Tuesday, March 17, 2009

A Touch of History

An Anonymous blogger has left a comment in the remarks section that I thought needed more exposure. AIM (An Inquiring Mind) is his byline. His thoughts adds some organization to what we have been discussing. Here is his post:

We've been on shaky ground and developing all sorts of systemic diseases for over a century due to operating with a central banking system controlled by The Fed, following Lord Keynes theories; income tax, going off the gold standard, totally utilizing a fiat currency, allowing politicians, lobbyists and the military industrial complex to dismantle our economy. Yet, as far as causality goes for this recent episode, here is my understanding and take on it:

It started with the Carter administration and the Community Reinvestment Act ("everybody should have a home and we'll lend you the money to buy it"). Clinton and Bush expanded it in their administrations.

Then we had the tech or dot com crash, a recession and the 9/11 terrorist attack. So, Greenspan lowered interest rates for a very long term. He created very cheap money. Lenders started coming up with all sorts of mortgage structures to facilitate home sales (ARMs, option ARMs, interest only loans, stated income only loans, etc.) They dropped all protective guidelines and standards because they were able to transfer the risk... they packaged and sold them to Wall St.

Wall St. with their new flock of financial engineers securitized these mortgages (as well as credit card, auto and student debt) in the form of CDOs, MBS's, SIVs, etc. and sold them off to every far corner of the world. They also transferred the risk to pensions, mutual funds, money market, hedge funds, etc. The credit agencies gave them falsely high ratings. Congress passed or rescinded laws in order to increase leverage, allow banks to become investment banks, create derivatives. The SEC allowed some to leverage at 40 to 1.

Then the bubble floated into a pin and popped. Beginning the financial collapse and cascade of trouble that we are now enjoying. Continuous and erroneous policies have been implemented as the solution (TARP, TALF, TLGP, TSLF, SLF, PDCF, HAM, ETC. ETC. ETC. ETC.) and they are being continued in the Obama administration. The fallout is historic: foreclosures, bankruptcies, commercial RE, debt destruction, unemployment, etc. etc.

There is a worldwide attempt to deleverage, restructure, and recapitalize. The International New World Economy boys see their chance to move things in their direction now, and will attempt to do so (under the "capitalism doesn't work" guise).

Our current administration has no focus or certainty. They go from one emergency or fire to the next. This is traumatizing the markets. We have a tsunami of trouble: zombie banks, zombie homeowners, key drivers of the economy are crashed, energy and food problems in the near future, etc. etc. And our government is basically running in the wrong direction with every solution they implement. They have no idea what other complications or collateral damage they are causing in our near and distant economic future.

The guys that caused this or allowed it to happen (Bernanke, Geithner, Summers) are now in charge of fixing it?! Many more explosions are yet to come. Due to this, there is really no way to predict where things are going and what will happen.

We've been forced into a situation of instability and inability to predict. We have to live week to week, month to month and can't rationally plan beyond these short time frames. The government is PUBLIC ENEMY #2. We are PUBLIC ENEMY #1 for allowing our government to grow into what it is and our politicians and corporate leaders to run astray.

More basic to this all is human nature. Once the government, wittingly or unwittingly, removed a significant amount of restraints the people went hog wild. Greed, something for nothing mentality, the party mentality, debt mentality, etc. all flourished and blossomed within the Capital building, the White House, Wall St., the halls of corporate America, the banks, the lenders, the shadow banking system, Main St. and in our own homes.

Hell, we are all to blame. Now we need rationality more than ever. Where is that going to come from?

3 comments:

Rob in NS said...

Where's it going to come from, well speaking from personal experience nothing focuses the mind like an empty stomach.

Rob

Anonymous said...

As regards insanity, here are the newest cases in point...

1.
The lead economist for Citigroup, you know... the bank that is falling apart and basically a zombie bank... has just been appointed to the Treasury Department to assist Geithner with his programs. Before this guy was with Citi he was with the Federal Reserve.

Let's bring a guy in from a failing bank who is also deeply imbedded in the system and programmed in the Keynesian way of thought (Fed Reserve). Wow! can it get any crazier?

(No need to answer. That was a rhetorical question.)

2.
Government discovers that AIG just spent 165M of its bailout money on bonuses to present and past executives and sales people. They've also set aside millions for exit packages for future layoffs. So, how does the Treas Dept handle this display of fiduciary irresponsibility, lack of ethics, and poor financial management? Geithner, as "punishment", is going to deduct the 165M from the next 30B bailout amount that he is giving them. Wow! can it get any crazier?

(No need to answer. That was a rhetorical question.)

The American citizen/taxpayer and their children, grandchildren, great grandchildren, great great grandchildren and so on, are being put into debt so that bank executives can be given huge bonuses (for poor performance) and drive back and forth, in their Bentley's, between all the homes they own.

Didn't the French separate people from their heads for this sort of behavior?

Will a large enough percentage of Americans ever be cognizant as to what is happening right under their noses in order to do something about this greatest transfer and theft of wealth?

THELOUISIANAEXPLORER said...

Good post, this is very good. Things were bad, real bad in the 20s and 30s. There's a book just out that identifies an individual that sacrificed everything to support the laboring class in Louisiana and across America. He took on the Roosevelt administration and fought the Banckhead act and called for the removal of Hugh Johnson as the head of the NRA. Read more about the man at www.thomastfieldsjr.com Names such as Long, Roosevelt, Farley and Lech are found throughout the writing.