INCEIF the Global University in Islamic Finance

Kuala Lumpur, Malaysia MIF Program

Term Paper The current Global Economic Meltdown Causes and impacts

By: Mughees Shaukat Student ID # 0801014

HOW ECONOMIC MELT DOWNS ARE FABRCATED INTRODUCTION Crisis that affects the entire financial system and beyond is said to appear whenever the expectations of continuously higher returns to financial assets fail to materialize (Eichengreen and Mitchener, 2003).there is now a consensus that the global financial crisis began in the mortgage finance sector of the financial system of U.S. and spread so rapidly to the global financial system. Because the U.S financial system is the epicenter of the crisis. But the situation is not as straight forward as it ogres here. There are always two sides of the picture and to me it is that other side of the picture that is actually its only side and which we will explore in this paper. To begin our quest of this expedition which is a pragma and not a dogma of the philosophical and the very analytical conclusions profounded, it is imperative for us to first understand what this so called SUB PRIME crisis is and then extend our voyage to the real depths of fabricated despair to satisfy greed and the never ending lust for power and hence the abuse of it as the epitome. This paper will argue and hence will try to prove that how the global financial crisis has been manufactured. It’s even been planned, in advance. And make no mistake about it - it’s hardly started yet. It's not a cyclical downturn or a 'recession’. Furthermore it will also reveal its trunk from the invasions of Iraq and Afghanistan and finally will conclude at the predictable effects and some more questions left unanswered. The National Debt Clock in Times Square had to be taken down in September. The clock, which has been informing the public about the United States' soaring debt for nearly two decades, needed to be reconfigured to add space for new numbers. According to the Treasury, the national debt has grown more than $500 billion each fiscal year since 2003. And then,

beginning on September 30, 2008, it grew another $500 billion in a single month. Never before in U.S. history has the national debt increased so rapidly. The $700 billion government bailout recently passed by congress could send the total debt to more than $11trillion and the current global cost of the financial crisis is $2.8 Trillion and counting. As the nation speeds toward what could be the next great depression we are left to wonder, “what happened?” To find the answer, it helps to understand Wall Street jargon—mortgage backed securities, collateralized debt obligations, credit default swaps. It also requires us to revisit former economic sage Alan Greenspan, deregulation, and the role of U.S. homebuyers. The answer to the question, however, can be summed up two words Greed, and Power. The financial sector is one of the commanding heights of a modern economy, a key node in the flow of power. BACK GROUND THE GRAND DESIGN AND THE JEWISH-CHRISTIAN ALLIANCE There is a grand design that links international politics, international monetary economics and religion with today’s fraudulent monetary system Let us explain. We live in precisely such a world in which a Judeo-Christian alliance has emerged for the very first time in history. It is that alliance which has created modern western civilization, and which now rules the world through the United Nations Organization, etc. It has created a monetary and economic system through which it has already succeeded in unjustly enriching itself at the expense of the rest of the world. It is that Jewish-Christian alliance which established the International Monetary Fund. A rich elite now rules over the poor masses of mankind, and the rich nations now rule over the rest of the world. In addition, the wealthy ruling elite around the world now constitute one Jama’ah, and the stage is now set for a shift of power. The reader can easily recognize the very heart of the process of legalized theft in the international monetary system that the JudeoChristian alliance has created by focusing attention on an event that occurred in April 1933. The US Government enacted legislation at that time prohibiting American residents from keeping gold coins, bullion or gold certificates in their possession. Gold coins were demonetized, and were no longer permitted as legal tender. They could not be used as money. If anyone was caught with such gold after a certain date, he could be fined $10,000 and/or be imprisoned for six months. In exchange for the gold coins and bullion, the Federal Reserve

Bank, which is a private bank, offered paper currency (i.e., US dollars) with an assigned numerical value of $20 for every one ounce of gold. Most Americans rushed to exchange their gold for paper currency, but those who were aware of the rip off that was about to take place bought gold with their paper currency and then shipped the gold away to Swiss banks. It is significant that the British government also demonetized gold coins in the same year as the US. They did so through the simple expedient of suspending the redeem ability of the sterling paper pound into gold. After all the gold in USA had been exchanged for paper currency, the US Government then proceeded in January 1934 to arbitrarily devalue the US paper dollar by 41% and to then rescind the law of prohibition concerning gold that was previously enacted. The American people rushed back to exchange their paper currency for gold at the new exchange value of $35 per ounce of gold. In the process, they were robbed of 41% of their wealth. The reader can now easily recognize the legalized theft that takes place when paper currency is devalued. Domestically the new monetary system through which a massive and unjust transfer of wealth throughout the unsuspecting world could be achieved. Less than two years earlier, in September 1931, the British pound was devalued by 30% and this gradually increased to 40% by 1934. France then followed with a devaluation of the French Franc by 30%, the Italian Lira was devalued by 41%, and the Swiss Franc by 30%. The same thing subsequently happened in most European countries. Only Greece went beyond the rest of Europe to devalue its currency by a whopping 59%. What appeared to be "beggar thy neighbor" policies of 1930s — using currency devaluations to increase the competitiveness of a country's export products in order to reduce balance of payments deficits — resulted in plummeting national incomes, shrinking demand, mass unemployment, and an overall decline in world trade that came to be known as the Great Depression. However, it prepared the way for the imposition of an international monetary system that ostensibly sought to bring order and prevent chaos in the world of money and trade. In other words, the Great Depression was artificially contrived in order to justify the imposition of an international monetary system that would bring order to a chaotic world of money.

