Hugh Sunday explains the predators’ techniques in A short rough primer on leveraging and derivatives: “Leveraging means something like this. You sell $10 million in stock. You use this money as the basis to take out a loan so you can buy $100 million in mortgages. Now say you issue mortgage-backed securities based on these and sell them. Now you have a $100 million in cash so you go out and buy more mortgages only this time you use your $100 million to buy a billion dollars of them. You have just leveraged your initial $10 million 100 times.”

Can anyone do this? No. “This works if you, your banks, and the buyers of your paper are all sufficiently greedy. Why would banks loan you $100 million on $10 million collateral? The short answer is they wouldn’t for you or me, but they would and did to financial companies because of the fees and interest they made off of such transactions and because they ‘knew’ those companies were good for it. . . .”

New York governor Eliot Spitzer wrote:

Credit, they say, is the lifeblood of the economy, and without credit no one can make a move.

But credit is the lifeblood of the economy only because people are broke. Purchasing power in the U.S. has collapsed, and it is getting worse as the recession which has now begun worsens.

A long term recession and depression are inevitable, and they are expected by those in the know. In fact, there has been a plan in the works for a very long time to bring down the U.S. economy, and it will be happening over the coming months.

This is why the government is also preparing to implement martial law, or something close to it, in case public unrest breaks out. We will likely also see a clampdown on free speech, the right to protest, and use of the internet. Federal facilities are being prepared all around the country to backstop state prisons and local jails that are already bursting at the seams.