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Propaganda War: Our Version – The Banker’s Mexican Stand-off

Imagine if you were in a plane and you looked down and spread out beneath you, majestic in the ocean, was an entire mighty battle fleet. And then it sank; Not just one, but every ship in quick succession. What would you think? Would you think it likely that in each ship, by some amazing coincidence, there had been a rogue officer and they had all gone mental at the same time?

Or if you were coming in to land at JFK in New York and as you watched out the window you saw a skyscraper tremble and then fall. Followed by another and another. And as they fell they crashed into those around them until the entire island was obscured. Would you think the people in the buildings must have done something collectively very stupid to bring the buildings down upon themselves? Or would you be thinking someone ought to find out the names of the architects, contractors and builders of those buildings?

The thing about the bank debt crisis is that it has not been one or two banks failing causing problems for other absolutely healthy banks. In every nation, almost every major bank has collapsed on its own. Who brought down who is a stupid question. Who shot who in a Mexican stand-off? Silly question. Who thought it a good system to get into a Mexican stand-off? Good question.

So far in this series I have always used the graphs for Barclays. I want to make it clear this is NOT because I think they were any worse than other banks. No better, but no worse.

What do you notice about these two graphs? Both show the same massive miscalculation of risk. Both show that the banks, Barclays and Societe Generale, one British, one French,  believed that the assets they were buying and the loans they were making from ’04 to 07 were getting safer and safer.  In neither graph is there the slightest hint of what was about to happen. Neither graph shows the banks having the slightest glimmering of awareness that the assets they were holding were in fact extremely risky and that that risk was about to explode and blow their arms off. The graphs show the banks felt their assets were still very, very safe indeed and the risk weighting of their assets should continue to be marked as a fraction of their face value.

This was despite the fact that, for example, the banks knew that $1 Trillion’s worth of Residential Mortgage Backed Securities of the most unstable kind, all written and sold in 04-05, were about to reset in ’07, from their teaser rate to a rate everyone knew the borrowers were never going to be able to pay. (Page 177 of The Consolidated Class Action Complaint against Citi for a graph and the text for fuller detail).

In 2008 Soc. Gen had to be bailed out. Soc Gen will say they weren’t. But they were, by the Fed. Soc Gen took $11.9 billion from the US tax payer to keep itself afloat. The FED funnelled this money via the bail out of  AIG when it collapsed. That AIG bail out was in fact a  bail of of the banks. Barclays too will claim it wasn’t bailed out. That too is a lie. They were, again by the Fed.

In ’07 the Fed created a special bail out funding mechanism it called the Term Auction Facility (TAF). The Fed would accept assets the banks could not use in the market (no other banks would accept them) as collateral for short term loans of 1-3 months. It was explicitly set up to deal with the bank’s crisis and fund banks that would otherwise run out of money and collapse. The two banks who drew the most funds from the TAF were those in green at the bottom. Dark Green is Barclays. Light green is RBS. Both banks were lent billions by the US tax payer who was forced to save both banks from collapse.

Why did the Fed force the US tax payer to save them? Because both were major players in the US sub-prime securities markets. RBS did collapse and was bailed out even more by the UK tax payer. Barlcays also required further bailing out. But being a far better connected bank than Scottish parvenu RBS, Barclays was able to get Sheikh Mansour, the ruler of Abu Dahbi and the rulers of Qatar to invest £7 billion in new shares.

Any way you care to look at it this too was a bail out which saved the bank from collapse.

 

Here is BNP Paribas another vast French Bank. In August of 2009 BNP Paribas closed 3 very large sub prime funds because they were bankrupt. The closures caused panic. Overnight the ECB felt forced to pump €95 billion in to global markets to steady them. It didn’t work. The next day it pumped a further €156 billion, the Fed pumped in $43 billion and the BoJ a trillion Yen. It was the beginning of the crisis. Is there anywhere in the chart of BNP Paribas’ estimation of its risks, any hint of a looming problem? No there isn’t. Of course BNP Paribas held those Sub Prime Risks in off-balance sheet vehicles. Off-balance sheet was and is used by accountants as a way of getting risks off a bank’s balance sheet. Only it didn’t work did it. When the funds collapsed they brought BNP Paribas to the brink. BNP Paribas also received bail out from the Fed.

Lest anyone think I am playing favourites here is the chart for Commerzbank, Germany’s second largest lender. It was bailed out in August 2008 when the German tax payer was forced to buy 25% of the collapsing bank for €18.9 billion.

Any hint in the graph prior to the 2009 bail out of problems? Commerzbank like RBS and the other German disaster Hypo Real Estate was felled in part because it was so vastly stupid as to buy a rival right at the top of the market. Commerzbank bought Dresdner bank, RBS bought ABN Ambro and Hypo bought Depfa. How could they have been so stupid? Well, each bank would have studied the ‘risk weighting’ of the assets in the bank they were buying. Does that help?

And that brings us to the larger point. While each of these graphs shows that each bank completely and uttely failed to see any of the risks it was running and was carrying, the failure is wider still. The failure was and is of the entire market and the rules upon which it is built. For the Liabilities side of each bank is connected to and to a large extent made up of the assets side of all the other banks. And the Assets side of every bank is tied to and, in large part, made from from the liabilities side of all the others. When people talk of ‘the Market’ it is an abstraction only. There is no even larger, daddy organization called ‘THE MARKET’. To return for a moment to my original analogy each bank is a hugely unstable tank of water, built like an upside down pyramid constantly being strained by the huge in and out flow pipes that feed and drain it. In this analogy ‘The Market’ is just the abstract summation of all the flow in all the connecting pipes that is hurtling from one bank to another at any given instant.

So it is silly to somehow imagine the market is a huge reservoir of stability separate from the banks and other institutions themselves. It is simply the sum of them. So if each bank is stupid, greedy, unstable and blind to the risks of its own construction and functioning – then ‘The Market’ is simply the sum of all that stupidity, greed and disastrous design. The market is not the cavalry. There is no cavalry.

 

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114 Responses to Propaganda War: Our Version – The Banker’s Mexican Stand-off

  1. Roger March 15, 2012 at 6:59 pm #

    Good Lord. Incendiary or what?

    Fire in the Hole!

    • Golem XIV March 16, 2012 at 11:38 am #

      Thanks Roger. Glad you found it a good read.

  2. Michael Fish March 15, 2012 at 7:31 pm #

    I don’t see anyone very much able to stop the situation. The American Banks and the British Banks are lobbying fiercely to stop any more regulation.
    The situation is going on without change.
    It is truly a monumental collapse of the most elementary common sense.
    Sad.
    Michael Fish
    Canada

    • Golem XIV March 16, 2012 at 11:38 am #

      Hello Michael,

      Thank you. By the way, our mutual friend says hello.

    • Gary March 16, 2012 at 10:17 pm #

      This is why regulation never works. The bankers, through lobbyists and political connections and insiders, write the legislation. What needs to happen is let the free market operate and do what it does best., kill off bad uneconomic businesses BEFORE they get too big to fail. It was not a failure of the market it was a failure to allow the market to work. All the banks grew like a cancer because their risk was removed and places onto the taxpayer by govt regulation. This ensured that insane risk taking would ensue without bank liability, and more to the point without management liability. The more insane the risks the more they paid themselves in bonuses. If the free market was allowed to operate without govt intervention the banks would have mostly gone out if business in 1998 during the Asian crisis, and probably before that in the Mexican bailout and the s&l crisis. There is nothing wrong with bad businesses failing. It is essential if good businesses are to thrive. A healthy economy always had pruning for growth. It is only when this is prevented that you ignite cancerous systemic boom, followed by systemic bust.

      The market is no mythical beast, it is just the sum of the cumulative actions of all of us, the people. And when left to our own devices we shun excessive risk if the consequence is utter wipeout. The market is not only about greed, it is also about the more powerful emotion, fear. Remove that fear and you no longer have market, you start the process of malignant untrammelled growth and you sow the seeds of collapse.

      To make sure this never happens again, we have to understand the problem and the problem is not the market, but the lack of it.

      • Mike Hall March 17, 2012 at 12:31 am #

        Gary, I suspect you have your ideological blindfold firmly in place already, but I’ll reply anyway.

        Without some overseeing authority setting the rules ‘free markets’ have never existed anywhere for very long. The problem is that powerful players always end up using their information assymetry advantage. This is the case in all ‘financial markets’, most action in which today takes place away from regulated exchanges or any oversight by governments & their agents.

        What you appear to proposing has already happened & we see the results. Read Randall Wray’s report on the key global commodities ‘markets’ of the last decade or so. Several sigma price movements of one or two commodities would themselves be historically unprecedented. Wray found such price movements on most of them. But the underlying transactions of the bulk of trading are beyond any exchange oversight. Tell you something?

        Read also former oil market insider Chris Cook’s articles. Nothing straight about the oil markets. Again little or no oversight or regulation.

        Derivatives? Securitisation markets? Read Bill Black.

        No government is getting anywhere near this. Aside from the general ‘capture’ of politics, the financial sector plays one country’s political leaders off against another. They are global players & will just move operations to wherever jurisdiction they get free reign.

        To understand how ‘financialisation’ has come to dwarf & extract tribute (rent) from the real economy, read Michael Hudson. Politician’s & governments are merely useful idiots & propagandists at this stage.

        • Gary March 17, 2012 at 10:59 am #

          Mike

          Who do you think is causing these sigma price movements in the commodities markets ? The banks. And where do they get all the free money to make these disproportionate moves ? From the govt decreed central bank that has legislated monopoly authority to print money out of thin air and monetise govt bonds. The govt IS the ultimate cause of this distortion. A monopoly is very difficult to achieve for an extended period of time without favourable govt legislation. A free market is defined by creative destruction and innovation and new efficiencies soon destroy old inefficient business. The only thing that can keep such inefficient business on life support is govt legislation.

