DECLINE, DECAY, DENIAL, DELUSION, & DESPAIR

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Posted on 8th October 2012 by Administrator in Economy |Politics |Social Issues

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The majority of Americans seem OK with just waddling through life, accepting the lies and misinformation blasted from the boob tube and their various iGadgets by their owners, gorging themselves to death on Twinkies and Cheetos, paying 15% interest on their $10,000 rolling credit card balance, and growing ever more dependent on the welfare/warfare state to provide and protect them from accepting personal responsibility for their lives. A minority of critical thinking people have chosen to question everything they see and hear being spewed at us by the propagandist mainstream media, the corporate fascist government, and the powerful banking cabal that has an iron grip upon our throats as they choke the life out of the global economy in their never ending desire for more riches and more power.

The decline of the Great American Empire cannot be attributed to one factor or one bogeyman. There are a multitude of factors, villains, and choices made by the American people that have led to our moral, civil, social, and economic decline. The kabuki theater that passes for our electoral process is little more than a diversion from our imminent fate. Neither candidate for President has any intention of changing the course of the U.S. Titanic. Our rendezvous with destiny has been charted, and there aren’t nearly enough lifeboats. Those who built the ship and recklessly navigated it into a sea of icebergs will be the 1st into the few lifeboats. The leaders we’ve chosen, the choices we’ve made, and our unwillingness to deal with facts and reality have set in motion a disaster that cannot be averted. It’s a shame the majority of Americans have the math aptitude of a 6th grader, because the unsustainability of our empire can be calculated quite easily. Math is hard for Americans, but denial and delusion are easy.      

Oddly, a couple of late September days in Wildwood NJ were able to crystalize many of the aspects of our cultural and economic decline in my mind. I should have just enjoyed the 72 degree temperatures, a few beers, and the freedom to read a book on my deck. I wish I was just oblivious to my surroundings, but my weekend in Wildwood NJ was an eye opener. Everywhere I turned I saw something that made me laugh, shake my head in disgust, or wonder how our government could have become so inane, incompetent and out of control. We all generalize based upon our preconceived beliefs, but sometimes what you see is what you get. The weekend started normally with a morning bike ride on the boardwalk with my wife and son to the Hereford lighthouse in North Wildwood. Along the way we passed the usual suspects on the boardwalk: the obese, the tattooed, the pierced, and the blue haired. I wish I was exaggerating, but I saw a dozen hoveround and rascal scooters carrying extremely obese Americans on par with this person:

 

If I wanted to be politically correct, I’d call the fat asses cruising on their “free” rascal scooters, the weight challenged disabled on their powered mobility enhancement vehicles. You know a trend has become a massive scam, when South Park dedicates an entire show to the shame of obesity and the scooter brigade. The majority of the scooter squad jamming up the boardwalk was less than 50 years old. They weren’t disabled. They were just too obese and lazy to wobble down the boardwalk to the next junk food joint. They were certainly in the right place. The Wildwood boardwalk is home to pizza topped with cheese fries, chocolate covered bacon, fried Oreos, funnel cake topped with powdered sugar, and 64 ounce sugar laced lemonade. The place would make Nanny Bloomberg’s head explode.

   

 

We’ve all seen the commercials for the Scooter store urging anyone on Medicare to rush in and get a power scooter or wheelchair “at little or no cost to you”. The entitlement “free shit” mentality permeates our culture. There is a cost and it is over $800 million per year, paid for by the 53% who pay Federal taxes.  Records from the Centers for Medicare and Medicaid Services show that the cost of motorized scooters and wheelchairs to the government health service for senior citizens rose 179% between 1999 and 2009, the last year for which full records are available. This data is fascinating as the number of Americans over the age of 65 only increased by 18% over this same time frame. The bill in 1999 was $259 million; in 2009 it was $723 million – and is surely over $1 billion today. This is another billion dollar scam being funded by your tax dollars, but there are no spending cuts possible according to our beloved Congressmen.

A recent report by Medicare’s inspector general also showed that 61% of the motorized wheelchairs provided to Medicare recipients in the first half of 2007 went to people who didn’t qualify for them. (Only people who cannot get around without one are supposed to be eligible.) The inspector general found that Medicare is billed an average of $4,018 for a motorized wheelchair that normally sells for $1,048. As a taxpayer, you will be shocked to find out that people are selling their “no cost” Rascal 600 B mobility scooters on eBay. I’m sure the keen eyed government drones working in the Health & Human Services agency are policing the resale of taxpayer paid for scooters. I find it amusing that scooters have various naming classes, just like BMW and Mercedes. The vast majority of people I see tooling around on their “mobility scooters” are just plain fat. They aren’t over 65 years old. On my Sunday bike ride I was flabbergasted and amused by the sight of a 350 pound woman on a Rascal with the pedal to the metal pulling a 275 pound man in a wheelchair attached by rope. The plague of slow metabolism is sweeping the countryside.    

 

While I was relaxing on my deck reading and trying to blot out the nightmare visions of obese boomers in Rascal formation like German panzers invading Poland, a brand new SUV pulled into the parking lot across the street. After five minutes, the driver’s side door opened and out sidled a four foot five, two hundred and fifty pound female senior citizen in all her girth. She waddled to the back of the SUV and opened the hatch to extract her walker with wheels. She began berating the three hundred pound dude that got out of the passenger side to come and get his walker. Then she motored off towards Laura’s Fudge, while her hubby conserved his energy waiting by the SUV. Minutes later she scooted her way back hauling a sack of fudge. They then trundled off towards the boardwalk, most likely headed for Kohrs Bros for a double dipped fudge ice cream cone or some Boardwalk fries smothered in cheese.   

