Introduction- The Ten Suicide Bombers

The American monetary system is self destructing at the hands of suicide bombers which have been infiltrating into the system over a number of years; they are now all poised to explode, and it appears that even Barack Hussein Obama is unlikely to be able to save it from destruction. Of course America will survive, but its influence on global economy, fiscal planning and power projection will be reduced drastically. The greatest scam in the history of mankind has been exposed for the sham that it was; and is ready for burial.

It started in 1907. The cash run on banks and the resulting financial crash led to the creation of the Federal Reserve. It was a private banking cartel, which through US legislation was given the job in 1913 of printing all US money and allowed to earn interest on the money it supplied .This ensured the Fed would became a consortium of banks guaranteed to produce debt - the more money it supplied ,the greater would be the profit it could earn. SUICIDE BOMBER # 1

This created a far greater problem. Assuming the bank supplied $100 billion the first year at 5% interest .At the end of the year it would have to be returned $105 billion. Where on earth would the extra $5 billion come from? It is self evident the money would have to be printed; and equally obvious that repayment of yesterday’s debt, would leave society in even deeper debt today. In interest based systems if banks create sufficient money to repay debt we enjoy a healthy or inflationary economy. If they don’t, recession or deflation arises. Thus by definition a healthy economy must be inflationary –and lead inevitably to an increase in both debt and money supply in the long term. SUICIDE BOMBER # 2.

But banks are in business to make ever greater profits, and the Fed as the sole producer of American money was uniquely positioned to exploit its position. It would become the god-father of speculation and market manipulation. Playing the markets increased the need for cash and thus increased the banks profits; while market manipulation enabled it to turn an even quicker buck. To this end the Fed doubled America’s money supply within five years, and in 1920 called in the loans. Over five thousand banks collapsed overnight. One year later it again increased the money supply by 62% and in 1929 called the loans in. This time, over sixteen thousand banks crashed and the stock market plunged 89%. On both occasions insiders within the cartel were able to snap up the failed banks and devalued stocks at cents on the dollar! Market manipulation and Speculation enabled the Fed to continuously keep on enriching itself at the cost of the lesser fry. SUICIDE BOMBER # 3.

The greed of the American financial system for speculation had no limits. Increasing the activity required massive amounts of fresh money to be printed, but the gold standard set a limit. The depression of 1933 (caused mainly due to the inability and therefore stoppage of European nations to pay their WW-1 debts to the US) provided an opportunity to do away with it. President Roosevelt issued an order confiscating all gold bullion from the public; and by the end of the year also abolished the gold standard for the US dollar. US currency became paper ‘legal tender’, and could no longer be exchanged for gold. The shattered European economies- already defaulters on their US loans – had no option but to accept this unilateral ‘dictat’ if they wished to continue trading with the US.

At the post WW-2 allied conference at Bretton Woods the US further reinforced this dictat.The value of the US dollar was fixed at $35 to an ounce of gold , and the value of all other world currencies was pegged (at a constant or fixed ratio) to the US dollar rather then gold. The World Bank and IMF were created as international authorities to monitor the printing of national currencies and ensure maintenance of their pegged values. Bretton Woods even ‘fixed’ the mechanics for doing so. Later, in 1971, President Nixon did away with the gold standard for the dollar. US power (and trust in its government?) ensured the US dollar was henceforth accepted ‘as good as gold’; and worth ‘whatever the US decided it was worth’. The Fed was finally free to print as much money as it wanted. SUICIDE BOMBER # 4

Since all nations had to hold their reserves in dollars for international trade, there would never be a slack of demand for what ever paper the Federal Reserve printed and termed as dollars! This effectively placed the world’s wealth in America’s clutches. Additionally as a military industrial complex for the entire allied war effort the US had profited exponentially from the war. The post World War II period thus created an America flush with cash and assets, and the new monetary system combined with European war debt repayments propelled America to superpower status. American could finally afford anything and yet rake in increasing wealth by exporting to captive markets the world over. This encouraged the US government into excessive spending to pursue its global ambitions during the 45 years of the cold war.

