FINANCIAL EXPERT WARNS OF ECONOMIC COLLAPSE
By Cliff Kincaid
August 26, 2010
In shocking news, the New York Times cites figures that investors withdrew $33.12 billion from domestic stock market mutual funds in the first seven months of this year when billions of dollars should have been expected to be flowing in.
The New York Times blames this unusual development on “economic uncertainty.” One explanation is that the financial reform bill pushed by President Obama and passed by Congressional liberals was a complete fraud. The bill failed to protect invested capital, did nothing to stop the devaluation of our homes, and didn’t reform Fannie Mae and Freddie Mac, the government-sponsored mortgage entities involved in the financial crisis.
As Accuracy in Media has consistently reported, the basic problem is that the regulations that protected investors and their capital were removed, beginning in 2007 under the George W. Bush Administration, and have not been restored.
Zubi Diamond, author of Wizards of Wall Street, has released a new YouTube video highlighting what needs to be done and how the nation got into this predicament. He has focused attention on the notorious hedge fund short sellers who brought on the 2008 economic and financial crisis that paved the way for Barack Obama’s election as president.
These short sellers, such as George Soros, made billions of dollars betting on the collapse of the subprime mortgage industry as ordinary Americans lost their savings.
“They subverted our capitalist system economy in order to achieve a regime change in America. They looted the country and visited financial violence on the American people. American families bear the brunt of the destruction of capitalism and the installation of socialism in their country with job losses, home foreclosures, and retirement portfolio wipe-outs,” Diamond charges.
The major media, he said, have concealed the truth about what has happened from the American people.
He explained, “Most Americans cannot even imagine the fact that this calamitous crisis was deliberately engineered by enemies and traitors within our borders.”
Diamond urged the media to start educating the public about what is happening: “Most people do not know how capitalism works, in terms of the safeguard regulations which protected our capitalist economy. Once you unhinge and unscrew the nuts and bolts, and tear down the underpinnings and remove the safeguard regulations, you have succeeded in dismantling capitalism and killing the economic engine of growth. They are killing the goose that lays the golden egg.”
In response to the Times article about investors fleeing the market, Diamond said, “Who wouldn’t flee the market when you are being robbed every day by the hedge fund short sellers? They are targeting and preying on the small investors. The reality is beginning to sink in as more people and more people realize that the economy is in terrible shape, and it is not going to recover.”
A recovery is possible, Diamond said. But the Congress and the President have to restore the regulations that “protect the invested capital that is needed to create jobs, and to protect the value of our homes and assets. You must restrict short sale transactions, end mark to market accounting completely, restore the old circuit breakers, and restore the old uptick rule to their original condition without any modification.”
His recommendations include:
Reinstate the uptick rule.
• Remove mark-to-market accounting and replace it with historic cost accounting.
• Dismantle and discontinue trading on all the short Exchange Traded Funds (ETFs), also called leveraged inverse ETFs.
• Reinstate the circuit breakers and the trading curb to kick in whenever the Dow Jones drops 150 points.
• Regulate the hedge funds just like mutual funds and pension funds are regulated.
A powerful film, Stock Shock: The Short Selling of the American Dream, analyzes this phenomenon as it relates to the rise and fall of Sirius XM radio stock. The film asserts that the removal of the uptick rule in 2007 by the Securities and Exchange Commission (SEC) led to the rise of short selling and stock market manipulation.
Diamond explained how the looting and destruction of the economy have occurred. “To short sell a stock is to sell a stock you do not own. Such a transaction should be governed by a regulation, designed to protect the owners of the stock, their assets and invested capital. That regulation which governed short sale transactions is called the uptick rule or short sale restriction rule.”
He added, “The Managed Funds Association (MFA), the association of hedge fund short sellers, successfully lobbied regulators and policy makers to remove that short sale restriction requirement, meaning they now have the government’s approval to sell what they do not own unrestricted, when they know very well that selling what they do not own is stealing. The only difference is that they are stealing with the approval of the government.”
“Our stock market is a broken market,” Diamond added. “There is no investor confidence because the invested capital is not protected. There is no uptick rule, no circuit breakers and no trading curb. There are no legal protections for the capital. There is no capitalism.”
The stock market, he said, has become “a money manufacturing factory. The commodities being processed are the small investors, retirement portfolios, and mutual fund investors.”
As a result, the small investors are experiencing diminishing returns and losing their appetite for risk.
The Times should explain to its readers the real reason why investors are fleeing the stock market, he said.
“Our publicly traded companies can now be held hostage by the hedge fund short sellers as they continue preying on investors,” he said. “They can evaporate any of the publicly traded companies in short order. They demonstrated that capability in the ‘flash crash’ of May 6, 2010, when they drove down the stock price of Accenture (ticker symbol CAN) from $44 per share to one cent per share in a 15-minute time period.”
The SEC is supposed to be an independent regulatory body to protect the integrity of the market but it is under the control of the Managed Funds Association. “They have rigged and primed the market for manipulation,” Diamond said.
past, ordinary Americans could analyze the market and individual companies
and invest accordingly. Today, the situation is different.
“Without the short sale restriction regulation, the fundamental attributes of the companies are rendered useless,” he said. “The effective use of technical analysis has been nullified. When it does seem to work, it can be used by the hedge fund short sellers to manipulate the market as they set traps for investors at each fulcrum, resistance or support levels.”
He explained, “You have a market that is very difficult to trade or invest in. This is a market that can do anything, reverse, go up or down, or reverse again with increased volatility as the manipulators are on a search mission, preying on small investors, searching for investment capital to steal.”
Diamond compared the stock market to a Las Vegas casino, where the house always wins. The MFA is the house in today’s market. “They own the stock market and the stock market police—the SEC. Everything is stacked against the small investors. They operate with impunity.”
Diamond said the hedge fund short sellers use various techniques to accomplish their insidious goals. These include “dark pools,” in which their transactions are concealed from the public; flash orders; front running; insider trading; and collusion.
He explained, “They raid companies at will, shorting stocks fearlessly without an uptick, colluding to determine the direction of the market. They trade fearlessly without risk, and they transferred all the fear, and risk of investment losses and capital losses to the small investors, regular investors, retirement portfolios and mutual funds.
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As if the situation wasn’t bad enough, the so-called financial reform bill which Diamond warned against but passed the Congress exempts the SEC from the Freedom of Information Act.
“The documents that I was available to see to help me write the book Wizards of Wall Street will no longer be made available to the public or journalists. The SEC will now only release documents to the Congress and the courts. The MFA made sure that its lap dogs at the SEC are shielded from scrutiny and criticism as they cooperate with the agents of George Soros in destroying America and capitalism.”
© 2010 Cliff Kincaid - All Rights Reserved
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Cliff Kincaid, a veteran journalist and media critic, Cliff concentrated in journalism and communications at the University of Toledo, where he graduated with a Bachelor of Arts degree.
Cliff has written or co-authored nine books on media and cultural affairs and foreign policy issues. One of Cliff's books, "Global Bondage: The UN Plan to Rule the World" is still awailable.
Cliff has appeared on Hannity & Colmes, The O’Reilly Factor, Crossfire and has been published in the Washington Post, Washington Times, Chronicles, Human Events and Insight.