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Please resist your natural instinct to NOT READ this because of the word Derivatives in the title.
I am acutely aware of the boredom and befuddlement that this word instills in you and that is why I
added the word Sex to the title, but it is important that you read what I am about to say.

Never before in the history of the world have we been faced with the threat of such a
great financial catastrophe but, sadly, most people are totally oblivious to all of this.

They continue to have faith that their leaders know what they are doing, and they have been lulled into
complacency by the bubble of false stability that we have been enjoying for the last couple of years.
Unfortunately for them, however, this bubble of false stability is not going to last much longer and when
the financial crisis comes it is going to make 2008 look like a Sunday picnic.
Let me explain why I believe the aforementioned to be the case.
What Is A Derivative?
If you do not know what a derivative is, Mayra Rodrguez Valladares, a managing principal at MRV
Associates, provided a pretty good definition in a recent article for the New York Times saying:
A derivative, put simply, is a contract between two parties whose value is determined by changes
in the value of an underlying asset. Those assets could be bonds, equities, commodities or
currencies. The majority of contracts are traded over the counter, where details about pricing, risk
measurement and collateral, if any, are not available to the public.
In other words, a derivative does not have any intrinsic value. It is essentially a side bet.
Most commonly, derivative contracts have to do with the movement of interest rates but there are
many, many other kinds of derivatives as well. People are betting on just about anything and everything
that you can imagine, and Wall Street has been transformed into the largest casino in the history of the
planet.

Derivatives: Their Origin, Evolvement and Eventual Corruption

Derivatives are financial instruments whose values depend on the value of other underlying financial
instruments or objects. The main types of derivatives are:

futures,
forwards,
options and

Copyright 2014 InterAnalyst, LLC

swaps.

The original intended use of derivatives was to manage risk (hedge); however, now they are often
traded as investments whether hedged, un-hedged or as component of a spread trading strategy. The
diverse range of potential underlying assets and pay-off alternatives leads to a wide range of derivatives
contracts available to be traded in the market.
Derivatives can be based on different types of assets such as:

commodities,
equities (stocks),
residential mortgages,
commercial real estate loans,
bonds,
interest rates,
exchange rates, or
Indices such as a stock market index, consumer price index (CPI) see inflation derivatives or
even an index of weather conditions, or other derivatives).

The largest component of the derivatives complex remains interest rate products which the U.S. Office
of the Comptroller of the Currency tells us constitute more than 82 % of all outstanding bank held
notionals. Interest rate derivatives have a great effect on interest rates as will be discussed later.

Origin of Derivatives
Derivatives have their roots in the agri-complex. From an historical context, it was agricultural
commodities futures (mainly grain) that first gained traction as viable financial instruments. The genesis
of these products dates back to the founding of the Chicago Board of Trade (CBT) in the mid-eighteen
hundreds.
Back in the eighteen hundreds large scale farming enterprises were difficult (risky) to bank. The risk
was embodied by the known costs associated with planting seed, fertilizing and subsequent growth and
harvest versus the often volatile, unpredictable final selling price of a perishable commodity. Futures
removedthis unknown from the banking/farming relationship and transferred it to speculators for a
nominal fee or cost.
From 1850 59, American agricultural exports were $189 million/year (81% of total exports). With
agriculture occupying such a huge percentage of exports and GDP it was only natural that business of
this scale (potential fees and profits) would and did attract the attention of the money changers. The
advent of futures and forward contracts in the agri-complex was productive: giving a higher degree of
predictability to farm income making the business of farming more bankable. Making farm income more
predictable enabled the growth of corporate agri-businesses which brought with it economies of scale,
the freeing-up of human capital which enabled / translated into mass migration [urbanization] of
farmers into cities in part assisting with the rise of the human capital pool essential for the
industrialization of America.

