Bernanke
referred to is the collapse of the global banks. This is FED speak and
to those in the loop, this is the dire warning.
So many renowned economists have misdiagnosed the objective and
consequences of quantitative easing. Central bankers’ scribes and the
global mass media hoodwinked the people by saying that QE will enable
the banks to lend monies to cash-starved companies and jump start the
economy. The low interest rate regime would encourage all and sundry
to borrow, consume and invest.
This was the fairy tale.
Then, there were some economists who were worried that as a result of
the FED’s printing press (electronic or otherwise) working overtime,
hyper-inflation would set in soon after.
But nothing happened. The multiplier effect of fractional reserve
banking did not take off. Bank lending in fact stalled.
Let me explain in simple terms step by step.
1) All the global banks were up to their eye-balls in toxic assets.
All the AAA mortgage-backed securities etc. were in fact JUNK. But in
the balance sheets of the banks and their special purpose vehicles
(SPVs), they were stated to be worth US$ TRILLIONS.
2) The collapse of Lehman Bros and AIG exposed this ugly truth. All
the global banks had liabilities in the US$ Trillions. They were all
INSOLVENT. The central banks the world over conspired and agreed not
to reveal the total liabilities of the global banks as that would
cause a run on these banks, as happened in the case of Northern Rock
in the U.K.
3) A devious scheme was devised by the FED, led by Bernanke to assist
the global banks to unload systematically and in tranches the toxic
assets so as to allow the banks to comply with RESERVE REQUIREMENTS
under the fractional reserve banking system, and to continue their
banking business. This is the essence of the bailout of the global
banks by central bankers.
4) This devious scheme was effected by the FED’s quantitative easing
(QE) – the purchase of toxic assets from the banks. The FED created
“money out of thin air” and used that “money” to buy the toxic assets
at face or book value from the banks, notwithstanding they were all
junks and at the most, worth maybe ten cents to the dollar. Now, the
FED is “loaded” with toxic assets once owned by the global banks. But
these banks cannot declare and or admit to this state of affairs.
Hence, this financial charade.
5) If we are to follow simple logic, the exercise would result in the
global banks flushed with cash to enable them to lend to desperate
consumers and cash-starved businesses. But the money did not go out as
loans. Where did the money go?
6) It went back to the FED as reserves, and since the FED bought US$
trillions worth of toxic wastes, the “money” (it was merely book
entries in the Fed’s books) that these global banks had were treated
as “Excess Reserves”. This is a misnomer because it gave the ILLUSION
that the banks are cash-rich and under the fractional reserve system
would be able to lend out trillions worth of loans. But they did not.
7) Because the global banks still have US$ trillions worth of toxic
wastes in their balance sheets. They are still insolvent under the
fractional reserve banking laws. The public must not be aware of this
as otherwise, it would trigger a massive run on all the global banks!
8) Bernanke, the US Treasury and the global central bankers were all
praying and hoping that given time (their estimation was 12 to 18
months) the housing market would recover and asset prices would resume
to the levels before the crisis. .
Let me explain: A House was sold for say US$500,000. Borrower has a
mortgage of US$450,000 or more. The house is now worth US$200,000 or
less. Multiply this by the millions of houses sold between 2000 and
2008 and you will appreciate the extent of the financial black-hole.
There is no way that any of the global banks can get out of this
gigantic mess. And there is also no way that the FED and the global
central bankers through QE can continue to buy such toxic wastes
without showing their hands and exposing the lie that these banks are
It is my estimation that they have to QE up to US$20 trillion at the
minimum. The FED and no central banker would dare “create such an
amount of money out of thin air” without arousing the suspicions and
or panic of sovereign creditors, investors and depositors. It is as
good as declaring officially that all the banks are BANKRUPT.
9) But there is no other solution in the short and middle term except
another bout of quantitative easing, QE II. Given the above caveat, QE
II cannot exceed the amount of the previous QE without opening the
proverbial Pandora Box.
10) But it is also a given that the FED will embark on QE II, as under
the fractional reserve banking system, if the FED does not purchase
additional toxic wastes, the global banks (faced with mounting
foreclosures, etc.) will fall short of their reserve requirements.
11) You will also recall that the FED at the height of the crisis
announced that interest will be paid on the so-called “excess
reserves” of the global banks, thus enabling these banks to “earn”
interest. So what we have is a merry-go-round of monies moving from
the right pocket to the left pocket at the click of the computer
mouse. The FED creates money, uses it to buy toxic assets, and the
same money is then returned to the FED by the global banks to earn
interest. By this fiction of QE, banks are flushed with cash which
enable them to earn interest. Is it any wonder that these banks have
declared record profits?
12) The global banks get rid of some of their toxic wastes at full
value and at no costs, and get paid for unloading the toxic wastes via
interest payments. Additionally, some of the “monies” are used by
these banks to purchase US Treasuries (which also pay interests) which
in turn allows the US Treasury to continue its deficit spending. THIS
IS THE BAILOUT RIP OFF of the century.
Now that you fully understand this SCAM, it is left to be seen how the
FED will get away with the next round of quantitative easing – QE II.
Obviously, the FED and the other central banks are hoping that in
time, asset prices will recover and resume their previous values
before the crisis. This is a fantasy. QE II will fail just as QE I
failed to save the banks.
The patient is in intensive care and is for all intent and purposes
brain dead, although the heart is still pumping albeit faintly. The
Too Big To Fail Banks cannot be rescued and must be allowed to be
liquidated. It will be painful, but it is necessary before there is
recovery. This is a given.
When the ball hits the ceiling fan, sometime early 2011 at the
earliest, there will be massive bank runs.
I expect that the FED and other central banks will pre-empt such a run
and will do the following:
1) Disallow cash withdrawals from banks beyond a certain amount, say
US$1,000 per day; 2) Disallow cash transactions up to a certain
amount, say US$10,000 for certain transactions; 3) Transactions
(investments) for metals (gold and silver) will be restricted; 4)
Worst-case scenario – the confiscation of gold AS HAPPENED IN WORLD
WAR II. 5) Imposition of capital controls etc.; 6) Legislations that
will compel most daily commercial transactions to be conducted through
Debit and or Credit Cards; 7) Legislations to make it a criminal
offence for any contraventions of the above.
Maintain a bank balance sufficient to enable you to comply with the
above potential impositions.
Start diversifying your assets away from dollar assets. Have foreign
currencies in sufficient quantities in those jurisdictions where the
above anticipated impositions are least likely to be implemented.
There will be a financial tsunami (round two) the likes of which the
world has never seen.
Global banks will collapse!
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© Copyright Matthias Chang, Future Fast Forward, 2010
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