Senator Kaufman Was Right – Our Financial System Has Become Dangerous

By Simon Johnson, co-author, “13 Bankers: The Wall Street Takeover and The Next Financial Meltdown

Update: link to Senator Kaufman’s speech yesterday

Senator Ted Kaufman (D, DE) is best known these days for arguing that, as part of comprehensive financial reform efforts, our biggest banks need to be made smaller.  His advocacy on this issue helped build support around the country and forced a Senate floor vote on the Brown-Kaufman amendment, which was defeated 33-61 last Thursday.

Senator Kaufman has also pushed strongly the idea that in recent years there was a pervasive “arc of fraud” within the mortgage-securitization-derivatives complex.  This thesis also seems to be gaining traction – according to the WSJ today, the criminal probe into this part of the financial sector continues to develop.

But the Senator’s biggest home run has been on a different issue: his warnings about the dangers of high-speed trading, involving “dark pools” of money, appear to have been completely vindicated – ironically enough, also last Thursday.

Think about it this way.  The US stock trading system, long-established and widely thought to be robust, crashed on Thursday afternoon.  Widely held stocks, traded with consistent liquidity, do not fall in value from $40 to 1 cent and then bounce back again – even in emerging markets, let alone in the United States.  It is true that complex systems crash, but given the infrastructure and back-up systems involved here, this is much closer to east coast air traffic control shutting down for 15 minutes than it is to your local cable company having a problem.

And here’s the most remarkable point – after 6 full working days (and top people do sweat this kind of issue on the weekend), we are still no closer to really understanding what happened.  To be sure, there are plenty of theories – and no shortage of proposals for avoiding a recurrence.  But, despite the evident resources thrown at this problem, we do not know what went wrong.

As Senator Kaufman points out, the SEC does not even routinely collect the data it needs to understand the actions and impact of large traders.

The Merkley-Levin amendment would also likely be a step in the right direction, in terms of reducing the socially dangerous casino nature of our financial markets.  But it is far from enough.

The rationale for organizing our financial system as we do is that this leads to a reasonable allocation of capital across the economy.  We can argue the merits of this proposition at various levels – but no one would suggest that the extreme volatility and breakdown of trading last week was anything other than completely dysfunctional.

The SEC is, without question, beginning to get its act together under Mary Shapiro.  But there is also no doubt that it needs to lift its game to a much higher level, if regulation is even to catch up with how markets have developed over the past decade – just look at this timeline of problem identification and policy response.

Senator Kaufman has flagged mortgage-related fraud, high-speed/dark-pool trading, and bank size as pressing issues to address.  He was completely right on trading and, based on what we know so far, also right on fraud.

How long before he is completely proved right on the dangers posed by excessive bank size?

149 responses to “Senator Kaufman Was Right – Our Financial System Has Become Dangerous

  1. Mark Forziati

    Senator Kaufman is spot on but the “black box” high speed melt down happened before as well,in August 2007. The MIT magazine Technology Review wrote about in the Nov/Dec 2007 issue. The article written by Bryant Urstadt is titled The Blow-Up !! In 3 years nothing has changed.

  2. Our current financial system has been subjected to a patchwork of futile efforts and initiatives that speak more of bilking the system, redeeming impaired assets, and channeling funds to those most responsible for the failures. Instead of seeking solutions, the banking and political leaders always revert to what has been their bag of failed tools, since they know nothing else, stuck in the Keynesian box, painted into the 0% rate corner and the costs are horrific when solutions are not pursued.

    The system cannot repair itself because those in charge making decisions caused the failures and protect their power base. They live and operate within a system that no longer functions effectively. Reform would involve bankruptcy for the elite in charge. Remedy would involve liquidation of the balance sheets for the elite in charge. A real crackdown ( Peccora Commission )would involve prosecution and jail time for the elite in charge.

    Changing of the guard would involve lost power for the elite in charge. Independent audits would involve revelations and disclosures of criminal fraud on a widespread basis. So the system lumbers along, broken. Nowhere has the brokenness gone more unaddressed than under-water mortgages for 22% of the American public.

    True remedy would involve a mushroom of criminal allegations from bond fraud, revelations of duplicate usage for mortgage payment revenue streams, lost property titles, and counterfeit fraud. That is probably the major reason why Fannie Mae was nationalized, to keep the fraud under the roof of the greatest criminal organization on earth, operating under the United States Government, where the corruption, theft, and fraud can be protected by the numerous agencies.

    The global response has been and will continue to be a flight into gold, finally recognized as a zero risk safe haven. The global decline in trust for government debt is the death knell for the major currencies, the monetary system, and the central bank franchise system. It is also the harbinger for $2000 gold and $50 silver. I’ve been saying this for the last ten years. The system is corrupted. Yes, the head of the fish does stink and so does the rest of it.

  3. Sen Kaufman and his supporters are brave and gallant defenders of fair play in financial markets, but their joint efforts amount to no more than a “fool’s errand” as long as big money pervades the electoral/political process.

    Given the crisis reasonable Americans would expect the vote on his bill to carry the day. But there is so much absolute corruption among Senators, they dare not cut off the hand that feeds them.

  4. markets.aurelius

    Nothing’s been said about this being a systemic vulnerability of the system. This time we’re led to believe it was a fat-finger error, right? What’s to keep someone with intent from writing attack programs to assault the system continually?

  5. It’s ironic that you think it was “ironic” or coincidental that the “flash crash” happened right around the same exact time the Brown-Kaufman SAFE Banking Amendment was being debated, especially in a post about corruption and manipulation in the markets.

    Also, hasn’t Sen Kaufman already been proven right about banks’ sizes, to the tune of however many trillions of taxpayer dollars put at risk to bail them out? How much more evidence is needed?

    It doesn’t matter anyway, a majority of Senators are owned by these banks, but maybe if we document this well in blog posts, the cockroach regime that rules the planet after us will learn from our mistakes.

  6. He already was. The bailout!!!

  7. Nowhere that things have gone more horribly wrong is evident than in the insolvent big banks. Not a one is solvent, all vampires in search of tangible assets, willing to trade worthless stock shares for assets. Lending is a thing of the past. Their loan loss reserves have vanished, as reserves are tucked away from the lending circles in the US Federal Reserve.

    Insolvent banks engage in minimal lending, since approval is inhibited by the lack of working capital. The banks are loaded down by an endless raft of foreclosed properties, kept from the market, not on the market. Speaking of insolvent, the USbFed itself is in pretty bad shape. A mere 5% decline in their mortgage assets translates to a negative balance sheet.

    A more likely 40% decline in mortgage assets, is closer to reality and translates to hundreds of billion$ in negative balance sheet. This august US Fed is supposed to lift the US financial structure from its underwater grave? Methinks not!

  8. The Hedge Funds are to big and to powerful for the system. The Stock Market was never intended as a futures market, but it is being played like one. The market cant absorb the amount of money that is out there. No matter how you change it….its still at a dis advantage to the money and trading platforms that have been created around it. Why is it Banks are allowed these super high speed trading platforms along with hedge funds, while the rest of the country is not.

  9. Not only do the big banks need to be broken up, their CEOs need to go to jail for accounting control fraud.

    Otherwise, the doom loop repeats four or five years down the road.

  10. Simon,
    You forgot the c in Schapiro.

  11. Can you get that online for free?? I would be very curious to read that. Sounds insightful.

  12. ”Last week Wall Street stumbled upon its very own Doomsday Machine”….(eight paragraph down): “…While Senate Democrats backed the amendment 30 to 27, the 13 Democrats on the Banking Committee, who tend to receive the biggest contributions from banks, voted it down 11 to 2.” Honestly, why would any Senator want to bite the hand that feds it: Senators Dodd and Shelby both argue that their judgment isn’t influenced or clouded by campaign contributions and they also say they have beach front property they want to sell you in Arizona….

    “But the demands for information are likely to increase in the wake of last Thursday’s wild ride. KAUFMAN and Sen. John Warner (D., Va.) have asked Senate Banking Committee Chairman Christopher Dodd (D., Conn.) to include language in financial overhaul legislation.” Senator Warner voted against the Brown-Kaufman amendment.

    KAUFMAN has been leaning on the SEC for over a year to look at high-frequency trading generally, and he has asked that the market data the agency collects be made public so academics and private analysts can examine it.

    Timeline: http://kaufman.senate.gov/imo/media/doc/Kaufman%20Timeline1.pdf

  13. WalterJesseSmith

    The anarchists (anti-government, anti-politics) party, pretending to be a republican party, has won. If we knew our history, we would also see why: the history began with “our” winning the revolutionary war.

    Bankers couldn’t resist forcing war veteran farmers out of their homes and into poverty; the ruling elite couldn’t resist creating a constitution and imposing it over the heads of those not quick enough to see through the smoke and mirrors called The Federalist Papers. Those smelling the stink were dubbed “radical republicans;” they were buried in the Constitutional Ratification debates.

    Today the same old story is being repeated by spiritually dead politicians, and being denied by spiritually dead anti-politicians. The gods are all laughing themselves crazy.

    Alas, the “radical republicans” again appear before us: born again, only this time neither republican nor even concerned with anything fundamentally “American.” They can and should now be called the Wrecking Party, because they are spoiled rotten children eager to work with any vanity, any foible, any weakness anywhere in society, with only one goal: destroy everything the US has come to be, and the quicker the better.

    One might wish the “democrats” would stop cooperating. But wishing isn’t always wise.

  14. Is it possible that the system was hacked? We have been warned for years that the day would come and this event carries significant marks that that is what occurred.

  15. Mort Twain

    “Nothing has changed.” “Mistakes were made.” “Nobody could have predicted it.” Those are just some of the new excuse lines being used to explain away the collapse of the Roman Empire which is now us. Such stupidity and corrpution is always rewarded by nature by a process knowns as extinction.

  16. notabanker

    I think this is relevant re this subject thread.

    A Bloomberg item remarks on 3 TBTF bank’s (GS, JP Morgan Chase and Bank of America) trading desks each being profitable 63 days in a row during the same quarter! Also the incredible microscopic probability of this happening in a market that is not rigged!