          The oil markets are, after the bond market, the largest market in the world. It is no surprise that the the most bankrupt entities in the world, the govts and the banks are keen to game the oil markets. It is a tax on us all. A world tax. Free paper money is the originating means of rigging the market.

          In a free market do you believe that people would voluntarily accept payment in paper that loses over 80% of its value in 20 years ? Of course not. In a truly free market paper money and hence the banks that produce it would be shunned and go out of business. The govt is their life support. Without govt mandated FDIC (deposit insurance) people would be very careful assessing the health of their banks before they committed their money to it. Only the best , most prudent banks would gain our business. Govt sticking its oar into the market is always distorting the market.

          As for Hudson and the Modern Monetary Theorists(MMT), what they have not yet gathered is that taking the money issuing monopoly away from the banks and handing it over to govt is just as bad or worse. They don’t consider the Problem of Economic Calculation that states that it is only the millions or billions of interactions of the people who desire the resources that are in any position to determine the allocation of those resources and outside of this it is not possible to determine the allocation of resources in an economic way. So, why should the govt have any superior insight into the allocation of money , or even what type of money to be used , than the people who demand it ? If there was such a method the person/group holding that information would be able to become richer than Croesus, and as soon a they obtain the Holy Grail, the participants in the market would arbitrage that advantage away as they front run the model. In any case, would you want any one group to have such power ? That is a recipe for disaster , as you see today with the banks.

          Hudson and the MMT crowd are just another group of autocrats who have no trust in the people, they are anti-democratic. The people know best what they want and they will do best if they decide and not just once every 5 years, but every single day in everything they do. That is called a free market.

          • Mike Hall March 17, 2012 at 1:47 pm #

            Well, it’s as I suspected Gary. Sounds like the Austrian gold bug, no- government religeon to me.

            I don’t think you’ll find many devotees here to the idea political leaders over the last few decades have done little else but follow the wishes of the financial sector & top few percent wealthy elites. It’s abundantly clear who has the power – and it’s not governments or citizens. How you can imagine otherwise is beyond me. Especially viewing the Eurozone mess & Wall Street’s effective takeover of Washington.

            How you seem to think that doing away with governments will somehow magically bring about ethical behaviour in the players who inevitably come to dominate markets also flys 180 degrees in the face of reality for the entirety of human history.

            You also don’t seem to understand that MMT is agnostic on the ‘size’ of government. It demonstrates clearly that there are few real constraints (but not none) on what a monopoly (fiat) currency issuing government +could+ do. But leaves what it actually +chooses+ to do to the democratic process. The Job Guarantee is merely a buffer stock/income floor stabiliser. If your mythical free markets, minimal government fantasy can actually deliver prosperity (near full employment), there would be nobody availing of the Job Guarantee. So if you were to achieve your small government, by democratic means, under an MMT system, and it works as you believe, the Job Guarantee becomes an unused, no cost feature.

            By the way, the bubble & crash of the Great Depression all took place under a gold standard. So to imagine the banksters scams can be restrained by this is again pure fantasy.

            Even further in to the planet of a parallel universe is the idea that a gold standard could even be introduced in the present circumstances of massive global trade & capital imbalances. There is not the slightest chance that this could happen. You might as well be arguing that the moon should be painted green – it’s about as sensible.

            Anyhow, bearing in mind that there simply can be no return to a gold standard in any of the world’s major economies this side of the 22nd century, you should seriously consider what practical options remain.

            If, as you say, you blame the financial sector (& ignoring the nonsense that governments are presently independant actors dictating to them) & wish to argue your case for ‘small’ government in a democratic process, MMT has much to offer. It describes monetary operations as they actually are, not what ideologues & useful idiots would have us believe. It uses accounting identities & methodology to do so. Which is why critics of any standing never criticise this (they would look plain stupid, rather than just bigoted). Instead, they ascribe, as you have done, ideological positions it does not actually prescribe. Of course, that in itself makes MMT by far the most dangerous challenge to the status quo.

            Much of which has been the topic of a number of Randall Wray’s superb articles recently at neweconomicperspectives.org (Comparison with ‘Austrian’ economics.)

            Of course, we need serious democratic reform to produce political leadership that actually does represent the majority of citizens, not just the top few perecent, mainly financial sector elites.

            What MMT does to greatly help this, is expose all the lies & bullshit that pretend ‘economics’ constraints & rationale for policy that is nothing more, in reality, than purely political, ideological choices.

            Mmmm…smell that fresh air.

      • Louis Hill March 18, 2012 at 2:52 am #

        Thanks Gary – nice description.

  3. Mike Hall March 15, 2012 at 9:33 pm #

    KPFA radio have put out a recording from the MMT teaching weekend held in Italy in Feb attended by 2,000 people in a sports stadium.

    Stephanie Kelton talks about the nature of money for the 1st 10mins, then Michael Hudson lets rip on the financial crisis & the game plan of the financial sector since. About 1hr in total & very pertinent to this (excellent) blog.

    http://www.kpfa.org/archive/id/78503

    • Gary March 17, 2012 at 3:03 pm #

      The govt nor anyone else can set a money supply that can prevent inflation. They simply do not have the information. The govt in any case corrupts the inflation numbers because they want to inflate the money supply to bribe voters and grant themselves big expenses , while on the other hand they want to underpay the public sector. So not only don’t they know what the money supply should be, they want to rig the numbers that gauge it. They cannot be trusted any more than the bankers can. The bankers and the govt are a symbiotic cabal that bestow favours on each other. Without the bankers the govt won’t sell it’s debt, and without govt the bankers won’t have a monopoly and taxpayers insurance for insane risk.

      A small govt can and will work. It worked in the 100 years prior to 1913. The most productive age in history and there was no income tax. Sure there were bank runs and failures, but that was not a problem but a virtue. Bad businesses failed before they took down the entire economy.

      There is only one gauge of inflation that is infallible in a free market, that is the price/value of gold. Even Keynes said that and he looked at over 200 years of empirical data. I agree that a “gold standard” where the same ounce of gold is sold multiple times with paper promises in a fractional reserve pyramid is unworkable, it is also not a gold standard except in name. That is what happened in the 1920s. I also agree that a hard gold currency only cannot work today. What can , has and will work is expiring bills of exchange drawn against consumer goods and discounted freely in the market circulating as money BUT CLEARED FOR GOLD. This money is non inflationary and the supply ebbs and flows as the demand for consumer goods ebbs and flows. It arises in the market and no one entity has a monopoly on the creation of money. Tying the bills to gold gives the market the feedback on what price the bills are discounted for and prevents an explosion of unbacked credit, as we now have. Because the value of gold is the premier inflation indicator.

      Here is a short explanation of the bills.

      http://www.goldstandardinstitute.net/2010/06/what-is-a-real-bill/

      I fear that while the MMT people have the best intentions and rightly want to neuter the bankers, they are leading us from the frying pan into the fire and we will have a calamity with the clueless govt been able to write their own cheques. They can’t even be trusted on their own expenses.

      I would hope that MMT gives the time for a study of bills of exchange cleared for gold. They worked before in the 19th century they will work again. Govt issued money would be a disaster.

      • Gary March 17, 2012 at 9:46 pm #

        The thought of Osbourne, the wallpaper salesman, having the final say in the nation’s money supply fills me with dread. I do not trust the man or any of his accomplices. When is he going to publish the minutes of his secret Bilderberg meetings, since he is in our employ ?

        We don’t have a democracy. If you don’t like Osbourne you get Balls. MMT is asking us to trust these people ?

        • Gary March 17, 2012 at 10:22 pm #

          It is entirely possible that MMT is an elaborate ruse to appease the 99% by the bankers ostensibly giving up power to print money but instead transferring it to their cousins, the technocrats deeply ensconced in govt. They must be laughing at us.

          Just give the people the power and stop the nonsense.

          • allcoppedout March 19, 2012 at 6:38 pm #

            Cameron today gave a version of Harold Wilson’s ‘white heat of the technological revolution’ speech with no consideration of how to attract the hot money of the private sector without giving up huge rents to be paid by us, or stop the tax dodging that will mean capital flight from the cash cows. Osbourne is typical of the post-industrial silver-spoons more likely to do the naff MBA-style financial crap than actually sell anything from a productive business. He’s about as moral as Steve Jobs.
            MMT is OK as far as it goes in terms of reminding us the idea of a level playing field for free trade, but it does nothing on power and the need to control those allowed authority, whether to print money or otherwise.
            “Capitalism” still exploits in terms of going where wages and conditions can be forced back a century or so. I doubt we need much government these days to stop this and replace it with something better – largely because technology could do the regulating. We can’t grasp this because of ‘great leader ideology’. We have embodied all kinds of human skills, but shy away from the cooperative competition (which most sports are an example of in principle) we could now embody in technology.

      • Mike Hall March 18, 2012 at 12:25 pm #

        Gary writes..

        “A small govt can and will work. It worked in the 100 years prior to 1913. The most productive age in history….”

        Ah, Victorian Britain. Children down the mines & operating lethal machinery in cotton mills 80+ hrs/week. Low life expectancy, no healthcare, no education for the masses.

        Yes, indeed Gary, a Golden age…so long as you weren’t one of the majority of citizens.

        Which group do you see yourself in Gary, one of the elite (or their lackeys), or the exploited masses? (I think we know…)

        And..(in comment below)

        “…Just give the people the power ….”

        Well, yes, tho’ your Victorian golden age didn’t operate that way…

        You offer no means of people getting (collective) power. And, no, ‘free markets’, as in completely free of any rules have never & will never produce anything but power concentrated in the elite & wealthiest few. That is why such people always desire the smallest government possible. People like the Koch bros. in the US.

        • Gary March 18, 2012 at 1:04 pm #

          “Ah, Victorian Britain. Children down the mines & operating lethal machinery in cotton mills 80+ hrs/week. Low life expectancy, no healthcare, no education for the masses.”

          Technology solved these problems. Big Govt was not necessary.

          The Big Govt backers like to argue that there are no rules under a free market. They are wrong. What they really mean is there are no, or few, govt rules, but what they omit is that there is a strong foundation of common law rules made by precedent in the courts that governs over the interactions in the market. eg contract law and property rights.

