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Posts Tagged ‘Greenspan’

Unfortunately, Capitalism is the de facto religion of America. I say this is our religion because one is pretty much considered to be un-American if you don’t believe in this economic system. It is equated with freedom itself – even though it is not freedom. To be opposed to Capitalism is to be considered a Communist in America. To be a patriotic American, one must BELIEVE.

The problem is: it doesn’t work. It’s that simple. The current collapse of the U.S. and world economy is not a one time thing – it is a recurring phenomenon in our history. Everyone knows about the Great Depression that began in 1929. But couldn’t that just be a weird coincidence? Two events don’t exactly prove that Capitalism doesn’t work, does it? No, it doesn’t. How about the Bank Panic of 1907? Would that help? That’s the one where J.P. Morgan had to use his private resources to save the entire country from financial disaster. Not enough? OK, how about the bank panic of 1893? Still not enough? How about the bank panic of 1873?  Let’s not even start with the recessions that come in between the depressions.

Even Alan Greenspan had to admit that his free market ideas were wrong and that they led to the collapse of the stock market. Yet, about half the country still worships the concept of a free market capitalist economy, refusing to see what is plain to see: American-style Capitalism is seriously flawed. As the Occupy Movement people point out, it is deliriously wonderful for about 1% of the population who own about 25% of the national wealth. It is the other 99% who suffer. The question we should be asking is this: why doesn’t Capitalism work for everyone? The answer is simple: it is literally out of control. The bankers of Wall Street control U.S. monetary policy. It almost seems that it has become a requirement these days that in order to be Secretary of the Treasury you first have to have a top position at Goldman Sachs – just so the government can be sure that you know how everything is supposed to work.

We have, in this country, a true oligarchy that cares only for the few wealthiest people in America. The one thing in America that the government feels compelled to protect is the wealth of the wealthiest. Consider the last collapse (not the one we are feeling right now – I mean the one George Bush created). What did the government save? The banks. Consider the situation in Europe now. The Euro zone is on the verge of collapse. Some countries, like Ireland, have already experienced a collapse of their economy. What was and is being saved in Europe? The banks. Why? Are these particular banks so crucial to the survival of mankind? Of course not. However, it is the extraordinarily wealthy people who own these banks who also own the governments of the major Capitalist countries.

The problem with Capitalism is that none of the wealthy Capitalists will acknowledge that it is not perfect and that it must be controlled. They hate the very idea of controls. (Good thing they’re not airline pilots.) You see, it cuts into their ability to make billions of dollars at the expense of the common man.  So…. we don’t have controls. And our economy periodically collapses. And the government saves the wealthy while letting the average citizens fend for themselves. After all, what do you expect from an oligarchy?

The time has finally come for the entire world to wake up and realize that uncontrolled Capitalism is horribly imperfect. It needs to be controlled. The wealthy people also need to be controlled. They must be prevented from grabbing control our government through bribery via lobbyists.  The governments of our “democracy” must be more democratically elected. Why is it that essentially every Senator and Congressman in our government is a millionaire? It’s because no ordinary person can afford to run for office.  We have a political system that perpetuates an oligarchy.

Capitalist greed has infected our banking system and our government to the extent that the people at the very top of government have lost touch with the people.  They only use the power of government to perpetuate their own wealth and – above all – preserve the banks. Preserve the banks at all costs, that is their mantra. That is literally their religion.

It doesn’t have to be this way. It shouldn’t be this way. The first step in fixing the problem is to nationalize all of the banks. Cut the head off of the snake. Banks should be operated only as a utility for the benefit of all citizens – so that all citizens can enjoy the fruits of Capitalism. The greedy moneylenders of America should be told to get a real job and stop being bloodsucking parasites on the 99%.

Gargantuan banks are not necessary for Capitalism to succeed. Indeed, they have been shown, time and again throughout our history, to be the cause of the failure of Capitalism. Monster banks, out of control, are an imminent danger to democracy and a free economy. History has demonstrated this time and again. So why doesn’t our government fix the problem? Because our monster banks own our government.

And that is why American Capitalism has had a history of recurring, catastrophic failures for well over 100 years.

