The Committee to Destroy the World. Lewitt Michael E.

in The Credit Strategist that investors sell short all of the long-dated European sovereign and corporate debt on which they could get their hands. See The Credit Strategist, April 1, 2015. As of the end of 2015, that still remained my recommendation.

14

Christopher Whalen, “Central Banks, Credit Expansion, and the Importance of Being Impatient,” Kroll Bond Rating Agency, March 20, 2015.

15

In Europe, there is an even bigger risk in entrusting one’s money to banks. As the citizens of Cyprus learned, their savings can be confiscated by the government. This calls into question the integrity of the banking and the financial system and the very tenets on which society is organized and is almost certain to lead to social unrest and violence.

16

Luigi Buttiglioni, Philip R. Lane, Lucrezia Reichlin, and Vincent Reinhart, “Deleveraging? What Deleveraging?” Geneva Reports on the World Economy, Centre for Economic Policy Research, International Center for Monetary and Banking Studies, September 2014, 1–2.

17

Ibid., 2.

18

Ibid.

19

McKinsey, “Debt and (Not Much) Deleveraging,” vi.

20

Dr. Philippa Malmgren, Signals: The Breakdown of the Social Contract and the Rise of Geopolitics (London: Grosvenor House Publishing Limited, 2015), 325.

21

Bank for International Settlements, BIS Quarterly Review, June 2015, p. 4; Bank for International Settlements, Derivatives Statistics, June 8, 2015, Table 19, www.bis.org/statistics/derstats.htm.

22

Ibid., 5.

23

Ibid.

24

David Enrich, Jenny Strasburg and Eyk Henning, “Deutsche Bank Suffers From Litany of Reporting Problems, Regulators Said,” The Wall Street Journal, July 22, 2014.

25

James Rickards, Currency Wars: The Making of the Next Global Crisis (New York: Penguin, 2011), 210.

26

Francis Fukuyama, Trust: The Social Virtues and the Creation of Prosperity (New York: The Free Press, 1995), 26.

27

“Transparency” is one of those terms that regulators like to use to impress their political bosses that they know what they are doing. The problem with “transparency” when applied to derivatives is that there are very few regulators with the requisite expertise to understand what they are looking at when the curtain is pulled back on these complex financial instruments. Just because regulators are provided with a mountain of data on derivatives does not mean that they possess the ability to understand the information with which they are being provided. In fact, we can virtually depend on the fact that they do not. This is something that the decision makers who decided to leave derivatives in the hands of regulators after the crisis failed to understand.

28

Source: Bank of International Settlements, Quarterly Review, September 2014, Statistical Annex; “Foreign Exchange and Derivatives Market Activity in 2007,” Bank for International Settlements Triennial Central Bank Survey, December 2007. In November 2014, it was reported that Deutsche Bank was sharply reducing its trading in “single name” credit default swaps relating to individual sovereign issues and U.S. and European companies. Katy Burne and Eyk Henning, “Deutsche Bank Ends Most CDS Trade,” The Wall Street Journal, November 17, 2014.

29

The Barclays High Yield Index was approximately $1.3 trillion in par amount outstanding in October 2014 while the S&P/LSTA Leveraged Loan Index was approximately $825 billion in mid-December 2014.

30

Only in late 2015, long after the damage was done, did the Justice Department move to adopt formal guidelines designed to foster indictments of individuals responsible for corporate wrongdoing. The new policy, set forth in a memorandum to federal prosecutors from Deputy Attorney General Sally Quillian Yates dated September 9, 2015, states that settlement agreements will not give companies credit for cooperating with the government unless they turn over evidence against employees involved in wrongdoing.

31

“Financial Crimes: Unfair Cop,” The Economist, May 23, 2015, 13.

32

Charles Kindleberger, Manias, Panics and Crashes: A History of Financial Crises (New York: Basic Books, 1989), 86.

33

Charles Krauthammer, “Are We Alone in the Universe?,” The Washington Post, December 29, 2011, reprinted in Things That Matter: Three Decades of Passions, Pastimes and Politics (New York: Crown Forum, 2013), 129.

34

The National Military Strategy of the United States, June 2015, 2.

35

Thomas Friedman, “A Good Bad Deal,” The New York Times, July 1, 2015.