    What are we to conclude from this information? Is this another facet of TBTF banking expertise?

    http://www.bloomberg.com/apps/news?pid=20601039&sid=ax0kTsl0dBXw

  17. No one has been able to explain for me why certain stocks trade on multiple exchanges (each with different rules) and multiple venues including dark pools. I am yet to see a convincing rationale behind this relatively recent phenomenon. Surely a stock should at the very least be bound to the rules of its primary listing?

    Meanwhile, we have retail buy and sell orders subject to front running by high frequency accounts (making each trade marginally more expensive) and the likes of Goldman Sachs, BofA, JPM and Citigroup reporting a trading profit EVERY day in Q1, it’s not that much of a stretch to say this market looks dangerously like it is rigged

    I pray that sanity will prevail and congress will be able to lead a concerted effort to regulate HFT/dark pools etc but given the dismal state of politics in Washington right now somehow that just doesn’t seem likely.

  18. While possible, it seems unlikely. In the last two years, much attention has been given to Flash Trading. Estimates that 73% of the New York Stock Exchange trading volume is from program trading. So Wall Street is essentially deeply committed to circle jerk endeavors, or exercises to eat each other’s lunch, certainly not producing anything.

    Paul Volcker accused the financial industry of one good innovation in 20 years, the automatic teller machine. He finds no value in either credit derivatives or computer program trading. In fact, much of the Flash Trading proprietary devices are elaborate insider trading mechanisms that view the order stream and front run.

    See the Goldman Sachs incident one year ago, when an employee stole the illegal software, but the FBI came to the rescue of GS and kept the story and device under wraps. Flash Trading was unleashed on May 6th again. A grand heist ensued, clearly motivated by insider information of a weekend European bank rescue and $1 trillion monetization package.

    In today’s world of high finance, a flash trade computer program device is a different form of pistol used in a holdup, gunning for the sell stops, filling them at absurdly low levels, mugged on the trading platforms. The Dark Pools in OTC trading account for $60 trillion in annual activity, versus a mere $5 trillion in monitored traffic. That translates to more back alleys for mugging than passageways well lit to prevent criminals at work. Simply put, the markets are nothing more than rigged casinos.

  19. theotherguydidit

    Why are people so tuned into a hack job by the banks as a warning to the Senate to dump the reform package?

    Could it not be our NSA sending a shot in the other direction? Put one accross their bow, Admiral!

    That’s got their attention. Prepare to board and give no quarter if they resist!

    Challanges to the power of government are often supressed by means other than diplomacy and the rule of law.

  20. article from zero hedge to show you how much the system has changed. and we aren’t changing it now:

    Courtesy of JG

    Does anyone here remember the Latin American debt crisis in 1982? It was a lot like Greece….

    In the FDIC’s own words: “The crisis began on August 12, 1982, when Mexico’s minister of finance informed the Federal Reserve chairman, the secretary of the treasury, and the International Monetary Fund (IMF) managing director that Mexico would be unable to meet its August 16 obligation to service an $80 billion debt (mainly dollar denominated). The situation continued to worsen, and by October 1983, 27 countries owing $239 billion had rescheduled their debts to banks or were in the process of doing so…

    Sixteen of the nations were from Latin America, and the four largest, Mexico, Brazil, Venezuela, and Argentina, owed various commercial banks $176 billion, or approximately 74 percent of the total LDC debt outstanding. Of that amount, roughly $37 billion was owed to the eight largest U.S. banks and constituted approximately 147 percent of their capital and reserves at the time. As a consequence, several of the world’s largest banks faced the prospect of major loan defaults and failure.

    http://www.fdic.gov/bank/historical/history/191_210.pdf

    Guess what happened? The Fed started by injecting $600m in “currency swaps,” which were effectively bridging loans that gave Mexico enough hard cash to pay its bills (aka interest payments to US banks) without showing massive end-of-month depletions of reserves on its books. The Fed deposited dollars in Mexico’s account at the NY Fed, and Mexico gave the US pesos in return, promising to redeem them with dollars at the end of the month. The use of currency swaps was especially advantageous because they could be done under the radar screen—public reporting of currency swaps was required quarterly, so the emergency loans would not be disclosed for 3-4 months, during which time Volcker hoped Mexico would be able to arrange a more substantial financing package from the IMF.

    Incidentally, I took most of this information from a 1987 book by William Greider called SECRETS OF THE TEMPLE: How the Federal Reserve Runs the Country, which I discovered on my Econ 101 professor (and former Fed Vice Chairman and Bill Clinton Economic advisor), Alan Blinder’s Macro Econ course syllabus. The 700+ page tome chronicles Paul Volcker’s war on inflation in the early 1980s, in what is essentially an attack on the Fed system from the left. Greider argues convincingly that Volcker held rates too high for too long, which a) transferred vast amounts of wealth from debtors to creditors; and b) raised the value of the dollar in international FX markets to the point where domestic producers could no longer compete, forcing manufacturing jobs to move permanently overseas. The deflationary environment and extremely high interest rates crushed debtor nations, as well as small farmers/business men who simply could not earn enough to service their debts.

    What struck me most about the book, is how words written more than 23 years ago describe vulnerabilities in the system and a questionable Fed playbook that both persist today. For example, Richard Koo, Chief Economist at the Nomura Research Institute, published a note on 20 April in which he revealed that the Fed is currently allowing banks to mis-mark their books to avoid triggering what he called a “bank inspector recession.” During the LDC debt crisis in 1983-84 bank examiners were also told to be tolerant. “Special advice went out to examiners on the handling of agribusiness loan losses and on the rules for declaring international loans past due. When Argentina fell behind on its interest payments, a special grace was granted…”

    Does anyone here remember Continental Illinois in 1984? It was the original “TOO BIG TO FAIL” bank…

    Continental Illinois was at one time the seventh-largest bank in the US. In May 1984, the bank became insolvent due in large part, to bad loans purchased from the failed Penn Square Bank (think mini-Lehman).

    Guess what happened? The Federal Reserve and FDIC decided that failure would destabilize the financial system. Unable to find a willing merger partner, the FDIC injected $4.5 billion to rescue the bank. Eventually, the board of directors and top management were removed. Bank shareholders were substantially wiped out, although holding-company bondholders were protected. Until the seizure of Washington Mutual in 2008, the bailout of Continental Illinois was the largest bank failure in American history.

    Congressman Stewart McKinney popularized the term “too big to fail” during a 1984 Congressional hearing to discuss the FDIC’s intervention. Congress was talking about TOO BIG TO FAIL in 1984?

    In a 1986 interview, an economist at Salomon brothers pointed out that “The growth in credit is nourished by…the willingness of our government to spread an official safety net over a variety of participants which tends to reduce the risk of borrowing. No large business corporation is allowed to fail. No large financial institution is allowed to fail…Federal credit agencies that get into trouble are not allowed to fail. So there is…an official safety net that’s spreading and that is perceived by the market place.”

    The moral hazard inherent in privatizing profits and socializing risk has been well understood by the market for more than 20 years, and yet the system has remained basically unchanged. The Fed bailout of Mexico ensured that its US-based lenders would get their interest payments and remain solvent. The ECB bailout of Greece this week similarly saved the French and German banking systems (at least for now). There are some who criticize the banks that lent to Greece for shoddy due diligence, but history teaches us that chasing the high yields in Athens in spite of the country’s fiscal challenges was probably rational given that there was an implicit backstop from the ECB. In the broader context, EC President Jose Barroso’s comment that “We will defend the € whatever it takes,” was to be expected.

    If regulators really want to reform a financial system that incentivizes excessive risk taking, perhaps they should start by restricting government’s ability to bail out failed institutions. It is probably unrealistic to expect government behaviour to change—and given past performance, lenders to Portugal, Spain, California etc. can take some comfort. But then again: (p. 667) “In American history, fundamental shifts in the economic orthodoxy usually did not occur until after there was a large and painful calamity, a visible crisis like the financial collapse of 1929 or the Great Depression that followed. The awful consequences from such an experience discredited the prevailing wisdom and suddenly opened the way for new thinking. It was only after a disaster unfortunately, that most politicians and most economists were able to entertain ideas they had previously dismissed as unthinkable…”

    http://www.zerohedge.com/article/guest-post-lessons-80s-nothing-new-under-sun

  21. notabanker

    Another question:
    ank and Hedge funds trading desks make money on stock movements?

    Market making can include making stock prices move up or down. Now if there was a program that caused stocks to move down then lightning fast trading tools could make money and exit before detected?
    It would be smart to test our new baby so let’s hit the market. Wow! we pushed the market down to the 9,000′s!

    Funny that there is no discovery of this activity?
    Maybe I’m just getting suspicious?

  22. I hate to say this but it has been bloggers like myself that have though about the market structure and clearly seen the faults inherent in the structure that have been providing senator kaufman the information he needs to make these speeches.
    for reasons I don’t know major media outlets appear clearly afraid to push the envelop when it comes to thinking about this mess. try getting the ft, or times, to discuss market manipulation, HFT, front running , and the list goes on. we in the community have been warning of this for a long time. of course we were called fringe and nut jobs but in fact almost every prediction we have made has come true.

    don’t expect any cahnges as long as the folks who run the system couldn’t/or didn’t want to see the clear and easy problems that just took a bit of thought. Mr. Johnson has it correct when he says we have been highjacked by a quite coup. we don’t own the regulating agenciaes, the policy making agencies, or even the white house and legislative bodies. we have effective contol of the entire goverment apparatus by big industry. as banking has the highest ROE it has the most control.

    as long as the lender of last resort (federal reserve) is owned by the people it bails out (wall street banks)there will never be reform and we will always loose out to the bankers. Monetray policy, bailouts, and regulations will always be for their benefit.

  23. mondo pinion

    The Federal Reserve is owned by the people ?

  24. Whenever I hear and or read about financial problems south of the boarder I’m reminded of the book Confession Of An Economic Hit Man and the games that our government plays via both the NSA as well as the CIA. Panama was a perfect example prior to Noriega. If a foreign government won’t bend to suggestion, send in the jackals and when that fails assassinate the current office holder.

  25. Last time I checked, it was a private banking cartel.

  26. Thanks to the good Senator from Delaware for all his efforts. And to give further thanks, we need to include Patrick Byrne and the folks at DeepCapture who have met with the Senator and his staff to explain the sordid machinations which he has been bringing to light.

