Armstrong Economics

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The Goldman
Conspiracy.
Sachs
The Real
Dark Pool
by: Martin A. ftrmsUmig
former Chairman o f P r i n c e t o n Economics l n t ' 1
Foundation f o r the Study oE Cycles
There seems t o be an extraordinary amount of
a t t e n t i o n now s t a r t i n g t o focus on the Goldman :
1
Sachs Conspiracy as i t i s becoming known. This i s
g i v i n g me great concerns, f o r ttdiat I have been now j
reading l i k e the piece f e a t u r i n g the D i r t y Dozen ; Lloyd Blankfein
by Matt T a i b b i i n the R o l l i n g Stone on A p r i l 2nd, ; Chairman £ Chief Executive
Goldman Sachs
2009, appears t o be focusing on loose connections , ___
t h a t spun together leads nowhere while a t t r i b u t i n g ;

i n t e n t i o n a l acts t o many. This so c a l l e d "conspiracy" I b e l i e v e i s s t a r t i n g t o be

i n t e n t i o n a l d i s - i n f o r m a t i o n t o confuse and defuse the r e a l conspiracy.
i
In marketing, and p o l i t i c s , they can manipulate the press by a c t u a l l y feeding
them s t o r i e s t h a t are s e n s a t i o n a l t o d i v e r t a t t e n t i o n f r a n the t r u t h . When the news
b r i l l break anyway, the best s o l u t i o n i s a quick defense o f d i s i n f o r m a t i o n . When the
Bank o f England c a l l e d a l l the s i l v e r dealers together f o r a meeting i n London i n
e a r l y 1998 t o i n v e s t i g a t e the manipulation o f that market, Warren B u f f e t t came out
that night before the meeting t o announce he had bought $1 b i l l i o n worth of s i l v e r
and he was not manipulating the markets, f o r t h i s was a long-term investment. I
b e l i e v e you w i l l see t h a t B u f f e t t s o l d the l o t f o r s i l v e r went t o new lows a f t e r
t h a t anyway. The o b j e c t , t o defuse the news that would come out and prevent any s o r t
of an i n v e s t i g a t i o n t h a t j u s t may have revealed who e l s e was involved.

The s t o r i e s about Goldman Sachs and spreading the blame around l i k e i t was a
g i a n t p l o t t o destroy the economy and then create the greatest t r a n s f e r of wealth
i n modern h i s t o r y o r ever under the noses of the Democrats, i s missing the p o i n t .
You have t o r e a l i z e t h a t there was no p l o t t o i n t e n t i o n a l l y create the economic collapse
to make a w i n d f a l l p r o f i t . That i s a s t o r y t h a t could be i n t e n t i o n a l l y planted t o d i v e r t
the t r u t h . This has always been about c r e a t i n g the .perfect trade and r i g g i n g the game.
i

I was behind the c u r t a i n . Check f o r y o u r s e l f i f the National G a l l e r y i n Washing-

ton ever hosted the TMF party p a i d f o r by Edmond Safra. How can scmeone be h e l d i n
j a i l f o r more than 5 years w i t h no indictment, c i v i l ccmplaint, or d e s c r i p t i o n o f
any fraud w i t h no v i c t i m s ? When the Judge who allows t h i s Un-American a c t i v i t y i s
the f i r s t cousin of President Bush who keeps grabbing every e f f o r t t o appeal and
won't ever allow any r i g h t t o access the courts t h a t was suppose t o be a F i r s t Amend-
ment r i g h t t o p e t i t i o n along w i t h the Free Press, you suddenly see the "Club" can
do anything. Why i s the piece I wrote "Behind the O i r t a i r i " being counterfeited? Is
i t because i t shows the r e a l conspiracy, not f i c t i o n a l destroying the world versions?

1
 The way t o d i s c r e d i t an i s s u e i s (1) attack the; messenger, o r (2) put out the
misinformation t o convert i t i n t o a "conspiracy theory" p o s i t e d by nut jobs. These
are the two attack formations. Look at Scooter Libby. We know t h a t a l l the leaks
came from Dick Cheney. They t r i e d t o get at Lihhy, h i s a i d , but he knew that Bush
would take care o f him i f be h e l d h i s ground. They attacked the press, J u d i t h M i l l e r
of the New York Times, even throwing her i n j a i l on contempt u n t i l she would agree
t o t e s t i f y . So much f o r Woodward & B e r s t e i n p r o t e c t i n g "Deep Throat," They attacked
the messenger and d i v e r t e d the a t t e n t i o n from Cheney.

I t i s easy t o take f a c t s and s t r i n g them together t o create a Conspiracy Theory.

They are u s u a l l y based upon a f a l s e assumption t h a t there i s an a c t u a l p l o t . Perhaps
T was the l a r g e s t corporate advisor i n the world. I don't know and don't r e a l l y care.
What I can say, i s I never once saw sane giant corporate p l o t that coordinated a
scheme against s o c i e t y . What T d i d see, was more o r l e s s t r i a l and e r r o r , and a l o t
of mistakes t h a t o f t e n r e s u l t e d i n c a l l i n g our firm.;

There were rumors of a conspiracy i n the auto-market. One could e a s i l y s t r i n g

disconnected f a c t together t o make i t sound l i k e a c l e v e r h o s t i l e takeover. T h i s i s
f a r from the t r u t h and an i l l u s t r a t i o n of how Real Free Markets f u n c t i o n . In the '70s,
the German cars became popular because that were (1} q u a l i t y , but (2) would r i s e i n
r e s a l e value making i t nearly 95% r e t u r n of o r i g i n a l expenditure a f t e r 2 years of
d r i v i n g them around. This was r e a l l y created by the b i r t h of the f l o a t i n g exchange
rate system i n 1971 and the p e r s i s t e n t d e c l i n e i n the d o l l a r i n t o T90Q. This created
the image t h a t German cars ware b e t t e r , yet i t was l a r g e l y e f f e c t e d by currency,

(1) the Germans manufactured t h e i r product i n Germany and t h e i r

cost o f production was i n German marks-
(2) and the German mark rose i n value ( d o l l a r declined) the cost
o f those cars i n d o l l a r s rose i n d i r e c t proportion t o the
decline i n the currency.

