All this being so, the position of the people who had at least nominal responsibility for what was going on was a complex one. One of the oldest puzzles of politics is who is to regulate the regulators. But and equally baffling problem, which has never received the attention it deserves is who is to make wise those who are required to have wisdom
Some of those in positions of authority wanted the boom to continue. They were making money out of it, and they may have had an intimation of the personal disaster which awaited them when the boom came to an end. “But there were also some who saw, however dimly, that a wild speculation was in progress and that something should be done. For these people, however, every proposal to act raised the same intractable problem. The consequences of successful action seemed almost as terrible as the consequences of inaction, and they could be more horrible for those who took the action. …
The real choice was between an immediate and deliberately engineered collapse and a more serious disaster later on. Some one would certainly be blamed for the ultimate collapse when it came.
===The Great Crash 1929, John Kenneth Galbraith
October 24, 2007
Citigroup and other giant U.S. banks are not imperiled by subprime debt, despite the fact that they own tens of billions of dollars in debt linked to the deteriorating mortgage markets, former U.S. Treasury Secretary Robert Rubin said in Minneapolis on Wednesday “The banks appear to be in fine shape,” he said. “That’s not a problem.”
I think the problem with this SIV issue is that it’s been substantially misunderstood in the press,” said Rubin, who has a considerable personal stake in the fate of Citigroup. The banking firm paid him $17.3 million last year.
===Minneapolis Star Tribune
Consensual Reality is either what exists, or what we can agree by consensus seems to exist; the process has been (perhaps loosely and a bit imprecisely) characterized as “when enough people think something is true, it… takes on a life of its own.” The term is usually used disparagingly as by implication it may mean little more than “what a group or culture chooses to believe,” may bear little or no relationship to any “true reality”, and, indeed, challenges the notion of “true reality”.—- Wikipedia
We devote our intelligence to anticipating what average opinion expects average opinion to be.
==John Maynard Keynes
Are financial markets efficient? Examined through the lens of Complexity Economics, financial markets are an evolving ecosystem of competing trading strategies. Thus, asking whether markets are efficient makes about much sense as asking whether the ecosystem of the Amazon rain forest is efficient. Efficient compared to what?
==Eric D. Beinhocker; The Origin of Wealth
I will admit that, as one who turned radically bearish at the start of 2007, after many years of being the exact opposite starting with the fall of the Berlin Wall, I have been more than skeptical of the Keynesian and central bank lead American and global “recovery”, very likely to the point of losing credibility with my old Wall Street friends, institutional and hedge fund clients.
That caveat being made, my doubts and concerns about the sustainability of a global economic expansion built upon debt and suppressed interest rates has become a conviction. A conviction that we are now entering the final stage of the century long experiment with Anglo-American finance capitalism supported by almost surreal levels of debt, both private and sovereign. I have never been more bearish on financial markets, nor on the prospects for the freedoms of Americans.
A system supported by fractional reserve banking and the buy-it-forward over consumption by consumers and governments alike is ultimately unsustainable. Spurred on by the creatures from England’s Tavistok Institute, Madison Avenue and Jekyll Island, the transition to the moral degradation of consumption as the new secular religion of the masses was to be assured by a highly leveraged credit based system of global finance that could only be made possible by the fractional reserve banking system and fiat currencies.
The little known Tavistock, from which Walter Lippmann and Edward Bernays were birthed to develop the concepts and techniques of propaganda and advertising induced behavioral desires combined with credit based, leveraged consumption would change the dynamics of the capitalist system and undermine the edifices of the Protestant ethic and American familial frugality.
From his perch on Wilson and Colonel House’s Creel Commission and subsequently, America’s Madison Avenue, Bernays advertising propaganda, when combined with the insidious banker created, banker owned and banker controlled Federal Reserve, assured that the American economy and eventually that of the entire worlds, would become addicted to excess consumption and a debt peonage that would eventually consume it. It has become a totally unsustainable system.
Permanent wealth is not created by the wave of a wand of monetary stimulus. It was fun while it lasted, but as all good things come to an end, the inevitable happens. The inevitable has arrived.
The marginal returns of credit and money creation turned negative some time ago and the anemic state of the world economy is testament to this. However, it is not simply that the policies pursued since the start of the final depression of the finance capital era in 2008 are ineffective, it is that these false nostrums have assured that the final catharsis will be multiple times more severe, more disruptive and socially destructive than would have been the case if the natural revulsion of the markets were allowed to take their painful course eight years ago.
Instead, what was essentially a total bailout of the bankers and the crony capitalist class has encumbered America and the global financial system with unsustainable debts, socially dangerous levels of income inequality and an almost complete hollowing out of the middle classes.
How many trillions of dollars could have been utilized to contain the pain and suffering of the masses who, caught in the debt traps of the consume-it-forward advertising and profit driven voracious maw of crony finance capital instead of, once again wasted bailing out the capitalist class, whose transnationalist ends contain limited loyalties to the survival of America?
Look at how Iceland handled their banking crisis, it was the most honest, direct and productive path to take. Iceland did not bail out their insolvent banks and the bankers, and those that knowingly used the complexities of creative finance, the Mobius Wheel of Wealth Creation that the credit/debt paper chase had become, instead they were sent to jail.
In America the tax dollars used to bailout finance capital were those not taken from the people at the time, but from future generations. The holders of the promises to pay to finance the coffers of the banker class may never be paid back with anything remotely of the values anticipated when assumed.
If all of those firms in danger were allowed to collapse, the pain would have been severe but, as with the banker orchestrated panic of 1907, the recovery would have arrived more quickly than one would imagine and it would have been based on a far more solid footing. No matter the perceived fairness of debt repudiations, the likely effectiveness of the cleansing process would, if accompanied by systemic changes to the banking architecture, provide for a sustainable recovery that benefited vastly more Americans than what has subsequently occurred.
