Usury is Fragging!: Why CDOs Are “Dangerous Devices”

Diagram of Subprime Mortgages as “CDOs” (Collateralized Debt Obligations)
What CDOs really are: A Bouquet of Grenades (Geballte Ladung; “Concentrated Charge”) for Fragging

Anyone who has read the entirety of SMP Compendium must be capable of knowing how to distinguish between the Arbeit and Geld of Socialism and the “Kapital and Schuld of Neoliberalism.” By doing so, one is able to realize why and how there are these finer distinctions separating Socialist Finance under the Work-Standard from those of “Liberal Capitalist Finance under the Debt-Standard.”

The Work-Standard is compatible with the Reciprocal-Reserve Banking System. The Reciprocal-Reserve Banking System relies on a NSFI (National-Socialized Financial Instrument) called a Work-Tenures, an Interest-free Bank Loan. The Borrower must create 50% of the Arbeit and Geld, the Lender creating the other 50% of Arbeit and Geld. Once Lender and Borrower contributed their halves, the Work-Tenure ceases.

For the Liberal Capitalist equivalent, the “Collateralized Debt Obligation” (CDO), I am not even going to begin with confusing or boring the entire Union with the sheer abstract nonsense taught at actual Financial Engineering classes inside of real university lecture halls. I have a more concrete analogy befitting of the ethical and moral arguments from Emanuel Derman and Paul Wilmott in The Financial Modelers’ Manifesto on behalf of both Socialist Finance and The Fourth Estate.

The “Debt-Standard” is compatible with the “Fractional-Reserve Banking System.” Everyone should always be aware that every privatized commercial bank is by definition the Lender of a Loan to a potential Borrower with an Interest Rate. A CDO is far worse as fitting the legal, ethical and moral definition of Usury as privatized commercial banks are capable of becoming the Borrower of another Lender. The secret to any CDO is a privatized commercial bank’s ability to “repackage” the Schuld of various individual loans into a bundled product to sell to investors on the Financial Markets. This Schuld is automatically created whenever somebody decides to borrow anything from a bank relying on the Fractional-Reserve Banking System, allowing that bank to create Kapital out of thin air and increasing the Quantity of Kapital in existence. If the Borrower, the Lender or the Lender’s Predatory Lender fails to pay back their Schuld, the CDO becomes a live hand grenade like the “Subprime Mortgages” that exploded in the Great Recession.

The term “collateralized” is the dead giveaway behind why every conception of Liberal Capitalist Finance relies on specific Liberal Capitalist conception of Currency. It matters very little whether the Kapital in question happens to be Commodities like Gold and Silver, Banknotes, Cryptocurrencies, or other LCFIs; all of them will suffice in giving a CDO its Value and therefore its Price. This is because the Schuld of every CDO is dependent on Kapital, demonstrating how one cannot oppose Kapital without also opposing Schuld.

Under the Intents of Command and Obedience, Hamiltonian Federalist Socialism will see to it that US Federal Law deems CDOs as dangerous devices on par with live hand grenades. This is not the place for ethical questions or legal debate over whether Usury should be allowed by America or any country on Earth because the Work-Standard, due to the inherent characteristics of Arbeit and Geld, will deems the Implicit Intent of Predatory Lending as following the same logic as the Implicit Intent of Predatory Fragging:

Hand grenades are regulated under the National Firearms Act (“NFA”), a federal law first passed in 1934 and amended by the Crime Control Act of 1968. The 1968 amendments made it illegal to possess “destructive devices,” which includes grenades. (26 U.S.C. § 5801.) There’s no doubt that a live hand grenade designed for military combat fits within the law’s provisions—non-military people may not possess them.

Under one approach, some [US Federal] courts insist that prosecutors prove that the defendant intended to use the device for illegal purposes. Under this approach, someone who created the device, or assembled the components, would escape conviction unless the government proved that he intended to use the device for nefarious ends.

Most courts have not adopted the approach described above—the “subjective approach.” Instead, they focus on the language “may be readily assembled.” That is, if the items could be put together to create a destructive device, the offense is complete, regardless of the defendant’s protestations that he had legal uses in mind.

The common sense approach works like this: The judge asks whether the device, in pieces or as assembled, possesses any innocent value—whether it’s anything but a weapon. If the answer is no, then that’s the end of it—the subjective intent of the defendant isn’t important. But if an innocent or legal use is possible, the subjective intent of the defendant is examined. His statements and the circumstances surrounding the event can be used to prove an illegal motive or plan, or an innocent one.

This mixed approach results in more satisfying outcomes for our scenarios noted above. The science student, convicted under the objective approach, would have a chance to prove that he had no intent to use the device or components in an illegal manner. And the terrorist helper would probably be convicted, for although his assemblage of dynamite, fuses, and caps could be used for benign projects, his stated purpose makes it clear that he had no such plans in mind.

That is basically what The Financial Modelers’ Manifesto is trying to warn: that CDOs are Usury and is capable of becoming a “dangerous device” for Financial Warfare.

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