пїЅ Stock Market,
Pension Funds, U.S. Dollar on Brink of Collapse and Implosion
пїЅ 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
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Originally posted July 7, 2002
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.
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.
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.
are as clear, explicit and well-documented as were the warnings
received by the U.S. government throughout summer 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.
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 ]
8, 2002, (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,
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 to 1, should properly be corrected to about
15 to 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
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
"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."
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 (U.S.) 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
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...I 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
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
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.'"
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 FTW 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
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 these bubbles require cash, and
this is the liquidity 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
the PPT now have is that there is virtually no more official
gold left to borrow."
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], 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 p.m...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
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.
Security in 2001 (USA Today/Washington Post)
- Social Security in 2002
(est.) (House Budget Committee)
- Federal Employees Retirement
System (Wall Street Journal 6/13/02) (to Meet 2002 budget
- Civil Service Retirement
and Disability Fund (ibid)
- Stolen from the Dept. of
Defense -- 1999 (Cong. Record and Insight Magazine)
- Stolen from the Dept. of
Defense -- 2000 (CBS News)
- Stolen from HUD -- 1999
- Shareholder Equity Lost
to Financial Fraud -- 2002 (Fox)
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
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, U.S. gold,
or U.S. stocks.
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 already 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 Bilderberger
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
Summers, 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) reported that corporate layoff announcements
had risen by 12 percent in one month. In this context Bush's
tax cuts seem worse than bad judgment.
As former Assistant 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 percent of the total tax cuts will go
to the richest one percent... 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.
* -- 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