  

Based upon my unscientific assessment of the people walking on the Wildwood boardwalk, I would conclude that 35% of the people are obese, 40% are overweight by 20 or 30 pounds (myself included), and 25% are in relatively good shape. After checking the government statistics, my assessment appears to be accurate. Who is to blame? The easy answer is to just blame the individual for their lack of self-restraint and inability to contain their impulses. But when you consider that 160 million out of 232 million adults in this country are either overweight or obese, along with 11 million adolescents, there must be something more sinister behind the phenomenon. There is no doubt that a major portion of the blame must be laid at the fat feet of those who could have exercised restraint over their cravings, but the words of master propagandist Edward Bernays provides another factor in the equation:

“If we understand the mechanism and motives of the group mind, it is now possible to control and regiment the masses according to our will without them knowing it.” – Edward Bernays

     

Bernays reveals a truth that is self-evident to those with critical thinking skills. Sadly, few Americans exhibit any thinking skills whatsoever. Our society has bifurcated into those who control and those who are controlled. The overlord Double Plus Alphas in our society consist of the Wall Street banker cabal, the executives of our mega-corporations, Federal Reserve governors, Washington DC politicians, Federal government apparatchiks, the propaganda experts in the mainstream corporate media, and the secretive billionaire set that manipulate and maneuver behind the scenes. The first step in controlling the Gammas, Deltas and Epsilons, as Aldous Huxley knew in 1931, was to indoctrinate them with propaganda in our government run schools. This mission has been accomplished. The vast majority of school children graduate from the government school system with no ability to think critically or question what has been spoon fed to them as facts. The fascist alliance of corporations and the state begin in the public schools, with product advertisements by corporations now subsidizing school budgets. The road to obesity is paved with chicken nuggets, fries and pizza dispensed by the government schools on a daily basis.

Just as in Huxley’s Brave New World, America has been built upon the principles of Henry Ford’s assembly line—mass production, homogeneity, predictability, and consumption of disposable consumer goods. In the dystopian novel, members of every class, from birth, are indoctrinated by recorded voices repeating slogans while they sleep. Huxley didn’t imagine the power of TV and other mass media outlets to do the same while we are awake. We are bombarded day and night by propaganda from mega-corporations to buy their products. Mass consumption of processed food sold by the likes of multi-billion dollar corporations Kraft, Pepsico, Coca Cola, General Mills, Nestle, and Unilever is the chief cause of the obesity epidemic in America. The few know how to manipulate the many through messaging, repetition and persistently molding the opinions of the feeble minded non-thinking masses. The billions spent by corporations on advertising to convince the masses that eating a Wendy’s Baconator, KFC extra crispy bucket, or Double Quarter Pounder with Cheese, washed down with a two liter Mountain Dew or Cherry Coke, is a tribute to the invisible government running the show. Huxley and Bernays had it all figured out eighty years ago:            

“The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. …We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of. This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons…who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind.” – Edward Bernays, Propaganda, 1928

The conscious and intelligent manipulation of the masses by the invisible government Alphas has transmuted citizens into overweight, non-thinking, debt dependent, egocentric consumers. This was not a mistake. The powerful interests used their control over the banking system, media outlets, and political system to lure the willfully ignorant into a debt financed lifestyle through the Federal Reserve created inflation, Wall Street peddled credit cards, auto loans and “creative” mortgages. The manipulators convinced the manipulated that borrowing today to buy houses, cars, bling, tech gadgets, clothing, and fast food was preferable to what previous generations of Americans had done – save to buy things they wanted or needed. This behavior seems to be completely irrational as a people that once saved 12% of their income and carried a moderate amount of debt chose to reduce their savings to 0% and not worry about tomorrow.

 

It is easier to understand when you realize who benefitted from this purposeful shift in societal norms. The low debt, high savings, production era from 1950 through 1980 benefitted the working middle class, allowing millions to improve their standard of living. The rising debt, low savings, consumption era, from 1980 through today, benefits the 1% Alphas while impoverishing the middle class and sentencing the lower class to a lifetime of dependent servitude to the state. Who benefitted from debt fueled conspicuous consumption and continues to benefit today? The peddlers of consumer debt on Wall Street and the mega-corporations that convinced Americans they couldn’t live without that 5,500 square foot McMansion, BMW X5, stainless steel appliances, 84 inch 3D HDTV, iPhone 5, diamond encrusted Coach handbag, and thousands of other Chinese made trinkets that pile up in underwater homes across the land, benefitted tremendously. The proliferation of debt resulted in obscene profits for the financial sector, record profits for the mega-corporations that shipped production to Asia in order to take advantage of the slave labor, and three decades of wage stagnation and increasing debt for the average working middle class American.    

 

The financialization of America was a conscious decision by the oligarchs. They controlled the issuance of credit. They controlled the currency and level of inflation inflicted upon the masses. They controlled the corporations selling consumer goods on credit. They controlled the Congress, courts, and government agencies with their deep pocket lobbying and buying of influence. Lastly, they controlled the media messages and molded the opinions and tastes of the masses through their Bernaysian propaganda techniques perfected over the decades. In one of the boldest and most blatant acts of audacity in world history, the Wall Street/K Street oligarchs wrecked the world economy in their insatiable thirst for profits, shifted their worthless debt onto the backs of taxpayers and unborn generations, threw senior citizens and savers under the bus by stealing $400 billion per year of interest from them, and enriched themselves with bubble level profits and bonus payouts. Meanwhile, median household income continues to fall, real GDP is stagnant, true unemployment exceeds 22%, and 47 million people are living on food stamps.   

