Now that the bank lobbyists are nearly finished neutering the financial reform bill, it's time to face reality: our financial world will continue to be run by the very financiers who crashed the system two years ago. The bankers' arguments ricocheting through the halls of Congress make it seem as if our financial system is basically rational and sound -- that only a few flaws need fixing. That's lunacy. Our bright bankers may be rational as individuals, but collectively they perpetuate a fractured system gone utterly mad... and getting madder every day.
So the financial insanity will continue, with such psychotic outcomes as these:
1.Our pensions and 401ks will continue on their roller coaster ride, driven by market chaos and high-speed computer cacophony. Last week, the automatic trading programs our financial geniuses invented sent the Dow into a one-hour, 1,000-point freefall. Thank goodness it was only one hour. Two would have set off a global panic. No one is sure what happened or why. But don't worry, we're told. The glitches will be fixed and all will be well. (Just as a little technological tinkering is sure to prevent another offshore oil disaster too--not a problem!) In a saner world we would be asking the obvious: Does that high-speed trading serve the needs of our people, or is it just another high-risk strategy to enrich the largest and most connected investors?
2. Big financial institutions, now fully assured that they are indeed too big to fail, will continue to dominate both finance and politics. Anyone in their right mind knows that allowing five or six banks to control our entire financial system is a recipe for disaster and a major threat to democracy. What's the excuse for this form of madness? Well, we're told, during the Great Depression 4,000 banks failed (including lots of little ones), which proves that size doesn't matter. Please help me with this logic: Many banks failed and caused the Great Depression. A few big banks failed and caused our recent Great Recession...Therefore big banks are better? (Somebody flunked their Logic 101 class.) Here's what our experience tells us. Banks, both big and small, when left to play out in the street unsupervised, often end up at the casino tables-- gambling with our money. Big banks are an even bigger risk, because they have the power to gamble with our democracy as well.
3. We'll continue to pay top hedge fund managers 26,000 times more than we pay teachers. This goes back to a question I asked in an earlier post: Are 25 hedge fund managers worth 658,000 teachers? Apparently they are, since that's what they netted in 2009 during which they enjoyed the benefits of our $8 trillion (not billion) bailout. We rescued every hedge fund and bank, but left more than 30 million Americans scrambling for full-time work. This soaring unemployment caused tax revenues to tank, touching off fiscal crises in nearly every state. So governments dramatically cut spending and axed tens of thousands of teachers. The ultimate losers? Public school kids all over the country who were hoping for a good education. The winners? The bankers who caused the crisis. Even during the worst year since the Great Depression.--the sun was still shining on Wall Street, with a $150 billion bonus pool and a billion dollars each for the top 25 hedge fund managers. We put no windfall profits taxes on those billions, even though the money came directly from the U.S. treasury in the form of bailouts. We even allowed that income to be taxed at lower capital gains rates. That's rational?
4. Little countries that falter, like Greece, will continue to put the whole global economy at risk. We're told that the Greeks have only themselves to blame: They retire too early, drink too much retsina and often break into dance without warning....all on borrowed money. Yes, they broke the EU's debt limit rules. But they had a bit of help from Goldman Sachs, which made hundreds of millions of dollars in fees for creating complex derivatives to "help" the Greek government hide their debt. And yet Congress still refuses to regulate these scary financial items because they are "customized." Of course it was the global crash begun by our big banks that sparked the Greek fiscal crisis in the first place. In a sane world, the largest banks and the wealthiest investors in Greek debt (who caused the crash in the first place) would be forced to make reparations for the damage they caused. Instead, we have to make the Greeks stop dancing? Sicko.
5. The deficit hysteria drumbeat will build to a deafening crescendo. Forget about taxing the super-rich--we've got to cut benefits for working people instead. Respected journalists like New York Times columnist David Leonhardt warn us that we're all living beyond our means. It's time to tighten our belts or we'll end up like Greece. No more tax breaks for health and housing. We've got to retire later, with less money, and cut our medical expenses. And our wages have to become more "competitive." But who is "we"? Where are all these high-living people? The average non-supervisory production worker in America (about 75 percent of the workforce) has already seen an 18 percent drop in real wages since the mid 1970s. Meanwhile productivity increased by more than 90 percent. Yet now we've got to tighten our belts? Where did all that money from the higher productivity go, if not to us? No surprise here: into the hands of the few.
It all goes back to that most glaring symptom and cause of our psychosis: our insane maldistribution of income, which gets worse and worse every year. The richest 1 percent of Americans now earn more than the bottom 50 percent. Back in 1973, the richest 1 percent of earners collected 8 percent of the national income. By 2006, the top 1 percent got nearly 23 percent of the national income -- the highest proportion since 1929. Or look at the pay gap on the job: In 1970, the top 100 CEOs earned 45 times more than their workers, on average. In 2009 the ratio was 1,071 to 1.