Copyright 2014 InterAnalyst, LLC

Early Growth the Commodity Futures

In the beginning, as with users in the agri-complex there were identifiable end users (farmers) for
these products. Over time, futures and forwards were developed to meet demand in
othercommodities like coal, crude oil, lumber, cattle and others. Similar commodity futures markets
for these products and trade volumes were driven primarily by end users and its important to
distinguish that for the entire 1800s and virtually all of the 1900s the growth in derivatives was
primarily tied to the commodity trade.
Commodities Law Dictates that Futures Only Aid In Price Discovery

Price Discovery is a method of determining the price for a specific commodity or security through basic
supply and demand factors related to the market.
According to William J. Rainer, former Chairman of the Commodities Futures Trading Commission [CFTC]
back in 1999, Section 3 of the Commodities Exchange Act espouses three basic purposes for the
regulatory structure currently administered by the CFTC:

to protect the price discovery function;

to prevent the manipulation of commodities through corners, squeezes and similar schemes;
and
to assure an effective vehicle for risk transference.

Implicit throughout [the above purposes] is the need to provide suitable customer protection from
abusive trade practices and fraud.
The Rise of Financial Engineering: The Genesis of OTC Interest Rate Derivatives
President Nixon took America and the world off the gold standard in August, 1971. What ensued was a
dramatic increase in the price of crude oil which led to burgeoning balances of petro dollars (Eurodollars) as deposits in the treasuries of banks involved in international trade and a subsequent
bolstering of their treasury operations to deal with the influx of inflated dollars.
Interest Rate Derivatives were developed around 1980. Their basis was the four 3-month IMM
(International Money Market) Eurodollar Futures Contracts (December, March, June, September) on the
Chicago Mercantile Exchange (CME). These futures contracts are derivatives of 3 month Libor (London
Interbank Offered Rate) for Eurodollar Time Deposits. The 3 month Libor rate is set daily by a group of
banks selected by the British Bankers Association and represents where these reference banks are
willing to loan their mostly recycled Euro Dollars (petro-dollar) to their most credit-worthy customers.
These derivatives/futures gave banks the ability to hedge or book profits on sizable amounts of
predictable future cash flows. Up until 1980, this bank treasury trading business remained largely a cash
trade.

The Toronto Chicago Nexus

In 1980, Canada revised its Bank Act. In the ensuing few months Canada went from having 5 domestic
banks to having roughly 65 foreign banks dubbed schedule B banks. To protect their home turf, the

Copyright 2014 InterAnalyst, LLC

existing domestic banking industry successfully lobbied Canadian politicos to limit the amount of capital
[these] new schedule B banks could have to initially 5 million, and in a couple of instances,10 million
Canadian dollars. This placed growth restrictions on the new foreign bank entrants [as these] capital
ceilings implied severe balance sheet restrictions [as they] were substantially limited in participating in
main stream bank treasury operations, such as lending long and borrowing short in the inter-bank
market, because these activities bloated balance sheets. [As such, they]needed to find a profitable
raison detre or their parent banks would shut them down.

Competition Breeds Innovation

To differentiate themselves from the rest of the crowd back in the early 1980s, institutions like CitibankToronto, Chemical Bank-Toronto and Chase-Toronto went on a hiring binge of Ph. D mathematician
types and immersed themselves in financial engineering utilizing then emerging exchange traded
futures (cited above). These financial engineers conjured into existence two Over-the-Counter (OTC)
products:

Future Rate Agreements (FRAs) and

Interest Rate Swaps (IRS).

Trade in these products did not entail the exchange of principal sums between counterparties but only
interest-rate differentials on principal amounts (referred to as notional underlying amounts). The beauty
of this new trade was that:

it was fee based,

for accounting purposes, it was off balance sheet and
it circumvented capital ceiling restrictions.

From a customer standpoint these products were marketed to corporate customers as a means to
achieve cheaper, more flexible funding or alternatives for funding in terms (years) they otherwise would
not be able to access . . .
Citibank-Toronto was the first to engineer
a financial model to successfully book
accounting profits from FRAs and interest
rate swaps and in the beginning these
trades were enormously profitable, so
much so that Citibank-Toronto very quickly
became the worlds biggest OTC interest
rate derivatives house and was, in fact, the
clearing house for OTC interest rate
derivatives for Citibank worldwide. This
business absolutely mushroomed as can be
seen in the graph to the right!

