Let's start with one Jeffrey Garten, writing in Newsweek, who opined:
"If George W. Bush's upcoming global summit on how to fix the world's broken financial system—an event proposed by several European presidents and prime ministers—is to be a serious effort, the leaders should begin laying the groundwork for establishing a global central bank.
The idea of such an institution would have been a political nonstarter before the current debacle. The crises of the last several decades—the Latin American debt meltdown in the early 1980s, the stock-market crash in 1987, the savings and loan collapse of the early 1990s, the Asian financial blowup of the late
1990s, the Internet-stock collapse earlier in this decade—did not involve the extent of global linkages among financial institutions or the mind-boggling consequences of complex securities that we are seeing today. In none of these previous blowups did the global credit system shut down, as it did in recent weeks; in none did governments in both the industrialized and developing world intervene so massively, coming close to nationalizing the entire global banking system."
Whatever you paid for your "education" and however Yale managed to put you in their post, it simply documents the worthless nature of both, "Professor".
Let us take a trip through history - recent history.
- The IMF already has the ability to "sound alarms." Has it? Why not?
- Nation-based central banks have enabled the serial bubble-blowing, excess leverage and fraudulent, opaque accounting that created this mess. Any or all of them could have stood up and stopped it within their borders. Not one central bank did so.
- There is absolutely no reason to believe that any such "global" central bank would have any different outcome. In fact, we have every reason to believe it would make the situation demonstrably worse, as it would have effective veto power over the actions of a given nation's central bank (or it would be as toothless as the IMF)
Make no mistake - Ponzi finance has been both national and international policy for the last 20 years. 30x capital? Try 60x over in Europe. They make the US look like Pikers when it comes to debt-to-capital ratios.
You have to look at why such a structure would be allowed to exist, even though every one of these people is a degreed professional and most have PhDs as you claim, sir.
Its really quite simple - most of America (and most of the rest of the world) doesn't understand basic mathematics, and therefore has no chance of defending itself against this sort of outrage. You can lay that at the feet of our educational systems if you wish but the fact remains that the capacity to understand leverage and how it can kill you deader than a field mouse in a trap is beyond 90% of Americans and essentially 100% of the uneducated.
But the lure of that excess leverage is ever-powerful and always will be. Why? Its simple, really, although its not as sinister as some would make it out to be.
Quite simply, it is through that excess leverage that the banks are able to crank up their "earnings" and thus their bonuses to both executives and employees, along with stock prices.
Everyone loves a roaring stock market, right?
It doesn't matter (to the bankers who stole all the money) when the bubble bursts and ordinary Americans lose their retirement savings. Heh, we've only done it twice in the last fifteen years or so, and I've only witnessed it twice, once from the inside as the CEO of an Internet company.
I raised hell then and nobody cared. Now I'm doing it again - how long before "we the people" gets*****ed off enough to do something about this serial and intentional act of robbery?
I don't know, but I suspect we're going to find out.
How do you keep it from happening?
Really, its not that hard.
You force transparency. From top to bottom. 100%. No exceptions. You use existing laws to declare that anything but 100% transparency with all transactions for derivatives and other securities taking place on a public exchange is considered an act of fraud and lands you 20 years in the hoosegow.
No SIVs, no fancy derivatives, no off-balance sheet anything, no Level III "assets". Leverage ratios must be published every quarter in your reports against actual Tier 1 capital, which is defined as cash reserves and the sovereign debt of the nation in which you operate, nothing more or less. No MBS, no CDOs, no CDS. I don't give a tinker's damn what the "rating" is on the security, if its not a Treasury Bond, Bill, or outright cash its not Tier Capital. Period.
Next, reserve ratios are set by law within a nation with no exceptions. Let the market decide within a nation as to whether people want to trust a nation's reserve ratios as "sufficient" or not. Its none of my damn business whether Britain's reserve ratios are adequate, but it sure as hell is their business.
Finally, no more swap line garbage. If you can't manage to run your own affairs then you deserve to have your currency and nation implode. You can ask, but you can't demand, and foreign Central Banks should be enjoined by law in their own nation from extending any such foreign rescue without explicit authorization of their legislature for each and every instance in which it is provided, and for a specific term in each case.
You do those things and 99% of this crap goes away instantly. People are forced to live within their means, including governments.
