It is likely the largest financial scam in the history of mankind, Moon.

It is likely the largest financial scam in the history of mankind, Moon.

Lol, the boy bank who cried wolf.

Just as small businesses buy insurance against derivatives loss, they always seem to lose. And betting on the high fixed rates on derivatives is a losing trade almost every time.

It is hiding bad bets off balance sheets that was the essence of Enron. And yet, Basel 2 adopted the same rules. And it was ok for the banks to do what Enron didn't get away with. The banks financed shadow banks through the commercial paper market and off balance sheet banking. When the commercial paper market crashed, the banks were forced to take those loans back onto the books. That made the housing crash much worse, as did mark to market and failure of the Fed to buy commercial paper to keep the banks in real estate. The middle class was decimated, and then the wealthy got credit lines from the very same banks, and bought the real estate for Wall Street.

And, as far as DB is concerned, it teamed up with Blackstone, as I recall, to buy houses out from under the middle class. That was just kind of underhanded. Maybe it was not as good of an investment as they thought it would be. And DB sold the Cosmopolitan in Las Vegas to Blackstone a couple of years ago and now DP is downgrading Blackstone to hold. Wow. One would think that buying the Cosmo for less than 1/2 price would be smart, and maybe it is. But hold from buy?

One ounce of gold 500 buyers? That sounds like selling multiple mortgages on one house. Not such a good idea. But it all depends on the GDP. If it craters, beware, the banks will just liquidate. Weird we could have two liquidations within 10 years. Let's hope that does not happen.

NGDP was warning of a slowdown. And Patrick Kennedy introduced HR1424 into the congress in early 2007, knowing full well that the Fed would need to buy commercial paper. Yet the bill languished, until the commercial paper market crashed and this exposed the TBTF banker involvement in the shadow lending system. The paper should have been bought prior to the crash of main street property values. But it wasn't. There was a liquidation. And that liquidation flushed out the economy on main street. Now slow growth is the norm, and the Fed wants it that way after its constituency, the insiders, made billions of dollars for the Street.

Well, for both NY and Atlanta the trend is up. One wonders if GDP will be up as well. They seem to be doing the right thing because GDP is dreadful. But the Fed already has its foot on the brakes, with another interest rate hike in June, maybe.

With this logic, rates should go to 50 percent and only the debt free companies would survive! I find this article to be fascinating, but I would like a breakdown of what zombie companies provide as to value to the economy. If a zombie company provides something important, but to just a few people, it could be taken out by rising rates.

Also, remember, it isn't just rising rates that could weaken companies. Many are issued swaps by the banks, and the banks bet on the low floating rate, and the companies are forced, if they want a loan, to take the fixed high rate on swaps. I would like to know how many of them have been wiped out by the difficulty of paying the fixed rate the last couple of years in swaps: https://ycharts.com/indicators/10_year_swap_rate