Copyright 2014 InterAnalyst, LLC

Source: U.S. Comptroller of the Currency

Tracking the evolution of the aggregate derivatives held by U.S. banks, it is apparent that trade in enduser products has been absolutely overwhelmed by volumes in dealer trades all in a supposed
market which [as of June 30, 2011] is 96% constituted by 5 players (J.P. Morgan [23.5%], BofA [22.5%],
Citi [16.5%], Goldman [16.5%] and Morgan Stanley [17%]) as the U.S. Comptroller of the Currency tells
us in the executive summary of their Quarterly Derivatives Report.
At this rate of concentration, the derivatives complex appears a lot more like an old boys club than it
does a market. Therefore, the derivative market rapidly evolved during the late 1990s to the early
2000s from a previously end-user-based to a dominantly dealer-based or trading market. The parabolic
rise of these dealer traded volumes parallels the rise of market rigging or the movement toward a
centrally planned economy.

How Derivatives Morphed into a Tool of Abusive, Manipulative Economic Tyranny

Through the late 1980s and early 1990s the Fed and U.S. Treasury with a little bit of help from
academia realized that interest rate swaps could be utilized to CONTROL fixed income (bond) markets
and hence controllers could arbitrarily determine the cost of capital. As such, its no coincidence that
institutions like Citibank-Toronto had their U.S. Dollar derivatives books repatriated back to New York
in this time frame.
Historically, the Federal Reserve/U.S. Treasury only had control of the very short end of the interest rate
curve specifically the Fed Funds rate (the rate at which banks and investment dealers borrow and lend
to each other on an overnight basis). With the advent and proliferation of interest rate derivatives,
[however, and] specifically Interest Rate Swaps, the Fed/Treasury gained effective control of the long
end of the interest rate curve. Thus the Fed/Treasury has been practicing an undeclared form of
financial repression for a very long time.
In free market economies the laws of usury dictate that the interest rate mechanism serves as the
arbiter as to where scarce (finite) capital is allocated. Historically, it was a group of industry
professionals known as the bond vigilantes who enforced this discipline primarily on spend-thrift
governments by making them pay more, through elevated interest rates when they demonstrated
poor stewardship of national finances.
Before the neutering of usury, [what I now refer to as "neusury",] when the bond vigilantes sold
interest rates went up. To illustrate this point look no further than Bill Gross (the closest thing there is to
a bond vigilante today) who heads the worlds largest bond fund PIMCO, who dumped all the US
Treasury bond exposure in its flagship Total Return Fund given his belief at the time that Treasurys were
over-valued.

Copyright 2014 InterAnalyst, LLC

[Pimco's actions, however, did not cause] a major sell off in bonds [resulting in] higher rates[because]
the Fed/U.S. Treasury and their captive investment banking vassals pre-determined the outcome
through the Interest Rate Swap complex to show folks like Bill Gross whos really in charge (the cascade
in 10 year yields depicted above just happens to coincide with the first half of 2011 when, according to
the Office of the Comptroller of the Currency, Morgan Stanley just happened to grow their swap book
from 27.2 Trillion to 35.2 Trillion in notional for a cool increase of 8 Trillion in six months at one
investment bank)overwhelming the bond vigilantes rendering them either impotent, extinct or
perhaps just plain-old confused and afraid
The incapacitation or extinction of the bond vigilantes has enabled the U.S. government to spend like
drunken sailors, prosecute wars and misallocate resources on a grand scale all the while lowering
and/or keeping interest rates at or near zero percent. This arbitrary, gross mispricing of capital helped to
spawn further abuses like the real estate and equity bubbles the development of which produced new
sub-sets of equity derivatives and cdos which also enabled the macro-management of these markets.
Economics 101 tells us that capital is scarce and finite but, by arbitrarily rigging interest rates too low,
capital markets created the false impression of abundance and loose lending practices resulted.

How the Long End of the Interest Rate Curve is controlled

Control over the long end of the interest rate curve works as follows: The U.S. Treasurys Exchange
Stabilization Fund (ESF), a secretive arm of the U.S. Treasury unaccountable to Congress, began entering
the free market deals brokered by the N.Y. Fed as a receiver of all in fixed rates in terms from 3
to 10 years in duration. Interest rate swaps trade at a spread expressed in basis points over the yield
of the 3, 5, 7 and 10 year government bond yield. Banks are virtually all spread players. When trades
occur between spread players one side of the trade sells the other side of the trade the proscribed