  27. As the old Russian saying goes, the fish rots starting with the head.

    Actually there is a more subtle problem. To fix our mess we would need new leaders. But winning elections costs money and the only people with money are those that agree with the system.

  28. Obama said he expects BP to pay the costs for the Gulf oil spill. I don’t believe for a minute they will be forced to pay all of the costs, but they will pay a good deal of them. Why is is that Wall Street is not forced to pay for their industry-related disaster?

  29. Watt DeFark

    Yeah, and we’re all forced to be part of it with our little 401K all…

    You’re right, it’s a rigged game and we’re the stupid money.

  30. Trading is mostly casino insanity, day/minute trading doubly so. Our markets will become rational only when Americans go back to the concept of investing in capital markets and not gaming them. Fat chance.

  31. Going completely off-topic, an even better example is Iran. The CIA engineered the Shah’s rise to power in 1953. When Iran got tired of his secret police, they threw him out (and held our embassy hostage because we supported him). The USSR shot-down KAL 007 in 1983 — full of civilians — because of Soviet incompetence and paranoia. Then we shot down IR655 in 1988 — full of civilians — but we deny that it can be compared to KAL 007.

    Now we have cowboys in our government, and in Israel, who want to launch an attack upon Iran even though experts like Robert Baer have explained that Iran will counterattack by sending missiles into Saudi Arabian oil fields. Oh, what a tangled web we have woven.

  32. Clearly, this author is not overly familiar with U.S. capital markets…

    “…his warnings about the dangers of high-speed trading, involving “dark pools” of money…”

    and

    “Senator Kaufman has flagged mortgage-related fraud, high-speed/dark-pool trading…”

    “High-speed trading” and “dark pools” are NOT one in the same. “High-speed trading” refers primarily to the advanced technology and algorithms that many trading firms now employ; “dark pools” are not pools of “money” as the author suggests, but rather, “dark pools of liquidity” (i.e. trade orders are entered anonymously and usually broken up into smaller chunks; typically institutions use these to execute large orders for mutual funds, pension funds, etc. without negatively impacting the market price).

    A proper discussion of U.S. equities market structure should be based on a fundamental understanding of financial definitions.

  33. Mark Forziati

    Ted K—You can purchase it for 1.99 or subscribe to the magazine from their website

  34. There is a very old tradition of two investors, well known to each other, sitting down together and negotiating a direct sale of shares of stock. They shake hands, one signs the physical certificates over to his fellow, his fellow pays by cash or check, and they smoke a cigar.

    Many people are surprised to find that this is still legal in the age of regulated markets. But it is this “loophole” that allows traders to trade directly with each other, without going to an exchange. When it was two rich guys in an office (or lounge, maybe) passing physical certificates, no one minded too much. But now that it is teams of hundreds trading millions of shares every second by computer, people have a problem with it.

    Most Americans (not just Republicans) tend to support this idea. Few people would want to drag all their junk to an “exchange” when they can have a garage sale in their driveway. Perhaps they would get better pricing on some of the stuff in a market with lots more buyers bidding, but there is up-front effort and cost. Why shouldn’t the same logic apply to stock shares (or grain futures, etc)?

    The issue is whether the externalities of these very large private transactions can be properly accounted for, and priced into the transaction. If not, perhaps prohibition would be better.

  35. Wake-up! The system has failed us, it has not failed those who are benefiting from it, the Corporate Elite.

    Talk by the powerless will not change the system. Action will change the system. To turn the powerless to the powerful, involves cooperation.

    1. Move Your Money and Credit Cards from Banks to Credit Unions.

    2. Create a Stockholders Proxy Organization, to monitor Corporate CEO’s.

    3. Vote to Stop the White Collar Wall Street Crime Wave. Congress and the Attorney General are putting on a “Hearings Show” rather than prosecute Crimes!

  36. Travis Bickle

    “It was a Perfect Storm…..”

  37. Its gonna take more then One White Knight jumping into the pits of hell taking on the conglomerate cartels and their political minions…Its like one man taking on the drug cartels and their corrupt officials…

    It is such a joke to see politicians chastise and call out the bankers, the regulators, the rating agencies etc for their roll in probably the greatest fraud in history but who’s job is it to call out chastise & Shame the politicians that set up and created the casino for these players to play in…Who loves to wield “the peoples right to know” as if they represent the people…Yea…The Corporate Media…

    The SEC, asleep at the wheel or complete idiots…Hardly, you may be able to make that argument if the many other regulation agencies involved had done anything but none of them did…They were all guilty of negligence…They were all given their Marching Orders…

    The only way the SEC can be effective is if they work in conjunction with the other regulatory agencies…

    Does anyone have any Integrity or Honor…

  38. You are absolutley correct and your writing skills are most adept and very appreciated. I wish I had your talent in writing. Our country is doomed to collapse because of the corrption and fraud in our financial/government sectors as well as that on the corporate level. It will have a domino affect. The world cannot sustain this fraud any longer and the ultimate crash is imminent. Those perpetrating the fraud are indeed in charge and will do everything they can to perpetuate this fraud not seeing the ultimate end. Greed is blind.

  39. Travis Bickle

    Neo-liberal economics, Neo-colonialism, Neo-conservatism….a Neo-World order? I think not: The world spins in one direction and the song remains the same.

    The rich want/need to get richer; always have, always will. Systems will be developed, modified to the extent possible politically….and then successfully gamed. The best that can be done is to throw up the occasional roadblock (limiting the size of banks), or even more rarely, to roll the tide back temporarily (trust bust, take successfully to the barricades).

    The important thing to note and base our observations/actions on is the role of communications and psychology, where quality public relations is used by all. Those who used to allow themselves to be caricaturized as they jackbooted their way through the square are a vanishing breed, but not dying.

  40. You are not forced. I opted out of my opportunity for a 401k – I may be the only person in my company to do so and I was asked why. My answer was Wall street was so corrupt and I choose not to participate. They had no waiver for me to sign to get out, but my monthly contribution was zero. Opted out and stop feeding the beast.

  41. What seemed and in actuality is absurd were the video transmissions of Goldman Sachs henchmen being “grilled”by congressional committees whose campaigns were largely or partially financed by Goldman Sachs. Every elected pariticpant must certaintly have realized that they have no possible chance of reelection if Goldman is criminally prosecuted for their criminal behavior. And special kudos go to SCOTUS and Mr. Alito for their January ruling equating corporate free speech with the purchase of elected officials and elections forever guaranteeing the further dissent of our “system” into the hands of the educated, elite, but nonetheless, criminal class. I’ll borrow from former SCOTUS appointee, GW Bush, Its a perfect trifecta.

  42. They are using the traditional scapegoat of illegal Mexicans to provide the smoke and mirrors or diversion from the true criminals who run the banks, corporate America, and our governing bodies. Wall Street complicit with our governing bodies are the criminals – but it is more important to blame social ills on those they lured here with job opportuntites (which also lowered the wages of the Average American). 15 million iliegals did not come here to sight see – they came to work and they have been given jobs for thirty years and our employers illegally hired them because they were cheaper. Are ther some criminal elements in the illegals – yes but not nearly as much as those on Wall Street.

  43. damn you just nailed it-

  44. Won’t the IMF’s massive gold sell-off put a damper on the record gold prices? Does anyone know when the IMF is likely to dump it?

  45. I hope you buried your can of money deep enough so the dog doesn’t get at it.

  46. If you wanted to crank over the engine of the economy and your economy is 70% based on consumerism what are you going to do?

    These consumers or Demand Sider’s, need to spend. They won’t spend if they perceive economic danger ahead.

    You need to ease their worried minds and give the impression of an economy on the mend.

    You can’t reignite the housing bubble to make them feel good and provide debt dollars to consume with. Next best thing is to prop the market with Fed money mainly via the futures.

    Eventually that starts to become obvious and the markets get leery and won’t buy at ridiculous levels.

    Market technicians see nothing but up for over a year. They Need a correction, ordinary people get suspicious, they Need a correction. Media starts talking about waiting for a 10% correction.

    So what do you do? Innovate! How about a 15 minute 10% correction that no one but the daytraders or those with “Hail-Mary” limit orders could participate in. Then bust all the trades +/- 60% to ensure no one got too beat up.

    You’ve just reset all the Daily Charts and added the much anticipated 10% correction. The Black Box Trading systems don’t know it was a 15 minute anomaly. The all signal fresh new Buy Signals.

    Magically you’ve just cleared the way for the prop job to continue. Fear not consuming public! All is well and getting better all the time. Go shopping!

  47. Thanks for the answer Mark. And erichwwk, you’re my new hero. I sincerely appreciate it, both of you. Here’s a terrific Op-Ed by Nouriel Roubini. It’s a relatively quick read and very insightful. Like scarily insightful.

    http://www.nytimes.com/2009/05/14/opinion/14Roubini.html?_r=3

  48. I have been following Simon for a long time and agree with a lot of what he has said. Keep up the good work Simon!

    I tried to put my own spin on it in the form of poetry (first time published) You can check it out here.

    http://www.huffingtonpost.com/patricia-o/banksters-a-poem_b_574380.html

  49. ” . . .is owned by the people it bails out (wall street banks). . .”

  50. Excellent question. But who involved will ask it?

    Grandpa always said, If it walks like a duck and quacks like a duck . . .

    This isn’t rocket science here, there is a reason that no one in Washington will go up against Wall Street and the banksters and that reason used to be called payola.

  51. Trevor J…..The IMF already did it’s gold sale. 200 tons went to India and China took the rest. I believe around 190 tons. The long term bull in gold is well established and will continue its march higher.

  52. You’d be better off with a gold backed retirement program. There are many available and you literally have no liability.

  53. engineer27

    Ted,

    Roubini here sounds like a typical dollar hawk, lamenting how bad it would be for everyone for the dollar to lose value. This point of view is particularly dubious when the comparison currency is the Renminbi, which China depends on being less valued than the Dollar in order to maintain a strong export sector to the American market. So on the one hand, a gradual decline of the Dollar vs the Renminbi would help with trade imbalances and the relentless downward pressure on US wage levels; on the other hand, the loss of “prestige” that would accompany the transfer of reserve currency status from US Dollar to Renminbi is contingent on two major things happening in China, only one of which does Roubini even mention. The first is eliminating capital controls and making the Renminbi fully convertible (mentioned in the article). The second is reworking major sectors of the Chinese economy to be less dependent on exports. Both of those things are going to be very painful and unpopular in certain powerful sectors of the Chinese polity, and are likely to take some time to enact. There is certainly time to deal with long-term structural problems with government finances, and it can be done so long as there is a commitment to leaving budget surpluses rather than “giving them back to the taxpayers.”