Now coma the Japanese i n the next decade. How d i d the Japanese cars beat both
the American and German manufacturers? They took the currency r i s k home. Besides
providing a q u a l i t y product, they achieved p r i c e s t a b i l i t y by p r i c i n g the cars i n
d o l l a r s rather than yen, and hedging the currency r i s k . As German cars would r i s e
i n p r i c e , the Japanese were able t o ccmpete and take the market by t a k i n g the " r i s k "
of currency back t o Japan.

I received a c a l l from Mercedes i n Germany. They heard Princeton might have had
something t o do w i t h the Japanese g a i n i n g market-share. I f l e w f o r the meeting t o
S t u t t g a r t . They had tfade another ntistake. They s o l d jthe B r i t i s h pound short assuming
t h a t the Euro would be k i n g . The hedge was devastating the balance sheet. I Jjimediately
advised they l i q u i d a t e the hedge and t o change their: p r i c i n g t o the l o c a l currency
f o r each market s e t t i n g up a hedging desk at home.

Mercedes survived. But the c h i e f f i n a n c i a l o f f i c e r was on the board o f Daimler-

Benz, who had mada the sane hedging d e c i s i o n . I met w i t h the board, but Daimler had
passed a r e s o l u t i o n t h a t once they had made a hedging d e c i s i o n that was made a t the
board l e v e l , they would l e t i t e x p i r e . This l o s t abdut $1 b i l l i o n and on the l a s t day
o f the f i s c a l year, Daimler was merged suddenly w i t h Mercedes. This was done t o take
the b i l l i o n c e l l a r l o s s on hedging at Daimler and blend i t w i t h the b i l l i o n p r o f i t
at Mercedes who l i q u i d a t e d the same p o s i t i o n .
 I have never seen any such coordinated e f f o r t s between corporations t o r i g the
game. They were t y p i c a l l y the t a r g e t s o f the investment bankers who viewed a l l things
i n an adversary r o l e , even when you are t h e i r c l i e n t . Currency made", atria broke many
corporations around the world. You have t o understand t h a t the f l o a t i n g exchange r a t e
system was born by d e f a u l t i n 1971. Tt was not l i k e the 1944 Bretton-Woods accord
:

vrtiere there was a p l a n and a d i r e c t i v e - The 1971 event was an e v o l u t i o n t h a t was the
product of a time w i t h OPEC t h a t d i s t r a c t e d the world frcm even addressing the f a c t
t h a t currencies f l o a t e d . Hast u n i v e r s i t i e s s t i l l t o H r i e ffey do n o t teach a course
i n hedging. To be a CFO, i t became t r i a l and error,: This i s t h e gap that P r i n c e t o n
Economics f i l l e d . ••

In 19B5, K e t - L i f e purchased a B r i t i s h L i f e company. By chance, they d i d i t when

the d o l l a r was a t i t s peak against the pound n e a r l y J1_03. They were our next-door
neighbor i n P r i n c e t o n , the i n t e r n a t i o n a l d i v i s i o n . They d i d not ask advice- They were
t y p i c a l American companies t h a t never gave currency: a second thought. The pound rose
t o n e a r l y $2-00- They were handing out bonuses f o r the greatest takeover i n h i s t o r y .
Why? Even i f the B r i t i s h company l o s t 5%, they r e f l e c t e d t h e i r p r o f i t s and assets i n
d o l l a r s r e q u i r i n g the conversion i n currency t o d o l l a r s f o r year-end. Then tjie pound
f e l l back t o about $1.50. They f i n a l l y crossed the h a l l and came t o t a l k - They had
t o now r e f l e c t t h e i r B r i t i s h assets i n d o l l a r s a t the new r a t e t h a t was about a 25%
l o s s from the previous year. An employee came and asked t h a t they understood we were
kind-of the currency s p e c i a l i s t s , and explained the! problem t h i n k i n g that t h i s might
have seme t h i n g t o tfe w i t h currency.

Thedegreeof s o p h i s t i c a t i o n i n the corporate u o r l d was never that high, mainly

because when those a t the top went t o school pre-1971, they never had a d i s c u s s i o n
about currency- Economics was taught as a Eero—sum game and trade always was suppose
to balance. They ware taught i n a d i f f e r e n t world, and the Conspiracy Thories can
weave a n i c e t a l e , but there was no substance t h a t I ever saw. This d i s i n f ormation
s t r i n g s together f a c t s t h a t a r e not connected, and assumes a degree o f under standing
t h a t does noi e x i s t -

There are even Conspiracy Theories

about the Federal reserve and the world
Central Banks. To a large extent, these
seem t o have been b o i l i n g ever s i n c e the
days o f the Bank War between Andrew Jack-
son and Nicholas Biddle (1766-1844) and
the Bank o f the United States. Again, I
never saw any w e l l thought out p l a n f o r
global/dominations of any s o r t . What I d i d
see was the f i r s t attempt t o coordinate
a c t i o n s o f i n t e r v e n t i o n between 1985 and
1990, but even t h i s gave way to s e l f - i n t e r -
e s t . There were schemes a t times t o d i v e r t
c a p i t a l f l o r a . The US fed lowered i n t e r e s t
r a t e s i n 1925 i n hope of d e f l e c t i n g the
c a p i t a l flows back t o Europe- That f a i l e d ,
attempts t o t r y t o i n f l u e n c e markets has
c e r t a i n l y been present, but t h a t i s about
where i t has ended.
 I
I

There are many conspiracy

t h e o r i e s t h a t I have heard and :
been asked t o comment on over
the years. Most o f them are
j u s t nonsense- They begin with
a presumption that the people
at the Fed and other C e n t r a l
Banks are a c t u a l l y i n c o n t r o l
o f something and i n f a c t the
even know how t o use such power.
They are no d i f f e r e n t than any
other person. There were not at
a l l born w i t h d i v i n e powers and
i f God speaks t o them i n the
middle o f the n i g h t , don't you
worry f o r i t a l l j u s t a delusion.
They do r o t d e l i g h t i n t h e i r own
applause as we nay see the " c l u b "
who delude themselves every time
assuming they can c o n t r o l a power
to ensure 100% v i c t o r y .

i t had dawned on me perhaps when there was the 1989 Crash. I had c a r r i e d two
c e l l phones many times when the model was r e a c h i n g c r i t i c a l t u r n i n g points as i t
d i d i n 1989. The markets were going nuts, and my ohe c e l l phone ran t h a t was used
p r i m a r i l y f o r very s p e c i a l c l i e n t s . I t was one o f the G5 C e n t r a l Banks asking me
o u t r i g h t what the model was showing and d i d I t h i n k they needed t o intervene? As
T was e x p l a i n i n g the focus was i n Japan and t h a t there would not be any abnormal
c o r r e c t i o n and thus there should not be concern about i n t e r v e n t i o n , my regular c e l l
phone rang. I t was another G5 member asking the same questions.