Here's an example of what this maldistribution is costing us: The top 400 richest Americans have a combined wealth of more than $1.3 trillion. And that's enough money to endow every public college and university in the country so that students could attend tuition-free in perpetuity. (Hopefully some would decide to graduate before then.)
We need to return to Eisenhower era tax rates: 91 percent on those earning over $3 million in today's dollars. The money would roll in, and the deficit hawks would sound like parakeets.
The ultimate insanity of our current moment is that the richest investors and the largest bankers in the world just crashed our system, got bailed out by taxpayers, grew even larger, and now are back to earning record profits and bonuses. They caused the biggest jobs crisis since the Great Depression and drove the entire global economy into a ditch--and they could do it again any minute. And now they're telling us to tighten our belts and act more responsibly?
Here's the good news. The American people sense something is really wrong. They're angry at Wall Street and anyone in its pocket. It's taken a while, but the truth is seeping in. The angry public forced Congress to bring those squirming bankers into their hearing rooms. Unfortunately, Congress caved when it came to actually passing a strong reform bill that would bust up the biggest banks, end windfall profits and curb the gambling. Too bad the average citizen has no way to register his or her anger except to vote the "ins" out. Since. both parties are largely in the pocket of the financial industry (and other industries), it's hard, if not impossible, to be optimistic about the new "ins."
Imagine if we could vote for something like a jobs and environment party, free from Wall Street's money, that was dedicated to putting ALL of our people to work building a truly sustainable economy? Now that would be really insane.
Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It Chelsea Green Publishing, June 2009.
Follow Les Leopold on Twitter: www.twitter.com/les_leopold
The powers that be have control and support of a compliant media, they have already recruited private armies ( Black water etc.) , laws like the Patriot Act and recently the Supreme courts give away to big business to openly by Congress.
After 40 years of 4-6 hours of propaganda TV per day very few people have the will to do more than mildly protest .
In the analogy of the "boiling frog" Americans are already cooked and they do not know it !
"The term and meaning of a Resource-Based Economy was originated by Jacque Fresco. It is a system in which all goods and services are available without the use of money, credits, barter or any other system of debt or servitude. All resources become the common heritage of all of the inhabitants, not just a select few. The premise upon which this system is based is that the Earth is abundant with plentiful resource; our practice of rationing resources through monetary methods is irrelevant and counter productive to our survival.
Modern society has access to highly advanced technology and can make available food, clothing, housing and medical care; update our educational system; and develop a limitless supply of renewable, non-contaminating energy. By supplying an efficiently designed economy, everyone can enjoy a very high standard of living with all of the amenities of a high technological society.
A resource-based economy would utilize existing resources from the land and sea, physical equipment, industrial plants, etc. to enhance the lives of the total population. In an economy based on resources rather than money, we could easily produce all of the necessities of life and provide a high standard of living for all." http://www.thevenusproject.com/a-new-social-design/resource-based-economy
- The cause of the 30 minute self correcting plunge has yet to be determined
2. Big financial institutions, now fully assured that they are indeed too big to fail, will continue to dominate both finance and politics
- "too big to fail" - better known as moral hazard is not sufficiently addressed in this bill & that will sow the seeds for the next crisis
3. We'll continue to pay top hedge fund managers 26,000 times more than we pay teachers.
- The private sector clients of hedge fund managers pay their salaries; taxpayers pay (public) teachers salaries - what's the connection? More importanly, who cares what the difference is?
4. Little countries that falter, like Greece, will continue to put the whole global economy at risk.
- just wait until the 6th largest economy in the world (CA) falters...
5. The deficit hysteria drumbeat will build to a deafening crescendo.
- as it should. Flatten and simplify marginal tax rates. Substantially cut the military and entitlement budgets, repeal Obamacare, jettison the departments of HUD, Energy and Education.
"Wealth redistribution", which is the polite name for socializing outcomes is a sure path to economic stagnation and lower living standards. The less we pursue those policies, the better for America.
The politics of envy and greed produce bad economic policies that (as most government actions) produce the exact opposite of intended
This country has been through worse than today! Look at the depression, Did we not recover? The safety nets set up during this era, probably stopped this situation from getting worse. The Law of the Jungle, belongs in the Jungle. This is Civilization, without which we would have nothing but chaos.
How did we reach the pinnacle of the world with ALL THOSE “ENTITLEMENTS”?
Our problem is more of a demographic one, the population is aging. The Boomers are past their peak spending years. They are starting to save for retirement or retiring. We CANNOT escape this. The last time we faced the same demographic situation was in 1928. Japan has already experienced this in the 1990’s.
Anything else is a just a Red Herring…
We are facing the end of 5 cycles almost simultaneously, a Spending cycle, Technology cycle, Commodity cycle, Housing and a demographic one. We’ll survive, and in the end there will be more entitlements and we will see deflation. Taxes will go up. Weak companies will die. Assets will depreciate and debts will just disappear… In the end the general population will once again be able to afford to live on what they make. You can fight it, or accept it and make wise economic decisions by understanding it.