    (Although, there are those who have a pretty good case that the structural problems are not really there, either: See Here.

  54. Bingo!

  55. notabanker

    Probably already done and this big drop was maybe a trial run of that program.

    Who is the perp? Well, the TBTF banks and their millisecond, awesomely profitable trading desks are probably the place to start looking.

    Blame terrorists? Blame ‘fat fingers’? Blame the wicked witch of the West? Just a ploy to confuse those seeking to detect the cause of the drop. Gotta keep the 401K lemmings ‘donating’ their dinero?

  56. EVERYTHING IS CORRUPT. We all see that clearly. Now, what are we going to do? We’ve bought a few years on debt, tops. Washington is not correcting this.

    We need an Article V Constitutional Convention. We’d have a better chance with 3/5th of the states legislatures than anyone in the NY-DC corridor.

    That is a fact. The options are few. I think this is the ONLY option that can bypass both cities.

  57. Let me add, the reason only WE think this is a hair-on-fire crisis is because the FED/Congress has bribed everyone else and BOUGHT TIME. 20% of the employed are only employed because of debt interventions. The unemployed, they have just enough gov help to not revolt. We’re breathing thin air. But, they sedated most people again, didn’t they….with invisible debt. Many people I know are back to routine thinking, hell, it must have passed.

  58. What we require to demolish the current system is something close to what they did in the movie Independence Day. We need a virulent virus that prevents investors from purchasing another dime of debt. Let the system collapse, wipe out all debt both commercial as well as private and start over sans the Federal Reserve. This country never did need a central bank. It was created to simply keep the masses as debt slaves.

  59. That’s a GREAT poem!

  60. You might have something there Anon. It’s right in the first paragraph of the Declaration Of Independence. Lincoln said it best in his first inaugural speech.

    “This country, with its institutions, belongs to the people who inhabit it. Whenever they shall grow weary of the existing Government, they can exercise their constitutional right of amending it or their revolutionary right to dismember or overthrow it”…… A. Lincoln

  61. “How long before he is completely proved right on the dangers posed by excessive bank size?”

    Call me ignorant, but aren’t we already living in the aftermath of the dangers posed by excessive bank size? Aren’t we currently cleaning up after them? Haven’t we already proven this point?

    I believe the only REAL debate at this point involves a bunch of banking shills shouting “NOTHING TO SEE HERE, PEOPLE. MOVE ALONG! MOVE ALONG!” as loud as they can, while more reasonable participants in the discussion say “Now hold on, something went wrong here and you’re sweeping it under the rug…”

    Not much of a debate to me. In fact, it more resembles an attempted cover up.

  62. ‘Talk by the powerless will not change the system. Action will change the system. To turn the powerless to the powerful, involves cooperation.’

    Some advice from Pat Condell… never one to mince words!

    http://www.youtube.com/patcondell#p/a/u/1/krybvOx-8Dk

  63. And Truthful!

  64. Just call me publius ;)

    I’m ready to help in any way. I’ve been reading about it for a week or so. I actually (incredibly) think it’s the best and fastest possible option. The Senate is a staggered board. The Vitter amendment and TBTF vote showed true colors of Senate reform.

    I don’t want to see a failed treasury auction in my lifetime. I don’t know how to avoid it. We’re in a debt trap. The last hope was Obama and DOJ turning the screws on banks worldwide to restructure the debt “or else”. I’m holding out, but I don’t see it.

    If Simon and James could collect a group of fairly notable people who could swing popular attention to an Article V, I would lend my historical research and support.

    Publius

  65. Thanks, Barbara. Still can’t get past the price, but relaize it’s likely to go higher. Finding it difficult to commit, but working on it.

  66. Re: @ Setaclay___Simply said,they can get ahead of the trade in nanoseconds versus microseconds making “Out of Sight” huge profits! PS. King George W. Bush (#43)…gutted the SEC,FDA,and IRS not to mention every regulatory agency to near impotence with massive budget cuts during this “Cow-Poke’s” ruthless rein on the Texas Plain.

  67. That’s either decidedly pessimistic or borderline paranoia (I know, it’s not paranoid if they really are out to get ya’). Gold is indeed deflationary and certainly there are some good disincentives for government spending involved with being on it. But the gold standard itself died as a desirable monetary policy when it destroyed the world economy circa 1930′s after a decade of countries wrestling themselves back onto it after WWI. Largely by keeping interest rates high enough to shrink their economies to conform to their gold value until the world’s economic powers were basically destroyed (US, England, Germany, etc). To put an exclamation point on it the country that lead the charge to reestablish the gold standard after WWI, lead the charge away from it. As the first country to abandon it. England was also the first country to turn their economy around when they abandoned it. The US waited (regrettably) for Hoover’s gold inspired constricting policies and obsession on a balanced budget to wreck the worst damage ever seen to a modern economy (particularly given the better options we now realize were available).

  68. Re: @ saucymugwump___Isn’t Haliburtin in the mix,and TransOcean Drill Rigging. We know that Haliburtin will skate,and TransOcean can file Chapter #7 leaving BP holding the bag. Now – does anyone know who the largest shareholders of BP are? That’s correct …”The Queen of England & Family”?

  69. we should impose clawback provisions on anyone employed in the financial sector// simply put we seize their personal assets to repay the damage inflicted by their reckless behavior and leave them financially destitute as they have done to millions of americans// the Italians did this during the scandal involving the parmalat scandal //they retroactively made what was done illegal and put the entire family in jail and seized their assets

  70. Brett in Manhattan

    The whole mentality needs to change.

    Goldman knowingly creates a defective product, finds suckers to buy it, then, shorts the hell out of it.

    Then, you have CNBC shills, the slimy Jim Cramer and the pathetic Erin Burnett defending this practice by saying the counterparty was a big boy. In other words, a con artist and his victim bear the same responsibility.

    Hopefully, when all is said and done, Goldman et al. will be shamed to the point where smart kids don’t want any part of this.

  71. Brett in Manhattan

    The reason is that these banks/brokers are in the right place at the right time. They’re market makers as well as investors in the same stocks vis a vis they are allowed to bet on games that they referee.

    An NBA referee did the exact same thing and spent a few years in jail, but, this practice is perfectly legal on Wall St.

  72. If shame were enough to keep people from being con men, we wouldn’t have con men.

  73. My hats off to “Brown & Kaufman,but the real problem arises from the “Nixon Era”, with the gutting of “Bretton Woods”.____Excerpts from “Bill Murphy”: Manipulation of the Gold Market (June 5,2009). It’s what we call “The Gold Cartel”: The United States government is the main culprit, with “hit men” like Goldman Sachs, JP Morgan Chase,and other central banks, like the Bank of England. It’s been going on for some time now. Bill Clinton’s people…Robert Rubin ,and Larry Summers articulated (kept in play by Bush #43 administration), keeping the gold price down – you keep interest rates down. Note: Keeping interest rates down (treasuries,and bonds) ,and keep gold prices down or else, “Chaos”! They should be the inverse of each other ,period. Since 1955, and even with the inception of the FOIA we can’t find out what’s left in US Gold Reserves. There’s never been an audit. Foward: They said that Bunker Hunt (those young enough to remember?) manipulated the silver market. Wrong! We’re saying that JP Morgan Chase is part of the gold ,and silver market manipulation. Murphy claims that the Fed is/was instrumental in the price manipulation ,but the argument is, “how can you reconcile quantitative easing”? One of the side effects of that is that gold prices are going to shoot up. Right? Bill’s answer is simple, with his response, “That’s where they’re in trouble”. Quantitative easing will be the final straw to break the camels back. They should have not done this in the first place. That’s what caused the problem. Had they not rigged the gold prices for the past 10 or 12 years, interest rates would’ve had self-correcting (Note: Mechanism?) mechanisms. This is hurting alot of people, and yet they keep doing the same thing. But they’re going to get beat.____ End -”Bill Murphy” excerpts (please note the dates). I have one opinion to add. The world is going back to the “Hard Asset of Gold” as their Reserve”. The markets don’t like it for Gold could go to $3k-$5k per ounce (“The Great Equalizer”)? OUCH! Thanks Simon,and James,and keep up the “Good Digging for America’s Sake” :^)

  74. Uh, hello Earle, Bill Clinton signed a lot of the financial deregulation laws into effect. Look it up. This did not all happen on Bush’s watch. Obama is on the Goldman-Sachs payroll as well to the tune of almost $1,000,000. Do some homework, cowpoke!

  75. Right on !! All empires expire from within and not from the enemies (supposed and not) outside its borders.

  76. Right on !! For the last 30 years Americans are so insular that they do not recognize anything no further than 5 feet in front of them.

  77. I agree Publius. One would require an enigmatic economic leader/s willing to whip the masses into speaking truth to power while having the rest of the country behind him. I couldn’t think of a better time in our history for just such an individual/s to come forward.

    On the other hand, if you could get together people like Simon,and a few notable others willing to take on the 800 pound gorilla, I think there would be a great shot at an article V. But honestly, Simon came from the IMF mindset and would probably throw cold water on the idea. Just thinking out loud here. But there is no doubt in my mind that the country en mass would support the idea. Enough is enough. It’s time to clean house. Perhaps a combo of economic minds as well as the military as icing on the cake.

  78. The markets will hate it when gold goes even higher than your predictions. Greenspan knew the truth. Gold and Economic Freedom ala Greenspan published in 1966. Too long to post here but you can Google it.

    “An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense – perhaps more clearly and subtly than many consistent defenders of laissez-faire – that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other……

    “This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”

    Given his Randian audience and the mood at the time, it is interesting that Greenspan defines the culprits in the scheme of fiat monetization as ‘welfare statists.’ How ironic, that over a period of time there is indeed a group of welfare statists behind the latest debasement of the currency, the US dollar, but the recipients of this welfare are the Banks and the financial elite, who through transfer payments, financial fraud, and federally sanctioned subsidies are systematically stripping the middle class of their wealth. Perhaps they decided that if you cannot beat them, beat them to the trough and take the best for themselves until the system collapses through their abuse. Sounds about right to me.