          MMT is a smokescreen to entrench banker control via control of the govt. The treasuries in America and the UK are already stacked with unelectable banking alumni. Secretaries of the Treasury Geithener(NY FED) and before him Paulson(Goldman Sachs) both previously bankers. In Italy and Greece they make no pretense , they have installed bank technocrats as leaders of the govt. The bankers own govt. The govt regulators are bankers. The unelectable head of the FSA has just gone back into The City having previously worked for Credit Suisse First Boston (CFSB) and UBS. The revolving door just keeps revolving.

          Be very careful about MMT.

          • Gary March 18, 2012 at 1:31 pm #

            The future of mass education has nothing to do with Big Govt, the internet is already taking care of that eg. of the best out there for free with over 3,000 videos covering everything from school maths to arts , started by a genius (IMO) from MIT Salman Kahn with a gift for making the complex understandable :

            http://www.khanacademy.org/

            Here is a quick lesson on fractional reserve banking :

            http://www.cobdencentre.org/2010/09/khan-academy-fractional-reserve-banking/

          • steviefinn March 18, 2012 at 3:11 pm #

            Gary

            Thanks for the link.

          • Mike Hall March 18, 2012 at 6:13 pm #

            Gary

            If you think contract law & property rights offer any salvation to ordinary citizens, you should read the (zerohedge) link I gave lower down to see how far the big banks are able to subvert laws. There are many other examples.

            You also seem to contradict what you posted earlier blaming government & implying that if the markets & the big players were allowed to just do what they want then things would be fine & no crises occur.

            Now you are pointing (correctly) to the corruption of governments by the big players.

            So, whether you want ‘small’ or ‘big’ government, the reality is that either must be rid of corruption. The way to do that is by rules – not letting the ‘free market’ in politics continue.

            I haven’t the slightest concern about MMT, most especially because it is not prescriptive on the size or extent of government involvement in the economy.

            Whereas your ideology of ‘do what you want’ has proved to make democracy irrelevant thru’ the entirety of human history.

            It’s not ‘technology’ that has improved the lot of the masses but hard fought collective action.

            Also, during the last 3 decades of huge productivity gains thru’ computerisation, the share of returns to labour has been greatly eroded – the reverse of your assertion.

            I think readers here should not just be very careful of the ideology you are peddling but reject it outright as a continuation of the selfishness & greed of the present structure with even less democracy than exists now.

          • Synopticist March 19, 2012 at 4:20 am #

            “Ah, Victorian Britain. Children down the mines & operating lethal machinery in cotton mills 80+ hrs/week. Low life expectancy, no healthcare, no education for the masses.”

            Technology solved these problems. Big Govt was not necessary

            Technology stopped child labour? Technology gave us universal healthcare and education?

            Libertarians really are retarded. I’m sorry if people think i’m lowering the level of debate here, but they are. It’s an ideology of consequence free, tissue thin delusion, and i’d prefer it if people stopped being polite to them.

          • Gary March 20, 2012 at 10:58 am #

            Synopticist

            A corporation is a govt constructed Legal Fiction designed to circumvent common Law and to take the legal identity away from people. Without the govt there would be no corporation. Look it up.

            I am done arguing with a person who believes a free market will breed monopolies and a govt won’t. Incredible !

            This crisis was caused by govt NOT allowing banks to go bust a decade or more ago. . Don’t forget that. You and me are paying, our children will pay and so will their children. It beggers belief that you retain faith in these govt incompetents.

            You resort to playground name calling. I thought that you might. Typical in cradle-to-gravers.

        • Gary March 18, 2012 at 7:55 pm #

          You keep writing (eg. below) about where in a free market there is nothing but greed and “you can do what you like”. You omit FEAR. Fear in a free market , where no taxpayer is going to save you, is a more powerful emotion and it keeps in check any propensity to take insane , systemic risks. You overextend yourself , you personally get wiped out. There is no more powerful incentive. Companies who mistreat customer in a free market soon go out of business. You cannot just do as you like. Common law and juries of your peers passing judgement and sentences, prevent anyone from doing what they want. If you steal someones property you go to jail. If you break a contract you are punished.

          Govt is rotten to the core and it cannot be healed, best avoid it, and certainly keep money creation out of its paws. I would prefer laws made by my peers in civil court than the banker ridden “justice” of govt, including the govt Supreme Court. I would prefer money to arise out of the market where the business is done. It is far more easy for lobbyists to get to the govt , all huddled under one roof in Westminster, than it is for them to get to thousands of courts and millions of people doing billions of transactions throughout the land.

          The problem is the Big Govt adherents don’t trust the people. Govt knows best. It is a despicable arrogance that attracts the most base control freaks.

          • Synopticist March 19, 2012 at 4:27 am #

            “Companies who mistreat customer in a free market soon go out of business”
            Not if they are part of a cartel, or a massive monoply, which is the natural desire of any big company. Things that can only be prevented by government regulation.

            Your ideology is soooo f*cking stupid.

          • Gary March 19, 2012 at 10:31 am #

            Maybe it would be better if these people who want Osborne to control our money supply would let me answer them directly with a REPLY active button ?

            All I will say is, if you want this country to be an even bigger financial basket case than it already is via the BoE and King, give Osborne control of the money. And when he is finished wrecking the place , give it to Balls. Because those are your choices. (Don’t even mention Farage and Clegg).

            You may be interested in this news on The BoE :

            “Although Deputy Governor Charlie Bean has admitted that the Bank’s MPC entirely failed to predict the financial crisis, the Bank’s pension fund presciently sold its entire 21.6% holding of UK shares at the end of 2007, avoiding the calamitous losses suffered by everybody else’s pension funds the following year when the stock market collapsed….Throughout this period we were being told by the bigwigs at the Bank of England that the danger was not inflation but deflation. As blogger Guido Fawkes points out, given the programme of Quantitative Easing instituted by the Bank, this virtually amounts to insider trading. I’m not holding my breath waiting for the Financial Services Authority to mount an investigation.

            So, next time we hear Sir Mervyn King expressing sympathy for savers or telling us that inflation will soon be a thing of the past, bear in mind that his own pension pot, so well protected from the effects of inflation, was arbitrarily increased from £3.95m to £5.36m. And whenever Charlie Bean opens his mouth to insult savers, telling us to stop moaning and that we’re better off than we think, don’t forget that his own pension pot, a measly £1.44m in the year to February 2009, was increased to £1.97m the following year and then injected with yet another half a million pounds to bring it up to £2.52m by February 2011. And it is almost entirely invested in index-linked gilts.]”

            http://www.saveoursavers.co.uk/inflation/inflation-the-savings-killer/

            These people that you trust so much are robbing you blind. So blind that you cannot seem to see it.

          • Hawkeye March 19, 2012 at 2:11 pm #

            Gary

            One shouldn’t conflate the Big Gvt / Small Gvt debate, with a proper discussion about Good v Bad Government.

            The reason that many people are wary of demands to shrink / eliminate Gvt is because the role that a proper functioning democratic Gvt should play. To render all social and economic actions to market transactions could end up as a dangerous path in its own right. This is because non market-based solutions are required from time to time. For instance to deal with Externalities and Social policies, which if left to pure market forces may end up creating poor long term consequences.

            But this is not to say that everyone agrees that our current Gvt system is not corrupt or failing us. It is clear that the original aim of Gvt (to represent everyone’s interest, regardless of wealth or power, using non-market methods) is currently NOT working. This is not a failure of the principle of Gvt, but of the current practising Gvt (one that colludes with wealthy & corporate interests to increase wealth & power concentration).

            Surely Libertarians and other “Neo-dissenting” groups, can at least agree that our main enemy is excessive and un-representative power concentration?

          • Gary March 19, 2012 at 4:06 pm #

            Hawkeye March 19, 2012 at 2:11 pm #

            “Gary

            One shouldn’t conflate the Big Gvt / Small Gvt debate, with a proper discussion about Good v Bad Government.”

            I apologise for answering here. For some reason “REPLY” gets turned off on some posts.

            If you start from the premise , as I do and many others do, that govt can NEVER allocate resources economically, because it cannot replicate or meet the demands that millions of people doing billions of transactions wish to achieve. This has nothing to do with the size or virtue of the government , it has to do with this impossibility of Economic Calculation. This problem will never be solved until the nature of the socialized human brain is solved.

            Consider this. If there was a formula that existed that could do this efficient allocation, then
            a) it would be the most powerful piece of information in the world.
            b) it would be sought by every crook on the planet
            c) it would be copied
            d) the minute it worked people would be front running it and everyone would be gambling on its next move.
            e) from then on it would cease to be effective.

            I trust people. I trust that they know what is best for themselves. I don’t want to control anyone, and I don’t want anyone to control me. I will live within the common law as laid down by my fellow man in courts adjudicated by my fellow man, to protect my property and the contracts I make. The minute someone steps in and tries to force their will on others, the outcomes are completely unpredictable. The BoE , with all their so-called experts, have hardly got one decision correct in the past decade. They are clueless. The govt is just as clueless, this is how we arrived in this mess. If they were aware of the Problem of Economic Calculation , they would give it up and let the people control the allocation of resources in the free market.

            One other thing. Sustained Monopolies where there are divisions of labour(specializations) are always as a result of govt legislating to protect them. In a free market innovation and efficiencies destroy everything that went before, by definition. Monopolies cannot exist with that pressure. However, there are some industries that are obviously contentious and maybe natural monopolies, such as water, and other SINGLE SOURCE utilities.You cannot easily divide labour, spacialize and make a market for these , there is ever only one supplier , the local river. Maybe we need some kind of new mutualization just to run these. A form of co-op. This would not be very efficient, these are special cases, but it is the probably best that we could do.