Copyright 2014 InterAnalyst, LLC

amount of U.S. Government bonds. This creates superfluous settlement demand for bonds. When the
U.S. Treasurys Exchange Stabilization Fund intervenes in this market,[however,] they are not spread
players.
When the ESF trades with spread players (Morgan, Citi, BofA, Goldman, Morgan Stanley) the banks
are forced to purchase cash physical U.S. Government bonds in the proscribed terms (3-10 years)
- almost dollar-for-notional-dollar as hedges for each trade they do with the ESF because the ESF does
not supply them. This is why, instead of the hollow, contrived, official excuses offered by the Fed [and]
despite record, off-the-charts, government bond issuance, a remarkably large percentage of U.S.
Government bond trades fail to settle.
The ESF participates in these trades taking naked interest rate risk meaning they do not provide their
counterparties with the requisite amount of bonds to hedge their trades thus forcing them into the
free market to purchase them. This generates unbelievable stealth settlement demand for U.S.
Government securities. This is how/why U.S. Government bonds and hence the Dollar can be made to
appear bid-unlimited even when economic fundamentals are screaming otherwise.
The amount of demand for cash government bonds that can be conjured out-of-thin-air in the derivative
interest rate swap complex, which might be best described as high-frequency-trade on steroids
measured in hundreds of Trillions in notional literally overwhelms the cash bond settlement process.
This:

means bond yields are set arbitrarily in accordance with Fed/Treasury policy not in free
markets,
explains why there are no identifiable end-users for the dizzying growth in interest rate
derivatives (swaps) the trade is all attributable to the Treasurys invisible ESF an institution
that is not publicly accountable to anyone or anything,
is why other nations can and do have, from time to time, failed bond auctions while America
never has and never will be allowed to,
is all done in stealth to facilitate and give an air of legitimacy to the U.S. Treasurys ZIRP (zero
interest rate policy) and this
is the real reason why J.P. Morgan Chase and the rest of the magnificent 5 now sport OTC
derivatives books of 50 80 TRILLION in notional.

[For those so interested]the detailed, documented, inner workings of the Treasurys Exchange
Stabilization Fund and their unique relationship with the N.Y. Fed trading desk is best explained by
forensic financial researcher Eric deCarbonnel, here.

How We Know the ESF is the Other Side of These Trades

Morgan Stanley (MS) supplies us with the smoking gun. MS grew their derivatives book by 14 Trillion
in notional in the first 6 months of 2011 virtually all in product swaps that requires 2-way/mutual
credit linesThe global banking system, in aggregate, does not have sufficient credit lines to allow
Morgan Stanley to conduct this level of trading activity in these credit dependent products as reported

Copyright 2014 InterAnalyst, LLC

with legitimate banking counterparties. The notion that this obscene amount of trade represents
legitimate business with banking counterparties that was bilaterally netted is preposterous and a nonstarter. Ergo, the other side of the bulk, if not all, of this trade is necessarily the ESF which is being done
in the name of national security and/or the perpetuation of ZIRP and global U.S. Dollar hegemony

Complete Capture of the Derivatives Complex and Defiling of Fiat Capital

Rather than let the fiat U.S. Dollar fail, as all irredeemable fiat currencies are designed to do. [those] in
charge of the Anglo/American banking edifice have bought time through the capture of the derivatives
price control grid by blatantly commandeering the unlimited resources of the U.S. Treasurys ESF along
with the printing presses of the Federal Reserve. This is done to make historic alternative currencies, like
precious metal, appear unworthy. This has further endangered the financial wellbeing of all who have
acted prudently and financially responsible.

Physical Precious Metal: The Achilles Heel of Fraud

As the interest rate swap mechanism is used to corral interest rates so are gold futures contracts on
exchanges like COMEX and the London Bullion Market Association [LBMA] used to suppress the price of
the U.S. Dollars number one competing currency alternative gold.
The reality is that metals exchanges, like those identified above, have sold as much as 100 times, or in
some case much more, paper ounces or promises of gold in the form of receipts than they have physical
bullion available for delivery in their vaults.
There is plenty of documented proof availablethat conduits for procurement of physical precious
metal like national mints have been choked or suspended for prolonged periods of time over the past
few years for investment grade physical gold and silver bullion coins. These shortages have always been
characterized by, or in, thefinancial press as being the result of issues specific to the retail trade (like
not enough gold or silver blanks available from which bullion coins are stamped). These reported
bottlenecks, however, fly in the face of anecdotal reports by the likes of major industry players such as
Sprott Asset Management principal, Eric Sprott, who has reported that institutional amounts of silver
bullion received were virtually all smelted after they were bought and paid for which is inconsistent with
the waterfall of paper-silver-prices on highly conflicted and suspect exchanges like COMEX and also
inconsistent with the notion that physical silver bullion shortages are strictly a retail phenomenon. The
derivatives that trade on exchanges, supposed[ly] to reflect or aide in price discovery, are increasingly
being used as tools of price manipulation.
Regaining control and the reinstatement of integrity to our capital markets requires market participants
to continue saying NO to paper promises and yes to physical bullion