Yet their remained an internal problem. After the Great Depression private banks remained afraid to make loans; and without ‘takers’ how on earth was the Fed to print the vast amounts of money –and thus make the wind fall profits - it was now in a position to make? With out Americans consumer consumption the whole effort would be an exercise in futility! So Roosevelt created Fannie Mae, a state supported mortgage bank to provide federal funding to finance mortgages for affordable housing. In 1968 President Johnson privatized Fannie Mae, and in 1970, Freddie Mac was created to compete with Fannie Mae to buy mortgages from banks etc, and sell them to new investors. The official patronage of artificial and excessive American consumerism had arrived on the scene. SUICIDE BOMBER # 5.

This policy continued gaining strength through out the cold war years. Despite a post Vietnam War economic decline, made worse by US financing of the global Jehad in Afghanistan – wide spread job loses with production increasingly being sent overseas – American consumerism was kept alive by easy credit to maintain an illusion of well being. This was essential in order to conceal from the American voter the destructive impact the US politico –military alliance and the pursuit of its geo-political ambitions was having on the economy.

Thus when in 1987 the US stock market plunged by 22% in one day, followed by the Savings & Loan crisis in 1989;President George H.W. Bush gifted $142 billion to Freddie Mac to give sub-prime (below prime-rate) mortgages to low-income families. Again in 2000, after the “highly speculative” dot-com bubble burst wiping $5 trillion from market values; the Federal Reserve kept interest rates low. Thus forcing consumerism as anyone saving his or her income would actually loose money. Quite obviously as long as the world continued to accept the Federal Reserve’s printed paper as replacement of gold, it would become established US government policy to conceal the ever mounting debts and economic crisis it’s politico-military nexus was driving it into, by printing more dollars and encouraging ever greater consumer spending at home to create a false illusion of well being. SUICIDE BOMBER # 6.

The magnitude of the stupendous direct US government debt run up in the pursuits of global ambitions is by now too well known to be discussed here. What are lesser known however is how these efforts led to –and the magnitude of – the present crippling economic crisis which faces the US? This paper therefore attempts to explain in lay man’s terms the immediate reasons for; the magnitude of; and the likely long term effects of the present economic crisis.

The immediate cause of the crisis lies in the1990s. The system excelled itself in marketing an ever more luxurious lifestyle, through abundant easy credit. The sub-prime (very low) interest rates meant any one could afford a home. Besides the belief took hold that houses would always go up in value and even if they fell the central bank would cut interest rates so that prices would continue going up! Since house prices could never go down, no house holder could possibly loose. Even the banks believed –or at least pretended to believe this. As a result the mortgage lenders would advance loans for a house even when fully aware that the person asking for it would not be able to re pay. Thus even a person on minimum wage could readily secure 100% loan to buy a half million-dollar house. SUICIDE BOMBER # 7.

The more the bank loaned - the more interest it collected. It was a lucrative business this giving away of money it never had! Mortgage banks and investment houses even borrowed money on international money markets to fund these 100% plus sub-prime mortgages, and began lending more than ten times their underlying assets. After 9/11, George Bush told the nation to spend, and during a time of war, that’s what the nation did. Even the government borrowed at unprecedented levels to pay not only for its war on terror in the Middle East (calculated cost $5 trillion) but also to pay for tax cuts at the very time they should have been increased. Bush further removed the reserve requirements in case of Fannie Mae and Freddie Mac, from 10% to 2.5%. They could now lend more then ever before at bargain basement interest rates. SUICIDE BOMBER# 8.

New heights of excessive consumerism were touched by making the homes as the equity itself. Because of home prices never falling they could always be remortgaged at lower rates if needed. As long as an American had a house, second mortgages became easy - and home equity loans were routinely used to even clear credit card bills. The more Americans bought, the more they fell into debt. This was, as one economist put it, an ‘orgy of excess’.