Similarities can be drawn from this so called great depression and applied to the present situation keeping in mind the statement which I already have lingulised that the global financial crisis has been manufactured. Its even been planned, in advance. And make no mistake about it - its hardly started yet. It's not a cyclical downturn or a 'recession'. Prevalent from the very roots of this articulate parlance, let us scrutinize what SUB PRIME crisis is how it uprooted and the predictable effects it carries with it ringing the bell with this huge conspiracy. Securitization and the subprime crisis The subprime crisis came about in large part because of financial instruments such as securitization where banks would pool their various loans into sellable assets, thus off-loading risky loans onto others. (For banks, millions can be made in money-earning loans, but they are tied up for decades. So they were turned into securities. The security buyer gets regular payments from all those mortgages; the banker off loads the risk. Securitization was seen as perhaps the greatest financial innovation in the 20th century.) As BBC’s former economic editor and presenter, Evan Davies noted in a documentary called The City Uncovered with Evan Davis: Banks and How to Break Them (January 14, 2008), rating agencies were paid to rate these products (risking a conflict of interest) and invariably got good ratings, encouraging people to take them up. Starting in Wall Street, others followed quickly. With soaring profits, all wanted in, even if it went beyond their area of expertise. For example, •Banks borrowed even more money to lend out so they could create more securitization. Some banks didn’t need to rely on savers as much then, as long as they could borrow from other banks and sell those loans on as securities; bad loans would be the problem of whoever bought the securities. •Some investment banks like Lehman Brothers got into mortgages, buying them in order to securitize them and then sell them on. •Some banks loaned even more to have an excuse to securitize those loans.

•Running out of who to loan to, banks turned to the poor; the subprime, the riskier loans. Rising house prices led lenders to think it wasn’t too risky; bad loans meant repossessing high-valued property. Subprime and “self-certified” loans (sometimes dubbed “liar’s loans”) became popular, especially in the US. •Some banks evens started to buy securities from others. •Collateralized Debt Obligations, or CDOs, (even more complex forms of securitization) spread the risk but were very complicated and often hid the bad loans. While things were good, no-one wanted bad news. Side Not When asked what if someone raised concerns, Peter Harn, one of the innovators of CDOs, an even more complex version of securitization, told the BBC such people would likely lose their job; anyone trying to slow down would have seen a decline in their market share compared to others, for example. High street banks got into a form of investment banking, buying, selling and trading risk. Investment banks, not content with buying, selling and trading risk, got into home loans, mortgages, etc without the right controls and management. Many banks were taking on huge risks increasing their exposure to problems. Perhaps it was ironic, as Evan Davies observed that a financial instrument to reduce risk and help lend more securities would backfire so much. When people did eventually start to see problems, confidence fell quickly. Lending slowed, in some cases ceased for a while and even now, there is a crisis of confidence. Some investment banks were sitting on the riskiest loans that other investors did not want. Assets were plummeting in value so lenders wanted to take their money back. But some investment banks had little in deposits; no secure retail funding, so some collapsed quickly and dramatically. The problem was so large; banks even with large capital reserves ran out, so they had to turn to governments for bail out. New capital was injected into banks to, in effect, allow them to lose more money without going bust. That still wasn’t enough and confidence was not restored. (Some think it may take years for confidence to return.) Shrinking banks suck money out of the economy as they try to build their capital and are