 

The propaganda being flogged by the oligarchs since 2009 is the supposed deleveraging by the American consumer and trying to convince the ignorant masses to resume borrowing and spending. It’s working. Consumer credit outstanding is at an all-time high of $2.73 trillion as the Federal government has dished out billions in student loans to 50,000 University of Phoenix MBA aspirants sitting in their basements quivering with anticipation of on-line graduation and future six figure job with Goldman Sachs. The Feds have also added the impetus to the “strong” auto sales through their 85% TARP ownership of Ally Financial by doling out 7 year 0% auto loans to subprime borrowers in urban enclaves around the country. The oligarchs aren’t worried about these loans being paid back, because they are reaping the profits today. The future losses will just be foisted onto the taxpayer, as always. Total credit market debt of $55 trillion now exceeds 350% of GDP. The National Debt of $16.2 trillion will exceed $20 trillion in 2015 no matter who wins the Presidency in November. The oligarchs adapt and control whoever occupies the White House. It is essential for our owners to keep debt growing at an exponential rate or the Ponzi scheme collapses.

Narrow minded ideologues want a simple answer to a complex interaction of generational, cultural, economic, political, and criminal factors that have conspired to put the country into a predicament that, at this point, will inevitably lead to economic collapse. The truth is the American people have learned to love their servitude. They have willfully chosen ignorance over truth. They’ve chosen to believe what their keepers have instructed them. They’ve chosen to trust the storylines generated by the corporate media rather than think critically and question everything. They’ve chosen obesity and sickness over health. They’ve chosen debt financed faux wealth over savings based real wealth. They’ve chosen safety and security over liberty. They’ve chosen dependency over self-reliance. These choices were aided, abetted and promoted by the Alphas through their ability to manipulate and control the unthinking masses. Huxley understood the power of propaganda and brainwashing decades before it was perfected by our owners.  

“There will be, in the next generation or so, a pharmacological method of making people love their servitude, and producing dictatorship without tears, so to speak, producing a kind of painless concentration camp for entire societies, so that people will in fact have their liberties taken away from them, but will rather enjoy it, because they will be distracted from any desire to rebel by propaganda or brainwashing, or brainwashing enhanced by pharmacological methods. And this seems to be the final revolution.” – Aldous Huxley

The saddest part of this episode of the Decline & Fall of the American Empire reality show is the continued delusion of the majority of the populace, as their desire for material goods and fair share of the entitlement pie outweighs their sense of obligation to their children and grandchildren. Their chosen ignorance is fulfilled through their attachment to their personal digital ignorance gadgets and supported by what passes for government education. The truth is obscured and hidden under waves of triviality, reality TV, and data manipulation by our government masters. The dystopian nightmare that engulfs our country has thus far resembled Huxley’s vision of a shallow populace easily distracted by consumerism, pleasure seeking, cultural trivialities, and a never ending ability to be distracted by meaningless minutia. Orwell’s darker vision of surveillance, captivity, information control, authoritarianism and pain will become the norm once the existing social order falls.   

“What Orwell feared were those who would ban books. What Huxley feared was that there would be no reason to ban a book, for there would be no one who wanted to read one. Orwell feared those who would deprive us of information. Huxley feared those who would give us so much that we would be reduced to passivity and egotism. Orwell feared that the truth would be concealed from us. Huxley feared the truth would be drowned in a sea of irrelevance. Orwell feared we would become a captive culture. Huxley feared we would become a trivial culture, preoccupied with some equivalent of the feelies, the orgy porgy, and the centrifugal bumblepuppy. As Huxley remarked in Brave New World Revisited, the civil libertarians and rationalists who are ever on the alert to oppose tyranny “failed to take into account man’s almost infinite appetite for distractions.” In 1984, Orwell added, people are controlled by inflicting pain. In Brave New World, they are controlled by inflicting pleasure. In short, Orwell feared that what we fear will ruin us. Huxley feared that our desire will ruin us.” – Neil Postman – Amusing Ourselves to Death

I despair for my country that has chosen to eat, amuse and borrow itself to death. But my despair is deepest for my children and their future. The greed, corruption, myopia, selfishness, and disregard for the well-being of future generations by current and past generations has left a barren and bleak landscape for my children. The Huxley vision of America consuming and amusing itself to death is coming to a painful conclusion, as the limits of a fiat currency and debt based lifestyle become evident. Those in power are preparing the masses for a more Orwellian vision of America when they are forced to pull the plug on the existing paradigm. The Patriot Act, NDAA, military exercises in our cities, militarization of local police forces, warrantless surveillance of our communications, searches and seizures in our airports and train stations, purchase of millions of rounds of ammo by government agencies, implementation of drone technology, camera surveillance, attempts to control the internet, manipulation of economic data, and executive orders allowing the President to take over all commerce while imprisoning citizens indefinitely without charges, are the next step in our descent into a dictatorship of tears.

