That is one obvious answer, but financial analysts Jim Willie and Rob Kirby think it may be something far larger, deeper, and more ominous…. The national debt is growing at $1.5 trillion per year. Ultra-low interest rates MUST be maintained to prevent the debt from overwhelming the government budget. Near-zero rates also need to be maintained because even a moderate rise would cause multi-trillion dollar derivative losses for the banks, and would remove the banks’ chief income stream, the arbitrage afforded by borrowing at 0% and investing at higher rates.
The low rates are maintained by interest rate swaps, called by Willie a “derivative tool which controls the bond market in a devious artificial manner.”
Kirby contends that the only organization large enough to act as counterparty to some of these trades is the U.S. Treasury itself. He suspects the Treasury’s Exchange Stabilization Fund, a covert entity without oversight and accountable to no one. Kirby also notes that if publicly-traded companies (including JPMorgan, Goldman Sachs, and Morgan Stanley) are deemed to be integral to U.S. national security (meaning protecting the integrity of the dollar), they can legally be excused from reporting their true financial condition. They are allowed to keep two sets of books.
Interest rate swaps are now over 80 percent of the massive derivatives market, and JPMorgan holds about $57.5 trillion of them. Without the protective JPMorgan swaps, interest rates on U.S. debt could follow those of Greece and climb to 30%. CEO Dimon could, then, indeed be “the guy in charge”: he could be controlling the lever propping up the whole U.S. financial system.”.
Ellen Brown asks the key question ~ Is there no alternative but to succumb to the Mafia-like Wall Street protection racket of a covert derivatives trade in interest rate swaps?
“ As Willie and Kirby observe, that scheme itself must ultimately fail, and may have failed already. They point to evidence that the JPM losses are not just $3 billion but $30 billion or more, and that JPM is actually bankrupt ;
The derivatives casino itself is just a last-ditch attempt to prop up a private pyramid scheme in fractional-reserve money creation, one that has progressed over several centuries through a series of “reserves” ~ from gold, to Fed-created “base money,” to mortgage-backed securities, to sovereign debt ostensibly protected with derivatives. We’ve seen that the only real guarantor in all this is the government itself, first with FDIC insurance and then with government bailouts of too-big-to-fail banks. If we the people are funding the banks, we should own them; and our national currency should be issued, not through banks at interest, but through our own sovereign government.”
See full article: http://webofdebt.wordpress.com/2012/06/19/why-the-senate-wont-touch-jamie-dimon-jpm-derivatives-prop-up-u-s-debt/#more-3936
Commodity Futures Trading Commission head and former Goldman Sachs partner Gary Gensler puts the credit swap problem in easy to understand terms;
Allen L Roland