So many people received these sub-prime loans that the speculators came up with a new scheme to make money: they started selling these virtually worthless home loans to unsuspecting speculators and foreign countries as solid US investments. Now American excess and consumer spending would be buoyed up by foreign speculators and even governments! But what if the home prices started falling? To guarantee against this the same financial houses started offering ‘hedge bets’ – insurance policies which were marketed under the name of Credit Default Swaps (CDS). In effect saying the asset would go up in value, but you can also place side bets to protect your self in case you fear they might go down. Soon CDS were trading at $62 trillion, more than the stock markets of the whole world combined. Fueled by a false sense of security both the American government as well as the people rushed heedlessly towards this disaster. SUICIDE BOMBER # 9

As government must regulate insurance policies, by terming these as CDS the sellers avoided regulation. The industry had all the appearances of banks, but the hedge funds, equity funds, and derivatives brokers were worthless. If the owners defaulted, the hedge funds had no money to pay the trillions that would be needed to cover losses. Challenged as being illegal in the 1990s, the Fed legalized the derivatives practice. Thereafter these worthless hedge funds became an entire industry. Now it was easy money for the sellers, and all the financial giants were cashing in: Bear Stearns, Lehman Brothers, Citigroup, and AIG. By latest accounts the derivatives trade was ‘worth’ more than one quadrillion dollars, or larger than the economy of the entire world. (In September 2008 the global Gross Domestic Product was $60 trillion). SUICIDE BOMBER # 10

By the mid- 90’s American homeowners were way into unbearable debt. They had borrowed not only for their original houses but also used them for amassing ever increasing debt as they re-financed for ever bigger houses and newer cars; credit cards; student loans; medical payments; groceries; even health and insurance premiums. There was a growing chance that if housing prices started to fall, alarmed by defaulting loans the whole ‘ponzi scam’ which the US financial system had become, would come crashing down like a pack of cards.

The Suicide Bombers Start Exploding!

In 2008, housing prices did in fact begin to slide and mortgages suddenly began losing value. All those who had refinanced their debt for lower rates that ballooned were caught in a trap, and Americans began to default on their mortgages. This in turn trapped the financial giants who had to stop trading these mortgage-backed securities, as now their losses would have to be visibly accounted for. Investors began withdrawing their funds. Bear Stearns, which specialized in home loan portfolios, was the first to go on the block in March.

Just as they had done in the past, JP Morgan a Fed insider picked up Bear Stearns for $2 a share (just a year back it traded at $159). Again in September, JP Morgan paid just $1.9 billion for Washington Mutual (the largest bank failure in history) whose assets alone were valued at $176 billion. Freddie Mac and Fannie Mae, the publicly traded companies responsible for 80% of the home mortgage loans, lost almost 90% of their value. To guarantee they would stay alive, the Federal Reserve stepped in nationalizing both Freddie Mac and Fannie Mae with a $700 billion bailout package presented as essential to avert a banking crisis.

But this is far from the truth; as it was nothing but a cosmetic gesture designed to dam the fast eroding public confidence .The quadrillion dollar derivatives industry faced a derivatives exposure for US banks of an estimated $180 trillion .This sum represents an impossible-to-fill black hole that is three times the gross domestic product of the entire world put together. The $700 billion bail out therefore makes no sense. Perhaps the US government felt the free gift of $700 billion to its favorite swindlers was a small price to pay in hopes of perpetuating the myth that the US banking system is not dead?

Treasury Secretary Henry Paulson, admitted as much when after touting the bail out as essential, he added : “ the $700 billion taxpayer funded takeover would not prevent other banks from collapsing, in turn causing a stock market crash”. And sure enough soon after, the market fell another 2000 points and other financial institutions began imploding.

And thus commences the disintegration of the much touted American fiscal system and those who follow it world wide. A year ago the largest US mortgage lender Countrywide fell. Soon after, the largest lender in the UK, Northern Rock, went under. Japan and Korea’s auto manufacturing nose dived by 37%. National economies started contracting world wide. In October Iceland went bankrupt having bought American worthless sub-prime mortgages as investments and stock markets dived the world over.European banks began exploding, all wanting to cash in concurrently on their inflated US stocks, and Pakistan faces immanent default unless its Muslim friends and China come to its rescue.

The excessive greed of western speculators also stood revealed during the recent rise in oil prices .Even in the midst of a crisis they would not let go of their unholy pursuit. Oil prices were taken to a peak of almost $150 per barrel in the summer, and costs immediately passed on to the already devastated homeowner. Yet 60 % of the increase was pure speculation, which became clear as soon as the financial crisis hit with full force. The immediate slide from a high of $ 150 to $61per barrel proved that speculation and not Saudi Arabia (which alone had been blamed initially) was responsible for the hike!

