Lehman Brothers and GMU
Posted by Ivo Cerckel on September 16th, 2008
A “Lehman’s lessons” Lex-column, published on 15 September 2008 at 09:27, in the Financial Times (FT), blames Lehman Brothers’ bankruptcy on too much leverage in the financial system.
Leverage is any arrangement (such as a margin purchase or an option contract) that exaggerates the effect of any change in the price of the underlying investment. By analogy, volatility.
By arguing that the nature of that collateral has changed dramatically since the US central bank, the Federal Reserve, or Fed, started throwing lifelines to investment banks, the FT’s “Fed up? Not yet” Lex-column, published on 15 September 2008 at 15:05, implicitly recognises that the dollar has no collateral whatsoever. The gold reserves of the US Treasury, formerly of the Fed, at Fort Knox are empty.
In its “Downgrades deepen AIG woes”-article, published on 15 September 2008 at 19:01, the FT nevertheless argues that AIG, the troubled insurer that sits at the heart of the financial system, on Monday had its key credit ratings cut, potentially triggering billions of dollars of collateral payments on its many derivatives trades.
Collateral is an asset that is pledged for a loan, to be sold for the benefit of the lender if repayment is not made.
How can a dollar paper note which has no collateral constitute a collateral payment?
The FT’s “Wall Street banks fight for life”-article, published on 14 September 2008 at 23:48, says that the world’s top banks appeared close to abandoning efforts to save Lehman and set out to build a “firewall” against further financial chaos with a $50bn liquidity pool to support other vulnerable institutions.
A firewall between the collateral and the underlying investment prevents leverage.
How can the take-over of Lehman’s competitors, like Merrill Lynch, by other banks constitute a firewall for these other banks?
That’s why the new monetary system which is being built up by the Gulf Monetary Union (GMU) and the European Central Bank (ECB)) will naturally employ a gold component and a paper component, but will put a “firewall” between the two such that gold’s valuation as a wealth-preserving asset cannot be pulled lower by the inevitable inflation of the paper component of circulating currencies.
With their gold assets regularly marked to market, the eurogulf-system seems well on the way to replace the dollar as the world reserve currency.
The bankruptcy of Lehman Brothers is due to the fact that the dollar is a worthless piece of paper.
With FreeGold it’s up to you to decide what you do with your individual wealth, either you entrust it to the fraudulent fiat-system from which Lehman Brothers and its competitors could take so much advantage since the early seventies when US president Richard Nixon broke the Bretton Woods system, or you invest it in internationally freely floating gold.
ivocerckel@siquijor.ws