Iraq War: End in Sight?

It's possible the war in Iraq will end soon, and for financial reasons most of you do not understand.

No, we are not broke. Technically insolvent? Yes. Bankrupt? No.

Yet, even our nation's financial insolvency is not the reason why we might soon end our occupation of Iraq.

Truth is the credit creating machine called Structured Finance is significantly frozen, so the profit to be made financing the war is rapidly diminishing. Thus, the takeover of the sovereign credit of the United States by global private finance probably is set to enter a new phase whose character could be extremely debilitating and oppressive.

Shortly, I will argue our nation is being prepared to destroy itself from within, and this quite literally. Of course, there is hope we could avoid this outcome. However, only if we heed the lessons of history and rightly answer our nation's calling to purpose as citizens in a temple of liberty and a beacon of hope.

Make no mistake about it. The vice grip global private finance has over the U.S. Treasury is a concern of the first order because there clearly exists an agenda contrary to the spirit expressed in the U.S. Constitution's Preamble. Tyranny is its name. Some things truly never change.

So, let me begin to explain why I believe the war in Iraq might soon be coming to an end.

You must realize there was a devious reason Wall Street and the City of London welcomed the war in Iraq. The masters of global private finance knew the U.S. Treasury would be spewing debt like there was no tomorrow in order to finance the war. This was something they took advantage of on two counts.

First was simply creating conditions that, ultimately could be manipulated to the detriment of our nation's standing throughout the world, both presently and for all time to come.

The Iraq war has well-served the present purpose. Has the United States ever been more greatly reviled?

Likewise, the geometric increase of our national debt in the war's prosecution has become the means by which our nation's standing might forever be destroyed. I believe this is the very threshold we are, indeed, but at the point of crossing.

The second, more immediate reason the war in Iraq was favored by global private finance was because the explosion of U.S. Treasury debt would prove indispensable to the proliferation of myriad "private label" securities that are products of the greatest credit creating machine the world has ever seen: Structured Finance. Treasuries are used in complex, dynamic hedging schemes meant to protect issuers of the various Structured Finance products.

We might be wise, indeed, to view this proliferation of credit, both public and private, as bait to the trap we are proceeding to enter.

U.S. Treasury securities are AAA rated. Among other things, they typically are a safe refuge for investment capital in times of political and financial crisis, both of which are now upon us. (All well and good, in some respects. However, these are anything but typical times. Strategies that would have worked fine yesterday may fail miserably tomorrow. This is not your father's financial system.)

Treasuries also provide a reliable source of liquidity to back the hundreds of trillions of dollars at risk in unregulated over-the-counter derivatives markets operating through offshore, Anglo-Dutch financial centers located on the Cayman Islands, the Antilles, the Isle of Man, etc. Derivatives have been instrumental in perpetuating the myth that, securities created via Structured Finance are as "safe" as U.S. Treasuries.

However, since July '07, the greater bulk of the Structured Finance marketplace more or less has frozen. It does not appear this will substantively change anytime soon, either.

The problem began when a couple of Bear Stearns funds investing in sub-prime mortgages went belly-up last July. (Just who was behind the run on these funds might be worth knowing, if only to get some better perspective on negative fall-out yet to come.)

The impact on the Asset-Backed Commercial Paper (ABCP) market was immediate. It froze up. New issues could not be floated. Existing issues could not be traded. Buying interest simply evaporated. Thus, financing for creating "private label" Mortgage-Backed Securities (MBS) disappeared.

(ABCP is short-term financing; capital raised in the ABCP market was being used to create longer-dated, "private label" MBS.)

Now, the problem that began with the seizure of the Asset-Backed Commercial Paper market is spreading, because maturing securities simply cannot be rolled over. This effects marketplace liquidity. With capital less available, vulnerabilities are cropping up in other [massive] Structured Finance markets. For example, Collateralized Debt Obligations (CDO), Credit Default Swaps (CDS) and now, the "monoline" insurers (the two biggest being MBIA and Ambac) are under a great deal of pressure.

Thus, a U.S. Treasury still spewing off debt to pay for the war is becoming problematic. There no longer is an easy way financiers can leverage this debt. It is becoming more a burden to the game they control, rather than a self-serving benefit.

So, that's why we might be seeing an end to this war very soon ... and the start of a great deal of economic pain.

Securities created via Structured Finance have permeated global finance. A number of banks, insurance companies, and private and public funds have invested in these, expecting to pad their returns. However, many of these securities can no longer be traded, so a wide swath of financial institutions presently are threatened with insolvency.

You can be sure, though, certain well-connected sharks are circling, lobbying to create conditions favorable to their protected positions, so they might gobble up the weak and unprotected for pennies on the dollar, and likewise consolidate a great deal of power. FBI and SEC investigations (only recently initiated) provide a glance at who might become the intended victims. Just who will benefit remains to be seen.

You would rightly suppose, I think, that, as this thing unwinds, the ultimate resolution will not bode well for the average, over-extended John and Jane Doe.

