WINNING!!!!

2 comments

Posted on 18th January 2013 by Administrator in Economy |Politics |Social Issues

,

Whenever you are overwhelmed by storylines, propaganda and misinformation, step back and think about who is really benefitting from wahtever bullshit is being forced down your throat by the MSM and politicians on both sides of the aisle. Jesse and Simon Johnson know who are benefitting from the policies inflicted on the American people since 2008.

If You Remember Nothing Else About the Financial Crisis, Remember This

Few knowledgeable people talk about the need for financial reform anymore, just a few short years after the financial crisis and collapse.The right talks about getting tough on the weak and settling old scores, and the left is losing its way in obtuse gimmickry and quack economics that promote their own statist agendas. Pile enough rancid margarine on the bread and you won’t see its thinness or the mold.

The broad center, independents, and progressives are largely silent, having averted one almost certain disastrous choice in the most recent national election, only to find themselves still on unsteady ground with a weak and wavering ‘champion’ who may once more betray their trust for his own interests, and the deal.

And yet this is not nearly our darkest hour. That may be yet to come.

All the reform that has occurred so far has been largely window-dressing. Financial and political corruption is a tax that the real economy cannot support or endure while remaining free.

 Until there is substantial reform, there will be no sustainable recovery. This is only the appearance of recovery in the empire of illusion.

“From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent.

Simon Johnson, 13 Bankers

“The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises.

If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.”

Simon Johnson, The Quiet Coup

 
Posted by Jesse

DOOMSDAY CYCLE

5 comments

Posted on 17th October 2012 by Administrator in Economy |Politics |Social Issues

, ,

Wall Street is the enemy.

Doomsday Cycle targets America next

Commentary: Warning: Money + politics = ticking time bomb

By Paul B. Farrell, MarketWatch

SAN LUIS OBISPO, Calif. (MarketWatch) — Warning bells, alarms scream louder. But our banks and politicians can’t hear, are deaf, in denial. Won’t take action … not until it is too late.

That’s the latest from Simon Johnson and Peter Boone in “The Doomsday Cycle Turns: Who’s Next?” Who is next? America, Japan, the euro zone are the triple threat next in the line of fire, in danger of collapsing, thanks to a doomsday conspiracy where global “political and financial systems have aligned to build these dangers rather than suppress them.”

America has ignored the lessons of the 2008 meltdown even though coming “remarkably close to another Great Depression. Next time, we may not be so lucky.”

Three years ago, the first warning: “The Doomsday Cycle.” Since then Simon Johnson, former IMF chief economist, co-authored two bestsellers, “13 Bankers: The Wall Street Takeover and the Next Financial Meltdown,” and recently, “White House Burning.” Peter Boone is a research associate at the London School of Economics, which published their doomsday warnings.

In the first they warned: “Over the last 30 years, we have built a financial system that threatens to topple our global economic order, we have let an unsustainable and crazy ‘doomsday cycle’ infiltrate our economic system.” This doomsday “cycle will not run forever … The destructive power of the down-cycle will overwhelm the restorative ability of the government, just like it did in 1929-31.”

America has ignored the lessons of the 2008 meltdown even though coming “remarkably close to another Great Depression. Next time, we may not be so lucky.”

First. Risks shifted from emerging nations to big developed nations

Why? The “next time” is accelerating. But Americans are distracted by election drama, can’t see the oncoming train. Are Johnson and Boone alarmists crying wolf? Chicken Littles? Cassandras? No, they do see the collapse coming, its driven by a conspiracy of “political and financial systems” that will not act “until it is too late.”

So in this new warning, they ask: “Who’s Next? ” Here’s a summary, some paraphrased, some direct quotes:

Earlier, smaller emerging nations were at risk of collapsing. The threat has now shifted to developed countries, their financial institutions, government finances, and economic growth prospects are at great risk: And that world has “created enormous, complex financial structures that can inflict tragic consequences with failure and yet are inherently difficult to regulate and control … there are more and worse crises to come.”

Second. Financiers and politicians align in ‘symbiotic’ conspiracy

“There is a common problem underlying the economic troubles of Europe, Japan, and the US: the symbiotic relationship between politicians who heed narrow interests and the growth of a financial sector that has become increasingly opaque. Bailouts have encouraged reckless behavior in the financial sector, which builds up further risks — and will lead to another round of shocks, collapses, and bailouts.” That’s a doomsday conspiracy: money and politics.