The question is whether we will stand idly by, fiddling with our gadgets, tweeting about Honey Boo Boo, or will we regain our sense of duty to the future generations of this country. The manipulators are powerful, rich, connected and FEW. Those being manipulated, controlled, and abused are MANY. There will be a revolution in this country whether you like it or not. The existing social order will dissolve during the next fifteen years. What replaces it is up to us. George Carlin described what our owners want.

“Politicians are put there to give you that idea that you have freedom of choice. You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land, they own and control the corporations, and they’ve long since bought and paid for the Senate, the Congress, the State Houses, and the City Halls. They’ve got the judges in their back pockets. And they own all the big media companies so they control just about all the news and information you get to hear.

They’ve got you by the balls.

They spend billions of dollars every year lobbying to get what they want. Well, we know what they want; they want more for themselves and less for everybody else. But I’ll tell you what they don’t want—they don’t want a population of citizens capable of critical thinking. They don’t want well informed, well educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. That’s against their interest.”

What do “We the People” want?      



 

GREAT NEWS!!! – RECORD BANK PROFITS IN 2011

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Posted on 29th February 2012 by Administrator in Economy |Politics |Social Issues

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I bet this news warms the cockles of your heart. As 47 million(15% of the entire population) Americans survive on food stamps and 20 million remain unemployed or under-employed, the Wall Street Big Swinging Dicks are reaping $120 BILLION in profits. They are also paying out in excess of $20 billion in bonuses in 2011. Remember the mantra about getting rid of the Too Big To Fail problem. Well it seems 1.4% of all the banks in the country accounted for 83% of the profits generated. Amazingly, these banks were able to generate these massive profits with NO INCREASE IN REVENUE. How could that be? Well, they have accountants who made journal entries and created tens of billions in earnings by pretending they won’t have losses in the future on the subprime loans they are dishing out today. Half of their profits are a sham. The other half has been absconded from the American taxpayers and senior citizen savers.

Ben Bernanke loans these fuckers billions of your money for 0%. They then turn around and buy Treasuries or game the stock market with their super-computers. Ben is providing them risk free profits at your expense as inflation for food and energy skyrockets. In the 3rd Quarter of 2008, when Wall Street practically destroyed the world with their feeding frenzy of insatiable greed and criminality, senior citizens and average Americans saving for their future were earning $1.42 trillion per year of interest income. Savings leads to investment and a better tomorrow. Today, Ben has destroyed the incentive to save with his zero interest rate “save the Wall Street Banks” policy. Savers are now earning $446 billion less than they did in 2008. This $446 billion has been essentially taken out of the pockets of average Americans and handed to the Wall Street banking cabal.

As senior citizens across the country decide on whether to have Alpo or cat food for dinner tonight they can rejoice in the record profits of the 20 biggest banks in the country.  All Hail America – Land of the .01%.

US: Bank earnings hit five-year high in 2011

WASHINGTON (AP) — U.S. banks are coming off their most profitable year since 2006, a sign that many have put the financial crisis behind them.

The surge in bank earnings came largely because banks suffered fewer losses — not because they took in more money. The slow recovery, record-low interest rates and weak demand for loans left bank revenue mostly flat for the year.

The Federal Deposit Insurance Corp. said Tuesday that bank earnings rose in the October-December quarter to $26.3 billion.

And for the entire year, earnings rose to $119.5 billion. That’s 40 percent higher than the previous year and the most since 2006.

Banks with assets exceeding $10 billion accounted for almost all of the earnings growth last year. While they make up just 1.4 percent of U.S. banks, they accounted for more than 83 percent of the earnings.

Those banks include Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. Most of them have recovered with help from federal bailout money and record-low borrowing rates.

One reason for the higher earnings is that the banks, especially the largest ones, had set aside huge reserves to offset potential losses in the aftermath of the financial crisis and recession. When the losses from the businesses weren’t as deep in 2011, the banks were able to take large profits just from releasing those reserves.

The basic banking businesses of making loans, financing business plans and investing were hurt by the slow economic recovery and volatile financial markets.

Still, banks are much firmer ground today. Most of them have stronger balance sheets to withstand an economic downturn or a potential global financial shock. They are also better positioned to take advantage of the credit and financial needs of consumers and businesses.

Many of the largest banks complained last year that new regulations mandated by Congress have hurt their ability to make money and moved to charge new fees to make up the difference.

The effort sparked a backlash among consumers and fueled anti-Wall Street protests. Ultimately, the big banks dropped plans to charge customers for using their debit cards. But other fees have remained.

The number of banks on the FDIC’s confidential “problem” list fell in the fourth quarter to 813, or around 11 percent of all federally insured banks. That compares with 844 troubled banks in the previous quarter.

“The industry is now in a much better position to support the economy through expanded lending,” said Martin Gruenberg, acting chairman for the FDIC. “However, levels of troubled assets and problem banks are still high. And while the economy is showing signs of improvement, downside risks remain a concern.”

So far this year, 11 U.S. banks have failed. That’s far below the 92 banks that shuttered last year and the157 that closed in 2010 — the most for one year since the height of the savings and loan crisis in 1992.

Most of the banks that have struggled or failed have been small or regional institutions. They depend heavily on loans for commercial property and development. As companies shut down during the recession, they vacated shopping malls and office buildings financed by those loans.

Bank failures cost the FDIC’s deposit insurance fund an estimated $7.9 billion last year, down sharply from $23 billion in 2010. In the fourth quarter, fewer failures allowed the insurance fund to strengthen. The fund, which turned from deficit to positive in the second quarter of 2011, had a $9.2 billion balance as of Dec. 31, according to the FDIC. That’s nearly 18 percent higher than at the end of the previous quarter.

