The Gathering Storm: Global Financial and Economic Crash Imminent

national | miscellaneous | news report Tuesday July 09, 2002 12:24 by Blisset

A rant from Mike Ruppert

o Theft and Fraud Losses to U.S. Taxpayers Exceed $4.2 Trillion

The Gathering Storm

o Global Financial and Economic Crash Imminent

o Stock Market, Pension Funds, Dollar on Brink of Collapse
and Implosion

o Theft and Fraud Losses to U.S. Taxpayers Exceed $4.2 Trillion

by Michael C. Ruppert

[Copyright 2002, From The Wilderness Publications, www.copvcia.com.
All Rights Reserved. May be copied or distributed for non-profit
purposes only.]

[Ed. Note: The last time FTW issued an emergency economic bulletin to
its subscribers was Sept. 9. At that time a derivatives investment
bubble on the verge of implosion, a 900-point drop in the Dow Jones
average and a pending liquidity crisis signaled a crash on the order
of 1929. Only the attacks of Sept. 11 and massive intervention from
the U.S. Treasury and Federal Reserve prevented the collapse.
Investors blamed the ensuing market losses on the attacks.

The situation now is much, much worse as more factors combine to
suggest that foreign investors and trust in the U.S. economy might
soon be a thing of the past. Your pension is at risk today and your
home may be at risk in six months to a year.

One economic analyst has suggested that a nuclear exchange between
India and Pakistan might be the perfect cover for the biggest
financial wipe out in human history. I think that an ill-conceived
and risky invasion of Iraq might serve the same purpose. From
consumer confidence, to corporate accounting, to the dollar, to gold,
to foreign capital flight, to pension fund wipe outs, to the
derivative bubble, to debt, there is not a single economic indicator
that is not flashing red.

The warnings are as clear, explicit and well-documented as were the
warnings received by the U.S. government throughout the summer of 2001 that a terrorist attack against the World Trade Center would take place
during the week of Sept. 9 using hijacked airliners from United and
American airlines. Nothing was done to prevent that and apparently
nothing is being done now in spite of the fact that $4.2 trillion of
your money has been stolen right in front of your eyes.

There was no "single" reason for the attacks of 9-11. I have
cited oil, drug cash and geopolitics as three of the primary motives
for the U.S. government's complicity in allowing the attacks to
happen. But what also cannot be overlooked is the fact that 9-11
effectively masked a major economic crash that was certain to occur.
That crash has not been averted by the extraordinary financial
maneuverings of the Bush administration that followed 9-11. It was
merely postponed for a very short time.--MCR ]

July 8, 2002, 4 PM PDT (FTW) -- Reuters, London published a story
June 27 based upon an interview with billionaire financier George
Soros. The headline read, "Soros Blames 'Bush Factor' for Dollar's Fall." George Soros is a man to be reckoned with. Emerging from WWII as someone who allegedly cooperated with Nazi occupation troops by identifying assets to be seized, the European financier is one of the most powerful financiers on the planet. He is credited with successfully assaulting the currencies of several nations, including Britain's pound. He recently participated in the World Economic Forum in New York where he was seated on the dais with the likes of Zbigniew Brzezinski, Hillary Clinton, Shimon Peres and academics from Ivy League colleges. It is more than just a case that when Soros speaks, people listen. The truth is that when Soros speaks, markets move.

His comments were brutal.

"The international financial system is coming apart at the seams...
There is a lack of confidence. That's what I call the 'Bush factor' in the economy". There is a liquidity crisis in financial markets, said Soros. "Everybody's going home. The Swiss banks are going home. The strengthening of the yen clearly shows repatriation." Translated, that means that foreign capital is fleeing the United States in the wake of as yet not fully realized accounting scandals that will, according to Fox News on July 6, take an estimated $600 billion in value out of the U.S. stock market this year. One of the many smoke alarms triggered by this is the fact that the U.S. economy needs an estimated $1.5 trillion per year in new foreign investment just to remain solvent.