The credit-creating machine called Structured Finance, indeed, was responsible for the massive inflation of real estate over recent years. Home price inflation helped turn dwellings into virtual ATMs. Re-financing homes whose value was rising injected hundreds of billions of dollars in capital one suspects was partly (largely?) supplementing inadequate incomes.

But now, with the seizure of markets associated with Structured Finance, home values are falling. Thus, the virtual ATM a home once was is now out-of-order.

Sure, the traditional banking industry, outside Wall Street, might pick up some of the slack, but this will be nowhere near the deluge provided through Structure Finance over recent years, which, clearly, served the greater benefit of global private finance, much to our nation's ultimate detriment.

No doubt, there is a considerable effort being made to sustain appearances suggesting all is under control. Witness the scramble in Washington to pass a "stimulus package" which, really, is nothing more than a pathetic bribe.

Shut up! Help is on the way! Surely, though, this will fail to have any meaningful effect beyond getting us through this year's presidential election (or as close to this as is humanly possible). Face it, this is precisely all that is intended. Any thinking person realizes this.

The way is paved for a national economic disaster because a massive hyper-inflation in energy and food prices looms beyond the threshold we are crossing. This will be like nothing we have ever seen before in our nation's history. Here's why.

If nothing else, the price for ending the war in Iraq surely will be to remove the last leg of support for the dollar. Even if I am wrong about the war's end, though, the dollar's demise, truly, is already baked into the cake. There simply is no way the rest of the world will indefinitely continue on the wicked ride the United States is set to take, now that the grand illusion of prosperity -- removed the day the Asset-Backed Commercial Paper market froze -- is shaking the global financial system to its core.

The real tragedy is too few Americans understand our present vulnerability within the context of our nation's history. This is particularly sad given we are in an election year. Our power to peacefully revolt is being squandered.

Regrettably, then, it is by our nation's widespread ambivalence and relative ignorance that wiser minds would brace for the worst in the coming period. But what does this mean?

Quite simply, we could be on the verge of destroying ourselves from within.

Look, the trap is set! Observe the world around you. How many people sense with fear some onerous problem, yet are resigned to feeling helpless and confined to expressing nothing more than an irrational rage? It's epidemic! And it is the gravest danger we face.

Witness, as such, the seeds that could grow into a nation of unapologetic Fascists, precisely what global private financiers and their political play things have wittingly sown.

Would you like stark proof I am not just blowing a bunch of hot air?

Check out this article reporting irregularities following the New Hampshire primary a few weeks ago. Watch the video. Then, see my comments below the article. They're titled, "The Burden of Proof." You might begin to perceive the real danger suggesting how we might destroy ourselves from within sometime over the years ahead.

Now, I did state at the top of this long post there is hope. Truth is we simply need courageous leaders who will usher a return to the American System of Political Economy. This will require citizens who know, like the back of their hand, just what this means.

First, become better versed on how FDR rescued our nation when it faced the ravages of financial tyranny. For, indeed, yesterday's financial tyranny is much the same as today, once again threatening a worldwide economic calamity giving rise to the spirit of Fascism even in our own country.

Then, develop a richer understanding of Alexander Hamilton and ideas surrounding the creation of a National Bank.

This seems particularly useful, given a growing chorus these days who cite Thomas Jefferson's rejection of Hamilton's formulations. Most notable are Ron Paul supporters. Though they similarly recognize our nation's present vulnerability, history thoroughly discredits their fanciful notions of what makes for sound banking. Oddly, they rightly speak of principles enunciated in the Declaration of Independence and of rights our Constitution codifies. Yet, they seem to overlook our government's utter mandate -- the very purpose the U.S. Constitution ventures to facilitate -- as stated in the Preamble.

"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."

Hamilton's ideas surrounding a National Bank have had only brief intervals when they were made policy. Each time the practical result was a flourishing of the American ideal (the likes of which the Constitution's Preamble spells out).

Contrarily, it was ideology harmonious with Jefferson's opposition that fueled movements eventually leading our nation into Civil War, much as similarly threatens us today.

Be aware FDR foresaw the danger we presently face when, in his 1944 State of the Union Address, he stated:

"One of the great American industrialists of our day—a man who has rendered yeoman service to his country in this crisis—recently emphasized the grave dangers of "rightist reaction" in this Nation. All clear-thinking businessmen share his concern. Indeed, if such reaction should develop—if history were to repeat itself and we were to return to the so-called "normalcy" of the 1920’s—then it is certain that even though we shall have conquered our enemies on the battlefields abroad, we shall have yielded to the spirit of Fascism here at home."

I leave it to you, dear reader, to put into proper context the presently growing divide between the "haves" and the "have nots" (set only to grow wider, lacking effective action) and judge our nation's contemporary political process as it suppresses candidates who would upset the applecart pushed by those who bear the greatest responsibility for creating our presently degraded, vulnerable condition.

Yes, we may soon exit Iraq. Yet, would this represent much of a victory, when in our weakened state we would yield still further to the spirit of Fascism?