Have not dug into this one in depth yet. Thus far it has the odor of someone with a hypothesis that went in search of facts to shore it up. Anyone that uses that double word score term financial terrorism repeatedly makes me a bit suspicious.
Economic Warfare: Risks and Responses
Have not dug into this one in depth yet. Thus far it has the odor of someone with a hypothesis that went in search of facts to shore it up. Anyone that uses that double word score term financial terrorism repeatedly makes me a bit suspicious.
Interesting stuff, there is an accompanying article by Bill Gertz in the Washington Times.
Being familiar with some of the threads in this, I believe this report will be deflected, ignored, or downplayed. I also believe that by publicly tugging on some of these threads, the author has just exposed himself to personal and professional danger.
Could just as well have started with some of the answers, and then went looking for the OSINT to match.Originally Posted by Sergeant T
From the cited article:
I agree with Mr. Bracken. I also doubt very much that anyone is going into "personal and professional danger" over this. I look at things like this:Paul Bracken, a Yale University professor who has studied economic warfare, said he saw “no convincing evidence that ‘outside forces’ colluded to bring about the 2008 crisis.”
“There were outside players in the market” for unregulated credit default swaps, Mr. Bracken said in an e-mail. “Foreign banks and hedge funds play the shorts all the time too. But suggestions of an organized targeted attack for strategic reasons don’t seem to me to be plausible.”
I mostly just want to click somewhere else.explaining that those domestic economic factors would have caused a “normal downturn” but not the “near collapse” of the global economic system that took place.
Plenty of causes out there without going into the conspiracy market.
Never attribute to malice that which is adequately explained by stupidity, greed, ineptness, short-term thinking or any combination of the above..
The Miscreants’ Global Bust-Out: Preface, by Patrick Byrne. Deep Capture, 28 April 2011.
The Miscreants’ Global Bust-Out (Chapter One): Was the United States Attacked By Financial Terrorists?, by Mark Mitchell. Deep Capture, 29 April 2011.
I did not know if Zuhair Karam was violent, but I telephoned him because I thought his biography was interesting. For example, it was interesting that soon after making a home in Illinois, Zuhair Karam obtained finance to publish a semi-famous work of jihadi propaganda, and soon thereafter, became (without any relevant experience) a proprietary day trader of equities and derivatives at a small, unregistered brokerage in Chicago called Tuco Trading.
Most of the other people who operated through Tuco Trading also had interesting biographies. Among them (just to name a few) were a Russian Mafia figure who is knowledgeable about a brutal gangland-style murder in New Jersey; the top lieutenants of a Russian Mafia kingpin and oligarch who have been accused by U.S. officials of having ties to the Russian government’s intelligence apparatus; and an Iranian fellow whose family has high-level ties to Palestinian Islamic Jihad, and the terrorist-sponsoring Revolutionary Guard in Tehran.
Meanwhile, Zuhair’s little brokerage, Tuco Trading, maintained partnerships with several other brokerages, all of which had close business relationships with people of similarly colorful backgrounds. Among them were multiple associates of La Cosa Nostra; numerous traders with ties to the Russian Mafia; and a jihadi who not only was Al Qaeda’s most important financier, but also operated a secret bomb factory in a Chicago warehouse district before the U.S. government named him a “Specially Designated Global Terrorist”.Aside from the amazing backgrounds of this cast of characters, it was also interesting that Tuco Trading was closed by an “Emergency Order” of the SEC on March 9, 2008 — just a few days before the March 13 collapse of Bear Stearns. Not that the SEC had any idea what was happening at Tuco; the Commission seemed primarily concerned that the brokerage was massively exceeding margin limits.
What the SEC seems to have missed (though a report by Tuco’s bankruptcy receiver made it clear) was that in the month before it was shut down, this tiny, unregistered brokerage transacted trading equal to more than 20 percent of the volume of the largest brokerage on the planet. Moreover, data and other evidence obtained by Deep Capture suggests that most of this massive deluge was aimed at manipulating the stock prices of America’s largest financial institutions, including Bear Stearns.
In other words, there is good reason to believe that Zuhair’s strange, little brokerage with all of its odd connections, contributed to the 2008 financial cataclysm that nearly brought the United States to its knees.
Bourbon,
Yet again evidence that the current complex structure for regulation, reporting and enforcement we have in the West and elsewhere failed to cope with what was really happening.
davidbfpo
This is hyperventilated melodrama. You can't drive a company out of business by manipulating its share price. If the company is healthy, all you can do is produce a transient blip in its market cap. If a company is a hollow shell that's ready to die anyway (as Bear Stearns was) you can kill it off, but the cause of that is the underlying condition of the company, not the share price manipulation.
Short sellers are the vultures and jackals of the financial world. They kill off the sick and dying, they don't bring down the healthy. It's entirely possible - indeed likely - that people with inside knowledge of how badly Bear Stearns and others were overextended decided to make some money by pushing them over the edge. That's illegal, but it happens. These companies didn't fall because of short sellers, though, they fell because they were badly managed.
It all has a strong whiff of the standard conspiracy-theory tactic: start with a theory, find a bunch of factoids that ae consistent with the theory, ignore all facts that aren't consistent with the theory. You convince those predisposed to believe, but not many others.