Reuters quoted Soros as saying that the global economic downturn had
"exposed the weaknesses of corporate America and how the U.S.
administration runs the international economic system."

Soros is aware of what FTW and noted economic thinkers like Catherine
Austin Fitts, former assistant secretary of housing, and British
economist Chris Sanders of Sanders Research have been saying for
years: as much as half of the value of the U.S. financial markets is
derived from criminal endeavors, whether it is the laundering of drug
money or the fraudulent "cooking" of financial statements to boost profits.

PUMP AND DUMP

It's a simple scheme really. The mafia knows it quite well. By whatever means necessary, drive a stock's price higher and higher. Make it look like a mover, even if it's a dog. Cook the books and get suckers to buy in, helping to drive the price even higher. When you think the balloon will pop, call all your buddies and sell your shares. That effectively steals all the money that the suckers put in. When the stock crashes, the suckers who weren't part of the scheme will take the loss, whether they be individual investors or the New York City police and fire pension fund.

The U.S. stock markets have been pumped to the breaking point, and
they are trying very hard to dump right now. Most sober analysts have
agreed for a long time that the prices are over-inflated by as much
as 50 percent or more; that price/earnings ratios, now averaging more
than 30-1, should properly be corrected to about 15-1. That means the
Dow should be at 5,000 or lower. We'll talk about how the meltdown is
being temporarily prevented later. It is first necessary to examine
the severity of the crisis.

If I mention the "bookkeeping problem" that's threatening Wall Street right now and asked you how many companies were being investigated for or had announced "overstated earnings", how many would you say? Six? Eight? Try 17.* Seven of them are energy companies, and this adds another degree of imperative for Congress to force the White House to compel full disclosure from Vice President Cheney's 2001 energy task force. But he has a problem there too. One of the companies under investigation for fraudulent bookkeeping is Halliburton. Cheney was its CEO until taking office, and the fraudulent accounting occurred while he was the boss.

Did you think that WorldCom was a big one, having illegally claimed
$3.8 billion in earnings to boost its share price?

On July 5, according to Newsday, the energy giant Reliant Resources
"restated" its 1999-2001 earnings by chopping off $7.8 billion in
revenue. Just today it was disclosed on CNN that the pharmaceutical
giant Merck has overstated its revenues by $14 billion.

At the core of all these accounting problems is a non-transparent form
of corporate bookkeeping called "pro forma". As opposed to the more
transparent and rigid practice called GAAP (Generally Accepted
Accounting Practices), pro forma bookkeeping allows for all kinds of
manipulations like hiding debt as income, double booking revenues and
sneaking drug money onto the bottom line. What has yet to be fully
explored by any of the major media is which other major corporations
use pro forma bookkeeping. The reason is that all of the major media
companies use it too. Also on the pro forma system are GE (NBC),
AOL/Time Warner (CNN), Microsoft (MS-NBC), Viacom (CBS), Disney
(ABC), IBM, Intel, Cisco Systems, Sun Micro, Tribune (the Chicago
Tribune and the L.A. Times), The Washington Post (Newsweek) and the
New York Times.

The accounting scandals are starting to nip at the heels of these and
other cornerstones of American capital markets. Trading of GM shares
was halted June 27 after "unconfirmed market rumors of accounting
irregularities." And New York Times reporter Gretchen Morgenson
offered the suggestion in an April 14 story that GE might be cooking
its books. Thanks to PBS's Lowell Bergman in a 2000 report, we already know that GE has been called on the carpet for accepting drug cash, lots of drug cash, as payment for the good things it brings to life. So has Philip-Morris.

How much foreign capital can Wall Street expect to attract, let alone
retain if foreign investors expected to be wiped out for leaving their
money here? American investors, especially pension funds are still
putting money in or leaving it in place in the stock market. Are there
other alarm bells that mom and pop investors should be hearing? What
will happen to the value of the American brand name as a trustworthy
place to invest money if GM is ultimately revealed to have cooked its
books?

