There is more bad news coming down the pike, news of such magnitude that no amount of ordinary manipulation is liable to conceal it.
For one thing, roughly $400 billion in ARMs (adjustable rate mortgages) have or will reset between March and October of this year. Assuming 3 to 6 months for strapped debtors to actually hit the wall with their payments, a huge wave of defaults is about to strike, continuing through March 2009 – just in time for the next huge wave of resets, in option ARMs.3 Option ARMs are loans with the option to pay even less than just the interest on the loan monthly, increasing the loan balance until the loan reaches a certain amount (typically 110% to 125% of the original loan balance), when it resets. The $800 billion credit line recently opened to Fannie Mae and Freddie Mac may be not only tapped but tapped out, at taxpayer expense. The underlying problem is little discussed but impossible to repair – a one quadrillion dollar derivatives scheme that is now imploding. Banks everywhere are facing massive writeoffs, putting the whole banking system on the brink of collapse. Only public bailouts will save it, but they could bankrupt the nation.
What to do? War and threats of war have been used historically to distract the population and deflect public scrutiny from economic calamity. As the scheme was summed up in the trailer to the 1997 movie "Wag the Dog" --
"There’s a crisis in the White House, and to save the election, they’d have to fake a war."