Conclusion
All is not well not by a long shot. Global financial markets have been taken over through subterfuge in
a financial, fascist coup and the perpetrators have installed a police state. America is no longer a nation
of laws. Any additional regulation of the financial services industry would be fruitless. There already
exists laws on the books to prevent the blatant, criminal price rigging / abuse that has already

Copyright 2014 InterAnalyst, LLC

occurred. The abuse has been allowed to occur by derelict regulators who have vacated (or been
bought) their fiduciary duties.
While Americas industrial potential has been largely off-shored their Constitution and Bill of Rights
are in tatters but their propensity to manufacture is there it just manifests itself in different ways:

Manufactured financial data

Manufactured cost of capital [int. rates]
Manufactured gold and precious metals prices
Manufactured cost of energy

Its all about control. Derivatives products well intentioned when they were conceived have been
utilized to prop-up a failing fiat currency and undermine capital through the establishment of a phony,
crony, price control grid. As such, derivatives have become very dangerous tools in the hands of a gaggle
of miscreant sociopaths (who think, speak and act as if they are doing gods work) that now occupy
global treasuries and rule the Global Wall Street.

So, here is what the Derivatives market is . . . Online Poker!

One might think of derivatives as a random game of online poker:

you dont know who your opponents are (your counterparty),

you dont know if you will be paid (counterparty risk),

you dont know if the game is legitimate, (lack of regulation),

your opponents are probably able to see what cards youre holding (market domination by large
banks),

youre making bets that, in many instances, neither you nor your opponents fully grasp
(complexity of the market),

you are potentially risking not only your current assets with every wager but your future assets
as well (Leverage) and, in some cases,

you dont know how much you are betting.

Imagine, as well, that you play this game every day with trillions of dollars that you do not have. This is
the global derivatives market.
Derivatives are Parasitic Financial Instruments
Derivatives are abstract financial instruments which, like parasites, can attach themselves to all manner
of stocks, bonds, mortgages, commodity, debt obligations, currency exchange, interest rate
fluctuationsin short anything.
Derivatives exist in the twilight zone of the banking industry. Like black holes, their presence and
massive influence are acknowledged yet the true influence on the global economy of this quadrillion

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10

dollar event horizon is only theoretical. The near catastrophic disasters at Barings, JP Morgan and AIG
are small examples of their destructive powers.
Investorpedias more clinical definition of derivatives is: A security whose price is dependent upon or
derived from one or more underlying assets. The derivative itself is merely a contract between two or
more parties or, alternately, as derivatives are often created as a form of insurance, you could think of
them as an insurance policy in which you:

dont know the name, address or any contact information relating to your insurer

dont know if your insurer has the resources to pay a claim

dont understand the insurance contract as it is written in Greek

must rely on a shadowy third party to decide what constitutes a claim. (Credit event) and

dont know whether your insurer is itself vulnerable to the particular risk you have contracted
with it to insure.

The derivatives market is estimated to exceed one quadrillion dollars, yet despite the fact the
derivatives market eclipses the market capitalization of the NYSE by an exponential factor, it is not
discussed, reported or tracked because it is simply too complicated and opaque. Warren Buffetts
comment about weapons of mass financial destruction seems to be the beginning and end of any
discussion on the topic.
Contributor: munknee

