Citizens Electoral Council of Australia

Media Release Wednesday, 16 October 2013

Craig Isherwood‚ National Secretary
PO Box 376‚ COBURG‚ VIC 3058
Phone: 1800 636 432
Email: cec@cecaust.com.au
Website: http://cec.cecaust.com.au

Will 17 October be derivatives ‘Deep Impact’?

Australia, like every other country with massive exposure to financial derivatives bets, faces monetary chaos in the event of a U.S. government bond default on or after 17 October.

Such a crisis, however, is a crisis for financial gamblers, not the people, and therefore could be resolved very quickly to the benefit of all, if governments used the opportunity to: cancel and write off all derivatives bets; impose a strict Glass-Steagall separation of essential banking from any speculation; and start national banks to direct public credit into the infrastructure and industries that grow the physical economy.

Australia’s banks now hold $23 trillion in toxic derivatives bets, up an astounding $1.5 trillion in just the last three months. That’s Australia’s share of a total global derivatives bubble of $1.4 quadrillion—$1,400 trillion!

All derivatives are side-bets on some underlying transaction, and derivatives gamblers have a preference for betting on large-volume, regular-cash flow instruments, such as mortgages, and government bonds. Because there are more than $16 trillion worth of U.S. government bonds on issue, and those bonds are the most traded in the world, there are also more derivatives bets directly and indirectly on those bonds than any equivalent financial instrument in the world—bets that would amount to hundreds of trillions of dollars.

None, or virtually none, of those bets would factor in the possibility of a default, leaving the gamblers facing massive losses after the 17 October deadline for raising the U.S. debt ceiling.

Wall Street gamblers threaten to wipe out economy; LaRouche threatens to wipe out Wall Street

The biggest derivatives gamblers on Wall Street continue to threaten that all Holy Hell will be unleashed if the U.S. Congress fails to extend the debt ceiling, and guarantee the banks their due. Jamie Dimon, the boss of one of the world’s biggest derivatives banks, JPMorgan Chase, warned that a U.S. default “would ripple across the global economy in ways you couldn’t possibly understand.” The world’s biggest bond trader Pimco’s El-Erian swore that it “could cause a crisis that dwarfs the bankruptcy of Lehman Brothers in 2008. You will freeze the system.”

To all of which the U.S. statesman and physical economist who first warned of derivatives in 1993, Lyndon LaRouche, responded today that all of these apocalyptic threats coming from Wall Street and the City of London should simply be ignored. His view was straightforward: There is zero reason to defend Wall Street and its speculation. What they have done is something which no person can tolerate. They have proven, by their actions, that they have no right to exist: there is no value whatsoever in their holdings.

“What we will do,” LaRouche stated on 15 October, “is audit their books with the Glass-Steagall principle. We will march them into the conference room, tell them to put their papers on the table, and answer our challenge that they demonstrate any actual value therein. They cannot. The fact is that they have rotated debts through and through, each time raising the prices and their take. It’s all worthless speculation. Where’s the real cash? Where’s the beef? There is none.”

“And so we will bankrupt Wall Street,” LaRouche concluded, “because we have to, since their policy means killing off the population, which is something we will not allow.”

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