Yet, we still believe.

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A few years ago, John McCain brought up the issue of “Class Warfare” while running for President. He accused Barack Obama of espousing economic policies that amounted to class warfare. Perhaps McCain was sensitive to the issue because economic class warfare had been the policy of the previous Republican Presidents Bush and Reagan. Of course their economic policies were never described as class warfare, they simply destroyed the economy in order that the relatively few number of people at the top of the food chain could enjoy an extreme prosperity at the expense of most of the American population. John McCain’s fear was that, as President, Barack Obama would put a stop to these policies.Unfortunately, McCain’s fears were misplaced. Obama has done virtually nothing to change the fundamental economy of the United States.

Class warfare is nothing new. It only takes a brief look at history to realize that almost all warfare is class warfare. Consider, for example, a classic case: the overthrow of the Czar of Russia by the Communists. In the early 20th Century there were two distinct classes in Russia – a ruling noble class that included the Czar (by the way, the word Czar is a corruption of the Roman emperor’s title “Caesar”). The problem in Russia was the economy, i.e. the Czar and his family owned just about all the wealth and the people had very little. The people rose up against the Czar and his family, killed them all, and implemented a completely different economic system based upon an ideal of equality.

If we look further back in time to 1776, the American Revolution was a response to England’s class warfare. The King of England believed he essentially owned America – and he may have been right. After all, weren’t they founded as colonies of England and weren’t all the inhabitants subjects of the King? So what was the problem? It was excessive taxation. The taxes extracted by England from the colonists were a heavy burden and ultimately America rose up in class warfare against the King of England and all the royalty that owned the various colonies in America.

It wasn’t long after the American Revolution that a rebellion against the ruling class began in France; it was the French Revolution and it was a rebellion against the class warfare of the royalty of France. Like the uprising against Russian royalty in the 20th Century, things did not go well for the wealthy people of France.

Recently, we have witnessed the “Arab Spring” in the Middle East. In these uprisings it has always been a case of the poorer people rising up against their wealthy masters. It has been class warfare. From these and many other examples of past wars, including World War II, it can be seen that wars are usually caused by economic iniquity. Wars occur when the divide between the wealthy rulers and the common man becomes too vast, and it is seen that a few people at the top of the economic food chain are prospering mightily on the backs of the general population. It is the story of history and it is instructive to note that John McCain was and is very concerned about an outbreak of class warfare in America. But why? Does he know something most of us don’t? Probably.

One of the things that Senator McCain probably knows very well is that all members of the U.S. Senate and many members of the House of Representatives are multi-millionaires. They are not your typical Americans. Another thing that Senator McCain probably knows very well is that the American economy was deliberately transformed by Republican Presidents Reagan and Bush and a willing Congress. This was aided by the appointment of key people, for example, Alan Greenspan, to work in the key financial sections of the government, such as the Federal Reserve and the Treasury, in order to make the transformation from a country where all men were treated equally to one where the wealthy were treated as a separate, entitled class. Few people know the whole story of the downfall of the U.S. economy and how it was the result of many years of Republican, wealthy family favoring, economic policies. This sad story has been exposed on Public Television – and as a result probably seen by relatively few people. It can be seen here: Frontline.

Frontline revealed that Greenspan and his henchmen virtually destroyed the U.S. economy. Interestingly, Timothy Geithner was part of this group of people that deliberately created an uncontrolled marketplace that was doomed to collapse while it made a few people immensely rich at the expense of the average American. Inexplicably, President Obama chose Timothy Geithner to be his Secretary of the Treasury, i.e. Obama knowingly put the fox in charge of the chicken coop. We are by no means in a stable economy, even though we have avoided a complete meltdown. The wealthy class still rules and the Republican party is playing a dangerous game of chicken right now with the economy, threatening to let the country default on its obligations if any attempt is made to tax the wealthy. It’s class warfare alright, and its being waged by the Republican Party in order to benefit a miniscule minority of extremely wealthy Americans.