          • Synopticist March 19, 2012 at 4:59 pm #

            Hawkeye…
            “Surely Libertarians and other “Neo-dissenting” groups, can at least agree that our main enemy is excessive and un-representative power concentration”

            Ultimatelly, libertarians believe that money should decide where the power lies. There really is no shared ground. Their solutions would be worse than the problems we already have.

          • Synopticist March 19, 2012 at 5:20 pm #

            Gary, every dog on the street knows that unregulated markets tend towards monopoly and cartelization. They control the channels and add barriers to entry. Adam Smith 101.

            And as for that preposterous nonsense about “the problem of Economic Calculation”, you seem to believe that unlike governments, markets are magically capable of solving it. They’re not. Markets aren’t rational, anymore than people are.

          • Hawkeye March 19, 2012 at 5:35 pm #

            Gary / Synopticist

            If I understand correctly, then both the Libertarian & the “Neo-dissenter’s” goal is to reduce power concentration.

            Both of you aspire to remove the centralised / hegemonic power base.

            On that I think you both agree.

            The difference of opinion between you, is that the Libertarians assert that Gvt is the demonic hegemony, whereas Synopticist (et al) argues that corporations (if unchecked) become hegemonic (hence the need for Gvt regulation / intervention).

            What we presently have, though, is a poisonous collusion between Big Gvt & Big Business, a.k.a. a Predator State:

            http://forensicstatistician.wordpress.com/2011/05/23/a-predator-state-the-worst-bits-of-capitalism-communism-and-feudalism/

            This diagnosis doesn’t fall into the trap of blaming one side whilst lauding the other, but explains that the collusion is the problem. In other words, the Poachers (business) and the Game Keepers (Gvt) are in cahoots.

            Therefore, I wonder if the mutual model that Gary mentions would suffice as a suitable compromise between market forces and stakeholder representation.

            James Galbraith’s book on the “Predator State”, holds up the Northern European / Scandinavian mixed economy as a good example of an effective model of compromise between Gvt & markets. A form of “Stakeholder Capitalism”, as it were:

            http://en.wikipedia.org/wiki/Social_threefolding#Cooperative_economic_life

          • Gary March 19, 2012 at 6:18 pm #

            Synopticist

            “And as for that preposterous nonsense about “the problem of Economic Calculation”, you seem to believe that unlike governments, markets are magically capable of solving it.”

            It is more subtle than that. The problem does not have a solution because you are trying to solve that which the actors in the market , the people themselves, are trying to solve each in their own way. The problem has a billion statements and a billion solutions. It everybody’s individual hopes and dreams and means and capabilities and determination. This is not an algorithm. It can never be. The people are the market and the market is the people. It is an existential problem.

            Monopolies

            A business can only become a monopoly long as it can exist selling stuff that people want and there are no other options. The minute something cheaper and better replaces it , the aspiring monopoly is gone. In a free market where there are many options and many innovations, by definition, it is not possible to have a monopoly. If there is a monopoly the free market has ceased to exist. The best example is banking. Banking as we know it would have been obliterated by the free market in at least 1998 if it were not for the govt legislating to keep it going. In 2008 the banks would have been gone if we did not pay £1.2 trillion for the pleasure of keeping them fat in bonuses.

            Hawkeye

            The collusion between govt and corporations is the definition of fascism, and that is what I would argue what we now have. The worst of both worlds. I don’t see how govt interfering in the market in any capacity is not some degree of fascism. It always is. The only other option that is not fascism is when the govt owns nothing (free market) or everything(communism). I don’t like any degree of fascism.

          • Hawkeye March 19, 2012 at 6:44 pm #

            Gary

            Your discription of Fascism is along the lines of the Predator State, and therefore we share the same diagnosis.

            However, by choosing your description, the implication is that the State encroached into business, and therefore this was the source of the original sin. Galbraith paints a picture which is more balanced, suggesting that Business is as guilty, by interferring with Gvt (e.g. the revolving door, corporate lobbying etc.).

            A subtle difference, no doubt. But one which could still be exploited by those wishing to distract from the main conclusion; which is the corrupt collusion.

            Irrespective of how we got here, I presume that you agree with the Steiner Social Threefolding model (referenced above) which asserts that the State and Economy should be separated?

            And therefore, is the mutual model not a suitable step towards resolving this?

          • Gary March 19, 2012 at 7:03 pm #

            Hawkeye

            The mutual model MAY only be good where there is no natural market ie where there are no choices. If you apply the mutual model to areas where there is natural choice you will stifle innovation. Innovation is driven by the desire of the individual to succeed and this is best suited to a free market.

            BTW innovation includes sparing resources, because the less resources consumed the cheaper it is to innovate and build. eg. an aircraft turbine that burns lots of fuel is of no use to competitive air carriers, so engines are dramatically more efficient and cleaner. Everything must be as lean, durable and as effective as possible to gain a place in the market. Efficiency IS resource sparing. The old eastern europe was a polluted sump compared to their neighbours in the west.

          • Synopticist March 19, 2012 at 10:48 pm #

            “The people are the market and the market is the people. It is an existential problem. ”

            The PEOPLE are the MARKET ???? Corporations are people too, my friend. Retarded.

            “A business can only become a monopoly long as it can exist selling stuff that people want and there are no other options. The minute something cheaper and better replaces it “,

            This is the point about monoplies, they can prevent competitors entering the market, or if seriously challenged, accept them into a cartel or buy them out.Thats how unregulated markets work.

            The system you seem to want has close simillarities with the US in the late 19th century. A weak central govt, widelly devolved political power, and almost non-existent regulation.

            It was a wild, rapacious capitalist free for all, with huge booms and busts, massive income disparities, swindles, robber barons, tycoon dynasties, range wars, corrupt judges, and the worst depression in economic history. It was no place to be a little guy.

          • Pat March 20, 2012 at 6:53 am #

            Gary

            Like you, and doubtless everyone here, I deplore the working of the predator state. I am also naturally inclined to a non-authoritarian political view. However, I cannot help thinking that your prescription for less government regulation as a cure for our ills is incoherent.

            In your picture, the ‘market’ seems to be the ultimate arbiter of what is right and wrong. But surely this is to elevate freedom of economic action into a higher place in the scale of human values than it deserves. For the profit motive is very often a corrupting influence on human affairs, which frequently undermines or overrides ethical considerations such as the desire for fairness and universal rights.

            Viewing people primarily as economic, rather than moral, agents is a large part of our problem. That this view seems to pass unchallenged in most current debate is itself evidence of the degraded value systems that prevail in modern society. Wealth is seen as an end in itself, usurping the place of intrinsic values such as wisdom, justice, love, compassion. Whereas, in fact, the really important things are usually beyond price. How do you put a monetary value on preserving our natural environment, for example? (Schumacher’s ‘Small is Beautiful’ is well worth reading in this connection.)

            In addition, I do not see how you square your belief in an untrammelled free market with your belief in the operation of laws. This strikes me as doublethink. For how are laws to be upheld without any impartial guarantor of universal justice? Who is to hold the judges to account and how are laws to be formulated except by some form of government? If the free exercise of wealth is the arbiter of justice, then what is to prevent justice from becoming ‘the will of the stronger man’ (the position of Thrasymachus in Book 1 of Plato’s Republic)?

            Surely market forces need to be subject to some higher or external notion of justice, and, if so, this justice must be maintained by the concerted action of the aggregate population of a society, through some method of organisation. And what is this, except a form of government, even if only (preferably?) at a local level. Your notion that there is no more powerful incentive than fear strikes me as abhorrent and not true in any society that I would wish to live in.

          • Gary March 20, 2012 at 1:01 pm #

            Pat March 20, 2012 at 6:53 am #

            “In your picture, the ‘market’ seems to be the ultimate arbiter of what is right and wrong. But surely this is to elevate freedom of economic action into a higher place in the scale of human values than it deserves.”

            The common law set by precedent in thousands of courts adjudicated by juries of our fellow man, is the ultimate arbiter of what is wrong or right.

  4. allcoppedout March 15, 2012 at 9:41 pm #

    When I taught bankers years ago they would often comment that balance sheet, profit and loss and cash flow were OK systems but they had to be tested by visits to the ‘goods’ and checks on whether valuations were honest. Banks had loads of pretty sharp people who knew what might lie in accounts. This creates a problem for what David is saying – though I believe both this and what he says. These sharp people must have been sidelined, as they were once capable of reaching the same analysis we do. Indeed we know they do if you think about some of the whistleblowers (as in Enron).
    On a smaller scale, the transfer pricing involved in a university taking research money offers a model – we bill the project funder at the full price for lab equipment, computers and so on, and central accounts get a discount at year end of 40%. We could, in fact, shop around and get the stuff for half what we bill. We even get double funders, and bill out the same work to both. This is without offshore, unregulated chicanery. Outcomes are expressed in job numbers created by spreadsheets working to model, with no count in any real market. Independent evaluators want the next job and so never go looking. The corruption is fractal.

  5. sheepshagger March 15, 2012 at 9:59 pm #

    So all the banks are passing money back and forth in order to make the balance
    sheet look good and give the (false) impression, that the ratio of assets to liabilities
    comes within the acceptable norms ?

    In the meantime bonuses and commissions are being taken out of the system thus
    adding to the inherent instability of the house of cards.

    Surely it must have been the best kept open secret in the world of finance?

    A bit like the elephant in the room.

    A conspiracy of silence.

    Correct me if I’m wrong.

    • Synopticist March 16, 2012 at 6:05 pm #

      You’re only wrong in that there’s no conspiracy of silence any longer (If there ever was).

      Well informed people know whats going on, but the institutions involved are too politically powerful to be prevented from doing it.

  6. backwardsevolution March 15, 2012 at 10:22 pm #

    David – another excellent report. Well done! I think in metaphors, and your use of them paints a really good picture in my mind. Thank you. The best mystery novel in the world couldn’t get more interesting than this.

    Hate to keep citing Charles Hugh Smith’s work, but he complements what you have to say very well. His piece today is, “We Have No Other Choice,” meaning the Fed feels it has no other choice.