A look at the real health of the stock market is revealing. On April
26, The International Forecaster made two chilling observations:

"At the time of the AOL Warner merger the combined companies were
worth $290 billion. They are presently worth $85 billion. Their
quarterly loss is estimated to be $50 billion. This could be the
business mistake of the new century".

"The downgrade of Bristol Myers Squibb to Aaa by Moody's leaves only 8 AAA-rated companies left. They are GE, UPS, AIG, ExxonMobil, Johnson & Johnson Berkshire Hathaway, and Pfizer & Merck. In 1990 there were 27 AAA companies and in 1979 there were 58."

THE DOLLAR

Soros was extremely upset about what was happening to the U.S. dollar,
which has been falling against various currencies for about a month.
The key to understanding this lies in the lesson I learned at an
economic conference in Moscow in spring 2001. Almost all countries in
the world use the U.S. dollar as their reserve currency. They have
bought trillions and are holding them. If another currency becomes
more valuable or is viewed as more stable, then the world will switch
currencies, and trillions of dollars will come back into the country
--inflation would be inevitable and the dollar would lose its value.

In the week ending July 5, the dollar closed consistently at or near
parity with the Euro. As of this posting it sits at (US) 99 cents and
has been hovering there for more than a week. Since various economic
"reforms" from the 1950s to the 1970s removed the dollar from
the gold standard it has been a fiat currency, unconnected to any
measure of intrinsic value. The full faith and credit of the United
States -- along with its military -- have given the dollar its value.
The Euro is partially backed by gold and there have been lingering
but credible rumors for years that the U.S.'s gold reserves have
been moved to Europe.

Soros told Reuters, "But the declines in the markets have gone
somewhat further than what would be the natural consequences of the
previous exuberance"

"The decline in the dollar came as a surprise to me; attribute it to lack of confidence in the management of affairs by the United States, its unilateralism, the pursuit of national self-interests and not living up to the responsibility of being the dominant financial power in the world, not taking care of the system."

What is Soros setting us up for? The pumping of the stock market
occurred while Bill Clinton was president. Yet he's blaming Bush.
Is another Herbert Hoover being created before the big crash? The
signs are there. Britain's paper the Independent ran a June 28
story headlined, "WorldCom scandal: Currencies: Latest Wall
Street disaster sends investors all over the world running for cover."
The lead read, "The U.S, dollar yesterday moved to the brink of free
fall, a nightmare scenario for the world economy, after
reverberations from the WorldCom scandal triggered panic among
investors."

That was before the announcements about Reliant and Merck.

The story painted a glum picture. "This is threatening to become a
disorderly market," David Bloom, global economist at HSBC said.
"There's no better way to show loss of confidence in a country
than through its currency."

Quoting another financial expert, the Independent reported, "If
the dollar's decline turns explosive, this could compound the problems of the U.S. asset markets as currency losses raise fears of massive capital flight out of the U.S."

GOLD

For years the price of gold -- the ultimate smoke alarm signaling a
failing economy -- has been artificially suppressed by paper traders
who are capable of flooding the commodities markets with gold future
options when the price needs to be kept low. Why low? Because rising
gold prices have always signaled inflation and/or a lack of faith in
the financial markets. Years of efforts by the Gold Anti-Trust Action
Committee, or GATA, while not being successful at halting or fully
exposing the artificial manipulation of gold prices by the Federal
Reserve, major banks, the Bank of International Settlements and major
commodities traders, have opened the eyes of many to overt
manipulations in gold pricing.

As one investment banker told me recently, there is five times more
paper gold than there is actual gold out of the ground. If gold prices
ever pop they'll be out of sight.

Over the past year, certainly since 9-11, gold prices have often moved
in exactly the opposite direction (lower) from what conditions would
dictate. The financial effort required to do this requires the support
of powerful state banking institutions and cash to service the paper.
Gold has risen in price from around $280 an ounce nine months ago to a
high of around $327 in recent weeks. That's a return on
investment of 16 percent -- far better than the Dow has done this
year.