What became very c l e a r t o me, was they t r u l y had no i d e a what was t a k i n g place
any more than the r e s t o f the world. Everyone was s t r u g g l i n g t o comprehend the new
world t h a t was emerging. Connunism seemed defeated, markets were crashing, and the
general expectation was - Should we be r e j o i c i n g ? i

Most o f the c e n t r a l banks have a l o t o f PHDs, w i t h no r e a l world experience.

They have read becks, but have not been i n the trench t o " f e e l " what i t i s t r u l y
l i k e . This i s why government employees r a r e l y have anything worthwhile t h a t w i l l
ever contribute t o s o c i e t y . There i s not a s i n g l e economic s t a t i s t i c t h a t i s even
v a l i d , no l e s s any p l a u s i b l e guide as t o what i s going on- There are manipulated
11
so much t o t r y t o i n f l u e n c e the " p u b l i c confidence. t h a t i t becomes a joke.

I f there were r e a l l y c e n t r a l bank conspiracies, why c a l l me? Why d i d China

request I f l y t o B e i j i n g during the A s i a n Currency; C r i s i s ? These e n t i t i e s are
no d i f f e r e n t than any one e l s e out there. They do not have a l l the answers, nor
do they have the power t o command the world t o do one t h i n g a t the expense o f
another.
i
The G5 evolved i n t o the G20, and they cannot do anything, because they cannot
see t h a t they are part o f the problem. They are not devoid o f s e l f - i n t e r e s t , and
they w i l l not a c t a g a i n s t t h a t no matter what. You cannot convince any p o l i t i c a l
s t a t e t h a t they should take t h i s a c t i o n now t o avoid a problem even a decade away
f o r they w i l l simply say i n a democracy, i t a i n ' t :their problem, i t s t h a t f u t u r e
administration's problem. Do not confuse sheer i n e p t i t u d e w i t h some master p l a n
t h a t i s coherent and transcends a l l administrations t o achieve sore l o f t y g o a l .
That i s j u s t not how i t r e a l l y works.

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5
 Yes, i t i s t r u e that Princeton Economics acted l i k e almost a p r i e s t among
c e n t r a l bankers. How t h a t evolved T w i l l save f o r my memoirs. But what T d i d
l e a r n from the experience was t h a t even a t t h a t l e v e l , they knew l i t t l e more about
what was happening than p r o f e s s i o n a l traders. They were no more the man i n the
clouds l o o k i n g down upon us a l l and p o n t i f i c a t i n g what s h a l l take place next.

V)hy flU G\cM Statutes flge UJto*g I

The f l o a t i n g exchange r a t e system rendered v i r t u a l l y a l l economic s t a t i s t i c s
worthless. Because i n t e r n a t i o n a l trade under a f i x e d exchange r a t e system i s properly
r e f l e c t e d by j u s t l o o k i n g at the currency i n s o f a r as i f you spend more you presume
received more since the d o l l a r i s a constant, once we moved to a f l o a t i n g exchange
r a t e system everything changeI

I l l u s t r a t e d here i s a l e t t e r I sent to former Secretary of the US Treasury bade

i n 1997, Robert Rubin, I explained t h i s problem and how i t was s e r i o u s l y a l t e r i n g
the e n t i r e i n t e r n a t i o n a l measurement of the economy. What was happening, was t h a t
the US Treasury was again s t a r t i n g to p u b l i c l y make statements t h a t the US/Japan
trade d e f i c i t was expanding, and t h i s had t o be addressed.

The problem we face, i s that w i t h each new administration, there i s a learning

curve and one must s t a r t over again. A f t e r being requested f o r a l l research i n the
middle o f the 1987 Crash t h a t had the impact of reducing the p o t e n t i a l r e g u l a t i o n
w i t h a b r i e f statement that they believed the cause of the 1987 crash had a l o t t o
do w i t h currency, here again i n 1997 the same mistakes were s t a r t i n g t o surface.

The Treasury responded, and the ccenments ceased, although Princeton Economics
was perhaps the most respected i n t h i s area because we d i d everything from s c r a t c h .
Even one of the NY papers wrote t h a t P r i c e t o n Economics was one o f the most respected
firms around. The Canadian press had named myself economist of the decade. What was
t h i s a l l about? Foreign Exchange.

Simply put, i f the trade d e f i c i t increased by 100% i n a f i x exchange system,

then you must have purchased more produced. But i f the currency declined by 50%,
then you received the same amount of goods, the p r i c e increased t o compensate f o r
depreciation i n the currency. So once you r e a l i z e that the e n t i r e system of g l o b a l
economic s t a t i s t i c s does not a c t u a l l y measure the number of goods moving but the
amount of currency, you can see t h a t we r e a l l y do not have a c l u e as to the " r e a l "
economic trends.

When everything we measure w i t h i s printed on a rubber-band, you can imagine

t h a t we are honestly c l u e l e s s . How can we compare GDP growth of one nation to
another? My secretary had one of those metal s t i c k f i g u r e s on her desk holding a
s i g n t h a t s a i d i t best - " S h i t Happens." Things are not what they may seem. I have
a c t u a l l y sat i n the room w i t h some of the c e n t r a l bankers post-1985 where they
had a r e d phone connecting the G-5 (Group of,5 nations) formed i n 1985 where they
were conducting currency i n t e r v e n t i o n s . One day, the phone rank while I was there
and the banker was not answering i t . I asked why not? He r e p l i e d ; "Cfol I t ' s the
damn Germans t r y i n g t o get me t o buy more Dfcfark. I; have enough!" ( y o u ' l l have to
wait f o r the memoirs f o r which bank).

