8 Comments

  1. If $2 trillion or so of bonds are missing then how is the interest being paid on them? Does Ginnie Mae pay interset on missing bonds? I am at a loss to figure this out.If bonds are offshore or here, interest is still due from the issuer. I also wonder how many of these bonds are in the Caymens etc.

  2. > When CALPERS, Bill Crist said, “They’ve already given up on America”, did he
    > say why they had given up? Was it because of the greed they saw that led to such appaling corruption, or was it because the American worker was unwilling to work for slave wages? Or, was it
    > something else? Why had they — whoever they were — given up on America? Thanks, Karin Ludewig
    >
    >
    >
    >

  3. Larry:

    There are numerous ways that interest could be paid. My theory on the most likely is churning defaults on FHA mortgages and the FHA Fund supplies the money to pay all the interest. This would explain properties in poor neighborhoods that would default multiple times in one year, year after year. There are hundred of other ways that it could be done.

    As lead Financial Advisor, I kept trying to get them to sell loans and allow bidders bid on them one at a time. The head of servicing was adamant. They had to be in pools of at least $2MM. Every proposal I came up with to handle the workload or single loan closings was turned down. The reasons that they gave did not make sense and the tone of the conversations was that of when something covert is going on at HUD. I have had a lot of those conversations.

    I believe this is one of the reasons that they had to cancel the loan sales. They could not handle the collateral fraud with the defaults and foreclosures unless they did it in their traditional methods and hid the various losses and games that way.

    Before the loan sales got canceled, I think we were getting bids on single family auctions that were higher than I expected because –given what was in the file — you needed firms action as agents of the ESF at the Treasury and/or the Fed winning. It was driving prices up — but for the wrong reasons and money was coming from the wrong pockets.

    I think a lot of these bonds are in the Caymans and other offshore havens. Question is, in a real meltdown, if there are not validly issued or on the books of the US government, who is liable?

    Catherine

  4. After reading this piece more carefully, there are some concepts I’m not quite sure I understand, specifically regarding ‘monetizing’ US bonds. I’m not sure how a debt is resold as an asset, unless the broker, such as Cantor Fitzgerald, was selling naked short positions on a US bond. This, of course, would have huge implications, on the buyer since the guarantor of the bond wouldn’t have the credit rating of the US gov’t, but only that of CF. Unless, of course, the US gov’t doesn’t really know who and how many bonds it approved for sale. Maybe I just need to be straightened out a bit.

  5. Larry:

    Also, take a look at the Housing Bill, Part II post for links to Treasury-Fed reports on who has what US securities. Obviously, to be digested with a grain of salt,

    Catherine

    Karin:

    My guess is a combination of things:

    1. An aging population
    2. Slowing productivity
    3. An inability to achieve consensus and fiscal responsibility through the US political process — the 1995 federal budget confrontation was very destructive. We lost the ability to reach consensus or handle big issues.
    4. Explosive developments in new technology — adapting them centrally was much more profitable.
    5. Significant competition between various cartels and factions and regions
    6. High growth rates of young people and economies in Asia, Latin America and the Middle East that were eager to do more for less, more appreciative, more hardworking, more productive.
    7. The success of pump and dump economic warfare. If you look at the economics of bubbling the economy in the US and using that money to buy things in the areas where you pull credit and they crash, it is very significant. Fortunes to be made so to speak.
    8. Manipulation is easy. Media manipulation works. People are very easy to fool. They do not understand the system. They are easily afraid.
    9. Invisible weaponry and surveillance technology — makes it easier to control centrally.
    10. Frustration — popular support goes to the winner, not the ethical guy. This creates a system
    that creates a cycle of disrespect between people leading and everyone else.
    11. An understanding of the importance of shifting significant money out of the financial and information sector and use it to buy up and lock up global natural resources – oil, water, land, etc.

    Anyway, that is some of them. Kevin Phillip’s books give a good overview of some of these overarching reasons to want to pull capital from the aging populations and shift and reinvest in the young populations.

  6. Catherine,

    Thanks for the analysis.

    Based on the fake debt that will be consolidated on the government/taxpayers, I guess you see hyperinflation coming to pay off that $5T.

    Would you recommend buying a house now with a mortgage fixed for 10,15 or 30 years, so that one could take advantage of the inflation destroying the mortgage value?

    Andrew

  7. Seems to me that the risks of a deflation are greater right now that inflation. The inflation will be on our expenses, while asset prices on most assets decrease. This is what I call the slow burn (check the post by that name).

    A lot needs to be digested in mortgage and other debt right offs. So, the chances that asset price drops on housing and real estate in the US (not Dubai) are good. I am going to try to write a blog post in the next week about what happened in 1989-90 and why there are many similarities.

    Yes, the chances that inflation and a falling dollar will erode the cost of paying off a long term mortgage are good. However, if some areas, the economics of debt service and housing values may also work against you.

    Seems to me that self sufficiency is one of the most valuable approaches on a risk adjusted basis. So one variable is does the home give you the opportunity to significantly lower your overhead and increase community?

    Catherine

    Stay tuned.

Leave a Reply