Letters to the Editor
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And it Looks to be Happening Again ...
Just look at the Board Members for The Clearing House LLC ... The banks that own 97% of all derivatives held by banks.
http://investing.businessweek.com/businessweek/research/stocks/private/board.asp?privcapId=4504437
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Sounds like...
It also sounds like what Al Gore was telling Congress in the 70's about the global warming. Except instead of gambling with taxpayers money, this time they're gambling with the survivability of whole world.
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Well the problem with derivatives is that no one really knows what they were ever worth
They didn't care for good long time, now someone wants to get paid. And no one really knows if they have any value at all. It could be zero. Which wouldn't crush the banking system but it would deliver a staggering blow. Salon readers might be licking their lips at that prospect but it would be a global phenomenon. Middle class people would certainly catch it in the neck. Whereas poor people in the US and elsewhere would literally get run over with a train. We would see hundreds of millions of people added to the rolls of the marginal poor world wide.
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If you doubt this look in the history of cotton farming in India
when that market crashed thousands of people committed suicide.
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@Electro Robot
Middle class people would certainly catch it in the neck. Whereas poor people in the US and elsewhere would literally get run over with a train. We would see hundreds of millions of people added to the rolls of the marginal poor world wide.
So what do you think we should do? The government's current plans seem to call for changing Wall Street's diaper, assuming much of their bad debt, and letting them continue as before.
I think that Wall Street needs some adult supervision, and also that they should pay more taxes.
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I guess this country just has no collective memory
Wars, high finance...pick your topic, doesn't matter. We keep making the same f#king mistakes over & again.
ARRRGGHHHH!
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Blacker than Black
By Blacker yet Tuesday the banks will still be open, but their accounts will be frozen. Or at least only partial payments will be forthcoming. The Fed has printed trillions of dollars in hard currency, in anticipation of the problem. There is a good chance we will go back to being a cash economy, for a little while anyway. [If you have been hoarding your hard earned cash, the blizzard of fresh paper will make your life savings about as important as another bucket of water over Niagara Falls]
There are also contingent plans to put time strips in the new bills, and to place penalties on bank accounts which have no activity. Keep your old money as long as you can.
On Blacker than that Wednesday all the gold in storage will be locked up. Foreign countries will have nationalized their assets by then. Fort Knox is rumored to be empty, we will find out. The economy will revert to somewhere near the level we were at in the 1950's.
Russia will become a world power overnight. The Chinese will go broke along with their US consumers. There will be a workers Revolution. We will forget all about terrorism and they will forget about us.
Dont' forget that during the first Great Depression farmers went broke because no one could afford their products, and taxes went higher. That shouldn't as much of a problem this time, because money will be all over the place. It will just be a question of desirability.
If you own property, cattle or gold, you may do okay. You might even get rich if you can sell more of what you have, over and above what you need. Technological development will slow to a crawl, and we will be unable to come up with the counterdevelopments will offset many of its unintended consequences. In short people will live more simply.
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Alkaline
Well I'm not sure. It would depend on realistically how far you expect this whole thing to go. I believe that calls for the 4 Horsemen are indeed overstated. I think this will be a 20 month recession of sorts and if we're lucky it won't end in a high inflation spike. Given that there's a limit to what's reasonable and practical with the amount of time it takes for any change to show some demonstrable effect. Let's not forget that almost ALL of FDR's first term was a failure in terms of generating some productive benefit out of the Depression. The programs that failed were matched by the ones HIS OWN Supreme Court declared invalid.
Broadly speaking though, there's no such thing as a bank. Everything is a bank. So apply the same fidiciary, risk and reserve guidelines uniformly. The SEC is worthless and toothless and has been for 30 years. Change it or scrap it. Decide which Federal agencies need to be bolstered and which need to be done away with. Combining Freddie and Fannie would be a good idea too.
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Private Interests and Politicians
In the full testimony, Pizzo concludes: I want to end by saying Congress is once again being misled, just as it was when it deregulated the thrifts, at the request of a handful of people in that industry.
The word "misled" was generous. Very generous. How about bought?
What can't be bought from our politicians?
All three of today's presidential candidates have raised multiple millions from the financial services industry. Their advisors (and our future financial regulators) now sit in the corner offices or board rooms of the largest banks.
Perhaps the most enduring connection between government and banking interests started in 1912, when more than 30% of Woodrow Wilson's campaign funds came from a few dozen individuals, largely Wall Street bankers and brokers. These were the same individuals with an interest in government creation of the Federal Reserve system. This institution allowed (and still allows) Wall Street first access to the purchasing power of magical government-created money before the rest of the population. By the time we look in our wallets and see this money, we find ourselves all bidding for the same loaf of same loaf of bread with bigger numbers on the bills in our wallet. All these new dollars have raised the supply of money so much that prices simply go up: Inflation.
Wilson's purchased, narrow election won with only 42% of the vote, and then he printed and borrowed the money to proceed on numerous, costly global adventures.
Rinse. Repeat.
Government regulation is often put forward as critical, life-saving "action" to address crises, or perhaps to launch so-called productive and liberating social causes. Like ethanol, perhaps? Ethanol was sold under the banner of national economic security and energy independence. However, the agricultural lobby - led by Archer Daniels Midland (ADM) - actually created this policy. It has not arisen from the streets of Berkeley, nor is it the smart consensus of scientists at MIT. It has nothing to do with security or energy independence. Beyond the fact that there will be no net energy benefit, we are all paying for ethanol through reduced supply of food because farmland is planted for ethanol mandates, topped by taxes for bizarre farm subsidies, all multiplied by the diluted purchasing power of continually debased dollars. That's why corn traded over $6/bushel for the first time this week. And we won't be shutting off the spigot to Middle East oil any time soon. Some of the spigot from our wallets, however, is sure to flow to ADM.
In reality, today's policy agenda is the result of nothing more than the drive of politicians to maintain power, and the campaign funding and influence this requires from corporate interests who get (and keep) them in office.
This ethanol illusion is right out of the same book of tricks Pizzo talked about, and the same book of tricks is now being used to justify the government as buyer-of-last-resort for worthless derivatives at taxpayer expense. The manipulation of government regulation for private interests was alive in well in 1912. It was alive and well during Pizzo's testimony in 1991. And it's thriving today.