The FDIC is backed by the government, and its deposits are guaranteed up to $250,000 per account. Apart from its deposit insurance fund, the agency also has tens of billions in loss reserves.



WITHOUT WALL STREET, NEW YORK WOULD BE PHILADELPHIA

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

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I got all choked up reading this story about the poor struggling Wall Street dickheads who are having to make due with millions in bonus money rather than tens of millions in bonus money. Maybe they should create a tax sheltered charity to help these scumbags. I’m sure Mitt Romney would be supportive.

Why Wall Street Should Stop Whining

POSTED: February 8, 11:02 AM ET

By Matt Taibbi

New York Stock Exchange

Everybody on Wall Street is talking about the new piece by New York magazine’s Gabriel Sherman, entitled “The End of Wall Street as They Knew It.”

The article argues that Barack Obama killed everything that was joyful about the banking industry through his suffocating Dodd-Frank reform bill, which forced banks to strip themselves of “the pistons that powered their profits: leverage and proprietary trading.”

Having to say goodbye to excess borrowing and casino gambling, the argument goes, has cut into banking profits, leading to extreme decisions like Morgan Stanley’s recent dictum capping cash bonuses at $125,000. In response to that, Sherman quotes an unnamed banker:

“After tax, that’s like, what, $75,000?” an investment banker at a rival firm said as he contemplated Morgan Stanley’s decision. He ran the numbers, modeling the implications. “I’m not married and I take the subway and I watch what I spend very carefully. But my girlfriend likes to eat good food. It all adds up really quick. A taxi here, another taxi there. I just bought an apartment, so now I have a big old mortgage bill.”

Quelle horreur! And who’s to blame? According to Sherman’s interview subjects, it has nothing to do with the economy having been blown up several times over by these very bonus-deprived bankers, or with the fact that all conceivable public bailout money has essentially already been sucked up and converted into bonuses by that same crowd.

No, it instead apparently has everything to do with the Dodd-Frank bill, and specifically the Volcker rule banning proprietary trading, which incidentally hasn’t gone into effect yet.

He quotes Dick Bove, the noted analyst who last year downgraded Goldman Sachs. Bove’s quote on the bonus sadness:

“The government has strangled the financial system,” banking analyst Dick Bove told me recently. “We’ve basically castrated these companies. They can’t borrow as much as they used to borrow.”

When I read things like this I’m simultaneously amazed by two things. The first is the unbelievable tone-deafness of people who would complain out loud, during a time when millions of people around the country are literally losing their homes, that their bonuses – not their total compensation, mind you, but just their cash bonuses, paid in addition to their salaries and their stock packages – are barely enough to cover the mortgage payments for their new condos, the taxis they take when walking is too burdensome, and their girlfriends with expensive tastes.

The second thing that amazes me is that Sherman is buying all this. I don’t know this reporter at all, and I’m happy to concede that he probably hangs out with more Wall Street people than I do. But I’m still in touch with plenty of people in the business, and I have yet to have any investment bankers crying on my shoulder about how the Dodd-Frank bill is forcing them into generic breakfast cereals.

Now, I’m sure if you put it to them the right way – “Hey, Mr. Habitually Overpaid Banker, do you think Barack Obama and the Dodd-Frank bill are ruining your bonus season?” – you’ll get a good percentage of people who’ll take that cheese and cough out the desired quote.  

But in reality? Please. Wall Street people complain a lot, but in the last six months, the grave impact of Dodd-Frank on bonuses hasn’t even been within ten miles of the things these people are really panicked about. The comments I’ve heard have been more like, “My asshole has been puckered completely shut for four months in a row over this Europe business,” or, “If the ECB doesn’t come up with a Greek bailout package, I’m going to have to sell my children for dog food.”

Bonuses are indeed down this year, especially when compared with the bonuses of recent years, but let’s be clear about why. It has nothing to do with Dodd-Frank. We can posit three other factors:

1. Banks have unfortunately had to give up the practice of simply printing trillions of dollars out of thin air by selling off worthless mortgages for huge profits and/or making millions of synthetic copies of those same worthless mortgage assets;
2. After twice being saved from the execution chamber by Ben Bernanke’s Quantitative Easing programs, which printed trillions of new dollars and injected them straight into Wall Street’s arm, Wall Street was rocked this summer when Helicopter Ben decided to temporarily forestall QE3;
3. Europe, a slightly more than minor factor in the global financial picture, is imploding, causing mass hoarding of assets all over the world, severely impacting the business of investment banks everywhere.

Now, Sherman barely even mentions Europe in his article, which is interesting, because the banks on whose behalf he wails so loudly in this piece have mostly all pointed to Europe as more or less the sole reason for their reduced revenues of late.

Take for instance Lloyd Blankfein and Goldman, Sachs. Lloyd has the most famous reduced bonus on Wall Street – he’s making $7 million this year (it was $12.6 million last year) as his bank, Goldman, had a disastrous fourth quarter. Goldman’s $6.1 billion in revenues was down 30% off last year’s fourth quarter. To what does the big Lloyd attribute this sad development?

“This past year was dominated by global macro-economic concerns which significantly affected our clients’ risk tolerance and willingness to transact,” Blankfein said, “While our results declined as a consequence, I am pleased that the firm retained its industry-leading positions across our global client franchise while prudently managing risk, capital and expenses. As economies and markets improve – and we see encouraging signs of this – Goldman Sachs is very well positioned to perform for our clients and our shareholders.”