In our last economic bulletin FTW noted that the Dow had lost close to
900 points. Since March of this year it had lost, before the
profit-seeking 300-point rally of July 5, almost 1,600 points. Yet,
even as the economic news worsened last week, the price of gold peaked and then started to fall. As of this writing it sits at $312 an ounce. The gold price dropped as the worst economic news was hitting the streets. Why?

As one astute gold watcher, Jay Taylor, summed it up in an October
2000 newsletter, "Every single time there is concern about a stock market debacle, gold is bombed. Always."

On June 5 GATA described one of the recent moves to "fiddle" with gold prices. "MiningWeb.com has just reported an explanation for the plunge in the gold price today. The plunge, MiningWeb says, "came in the wake of a large after-market trade in New York last night, with an unnamed fund liquidating 5,000 futures contracts, a move which knocked the price first to $326/oz, then to $324/oz, and finally to $321/oz. The sale was executed using the "Access" system on Comex, which allows for anonymous trading by large funds." There are unmistakable signs of market manipulation now with regards to both gold and stocks. Who is it that keeps the markets from correcting, only making the inevitable crash that much worse? It's called the Plunge Protection Team, or PPT. And now it has to have the liquidity to flood both the gold and the stock markets
with enough cash to keep the bubbles from bursting. This, at the same
time that major banks like J.P. Morgan/Chase and Citigroup sit atop
huge derivatives bubbles that have been estimated at between $150
trillion and $300 trillion. Most major U.S. banks have heavy exposure
as a result of the mushrooming financial scandals. All of thAse bubbles require cash, and this is the liquidity Mr. Soros is rightly worried about.

Rep. Ron Paul, R-Texas, has been challenging the gold manipulation for years. He has been one of the few fiscally sane voices anywhere on Capitol Hill. His website has a listing of his writings and much
needed legislation he has or is sponsoring.

Only recently have there been signs that the PPT is also working in the U.S. equity (stock) markets.

THE PLUNGE PROTECTION TEAM

The Washington Post acknowledged the existence of a select group of
four who could and would intervene in markets to prevent massive
capital flight and a run on shares that would cause an economic
collapse if there weren't enough cash to pay out during a massive
sell off. In his Feb. 23, 1997 story headed "Plunge Protection
Team," Post reporter Brett Fromson identified the Federal Reserve
chairman, the Securities and Exchange Commission chairman, the
chairman of the Commodities Futures Trading Commission, and the
secretary of the Treasury as the team's key players. The
intervention of the team in the 1998 crash of Long Term Capital
Management, after it became wildly overexposed in the gold market,
revealed that private institutions such as Goldman Sachs, J.P.
Morgan, Merrill Lynch and other major banks could be involved as well.

Fromson quoted a former team member as saying, "In a crisis, a lot of
deference is paid to the Fed. They are the only ones with any money.
Or, I might add, the ability to print it.

Pointing to the 1987 stock market crash, the single largest crash in
history, Fromson observed, "The Fed kept the markets going by
flooding the banking system with reserves and stating publicly that
it was ready to extend loans to important financial institutions, if
needed."

On April 5, 2000 New York Post reporter John Crudele reported that
the stock market had turned back from the abyss. After a 500-point
drop that looked like it was leading to a meltdown, "someone started
buying large amounts of stock index futures contracts through two
major brokerage firms -- Goldman Sachs and Merrill Lynch - Unless
the brokers tell, there is no way of knowing which of their clients
were making the purchases - Then the market rebounded."

Calling it the PPT, Crudele both referred to the 1997 Washington Post
story and suggested that private banks were acting as team captains.

Gold activist David Guyatt, relying on information obtained from GATA
Chairman Bill Murphy, pointed to the PPT in October 2000. "The hand of the Plunge Protection Team (PPT) is clearly visible for the first time. The entire short gold play over the last few years is a technique that has been used to "prop up key stocks" and "fund futures" operations. In the simplest form it works like this. Borrow (at negligible interest rates) someone's [America's, Germany's, Britain's, Goldman Sachs'] gold and sell it in the market. This gives a handsome pool of
near-interest-free dollar cash. Whenever the stock market looks
shaky, or key stocks come under pressure, dive in and buy, buy, buy.