You mean according to efficient market hypothesis; which, if you are one of the people who still subscribe to this theory – I couldn’t convince you otherwise with a car battery and a strobe light. Needless to say, EHM completely ignores the reality of market panics.
You are also presupposing a classical bear raid, and ignore the use of ETFs, phantom shares, and option strategies. Not to mention credit default swaps, that can be easily manipulated.
That’s great, but again (and you have done this before) we are not talking about regular short selling, which is legal and generally good for markets.
We are talking about market manipulation and naked short selling, which is an abuse of the clearing and settlement system. It creates phantom shares which massively dilute supply, thereby driving down price.
It is apples and oranges, as has been explained before. Yet you continue to fail to understand the distinction.
Except the difference between conspiracy theory and scientific theory is the ability to make predictions; and the things DeepCapture and its principles were saying about the slop in clearing & settlement mechanisms has borne out over the past two years in scandals involving stocks, CDS, MBS, ETFs, and commodities. That intellectual debate has been settled; they were right.
The rest that is reported is actions – many of which can be easily confirmed; and actors – who would be suing the hell out of these guys if any of this wasn't true (they haven’t).
The Miscreants’ Global Bust Out (Chapter Two): The “Money Weapon” and a Jihad Bigger than Bin Laden, by Mark Mitchell. Deep Capture, 03 May 2011.
The Miscreants’ Global Bust Out (Chapter 3): Michael Milken and the BCCI Criminal Enterprise, by Mark Mitchell. Deep Capture, 05 May 2011.Three years later, a lot of people still thought it was “remarkable” that Sheikh DeLorenzo and an Al Qaeda operative had managed to insert spies into the U.S. military. But that didn’t stop Sheikh DeLorenzo (a sophisticated financier who looks the part in his pin-striped suits) from seeking permission from the Securities and Exchange Commission to set up a trading platform called Al Safi Trust, the ostensible purpose of which was to enable Muslim traders to engage in short selling without violating shariah law.
In 2007, the SEC granted permission, which is pretty “remarkable” because Al Safi Trust creates precisely the sort of crack in the financial system that would likely be exploited by people looking to crash the markets. Traders who engage in legal short selling (as opposed to illegal naked short selling) first borrow stock, then sell it, hoping the price will fall. This is a perfectly legitimate practice because it does not manipulate the markets. The stock that is borrowed and then sold is real stock; it is not phantom stock that artificially increases supply and drives down prices.
But, of course, this scheme eventually collapsed – and it must be stressed, the vast majority of the companies that Milken financed ultimately disappeared.
In later years, the “bust out” concept was refined into such schemes as the “death spiral” PIPEs finance that was pioneered with help from Al Qaeda Golden Chain member Shiekh Yamani’s Investcorp and other outfits. Always, the basic idea is to finance a company, load it with debt, and then take it down.
In the 1980s, Milken and his cronies orchestrated a number of bust outs in league with BCCI and its proprietors, including future Al Qaeda Golden Chain member Shiekh Mahfouz, who remained one of Milken’s closest associates until Sheikh Mahfouz’s death in 2009.
I am aware of the distinction. I'm also aware that it doesn't matter. Either way, all you're doing is driving down the share price, which has no impact at all on the fundamental viability or core strength of the company. If the company is strong, all you do by depressing the share price is open a buying opportunity for somebody else. You might as well try to dig a hole in the ocean. If the company is already on the edge, or is too small or too far out on the fringe for investors to notice the price dropping below what fundamentals can support, that's a different story. That's why short sellers seek out the weak and the isolated.
Naked or otherwise, short sellers don't bring down healthy companies and they don't bring down economies. Naked shorting is abusive and can do damage, but it's not a cause of major economic dislocation. If you see a long line of dominos falling and want to know why, don't ask what knocked down the first domino: dominos fall all the time. Ask why so many others were stacked in a neat vulnerable line.
Of course they were right. They were predicting things that were already going on, and have been for ages in various forms. There re always scandals in financial markets; predicting that is like predicting sunrise in the east. When the economy is strong, nobody notices outside the community. When the economy is weak, people come to the conclusion that the scandals caused the weakness. They're wrong. The scandals are always there and always will be. They are actually a good sign. Given the amount of money to be made, somebody will always break the rules. If there are scandals it means people are being caught, which provides at least some control. If there are no scandals it means nobody's getting caught, which means everybody is breaking the rules. Never invest in a market where there are no scandals.
I see no evidence that "economic warfare" or sinister malign influences were the cause of the recent crash. I see a long chain of mutually reinforcing bad decisions, from Wall Street, Main Street, and most of all Government, reaching back to the mid 90s... arguably before, but that's when it started going out of control. That chain could have been broken at several points, but it wasn't. Lots of lessons to be learned, but they really don't involve the Dark Arts, though people who really want to see it that way will always find reasons to do so, and will always suppose that the majority who don't see it that way are naive or deluded.
We too easily miss the forest for the trees. Any of us can point to a hundred abuses of the derivatives markets since 2002, and propose regulations, describe effects, etc. Or we could just note that if the derivatives markets had been allowed to fully crash in 2001/2002 when they needed to, instead of having the risk sucked out of them by an inappropriate countercyclic intervention, all that discussion would be unnecessary. Macro incentive management often achieves more than attempts at specific regulation.
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