Twelve-Step Program

Via Zero Hedge comes the 12-step con that Wall Street is pulling right now, as defined by Charles Hugh Smith.  Here's how things have gone:

1. Enable trillions of dollars in mortgages guaranteed to default by packaging unlimited quantities of them into mortgage-backed securities (MBS), creating umlimited demand for fraudulently originated loans.

2. Sell these MBS as "safe" to credulous investors, institutions, town councils in Norway, etc., i.e. "the bezzle" on a global scale.

3. Make huge "side bets" against these doomed mortgages so when they default then the short-side bets generate billions in profits.

4. Leverage each $1 of actual capital into $100 of high-risk bets.

5. Hide the utterly fraudulent bets offshore and/or off-balance sheet (not that the regulators you had muzzled would have noticed anyway).

6. When the longside bets go bad, transfer hundreds of billions of dollars in Federal guarantees, bailouts and backstops into the private hands which made the risky bets, either via direct payments or via proxies like AIG. Enable these private Power Elites to borrow hundreds of billions more from the Treasury/Fed at zero interest.

7. Deposit these funds at the Federal Reserve, where they earn 3-4%. Reap billions in guaranteed income by borrowing Federal money for free and getting paid interest by the Fed.

8. As profits pile up, start buying boatloads of short-term U.S. Treasuries. Now the taxpayers who absorbed the trillions in private losses and who transferred trillions in subsidies, backstops, guarantees, bailouts and loans to private banks and corporations, are now paying interest on the Treasuries their own money purchased for the banks/corporations.

 That's the last five years in a nutshell, right there.  It created the financial crisis, the banks got paid to cover their "losses" as well as reap the profits on their side bets to the tune of trillions on each side.  Now they have the funding to finish the job.  Right now, we're at Step 9:

9. Slowly acquire trillions of dollars in Treasuries--not difficult to do as the Federal government is borrowing $1.5 trillion a year.

Money's pouring into the bond market, keeping interest rates low.  That's why the argument is made that we can borrow more money because rates are crazy low.  The banks, however, want crazy high interest rates in the long-term.  That brings us to the coming austerity hysteria end game.

10. Stop buying Treasuries and dump a boatload onto the market, forcing interest rates to rise as supply of new T-Bills exceeds demand (at least temporarily). Repeat as necessary to double and then triple interest rates paid on Treasuries.

11. Buy hundreds of billions in long-term Treasuries at high rates of interest. As interest rates rise, interest payments dwarf all other Federal spending, forcing extreme cuts in all other government spending.

12. Enjoy the hundreds of billions of dollars in interest payments being paid by taxpayers on Treasuries that were purchased with their money but which are safely in private hands.

Why should China get all the money from owning US Treasuries?  Goldman Sachs and friends want in on that deal now, and they have the capital funding to do it, courtesy of you and me.  Everyone else gets skunked, and the big financial players now literally own the United States of America.

Step 10 is coming very, very soon.  The austerity hysteria people will simply create the need for austerity by manipulating the Treasury market to put interest rates into the stratosphere and collect government taxpayer money...and we'll be indebted to them forever.  The biggest transfer of wealth in the history of the world is almost complete, and when it is, we're done.

And at this point, I don't think there's anything we can do to stop it.