6
 There were a number o f c e n t r a l banks t h a t gave' us Information t h a t they wanted
published, but p o l i t i c a l l y speaking, they could not. T h i s TOE t r u e from Europe t o
A s i a . I gave a l e c t u r e i n Toronto where the C e n t r a l Bank o f Canada came t o l i s t e n
b r i n g i n g perhaps 10 people o r more. I would take questions from the audience, and
they were often about what the c e n t r a l banks were l o o k i n g a t - I would answer, and
everyone turned t o see i f the f o l k s a t the Bank o f Canada f l i n c h e d . The bankers
rare so cold-faced, afterwards, I went up and apologized i f I offended them. My
f r i e n d the head t r a d e r Pete, remarked: "Marty t h a t was a great l e c t u r e , I wish I
could t e l l these morons what you do." Of course Pete was r e f e r r i n g t o the f a c t t h a t
t h e i r hands are t i e d p o l i t i c a l l y . I even had the Finance M i n i s t e r o f Nova S c o t i a
t r y t o argue t h a t the c e n t r a l banks are i n control,'. they j u s t don't speak about i t .
Pete was there a t the same party, so I asked: "WDuld you l i k e t o meet the guy a t
Bank o f Canada?" Pete smiled.

The C e n t r a l Banks are f a r more independent than one expects. They are not part
o f a grand conspiracy. The danger t h a t e x i s t s i s more along the l i n e s o f a Goldman
Sachs t r y i n g t o put f o r t h t h e i r t r a i n e d people f o r p o l i t i c a l jobs. That i s the r e a l
danger. I f the c e n t r a l hanks were on board as some o f the conspiracy theories c l a i m ,
why W5uld GS neefl p o l i t i c a l candidates?

I t i s a l s o a d i s i n f o r m a t i o n s e r v i c e t h a t seems ;to go around the purpose o f the

c e n t r a l banks and the value they once served, i f we can keep the p o l i t i c a l characters
awry from p u l l i n g the s t r i n g s .

To the l e f t , please f i n d the

c a l l money r a t e s from the NY Stock
CALL MQWEYfWTES 1S7MQ32 Exchange. N o t i c e t h a t the peak i n
r a t e s was n e a r l y 200% i n 1899. The
an Mflj Fed was created i n 1913, I f i n d
-Mb
t h a t the e a r l y h i s t o r y seems t o be
ignored, o r overlooked perhaps even
'« intentionally.;
HU
Before there was the Fed, the
man who put together consortiums
t o save the n a t i o n and even the
-I the Government i n 1896, was J.P.
Morgan. He came t o the rescue on
a number o f times. But the age o f

•
the R e l i g i o u s Right was there and
furthered the ideas o f K a r l Marx
•3 profoundly. They backed the age
o f the Progressive republicans
T [—•—i 1 r- who perhaps d i d more t o destroy
1M0 P W) 15B \i& 1^- American r i g h t s u n t i l Bush.

J.P. Morgan was seen as e v i l by the Progressive Republicans and he was summoned
before the Senate b a s i c a l l y f o r an i n q u i s i t i o n , Tedxly Roosevelt's Trust-Busting days
saw e v i l - d o e r s everywhere they looked. Morgan was g r i l l e d i n p u b l i c and they t r i e d
t h e i r best t o destroy him. Hftdied s h o r t l y t h e r e a f t e r i n 1913. The Fed was created
e s s e n t i a l l y t o replace Morgan and t o do what he had been doing, stepping i n from time
t o time t o provide s t a b i l i t y ,
A c e n t r a l bank provides the l i q u i d i t y that helps t o smooth out the econonic
s e a s o n a l i t y o f the economy. For example, i n many i n d u s t r i e s , a t l e a s t l / 3 r d o f t h e i r
annual r e t a i l sales takes place a t Christmas time and thus are l i n e d up w i t h the
fourth quarter. Likewise, g a s o l i n e i s consumed core i n the simmer than i n the c o l d
winter. There are j u s t seasonal adjustments that a c e n t r a l bank does help t o smooth
OUt,
7
 Most people overlook the e n t i r e
purpose o f t h e Federal Reserve, From
i t s o r i g i n , i t was meant t o smooth out •;
the c a p i t a l flows n a t i o n a l l y t h a t had
created t h e Panic o f 1907. U n l i k e t h e
Fed today, i t d i d not buy Government
debt, i t s t a b l i z e d the economy by t h e
purchase o f corporate paper. Each o f
the 12 branches operated independently
and t h e c h a r t t o t h e r i g h t shows the
i n t e r e s t r a t e s o n l y a t the Hew York
Fed, that was t h e dominant branch, not
Washington,

Tt was F r a n k l i n D, Roosevelt who usurped the Federal Reserve i n t o a s i n g l e r a t e

system and c o n t r o l l e d i t from Washington. Because of the c o n f i s c a t i o n o f gold from
a l l t h e banks during t h e "bank h o l i d a y " and the funding o f World War TI, the Fed
was usurped f o r p o l i t i c a l purposes and was under orders t o support US government
bonds u n t i l 1951,

We cannot overlook that between 1943 and 1951, t h e Government v i r t u a l l y

d i c t a t e d i n t e r e s t r a t e s t o t h e Fed. i t was the Korean War t h a t broke t h e strong
g r i p o f the Government t h a t they maintained f o r 8 years manipulating by decree
the value of i t s bonds. President Truman stood up and a l s o t r i e d t o use h i s
o f f i c e t o b u l l y the bond markets. The market had paused between June and December
1950, as i f the market was confused, t r y i n g t o f i g u r e out would t h i s be i n f l a t i o n a r y
r e f l e c t e d i n higher r a t e s , o r was t h i s going t o be another period o f a u s t e r i t y with
i n t e r e s t r a t e s kept by decree a r t i f i c i a l l y i^w? The Muni-bonds rose sharply i n p r i c e
as expectations of higher taxes and wartime p r i c e c o n t r o l s would be r e f l e c t e d i n
t h a t market as w e l l .