  79. “But winning elections costs money.”
    Yes, that’s true if you’re going to go about it in the same old ways those so adept at playing “The Game” do. However…
    …whoever said that’s the only way to win elections? Who made that rule?
    The money: Isn’t a lot of it used for creating and placing/running ads? You know, brainwashing/ manipulating voters into believing things about a candidate that probably aren’t anywhere close to being true just to secure a vote?
    So what about stepping outside of that box?
    And what about spending time, en mass, really educating voters, so much so that these psychopathic “leaders” could end up spending billions on ads…and it wouldn’t make a difference anymore? Because…they’d just be ignored?
    Sound idealistic? Yeah, I know. But I sense the time is ripe for treating voters with respect rather than as mere pawns in a political sleight-of-hand. And the thing that’s different right now in comparison to any other time in our history: People are so ready for something to change. So ready.
    I know I’ve oversimplified. But if we really thought OUTSIDE the box and did a “tai chi” move AROUND the resistance we’re feeling from those clinging to their power at the top…
    millions upon millions would not be necessary.

  80. I was just trying to simplify things to make the point that Wall Street has skated. The White House Munchkins, aka the press, should have already asked this question.

  81. Thanks Mad Kat and Rene for taking the time to read my poem. Just trying to sum up in a quick fun format (poetry) things that great minds such as Simon, and everyone posting about the issues are saying

  82. Bayard Waterbury

    Maybe if the SEC paid as much attention to the stock market and do the job that it should, instead of paying too much attention to “adult” web sites, we could count on them providing the oversight so desperately needed. This is a travesty. When they obviously have the budget and staff to do the job, we have to wonder how influenced they are by the purported “market makers” who continue to scheme the average citizen and investor into oblivion.

  83. Dan Palanza

    It is simple to do: simply put a time limit on each contract. Then make the rule that a contract to purchase could not be resold for the designated time period. Begin with 5 minutes, then move it up or down until you get sensible value trading.

  84. Bayard Waterbury

    Yeah, for sure CNBC (considering the liberal bias of MSNBC) has a hardon for the market and the financial oligarchs (except Erin, of course, who just gets hot and hotter). Shills is probably a bit too polite for the folks on CNBC who somehow can make a verbal silk purse out of every sow’s ear. I usually tune in for a couple of minutes a day to glom the statistics, and mute the volume so I don’t have to even listen to their BS. The sad thing is that there is no broadcast or cable network that actually does anything resembling neutral reportage. FIX News certainly doesn’t. Maybe Bloomberg. Maybe.

  85. RE: @ BFlan1954____Your right! Just to show I’m impartial – big donars buy Obama’s books by the truckloads ,and warehouse them by the tens of thousands, as they have done with so many of the elitist. Happy Trails ;^)

  86. Do you really have to wonder?

  87. Bayard Waterbury

    Lawrence Lessig, Harvard University law professor, has formed MapLight.org, an organization dedicated to forming an Article V convention. Mr. Lessig is an expert on the connections between money and politics. Needless to say, his cause was greatly enhanced by the recent Supremes ruling in the campaign advertising case. This is his organizations home page:

    http://maplight.org/

  88. Bayard Waterbury

    Atu, I like your thinking. Sadly it may be close to the truth. With the big banks occupying so much of our economy, it probably is. Then they get another nice run up. If it happens again before the SEC gets a handle on things, we’ll all believe that you are right.

  89. The system is challenged? Or is it the dollar?

    James G. Rickards, senior managing director for Virginia-based research firm Omnis Inc., was interviewed for 19 minutes today by Eric King of King World News and remarked that world government is under construction, and it’s not the hallucination of the paranoid fringe. Rather, Rickards said, it’s being arranged at the International Monetary Fund, whose Special Drawing Rights are being prepared to replace the U.S. dollar as the international reserve currency. While this might terminate the unfair advantages given to the country that issues the reserve currency, Rickards said, it creates other problems: The IMF has no direct accountability to anyone and indeed letting it issue SDRs as a reserve currency would be money creation without any accountability at all.

    Rickards expects gold to rise to $2,000 in the near term and $5,000 in the long term.

    You can listen to his interview at King World News here:

    http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/5/13_J

  90. News Flash: “13 Bankers” is now #2 on NY Times Best Seller! Closing in fast on “The Big Short”. Way to go Simon,and James :^)

  91. Bayard Waterbury

    C’mon, as to point #3, the Pres doesn’t want to hurt his major campaign contributors or the buddies of most of his economic team. He is calling off the dogs. The next few months, with massive amounts of actionable issues arising from the discovery in the Goldman fraud case, there will be many opportunities for Justice to step into the breach. Will Holder have the courage and independence to do it, or will he be satisfied to let the FBI go after truly small time crime (by Wall Street standards, what Hitler did is small time crime, because truth be told, what happened a year and a half ago will kill 100,000,000 people in the end — mark my words).

  92. Bayard Waterbury

    Yeah, now Halliburton (Cheney) is truly satanesque. They control military spending (through KBR), and oil production. They do all of this quietly. They are the motivating force behind lax drilling regulation. They are the main contractor to the Pentagon providing massive services to the military worldwide. They are the reason why Cheyney and Wolfowitz successfully gamed us into the Iraq War (is there anyone who realizes that while the military is planning to “pull out” of Iraq in August — theoretically a 90% drawdown — we are building 15 perminent bases that Halliburton will run there for great profit). We need to start looking at the Foreign Relations Council and the Bilderberg Group. I’ve never liked conspiracy theories, but when Congress keeps acting like the public is ignorant serfs, we have to start really rethinking things.

    I love guys like Sanders and Kaufman, but without at least 60 more like them, they are just nice to look at and listen to. T. S. Eliot was right about humanity when he wrote The Hollow Men. Read that timeless work and tell me if it doesn’t apply today more than ever.

  93. pairochucks

    I am troubled by the equation: money = free speech. That one’s rights of free speech are negated by limits on spending for dissemination of that speech is not self-evident to me – and on this point I part with contemporary Republican conservatism, the Wall Street Journal, and the Supreme Court.

    I loathe President Obama’s humiliation of the Court at the State of the Union and I trust that justices will not attend in future, but I fear that the decision will have adverse consequences for the Republic – and I’m putting it very mildly.

    Does anybody out there feel the same?

  94. Re: @ Bayard Waterbury____Ah yes,…you had to mention Cheney. “How in the world can he embolden the enemy, unless of course its the Democratic Party? Mr. Cheney’s xenophobia delusional Republican Party is shrouded ironically by a self-inflicted annointed Aristocracy. Your Highness (Tricky-Dick Sequel #2) has over-exposed his demonic atrophy for his adversarial nemesis, known only as the “Democratic Party”! Vice Cheney’s psyche is on a journey of futility, shackled too a destructive venture brought on by the aromatic stinch of un-apologetic hubris, awash in narcissism. His pathetic tale is somewhat analogous to a “Pyrrhic Victory”, that has a beaten man throwing a match into a blazing forest fire…hopelessly trying too flame the base. Unfortunately, he recruits only the unrealistic, and hard core believers to follow him into the carnage of ashes! The plurality of the well-connected, and well-to-do, have abandoned the smoldering mind of a man that thought it was his world to command”? Ya had to mention Cheney,…?

  95. Re: @ Barbara____ Greenspan’s answer was to lease the Gold,and Silver. His cronies bought into the ruse, and shorted the Hard-Assets to “Kingdom Come”! Nice

  96. OK, a week ago. Some of my yapping friends in finance think that last Thursday one or more, likely more than one, very big program trader decided to stop all program buying for ten minutes and then stopped all program selling for ten minutes to make a point.

    Certainly, at least one on one, they could legally simply stop all buying and then all selling. Then again, only one major player shutting down programmed trading for their own account should do the trick.

    I keep probing for indications that this really might have happened. Does anyone posting here know of anything even possibly credible about switching of program trading singularly or plural?

  97. What the U.S. government isn’t PUBLICLY talking about:

    Obama Warns World Leaders Global Economic Crash Can’t Be Stopped

    http://www.eutimes.net/2010/04/obama-warns-world-leaders-global-economic-crash-can%E2%80%99t-be-stopped/

  98. Barbara, I think the link is broken.

  99. Banking with Hitler. Interesting points about FDR and his anti-Wall Street secretaries.

  100. So where do I sign up for this effort? Who starts the website/facebook group/meetup.org group?

  101. Bailing out the banks has turned out to just like giving a serial arsonist a big fifty gallon can of gas. They can use the gas to to make a weenie roast or they can once again burn down the garage and almost catch the house on fire.

    Obama wants them to have a nice little fire, but smart money says the serial arsonists burn it all down AGAIN.

    It’s time to take the gas away from the arsonists and throw them in jail.

  102. I agree with Roubini when he writes “Now that the dollar’s position is no longer so secure, we need to shift our priorities. This will entail investing in our crumbling infrastructure, alternative and renewable resources and productive human capital — rather than in unnecessary housing and toxic financial innovation.”

    And that means not subsidizing risk aversion the way it is done with capital requirements for banks that are lower for what is perceived as having lower default risks, and therefore already pays lower interest rates.

    But I absolutely disagree with Roubini on that nonsense of China taking over in ten year a role as a reserve currency, when it cannot even afford that the dollar loses that status. Yes there are very serious troubles awaiting the US and the dollar but, first, China at their current level of development, would not last one day suffering the “reserve currency curse” which would immediately halt their exports, and second, even if the US would default and their current dollar sink, the world would, the morning after, be willing to accept its New Dollars.