"But it is not only necessary to manipulate the stock market to
succeed. It is also necessary to manipulate the gold price and keep
the price of gold below the price PPT sold the leased gold for. This
is a game of double jeopardy. The problem the PPT now have is that
there is virtually no more official gold left to borrow," wrote
Guyatt.

The causes of this intervention were a pending NASDAQ crash and the
imminent downgrading of IBM and Intel stocks.

And the PPT's hand has been noted recently from as far away as Australia. Progressive Review Editor Sam Smith recently quoted a
story by Richard Bromby of the Australian Financial Review:

"At 2:32 Wednesday [June 26, 2002], New York time, something
extraordinary happened at the corner of Wall and Broad streets. The
New York Stock Exchange's Dow Jones industrial index -- struggling
since the opening bell after the WorldCom fraud revelations -- threw
off its problems. From an intraday low of 8,926.6, the Dow shot
skywards to its high of 9,160 at 3:29 PM-Could it be the work
of the much talked about, but never seen, Plunge Protection Team?
There is a belief that this team represents a powerful and secretive
hand that is ready to act at any time the Dow looks ready to tank
big-time.

"London's Observer newspaper last October reported it had information
the plunge team was preparing to spend "billions of dollars" to avert
a repeat of 1929 and 1987."

The problem is clear: With a strong dollar the PPT has demonstrated
that it has enough cash to suppress gold prices or to save the stock
market. It may not have enough cash to do both -- especially if the
dollar were to suddenly lose its value. Then, all of the chickens
that have been locked out will come home to roost with a vengeance.

As The International Forecaster reported on April 26, "The
American consumer has run out of credit and buying power. All bets are
off if the housing and credit bubbles break and that's a distinct
possibility. Debtor's prison is drawing nearer. House and Senate
conferences are deciding on a new set of rules for Chapter 7
bankruptcy. If the Plunge Protection Team weren't manipulating
the market with all these scandals, the Dow would already be at
4,500."

REALIZING THE EXTENT OF THE DESTRUCTION

Not all of the money looted from American taxpayers is going to
support the PPT market manipulations. A lot of it is just being
stolen.

According to the Standard and Poor's website, "domestic equity
allocation" (stock market) of U.S. pension fund investments was near
50 percent by the end of the 1990s. It has topped 50 percent since
then.

Before the 2000 presidential election, candidate George W. Bush
promised that he would tap the Social Security Trust Fund only in the
event of war, recession or national emergency. On Sept. 11, he was
quoted by his budget director, Mitch Daniels, as saying, "Lucky me! I
hit the trifecta!"

It's not a question about stealing a little here and a little there.
It's a question about open, full-scale looting -- but only
from the pockets of the American people who, in my opinion, will soon
have almost nothing left. Let's look at the hard numbers of
what has been taken and from where. These numbers are by no means
exhaustive. It's just what we know about.

$34 Billion - Social Security in 2001 (USA Today/Washington Post)

$160 Billion - Social Security in 2002 (est.) (House Budget
Committee)

$42 Billion - Federal Employees Retirement System (Wall Street
Journal
6/13/02)

(to Meet 2002 budget deficits)

$2 Billion - Civil Service Retirement and Disability Fund (ibid)

$1,100 Billion - Stolen from the Dept. of Defense -- 1999 (Cong.
Record and Insight Magazine)

$2.3 Billion - Stolen from the Dept. of Defense -- 2000 (CBS News)

$59 Billion - Stolen from HUD -- 1999 (Cong. Record)

$600 Billion - Shareholder Equity Lost to Financial Fraud -- 2002
(Fox)

$4,297 Billion TOTAL

Pending Thefts:

$845 Billion - Social Security (by 2010) (Washington Post citing
Cong. Budget Office figures)

An anecdotal story reveals the damage to pension funds. If you think
that Social Security will be a safety net, please read the above
section again. Of course we all know about the Enron employees who
were wiped out. But according to the New York Times on April 3, New
York City's pension system has lost $9 billion in the wake of
recent stock scandals. Imagine the impact if local governments
declared bankruptcy or defaulted on their pension obligations. It has
been estimated that the California state employee retirement system
(CALPERS) has more than 90 percent of its money invested in the stock
market.

