Good little post by Adrian Salbuchi

http://www.youtube.com/watch?v=xnnajAVspWU

This summary deserves merit because of a couple good points. One being the idea that the "derivative" market has become so huge no government has the resources to bail out the system. I have mentioned this many times. The other value is his analysis of the global financial situation based on four parts, as the four sides of a pyramid.

However, he should technically have a pentagon since his rant about the derivative markets are really a 5th side but he obviously would loose his theses title of the pyramid in global financial markets. To bad, the guy is smart bout could not figure out a catchy way to use a 5 sided analysis.

There are also 2 areas he is weak in presentation (first part of video):

1) Ponzi analysis flaw 1 second side of pyramid: "Private money exercises control over central banks." Actually, in the US the "central bank" is a "private bank" so this analysis does not work. However, he could have said the "private banks" (including the central bank or fed reserve bank in US) exercises control over the "government" through the insufficient supply of money, hence forcing not only private industry to borrow but also the government to borrow (since the government no longer issues money directly) and thus the "central bank" has the power to control interest rates and the cost of money to both private industry and the government and ultimately it's populace since they pay for government through taxes.

2) After analysis of privatising profits but socializing losses he mentions the Fed Reserve issuing "fake money" which "we all" pay for. Actually the rest of the world does not pay for this unless the issuance of money causes a collapse in the dollar which much of the rest of the world holds as a reserve currency. If in fact the dollar is highly devalued then his statement holds up. The world will indeed pay for the recklessness of the Fed's actions.

Secondly, the Fed is buying back it's debt with "new money" not necessarily "fake money". The "new money" is "real money" and is not being "borrowed" by the government. Instead it is being "printed" new. Now "printed" is also a term to be not misunderstood. This money is actually not being "printed" in the way we all think of $20's rolling off a printing press. The money is being lets say "injected" into the accounts of those who purchased the government debt in exchange for that debt. So even though the institution holding the debt could have simply "sold" the debt to the open market, this action would have resulted in no net gain in "money" in circulation. By the Fed "issuing new" money to buy this debt they are adding "money" to the financial system the institution can then use to expand lending to others or more likely as banks hoard money, simply buy more government debt at the next offering. All these actions are quite unprecedented and these actions have also been taken in Japan and the UK from what I know.

I will not critique the second part of his video as it is all speculation and offers no tangible solutions (Idea about the "good gold vs bad gold" is interesting). To bad, the guy has lived through so many of these crises and still does not tell us what the hell to do but "citizens hold your leaders to account". Like who knows what in the hell to hold them account to? Why does he not say, create a new model of economic / financial regulation and rules of the game so this cannot happen again not unlike what they tried in the 30's before all was reversed in the last 15 years?

Once again, this is a good summary but offers nothing else.