However, i t was a t t h i s time o f February/March 1951, t h a t the US Treasury and

the Federal Reserve reached an accord w i t h t h e government t h a t ended the p o l i c y o f
a r i g i d support f o r government bonds a t par. The p o l i t i c i a n s could no longer then
d i c t a t e t h e p r i c e o f bonds and the r e s u l t was a sharp drop i n long-term debt o f 4
t o 7 points i n t h e market, corporate debt a l s o f e l l by 7 p o i n t s , yet muni, bonds
d e c l i n e d 13%. P r i c e s o f US debt e v e n t u a l l y dropped 83% from 1946 i n t o 1981.

Most o f the events from the s t a r t of the t w o - t i e r gold market i n 1968, t h e c l o s i n g

of the gold window by Nixon i n 1971, t o the abandoning o f usury laws by Paul Volker,
none o f these actions were planned. They were the t y p i c a l flying-by~the-seat-~of-your-
pants types o f moves. Unfortunately, t h e problem with a Democracy and subjecting t h e
p o l i t i c i a n s t o vote, shortens the a b i l i t y t o ever p l a n ahead. Everything i s f o r t h e
moment t o win t h e next e l e c t i o n - nothing morel

- ^ T ^ C e Real C t u k ^ =
We are doing ourselves a great d i s s e r v i c e by assuming p l o t s and long-term plans
t o even Goldman Sachs and the " c l u b " because they cannot see past t h e next bonus check.
There i s no conspiracy t o c o n t r o l t h e world. Nor i s there a conspiracy t o create a
one world currency, t h a t i s ccming one way o r another"

I f we want t o s u r v i v e and t r u l y f i x t h i s mess, recognize GS f o r what i t i s , A

c l e v e r market manipulator who was never i n t e r e s t e d i n helping s o c i e t y , j u s t t o f i l l
i t s own pockets, GS i s i n t e r e s t e d i n remaining top dog and i t w i l l do whatever i t
takes t o keep t h a t p o s i t i o n . This i s about manipulating the f i n a n c i a l economy, not
about c r e a t i n g a p o l i t i c a l s t a t e o f a one world government.

3
 There i s a vast dis-information
campaign going on to cloud the r e a l
issues that are t a k i n g place. The more
one throws everything a t the w a l l , the
more i t sounds l i k e j u s t f i c t i o n .
T h i s i s Why you w i l l see a l s o attacks
upon myself because they do not want
you t o understand the core of the r e a l
Golfinan Sachs Conspiracy.

you have mcst l i k e l y read about

"Dark Pools" t h a t are being portrayed
as an off-exchange system that allows
people with s i z e to p a r t i c i p a t e away
from the s m a l l i n v e s t o r s and markets.
Let us make t h i s very c l e a r . He who
runs the "Dark Bool™ sees a l l l

(•That Michael Miken went t o j a i l

for as "Inside Trading" i n stocks under Ufa? U c h n a ^
the SEC r e g u l a t i o n s , i s standard and
open p r a c t i c e s off-exchange, and i n a l l
other markets i n c l u d i n g currency, bonds,
and i n Dark Pools, There i s a c o n f l i c t o f i n t e r e s t . when the so c a l l e d broker-dealer
i s making H P markets, has access t o huge funds, and trades against h i s own c l i e n t s .
You w i l l n o t i c e t h a t j . P . Jtorgan Stanley i s s a i d to be t r y i n g t o go back to the
brokering trade, whereas Goldman Sachs i s c l i n g i n g t o the p r o p r i e t a r y t r a d i n g model
against i t s own c l i e n t s . C o n t r o l l i n g p o l i t i c s and the Dark Pool System provides a
look a t i n s i d e information f o r p r o p r i e t a r y t r a d i n g . I f Goldman Sachs had not been a
major p r o p r i e t a r y t r a d e r , they would never have placed key people i n t o the p o l i t i c a l
world. There would have been no s e l f - i n t e r e s t i n terms of S m i t V s I n v i s i b l e Band,

The c o l l a p s e we have endured was not planned, i t was never conceived t h a t t h i s

fcould be the outcome. GS does not create long-term models- The " c l u b " i s only keen
on guaranteed trades* - never r i s k . They assume they cannot trade c o n s i s t e n t l y , so
to make money c o n s i s t e n t l y , they need to c o n t r o l the game, i n s i d e i n f o on stocks
may be " i l l e g a l " f o r everyone e l s e , but when you c o n t r o l the J u s t i c e Department and
the Courts throwing i n the Treasury, you get one o f those "Get Out o f J a i l Free Cards"
from the game Monopoly we played as k i d s . No one w i l l be c r i m i n a l l y charged ever
unless they s o l e from the "club" and then they w i l l . b e prosecuted.

Uncovering the " c l u b " i s not very hard. J u s t

follow the t r a d i n g . You w i l l see the c l u s t e r i n g o f
trading i n crmrtddities or currencies airong the key
players. They buy and s e l l together against the
p u b l i c and corporations, often g e t t i n g governments
to guarantee any l o s s c o v e r t l y . They w i l l buy and
s e l l together. Take o i l , f o r example. Yes, our model
came out i n 1997 and projected crude o i l would r i s e
from J10 t o $100 going i n t o 2007. The Departxait of
Energy requested that Princeton Economics b u i l d a
energy model f o r them. There was a court hearing on
t h i s before Judge Richard Owen i n the Southern D i s t -
r i c t o f New York on October 3rd, 2GQQ (99-Civ-9667).
The SBC and C F l C objected, and the Judge went w i t h
Alan Cohen, c h i e f Compliance O f f i c e r of Goldnan Sachs,
to block Princeton f r a n c r e a t i n g any mcdel to help
the American p u b l i c . Why?
 I cannot s t r e s s enough, t h a t the game i s not to c o n t r o l the p o l i t i c s o f the
world. The object i s j u s t to c o n s i s t e n t l y make money by i n s i d e information or by
c o n t r o l l i n g t h a t information. That i s why we must be more concerned about the p l a i n
background o f those appointed i n charge of the Fed, World Bank, i n t e r n a t i o n a l 1
Monetary Fund, and the various major Treasuries. I t i s by p l a c i n g key people i n
these r o l e s t h a t e x t r a c t s the key information sought to achieve t h a t goal o f always
being smarter than everyone e l s e , and never being wrong. This, unfortunately, i s
a matter o f s e l f - d e l u s i o n .