Any reasonable person would see that the wealthy class is playing with fire, confident that the under-class will cave in and obey. However, that isn’t true, it has never been true. That is the lesson of history from the American Revolution and even before: economically oppressed people always rise up. Look at the Middle East, look at Greece, look at Africa, look at the history of South America and Latin America. The problem is that the wealthy, upper class Republicans are blinded by their own greed and stupidity. They believe their flawed economic ideas will work, but their ideas are nothing more than pouring gasoline on a fire – you get a big flame for a short time, and then the fire dies out. It may well be that we are facing a major economic implosion because the fundamental problems that led to the previous meltdown have not been corrected. Indeed, except for Greenspan, many of the perpetrators of the meltdown are still in the game.

McCain was wrong about Obama, he is not an advocate of class warfare, but that doesn’t mean it won’t happen. It always does when the wealthy class goes too far. Just look at history.

 

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One of the great hallmarks of a capitalist economy is successful competition.  Build a better mousetrap and the world beats a path to your door.  Theoretically, that’s how capitalism works. It’s survival of the fittest. Darwinian economics. You have to adapt to changing conditions and always make a better product if you want to successfully compete with all the other players for all the loot out there.  Of course there is another way.  Sort of a shortcut, you might say.  You can just steal the money.  For some people, actually for a lot, it’s just easier that way and it also eliminates all that inconvenient stuff about being better, stronger, faster, et cetera. Which brings me to the topic of bubbles – not the type in your bathtub, the type in our economy.

Capitalists have always resorted to the bubble method of making money whenever they ran out of resources or ideas.  The basic idea is to promote something as a “must have”, jack up the price, create a buying frenzy, make a gazillion dollars, and bail out at the top, just before the whole thing collapses.  The key ingredient to a successful bubble is having enough ignorant (meaning not fully informed) people who buy into the bubble while the bubble manufacturer stays on top of the situation, fully informed and fully in control.  Bubbles have a long and distinguished history in capitalism; however, if one looks deeper they are also a harbinger, a canary in the coal mine, if you will.  This is because they tell those who are paying attention that the movers and the shakers have resorted to the last means of making a quick fortune, all other methods seemingly having dried up or vanished.  It’s a sign of a dying economy.

One of the most colorful bubbles in history was the Dutch tulip bubble of many, many years ago.  Somehow people became enchanted with tulips and began buying them at ever higher prices.  Those tulips that were a bit different from the norm commanded higher prices, and pretty soon, people were bidding up the prices for tulips. Investors found they could buy and flip flowers for huge profits.  It was all nonsense of course.  After all, what is the intrinsic value of a flower that has such a fleeting existence? Nevertheless, the bubble grew and grew until one day it popped.  And some people became very rich and some people became very poor.

The key thing to note about the tulip bubble is that there was a major element of untruth to the whole thing – an element of deception perhaps.  There are two sides to the bubble equation: the person who makes money selling the item and the person who loses money by buying the item.  The key thing to understand is that the item being sold isn’t really worth anything close to the actual sales price.

Not too long ago we had a grand bubble in America.  I’m talking about the tech bubble, not the real estate one.  Back around the turn of the century people began to get the idea that computers and the internet and anything technical was the next big thing. The Nasdaq skyrocketed.  People were making fortunes investing in tech. However, the old money that was invested in the old economy wasn’t doing so well.  Mr. Greenspan, who was chairman of the Federal Reserve at the time decided that this was not a good thing.  So he killed the tech bubble by continuously raising interest rates so that borrowing money became too expensive for the bright young startups and they all collapsed.  People who had invested in these winning companies lot their shirts.  A lot of that money was 401k money.  Huge numbers of Americans lost big time.  But, on the bright side, the old, stodgy, unimaginative economy guys – the old wealth – did OK. Thank God for that, right Alan?

The problem, of course was that after all was said and done – all we had was an old, stodgy, unimaginative economy that was going nowhere.  So, thankfully, our government stepped in and relaxed a bunch of regulations and adopted a policy of just not paying attention and pretty soon we had a good bubble, i.e. one that the old economy guys could profit from.  That of course was the housing bubble.  The housing bubble was fertilized by the government by giving an enormous income tax benefit to little people who bought and flipped houses.  Then the banks decided they didn’t really need to verify anyone’s actual ability to repay a mortgage and they gave out free money to anyone who could breathe so they could also play the housing bubble game.  Everybody won.  Especially people like Bernie Madoff who was running a little independent bubble on the side called a Ponzi scheme. Fortunately, he came under the overall  government policy of “let the children play – it’ll all work out”. So the SEC ignored all the warnings and let Bernie make his fortune while all the suckers lost theirs.  Hey, it’s Capitalism, with a capital C.  Right? It’s not a game for sissies.