Translation: Europe is such a mess right now that all our biggest clients are sitting on their money instead of letting us steal it from them. However, once Europe rebounds, as we expect it to, we will be well positioned to start stealing from them again.

Goldman’s numbers offer a hilarious counterpoint to Sherman’s piece. The bank’s earnings in total for last year were $4.4 billion, down some 65% off of last year’s numbers. Its revenues for the year were down 26%. Despite these bummerific numbers, Goldman reduced bonuses and compensation by only 21%, down to (a mere) $12.2 billion. If the era of outsized bonuses is over, how come the biggest banks aren’t even cutting them to match revenues, much less profits? One could even interpret Goldman’s numbers as a major increase in the size of the bonus pool, relative to earnings.

But what about other banks? Well, Citigroup also saw a drop in revenues for the year (although its net income actually went up, from $10.6 billion to $11.3 billion). But what was most concerning was the bank’s crappy fourth quarter, when it suffered an 11% drop in earnings.

So where did CEO Vikram Pandit lay the blame for the lost revenue? Dodd-Frank? Reduced leverage? Uh, no. He blamed Europe, too:

“Clearly, the macro environment has impacted the capital markets and we will continue to right-size our businesses to match the environment,” Pandit said.

How about JP Morgan Chase? The bank’s CEO, Jamie Dimon, was breathlessly quoted in the Sherman piece, and in fact had this to say to Sherman about the culture change:

“Certain products are gone forever,” Dimon tells Sherman. “Fancy derivatives are mostly gone. Prop trading is gone. There’s less leverage everywhere.”

So it’s prop trading and derivatives that’s the problem? That’s not what Wall Street analysts said, when Chase posted a 23% drop in earnings in the fourth quarter. While Dimon in a Q&A last month did go off on the potential problems the Volcker rule might inspire in the future, he was careful to note that those problems are still very much future problems (“I’m going to put Volcker aside, okay, because that really hasn’t been written yet”).

Instead, virtually every headline about Chase’s fourth-quarter earnings drop pegged Euro troubles. “JPMorgan Chase (JPM) ended a long run of profit gains when it logged a steep drop in fourth-quarter earnings Friday, as weakness in Europe contributed to a decline in investment banking revenue,” wrote Investor’s Business Daily.

The Telegraph commented thusly: “JPMorgan Chase chief executive Jamie Dimon struck a positive note on the outlook for the US economy even as Europe’s debt crisis dragged down the bank’s quarterly profits.”

And Dimon himself seemed to go along with his counterparts at Goldman and Citi in blaming macro troubles for the recent drop, talking about issues with the “current environment”:

The bank’s third-quarter profit fell 4% as its businesses were hit hard by Europe’s financial woes and the fragile recovery in the United States…

“All things considered, we believe the firm’s returns were reasonable given the current environment,” said Jamie Dimon, JP Morgan’s chairman and chief executive.

When I look at the revenue and bonus numbers on Wall Street this year, I see a number of companies that, despite being functionally insolvent in reality and dependent upon a combination of corrupt accounting and cheap cash from the Fed to survive, are still paying out enormous amounts of money in compensation.

In fact, when one considers the lost billions and trillions from the end of the mortgage bubble scam and the expiration of the quantitative easing program, it’s pretty incredible (one might even call it an inspirational testament to the industry’s dedication to the cause of high compensation) that bonuses are even in the same ballpark as they used to be.

***

And all of this is just looking at things from a bottom-line, Wall-Street-centric point of view. Looking at the question from the point of view of an ordinary human being, however, Sherman’s thesis is even more nuts. He’s written a sort of investment-banking version of Jimmy Carter’s “malaise” speech, complaining about a lost era of easy money, when in fact there are two damning realities he’s ignored:

1. He’s wrong. See the above argument about Europe, QE, etc.
2. Even if he wasn’t wrong, which he is, his reaction to the “news” that Wall Street’s outsized bonuses are dropping is all wrong. If it were true, it would be good news, not bad news.

Since 2008, the rest of America has suffered a severe economic correction. Ordinary people everywhere long ago had to learn to cope with the equivalent of a lower bonus season. When the crash hit, regular people could not make up the difference through bailouts or zero-interest loans from the Fed or leveraged-up synthetic derivative schemes. They just had to deal with the fact that the economy sucked – and they adjusted.

This ought to have been true also on Wall Street, but in a curious development that is somehow not addressed in Sherman’s piece, the denizens of the financial services industry managed to maintain their extravagant lifestyle standards in the middle of a historic global economic crash that, incidentally, they themselves caused.

After suffering one truly bad year – 2008, in which the securities industry collectively lost over $42 billion – Wall Street immediately rebounded to post record revenues in 2009, despite the fact that the economy at large did nothing of the sort. The numbers were so huge on Wall Street compared to the rest of the world that Goldman slashed its 4th-quarter bonuses, just so that the final bonus/comp number ($16.2 billion, down from what would have been $21 billion) didn’t look so garish to the rest of broke America.