The Doomsday Cycle became visible in 2007-08 in the months following the fall of Lehman, and Iceland, Irish banks and “endless lending programs by the IMF and the EU” for Greece, Ireland, Portugal, Italy, Spain, other euro-zone countries. Today some are claiming that the euro zone “put the worst of their problems behind them.”

Wrong, they’re in denial: “The doomsday cycle is indeed turning,” but it’s “heading towards Japan and the U.S.” where “the current level of complacency among policy makers in those countries is alarming,” warn Johnson and Booth.

Worse, they’re now predicting the cycle will “hit Europe again and probably harder than before.” Yes, Europe “is in big trouble:” Massive budgets, no growth, no bailout money and a loss of political support.

Third. Doomsday cycle accelerating, America is targeted

Back “in the 1980s and 1990s, deep economic crises occurred primarily in middle- and low-income countries that were too small to have direct global effects. The crises we should fear today are in relatively rich countries that are big enough to reduce growth around the world.”

Why? Because America’s “financial infrastructure makes it possible to borrow a great deal relative to the size of an economy … far more than is sustainable relative to growth prospects.”

Worse, “the expectation of bailouts has become built into the system,” from Treasury and the Fed. Unfortunately, what’s owed is far “more than can ultimately be paid,” and growing fast.

From a behavioral-economics standpoint, our financiers are now so totally addicted to these unrealistic expectations and delusions they cannot see the risks from inside the “thought bubble” we’re trapped in. Johnson and Boone see into our warped reality in three key areas:

1. Politicians … only see “great opportunities” and reelections. Politicians are obsessed with power, government as an opportunity “to buy favor and win re-election,” as “repeated bailouts have become the expectation not the exception.”

2. Financiers … sees only “easy money and great fortune.” “The complexity and scale of modern finance make it easy to hide what is going on. The regulated financial sector has little interest in speaking truth to authority; that would just undercut their business. Banks that are ‘too big to fail’ benefit from giant, hidden and very dangerous government subsidies. Yet despite repeated failures many top officials pretend that ‘the market’ or ‘smart regulators’ can take care of this problem.”

3. Voting public … see too little, “until it is too late.” “The issues are abstract and lack the personal drama that grabs headlines,” as becomes ever clearer in the debates, cable reports and political ads. Worse, our policy leaders are in conflict and “complicit in the schemes of big banks and politicians. The real costs of bailouts are disguised, millions of jobs lost, lives ruined, balance sheets damaged — and for what, exactly? The public is baffled and our leaders are driven by greed, selfishness and denial.

Doomsday recycling … targeting America, Japan, euro zone

Johnson and Boone warn, the entire world is being swept up in this historic shift: “Over the past four centuries, financial development has strongly supported economic development. The market-based creation of new institutions and products encouraged savings by a broad cross-section of society, allowing capital to flow into more productive uses.”

But since the 1980s “our financial development has gone badly off-track,” thanks to their alliance with politicians” resulting in “irresponsible public policy.”

Johnson and Boone see Japan on a “long march to collapse”: an aging population, declining population, slowing growth, and a debt-to-GDP ratio that’s skyrocketed from about 70 to over 200 in the past 30 years.

“The symptoms are different in the U.S.” but the impact will be the same: collapse. The 2008 crisis increased debt by 50%. Banks got bailouts, now too-big-to-fail. That created an army of lobbyists and “pro-bailout” politicians. After each new crisis, politicians promise it’ll “never happen again … but still it happens, again and again.”

And “with each crisis, the financial risks are getting larger … more unaffordable.” Soon we will “run out of enough savers to buy the bonds needed to bail out the system” and “suffer the ultimate collapse.”

Johnson and Boone see “no sign that the euro zone will emerge from crisis any time soon.”

The euro zone is a magnet for 17 nations, drawn to the ECB liquidity window, which “converts unattractive government and bank-issued securities into highly liquid collateral … at low interest rates.” Banks love it.

