Less than a month ago the longest sustained period of economic growth that the US has seen in the past 50 years came to a screeching halt. The only thing that changed was confidence, but that is the difference between putting your money in the market (or spending it at the market) and stuffing it under your mattress.
The whole house of cards that forms a solid economy came crashing down when all of a sudden investors began pulling their money from the sub-prime market. The lure of the sub-prime market is that it is risky, but generally pays off beyond the dreams of avarice. The run on the sub-prime market began when "foreign investors" began withdrawing their money. While widely reported that the investors were foreign, what is less widely commented upon was it was one French bank in particular that was heavily leveraged in this risky, but well paying investment, that started the run.
That started the other lemmings running from sub-prime. That led to news articles pointing out that the assets the US banks held, houses, were worth less and less because it was becoming harder and harder to sell them. That really shook consumer confidence and investor confidence because while the media was widely reporting on 60% increases in foreclosures and how the housing bubble had popped they never reported about the unprecedented growth of the housing market and millions upon millions of first time house buyers in the preceding half decade.
But I digress...
Fast forward to last week, a French investment house admitted one of their traders had hacked around security safeguards and made a number of unspecified risky investments using bogus accounts that ended up costing the bank more money that it was valued at. That sort of disclosure, especially with the knowledge that it was a French bank that began the run on the sub-prime made me think, "Wow, what a coincidence!" Except I don't believe in coincidences, especially when more (albeit limited) facts are disclosed.
The bank admits they knew of the rogue trades "days before" disclosing them, and "quietly unwound" the trades. And the bank is careful to say that the trades involved only European markets.
The bank's story certainly is sound... until you start scratching at the surface and then, while it doesn't exactly unravel, it does leave more questions than it answers. My bet is they knew about this prior to "unwinding" the rogue trades, perhaps weeks in advance. This would allow them to cover major portions of their losses and it is conceivable, perhaps even likely, that they, or one of the other banks dealing with them, began to sell off risky international investments to shore up their portfolio.
The proof isn't there linking the sub-prime sell off to this French bank, and while I'm not a big fan of conspiracy theories I have a healthy dose of cynicism that prevents me from believing in coincidences either. Especially in light of France's centuries long policy of protecting their economy at all costs. It is not out of the realm of possibility that the bank, acting alone or in concert with France's government, coordinated a run on the sub-prime after moving it's portfolios to more stable investments to minimize what has been a world wide deflation of most markets, with the France tanking the least.
Normally paranoia like this would indicate a straight jacket, or at least a tin foil hat, is needed, but read about this in the articles in the Financial Times and WSJ and paranoia quickly fades into a healthy skepticism for the commonly distorted... I mean reported accounts in the main stream media.
All that is missing is a tie in to George Soros... and coincidentally he commented on the US economy just this past Friday, warning about how fragile the US economy was. And then Chavez said South American countries should divest themselves of US holding. A true conspiracy nut would say this is Soros' third and latest run on the US economy... good thing I'm not one of those!
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