I f you b e l i e v e you can c o n t r o l the game, why bother w i t h honest a n a l y s i s ? My

contacts w i t h the " c l u b " were never about p r o v i d i n g advice. I t was to s o l i c i t me
to become p a r t o f the " c l u b " and then use t h a t p o s i t i o n o f g i v i n g g l o b a l advice
to c o n t r o l the market f o r the " c l u b " that they assumed i n f o can do, but the record
o f events since Long-Term C a p i t a l Management, demonstrate otherwise.

The " c l u b " b e l i e v e d they c o n t r o l l e d the IMF and thus had the i n s i d e t r a c k on
the loans going to Hussia. Edmond Safra i n v i t e d me to j o i n i n w i t h t h e i r Hermitage
C a p i t a l , where a f t e r h i s death, the CEO was banned from Russia by P u t i n . Just l i k e
w i t h RIG, b a i l i n g out RIG was an i n d i r e c t method o f covering the losses at GS, f o r
example.

Look a t December 2008. This i s where a l l the RIG b a i l o u t s to GS tcok place,

and what do we f i n d ? GS suddenly delayed t h a t f o r December because t h e i r f i s c a l
accounting year ended w i t h November. Then they changed t h e i r accounting year to i a
standard calendar so they reported $1 .S b i l l i o n p r o f i t f o r January-March making i t
appear l i k e Goldman i s now OK. What happened to the December number? W e l l , they
w i l l not be discussed u n t i l the quarter comparsions a t the end o f 2009, when they
w i l l be o l d news, and any p r o f i t w i l l be able t o show a glowing r e p o r t .

The IMP support o f Russia was operating the same way. The "club" purchased the
Russian short-term paper a t unbelievable r a t e s o f I n t e r e s t , and they were banking
on the IMF t o make sure t h a t the money kept flowing. I p e r s o n a l l y warned the head
o f Republic National Bank t h a t Russia was going t o c o l l a p s e . He j u s t about laughed,
I was i n v i t e d t o Washington t o the National G a l l e r y t o show me the power of the
" c l u b " and the i n s i d e information they c o n t r o l l e d . They b e l i e v e d they had the IMP
i n the palm of t h e i r hand. You can check the London F i n a n c i a l Times f o r the summer
o f 1998. I d e l i v e r e d t h a t f o r e c a s t t h a t Russia was about t o c o l l a p s e and the FT
put i t on the f r o n t page o f the second s e c t i o n , more-or-less s t a t i n g that i f everyone
l i s t e n e d to Princeton, Russia was doomed. The c o l l a p s e came and w i t h i t , a contagion
t h a t caused massive l i q u i d a t i o n s around the world to cover what could not be covered
w i t h the Russian debt. That created the Long Term C a p i t a l Management c o l l a p s e and
again we f i n d the " c l u b " g e t t i n g the Fed t o b a i l them out, t a k i n g the money i n d i r e c t l y
to pretend they d i d not lose i n the debacle.

The IMF and World Bank have a long-time reputation o f being j u s t a b i t corrupt.
They are used t o create i n d i r e c t flows o f p r o f i t s to the " c l u b " t o avoid the d i r e c t
t r a n s f e r route to prevent most people from seeing what goes on. There are a host o f
problems i n t h i s area, and t h a t included the European Development Bank t h a t spent so
much money on b u i l d i n g a palace i n London, one would be shocked.

The only conspiracy i s t o make money and create guaranteed trades. There i s no
grand master-plan to take everybody' s l i b e r t y . Even the tyranny o f the E n g l i s h k i n g
made every felony death because Hit was cheaper t o , k i l l a p r i s o n e r than t o feed him
f o r l i f e . I t was always about the money' and the "club" i s no d i f f e r e n t .

10
 Lloyd BLankfein, head o f Goldman Sachs,
goes on the i n t e r n a l speaker-box at GS twice
a week i n recent months t r y i n g t o keep
morale up among the ranks. While everyone
may focus on the "missing month" i n GS's
accounting assuming t h i s i s h i d i n g the l o s s
o f about $1.3 b i l l i o n and the AIG money
t r a n s a c t i o n s , there i s another i s s u e
t h a t i s c l o s e r t o the core s u r v i v a l .
What GS i s r e a l l y t r y i n g t o hide i s the
amount of loans t o i t s own s t a f f t o
help them cover t h e i r own margin
c a l l s , -i .'

Goldman Sadis has been quick t o

repay the TflRP money because they want ¥
the government out r e a l f a s t . Everyone
assumes t h i s has only t o do w i t h the 4
bonus structure. Tt goes a l o t deeper.
The payment system has always been
performance, and s i n c e GS i s h o l d i n g on t o the p r o p r i e t a r y t r a d i n g model and has
eliminated Lemans and BS while e f f e c t i v e l y humbling M a r r i l Lynch they c l e v e r l y
r

had hoped t o g a i n an e f f e c t i v e monopoly o f the US f i n a n c i a l markets. C o n t r o l l i n g

subvertly the Treasury, Fed, World Bank and the IMF, they hoped t o create not
a ccmpany t h a t d i c t a t e d your personal r i g h t s , j u s t c o n t r o l l e d your personal
finances.

anyone who has been a b i g t r a d e r , knows t h a t i n d e a l i n g w i t h the "market

makers" there use t o be competition. By e l i m i n a t i n g Lehman, M a r r i l , and Bear, the
net " r e a l " e f f e c t i s t h a t the spreads between b i d and ask have widened t o the
p o i n t t h a t one needs o n l y trade perhaps 1/3rd o f the previous volume t o make the
same amount o f money, Goldman Sachs has arisen powerfully by e l i m i n a t i n g any such
competition. They are not t r y i n g t o destroy the economy, although they have done
a good job by t h e i r own s e l f - i n t e r e s t , but they are t r y i n g t o e s t a b l i s h a r e a l
monopoly t h a t have not e x i s t e d i n recent memory.