    “Let’s be honest, shall we? There never was any fire for real reform of the financial sector. It was all rote, a foul, stupid play-act, a passionless pantomime of “caring” and fake-“progressiveness” displayed for propaganda purposes. […]

    Claiming that “saving the financial sector was necessary to save the economy” is akin to claiming that saving the massive tapeworm coiled inside the patient is necessary to save the patient: the logic is backward. The financial sector (tapeworm) is the cause of the economy’s (the patient) weakness and collapse.

    Ben is no genius nor is he a hero. He is simply doing what he has to because he has no other choice. What would happen if Ben didn’t funnel hundreds of billions of dollars into the financial tapeworm? It would die, and the “too big to fail” banks–for all intents and purposes, the Fed’s partners, and the generous funders of political toadies–would cease to exist. Extremely wealthy and powerful people– the top 1/100 of the top 1%–would lose great wealth and the power it buys.

    In a system that has become dependent on crony-capitalism and fraud for its very survival, then that is obviously not even a choice.”

    He compares the 2,319-page Dodd-Frank Wall Street Reform and Consumer Protection Act (which requires regulators to create 243 rules, conduct 67 studies, and issue 22 periodic reports) to the 37-page Glass Steagall Act (which had for about 70 years provided a good separation between commercial and investment banking). 2,319 pages versus 37? This is just a cover for more fraud; make it really, really complicated, and no one sees what’s happening.

    http://www.oftwominds.com/blogmar12/no-choice3-12.html

    *****In his post yesterday, he says: “What do you expect they will do going forward? There is no moral hazard as far as they are concerned. It’s all good for them. Therefore, they will exercise no restraint. They will accept no self-imposed limit to their asymmetric destruction of broader functioning capitalism because greater destruction maximizes private profit. If anything they will accelerate their demolition to get the greatest competitive share of what’s left.”

    http://www.oftwominds.com/blogmar12/money-from-nothing-pt2-3-12.html

    We are trying to call “time-out” and the banks are crying “play ball”. If they are not stopped, they are gong to ruin the world, maybe not in my lifetime, but in my children’s.

    • foucalt Tudoux Wimay March 16, 2012 at 11:58 am #

      In USA, they will let anyone patent anything they want, and let the lawyers fight it out afterwards, over who has seniority. Designers and engineers in big outfits like Apple, IBM, HP, play games about who can come up with the most unpatentable idea, and get a patent on it. I think the light switch (on-off) concept is the current winner.
      Dodd-Frank is just the same; the lobbyists pumped in hundreds of pages of conflicting regulations, and are happy to see years of chaos and un-enforceable legislation.
      On purpose.

      ‘Tapeworm’ -good call

  7. backwardsevolution March 15, 2012 at 10:39 pm #

    A letter from a J.P. Morgan employee (whistleblower).

    http://market-ticker.org/akcs-www?post=203423

    Yesterday, it was a Goldman Sachs executive director quitting in disgust.

    http://globaleconomicanalysis.blogspot.com/2012/03/executive-director-of-goldman-sachs.html

  8. Frank DeFelice, Ph.D. March 15, 2012 at 11:34 pm #

    Think you all need to read the definitive explanation of the financial fiasco by a world-class Financial Economist in WHAT ALL AMERICANS NEED TO KNOW ABOUT ECONOMICS
    ( Amazon 9.99/download).
    David is not an economist; just a writer and story-teller like the WSJ folks.

    • Mike Hall March 16, 2012 at 2:00 am #

      Looks like you’re in the business of self-promotion & promoting your own book.

      But there isn’t a single article or paper to be found seemingly anywhere on the internet, written by you.

      Basically, you’re a spammer Frank, so feck off.

      • Synopticist March 16, 2012 at 6:09 pm #

        OOH, a real spammer, here, on Golem!!

        How exciting.!!! cant wait to read his book.

      • Pat March 16, 2012 at 10:45 pm #

        Mike, your comment to John McHale’s piece in the Irish Times today was spot on. (I wish I could figure out how to post comments there myself, but their system continues to defeat me.)

        • Mike Hall March 16, 2012 at 11:35 pm #

          Thanks Pat 😉

          Last I looked it was ‘..awaiting moderation…’, so good to hear it eventually got published!

          The Irish economists are shocking in their deference to Euro authorities, regardless of how many Irish people are suffering from their collective intellectual bankruptcy.

      • CEDRIC WARD March 17, 2012 at 6:52 am #

        And what the hell have you written and published?

        Who is the creative one and who is the spammer?

        Maybe YOU are the one that should ‘feck off” !

    • steviefinn March 16, 2012 at 2:13 am #

      Thanks for making me laugh with your modest description of yourself & that delightful metaphor you used on your blog, the one that likens the state of the US economy to your Uncle Dick pooping in his bed. I think I will pass, besides I am not an American.

      http://open.salon.com/blog/corte33/2010/06/04/brother_can_you_spare_a_dime

      • foucalt Tudoux Wimay March 16, 2012 at 12:00 pm #

        … but he’s got a PhD!

        • CEDRIC WARD March 17, 2012 at 6:54 am #

          Do you?

          Or are you just a high school drop out?

          It’s easy to troll and criticize on the internet.

          Much more difficult to create and publish.

          • theprofromdover March 18, 2012 at 3:45 pm #

            (PhD? .. do you have one? –Cedric)
            Well, I’ve got 15 letters after my name if you must know. That doesn’t prove me smart or anything, so I don’t bang my drum. I just thought our PhD friend was self-publicising.
            I’m happy to be a jack of all trades and master of two (if I ignore some shortcomings);
            Also I generally don’t comment negatively, I am pleased to see all sorts throwing in their tuppence-worth and especially their anecdotal stuff.

            (Sorry, I got two names -one Foucalt)

            So, kisses on the bottom to you
            And don’t forget your anger-management class next week (or maybe it is just pause/reflect modules, to give you the benefit of the doubt)

          • steviefinn March 18, 2012 at 5:01 pm #

            Frederick Mishkin
            R. Glenn Hubbard
            Larry Summers
            Martin Feldstein
            Laura Tyson
            Milton Friedman
            Alan Greenspan.

            All PhD’s……………………………Nuff said, as Pat would say.

    • Troy Prideaux March 16, 2012 at 6:32 am #

      ahhh… you’ve never heard the saying that economists were invented to give astrologists credibility?
      Seriously, I have time for some of them, but too many have – and have repetitiously – proven to be wrong; in fact, they’ve made a career of being nowhere near the mark.

    • John Souter March 16, 2012 at 9:59 am #

      Just a writer and story teller! – well I would rather a Hemingway than an alchemist charging and making a fortune from potions that haven’t the integrity of snake oil.

      Here’s what I think Frank – If you have to write a book to prove something is as stupid and flawed as this is, you have questionable ability to reason. If you think the answer to this idiocy is more ‘economics’ the question on your reasoning ability is confirmed as chronic failure. If the context of the title is genuinely believed, then disregard the critique as to reasoning and accept my apology; you have already suffered a lobotomy.

  9. patma2003 March 16, 2012 at 2:23 am #

    This propaganda wars series is turning into a real saga. Epic stuff.

  10. Dave March 16, 2012 at 2:55 am #

    Pssssssssst GOLEM

    PNB Paribas doesn’t exist,

    It’s ” BNP” .

    frog2

    • Golem XIV March 16, 2012 at 9:12 am #

      Ooops! Fixed now. Thank you as always.

    • Gordon Donald March 16, 2012 at 12:27 pm #

      Reminds me of the story I heard about how French bankers working in the City of London found it very hard to book tables in the asian restaurants in Brick Lane. Whenever they said they wanted a table for BNP the phone would be put down…

  11. backwardsevolution March 16, 2012 at 3:43 am #

    Great investigative journalism from the Village Voice in New York. It’s from October of 2009, but it’s a great read. He covers all of the players. After reading this, it’s completely understandable how this all happened!

    “Greenspan- banks couldn’t get too big for him,” Fine says ruefully. He recalls a 2004 battle in which the Fed wanted to remove all capital reserve requirements from the big banks. Fortunately, the FDIC won that scrum. Otherwise, the megabanks’ behavior could have been even riskier and more devastating than what occurred.”

    AND:

    “More importantly, the nation’s new top prosecutor, Attorney General Eric Holder, has a history of preferring that deviant corporations be held to no more than a “voluntary cooperation” system in which they investigate themselves privately. Under the “Holder Memo,” which he wrote in 1999 as deputy AG in the Clinton administration, badboy executives and their corporations who turn over evidence to the government qualify for lenient sentences and fines and, sometimes, for settlements without even indictments. The consequences of their crimes often amount to only the cost of doing business.
    After leaving government, Holder followed the mandates of his own memo and made a lucrative living by conducting internal probes for companies and negotiating outstanding results for white-collar clients. He was public about it: Holder’s 2002 op-ed “Don’t Indict WorldCom” in The Wall Street Journal argued on behalf of the corporate perpetrator of one of the sleaziest frauds of the past decade.”

    AND:

    “The key statute that Treasury flouted under Paulson and Geithner is the Prompt Corrective Action (PCA) law. Congress passed it in the wake of the S&L scandal in 1991, and the first President Bush signed it. It’s probably the best, fairest, and clearest piece of financial legislation since the New Deal. Under the law, Federal Deposit Insurance Corporation (FDIC) examiners initially rate banks as “Well Capitalized,” “Adequately Capitalized,” “Undercapitalized,” “Significantly Undercapitalized,” and “Critically Undercapitalized.” The tags determine the examiners’ actions, if any. Undercapitalized
    banks must build up their capital and get FDIC approval for acquisitions and opening new business lines. When a bank becomes significantly undercapitalized, a regulator can order serious sanctions, ranging from firing management to restricting stock sales and forcing divestitures. Critically undercapitalized banks must be placed in receivership, unless the FDIC determines that some other action like a merger or sale would better protect the depositors. That’s it in a nutshell obviously, there was a whole lot more that regulators were allowed to do, like forcing a change in accounting systems and blocking bonuses. Bottom line: The PCA worked like a charm.”

    http://www.villagevoice.com/content/printVersion/1451059/

  12. Charles Wheeler March 16, 2012 at 1:06 pm #

    Interesting take on the monopolization of ‘free markets’:

    “Because of the overthrow of our antimonopoly laws a generation ago, we instead find ourselves subject to the ever more autocratic whims of the individuals who run our giant business corporations.