Of course the housing bubble pooped or popped and there were some really big winners and a lot of losers.  We don’t hear a lot about the big winners in the news, but they have to be there in accordance with the Law of Conservation of Winners and Losers in Economic Bubbles.  You hear a lot about the crying sissies though, don’t you?  They say it wasn’t fair and such. Please.  What does fair and just have to do with Capitalism anyway?  Just look at Pfizer.  They just got fined $2 billion for illegally promoting a drug that really wouldn’t help certain medical conditions that they said it would. Oh well.  Nice try anyway, Pfizer.  You got the deception part right, you just didn’t cover it up well enough.  You could have made a fortune otherwise.  It would have been a private drug bubble of sorts.  But don’t be a sissy, OK? Stop crying. You got caught, deal with it.  It happens.  Next time learn to cover up better. That’s how you play Capitalism. And don’t forget, next time get the government on your side.  Get some Senator or Congressman to write some legislation protecting companies that go out on a limb trying to help the public or something.  A little protection always helps.

Hey! We just had a mini-car-bubble.  Not mini-cars, a mini-bubble.  Did you notice? The cash for clunkers thing.  Everyone knows the clunkers weren’t worth a bent nail, but the people who traded them in got $4500 in clunker bucks and the car dealers sold a bunch of cars.  (I wonder who will be paying for all those clunker bucks the government gave away?)  Anyway, the Japanese car manufacturers did real well.  That’s good.  Help the world economy.  Too bad that the clunker mini bubble didn’t do so much for  GM and Chrysler. Those guys could use a good big, limousine-sized, gas-guzzler-sized bubble right about now, because the American public doesn’t seem to hold their products in high regard.  Only a big bubble can save them now.

Which bring us to us.  I think we need a bubble for us too.  Let’s face it.  Everything’s made in China now. Or India.  What little we still do make is being outsourced as fast as humanly possible.  Thank God for Bill Clinton and NAFTA.  OK.  So what do we do? We plan. Pretend, for a moment, that we are big bankers or investment houses. How can we make a ton of money from all the unsuspecting little people?  How can we get them to bite one more time?  Hmmm.  How about health care?  We could get them all to buy expensive insurance and then not pay off!  That would be good.  At least for those of us in the insurance business.  But we need something bigger than that – something that everyone can play. We need to sucker them in and then we pull out the rug from under them, just like the Robber Barons of old. We’ll make a fortune – for a few of us anyway.  First, we need to get the government on our side – so it’s all legal and such.  Hmmm…. Hey, here’s an idea: why don’t we create a shortage of water all over the planet and then sell melted Antarctic icebergs to people for drinking water?  Wait – are those icebergs salty? Maybe that won’t work.  Anyway, you get the idea. Deception is the key. Sell things for a lot more than they are worth. Get the government to look the other way, or even help out – that’s key too.

OH! I think I’ve got it! I have an idea!! Yes!!!

What??? You didn’t really think I was going to tell you my idea, did you?

Come on.  Please.  Don’t be a sissy.

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A few days ago Alan Greenspan, the former Chairman of the Federal Reserve, said that he was shocked that our financial system has broken down.  He said that we are in the midst of a credit tsunami and that, “I still do not understand exactly how it happened”.  In short, our nation’s, and indeed the entire world’s economy, has been threatened with disaster because of bad loans, and Mr. Greenspan doesn’t understand how this happened.  Over the long years that he was Chairman of the Fed he oversaw the creation of a system of financial operations whereby the banks and other financial institutions would regulate themselves.  Greenspan believed that they would be careful in their decision making because if they made ill-advised loans they would suffer the inevitable financial loss.  It seems that this didn’t quite work. Our financial institutions were only too happy to make idiotic loans to people who had utterly no ability to repay them and in the process the world’s financial system is on the brink of collapse because the world’s financial institutions all wanted to play this new game.