By mid October, the Dow, NASDAQ and S&P 500 had erased all the gains made over the previous decade. The Federal Reserves pyramid scheme of easy money from nothing was now crashing at break-neck speed with no solution in sight. President Bush in using statements like “America is the most attractive destination for investors around the globe” and “America is the global engine that drives the world’s economy” was trying to ensure the world retained confidence in the paralyzed and dying US banking system. Simultaneously his henchmen indulged in cosmetic surgery and verbal statements to stem the tide of global panic .Yet by now it is well known in economic circles that the US economic system is a black hole which will consume any capital which flows into it. And so despite all out US efforts to attract foreign capital, the world shies away.

The American Financial System Is Dead

The greed of American bankers and the arrogance of its politico- military establishment have finally killed the goose that laid the golden egg. Any hopes of reviving it are dead. Leave alone $700 billion even a bail out of $ 7 trillion will not come close to removing the $180 trillion in derivative liabilities from the books of US banks. Another recent measure to over come the crisis the Federal Reserves “Commercial Paper Funding Facility,” is equally fallacious. It seeks to make available much needed money to corporations for funding their day-to-day business operations. The U.S. Treasury believing the facility is necessary to prevent substantial disruptions to the financial markets and the economy has promised a special deposit in support of this facility.

But this only means that the government and the Fed are committing even more public money and taking on even more public risk. The US government debt is already massive. The Treasury’s “special deposit” will no doubt come from U.S. bonds, meaning more debt .In filling even partially the $ 180 trillion black hole ,the federal debt would become so massive that the U.S. could be reduced to Third World status, with “austerity measures” being imposed as a condition for further loans, and hyperinflation running the dollar into oblivion. Rather than solving the problem, such “rescue” plans would further worsen the situation.

And so as Ellen Brown says in the article ‘Financial Meltdown: The Greatest Transfer of Wealth in History’ :
“All the king’s men cannot put the private banking system together again, for the simple reason that it is a Ponzi scheme that has reached its mathematical limits”.

A Ponzi scheme is a form of pyramid scheme in which new investors must continually be sucked in at the bottom to support the investors at the top. Ultimately it reaches its limit as no more investors can be sucked in at the bottom, and 99 % of the investors are left holding the wreck as a few make their pile.
The US banking Ponzi scheme is based on banks lending between 10 to 30 times the cash reserves they actually hold. This allows them to lend money and earn interest on money which they do not hold. Over 97 percent of the U.S. money supply (M3) has been created by banks in this way. The problem is that banks create only the principal and not the interest (new money) needed to pay back the loans. Since bank lending is essentially the only source of new money in the system, somehow someone must continually be found or tempted to avail new loans just to create enough “money” (or “credit”) to service the old loans. This produces a constantly snowballing effect on interest payment (or new money needed) as well as the connected need to find new debtors. This has gone on for over 300 years –– until the system has become saturated and has reached its mathematical limit, with the whole world got mired in debt to the bankers’.

As Ellen Brown concludes “The parasite has finally run out of its food source. But the crisis is not in the economy itself, which is fundamentally sound – or would be with a proper credit system to oil the wheels of production. The crisis is in the banking system, which can no longer cover up (or continue) the shell game it has played for three centuries with other people’s money”.

The Future

Europe may turn out to be the first to have rebelled .It finally decided that it will pay no longer for American excesses at the costs of its own people. Perhaps in time it may also start re-collecting the US refusal to compromise on loans lent to these wrecked nations to peruse WW-1 and WW-2. On October the 13th instead of lending money to the US, the once divided EU nations unilaterally agreed on an emergency rescue plan to develop their own economy totaling $2.3 trillion. It was more than seven times greater than the government of “the world’s largest economy” could spare for sorting out its own mess. This says volumes for the present state of the US economy! China too has opted to provide first aid to its own economy, instead of trying to boost the stalling ‘global economic engine’!

Will the Muslim world wake up too? It appears not. Since the crisis unfolded six months ago, misleading statements of US officials and actions like the ones above have led to the out flow of $10 billion through private money changers alone from Pakistan; not to mention over $ 50-100 billion already estimated to be held in foreign bank accounts by Pakistanis! The case of other Muslim countries is similar. While others are rushing to pull out their money the Muslims are throwing their’s at the West; little realizing that in the present situation their money is going to be gobbled up by the black hole of US capitalism which the US economy has become. The best immediate option for all as Europe and China have demonstrated ,is to pump it into reviving their own markets; or else to hold their liquid assets in the form of gold –and within their own persons-since the US has a history of nationalizing even this stuff too!In the long term the world will have to come up with an alternate system that is fair and works for all-specially the investors.