    The equation is simple. In sector after sector of our political economy, there are still many sellers: many of us. But every day, there are fewer buyers: fewer of them. Hence, they enjoy more and more liberty to dictate terms—or simply to dictate.

    Over the past four years of financial collapse, many of us have come to view markets as a fantastical scam: a giant mechanism geared to transfer our hard-earned dollars into the hands of a few select bankers. And when it comes to the Wall Street markets we rely on to trade our equities and debt and commodities, this sentiment is not all wrong.

    But as every previous generation of Americans understood, a truly open market is one of our fundamental democratic institutions. We construct such markets to achieve some of our most basic rights: to deal with whom we choose, to work with whom we choose, to govern our communities and nation as we (along with our neighbors) choose.

    And so, as every previous generation of Americans also understood, monopolization of our public markets is first and foremost a political crisis, amounting to nothing less than the reestablishment of private government. What is at stake is the survival of our democratic republic.

    And so our new masters administer us in America today. They use their great nation-spanning and world-spanning corporations to isolate us as individuals, and then to pit us against our neighbors. They capture and hide away the information that until recently spilled from our open markets. And so they shatter our ability to speak coherently to one another from a base of common experience, to process even the most rudimentary of economic and political facts.

    To step outside the open market is to step outside the rule of law and to come under the rule of whim. To step outside the open market is to step outside the rule of reason and to enter a realm of nonsense. We have a choice in America today. We must learn how to make real markets once again—or bend our knees, perhaps forever.
    Barry C. Lynn: http://goo.gl/R0OXk

  13. steviefinn March 16, 2012 at 7:08 pm #

    Ferocious attack on the horror of bank of America from Matt Taibbi, outlining the ” who has the biggest dick in the room ” mentality.

    http://www.rollingstone.com/politics/news/bank-of-america-too-crooked-to-fail-20120314

    • richgb March 16, 2012 at 11:37 pm #

      Truly ferocious! This guy makes Max Keiser look like a fricking pussy.

      This excerpt is worth repeating:

      “The concept of an overmassive, acquiring-everything-in-sight, bicoastal megabank was hatched in the terminal inferiority complex of a greed-sick asshole – actually two greed-sick assholes, both of them CEOs of Southern regional banks, who launched a cartoonish arms race of bank acquisitions that would ultimately turn the American business world upside down.”

      .

    • Synopticist March 17, 2012 at 10:57 pm #

      Matt Taibibi is one of the very few journalists who tells it how it is.
      There’s no UK equivelent.

      • richgb March 18, 2012 at 1:59 am #

        Truly! And the reverberations of this article are echoing down the corridors of RT.

  14. Charles Wheeler March 16, 2012 at 8:19 pm #

    Corrective to the Tories’ ‘profligate government’ myth:

    http://goo.gl/OaYhf

  15. Drunken Master March 16, 2012 at 10:06 pm #

    Oh, to be a ( Too Big To Fail) bank. Virtually unlimited supplies of free money, a captured and craven political class, an entire army of well paid, connected lobbyists to do the dirty work for you and ensure any regulation remains ‘light touch’ and large bonuses you think earned because you invented another clever financial ‘product’ that no-one really understands. I think the most galling aspect of the last four years or so is that little or no effort has been taken to prosecute the rampant fraud that led to the sub prime bubble/collapse and the total lack of regulation and wholesale reform of the financial sector. They got, what, $29 trillion or so ( and that was just what the Fed lent out ) and were allowed to continue the party whilst we get left with the bill. How fair is that? I think it’s going to take a revolution to get things set straight, i don’t see how else this plays out. People are going to get mighty pissed off when they finally wake up…

  16. Jim M. March 16, 2012 at 11:30 pm #

    Excellent series, Golem!

    I know that the plight of Greece has long concerned regular readers here, and here is a sorry reminder that, even as the Troika fiddle, for some the fires are already burning.

    http://www.guardian.co.uk/world/blog/2012/mar/15/greece-breadline-hiv-malaria

    The piece ends on a hopeful note:

    “She sees a refreshing new phenomenon of self-organisation and social action. In the past year of this crisis I have seen really encouraging, really exciting things happening – people are seeing the power of organising themselves. We have to support them.”

    and this optimism is echoed with a caution attached by the plump one:

    “Here is just one example of why Greece is still a great place and why you should go there and spend your money, despite all the negativity in the press. But it is also a reminder that, whilst the financial markets are settling into the warm glow of complacency with the conclusion of the latest deal, the crisis is far from over and that none of the major economic contradictions have been addressed. Even though EU leaders think that they have successfully quarantined Greece (a policy that is the antithesis of solidarity), Portugal, Italy, Spain and Ireland are waiting in the shadows and even the Netherlands can’t meet the terms of the extraordinarily restrictive fiscal rules that they so assiduously helped to impose. There is no resolution, events are merely pausing for breath.”

    http://fatmanonakeyboard.blogspot.com/2012/03/anarchy.html

    I believe major political/financial change is now inevitable; if left alone, it will come when a sufficiently large number suffer a sufficiently severe degradation in their living standards. It will come, and it will be ugly and the outcome is uncertain.

    But the cost of maintaining the status quo is going up every day, and if we do not change the rules of the game it will continue to rise as long as we have other peoples lives to throw on the fire.

    That is not a game I am willing to play any part in.

  17. Mike Hall March 16, 2012 at 11:53 pm #

    Great piece at Zero Hedge written by Congressional Budget Office (CBO) staff economist whistleblower Ms Lan T. Pham.

    Essentially explaining being ordered by (named) superiors (from Harvard – why am I not surprised…) to bury away from Congessional eyes the likelyhood that legal title at MERS (Mortgage Electronic Registration Service) cannot be established in most of the mortgages in $7 trillion of mortgage backed securities (MBS) & hence foreclosures cannot proceed without lengthy court scrutiny (think ~50yrs).

    Whilst our attention has been drawn to the slow motion train wreck of the Eurozone, the next mega crisis may yet appear in the US.

    http://www.zerohedge.com/news/terminated-cbo-whistleblower-shares-her-full-story-zero-hedge-exposes-deep-conflicts-impartial-

    • Synopticist March 17, 2012 at 11:28 pm #

      “In January 2011, the Massachusetts Supreme Judicial Court reversed the foreclosure actions of two banks for lacking proof of clear title, followed by a decision in October 2011 that a buyer who purchased a house that was improperly foreclosed upon does not make the buyer the new owner of the house; the sale does not transfer the property.”

      Wow. Clouded title to all foreclosed house sales. So, arguably, if you bought a house that has been foreclosed upon, you may not actually own the property. In a country as lawyer infested as America that spells trouble.

      You can imagine a new form of vulture capatalist/lawyer, who goes around buying the ownership rights of houses from the previous foreclosed mortgagee for a few pennies, and then takes the new “owner” to court and confiscates his house.

  18. cynicalHighlander March 17, 2012 at 1:29 pm #

    SHERIFF ACCOMPANIED BY GARDAI VIOLATE CONSTITUTION AT ‘FORCED ENTRY’ ENTRY

    Constitution in video – http://www.constitution.ie/publications/­irish-text.pdf
    Ben Gilroy outlines the sections of the Irish Constitution which were violated this week, when The Sheriff, assisted by Gardai, used ‘forced entry’ to evict a family in Co.Laoise. This same eviction had previously been halted by the Freedom From All Debt group (Now called: People For Economic Justice) along with other anti-eviction campaigners, when they peacefully challenged its constitutional validity. The campaigners continue to question such significant use of precious Gardai resources the assist the banks purse a commercial (not criminal) dispute

  19. patma2003 March 17, 2012 at 11:51 pm #

    Some of the Irish and Euro crew might take an interest in this piece from ABC’s tax payer funded and long running 4Corners investigative program – an Australian perspective.

    Dicing With Debt.

    http://www.abc.net.au/4corners/stories/2012/03/08/3448633.htm

    Leading up to the global financial crisis, the entrepreneurs of Ireland were having a field day. Money was being borrowed, investment projects approved and the economy was booming. Now Marian Wilkinson tells the story of the crash, the Government bailout of the Irish banks and the brutal austerity regime the Government agreed to that’s taken a harsh toll on the Irish people. With Europe heading towards recession, some in Ireland say it should demand a renegotiation of its bailout terms, a move with the potential to create another financial panic.

    “Basically this is extortion and that’s what it is. It’s extortion. It’s the bullyboys of Europe, you know, the European Central Bank, the financial bullyboys of Europe forcing us to pay a debt that was never ours…”

    The program hears from the failed entrepreneurs about the gamble they took that shattered Ireland’s economy. We see evidence of the investments that failed, visiting massive “ghost estates” where row upon row of houses stand empty, awaiting their fate beneath the blade of a bulldozer.

    Crucially, Four Corners details the nature of the deal that was agreed by the Irish Government to take on private sector bank debt, and the furious negotiations that resulted in the Government being liable for the 30 billion euros the failed banks owed their private bondholders. It is that deal that is now coming under scrutiny. Was it fair that Ireland agreed to pay all failed bank bondholders, while holders of Greek Government debt are being asked to take losses to protect the rest of Europe? Many experts now agree Ireland will struggle to repay its debts, and the terms must be renegotiated.

    If that happens it’s possible the reaction will set markets staggering again, in a shockwave that will be felt beyond Europe.

  20. John Souter March 18, 2012 at 4:07 pm #

    The Arrogance of Idiocy.