Copyright 2014 InterAnalyst, LLC

11

The global derivatives bubble is now 20 percent bigger than it was just before the last great financial
crisis struck in 2008. It is a financial bubble far larger than anything the world has ever seen, and when it
finally bursts it is going to be a complete and utter nightmare for the financial system of the
planet. According to the Bank for International Settlements, the total notional value of derivatives
contracts around the world has ballooned to an astounding 710 trillion dollars
($710,000,000,000,000). Other estimates put the grand total well over a quadrillion dollars. If that
sounds like a lot of money, that is because it is. For example, U.S. GDP is projected to be in the
neighborhood of around 17 trillion dollars for 2014. So 710 trillion dollars is an amount of money that is
almost incomprehensible. Instead of actually doing something about the insanely reckless behavior of
the big banks, our leaders have allowed the derivatives bubble and these banks to get larger than
ever. In fact, the big Wall Street banks are collectively 37 percent larger than they were just prior to the
last recession. "Too big to fail" is a far more massive problem than it was the last time around, and at
some point this derivatives bubble is going to burst and start taking those banks down. When that day
arrives, we are going to be facing a crisis that is going to make 2008 look like a Sunday picnic.
If you do not know what a derivative is, Mayra Rodrguez Valladares, a managing principal at MRV
Associates, provided a pretty good definition in her recent article for the New York Times . . .
A derivative, put simply, is a contract between two parties whose value is determined by changes
in the value of an underlying asset. Those assets could be bonds, equities, commodities or
currencies. The majority of contracts are traded over the counter, where details about pricing, risk
measurement and collateral, if any, are not available to the public.
In other words, a derivative does not have any intrinsic value. It is essentially a side bet. Most
commonly, derivative contracts have to do with the movement of interest rates. But there are many,
many other kinds of derivatives as well. People are betting on just about anything and everything that
you can imagine, and Wall Street has been transformed into the largest casino in the history of the
planet.
After the last financial crisis, our politicians promised us that they would do something to get derivatives
trading under control. But instead, the size of the derivatives bubble has reached a new record
high. In the New York Times article I mentioned above, Goldman Sachs and Citibank were singled out as
two players that have experienced tremendous growth in this area in recent years...
Goldman Sachs has been increasing its derivatives volumes since the crisis, and it had a portfolio
of about $48 trillion at the end of 2013. Bloomberg BusinessWeek recently reported that as part
of its growth strategy, Goldman plans to sell more derivatives to clients. Citibank, too, has been
increasing its derivatives portfolio, despite the numerous capital and regulatory challenges, In fact,
its portfolio has risen by over 65 percent since the crisis the most of any of the four banks
to $62 trillion.

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According to official government numbers, the top 25 banks in the United States now have a grand total
of more than 236 trillion dollars of exposure to derivatives. But there are four banks that dwarf
everyone else. The following are the latest numbers for those four banks...
JPMorgan Chase
Total Assets: $1,945,467,000,000 (nearly 2 trillion dollars)
Total Exposure To Derivatives: $70,088,625,000,000 (more than 70 trillion dollars)
Citibank
Total Assets: $1,346,747,000,000 (a bit more than 1.3 trillion dollars)
Total Exposure To Derivatives: $62,247,698,000,000 (more than 62 trillion dollars)
Bank Of America
Total Assets: $1,433,716,000,000 (a bit more than 1.4 trillion dollars)
Total Exposure To Derivatives: $38,850,900,000,000 (more than 38 trillion dollars)
Goldman Sachs
Total Assets: $105,616,000,000 (just a shade over 105 billion dollars)
Total Exposure To Derivatives: $48,611,684,000,000 (more than 48 trillion dollars)
If the stock market keeps going up, interest rates stay fairly stable and the global economy does not
experience a major downturn, this bubble will probably not burst for a while.
But if there is a major shock to the system, we could easily experience a major derivatives crisis very
rapidly and several of those banks could fail simultaneously.
There are many out there that would welcome the collapse of the big banks, but that would also be very
bad news for the rest of us.
You see, the truth is that the U.S. economy is like a very sick patient with an extremely advanced case of
cancer. You can try to kill the cancer (the banks), but in the process you will inevitably kill the patient as
well.
Right now, the five largest banks account for 42 percent of all loans in the entire country, and the six
largest banks control 67 percent of all banking assets.
If they go down, we go down too.
That is why the fact that they have been so reckless is so infuriating.
Just look at the numbers for Goldman Sachs again. At this point, the total exposure that Goldman Sachs
has to derivatives contracts is more than 460 times greater than their total assets.