It would also have been a very constructive step in ameliorating the massive disparities in wealth in America. There would have been blood on Wall Street, but relief on every other. But the Federal Reserve, keeping to its real mandate as the bankers bank pursued policies to benefit from not only the bailout, but the ongoing absurd policies of the Federal Reserve accrued to the sole benefit of capital, all at the expense of the retired, pension funds and the disappearing middle class.
The cards were played as they were and the finance capital class received most of the benefits, but from the very start of the bailouts and quantitative easing, it is hard to believe the recipients of taxpayer largess were not very much aware that the deck would soon play out, that the game would eventually end and end very, very badly.
The formerly revered Goldman Sachs senior partner, the former Treasury Secretary and Citigroup Chairman, Robert Rubin and practically every one of the major players in the financial con game, lied about the state of the risks of financial collapse in 2007 in order to cloak reality to the public and buy time. Time to devise mechanisms to shift the risks and the costs away from themselves and their financial institutions upon the backs of the American public. To believe that an outbreak of honesty has gripped Wall Street and Washington today would be an egregious denial of reality and could end up destroying any remaining wealth you wish to preserve.
I have said this for over a year; the game is over and the coming collapse is going to be far, far more severe than any we have likely ever experienced—ever in the history of America and that of the era of finance capitalism.
Get the hell out of equities and do all you can to protect your assets, gold will help, and your families. The absurdity of the talking heads bouncing about on your televisions has never been more surreal–do not believe them, do not believe statements of solace out of Washington…this is the big one, we may not recover with a capitalism or a government anything like we have had in the past.
If we are willing as a people and a nation to let the natural course of events unfold with only attempts to cushion, as best we can, the ensuing pain and democratically address the critical issues, we may have a chance. However, wealth and power will not lay down their privileges willingly. Thus, the most likely path for our future is increasing government controls and restrictions with the imposition of a far more intrusive police state. In fact, the coming turmoil is likely to lead to a more traditional form of fascist tyranny in America and the death of freedom.
Albert Edwards Hits Peak Pessimism: “S&P Will Fall 75%”, Global Recession Looms
Edwards bemoans the lunacy of going “full-Krugman” (which regular readers know you never, ever do): I have always said that if inflating asset prices via loose monetary policy were the route to economic prosperity, Argentina would be the richest country in the world by now and it is not!
The Fed’s pursuit of negligently loose monetary policies since 2009 is a misguided attempt to boost economic growth via asset price inflation and we will now reap the whirlwind (the ECB, Bank of Japan and the Bank of England are all just as bad). One of the main problems has been the overconfidence with which the Fed pursues their objective.
Yet in the run-up to the 2008 Global Financial Crisis they demonstrated their lack of understanding of the disastrous impact of excessively low Fed Funds. Even in retrospect they remain in denial – as evidenced by Bernanke’s recent book. Why can’t these incompetents understand that they are, once again, the midwife to yet another global unfolding economic crisis?
But unlike 2007, this time around the US and Europe sit on the precipice of outright deflation. Next, after reiterating that the “impossible trinity” is called “impossible” for a reason, Edwards talks the RMB and exported deflation:
Oil could crash to $10 a barrel, warn investment bank bears – Telegraph
Oil could crash to $10 a barrel, warn investment bank bearsPetrol prices could fall back to levels last seen in 2009 as major banks say there is no bottom in sight for the world’s lopsided market.
Excellent Piece and Worthy Read!
Why did Rome and Byzantium fall apart after centuries of success? What causes civilizations to collapse, from a dysfunctional 4th-century-B.C. Athens to contemporary bankrupt Greece?The answer is usually not enemies at the gates, but the pathologies inside them.What ruins societies is well known: too much consumption and not enough production, a debased currency and endemic corruption.Americans currently deal with all those symptoms. But two more fundamental causes for decline are even more frightening: an unwillingness to pay taxes and the end of the rule of law.
Al Sharpton is again prominently in the news, blaming various groups for the Baltimore unrest. But Sharpton currently owes the U.S. government more than $3 million in back taxes, according to reports. His excuses have ranged from insufficient funds to pay them to sloppy record-keeping and mysterious fires.Sharpton, a frequent White House guest, apparently assumes that his community-organizing provides him political exemption from federal tax law. He seems to be right, at least as long as the current administration is in power.
The Clinton Foundation is expected to refile its tax returns for 2010, 2011 and 2012 after failing to separate government grants from donations. If an average citizen tried to amend his taxes for such huge sums and from that long ago, he would probably be under indictment.
The Tavistock Institute for Human Relations has had a profound effect on the moral, spiritual, cultural, political and economic policies of the United States of America and Great Britain. It has been in the front line of the attack on the U.S. Constitution and State constitutions. No group did more to propagandize the U.S. to participate in the WWI at a time when the majority of the American people were opposed to it. Much the same tactics were used by the Social Science scientists at Tavistock to get the United States into WWII, Korea, Vietnam, Serbia and both wars against Iraq.
Tavistock began as a propaganda creating and disseminating organization at Wellington House in London in the run-up to WWI, what Toynbee called “that black hole of disinformation.” On another occasion Toynbee called Wellington House “a lie factory.” From a somewhat crude beginning, Wellington House evolved into the Tavistock Institute and went on to shape the destiny of Germany, Russia, Britain and the United States in a highly controversial manner. The people of these nations were unaware that they were being “brainwashed.” The origin of “mind control,” “inner directional conditioning” and mass “brainwashing”