nervous about loaning. Meanwhile businesses and individuals that rely on credit find it harder to get. A spiral of problems result, as Evan Davies described it, banks had somehow taken what seemed to be a magic bullet of securitization and fired it on themselves. According to all the analysts, the global financial crisis is set to get much worse. Not even the corporate news channels can conceal this fact. It was only a few short months ago that we were assured there was no financial crisis, right? Global leaders said so. Presidents,Prime Ministers, the Presidents of Banks etc. They went out of their way to say nations were in a good position to weather the storm of any 'credit crunch’. But today (a few short months later) the same people are saying they don't even know how bad things will get!!! And we, the public, WILL 'bail out' these financial organizations, over and over again without ever knowing the depth of the problem or even whether these 'bailouts' solve the problem. (Whether we tell the political classes to vote differently or not). Have you ever felt ‘conned’? All the evidence is that the global financial crisis has been manufactured. It’s even been planned, in advance. And make no mistake about it - it’s hardly started yet. It's not a cyclical downturn or a 'recession'. So let's forget that. It's definitely not a 'credit crunch'. These bailouts of banks haven't fixed anything. This will become more and more clearer. So what we are really witnessing /experiencing is the terminal evacuation of all credit from the global financial system. Except for those in the 'system', The current Globalist Financial Crisis is a Financial False Flag operation. It is a controlled collapse of the globalist economic system, engineered by an international war crime. The globalist financial system is being intentionally destabilized with the same technologies that the government of Salvador Allende was destabilized in Chile by Henry Kissinger and Richard Nixon on behalf of David Rockefeller and the Rothschilds, resulting in Allende's assassination on September 11, 1973. The Financial False Flag designed to accelerate the deterioration of First World economies, democracies, and prosperity, in aid of a larger program of global depopulation. The same powers who control the Federal Reserve Bank are intent on depopulating between 1/3 and 2/3 of the current human population, in service to a grotesque covert elite plan.

This seems to fall inline too well with statements made by Rahm Emanuel and Gov. Jon Corzine of New Jersey. To quote Emanuel "You never want a serious crisis to go to waste... what I mean by that is opportunities to do things you think you could not do before". Henry Paulson, Con. Barney Frank, Sen. Chris Dodd, Sec. Andrew Cuomo Jr., are no exceptions to this either they knew full well that mandating low-income families that didn't have the ability to pay back the loans be given mortgages, and then the mortgage companies unloaded this toxic debt to investors... passing around the hot potato while playing musical chairs hoping they won't get it back when the music stops. Then on top... Henry Paulson paints the picture far blacker than it is to the point of what the article and Rush paraphrases as "Fraud". Now we have a government who is going to PRINT and spend money to the tune of Trillions which will devalue the dollar further and reduce the average American's buying power... let’s not forget the fact that now American Government debt will be just as toxic as the bad mortgages. Even now China is balking at buying more of this debt.... Canned food and shotguns, folks... buy long on canned food and shotguns... Iraq and Afghanistan War Culture another sham for Financial Crisis The corporate mass-media is playing a key role in seeking to shape the broad public perception of the current financial crisis. The corporate mass media, in its public relations capacity, has sought to specifically create a public perception that prevailing economic problems are a separate issue from on-going military adventurism in the Middle East. However, it is apparent that on at least two levels, the Iraq War was in fact, a direct precursor to the prevailing financial crisis. The first level is the actual cost of the war to the American taxpayer, and the second level, is an apparent culture of parasitism against the American taxpayers. The same group of dissemblers who unethically fabricated the Iraq War, also sought to engage in similar unscrupulous practices on Wall Street, and that in turn, produced the financial crisis. Indeed, the financial crisis is the result of an ego driven agenda by elites, who pursue insatiable commercial profit and power, with total disregard to civil society. the financial crisis and the Iraq

War as one of precursors to it, illuminates capitalism as technique of governance that fundamentally subverts the democratic potential of a society. Through the Afghanistan War, the American aristocracy and its confederates in the European Union, seek to perpetuate adversarial military retributions, designed to prod contrived enemies into counter-attacks. In turn, that can be used to legitimate demands for more money, away from a peaceful civilian economy, and into the apparent criminal orchestrators of military adventurism. Naomi Klein’s book Disaster Capitalism, indeed explores the mutation of capitalism into preying on human fear and dislocations, in the pursuit of insatiable commercial profit, power, and eugenic control over the 'masses’. Henceforth, it is the perpetuation of American military adventurism, that is throwing the Middle East into a worsening culture of deprivation and violence that well connected elites have sought to exploit and parasitize. Future falsified scenarios for the perpetuation and for the contriving of wars, toward worsening spiraling financial crises, cannot be prevented by bailing out the masterminds of generally unethical and specifically criminal conspiracies against taxpayers. EXTENSION OF ADVERSITIES Odious third world debt has remained for decades; Banks and military get money easily Crippling third world debt has been hampering development of the developing countries for decades. Many of these debts were incurred not just by irresponsible government borrowers but irresponsible lending (also a moral hazard) from Western banks and institutions they heavily influenced, such as the IMF and World Bank. Despite enormous protest and public pressure for odious debt relief or write-off, hardly any has occurred; one recently described “historic breakthrough” debt relief was announced as a $40 billion debt write-off but turned out to be closer to $17 billion in real terms. To achieve even this amount required much campaigning and pressuring of the mainstream media to cover these issues. By contrast, the $700 billion bailout as well as bailouts by rich other country governments were very quick to put in place. The money then seemed easy to find. INFACT THIS BAIL OUT IS

