Secrecy and Control – Bubbles and Bankers

From the very start of this crisis I have lamented the fact that there was never any debate at all about the nature of this crisis – was it a crisis of liquidity or solvency – nor about what actions should be taken (should the banks be bailed out, or should they be forced to pay off their bad debts and the bankrupt banks replaced with clean ones) and the consequences of each action (Incur vast public debt or not).

I understand the crisis was, at times, fast moving, but not all the time. There were long moments when a proper political and public debate could have been had. It never happened. A striking and disappointing failure in a democracy.

What happened instead, was that there was a chorus of hectoring voices from the financial class, backed up by their acolyte politicians and their panders the journalists. They had, it seemed to me, one shared purpose – to prevent and foreclose upon any debate and procure public acquiescence for what the bankers had decided.

My suspicion was that the self appointed financial experts had decided that there was not going to be any debate. They would not tolerate having to explain themselves to anyone who couldn’t afford to eat at the same restaurants they did. Today comes very suggestive evidence that I was right. It comes from released transcripts of the FED meeting of March 2004.

At that meeting they were discussing the fear, voiced by some, that there was a housing bubble. The president of the Atlanta Federal Reserve, Jack Guynn, explained that “a number of folks are expressing growing concern about potential overbuilding and worrisome speculation in the real estate markets, especially in Florida. Entire condo projects and upscale residential lots are being pre-sold before any construction, with buyers freely admitting that they have no intention of occupying the units or building on the land but rather are counting on ‘flipping’ the properties–selling them quickly at higher prices.”

A vague suggestion was made that perhaps some document laying out the facts could be prepared for public consumption.

The FED chairman at the time, Alan Greenspan, made it crystal clear what he thought about democratic control and public debate. Greenspan said, “We run the risk, by laying out the pros and cons of a particular argument, of inducing people to join in on the debate, and in this regard it is possible to lose control of a process that only we fully understand.”

THERE IT IS. Read it again!

There could be no clearer statement of contempt for you as a thinking adult. No clearer admission that control was the only priority. Informed debate was strangled and in its place came assurances that, ‘what had to be done’ was being done by those educated and expert enough to do it. You little people just pipe down and remember your place and function. Speak when spoken to and do what your told, when your told.

That was in 2004 when the crisis was being incubated. Do you really think the attitude, of those accustomed to having absolute power over us, of maintaining control and denying debate, changed when the folly of their actions became apparent?

There was no debate and there still isn’t, because those in power would rather your children grew up without hope of a job, without hope of a career, without hope of a decent education or a national health service, and you without a hope of a pension or retirement before 70 – they would rather all that, than allow you any real debate or choice.

The longer we we follow the insane course we are on, of taking on more and more debts the more certain it will be that no debate will ever be allowed.

Had we had a debate at the beginning, we might have at least heard the arguments against bailing out the banks and taking on the debt. But now that we have incurred those debts, can you imagine being allowed to even think about changing course? Should there be need of more bail outs, will there be any debate about it? Will we hear a voice saying – we should not throw yet more money into the bank’s debt vortex? Would it be allowed to even debate, repudiating the debts taken so far?

I wager such talk, if ever it was to gain any traction at all, would be branded dangerous, extremist and suspect.

Do we still live in a real democracy? Or do we live in a pretend one where we have the forms of democracy, in that we get to play dress-up in its clothes, but have none of its radical content? It seems to me that when it comes to finance, we can chose any party, any course of action we like, so long as it falls within a narrow range of ‘acceptable choices’ and does not ever threaten the control of those who know better what’s best for you and what must be done.