What Sherman now argues is that Dodd-Frank has so completely hindered Wall Street’s ability to magically invent profits through borrowing and gambling that, unlike those wonderful days in 2009, its fortunes are now reduced to rising and falling – heaven forbid – along with the rest of the economy. Things are so bad, his interview subjects argue, that one is now more likely to make big money going into an actual business that makes an actual product:

“If you’re a smart Ph.D. from MIT, you’d never go to Wall Street now,” says a hedge-fund executive. “You’d go to Silicon Valley. There’s at least a prospect for a huge gain. You’d have the potential to be the next Mark Zuckerberg.”

Once upon a time, Sherman argues, banking was boring. “In the quaint old days, Wall Street tended to earn its profits rather boringly by loaning money, advising mergers, and supervising bond issues and IPOs,” he writes. But then, in the eighties, the business became “turbocharged” when new ways to create leverage were introduced. A sudden surge in credit turned this staid business into the realm of super-compensated superheroes:

Credit was the engine that powered the explosion in bank profits. From junk bonds in the eighties to the emerging-markets crisis in the nineties to the subprime mania of the aughts, Wall Street developed new ways to produce, package, and sell debt to willing investors. The alphabet soup of complex vehicles that defined the 2008 crash – CLO, CDO, CDS – had all been developed to sell more credit.

But all of this leverage led to problems, Sherman grudgingly concedes, and those problems led to reforms, and now Wall Street is being threatened with a return to those “quaint” days of loaning money and supervising bond issues and such.

Such a return is being demanded by the 99-percenters, much-loathed by Sherman’s interview subjects and portrayed as a bunch of ignoramuses who don’t understand where their bread is buttered. In New York especially, it’s the regular people, he argues, who benefitted from all that crazy leverage. Why, without ginormous leverage-generated bonuses, New York would be … Philadelphia!

Consciously or not, as a city, New York made a bargain: It would tolerate the one percent’s excessive pay as long as the rising tax base funded the schools, subways, and parks for the 99 percent. “Without Wall Street, New York becomes Philadelphia” is how a friend of mine in finance explains it.

Sherman then goes further:

In this view, deleveraging Wall Street means killing the goose.

Look, the financial services industry should be boring. It should be quaint. Let’s take the municipal debt business. For ages, it was a simple, dull, low-margin sort of industry, in which banks arranged municipal bond issues and made small but dependable profits as cities and towns financed improvements and construction projects.

That system worked seamlessly for decades, until people like Sherman’s interview subjects suddenly decided to make the business exciting. You know what happens when you make municipal debt exciting? Jefferson County, Alabama happens. Or, on a macro level, Greece happens.

When making a few points on mere bond issues stops being enough, and you have to cook up crazy swap schemes and indices to bet against those schemes, ingenious scams allowing politicians to borrow billions of dollars that they will never in a million years be able to pay back, you might end up getting a few parks, schools, and subways in New York.

But what you get everywhere else is a giant clusterfuck that costs the rest of us years and even more billions of tax dollars to remedy.

This is what the protests are all about – it’s anger that Wall Street has been profiting from an imaginary economy that leaves bankers overpaid, but creates damage everywhere else. Sherman doesn’t get this. He seems to subscribe to the well-worn straw-man position that protesters are simply upset that bankers and financiers make a lot of money. Take for example his view on John Paulson, the hedge fund titan who was involved in Goldman’s infamous Abacus deal:

In October, a thousand protesters stood outside John Paulson’s Upper East Side townhouse and offered the hedge-fund billionaire a mock $5 billion check, the amount he earned from his 2010 investments. Later that day, Paulson released a statement attacking the protesters and their movement …. The truth was, Paulson was furious that the protesters had singled him out. Last year, he lost billions of dollars on bad bets on gold and the banking sector. One of his funds posted a 52 percent loss. “The ironic thing is John lost a lot of money this year,” a person close to Paulson told me. “The fact that John got roped into this debate highlights their misunderstanding.”

Hey, asshole: nobody misunderstands anything about John Paulson. They’re not mad that he made billions the year before, and they’re not happy that he lost money this year. They’re mad that the way he made his money in previous years – which involved putting together a born-to-lose portfolio of toxic mortgage bonds and then using Goldman Sachs to dump them on a pair of European banks, who in turn had no idea that Paulson was betting against them.

At least part of this transaction was illegal (so ruled the SEC, anyway), and all of it looks pretty damned underhanded. And if the benefit to society from this sort of work is the tax money New York City received from the proceeds of this fleecing, well, we’re willing to go without those taxes, thank you very much.

Listening to Wall Street whine about how it is misunderstood is nothing new. It’s been going on for years (often in that same mag). But if Sherman’s piece heralds a new era of Wall Street complaining about how it is not only misunderstood but undercompensated, you’ll have to excuse me while I spend the next month or so vomiting into my shoes.

The financial services industry went from having a 19 percent share of America’s corporate profits decades ago to having a 41 percent share in recent years. That doesn’t mean bankers ever represented anywhere near 41 percent of America’s labor value. It just means they’ve managed to make themselves horrifically overpaid relative to their counterparts in the rest of the economy.

A banker’s job is to be a prudent and dependable steward of other peoples’ money – being worthy of our trust in that area is the entire justification for their traditionally high compensation.

Yet these people have failed so spectacularly at that job in the last fifteen years that they’re lucky that God himself didn’t come down to earth at bonus time this year, angrily boot their asses out of those new condos, and command those Zagat-reading girlfriends of theirs to start getting acquainted with the McDonalds value meal lineup. They should be glad they’re still getting anything at all, not whining to New York magazine.  