  103. The most dangerous part with a financial system is when the regulators go crazy. Today I sent Simon’s IMF a letter that started with this:

    Dear IMF

    We have bank regulations that say that if a bank relends our deposits to a sovereign rated AAA, then it needs no capital at all, meaning unlimited leverage; if it lends to a sovereign that has been rated A+ to A, or to a private client rated AAA, then it needs only 1.6 percent capital, implying a leverage of 62.5 to 1; but when lending to small businesses and entrepreneurs, those on whom we depend so much for our jobs, those who cannot afford being rated by the raters, those who the banks are supposed to help while they make it to the capital markets, then the banks are required to have 8 percent in capital and need to limit their leverage to 12.5 to 1,

    This is insane, not only because it discriminates unfairly against the natural clients of the banks;

    but also because it gives immense powers to human fallible credit rating agencies, also open to capture;

    but also because it subsidizes the risk aversion that already exists in the market;

    but also because it turns our bankers into automats following credit ratings like if it was a financial GPS;

    but also because it forces the banks to react instantaneously to the same downgrading making all take the same exit at the high-way at the same time and increasing the chances of a crash;

    but also because going after AAAs probably defines the mother of all pro-cyclical regulations;

    but also because when something goes wrong, as it must sooner or later, even with AAAs, the banks are left with no capital at all when we most need them to lend;

    but also because it assumes the existence of real and abundant AAAs even though this must be the most scarce specie of them all;

    but also because it assumes that risk lies more in what is perceived as risky than in what is perceived as not risky and which is of course pure nonsense;

    but also because I cannot really think of one single bank crisis set off by something perceived as risky;

    but also because the biggest profits are obtained by squeezing in under what a real AAA’s roof should look like, as bad as possible credit risks, placing us on a very slippery slope;

    but also because I could go on and on with more similar arguments:

  104. Please keep watching for further posts, Keith. (My name…kinda recognizable!) In the meantime, while this whole idea ripens, I’m going to ask you – sincerely now, no joke – to spend time visualizing the outcome of such a change in the way it’s done. In other words, what types of people would be representing us? What would their character be like? And how would it make a difference in our country’s well-being? The world’s well-being?

    Just know: I sense this is in the incubation stage. And would ask you to trust that. Too many times we, as human beings, “dive in” before being clear in our hearts, in our souls. Which, again, is the old (corrupt, survival-based, power-over) way of doing it.
    BTW: Thanks for giving this the energy you did just by your reply. My guess is, if you want to engage with this further…it’ll happen.

    P.S. I’d also ask you to trust enough to let go of the belief that we’re gonna be time-scrunched unless we do something “tangible” NOW. Don’t mean to sound like a mystic, but my own personal experience has taught me…that to trust the timing of things is everything. Because when the time is RIGHT…everything “clicks.” Pretty effortlessly.
    Regards to you.

  105. Sign me up, Barbyrah!. As the other person who replied to you said, someone start a Facebook or Web Site. How do we get started? What to do first? This requires some organization. We would have to agree on some basic philosophies and directions. At some point we would need some intellectual leadership, I think. I’m tired of the “Woe is us!” complaining that goes around. It’s been redundant for awhile. But how do we get started in becoming a cohesive force. Let’s go! y’all.

  106. Yes. Byrne is remarkable. As are those associated with DeepCapture.

  107. Saw Simon on The PBS Newshour/Making Sen$e tonight.

    Looking good Simon!

  108. mondo pinion

    oh THOSE people . .

  109. Sorry, I wrote that last without looking at your more recent. Look. You’re on my list. My list is this: a list of names (60-100) on several sites such as Economist’s View, folks such as “Paine”, e.g. and “Anne”, who seem (to me) to have a bit of a handle on what our economic difficulties are and, since the crash, have been fairly keenly interested in discussing the subject. Everyone seems to agree that there’s a more or less organized cabal of wealth that’s successfully gotten the resources of this country funnelling to it to the detriment of the rest of us.

    These folks were able to do this through organization and persistence. The “Reagan Revolution” and what’s happened since then has been the result, or so it appears to me, of some smart folks pulling in pretty much one direction for a long while, to my chagrin. Now those of us who pretend to be horrified by the direction of things, who speak of “cliffs” and “Roman Empire” and such, it’s time for us to bear down and begin to focus together, or just shut up.

    So what are we going to do? What’s our first step? Can we somehow pull the people on “my list” (I put it in quotations to emphasize its roughness) into a group that might cohere? I made that list and then had no idea how to actually contact any or, especially, to feel any hope of anyone taking me seriously. I don’t even know how to exchange emails with someone on a forum like this without exposing ourselves to the spamming world. Besides I am very much a peanut gallery type in any discussion. I’ve been reading avidly this stuff for over a year and barely know what the better educated or experienced ones are talking about.

    Anyway, just as a twig to throw out, what about Tiffiniy Cheng’s site, ForOurEconomy.org? I think it’s new. She seems to want to do something, get active, but she, or they don’t seem to have done much yet. Could we see if she would be amenable to having people of a similar spirit join up with her?

  110. James Gornick

    Could it be Far-fetched… “Austerity Measures” coming soon to America with All These Market Rumblings…

    Otherwise, other name for this could be called,”Coase Oppression Theorem Conundrum Problems”.

    What a story, which is the real story and no one knows what is right.

    Bail out TARP and all who hold or are in debt and pretend and make it all go away might read the headlines…

    The headlines could read what has been Greece’s Demise or CUT THE LEGS OUT OF THE SOCIAL SPIRIT of EVERY MAN AND WOMAN and CHILD of your Country to pay back your debts.

    What a Mega Trillion Dollar Question we have come into for markets to deal with??? Governments can’t duck behind political contributions and lobbyist on this one. Secret society of the elites are cornered on this one because people being oppressed snap back and fight back at first, and it looks ugly and with media around, does not voe well with the others that are next on the list to receive their austerity benefit package from their governmental officials.

    These debts are and will remain debts still on the table for some time to come. We can come to grips to slow down growth around the world to a measurable debt to credit sustainable metric by balancing systematically a “Paying it Forward System” as we did recapitulation of our financial systems.

    Kind of a compounding system that if the formula is calculated properly, it would leave this economy with potentially a savings account at the end of the exercise.

    Another critical piece to this exercise comes to bringing a higher social order to our society. A social order that has gone deeply away from a creator and God and into decay. Decay within our virtues, and our ethics, morals, and morale.

    Can’t do this economic correction and sustainable change without inviting fully the define Creator of “I am”, also known as GOD in all the Books ever written.

    America was born and carries proudly the seal of “In God We Trust”. It also is what will carry our nation, if we all allow, as to unify a world to come together under God to put away Evil and to bring a harmony among man.

    I am a student at heart. This all started because I had to write a thesis for a professor to get that final piece of walking papers so I can teach other students. It also became a cause because of many I have met and some of my own plight and a dear friend thrown out of his job and has lost his home, no health insurance yet, and his family has been basically moving ever since.

    Yes, I got to put grand wishes of If I had a Dream for all Humanity to come together. A few great Professors and Men and Women before me had similar dreams for our nation and other countries in this world of ours. Not bad dreams to get others to catch on to…

    Far-fetched, Not anymore,

    James Gornick

  111. Patricia Craven

    Isn’t the real problem accountability? Identifying the problems is one thing – a good thing – but not holding anyone accountable basically provides an “incentive” for the same thing to happen again…and again…and again.

  112. I think we’re going to find that the Thurs, May 6 “Flash Crash” was systemic. Markets (venues for buying and selling stocks) have proliferated and, critically, the rules that coordinate them are poor. I think the NYSE has only 25% or thereabouts of daily volume these days. Then you have Archipelago – which, interestingly, has the same owner as the NYSE, NYSE Euronext (which is not the same thing as the NYSE itself). You have BATS, the Chicago Board Options Exchange, DirectEdge and god knows what else. I’d really like to see how volume divides up these days between all these different exchanges except I’m not sure that data even exists.

    Or that the powers-that-be (whoever they all are because they avoid the light) even want (or at least wanted) that data to exist. Many parties have profited handsomely from the balkanization of US stock trading, except now they have serious egg – or worse – all over their faces. Because (the joke’s on them) they built an exceedingly complex system with bad rules (at a minimum, these need to change) which could break down on them and us again in the same fashion, or maybe some newer, even more interesting fashion. And these Lords of the Market(s) themselves don’t even know how or when this could occur.

    None of which though completely rules out the possibility of something nefarious having occurred.

  113. Brad Thrasher

    Barbyrah, City Council seats can be won with a couple-300 votes in medium and small cities during off year presidential elections. Think global, act local.

  114. No this storm was manmade by regulators. By allowing banks to lend with almost nonexistent capital requirements whenever it had something to do with triple-A ratings the markets did what they normally do when there is a great demand for it, they supplied triple-As, albeit fake triple-As… and here we are up to our tilt in lousy triple-As, mostly sovereign, in a world of uncertainty where a real triple-A is almost a specie in extinction.

  115. ‘In other words, what types of people would be representing us? What would their character be like?’

    Noam Chomsky. Richard Dawkins. Sam Harris. Pat Condell. Simon Johnson? James Kwak? Christopher Hitchens? Definetly Noam Chomsky!

    Mind you, we only have to contact the leaders above and ask them politely to have a debate amongst themselves about possible solutions to the problems we ALL face (no more analyses, please), actions we the people can undertake and broadcast it on the worldwideweb.

    A possible format could be; The Four Horsemen HD: Hour 1 of 2 – Discussions with Richard Dawkins, Ep 1

    ‘And how would it make a difference in our country’s well-being? The world’s well-being?’

    As long as you can prevent (civil) wars, we should do our utmost.

    ‘Let us overthrow the totems, break the taboos. Or better, let us consider them cancelled. Coldly, let us be intelligent.’
    Pierre Trudeau (1919 – 2000)

  116. You don’t think that it’s possible for the Renmimbi (sp?) to take over reserve status in 10 years if the current pace keeps up of China absorbing the world’s, particularly the US’s, manufacturing? At the current, or recent, pace, mind you, if something doesn’t change.

  117. No I don’t. A reserve currency is one that is a strong currency and China has grown because the world has allowed it to be a weak currency. Also before there is not more fundamental political reform in China I do not see many but speculators wishing to place their life savings there.

  118. Travis Bickle

    As Dubya once sneering within range of the mics,”these people may have some right to speak…don’t mean they have a right to be heard….”

    Money = a bigger megaphone. So, big money talks, and the Little Man walks. I’ve sat around more than a few waiting rooms watching fellow citizens gaze slack-jawed at FOX news as the drool dripped relentless down their chins.

    Still, I don’t think its naive to think blogs/media like this have an asymetric ability to sway events/policy. Its a viral mktg thang….people who are awake and think critically seek out each other and these are the elites of any income, who at least historical, have made up the vanguard of thinking.