A WORD ABOUT HOUSING

Most Americans believe that their homes are their last, best
retirement insurance. Yet many Americans have mortgaged their homes
for 120 percent of value. Their loans are backed with the full faith
and credit of the U.S. government through various agencies such as
Ginnie Mae, Fannie Mae, Freddie Mac, and the Federal Housing
Authority.

The International Forecaster has predicted that "40 percent of
Fannie and Freddie's loans are going to come back and haunt
them. We envision an S&L type bailout of $2.4 trillion down the road.
This will be the biggest financial disaster in history."

The full faith and credit of the U.S. government lie behind these
home loans. If the homeowners go broke in an economic crash, they
default. If the U.S. government goes broke -- before or after that
point -- it defaults, and the holders of U.S. debt ultimately have
the right (especially under WTO and globalization) to foreclose on
the collateral -- your home loans. In the worst case scenario most of
the United States could legally be owned by all of the countries
holding U.S. debt -- better described as T-Bills, or U.S. gold, or
U.S. stocks.

CONCLUSION

The Great Depression was not an event that wiped out U.S.
capitalists. It was an event that made the rich even richer by
transferring the wealth of the people into the hands of the wealthy.
Legendary is Bank of America's rise to affluence through real
estate foreclosures from 1929-37. Don't believe for a minute
that the richest of the rich will be hurt by the coming collapse.
The only ones hurt will be you and me.

George Soros is a member of the Bilderberg Group, a collection of
the wealthiest individuals on the planet. It includes, from the U.S.,
both Democrats and Republicans, and from Europe and Asia the richest
"old" money that can be found. U.S. participants in this
year's conference included David Rockefeller, Henry Kissinger,
former Treasury Secretary Larry Summer, former CIA Director John
Deutch and George Soros. It was just after this year's meeting which
ended in early June, that all of the revelations about corporate
fraud started to really hit the news. One wonders if it had been on
the agenda.

I also note sadly a recent financial report from the Denver area
stating that mortgage foreclosures were going through the roof. This,
at the same time that Reuters (July 2, 2002) reported that corporate
layoff announcements had risen by 12% in one month. In this context
Bush's tax cuts seem worse than bad judgment. As former Ass't
Secretary of Housing Catherine Fitts pointed out to me in a last
minute e-mail, "By 2010, when (and if) the Bush tax reductions are
fully in place, an astonishing 52 per cent of the total tax cuts will
go to the richest one per cent. Put another way, of the estimated
$234 billion in tax cuts scheduled for the year 2010, $121 billion
will go to just 1.4 million taxpayers."

Unless you can convince me that gravity might suddenly reverse
direction, this collapse is inevitable and imminent. It will be
unspeakably brutal. How long do we have? Maybe weeks. Maybe months.
Maybe only days. But the house of cards is already starting to
collapse all around us. A major terrorist attack, the folly of an
invasion of Iraq or a nuclear exchange between India and Pakistan
would only be a momentary diversion from a much greater tragedy.

Suggested Resources:

www.sandersresearch.com

www.solari.com

www.gata.org

http://www.house.gov/paul/

* -- Enron, WorldCom, QWest, Tyco, ImClone, Martha Stewart (the
company), Global Crossing, Dynegy, CMS Energy, El Paso, Halliburton,
The Williams Co., Clear Channel (which owns approximately 1,200 radio
stations), Adelphia, Reliant, Motorola and Merck. [Source: CNN and
various news services]

***************************************

The rats knew the Titanic was sinking so they filled their pockets
with all the cashisch they could steal and ran to the Bank of Terror
to protect them from all the evil-doers who would ask too many
questions...!

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