 

Read more: http://www.rollingstone.com/politics/blogs/taibblog/why-wall-street-should-stop-whining-20120208#ixzz1lui2OVqM

PUT THEM TO DEATH

23 comments

Posted on 8th November 2011 by Administrator in Economy |Politics |Social Issues

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I particularly like Hammurabi’s code and think it should be used on all bankers that cost the American taxpayer one dime. Kill them. Taleb is great. He doesn’t give a shit what anyone thinks, he just tells it like it is.

End Bonuses for Bankers

By NASSIM NICHOLAS TALEB
Published: November 7, 2011

More than three years since the global financial crisis started, financial institutions are still blowing themselves up. The latest, MF Global, filed for bankruptcy protection last week after its chief executive, Jon S. Corzine, made risky investments in European bonds. So far, lenders and shareholders have been paying the price, not taxpayers. But it is only a matter of time before private risk-taking leads to another giant bailout like the ones the United States was forced to provide in 2008.

The promise of “no more bailouts,” enshrined in last year’s Wall Street reform law, is just that — a promise. The financiers (and their lawyers) will always stay one step ahead of the regulators. No one really knows what will happen the next time a giant bank goes bust because of its misunderstanding of risk.

Instead, it’s time for a fundamental reform: Any person who works for a company that, regardless of its current financial health, would require a taxpayer-financed bailout if it failed, should not get a bonus, ever. In fact, all pay at systemically important financial institutions — big banks, but also some insurance companies and even huge hedge funds — should be strictly regulated.

Critics like the Occupy Wall Street demonstrators decry the bonus system for its lack of fairness and its contribution to widening inequality. But the greater problem is that it provides an incentive to take risks. The asymmetric nature of the bonus (an incentive for success without a corresponding disincentive for failure) causes hidden risks to accumulate in the financial system and become a catalyst for disaster. This violates the fundamental rules of capitalism; Adam Smith himself was wary of the effect of limiting liability, a bedrock principle of the modern corporation.

Bonuses are particularly dangerous because they invite bankers to game the system by hiding the risks of rare and hard-to-predict but consequential blow-ups, which I have called “black swan” events. The meltdown in the United States subprime mortgage market, which set off the global financial crisis, is only the latest example of such disasters.

Consider that we trust military and homeland security personnel with our lives, yet we don’t give them lavish bonuses. They get promotions and the honor of a job well done if they succeed, and the severe disincentive of shame if they fail. For bankers, it is the opposite: a bonus if they make short-term profits and a bailout if they go bust. The question of talent is a red herring: Having worked with both groups, I can tell you that military and security people are not only more careful about safety, but also have far greater technical skill, than bankers.

The ancients were fully aware of this upside-without-downside asymmetry, and they built simple rules in response. Nearly 4,000 years ago, Hammurabi’s code specified this: “If a builder builds a house for a man and does not make its construction firm, and the house which he has built collapses and causes the death of the owner of the house, that builder shall be put to death.”

This was simply the best risk-management rule ever. The Babylonians understood that the builder will always know more about the risks than the client, and can hide fragilities and improve his profitability by cutting corners — in, say, the foundation. The builder can also fool the inspector; the person hiding risk has a large informational advantage over the one who has to find it.

Banning bonuses addresses the principal-agent problem in economics: the separation between an agent’s interests and those of the client, or principal, he is supposed to represent. The potency of my solution lies in the idea that people do not consciously wish to harm themselves; I feel much safer on a plane because the pilot, and not a drone, is at the controls. Similarly, cooks should taste their own cooking; engineers should stand under the bridges they have designed when the bridges are tested; the captain should be the last to leave the ship. The Romans even figured out how to deter cowardice that causes the death of others with the technique called decimation: If a legion lost a battle and there was suspicion of cowardice, 10 percent of the soldiers and commanders — usually chosen at random — were put to death.

No such pain faces bailed-out, bonus-taking bankers. The period from 2000 to 2008 saw a very large accumulation of hidden exposures in the financial system. And yet the year 2010 brought the largest bank compensation in history. It has become clear that merely “clawing back” past bonuses after the fact is not enough. Supervision, regulation and other forms of monitoring are necessary, but insufficient — consider that the Federal Reserve insisted, as late as 2007, that the rapidly escalating subprime mortgage crisis was likely to be “contained.”

What would banking look like if bonuses were eliminated? It would not be too different from what it was like when I was a bank intern in the 1980s, before the wave of deregulation that culminated in the 1999 repeal of the Glass-Steagall Act, the Depression-era law that had separated investment and commercial banking. Before then, bankers and lenders were boring “lifers.” Banking was bland and predictable; the chairman’s income was less than that of today’s junior trader. Investment banks, which paid bonuses and weren’t allowed to lend, were partnerships with skin in the game, not gamblers playing with other people’s money.

Hedge funds, which are loosely regulated, could take on some of the risks that banks would shed under my proposal. While we tend to hear about the successful ones, the great majority fail and their failures rarely make the front page. The principal-agent problem they have isn’t a problem for taxpayers: Typically their investors manage the governance of hedge funds by ensuring that the manager is hurt more than any of his investors in the event of a blowup.

I believe that “less is more” — simple heuristics are necessary for complex problems. So instead of thousands of pages of regulation, we should enforce a basic principle: Bonuses and bailouts should never mix.

Nassim Nicholas Taleb, a professor of risk engineering at New York University Polytechnic Institute, is the author of “The Black Swan: The Impact of the Highly Improbable.” He is a hedge fund investor and a former Wall Street trader.