But its “easy to understand how the system got abused and why it will be so difficult ever to make it safe,” loaded now with risky derivatives that ballooned from nothing in 1998 to 19 times the entire GDP of the euro zone, a ticking time-bomb.

America + Japan + euro zone are a ticking time-bomb to collapse

The “Japanese can’t control their public finances … the U.S. can’t control its too-big-to-fail banks” … plus pile on the “complexity of merging 17 regulators and 17 national governments into a system where someone else can be made responsible for bailing out the intransigents.” Unfortunately our system has become “crisis-prone” a “financial and regulatory nightmare” posing “great dangers to global financial stability.”

“The tragedy of the euro zone appears unavoidable,” warn Johnson and Boone, with “far greater risks that will spread to Japan, the U.S., and other advanced economies.”

The run-up to the 2008 meltdown is replaying and we’re in denial: “We have created enormous, complex financial structures that can inflict tragic consequences with failure and yet are inherently difficult to regulate and control.” And yet, we naively assume our political systems will “check these dangers,” even as our leaders “develop symbiotic relationships that encourage irresponsible growth.”

This is self-deceptive: “There are more crises to come and they are likely to be worse than the last one.” The world is now controlled by a doomsday conspiracy where “political and financial systems have aligned to build these dangers rather than suppress them.”

And unfortunately, the conspiracy will not wake up and voluntarily “fix their underlying fiscal and financial problems … until it is too late.” Yes, too late. World markets and the global economy must first collapse.

 

WHO CAPTURED THE FED?

6 comments

Posted on 30th March 2012 by Administrator in Economy |Politics |Social Issues

, , , ,

Fantastic piece from Jesse and fantastic article from Simon Johnson. In case you were wondering, the Federal Reserve is not looking out for your best interests.

30 March 2012

 
Future generations will look back and ask themselves, ‘How could they not see what was happening? Were they blind?’

The Fed is not the only problem here, but a key enabler. White collar crimes and fraud flourished amongst the robber barons even in the days of the gold standard. It just was not as convenient, as easy, to defraud the people en masse through the debasement of the currency.

The Fed has merely proven to be as vulnerable as the regulators and the Congress to the power of the monied interests.  If the political campaign process had not been corrupted by money, if the fairness doctrine in the media and Glass-Steagall in banking had not been overturned by the mindless impulse to cast aside the best of the laws, many of the problems we have today would not be so great.

These fellows creates crises, and then ‘save us’ from them, while lining their own pockets and perpetuating the swindle for their less publicly visible puppet masters.

There is little doubt in my own mind that Greenspan knew exactly what he was doing, and made his fateful decision after a meeting with Robert Rubin in the 1990′s shortly after his famous ‘irrational exuberance’ speech. What was said, what was promised or threatened, I cannot say. But the change in direction became clear. It became open season on the voices of reason and restraint in Washington.

What Clinton hatched, Bush brought to full fruition, particularly with his tax cuts, stock bubble, and unfunded wars. And when the Great Reformer came to Washington in the midst of the collapse, he brought back the very advisors who had helped to create the problem in the first place and betrayed the mandate of those who had elected him, prosecuting no one.

And in the aftermath of the financial collapse, the first popular reform movement that rose up in anger against the bailouts, The Tea Party, was quickly turned into a corps of willing tools that turned on the weak and the least among us, the very victims of a corrupt system, in their petulant pride and misdirected anger.

I only fear that the Fed, and some of the perpetual outsiders of history, will be made the scapegoats by the real culprits when the time of reckoning comes, and that genuine reform will be thwarted once again as it has been so many times in the past.  Their hypocrisy and shamelessness knows no bounds.

NYT
Who Captured the Fed?
By DARON ACEMOGLU and SIMON JOHNSON
March 29, 2012, 5:00 am

…But in the light of the crisis of 2008 and its aftermath, we have to ask: Has our central bank fallen back under the influence of special interests?

…At the dawn of the republic, Thomas Jefferson railed against the risks posed by government backing for concentrated power in the financial sector. President Andrew Jackson fought to abolish the Second Bank of the United States in the 1830s, the leading private bank of his day, which helped manage public finances and the banking system. Consequently, there was nothing resembling a central bank in the United States for much of the 19th century.