And the fraud - all of it - gets flushed.
If executives in Internet companies had gone to jail when they pulled this crap originally, we wouldn't have had an internet bubble. If we had 100 bankers in prison right now wearing wide pinstripes, we wouldn't have had this bubble.
But we also wouldn't have had an overheated stock market with "valuations" based on "earnings" that were built on a foundation of sand and fraud.
Go have a look at the S&P 500 from 1995 forward. Notice anything?
1995 was when the first batch of fraudsters started pulling their crap.
2003 was when the housing bubble, with all its fraud and lies, took hold.
None of this is surprising. Robbery works great to goose earnings until you either run out of suckers or safes you can rip off. Then that "business plan" collapses and everyone who thought they were buying into the "next great thing" winds up with nothing.
As for you Mr. Garten? Your PhD needs to be revoked and if you're considering Yale for your kid, or you are considering Yale yourself, choose somewhere else.
I recommend you pick an "educational institution" sporting professors that are capable of logical reasoning and accurately reflecting on how society got into a mess in the first place, instead of pontificating on "solutions" that would make a present mess 100 times worse and implode the entire world's financial system instead of just part of it when the next episode of fraud is willfully ignored for ten more years.
(This, by the way, is also why you never let academics like Ben-cough-Bernanke-cough-cough run real world institutions that have a function critical to an orderly society. Their utopian view of the world always leads them to make errors like this with disastrous results. Instead the wise leader picks someone who's seen the worst of the crap that the fraudsters can and will dish out and can stay at least even, if not one step ahead, of those clowns.)
On to Chris Dodd who was quoted by Mr. Nocera as saying:
"He continued: “If it turns out that they are hoarding, you’ll have a revolution on your hands. People will be so livid and furious that their tax money is going to line their pockets instead of doing the right thing. There will be hell to pay.”"
Dodd, you're a jackass.
You were explicitly told by thousands of Americans, myself included, in multiple faxes and petitions stretching over more than a year's time that this was exactly what was going to happen if you tried to "bail out" Wall Street.
That the money would not be used to make loans and wouldn't do a damn thing for Main Street. That in fact the only solution that will work is full, 100% transparency.
Guess what? We (all of us in America) were right and you were wrong.
Now man up you two-bit piece of crap and get on television demanding the repeal of the EESA/TARP law so that we the people don't get robbed for ALL of the $700 billion. Demand introduction and passage of a bill immediately de-funding Treasury's garbage dump.
Congress can do this whether Bush and Treasury like it or not.
After all, we now know for a fact that $70 billion will go to bonuses and most of the rest of the original $250 billion will go to shore up balance sheets and fund acquisitions - not help Main Street or homeowners.
How do we know?
Because the banks have admitted it:
"“loan dollars are down significantly.” He added, “We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side.” In other words JPMorgan has no intention of turning on the lending spigot."
It's time to man up and admit you screwed the taxpayer with your phony-baloney $700 billion "bailout' that was and is in fact being used for exactly one purpose - to line the pockets of the bankers.
SENATOR DODD: Be a man, step to the microphone here and now, admit you were bamboozled and then introduce emergency legislation to repeal this piece of dogsqueeze legislation or be branded forever as the fraud and phony that you are, suffering the justified slings and arrows from both your constituents and the nation as a whole for cheer-leading a piece of legislation that has screwed raw every American while enriching your banking buddies.
Finally, reality:
The Treasury TIPS auction today was a disaster. The market is sending Treasury and Congress a very strong warning that you both better cut this crap out or the Treasury market may dislocate, ending the party for America entirely.
If you want to know where that nasty selloff came from in the market late this afternoon, you just found the reason.
We now sit right on the precipice of a critical break of technical levels in the market - if they fracture (and they must be expected to do so, possibly as early as the overnight hours and/or tomorrow morning) the expected move is 2,000 - 3,000 points on the DOW - straight down.
Make sure you thank Paulson, Bernanke and Congress if you have another 30% wiped off your 401k (that is now a 201k!) - they have earned your loving, polite comments.
I'll have an update to the T-Shirt (and a sweatshirt) for those who would like to express their opinion while walking around town - or to the polls.
(Before you ask, in the interest of full disclosure, I make nothing - zero - off those shirts or any other mechandise at that site. They're a public service, not a profit center.)