NOTHING BUT TO COVER THE LOSSES OF THE WEALTHY. And, a common view in many countries seems to be how financial sector leaders “get away” with it. For example, a hungry person stealing bread is likely to get thrown into jail. A financial sector leader, or an ideologue pushing for policies that are going to lead to corruption or weaknesses like this, face almost no such consequence for their action other than resigning from their jobs and perhaps public humiliation for a while. A crisis of poverty for much of humanity Almost daily, some half of humanity or more, suffer a daily financial, social and emotional, crisis of poverty. In poorer countries, poverty is not always the fault of the individual alone, but a combination of personal, regional, national, and importantly international influences. There is little in the way of bail out for these people, many of whom are not to blame for their own predicament, unlike with the financial crisis. There are some grand strategies to try and address global poverty, such as the UN Millennium Development Goals, but these are not only lofty ideals and under threat from the effects of the financial crisis (which would reduce funds available for the goals), but they only aim to halve poverty and other problems.. A global food crisis affecting the poorest the most While the media’s attention is on the global financial crisis (which predominantly affects the wealthy and middle classes), the effects of the global food crisis (which predominantly affects the poorer and working classes) seems to have fallen off the radar. The two are in fact interrelated issues; both have their causes rooted in the fundamental problems associated with a neoliberal, one-size-fits-all, economic agenda imposed on virtually the entire world.

CONCLUSION I believe two things are clear. 1. We — everybody — have more questions than answers. 2. The American people are fools. These events should spark thought about their fitness for self-government. This post discusses the questions, the details about the crisis. As usual for this site, let us take this by the numbers. First, what do we know? • • • • • This down cycle has much more to go, still in its earliest stages. The de-leveraging of US households has just began. Purging of excess mortgage debt is the first step; credit card and auto loans are next to go. Most important, the global rebalancing process has barely started... How far will the U.S. government go in socializing the excess debt, moving it from private balance sheets onto the national credit card? Will our markets recover from the extensive manipulation by the US government? Midnight rule changes, authorizing falsification of financial statements, it is a long list of efforts to prop up prices. How long will U.S. government retain ownership? A short-term fix followed by a quick return to private ownership. Or long-term ownership?

How much wealth will be transferred from the taxpayers to insiders by this process? The Resolution Trust Company and the Iraq War proved that vast sums can be looted by insiders without public protest. Those sums might be pocket lint compared to what happens in the next few years. “There will be blood, in the sense that a crisis of this magnitude is bound to increase political as well as economic conflict. It is bound to destabilize some countries. It will cause civil wars to break out, that have been dormant. It will topple governments that were moderate and bring in governments that are extreme. These things are pretty predictable.

REFERENCES Federal Trade Commission: the Gramm-Leach-Bliley Act, Naomi Klein’s Disaster Capitalism T. Curry and L. Shibut, “The Cost of the Savings and Loan Crisis: truth and Consequences” in FDIC Banking Review, December 2000, pp. 26-35, available at: J. Sapir, Quelle économie pour le XXIè siècle, Odile Jacob, Paris, 2005. See chapter 2, 3 IMF, Containing Systemic Risks and Restoring Financial Soundness, Global Financial Stability Report, April 2008, Washington DC., p. 54. CNN.COM The financial dimension has been described in J.Sapir, “Global finance in crisis” in real-world economics review, issue no. 46, 18 May 2008, Greenspan, « The Roots of the Mortgage Crisis », The Wall Street Journal, December 12th, 2007. H.P. Minsky, “Uncertainty and the Institutional Structure of Capitalist Economies” in Journal of Economic Issues, op.cit., p. 361. J. Sapir, “Global Finance in Crisis and Implications for Russia”, CEMI-EHESS Working Paper, March 2008. Moody’s This is to some extent the view of F. Renversez, who links the trend to financial opening-up to constraints arising from a liberalised global economy and the development of institutions like the Economic and Monetary Union inside the EU. IMRAN HOSEIN.ORG Abbas Mukhtar and Noureddine Krichne: RECENT CRISIS AND LESSONS FOR ISLAMIC FINANCE