Government spending has bounced around 17-18% of GDP for decades. The past few years it's risen to 20-21%, and BHO's budget forecasts spending approximating 25%-28% of GDP. The massive deficits being projected are caused by profligate government spending. This spending pulls capital out of the private sector, which slows and reduces GDP growth, which in turn reduces taxable income.
Supply side economics calls for flattened/low marginal tax rates AND responsible government spending levels (Freidman recomended Fed spending at a max of 15% of GDP).
Just doing half the work will not promote prosperity (can't drive a car by only turning left and expect to get anywhere)
As long as the focus is on economic justice, opponents of reform can mock reform as simply a way for unsuccessful people to wage class warfare against rich people (whom Republicans always regard as successful, even if the riches were acquired through a bailout in response to an abject failure).
Progressives need to point out that without reform, U.S. national security will be in jeopardy. Computer systems must be made secure. Our most talented people are needed for productive work in green technology and security enhancement, not unproductive stock trading. Regulators must be able to see patterns of suspicious trades, so the pace of trading must be slowed down. Shortly after 9/11, wasn't cracking down on financing of terrorists a big priority?
Absolutely. Thanks for writing this.
I have a friend who is a conspiracy theorists, and puts The Fed at the middle of It All. He was all smiles the other day, after the 96 - 0 Senate audit vote. But to his credit, he didn't say 'I told you so.'
The tide, and, more importantly, the Realization, are turning. Those who were once laughed about as 'gadflys', are finally being heard.
And who is John Galt2?
"But, I have no option other than letting the big conglomerate push me around" - the politics of victimology are heavily intertwined with the politics of envy and greed...
"WHAT BUSINESS IS WALL STREET IN?" by Mark Cuban
http://seekingalpha.com/article/204160-what-business-is-wall-street-in
The ENTIRE FINANCIAL SYSTEM of our NATION is now at the mercy of a tribe of spiritually adolescent morally corrupt FINANCIAL "HACKERS" with NO END IN SIGHT and no one in EITHER political party with the guts to defend the everyday people who built this country. God help us!! We are in very, very big trouble.
Everyone keeps talking about “Wall Street” but like everything is existence “Wall Street” has a creator and enabler, the banks are the creators and their fractional reserve system is the enabler. Wall streets’ creators have given it a free pass beyond reality. Do some research and discover how much your bank is leveraged, and then discover what that really means. If you purchase a home for $200.000 and pay 25 % down you have leveraged yourself into a $200.000 dollar asset, but you don’t own it and could eventually lose your $50.000. The higher the leverage your bank carries the greater the debt they have. But wait, if they are in debt more than their assets how can they loan money? It’s called fractional reserve banking, they can loan many more dollars at interest than they really have.
http://betterexplained.com/articles/understanding-debt-risk-and-leverage/
CRASH COURSE IN ECONOMICS 101 - 21 VIDEOS (4 HOURS)
http://www.chrismartenson.com/crashcourse
ELLEN BROWN EXPLAINS THE LAST 350 YEARS - 5 VIDEOS
http://www.youtube.com/watch?v=QU0XiklHPMc
http://www.webofdebt.com/
http://webofdebt.wordpress.com/
DOUGLAS RUSHKOFF EXPLAINS THE LAST 500 YEARS - 1 VIDEO
Life Incorporated: How The World Became A Corporation, And How To Take It Back.
by Douglas Rushkoff
http://lifeincorporated.net/
STUDY THE HISTORY OF THE 300 YEAR OLD FRACTIONAL RESERVE BRITISH BANKING SYSTEM MODEL THAT STILL RULES US TODAY - 5 VIDEOS
http://www.youtube.com/watch?v=vVkFb26u9g8
CATHERINE AUSTIN FITTS: HER PERSONAL STORY
http://dunwalke.com/
Catherine Austin Fitts on Goldman Sachs (06/09)
http://www.youtube.com/watch?v=PbjPHwBVCSU
Catherine Austin Fitts IRTA Barter Convention (09/08)
http://video.google.com/videoplay?docid=-5455605137215634518#””””
http://www.dunwalke.com/introduction.htm
Congratulations of the highest sort to you, Mr. Leopold, and keep up the good work!
See if you can get this on the President's desk and on the desks of all those Senators and Congresspeople who do not seem to have a handle on the real situation. It might wake a few of them up.
I'll be buying your book this week.
Count me as a Les Leopold fan!
A sound, healthy financial system and investment system for society relies on long-term investment. We do not want a casino style financial system, or a complex one. Just keep it simple, and keep a level playing field for all American investors. Nothing fancy!
If only they could realize the severe damage it has done.
http://blogdredd.blogspot.com/2010/05/on-loss-of-touch-with-reality.html