. Even the Democrats w i l l do nothing against Golctaan Sachs because they need
them t o be able t o continue t o f l o a t t h e i r expected t r i l l i o n s o f new debt. Who
w i l l get i t s o l d i f G o l r t o n Sachs goes t o j a i l ? The courts are owned by the
"club" and t h a t i s evidenced by an attempt i n New york t o f i l e a major l a w s u i t
on a c l a s s a c t i o n b a s i s a g a i n s t M e r i l l Lynch s e v e r a l years ago. The s u i t was
given t o Judge P o l l a c k who dismissed the l a w s u i t p r o t e c t i n g the Investment Banks
and the excuse was a c l e v e r weaving o f l e g a l p r i n c i p l e s t h a t were h i g h l y doubtful
and the Southern D i s t r i c t o f New York w i l l not a l l o w such s u i t s . You cannot p r e v a i l
i n New York ever against t h e " c l u b " or the government. They enjoy a 99% v i c t o r y
r a t e s and a l l other courts w i l l back them up. So Goldtoan Sachs has reached the
l e v e l o f being untouchable, and the p o l i t i c i a n s w i l l a l l o w t h i s t o go on because
i t serves t h e i r purpose. They need somebody t o s e l l t h e i r debt. I t i s c a l l e d a
Primary Dealer,

There was a lawyer who t r i e d t o f i l e a s u i t against the c o r r u p t Second C i r c u i t

at the Supreme Court. That I l l u s t r a t e d why c a p i t a l i s j u s t not safe i n America any

11
more. Ha demonstrated t h a t never do c i t i z e n s win, and t h a t the decisions o f t e n
c o n t r a d i c t t h e . l a s t one, and every lawyer I ever spoke to about New York, says
the same thing. The Judges manipulate the r u l i n g s so t h a t the Government never \ ..
loses. We are no b e t t e r than a banana r e p u b l i c w i t h nuclear weapons. You j u s t
cannot invest i n a system t h a t i s rigged. This i s the code word t h a t Judge Sonya
Satomayor made - "Judges make p o l i c y . " When policy o b j e c t i v e s are t h a t the s t a t e
must always win, then there i s no r u l e o f law. That i s tyranny- So the courts
are f i r m l y w i t h i n the: hands o f the "club" and the p o l i t i c i a n s w i l l do nothing.
In f a c t , where the Senate has oversight CCTrmittees f o r the CIA, Homeland S e c u r i t y ,
and j u s t about every other department, there i s no such committee t h a t assumes any
oversight committee f o l l o w i n g j u d i c i a l r u l i n g s . Write you any Senator, T e l l him
you were t r e a t e d u n f a i r l y by a judge. I f he responds, he w i l l t e l l you he dees not
i n t e r f e r e w i t h the courts. Thus, you have no r i g h t s t o property a t a l l , f o r the
judges can do as they l i k e , whenever they l i k e , and t h a t serves the government
very n i c e l y . That i s why there are no o v e r s i g h t committees t o ensure you are t r e a t e d
f a i r l y . Even i f everyone voted tomorrow and demanded t o change t h i s law, judges are
not subject t o vote, and they c l a i m they have the f i n a l say as t o what any law means.
Goldman Sachs c o n t r o l s the courts i n New York- That i s even more powerful t h a t the

Fed.

Sr.H The Sih»*<Ltfi\ Setf^fc \

It's the F i n a n c i a l Sector that*
peaked with the Economic Confidence XI c n Stwa X S m W T . ] NTBE » ^ U i > ^ .n

Hji law n-" P P » P '] J> Jpfcnwg R_>d_(hfl •* nt p D E « )

Model i n February . 2007 whereas the OBO :

o v e r a l l market was not the center

focus of excessive speculation and
the concentration o f c a p i t a l . The
p o l i t i c i a n s are l i k e deer frozen
i n the headlights o f K a r l Marx .who
hated the concentration o f c a p i t a l
among a l l people, but t h a t i s how
c a p i t a l works on a l l l e v e l s . I f the
concentration o f c a p i t a l i n the hand
11
o f the " r i c h Is immoral, then the
same i s true among sectors, and
among nations- So we should give our
assets to A f r i c a and everyone should
share e q u a l l y . Why stop a t the horde

The concentration o f c a p i t a l i n
sectors w i t h i n an economy i s what nc*
creates innovation. A l i o n w i l l take
down a zebra f o r a meal, and we can
pronounce i t i s unjust, and we shouk
a l l be a vegetarian, but t h a t i s not
the design o f nature. C a p i t a l w i l l i t
f a c t concentrate and i t i s the f a l l
of t h a t sector t h a t creates the next
wave o f innovation. The F i n a n c i a l
sector peaked, Goldman Sachs may now
appear i n v i n c i b l e , but even they w i l l
f a l l f o r t h e i r own s e l f - i n t e r e s t i s
t h e i r undoing. They can pass a law
and prevent s h o r t - s e l l i n g i n t h e i r
stock as Paulson d i d before: But i t
w i l l not a l t e r the game,

12
 tej mil ; When we look aL Uie performance
OfHit 1—3* H|BII '""a Uaf -vi.ie u n e e «DfH 1 * 1 * gar cno f-s H i •
of iGoldman Sachs shares, tha s t ^ d a r d
t e c h n i c a l a n a l y s t s w i l l focus on the
o l d double bottom a t 150, and see t h i s
as the w a l l o f r e s i s t a n c e . This i s by
far not a 100% r e s u l t . Often t h i s i s
faded and t h a t a t times w i l l s u c k e r - i n
new buyers j u s t i n time f o r the sheer
collapse.