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13

And this kind of thing is not just happening in the United States. German banking giant Deutsche Bank
has more than 75 trillion dollars of exposure to derivatives. That is even more than any single U.S. bank
has.
This derivatives bubble is a "sword of Damocles" that is hanging over the global economy by a thread
day after day, month after month, year after year.
At some point that thread is going to break,
the bubble is going to burst, and then all hell
is going to break loose.
You see, the truth is that virtually none of the
underlying problems that caused the last
financial crisis have been fixed.
Instead, our problems have just gotten even
bigger and the financial bubbles have gotten
even larger.
Never before in the history of the United
States have we been faced with the threat of
such a great financial catastrophe.
Sadly, most Americans are totally oblivious to
all of this. They just have faith that our
leaders know what they are doing, and they
have been lulled into complacency by the bubble of false stability that we have been enjoying for the
last couple of years.
Unfortunately for them, this bubble of false stability is not going to last much longer.
A financial crisis far greater than what we experienced in 2008 is coming, and it is going to shock the
world.

Contributor: Michael Snyder

Copyright 2014 InterAnalyst, LLC

14

A body of research in positive psychology suggests that optimism has a number of benefits: social,
psychological and physical (Schneider, Gruman, & Coutts, 2011). Optimism has been correlated with
improved mental and physical health, better work and educational outcomes, and richer social
relationships.
While optimism appears to be a healthy orientation, things are not quite so simple. Some researchers
identify two classes of optimism: realistic and unrealistic (Weinstein, 1980). Unrealistic optimists are at
risk for self-deception, especially in domains such as risk assessment (Collingwood, n.d.).
Realistic optimists, on the other hand, more successfully incorporate data about situations and events,
balancing the best of optimistic and pessimistic perspectives. The realistic optimist point of view could
be summed up by the adage: "hope for the best, prepare for the worst".

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15

To make matters more complex, the idea of optimism and pessimism as dispositional attributes is giving
way to a more nuanced view of these constructs (Paul, 2011). Neither perspective is inherently "good"
or "bad", both can be adopted as needed, both may be considered highly functional depending on the
situational context.
In some situations, "defensive pessimism" can be a powerful motivator to make better choices. For
example, being pessimistic about the economy may be a motivator to avoid debt and manage your
money more effectively.
Personally, I've always considered myself something of a realist.
On a scale of half-empty to half-full, most of the time I think "oh, there's a glass with some water in it,
let's measure it".
In some contexts, I'm more optimistic (e.g., if I'm working on this newsletter and I have a sufficient
degree of control over it, I'm usually reasonably optimistic that it will succeed), in other contexts, I'm
less optimistic (e.g., if I'm out fishing on a Sunday morning, and the tides are all wrong and I'm out of
bait, I'm reasonably pessimistic about bringing home dinner).

InsidersPower
I believe socionomics, social mood, and capital flows drive economies in cycles globally. Because of the
World Wide Web there is no time in history that allows for easier data gathering and tracking because
all countries are now highly correlated.
This InsidersPower Newsletter is a compilation of current economic articles written, not by us, but by
global authors within the last 90 days. They represent the current global social mood and creates a
global Point of View that has, by the way, been extremely accurate from ancient Greece and Rome to
our own current society.
It represents current economic reality on a global scale whether its positive or negative. Ultimately,
through the Current Investment Guideline found at the bottom of the Wealth Preserver subscribers
page. It delivers the opportunity of an optimistic, positive and profitable outcome for you.
Based on the criteria already outlined, I believe InsidersPower to be an extremely REALISTIC newsletter
that carries both OPTIMISTIC and PESSIMISTIC content that delivers an OPPORTUNISTIC outcome.
Ultimately, I just hope you enjoy its content and profit handsomely.
InsidersPower has received both positive and negative comments by readers and we appreciate both so
please opine anytime to InsidersPower@InterAnalyst.us.
By the way . . . which point of view dominates your personality? Now ask your friend or spouse to see
if they agree!