    Nature created this earth and every form of life that’s ever been on it. And, while we may be capable of exploiting the elements of nature we are a long way off, if ever, of being able to claim dominion over them. Nature is by its nature a dictator. Perhaps generally benign, avuncular, acquiescent it never the less has no care whether we as a species choose to continue to thrive on its planet or be wiped out by nature itself or by self destruction.

    This is the irrevocable ‘given’ without which the gestation of ‘The People Business’ would never have been seen nor formed and must be the primary factor on which the scales of values and solvency of The People Business is measured.

    The role of Nature accepted, we then have to ask; whether in the affairs of humanity, any concept, system, practice or ideology which doesn’t improve the wellbeing, contentment, security and advancement of the majority of the species and its survival, has any claim to legitimacy or continuance by establishment or custom?

    So where, in scales of one to ten, would the present paradigms of economics, politics and financial alchemy meet, let alone support, the above criteria?

  21. James March 18, 2012 at 5:19 pm #

    The banks aren’t stupid. They knew the risks,
    and knew that whether the system crashed, (they knew it was going to) or didn’t they would benefit either way. This was just a scam. They will wait and repeat it again if we allow them to get away with it.

    • Hawkeye March 19, 2012 at 2:22 pm #

      James

      It seems that a Nobel Economist agrees with your premise:

      http://en.wikipedia.org/wiki/George_Akerlof#Looting

      In 1993, George Akerlof wrote about “Looting: the economic underworld of bankruptcy for profit”.

      What should have been taken as a severe warning to regulators and policy makers, merely became a “How To…” manual for increasing the prevalence of White Collar Looting.

      The collapse of the Icelandic banking system typified this “Looting” model. The City of London & Wall St are doing just the same, but on a much bigger scale. But with much bigger weapons (fiscal & military).

      • Charles Wheeler March 19, 2012 at 9:09 pm #

        As Robert Sherrill wrote in 1990 after the S&L crash which served as a dress rehearsal to the current debacle:

        “If anyone still had faith in the system, the savings and loan adventure surely must have brought him to his senses and to his knees. The gambling debt of $500 billion ($150 billion plus interest and other incidentals)–or will it be, as some economists predict, a trillion four?–that the S&L industry left with the taxpayers has prompted even that deadpan Tory, George Will, to remark in wonderment, “We seem to have a capitalism here in which profits are private and we socialize the losses. Why are we, in effect–if you’re big enough, if you’re a huge bank or a savings and loan–why, in effect, are we guaranteeing everything? … What I’m asking is isn’t there a way to reform the system so that the taxpayers don’t get stuck with what happens when you have deregulation and risk taking that goes wrong?”

        The answer to his question is: No, there is no way to reform the present system, because the system is owned and controlled by those who are ruining it. Voters, ordinary taxpayers, have nothing to say about it.

        Martin Mayer, a conservative economic historian, has seen his world crumble and become meaningless. The capitalism he set his watch by has stopped ticking. He finds the thrift mess almost unbelievable: “Players entered the game through a government charter and continued to play, however severe their losses, in violation of all capitalist principle–courtesy of a government that continued to insure their borrowings. This was not an accident: it was public policy.”

        When he talks about “players,” he makes it sound like customers at a casino. And that in fact is what it has become. Capitalism has become the Big Casino, with players guaranteed against loss, because in effect they have bought the house managers. That is public policy.

        Mayer predicts plaintively that “future sociologists…will study the irruption of criminality into what had been conservative, even beneficent, organizations….They will seek to learn why the fiduciary ties that had set the unspoken, self-dignifying rules of a competitive society had been so grievously weakened in the late years of the twentieth century.”

        But in fact, this has never been a competitive society, neither in the mythical “capitalist” commercial world nor in the even more mythical “democratic” world of politics. Big-big uncontrolled money has ruled both through special privileges, and the S&L disaster simply illustrates again what Mayer calls “the corruption that must ultimately infect any government where the costs of running for office are greater than those that can or will be borne by the relatively small community of the public-spirited.”

        Nevertheless, though it is obvious that the tottering commercial banking world needs tighter regulations than ever, the industry and the Administration push on pell-mell for deregulation. In fact, the dismal condition of the industry is being used by the deregulating claque as their strongest, and weirdest, argument. Just as St. Germain, Garn, Pratt and Wall argued that the best way to help zombie thrifts recover was to remove all regulations so that they could “grow out” of their problems, now Bush, Fed chair Greenspan, Treasury Secretary Nicholas Brady, Seidman and others demand that the government dismantle what Seidman calls the “archaic laws” that for many years have controlled commercial banking. They, too, want to “grow out” of their perilous condition. What these laws do is protect the banking industry from its worst instincts by insisting that banks remain banks, and not become gamblers, hucksters and hustlers in other lines as well.

        The deregulators will probably make their big power-play next spring, when, under mandate from Congress, the Treasury Department must come up with its “reform” plans for the banks. You can expect the other side to try to sell some blind horses to us, like offering to swap a lower ceiling on deposit insurance for wholesale abandonment of regulations–as if the rotters wouldn’t be just as happy engaging in risky activity under a lower ceiling as they have been gambling under the present one. If there is a double agent to be on guard against, it will be Donald Riegle, chair of the Senate Banking Committee. He and the moneylenders are–could any old saw be more apt?–thick as thieves. Riegle is recorded as receiving $200,900 from S&L officials and PACs between January 1981 and May 1990–second only to California’s Senator Pete Wilson ($243,334). Now that S&L money is seen to be tainted, Riegle has scrambled to redeem his reputation by returning $120,000 of it. But the commercial banks have stuffed his pockets too, and there is no record of his having returned any of that money.

        Recently Greenspan–that trustworthy fellow who guaranteed the morality of Keating and was one of the chief boosters of junk-bond purchases by S&Ls–guided his Fed colleagues into a disastrous decision. They ruled that J.P. Morgan (Morgan Guaranty Trust) could trade and sell corporate stocks. With this cloven hoof in the door, other banks will follow, and that will be the death of the Glass-Steagall Act, which Congress passed in 1933 to separate commercial banks from investment banks and thereby control some of the outlawry that had caused thousands of banks to fail. Next they will probably be targeting the Bank Holding Act of 1956, which was intended to keep banking out of commerce, and the McFadden Act, which limits interstate banking.

        What Greenspan, Seidman and their gang say to critics is, Oh, we want banks to be banks, too, but we want them to be universal banks. Which can be translated to mean uncontrolled banks, banks completely unfettered by regulations that restrict their operations–in short, pretty much a return to the reckless and lawless 1920s and early 1930s, which, if measured by the drama and excitement of collapsing financial structures, had it all over the 1980s.

        Brumbaugh, for one, is dumbfounded by what he’s seeing. “The administration and Congress just don’t want to acknowledge the problem,” he says with a sigh. “This is déjà vu all over again. You can’t believe it’s happening, but there it is.”

        Robert Sherrill, The Nation Nov 19, 1990
        —————————————————————-

        The neoliberals’ BIG LIE was that nobody could’ve foreseen that the housing credit bubble would have to burst, or that the explosion of exotic derivatives could destabilise the economy by multiplying rather than diluting risk. Just stick to the story that counter-party risk was all that was required and the miscreants can plead ignorance.

        But it’s NOT TRUE. Plenty of people could foresee the obvious dangers – Brooksley Born and Byron Dorgan being two of the more prominent. The neolberal argument that debt is irrelevant to the working of the economy because creditors and debtors cancel themselves out – the ‘patient’ financing the ‘impatient’ is absurd – and you don’t need the intellect of Steve Keen or Bill Mitchell to understand that.

        Thomas Frank writes brilliantly about the upside-down world of finance, where those that were wrong are lauded, while those that were right continue to be ignored in his essay: ‘Too Smart to Fail’. ‘What if the experts are wrong?’:

        http://goo.gl/QVCuS

        • Hawkeye March 20, 2012 at 11:31 am #

          Charles

          It wasn’t even the case that Brooksley Born could / did foresee problems with derivatives.

          She was ousted for merely proposing that evaluations / discussions take place. She was on the cusp of launching a “concept release” to garner comments on whether to / ways of regulating derivatives.

          She didn’t automatically start with the presumption that these things were toxic, she just wanted them to be assessed / overseen.

          A bit like a drug / medicine regulator wanting to conduct clinical trials before unleashing the products, but being told that there is NEVER any need to test or evaluate new drugs.

          For even proposing open (rational!) evaluation, she was (irrationally!) crushed.

          • Charles Wheeler March 20, 2012 at 4:07 pm #

            That’s true – though she was rattled by the collapse of LTCM, which she saw a warning to be heeded.

    • Synopticist March 19, 2012 at 5:26 pm #

      I’m not too sure they DID know. They worshipped at the alter of the rational market theory, and so they firmly believed that what they were doing was right, otherwise why would everyone else be doing it?

      “They will wait and repeat it again if we allow them to get away with it.”. On this we are in total agreement.

      • Hawkeye March 19, 2012 at 6:26 pm #

        Synopticist

        Watching “Inside Job” or Frontline’s “The Warning”, one gets the impression that certain people didn’t want any discussion or debate about the merits or consequences of their pro-market agenda.

        Why are critics completely ostracised or silenced?

        The relentless pursuit of “Rational Market Theories”, appears highly irrational to me.

      • Charles Wheeler March 19, 2012 at 9:46 pm #

        Truth is, when regulations are removed banks HAVE to compete within those conditions (we’ll leave aside all the rule-breaking) or die – if your competitors are leveraging 20:1 and making big profits, you have to leverage 20:1 or 25:1 or risk losing market share, a lower share price, takeover, or ‘gardening leave’.

        Chuck Prince of Citi, famous for saying: ‘As long as the music is playing, you’ve got to get up and dance” at the height of the boom was later derided for his hubris – but in retrospect it was more a statement of the obvious – like a scene from ‘They Shoot Horses Don’t They’

        It was Prince who would plead with Hank Paulson to save the banks from themselves as the house of cards started to collapse.

        L.T. Hobhouse claimed (in 1911) that ‘the permitted becomes necessary’ when surveying the wreckage caused by the first wave of laissez-faire economic liberalism.

