The Credit Meltdown



Wall Street highly leveraged creative financing over the last five years shows a feeding frenzy of securing mortgage debt and issuing trillions of dollars of highly leveraged very creative and complex new debt obligations -- Structured Investment Vehicles (SIV); Collateral Debt Obligations (CDO); and Credit Default Swaps (CDSs).

Wall Street, in collusion with the Fed and U.S. Government, has set the stage for the implosion of the gargantuan credit derivative bubbles, resulting in the implosion of the entire world financial system, and it is beginning to hurt globally: deceptions in rating agencies; highly inflated CDO ratings; triple A's bond default insurance.

The biggest legal firestorm in U.S. history is about to explode, and investors are going to look for someone to blame. The sub prime credit crisis is just a small tip of the much larger iceberg. We have had three bubbles collapse to date: the high tech/dot com bubble ($8 trillion in damage); the real estate bubble ($1 trillion in damage); the credit bubble ($2 to $3 billion so far, but trillions more to come.).

The U.S. consumer has been brainwashed to buy and borrow nonstop for the past 36 years, while the global derivatives bubble is standing at $681 trillion.

Indebtedness and fear are about to puncture the consumer bubble. We are very familiar with the decades of undisciplined U.S. Government spending which led to the largest and most onerous debt in history.

Be forewarned this is only the coming collapse of life as is. Among the possibilities according to financial experts: more taxes; restrictions on the use of property; a more Socialist government and society; restrictions on, or possible confiscation of, gold and other tangible assets; restrictions on funds coming in or going out of the country; restrictions on international travel.

Bob Jacobs

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