Copyright 2014 InterAnalyst, LLC

16

In 1986, Livio S. Nespoli wrote is first Investment Book called Invest with
History. In it, he revealed how an investor could use historical precedent
along with social mood and demographic trends to accurately predict the
direction of the markets, sometimes decades in advance.
Since then, Livio had delivered countless seminars to thousands of
professional and amateur investors teaching them how to accurately
identify booms and busts well ahead of the mainstream. He gained
international national attention for his warning investors of the 2000 peak
and 2008 stock market collapse months before they happened. But this was not the first time he was on the
money with his big picture forecast.
For example, in February of 2000 Livio accurately forecast the stock market collapse and the multi-decade
economic collapse that would begin. In other words, his proprietary indicators, which are now available to all
investors, accurately predicted the major economic and stock market events that could have made you
substantially richer over the past 18 years.
How does he do it? Well, while most economists focus on short-term trends, policy changes, technical
indicators, elections, things that are volatile, unstable and can change from day-to-day. Livio has always
focused on long-term trends and cycles, not the day trader mentality. Demographics. Business cycles.
Socionomic patterns. Things that have demonstrated themselves over hundreds and even thousands of years
to be consistent, predictable and measurable.
In addition, through over 80 years of research he has found that most of the largest financiers have known of
these proven and predictable Socionomic patterns. He has provided devastatingly accurate market entry and
exit points by helping you follow those historically proven cycles.
He studies the past to forecast the future, an approach that enables subscribers to position themselves with
an incredible degree of accuracy. Then he makes minor tweaks and adjustments in response to intermediate
term events that occur along the way.
And thats what he brings to you on his InterAnalyst subscriptions so youll know whats coming next, where
the immediate opportunities are, and where to park your money for the longer term.
As an InterAnalyst subscriber, you will know, for example, when its time to start profiting from the rise of
specific economies and exactly what investments will hand you the fastest profits.
Youll learn when commodities will likely reach their peak in their cycle and how to ride the gains. Youll also
learn when theyll turn down and what investments to make to profit from any moves down.
And youll learn when the property market will turn up again. Youll learn when, money markets and bonds
would be a better investment than equity allocations and when not. Youll be ahead of the markets on every
boom and bust and access the tools you can use to prepare yourself to profusion.

Copyright 2014 InterAnalyst, LLC

17

NEWSLETTER DISCLOSURE
This financial newsletter is a description of how financial markets behave and how we read current market
conditions. There may from time to time include commentary describing different investment theories
that may increase market accuracy. The purpose of our market-oriented publication is to outline the
progress of markets to educate interested parties in the successful application of the information within
the financial letter. While a course of conduct regarding investments can be formulated from such
application information. At no time will this financial letter make specific recommendations for any
specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice
is intended.
InterAnalyst does not scribe all articles; rather, we sift through thousands of current economic and
financial articles written by hundreds of contributors from around the globe. Like InterAnalyst, our
contributors do not care which direction the markets are going. Our contributors offer articles that help
us discern which way the markets may trend in the future.
InterAnalyst is solely responsible for the design, some articles, the current investment guideline herein,
the Wealth Preserver and Wealth Maximizer signals on the InterAnalyst.us website.
This financial newsletter is neither a solicitation nor an offer to buy or sell security of any kind. No
representation is being made that any account will or is likely to achieve profits or losses similar to the
illustrations herein. Indeed, events can materialize rapidly and thus past performance of buy and hold,
trading system, or any other methodology is not necessarily indicative of future results particularly when
you understand we are going through an economic evolution process and that includes the rise and fall
of various governments globally on an economic basis and the fact that economies continually cycle.
Past results of any individual or trading strategy published are not indicative of future returns.
Hypothetical or simulated performance results have certain limitations. Unlike an actual performance
record, simulated results do not represent actual trading. Also, since the trades have not been executed,
the results may have under-or-over compensated for the impact, if any, of certain market factors, such as
lack of liquidity. No representation is being made that any account will or is likely to achieve profit or
losses similar to those shown.
The indicators, strategies, columns, articles and discussions (collectively, the information) are provided
for informational and educational purposes only and should not be construed as investment advice or a
solicitation for money to manage since money management is not conducted. Therefore, by no means is
this publication to be construed as a solicitation of any order to buy or sell any security. Accordingly, you
should not rely solely on the information in making any investment. Use the information only as a starting
point for doing additional independent research in order to allow you to form your own opinion regarding
investments. Dont trade with money you cant afford to lose and never trade anything blindly.
Always consult with your licensed financial advisor before making and investment decision. Its your
money and your responsibility.