    Influence happens on the margins, and can be effective if focused on active/critical listeners and the undecided. Getting into shouting contests is a waste of time; its the boring policy venues where you can influence elite thinking.

    The underlying problem is the current notion of representative democracy in the US. At some level I find myself in agreement with Cheney when asked about public opinion (“….so?”). The problem is finding the right balance. To get past the merely symptomatic and get at the real underlying problem in our rather pathetic “governance”, we might angle toward repealing and rethinking the amendment to the constitution for direct election of Senators.

  119. A possible platform could be TED (Ideas worth spreading) and ask them to invite a few of our leaders discussing possible solutions on how to overcome our environmental problems (caused by our economic systems) facing our eco-systems (the places where we live) due to the severe pathological behaviour of psychopatic oligarchs, politicians, bankers, dictators and totalitarian kleptocrats who are wrecking the place.

    ———————————————————————————-

    To join the conversation, comment here or join our online community at TED.com. Any questions? Email contact@ted.com

  120. I’ve commented about this on your blog before, though it may have been wiped clean by the Facebook snafu. Trading systems have all the earmarks of non-linear iterated discrete dynamical systems. If so, the unstable behavior seen last Thursday may have less to do with evil designs than with ignorance.
    The instability may be built in to the system itself. It’s crucial that we absorb this fact. There are systems whose behavior is unpredictable and no amount of knowledge will change that fact. This lesson, brought home by fifty years of research, hasn’t yet penetrated the popular mind (and the unpopular mind if you want to include Wall Street!).
    And while that may have been passably acceptable when everything happened at eyeball speeds, it can be deadly in the age of automated high-speed trading. If these systems are indeed chaotic than we will all lose our shirt in an instant. Here’s what I wrote two+ years ago on MIT’s Technology Review as a comment to an article called “The Blow-Up” about the failures of quants:
    “So, we can put together complex financial instruments and replicate them so fast with the vast computing power we have at our disposal, that no one including the quaints has any idea what the implications are. Who wants to bet that there are non-linearities in the form of feedback loops embedded within these schemes that make the whole ball of string as unpredictable as next week’s weather?

    …[t]he Aite Group, a financial-services research firm, estimates that roughly 38 percent of all equities may be traded automatically, a number it expects to increase to 53 percent in three years… If these instruments are, in fact, chaotic, then we will all have a chance to lose our shirts “automatically” as well, in the blink of an eye. What if the “statistical outlier” is no such thing? What if, instead, the trajectory of the system rides on a strange attractor and can transition to another part of that attractor and orbit out there for a while?

    The moral is brutally simple: regulate or die.”

    We better get off this roller-coaster and the sooner the better.

  121. “Our Financial System Has Become (Even More) Dangerous”

    05-14-10 10:43 AM – Huff Post – excerpts

    “While the much-maligned credit rating agencies lost some power today after the Senate approved two measures pushing the government into the ratings business, they dodged a bullet in the exclusion of another….The agencies, which rate the creditworthiness of corporations and the financial obligations they sell to investors, like bonds and commercial paper, have been blamed for playing a major role in exacerbating — if not causing — the worst financial crisis since the Great Depression….

    In short, if a Standard & Poor’s or Moody’s Investors Service knowingly tries to deceive an investor, under current law that investor can’t sue.”

    http://tinyurl.com/24s8s55

    “Obviously crime pays, or there’d be no crime.”

    G. Gordon Liddy

  122. Mr. Johnson wrote:

    “And here’s the most remarkable point – after 6 full working days (and top people do sweat this kind of issue on the weekend), we are still no closer to really understanding what happened. To be sure, there are plenty of theories – and no shortage of proposals for avoiding a recurrence. But, despite the evident resources thrown at this problem, we do not know what went wrong.”

    In the medical field, the cause for the market’s recent Wile E. Coyote/Black Swan moment, would be referred to as Iatrogenic.

  123. Jon Stewart gives a fairly terse description of how it is now. The financial game has been rigged for a verey long time.

    http://tpmlivewire.talkingpointsmemo.com/2010/05/jon-stewart-if-we-switched-to-a-nut-based-economy-wall-st-would-say-theyre-squirrels-video.php?ref=fpb

    It seems to be political suicide to take on the banks politically, akin to bad-mouthing one’s employer.

  124. Bingo.

    The “again and again” is the essence of politics or what Mancur Olson calls “the roving bandit” model of government. Rent seeking (see wikipedia) is now the preferred way for the privileged to make a living (robbery).

    “The efforts of men are utilized in two different ways: they are directed to the production or transformation of economic goods, or else to the appropriation of goods produced by others”
    – Vilfredo Pareto

  125. Reply to James Gornick,

    Nice sentiment, but the meltdown will be required first. Nothing good ever happened in this country without bloodshed. This time will be no different.

  126. “It was DAMNED profitable while it lasted…”

  127. If this is instability is built in, we can’t understand it, and that’s the greatest danger. It could simply be what the machine that’s been built does under certain conditions. I’m not joking. There are systems all of whose dynamics are thoroughly understood but whose behavior is nonetheless unpredictable. That’s because you need to know every bit of information about the current state of the system, and I do mean every “bit”. That’s not possible under any circumstances.

  128. A quite timely comment

  129. Don’t wait to make a difference!!! There are places for us. Where we have power in numbers!!

    Here are a few.

    *Move Your Money- A grassroot movement, Is picking up steam, and gives info on what actions can be taken.

    *Hightower Lowdown- you can ask to have his two min. speeches aired on your radio station.

    *Bill Moyers- Always gives us thoughtful information to make us better voters, he is still on the internet.

  130. Except this system (and it instabilities) wasn’t built – this is a case of evolution. The poorly coordinated mishmash of trading venues arrived via the blind watchmaker. Except the predominant behavior of opportunism has been insufficiently leavened by other necessary qualities. Not a good recipe.

    I think we’ve traveled past the invisible hand. And I don’t think Adam Smith ever imagined that economic life would move at a speed other than that which characterizes human scale.

    Read your article Norm – interesting. It makes good points but (as one might imagine) I’d quibble with a few things. The programming community (myself included) has moved beyond relational databases. Relational dbs are still necessary in the right places but the biggest well-known installations (think, say, google and amazon) need referential integrity in only a minority of the cases.

    Weizenbaum and Mumford are good names to bring up but I’d definitely add Hyman Minsky to the list.

  131. Said individual would be assassinated post haste and with extreme prejudice. There’s at least a few out there that believe the military has already signaled to Obama through last year’s “Party/Reception Gate” diplomatic faux pas that he can be gotten to anytime they wish, all in the interests of furthering a military foreign policy “silent coup.” Sounds plausible at least to me.

  132. Schwarzenegger budget would eliminate welfare

    Friday, May. 14, 2010 – 1:55 pm – L.A. Times

    “Gov. Arnold Schwarzenegger asked lawmakers Friday to eliminate the state’s welfare program starting in October and dramatically scale back in-home care for the elderly and disabled as part of his May budget revision to close a $19.1 billion deficit.

    The Republican governor also proposed cuts to state worker compensation. Besides asking for a 5 percent pay cut, 5 percent payroll cap and 5 percent increased pension contribution, Schwarzenegger has proposed cutting one day per month of pay in exchange for leave credit.

    “We literally have to take the ladder away from the tree and shake the whole tree,” he said. “We’re left with nothing but tough choices. … I know how many people are suffering out there and how tough this is going to be.”

    http://www.sacbee.com/2010/05/14/2751461/schwarzenegger-budget-would-eliminate.html#ixzz0nwJrT1Fy

  133. Norm, you’re right on. Imagine the markets as discrete (sometimes interacting sometimes not) ecosystems of millions of fractals with each iteration of the calculation a single programmed trade and you get an idea of where we’re headed.

    The individual trades have calculations and logic (or not) embedded therein, but the whole market will appear as classicly chaotic.

    This is the Pandora’s Box we’ve opened by doing away with the Specialist system – under which a single Specialist had a primary and affirmative responsibility to maintain a fair and orderly market, and nothing else – and allowing anyone with a pulse to be a ‘market maker’, sometimes a dealer at the same time, and switching responsibility to the individual level and away from the market level. Namely decentralization.

    We don’t have computers that can keep up, 1) from a supervisory/regulatory perspective – with all the trades in the marketplace, 2) match those trades to present a net picture of the marketplace and/or 3) maintain a tops-down fair and orderly market.

    Combined with a permissive, anything goes, mentality we’ve created the perfect recipe for seeming chaos in the markets. By definition opaque, and as GS has rightly recognized, rife with legal and techical opportunities for manipulation.

    He who invests the most in technology wins in this market.

    Quite the opposite of the great social leveller the markets were intended to represent.

  134. I agree. We need to get money out of politics. This system is corrupt. It take a billion dollars to run for the JOB of President, how is that democratic.? The game is rigged, and we get to vote for candidates that for the most part are backed by special interests. We get a vote every few years, and the rest of the time we are kept in the dark. The Fed, our monetary policy, “SECRET” becasue it is in OUR BEST INTEREST. Our Foreign Policy, SECRET, becasue it is in our best interest. Does anyone believe they are working for us? check out Elizabeth Warren’s video on Youtube, “Collapse of the Middle Class,” says it all.

    Also if you feel like it check out my poem on Huff Post.

    http://www.huffingtonpost.com/patricia-o/banksters-a-poem_b_574380.html

    We need real Change, not some phony slogan.

  135. Seems as if ‘market-making’ includes trap manufacturing and doing anything necessary to tempt the rubes into the killing field? Ethics, principles or moral absolutes don’t come into consideration as this crowd ‘does god’s work’.

    Now this gaming scenario is incredibly lucrative (see http://www.bloomberg.com/apps/news?pid=20601039&sid=ax0kTsl0dBXw )

    The recent crash may have been some exotic mathematical quirk but in a world where gaming is everything, it seems strange that creatures that walk and quack like ducks, are not suspected of being ducks?

    Maybe we will see terrorists saying thank you for some new ideas?

  136. notabanker

    Oh boy is this a reasonable view of Wall St?

    http://www.huffingtonpost.com/jeff-schweitzer/myths-of-wall-street-the_b_573151.html

    I think I have just lost my remaining trust in these stock market con merchants. Now how can we invest in America while avoiding the scammers?

