Paul Volcker says a system break down has happend while providing testimony to Congress. This breakdown is not over and gold and silver are you major protectors. The situation is going to get a lot more ugly than it is now.
He uses the words "broken down" "break down".
What are the amounts of otc derivatives potentially involved? Try well over 500 trillion USD worth. If central banks around the world try to create out of thin air not even half that much to try and save the butts of the boyz, all hell breaks loose.
"We are in the most difficult and complicated circumstances...
I would emphasize the point that we often lose sight of.
This country has spent some years spending a lot more than it has been producing. It's been carrying out a higher level of consumption relative to GDP than we can sustain.
In the forground is the new financial system that a number of you have commented on, less relying on banks, more relying on the open market, a more fluid system, certainly heavily engineered. You and others have said, Mr. Chairman, that you look to more tranparency. It's hard to argue against tranparency but I have to tell you this new financial system with all its enormous complexity gives rise to a certain opaqueness. It is almost impossible to penetrate. So I don't think we're gonna find all the answers in transparency.
There's kind of a symbiotic relationship between this new financial system and the unbalanced economy that the new financial system was so fluid and so effective in some ways that it enabled us to finance the excess in spending. We didn't have to save when people thought that they had other ways of finding money. The sub-prime mortgage phenomina is the prime example of financial engineering leading to a way to finance consumption. Well, that's broken down. And to over simplify I think we've seen a system in which the mathematicians have basically have taken over, the financial engineers.
And you combine that complexity and opaqueness with a super charged compensation system and you had great incentives for risk taking. And at the same time you had a basic break down I think in the discipline of creditor houses. That the system developes in a way that it is trading dominated. People didn't worry so much in the quality of the paper so long as you could pass it off on someone else in a hurry. And there was a lessor sense of vulnerability. And I .. a general sweeping conclusion I would have to say that under stress, this new system has failed the test of the market place. We are here because the new system has in effect broken down. That put the Federal Reserver front and center in dealing with a crisis. It obviously has reacted in unprecidented ways.
When things are going well, no one wants to be regulated.
When things go bad everone asked the regulator where were you.
But there have been breakdowns in supervision and regulation. I don't think there is any doubt about this.
Of course being one of the boyz himself, he fails to mention the most fundamental problem of the new (since Bretton Woods in 1971) system, everyone in the system never gets paid, no settlement. They just get to use a medium of exchange based on debt. This new system that the world has never experienced will fail in a really big way because it tries to deny the fundamental facts of life.
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Page 18 of the .pdf file.
The Fed's balance sheet has be deteriorating since taking on all kinds of junk collateral for loans to various financial entities. Get your dog to sign a million dollar I.O.U and see if the Fed will take it as collateral for a loan to your dog.
When the Fed runs out of US Treasuries for assets, what they want to do is to be able to tell / order the Treasury to issue more debt, send it over to the Fed, and the Fed will use it to issue more US dollars since that debt is an asset on the balance sheet of the Fed. 'course the Treasury will have to pay interest to the Fed ... or ultimately the US tax payer will have to pay the interest and other dollar holders through the process of loss of stored value in USD due to USD devaluation due to the increase in supply of USD. Virtually no people in the US are aware of this at the moment, that they will be bailing out the boyz, the gangster banksters. Wait till they find out, it won't be pretty.
Ron Paul tells Paul Volcker what really is needed:
"Last call to board gold train at under US$1,000"
Article by John Embry, chief investment strategist at Sprott Asset Management
Currency War (a best seller in China)
"6th printing in two months, sales breakthrough 100,000 copies, still in short supply, -- the book "Currency war" in the financial services sector has brought spotlight.
Song is not denying his view - all Chinese families should produce 3% -5% of revenue to purchase gold in kind, to add their wealth with insurance, because when real turbulence come, we can guarantee wealth, rather than any government-issued letter with notes. In fact, when the government trusted, issued currency is valuable, and when the government was not strong sense of trust, it will devalue the currency, or even worthless."
Gold and silver are major protection from what's coming. Even if Paul Volcker does not say all this, he knows it. Watch for panic at some point as people try to get their hands on gold and silver. Because the new system is so flawed, it looks like it will have an historically very short life.