        It’s just a shame that we’ve had to go through that learning process all over again.

        That’s why regulation is good for markets – without it, game theory kicks in and it’s a race to the bottom.

        • Synopticist March 19, 2012 at 11:24 pm #

          Charles Wheeler and Hawkeye
          Wow, those quotes from the ’90s are astonishingly prescient. And, of course, in the meantime we had the dotcom bust.
          Got to love those rational markets.

          Off topic I know, but the libdem supporting Guardian has a poll that puts the Libdems on 15%. Every other poll puts them at 8-9%

          And that’s the one and only newspaper that i once previously quarter-trusted not to lie through its teeth when it suits them.
          We truly are f*cked.

          • Synopticist March 20, 2012 at 1:40 am #

            Plus i’m having to watch the f*cking RUSIAN PROPOGANDA CHANNEL to find out the latest developments in the MF Global story, the worlds worst ever brokerage bankrupcy.

            The BBC has made no substantial mention of it since december, as far as I can see.

          • Charles Wheeler March 20, 2012 at 4:24 pm #

            I always take those polls with a large dose of salt given the sample size, selection process, margin for error and apparent elimination of ‘none of the above’ (35% in 2010).

            Tories got votes of 24% of electorate in 2010 – is it conceivable many who didn’t vote Tory in 2010 are now seeing the light?

            LibDems gained votes of 15% of electorate in 2010 – since which time they’ve ditched ALL their major manifesto commitments.

            By ignoring dissatisfaction with all parties polls exaggerate the level of support for each.

            As all three parties follow similar neoliberal doctrines measuring discontent needs to be downplayed.

            But, like the rating agencies, pollsters stand outside the realm of scrutiny.

  22. steviefinn March 19, 2012 at 12:31 pm #

    A gleam of light from within the fog of the mainstream media. It shows the real state of the UK’s finances. One of the conclusions is that we are another potential Greece. The rating agency vultures are already starting to hover.

    http://www.telegraph.co.uk/finance/comment/liamhalligan/9150416/Budget-2012-Chancellor-George-Osborne-should-cancel-his-Budget-we-dont-need-it.html

    I re-watched the film the Matrix at the weekend, it struck me that the MSM is a bit like the matrix as described in the film. There are a few of us who are aware of the truth, but I suppose the question is, how bad will it have to get before enough people also realise & do something about it. In the meantime the machines ( bankers etc ) will continue to suck the sustenance out of everything including us.

    The view on the article from the Slog:

    http://hat4uk.wordpress.com/2012/03/18/osbornes-pointless-budget-us-deficit-debt-and-obligations-and-the-real-story-behind-britains-hopeless-position/

    • Charles Wheeler March 19, 2012 at 9:52 pm #

      Though MMTers would draw a strong distinction between Greece as a user of currency ‘locked-in’ to the Euro with no control over its monetary (and now fiscal) policy – and the UK as an issuer of currency (as long as Osborne doesn’t continue to pretend that we live under a gold standard). See Bill Mitchell.

      • Charles Wheeler March 19, 2012 at 9:53 pm #

        p.s. Liam Halligan wears two hats.

        • Charles Wheeler March 19, 2012 at 9:57 pm #

          p.p.s. doesn’t this sort of defeatism feed straight into the neoliberal/Tory/Telegraph agenda.

          Would prefer Michael Hudson or Bill Mitchell’s take on it to the same MSM that sold us ‘The Great Moderation’.

    • Mike Hall March 20, 2012 at 12:56 am #

      Halligan writes

      “That such a notion has even been entertained by our political classes, and gained any kind of currency at all, speaks volumes for the UK’s low level of economic literacy and the lurid nature of what passes for “debate”. ”

      (Referring to the idea that austerity should be backed off.)

      It is Halligan himself who is the economic illiterate regarding the macro economics. The comparison with Greece is completely stupid.

      Even if one goes along with the pretence that a soverign fiat currency issuer such as UK gov need ‘borrow’ to spend anything, the BoE sets the interest rate not ‘markets’. As gov debt for such sovereigns is never repaid the cost is merely that of debt service. Greece’s debt, like all Euro users +is+ subject to the markets. In practice even for Euro/EMU countries in no worse economic shape than UK, their gov debt interest is 3 times that of UK. Which means that UK can carry 3 times as much debt by whatever ‘sustainability’ opinion you choose.

      Japan, another sovereign currency issuer has had over 200% debt to GDP for some years. Even with the global crisis & recession & Tsunami, unemployment (Jan 2012) is only 4.6%. There is no ‘crisis’ there comparable to Europe or the US.

      It’s Halligan & his neo liberal ideologues who have the economics wrong.

      Moreover, UK has not, & will not reduce the debt by growth killing austerity – most certainly not in concert with their main trading (export) partners. The level of gov debt is irrelevant to a (fiat) currency issuing sovereign, but the austerity policy is a failure even on their own bogus terms.

      It’s criminal that such policies are adopted (not from the view of the top few percent of course) but the mess is proving & providing ever more evidence that MMT economics is empirically correct. (Tho’ there is endless historical proof.)

  23. simoncz March 19, 2012 at 10:18 pm #

    More from Matt Taibbi

    http://www.rollingstone.com/politics/blogs/taibblog/another-hidden-bailout-helping-wall-street-collect-your-rent-20120319

    Banks buying up the foreclosed homes to rent them out.

    Coming to UK in the next few years?

    • Synopticist March 19, 2012 at 11:38 pm #

      Oh dear God.
      We rightly complain about our bankers, but those yanks are something else.

      • simoncz March 20, 2012 at 12:05 am #

        Incredible isn’t it? It really does sound like a long running conspiricy.
        And Warren Buffet saying he’ll buy up a couple of hundred thousand foreclosed homes if he can get a good deal?
        Where but in an insane world does one guy buy up a couple of hundred thousand homes?

        • John Souter March 20, 2012 at 9:15 am #

          simoncz -well you need somewhere to house the serfs.

    • Charles Wheeler March 20, 2012 at 4:27 pm #

      Taibbi on Bank of America: Too Crooked to Fail: http://goo.gl/Y06bJ

  24. John Souter March 20, 2012 at 10:12 am #

    The present financial paradigm thrives and multiplies debt.

    Debt is stress and stress kills everything it touches – hope,motivation, innovation and compassion are the first to fail in a species capable of abstract thought and imagination left with nothing but an abject wasteland of despair.

    Forget quasi concerns such as health warnings on fag packets, it is governments and institutions that need health warnings writ large across all of their agendas.

    Through the medium of the internet we are gradually being educated on the techniques adopted by the power brokers and the media strategies they use to distort and confuse the true purpose behind them. It has taken perhaps twenty years for this phenomena to be appreciated and a major ‘crises’ for it to develop into a tool of understanding.

    That understanding, while only an insignificant glitch in evolutionary time, is a major factor in all of our lifetimes.

    So what does that understanding tell us?

    Well for me it seems we have a major parasitical cancer in our world that needs a major and aggressive therapy in order to eradicate it. We have no option. Since it refuses to react to less intrusive or benign remedies we either kill it or it kills us.

    To cut to the chase, humanity has no legitimate purpose in this world if it cannot look after itself.

    • Hawkeye March 20, 2012 at 11:18 am #

      John

      “humanity has no legitimate purpose in this world if it cannot look after itself”

      Sir Alfred Ewing once said: “The command of Nature has been put into man’s hands before he knows how to command himself.”

      • John Souter March 21, 2012 at 10:16 am #

        Hawkeye – minor point – put or taken? And that aside we do not ‘command’ nature, at best we can only learn to understand and utilise it as best we can.

        In that sense exploitation is always dangerous.

        • Hawkeye March 21, 2012 at 11:13 am #

          John

          Fair point!

          Mankind doesn’t create wealth – he merely exploits that of nature, by taking nature’s wonders and converting to man’s own end.

          Hawkeye’s law of conservation of wealth: For every increment in mankind’s wealth, there is an equal and opposite decline in nature’s.

  25. Hawkeye March 20, 2012 at 1:05 pm #

    A thorough expose of the Goldman Sachs business model, and it’s endemic replication in modern banking:

    http://www.independent.co.uk/news/business/comment/satyajit-das-goldman-sachs-flawed-model-7575865.html

  26. Charles Wheeler March 20, 2012 at 11:05 pm #

    Long suspected Stephanie Flounders spends much of her time rehashing press releases to reinforce mainstream ‘govt. profligacy’ myth.

    This article suggests as much: “Last Friday the BBC’s economics editor Stephanie Flanders ran one of the most terrible economics articles I’ve ever read: ‘The Truth About UK Debt. ’ The problem is that it contains very little truth. The reason it contains so little truth is because, not to put too fine a point on it, Flanders comes off as having quite literally no idea what she’s talking about.”
    http://goo.gl/QSIUM

    • John Souter March 21, 2012 at 10:10 am #

      Charles- I’ve long suspected what comes out of BBC mouths is controlled more by their pockets than their wit or integrity.

    • Mike Hall March 21, 2012 at 1:30 pm #

      Good piece by Philip Pilkington

      Flanders is truly dreadful, vacuous. A total neo liberal paradigm repeating robot. She plainly understands nothing whatever of macro economics. As my dad used to say ‘I wouldn’t pay her in washers’.

      Mason at least tries to report on how things affect ordinary people. I wish he’d get over to the MMT blogs & educate himself properly in macro economics. I think he could be open minded enough to realise what’s there.

      Someone (in less unemployed poverty than myself) should send him a copy of Wray & Mitchell’s new macro text book when it comes out later this year.

  27. John Souter March 21, 2012 at 5:06 pm #

    Seemingly we have had a budget today!

    Is every Englishman’s home now a mansion – is it now official that every road to anywhere is now a Toll and the national north south divide is now officially anywhere north of Hampstead?

    And has statute decreed that the lot who have little must continue to subsidise the little who have squandered a lot?

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