  137. Travis Bickle

    The problem with direct representation is that the world has gotten too complex for “common sense” solutions to suffice: the pastoral vision of life around a civilized village pump is delusional. In a world with more people and diminishing resources, we have to live together as the backyard is no longer an acceptable dump, excepting for people like Sarah Palin.

    What is needed is a representative government sufficiently removed from the masses (who are asses (otherwise why would Fox and Heraldo, etal consistently outscore McNeil Lehrer), who will do what is the “right thing” for the general welfare, and how to keep these people in check. The reality is that it is a MAJOR challenge for any fully employed person to become well enough informed to even JUDGE a substantive discussion in ONE AREA in today’s inter-related world with an acceptable level of criticism. We have to delegate, but how? That’s what we need to think about.

    The fundamental question is whether it will be a govt of/by/for people…..or whether corporatons are people…in which case they are super-people because of their ability to aggregate power unto an oligarchy (defined, as I recall, as group who is essentially above the law, and who consequently define it). In which case, we are on our way back to feudalism, with an aristocracy ruling a bunch of serfs. This is, obviously enough at this point, where we are heading.

    It may be that a people-oriented govt would be limited in its economic potential, but this would be a trade-off that’d have to be made. However, in terms of seeing things really change in this regard, power is never relinquished willingly; It’d take blood. Otherwise, the only changes we are going to see will be in the window-dressing, as the existing trend toward consolidation of power continues toward the already rich. Marx was a bit tedious to read, and his solutions were unrealistic, but his fundamental analysis of the human condition and trends within it were correct.

    A practical question become how we serfs in this world best take care of ourselves? Well, hoarding gold is pathetic, since the oligarchs also will run that game. But the real question is to what degree will the true powers realize it is not in their enlightened best interest to abuse their power, and us, too horribly. The people in our current system, collectively, are like sheep who exist to be shorn and harvested regularly and indefinatly….as long as those in control don’t get too greedy.

    So, its either the existing scenario or have a successful constitutional convention. In which case you may want to read the Koran or refer to other models outside the judeo-christion traditions, about their notions of financial responsibility and the role of govt/business. And if you do go down that path, be prepared to become a “terrorist”, because thats the degree of commitment and rebellion it will take to reform this system, and the people who have taken things over will be the LAST people to allow it to be taken back without force.

  138. Re: @ Travis Bickle____I’d rather have “21 Pieces of Gold” collecting dust in a safe deposit box than have, “Twenty-Five Grand” in the Stock Market paying someone’s salary,and fee’s! Sure,…Gold will take a (great buying opportunity too wet your toes if it retraces to ~ $1K?) hit. Big Deal! Things don’t go straight up forever, but this isn’t enough to stop the “Worldwide Momentum”! Funny thing though – the Chinese love their silver from past history? PS. “The New World Order Gold Rush” ,Latin America (Brazil,Mexico,Peru,Nicaragua, and Bolivia); Russia; Uzbekistan; Kazakhistan; ie.) pretty much all the “stans”; Australia; Canada; US/ Alaska; and the “Biggy”… South Africa (the mother load) and “Hot-Spots” peripheries such as Niger,Rwanda,Kenya,and Sudan. Note: The Chinese (yes,even mining in Afghanistan as I write, for Gold, Silver,and valuable Gems) are in all the above countries except the US,Canada,and Russia.

  139. Travis Bickle

    Gold may your move, but it’s only the best of a lot of very bad passive tacks. Like every other market it’s still just another zero-sum game set to be managed and manipulated by others with more info/access/power than you (with all due respect).

    Anything people will continue to find attractive as the world/economy changes will to conserve your capital. I personally have well-located income producing real estate whose value will largely stay with the market or even appreciate (as opposed to commodity properties).

    Gold may be the best option for YOU and others, but it is based on merely a deep social tradition as a store of value, not for its substantive functionality, which is rather limited.

    MY POINT, was that real reform is not going to come without blood, and that level of commitment is not going to happen unless The People in generally are motivated to shed their own. And people are not going to be that motivated that strongly unless the oligarchs who are now so very ably managing The People like a bunch of barnyard animals, get greedy and take their abuses too far. And we aren’t that close to taking to the barricades at all, are we?

    SO, ABSENT SUCH ABUSE, we would need to provoke the underlying disposition to abuse, in order to motivate the masses in way that is not going to otherwise happen. To do that, you need to look to the deeper legacy of what is now termed “terrorism.” Not necessarily planting bombs, but in creative ways doing everything possible to provoke the Big Dumb System (dominated by greedy, insecure, elites) into over-reacting and over-playing their hands. The good news is that we can see this happening somewhat by nature; once some smart guys/groups start doing it deliberately, we could get some real movement. Overall, I’d stake my money and faith in anarchistic creativity against a hundred thousand consensus-driven staff meetings any day.

    EVENTUALLY, when the pressure builds far enough there must be real rebellion (with real violence: hey, remember the ’60s? It wasn’t so bad), to drive a rethinking/reimplementation of a new system. That means, IMHO, a full-fledged Article V constitutional convention. There are a lot of good lessons from the old document and the history of 200-odd years, but the situation today is completely different and we need a fresh start.

    But it will NOT happen without the issue/case being forced.

  140. Bruce E. Woych

    FLASH CRASHES AND SHOCK WAVE RAIDS: http://www.alternet.org/news/146793/was_last_week%27s_market_crash_a_direct_attack_by_financial_terrorists/
    Apparently there are a string of potential calculated “flash crashes” for political and strategic financial capture at least since 1997 when the NY Stock exchange took a 340 point drop but quickly recovered with no full explanation and a trail of baffled “experts” in the media. Of course the cover of September 2r. 2008 masked another flash dance, and March 9, 2009 was a global dip when timing was seasonally ripe and crisis loomed with doom. That “computer generated glitch” was never fully explained and was “normalized” as just part of computer anomalies during stress and market duress. This year, another dramatic plunge on May 6, 2010 is suspiciously tied to political motivation and financial racketeering (more like pirateteering…) by computerized “flash raiding” with shock and claw strategies.
    We won’t know till we investigate, and we won’t investigate if we don’t raise the very real possibility that shorting the market and hostile acquisition has been a certainty at scale levels…and computerized pumping and dumping has been the norm. The only difference here is in scope, and you would have to be foolish to believe that such potentials would be beyond the scope of desperate vultures competing for it ALL.

  141. see moveyourmoney.info

  142. Re: @ Bruce E. Woych____Let’s assume (I hate using this word, but its appropriate for this analysis via discussion for the very fact its only hypothetical) from the vast universe of eqities trading 5/6/10 ~ time 3PM…that there were approximately a hundred individual stocks that took a hit, or seemed too have been adversely effected by the HFT’s. Now let’s assume that of the one hundred, “Ten” really seemed to have been manipulated, or better said,…a significant rate of change had taken place? Now applying age old algebra with variable algorithmic schemantics applied to a simple calculus equation {T(1)/T2 (T= Start/End Time of HFT) being limits} involving the process of elimination”. The “Constant Ten” will each be assigned a multiple rational parameter used as a filter to kick it out of the equation if said volitatity index is not meant. Repeat ,until One,Two, or even Three are captured. The diversions have been eliminated and now is time to get the “BIG – Trading Desk” to verify,period! GS,ML,Citi,BS, PIMCO, Vanguard, State Street Corp., Barcap (Barclays Capital) plc.,and BLK Inc.(BlackRock Global Investors) Note: Larry Fink the CEO of BlackRock pioneered “Mortgage Backed Securities/ MBS’s” back in the mid-eighties as a managing director at First Boston! Nice! I’m not a mathematician ,and I know your out there on this blog that could ferret out quickly,and expeditiously why the system failed. I’m willing to be bet on the nefarious side of the exogenous equation. Thanks

  143. notabanker wrote:

    “Oh boy is this a reasonable view of Wall St?”

    http://www.huffingtonpost.com/jeff-schweitzer/myths-of-wall-street-the_b_573151.html

    Yup.

    Fat Finger Fandango

    May 13, 2010 – Huff Post – excerpt

    “You’re nothing but a mark in the world’s greatest scam. Remember that the next time the bottom falls out of the market, or a corruption scandal brings down an otherwise perfectly good company, or yet another insider trading scheme is revealed or a trillion dollars of hidden debt comes to light or brokers market securities they are themselves shorting or mutual funds are found to be rigged to favor special investors or a company knowingly overstates earnings by $ 1 billion or automated computerized trading paralyzes the market. You are a fool if you let the thieves of Wall Street take your money. You’re the mark.”

  144. Bruce E. Woych wrote:

    “We won’t know till we investigate…”

    Bruce I agree, our financial woes occurred through either intent or neglect, but not through ignorance.

  145. Re: @ Rickk_____That’s my point ,…who’s going to investigate? The same bunch of crooks that let the oversites occur for decades! Please be well advised that the Index’s of “ETF’s & Mutual Fund ” are two separate animals. “ETF’s” (active trading/executed immediately) is where the carnage took place – the suckers that got crucified,period! The “Mutual Fund Indexs” (passive trading – they close out at end of day no matter when you sell)! The public can hire their own independent auditing firms, and bring a class action against these companies I previous mentioned. This was collusion to the nth degree,period!

  146. earle.florida

    “Re: @ Rickk_____That’s my point ,…who’s going to investigate?”

    They investigate after each financial event.

    Be more focussed on how you will respond rather than who the investigators are. You can’t change them, but you can change how you respond, that is paramount.

  147. Re: @ Rickk_____Have you actually seen any current controversial investigative dossier’s by the SEC? Probably not – you’ll have to file “FOIA”,and wait for years if your lucky. America wasn’t built on fatalism,…there are 315 million American citizen’s that can demand it! Just as I stated,…large institutional investors can hire outside auditors, subpoenaing financial records where there’s suspected malfeasance. It’s not hopeless! Responding to your congressman is a starter because of the volatile election year. HFT’s are simple,period! They save money for the big trading houses not the retail investor. Why? They can trade at tenth’s of a cent but with huge volume and say , “we got you the best price”…whereas in all reality they make all the dole – and the retail investors has to pay a few extra cents ,big deal? Is it worth having this type of a front running illicit Trading Platform unregulated? PS. People read Rickk,and the messages get out,…believe me,…?