Update From The Financial Front In Palestine

John Helmer has an important new post up that explains what’s going on with US financial support for the genocide against Palestinians. It’s information dense so I’ll need to quote it extensively. We previously followed Helmer’s explanation about the difficulties Israel is facing in financing its genocide. Reading between the lines and the details, the Israeli bond issue is being handled in such a way as to hide the effect of war on Israel’s economy. My take—subject to correction from those more knowledgeable in these types of financial dealings—is that the US government put pressure on private institutions to underwrite the Israeli bond offering in such a way that a true public offering would be avoided—because that would have revealed too much. But to push this secret deal through, the US also had to significantly enrich the underwriters:

GOD IS UNDERWRITING ISRAEL’S GENOCIDE BOND, SO THE US SECURITIES & EXCHANGE COMMISSION & GOLDMAN SACHS AGREE GENOCIDE IS NO SECTION 17(A) FRAUD ON BOND INVESTORS

Last week it happened that God and the United States Treasury managed to underwrite a record issue of Israel Government bonds to continue the war against the Arabs in Gaza, West Bank,  Lebanon, Syria, Iraq – and Iran if necessary.

The war financing comprised $2 billion of five-year bonds, and $3 billion each of 10 and 30-year bonds.

The US Treasury guarantees bond holders that if Israel defaults on repayment of its obligations,  the US will pay instead. Notwithstanding this, the Israelis were obliged to offer an extra 1.35%, 1.45%, and 1.75% more in interest over the going rate for US Treasury bonds for the same length of term.

What does this say about how US bond holders view US Treasury guarantees these days?

The Reuters news agency headline on March 6 celebrated “Israel sells record $8 billion in bonds despite Oct 7 attacks, downgrade”.  The propaganda agency based in New York quoted Israel’s Accountant-General as claiming the bond placement “results showed an “unprecedented expression of confidence in Israel’s economy by the world’s largest international investors”.*

In fact, according to well-informed bond trade sources in Europe, with the higher interest rates the market has just demanded from the Israelis, the spread between the Israel bonds and US Treasuries has never been wider, and the worse this spread will become for Israel. This is a vote of no-confidence from the market which the Israelis, the Americans, and their media are trying to keep secret.  

The longer the war is protracted, the more obvious the costs of Israel Defence Forces’ (IDF) failure will become – and the deeper the negative bond sentiment will grow. By converting secrecy into money, the market is signalling that it has begun to turn against Israel – and profit at Israel’s expense.    

Also unprecedented is the secrecy in which the “expression of confidence” has been managed by the US, French, and German banks acting as managers of the Israeli bond issue;  and of the US Securities and Exchange Commission (SEC), which has had regulatory oversight of the process. The debt financing has been reported as a “private placement”; this has removed the requirement that the Israelis produce a public prospectus explaining how they think their war – plausibly genocide, according to the International Court of Justice in its ruling of January 26, 2024  – is going, and how long the IDF claim it will last.

This does not remove the legal requirement on the two US banks engaged in marketing the bonds to US investors, Bank of America and Goldman Sachs, to submit a formal application for SEC approval of what is called a letter of consent. However, asked to confirm the contents of the letter of consent application for the sale of the Israeli bonds, and its official approval, the SEC has refused to give any answer.

Goldman Sachs was asked the same questions. The bank also refuses to say.

Last October the chief executive of Goldman Sachs, David Solomon,*  issued a personal letter to the bank’s employees claiming the Hamas operation was a “violation of fundamental human values”:   Solomon then proposed a $2 million gift of bank funds “to organizations providing critical support and humanitarian relief in Israel”; plus additional bank money, three bank dollars for every one contributed by bank staff making donations under $25, and one for one if the staff contribution was over $25. Asked how much money has been raised for Solomon’s gift to the Israelis, the bank is refusing to reply.

In other words, Israel’s public genocide is a private secret among Americans who are paying for it, and among US government officials responsible for regulating the scheme according to US law.

According to well-informed bond traders, this deal-making is worth in fees to the dealmakers, led by Goldman Sachs, about $100 million.

You’d almost think there was a fanatical Zionist in charge of the US treasury.

Appended to Helmer’s article are excerpts of a Bloomberg assessment (with explanatory comments) of what occurred with this bond offering. What emerges is that Israeli investors are seeking safe havens for their money—and they don’t regard these Israeli genocide bonds as a safe haven. That’s why the US Treasury took on the underwriting. The secrecy thus afforded masks market nervousness:

According to Bloomberg, about $58 billion in new debt would be issued this year, up by a third from the prewar year. About 80% of that total is usually raised in the domestic Israeli market; but if Israeli investors lack the funds or are fleeing to safe havens for their money, a much larger percentage of the issue will have to be raised from international investors, most of them in the US. This, conceded Bloomberg’s Israeli informants, would require “private placements, which are typically bought by a few investors at most. Those have been arranged by banks such as Goldman Sachs  and Deutsche Bank.”

“Domestic issuance in the first two months of this year,” Altstein reported for Bloomberg, “is projected to total the equivalent of more than $9 billion, a 350 percent rise from the same period last year…The cost of insuring against an Israeli default — as measured by credit default swaps — is now higher than that for lower-rated sovereigns such as Mexico and Indonesia, indicating some investors are nervous.”

Israeli financial media reporting indicates that the $8 billion in bond sales completed this month were entirely placed outside Israel.

In the money markets, nervousness fetches a rising price; in the case of Israel’s genocide bonds the only way to keep that price rise secret is through private placements. They are operations run by banks like Goldman Sachs which avoid the requirements of issuing a prospectus; obtaining a credit rating from a ratings agency which evaluates the prospectus claims; and making a market with semi-public meetings with investors and answering their questions. What Goldman Sachs does instead, according to those familiar with the bank’s operations, is to “dump the issue in state or institutional pension funds which can be counted on to hold the issue until maturity, and ask no questions.”

But even passive pension fund managers have their fiduciary limits: Israel’s war began to trigger withdrawals from both Israeli state and corporate bonds by Norwegian pension funds last November; by Danish pension funds after the genocide ruling by the ICJ  in January.

Helmer includes some eye-opening comments from a “trade source”:

He believes the Israel government’s calculation is that the war on the military front is going to get worse, and the economic war far longer than can be acknowledged publicly. “So they are trying to lock in as much money for the long term as they can now, leaving less to pay back in the short term. They say they are aiming to raise $58 billion over this year, but we are already three months in — they have $50 billion still to go. At this rate of timing and at this pricing, they won’t make it.”

…

“I speculate that the fees will be around $100 million. The princes at Goldman Sachs are being rewarded handsomely. We will have to wait and see if they will regret it. The buyers should also be asking the fee question. If there is no answer, then these Israel bonds are not being bought or placed based on financial reasoning. It’s political, ideological, religious.”*

But don’t worry. It’s all guaranteed by … you and me.

Lots more at the link.

In the previous post I linked to a Danny Davis - Doug Macgregor video. In that video Macgregor emphatically declares that the US military is not prepared to wage any of the wars that the ruling class is currently involving the country in. The US is flirting with comprehensive disaster, and Davis speaks of this in impassioned terms later:

BIDEN Abdicates his Authority on the World's Stage