Incidentally least affected by the crisis are the half baked Islamic banks created in the early 90’s. Islamic banking prohibits the acquisition of wealth via speculation, gambling (or investment in alcohol, tobacco, pornography, or in stocks of armaments companies), and forbids the buying and selling of a debt as well as usury. Additionally, Shania’s banking laws forbid investing in any company whose debts exceed thirty percent. Minus the lack of gold backing for the currencies- a factor imposed by western conditioning- , they deal in tangible assets, and share in the profit and the risk. Their direct exposure to sub-prime asset investments has therefore been low...Yet since the Islamic banking sector is also part of the global economy, and both work side by side in most Muslim countries, liquidity slow down has affected countries with heavy international borrowing; while a loss of confidence in the regional stock markets has been the most notable effect.

Eight years ago, in May 2000, Saudi Islamic banker His Highness Dr. Nayef bin Fawaaz ibn Sha’alan summed it best when publicly giving a series of economic lectures in Gulf.
He warned then that it was a certainty that the US economic system was on the verge of collapse because of its cumulative debts, ever-increasing deficit and the interest on that debt. “When the debts and deficits come due, they just issue new Treasury bonds to cover the old bonds due, with their interest and the new deficit too.” The cycle cannot be stopped or the debt cancelled because then the US would no longer be able to borrow. The consequence of relieving this cycle would be a total collapse of their economic system.

“The essential difference between the Islamic economic system and the capitalist system”, he continued “is that in Islam wealth belongs to God - the individual being only its manager. It is a means, not a goal. In capitalism, it is the reverse: money belongs to the individual, and is a goal in and of itself. “Islamic banking”, said Dr. Al-Sha’alan, “always protects the individuals’ wealth while putting a cap on selfishness and greed. It has the best of capitalism - filtering out its negatives - and the best of socialism - filtering out its negatives too.”

He therefore advised that Arabs pull out their investments in the US (to the tune of $1.5 trillion in 2000), which in his view were being held hostage to consumerism and speculation; and reinvest them in the tangibles of the Arab and Islamic markets. “Not in stocks however because the stock market could be manipulated remotely, as we have seen in the last couple of years in the Arab market where trillions of dollars evaporated”.

Coming back to the issue of half baked Islamic banks. I used the terms only because so far these banks have applied the Islamic principles of finance only to their valueless ‘paper’ money tied to the equally valueless US dollar. Even then they have escaped some of the more grievous damages. But the heart of the Islamic monetary system is the value given to it’s gold backed currency. It is only when a currency having intrinsic value of it’s own is combined with the greed controlling and investor/entrepreneur friendly principles of Islamic finance that best results can be achieved.

If His Highness Dr. Nayef bin Fawaaz ibn Sha’alan were to embark on a series of lectures now, perhaps he might lecture on how this is the right time for the creation of a full fledged Islamic monetary system including an Islamic International bank, an Islamic Monetary fund, along with the creation of a gold backed Islamic dinar.Indeed between themselves the Islamic nations have both the economic skills as well as the wealth to make it work. If they find the will to do so , not only would they put their wealth to real use in Islamic markets; but even a majority of the speculation battered investors of the capitalist world could be expected to willingly beat a path to the real assets, and, the level and fair playing field provided by such an Islamic financial system.

Conclusion
Since 9/11 the Muslim world has seen its historical ally turn into its worst nightmare - militarily as well as economically. The whole exercise of capitalism and democracy through use of force, first against Germany, Russia and European socialists; and then against Muslim nations has almost bankrupted the US. The US system always sought to feed itself in a combative scenario; selling protection against risk, and manufacturing wars against self declared villains to feed its ambitions. After winning the Cold War with the help of Islamic Jehadis, the financial system it feeds on was left with no easy enemies to conquer. The US has nothing to offer the world except two self declared and unilaterally imposed wars on its former allies: no exports, no production, few natural resources, and no service sector.
The Muslims world naturally sees the hand of Allah in the wrath that has befallen America. The world’s economy is no longer America’s to control as it is already massively indebted to the rest of the world. plus the magnitude of the problem is such that its fiscal system is badly exposed and beyond repair. For all practical purposes it is already dead.