Mr. Greenspan professes not to understand how this could happen, so I thought I would give him a little help.  The cause of this seemingly strange behavior by the world’s financial institutions was not “irrational exuberance” –  that is Alan’s term for us little investors who get duped into making dumb investment decisions and then get taken to the cleaners by the big boys at the investment houses. I would say the proper term to describe the behavior of the financial institutions would more appropriately be “insatiable greed”.  Given that, by their very nature, bankers are greedy, I use the term “irrational” to denote those loans that had interest rates so high that any intelligent person would know they couldn’t possibly be repaid. So we have mortgages and credit card debts with excruciatingly high interest rates, which periodically get adjusted higher and higher, and we have the poor people who got saddled with these mortgages and credit cards who had no idea they had entered credit hell.

This, however, was only step one for the greedy banks. They’re not completely stupid, in fact they seem to be a lot sharper than Mr. Greenspan. These banks knew that these really shaky loans were really hot potatoes so they protected themselves by selling the loans as soon as they made them to some unwitting bank on the other side of the world. This was made easier by lumping a whole bunch of these loans together and then slicing and dicing them and repackaging them so no one had a clue as to which package had which loan.  All that was left was for the ratings agencies to certify that these were AAA-rated, mortgage-backed, securities and everybody bought them.  Of course these buyers also bought insurance for these securities from insurance companies like AIG who called this insurance a “credit default swap”.  There was also a host of “derivatives”, i.e. other things the banks could sell that derived their value from these loans – things like options and futures. The market for credit default swaps and derivatives was a hot one too, and the best thing about the whole thing was that there were (thanks in part to Mr. Greenspan)  no regulations because the banks were policing themselves – out of their own self-interest (despite the fact that they were selling these worthless investments as fast as they could). It’s a shame that Mr. Greenspan can’t get his arms around this…

Well, of course the inevitable happened. The people who got in and got out early made enormous fortunes and the poor “stuckies” who got left holding the worthless pieces of paper went broke. They were basically cheated by the fast talking, crooked, financial institutions who sold the loans and the derivatives to them and forgot to mention that the loans were made to people who couldn’t possibly repay them.  So much for self-policing. Someone should tell Mr. Greenspan that this is a good example of why we have regulations – it’s because there are plenty of greedy people out there who have no internal moral compass and who will do or say anything to cheat you out of your money. A lot of these people seem to choose careers in finance.  These people need to be watched all the time, Alan. The have insatiable greed and they think they can beat the system and they don’t care who gets hurt as long as they make a fortune – and a lot of them did.

This isn’t only Alan Greenspan’s fault.  It’s also the fault of Senator Phil Gramm who wrote legislation that eliminated many of the banking rules that had been created during the Great Depression because everyone knew that the financial institutions were a bunch of crooks then. It’s the fault of Senator John McCain who has made a crusade out of deregulation, whose ideal form of the marketplace is no-rules capitalism.  It is the fault of all the “pure” capitalists, like George Bush, who fail to believe or even care that pure capitalism is like a car with no speed controls, no brakes, and no steering wheel. It is the fault of bankers and financial people who believe that pure capitalism is a religion that you must believe in or else you are not an American. But mainly, it is the fault of the intelligent people who knew from the beginning that the wheels would eventually fly off. They knew they had to flip the loans as soon as they made them. They knew they could make a quick buck, but then they had to get out fast. They knew that the outcome would eventually be a disaster for the world’s financial systems that they had poisoned with millions of worthless loans.

If Alan Greenspan truly wants to understand what happened he need only look at the really smart people who profited from this debacle, the people who knew what would happen when they made and sold worthless loans, but eagerly participated anyway out of their irrational greed, and out of their complete lack of morality or caring what happened to anyone else in the world.  It was these no-rules capitalists who knew exactly what they were doing who created Alan Greenspan’s credit tsunami.

It’s such a shame that poor Alan doesn’t understand, isn’t it?

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