ZOMBIE MONEY: How The World Keeps Cancerous Banks Alive

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EDITOR’S ANALYSIS: In 1983 the amount of derivatives based upon credit instruments was zero. Then it went past $600 Trillion in 2007, and it is suspected (these are mostly “private” contracts) that they might be over a quadrillion now. There is approximately $70 Trillion in total for the whole world in money issued by government, up $20 trillion in just 4 years because of quantitative easing (i.e., printing money). The twenty trillions dollar increase is zombie money.

There was a choice. Either issue the money and hope that the $600 trillion in derivatives would some how work itself out, or let the the $600 trillion collapse, cancelling itself out because it contains numerous bets going every which way but loose. The Banks, as we all know, won the game and managed to get governments to issue the $20 trillion and worse, they managed to get the money into their own hands rather the investors and others whose wealth had been destroyed.

The Zombie money is a way of kicking the can down the road and the result of doing it has yet to be determined. But it did kick the can down the road. The problem is that it isn’t working as well as had been hoped and countries are about to fall. The article below talks about the effects of zombie money not only on housing and banking but on all the commodities we need to live.

Zombie money is the money that seems, but only seems, to exist because of unrecognized losses. QE measures, for instance, basically serve to keep those losses unrecognized. That’s what they’re for. To make markets, and ordinary people, believe that banks are still solvent when in reality they’re not.

Funny thing is, even with all the accounting tricks that hide those losses, the entire system is still, and already, on the verge of collapse. And when it goes, the loser will be you, not the gamblers that lost fair and square. If dark inventory shows you anything, it’s that fair and square is a thing of some mythical fairy tale past. The reality for you and me is, and this is not the first time I put it like this: heads you lose, tails you die.

Zombie money pays for dark oil inventory; this is for instance why tar sands can look profitable, even as their EROEI is very low. If there’s sufficient difference between spot prices and forward prices for natural gas and oil, it makes sense to turn the former into the latter (which is all that tar sands are about). Nothing to do with energy efficiency, everything to do with market manipulation. The same goes for shale gas, and for oil shale. It will all soon give a whole new meaning to the term “unsustainable”. Promise.

Zombie money also allows, and causes, lenders, aided and abetted by governments all over, who want no part of a crashing real estate market, to keep millions of homes off the market, which in turn allows them to keep billions, if not trillions of dollars, in losses off their books. This results in hundreds of millions of people, throughout the western world, who think their homes are worth much more than they are. And then they wake up.

Dark inventory and shadow inventory keep us all from having a realistic picture of what is actually out there, what anything at all is worth. Prices are not set in any sort of “free” market; they are set in “shadow markets”, “dark markets”, in which – derivative – financial instruments rule, not the actual assets they are based on. Until they don’t.

Today’s prices are set by bets on expectations of tomorrow’s prices, and these expectations in turn are manipulated by parties that have a vested interest in making investors – and the general public – think a certain expectation is realistic; all it takes is to make that expectation sufficiently opaque, to make sure investors have access to far less information than the parties that deal and/or hold the derivative instruments.

That’s all it takes to create, out of thin air, a whole new generation of suckers and greater fools.

This creates a tremendous cognitive dissonance, a picture of the world that is entirely delusional. And that, of course, can and will not last. Even if a majority of people still wishes to think that it can. What do they know about what’s going on behind the curtain? Hardly anything at all.

And then they wake up.

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Read more: http://theautomaticearth.blogspot.com/2012/01/january-14-2012-housing-and-oil-dark.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+blogspot%2FlRTBR+%28The+Automatic+Earth%29#ixzz1jfOmARbR

Tags: bankruptcy, borrower, countrywide, disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, LOAN MODIFICATION, modification, quiet title, rescission, RESPA, securitization, TILA audit, trustee, WEISBAND, zombie money
Posted in bubble, Corruption, Eviction, securities fraud |