The Federal Reserve System, created in 1913, was a uniquely American compromise, trying to balance public and private interests. Banks controlled the boards of the 12 regional Feds – with big Wall Street firms holding great sway over the New York Fed, which had a disproportionate influence within the system as a whole — and still does.

This version of the system presided over a crazed and highly leveraged stock market boom in the 1920s and the catastrophic collapse of credit in the early 1930s, while protecting the big Wall Street firms.

…Unfortunately, as the United States and other countries learned after 1945, clever politicians can use central banks to manipulate the business cycle, boosting output growth and cutting unemployment ahead of elections. Richard Nixon, for example, famously pushed the Fed to ease monetary policy when it suited him.

…Increasingly, however, it seems that technocratic policy-making is just a myth. We have come full circle, and the Wall Street banks are calling the shots again.

Crucially, the idea that politics is just about electioneering misses the point. Politics is about getting what you want, not just through the ballot box but by persuading people in public office to take actions that help you. So declaring the central bank independent doesn’t move it outside the orbit of politics.

Monetary policy has an impact on inflation, output and employment. But it also has a major impact on stock market prices. Any central banker raising interest rates is reducing stock market values and thus eroding the bonuses of top bankers and other chief executives.

Those people will lobby, asserting that higher interest rates will undermine the economy and cause us to plummet into recession, or worse.

In principle, the Fed could stand up to the bankers, pushing back against all specious arguments. In practice, unfortunately, the New York Fed and the Board of Governors are quite deferential to financial-sector “experts.” Bankers are persuasive; many are smart people, armed with fancy models, and they offer very nice income-earning opportunities to former central bankers.

We have lost track of the number of research notes from major banks pleading for easier credit, lower capital requirements, delay in implementing financial reforms or all of the above.

In recent decades the Fed has given way completely, at the highest level and with disastrous consequences, when the bankers bring their influence to bear – for example, over deregulating finance, keeping interest rates low in the middle of a boom after 2003, providing unconditional bailouts in 2007-8 and subsequently resisting attempts to raise capital requirements by enough to make a difference.

As the American economy begins to improve, influential people in the financial sector will continue to talk about the need for a prolonged period of low interest rates. The Fed will listen.

This time will not be different.”

Read the entire article here.

 
 
 
Posted by Jesse

QUOTE OF THE DAY

2 comments

Posted on 9th March 2012 by Administrator in Economy |Politics |Social Issues

“I’m surveying the political landscape closely for anyone who can play the role of Teddy Roosevelt, using legal tools to break monopoly ‘trusts’ and shifting the mainstream consensus decisively toward imposing constraints on the abuse of power by powerful individuals. So far, I see no one truly in the Roosevelt tradition with a realistic chance of election, while the rich become more powerful and the powerful become even richer.”

Simon Johnson



6 BANKS RULE THIS COUNTRY

6 comments

Posted on 10th January 2011 by Administrator in Economy |Politics |Social Issues

, ,

Another outstanding piece by Simon Johnson. The 6 Criminal Banks have assets totaling 64% of GDP. In 1995, these same banks had assets totaling 17% of GDP. Who benefitted? Who lost?

The Bill Daley Problem

By Simon Johnson, co-author of 13 Bankers (out in paperback on Monday)

Bill Daley, President Obama’s newly appointed chief of staff, is an experienced business executive.  By all accounts, he is decisive, well-organized, and a skilled negotiator.  His appointment, combined with other elements of the White House reshuffle, provides insight into how the president understands our economy – and what is likely to happen over the next couple of years.  This is a serious problem.

This is not a critique from the left or from the right.  The Bill Daley Problem is completely bipartisan – it shows us the White House fails to understand that, at the heart of our economy, we have a huge time bomb. 

Until this week, Bill Daley was on the top operating committee at JP Morgan Chase.  His bank – along with the other largest U.S. banks – have far too little equity and far too much debt relative to that thin level of equity; this makes them highly dangerous from a social point of view.  These banks have captured the hearts and minds of top regulators and most of the political class (across the spectrum), most recently with completely specious arguments about why banks cannot be compelled to operate more safely.  Top bankers, like Mr. Daley’s former colleagues, are intent of becoming more global – despite the fact that (or perhaps because) we cannot handle the failure of massive global banks. 