What is referred to as a sub-prime mortgage collapse obfuscates the real facts and is a myth to conceal the truth. The immediate carnage occurred because the entire fiscal system was based on greed, hot air, and speculation. The basically inequitable system was forced to create indebtness in every field –not just in housing - through consumerism based on a false sense of prosperity just in order to survive. It therefore marketed even these risky mortgages renaming insurance guarantees as ‘credit default swaps’ and unregulated risky gambling wagers as ‘derivatives’. Financial managers and banking executives went on selling this ultimate con to the entire world, and by October 2009 it was a quadrillion-dollar ($1,000 trillion) industry which few can understand – let alone put right - as it spirals into a mortal nose dive.

Yet the interest scam and the overwhelming greed it nurtured as a result of 300 years of it’s perpetuation only hastened the inevitable. For basically the western financial system is a ponzi scam which has reached its mathematical limit and so is irrecoverably dead. Can Muslim leaders and financial experts seize the moment to give the worlds investors an honest, just and fair economic system which they possessed –and the world so desperately needs?

Mean while real Islamic fighters –as well as fanatical suicide bombers - continue hammering away at the symbols of American arrogance in their midst; daily gaining ever increasing recruits as American arrogance stubbornly continues to cling to it’s follies. Despite massive use of force and colossal expenditure, a mission declared accomplished more then seven years ago is in worse straits then ever before. Both the history of the region as well as they history of America proves that it is in an unwinnable situation –and daily digging itself into a worse hole.

As this article proves it wasn’t the best con game even when it lasted: At the strategic level making war a profitable industry selling protection to allies and defeating enemies to plunder their assets, while keeping on creating new enemies as the old ones are tamed. At the tactical level getting paid well for selling vast amounts of risk, failing, and then fixing the problem at the expense of the suckers who took the poisoned chalice of interest , never living to see a penny of profits on their investments in the long run. The crash of the entire global economic system proves this.

America’s fiscal arrogance based upon one set of rules for its bankers and another for all the rest; who even deluded their own people to feed their capitalistic greed -combined with American military arrogance which believed allies are only to be milked and then discarded or made into enemies when of no use - is finally translating into a failure of the capitalism altogether.with Afghanis –and Muslim Jehadis- stand willing and eager to make another Russia out of the USA.

As two leading European column writers have commented:

“It would certainly be short-sighted to underestimate the USA’s capability for self-renewal and to write it off. American power will be reduced, but it will remain a factor. Adjustment to the new reality will nevertheless be painful and will take its time. In the end, the world will no longer be as it was before. The sole dominance of the West and it leading power will certainly end at last with this crisis”.

“Within two decades it has now happened for the second time that a global system of order has fallen apart: After the Cold War’s system of bipolarity, now the unipolarity of the lone world power, the USA, is collapsing. With it ends the epoch of unrestrained finance capitalism”.

And yet America now has an outstanding new leader who promises change.One who has proved his wisdom and sagacity in the brilliant campaign he has just won.He is on record as having said: “To those — to those who would tear the world down: We will defeat you. To those who seek peace and security: We support you. And to all those who have wondered if America’s beacon still burns as bright: Tonight we proved once more that the true strength of our nation comes not from the might of our arms or the scale of our wealth, but from the enduring power of our ideals: democracy, liberty, opportunity and unyielding hope”.

Indeed, Pakistanis can only say Amen to that. But we have heard such words before. Remember JFK: “ We shall pay any price, bear any burden, meet any hardship, support any friend, and oppose any foe, in order to assure the survival and the success of liberty.” And such noble words have always been belied by the deeds of American statesmen, military and business.

Will Obama prove any different? Will he prove man enough to truly take stock of Americas best and worst traits …and those of other civilization; and work to bring forth a bouquet which merges the best of each? If not it is a certainty this crusade will continue for hundreds of years like the last one; and like the last one it shall be the true ‘Saladin’ who shall prevail, and not the one who merely mouths the ideals of a Saladin.

For America’s sake and for the sake of the world I can only pray that Obama can discover in himself the courage, chivalry, wisdom, piety, humility and sagacity of a true Saladin.