The standard downtrend l i n e o f

200S has been exceeded and r e s i d e s i n
the mid 130 range. Here a l s o , exceeding
i t means nothing. What we need t o see
i s t h a t t h i s transforms i n t o support
f o r any d e c l i n e . I f share p r i c e s f a l l
below t h i s area, t h i s w i l l be a s i g n a l
of f u t u r e weakness.

I t i s the Breakout L i n e drawn from

e i t h e r s i d e u s i n g the opposite r e a c t i o n s
Fil V i /m M/j H Jul 17? dpi h a . Iha JHDIT Frt V - I
S*.Bf JB... t a k i n g place around the Ncrtsnber 2000
low. l l i i s l i n e was exceeded i n A p r i l ,
r a t e sted i n May, and then the r a l l y i n t o
June t o r e t e s t t h e 150. T h i s now r e s t s
a t the 125 are i n J u l y and p e n t r a t i n g
t h i s w i l l s i g n a l the r a l l y i s most l i k e l y
over.

I f we head t o new lows, they would

unfold going i n t o perhaps the May/June
time p e r i o d i n 2010- I d e a l l y , the f i n a l
low g e n e r a l l y forms 31 months from the
major high-

When we look a t Morgan, we come away w i t h a much d i f f e r e n t p i c t u r e . Where Goldman

Sachs created a November 2008 low, JEM d e c l i n e d i n t o February 2009. On f i r s t blush, one
might assume t h a t JPM i s weaker than GS, but i s r e a l i t y , i t i s r e f l e c t i n g f a r greater
long-term support, and t h i s i m p l i e s t h a t JEM may be the l a s t one standing a f t e r a l l . GS
may net s u r v i v e as w e l l even f a r a l l i t s cunning and p o l i t i c a l machinations-
Do not get confused i f
we see JPM bottom before GS
and t h i s may provide even a
leading i n d i c a t o r . JPM i s
o f f i c i a l l y claiming i t i s
moving away from the con-
f l i c t o f proprietary trading.
I f t h i s proves c o r r e c t , we
could sea the e v o l u t i o n o f
JIM being transformed Into ;

the major house- Goldman '

Sachs may l o s e t a l e n t who
r e a l i z e i t i s more l u c r a t i v e
overseas. Nevertheless, f o r
now the Goldman P r o f i t s are
going to r i s e , but t h i s i s
from p r o p r i t a r y t r a d i n g , n o t
'is - = ->- Z
business and i s therefore not
a r e f l e c t i o n of the economy.
 !

I t ' s the Dark Pool that i s a c l e v e r name

for enhancing p r o p r i e t a r y t r a d i n g . He who makes
the r u l e s , owns the gold. That i s what we are
l o o k i n g at w i t h the new concept i n Dark Pools.
Fox decades, one c a l l e d the broker i n i n t e r -
bank and he would t r y t o read you and then he
s h i f t e d h i s quotes t r y i n g t o squeeze an e x t r a
d o l l a r . Once he knew where you were, they i n
f a c t kept t r a c k o f your p o s i t i o n s . What Milken
want t o j a i l f o r , was standard p r a c t i c e i n
commodities and currencies. Creating Dark Pools so t h a t b i g traders are not e f f e c t i n g the
small t r a d e r s , i s the greates b u l l s h i t s t o r y s i n c e death insurance ttos c a l l e d l i f e i n s u r ¬
ance t o increase s a l e s ,

A Dark Pool w i l l a l l o w the same i n s i d e information t o a i d the p r o p r i e t a r y t r a d i n g

Of Goldman Sachs. The government w i l l look the other way, and what use t o be a crime
magically becomes l e g a l - The problem w i t h the whole Goldman Sachs Model, they are
r e a l l y a hedge fund with favored s t a t u s .

I f one must speculate t o earn a l i v i n g , then the business is a f a i l u r e . You might

as w e l l become a fund manager s i n c e the business you are operating i s j u s t not working*
Goldman Sachs l o s t b i g the l a s t few times. A sudden c o l l a p s e i n the market, and they
get wiped out. There is no r e a l business i f one has t o speculate t o make money.

Hie government should outlaw what Goldman Sachs, i s doing. E i t h e r you a r e a bank,
a broker-dealer- market-maker, o r a hedge fund. You cannot be everything r o l l e d - u p
f

in one e n t i t y , The c r i s i s t h i s presents, i s t h a t confusion w i l l dominate during any

period o f uncertainty.

I f Golctaan Sachs loses b i g i n t r a d i n g , what everyone thought was business p r o f i t s

r e f l e c t i n g a rebound i n the banking s e c t o r , w i l l be suddenly l e f t standing an empty
hand, f o r what they thought was t a k i n g place was the opposite.

The REAL Goldman Sachs conspiracy i s o n l y about t r a d i n g . They have sought t o be

the masters a t manipulating the events and government o n l y t o Sttftk personal gain. They
have no p l a n t o b e n e f i t s o c i e t y . They are not even a r e f l e c t i o n o f how the economy i s
doing. They are traders - and not much more.

When Goldman Sachs share p r i c e s f a l l , do not assume t h a t i t h i s i s a t r u e and r e a l

r e f l e c t i o n o f the economy. They are a symptom of the problem, not a s o u l t i o n f o r the
future.

I have p r e v i o u s l y w r i t t e n about the h i s t o r y o f the " c l u b " and the organized

e f f o r t t o r i g i i t h e markets. I stand by those comments and i n v i t e anyone t o d i g up the
t r a d i n g records and you w i l l see who was long and s h o r t when.

Morgan claims t o be r e t u r n i n g t o the broker-dealer model and away from the high
r i s k o f p r o p r i e t a r y t r a d i n g . Goldman Sachs sees only: the mcney, not the business
model. The advice of i t s former Chairmen who have h e l d the l o f t y places o f p u b l i c
o f f i c e are no more educated i n the r e a l world economy than any politician;:.They have
presumed power i s t o manipulate and t o h e l l w i t h the f r e e markets. They views are
no d i f f e r e n t than t h e i r p o l i t i c a l c o n s p i r a t o r s .

There i s no one on our s i d e because they are d r i v e n by s e l f - i n t e r e s t . We have f a r

too many p o l i t i c i a n s , and no statemen.

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