The system that led to the crisis of 2008, and the recession that has so severely damaged so many Americans, encouraged excessive risk-taking by major private sector financial institutions and, yes, Fannie Mae, Freddie Mac, and other Government Sponsored Enterprises (although these were most definitely not the major drivers of the crisis – see 13 Bankers).

Today’s most dangerous government sponsored enterprises are the largest six bank holding companies: JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley.  They are undoubtedly too big to fail – if they were on the brink of failure, they would be rescued by the government, in the sense that their creditors would be protected 100 percent.  The market knows this and, as a result, these large institutions can borrow more cheaply than their smaller competitors.  This lets them stay big and – amazingly – get bigger. 

In the latest available data (Q3 of 2010), the big 6 had assets worth 64 percent of GDP.  This is up from before the crisis – assets in the big six at the end of 2006 were only about 55 percent of GDP.  And this is up massively from 1995, when these same banks (some of which had different names back then) were only 17 percent of GDP.

No one can show significant social benefits from the increase in bank size, leverage, and overall riskiness over the past 15 years.  The social costs of these banks – and their complete capture of the regulatory apparatus – are apparent in the worst recession and slowest recovery since the 1930s.

Paul Volcker gets it; no wonder he has resigned.  Mervyn King, governor of the Bank of England, gets it.  Tom Hoenig, president of the Kansas City Fed, gets it.  Elizabeth Warren, the tireless champion of consumer rights, gets it.   Gene Fama, father of the efficient financial markets view, gets it better than anyone. 

I discussed the issue in public for two hours at the American Financial Association (AFA) meetings in Denver on Friday with two presidents of the AFA (Raghu Rajan and John Cochrane) and a Nobel Prize winner (Myron Scholes).  This is not a left-wing or marginal group – there must have been at least 500 people in the audience (video will be available).  The top minds in academic finance understand the problem vividly and are articulate about it – there is no rebuttal to the points being made by Anat Admati and her distinguished colleagues.

This is not a left-right issue – again, look at the list of people who co-signed Professor Admati’s recent letter to the Financial Times.  This is a question of technical competence.  Do the people running the country – including both the executive branch and the legislature – understand economics and finance or not?

If the country’s most distinguished nuclear scientists told you, clearly and very publicly, that they now realize a leading reactor design is very dangerous, would you and your politicians stop to listen?  Yet our political leadership brush aside concerns about the way big banks operate.  Why?

Top bankers, including Bill Daley, have pulled off a complete snow job – including since the crisis broke in fall 2008.  They have put forward their special interests while claiming to represent the general interest.  Business and other groups, of course, do this all the time.  But the difference here is the scale of the too big to subsidy – measured in terms of its likely future impact on our citizenship and our fiscal solvency, this will be devastating.

Most smart people in the nonfinancial world understand that the big banks have become profoundly damaging to the rest of the private sector.  The idea that the president needed to bring a top banker into his inner circle in order to build bridges with business is beyond ludicrous. 

Bill Daley now controls how information is presented to and decisions are made by the president.  Daley’s former boss, Jamie Dimon, is the most dangerous banker in America – presumably he now gets even greater access to the Oval Office.  Daley is on the record as opposing strong consumer protection for financial products; Elizabeth Warren faces an even steeper uphill battle.  Important regulatory appointments, such as the succession to Sheila Bair at the FDIC, are less likely to go to sensible people.  And in all our interactions with other countries, for example around the G20 but also on a bilateral basis, we will pursue the resolutely pro-big finance views of the second Clinton administration.

Top executives at big U.S. banks want to be left alone during relatively good times – allowed to take whatever excessive risks they want, to juice their return on equity through massive leverage, to thus boost their pay and enhance their status around the world.  But at a moment of severe financial crisis, they also want someone in the White House who will whisper at just the right moment: “Mr. President, if you let this bank fail, it will trigger a worldwide financial panic and another Great Depression.  This will be worse than what happened after Lehman Brothers failed.”

Let’s be honest.  With the appointment of Bill Daley, the big banks have won completely this round of boom-bust-bailout.  The risk inherent to our financial system is now higher than it was in the early/mid-2000s.  We are set up for another illusory financial expansion and another debilitating crisis. 

Bill Daley will get it done.

« Older Entries