“A Healthy Financial System Cannot Be Built On The Expectation Of Bailouts”

By Simon Johnson.  Testimony submitted to the Congressional Oversight Panel, “Hearing on the TARP’s Impact on Financial Stability,” Friday, March 4, 2011.

I.                   Summary

1)      The financial crisis is not over, in the sense that its impact persists and even continues to spread.  Employment remains more than 5 percent below its pre-crisis peak, millions of homeowners are still underwater on their mortgages, and the negative fiscal consequences – at national, state, and local level – remain profound. 

2)      To the extent that a full evaluation is possible today, the financial crisis produced a pattern of rapid economic decline and slow employment recovery quite unlike any post-war recession – it looks much more like a mini-depression of the kind the US economy used to experience in the 19th century.  In addition, the fiscal costs of the disaster in our banking system so far amount to roughly a 40 percentage point increase in net federal government debt held by the private sector, i.e., roughly a doubling of outstanding debt. 

3)      In this context, TARP played a significant role preventing the mini-depression from becoming a full-blown Great Depression, primarily by providing capital to financial institutions that were close to insolvency or otherwise under market pressure.

4)      But part of the cost is to distort further incentives at the heart of Wall Street.  Neil Barofsky, the Special Inspector General for the Troubled Assets Relief Program put it well in his latest quarterly report, which appeared in late January, emphasizing: “perhaps TARP’s most significant legacy, the moral hazard and potentially disastrous consequences associated with the continued existence of financial institutions that are ‘too big to fail.’”

5)      Adjustments to our regulatory framework, including the Dodd-Frank financial reform legislation, have not fixed the core problems that brought us to the brink of complete catastrophe in fall 2008.  Powerful people at the heart of our financial system still have the incentive and ability to take on large amounts of reckless risk – through borrowing large amounts relative to their equity.  When things go well, a few CEOs and a small number of others get huge upside. 

6)      When things go badly, society, ordinary citizens, and taxpayers get the downside.  This is a classic recipe for financial instability.

7)      Our six largest bank holding companies currently have assets valued at just over 63 percent of GDP (end of Q4, 2010).  This is up from around 55% of GDP before the crisis (e.g., 2006) and no more than 17% of GDP in 1995. 

8)      With assets ranging from around $800 billion to nearly $2.5 trillion, these bank holding companies are perceived by the market as “too big to fail,” meaning that they are implicitly backed by the full faith and credit of the US government.  They can borrow more cheaply than their competitors and hence become larger.

9)      In public statements, top executives in these very large banks discuss their plans for further global expansion – presumably increasing their assets further while continuing to be highly leveraged.

10)  There is nothing in the Basel III accord on capital requirements that should be considered encouraging.  Independent analysts have established beyond a reasonable doubt that substantially raising capital requirements would not be costly from a social point of view (e.g., see the work of Anat Admati of Stanford University and her colleagues).  

11)  But the financial sector’s view has prevailed – they argue that raising capital requirements will slow economic growth.  This argument is supported by some misleading so-called “research” provided by the Institute for International Finance (a lobby group).  The publicly-available analytical work of the official sector on this issue (from the Bank for International Settlements and the New York Fed) is very weak – if this is the basis for policymaking decisions, there is serious trouble ahead. 

12)  Even more disappointing is the failure of the official sector to engage with its expert critics on the issue of capital requirements.  This certainly conveys the impression that the regulatory capture of the past 30 years (as documented, for example, in 13 Bankers) continues today – and may even have become more entrenched.

13)  There is an insularity and arrogance to policymakers around capital requirements that is distinctly reminiscent of the Treasury-Fed-Wall Street consensus regarding derivatives in the late 1990s – i.e., officials are so convinced by the arguments of big banks that they dismiss out of hand any attempt to even open a serious debate.

14)  Next time, when our largest banks get into trouble, they may be beyond “too big to fail”.  As seen recently in Ireland, banks that are very big relative to an economy can become “too big to save” – meaning that while senior creditors may still receive full protection (so far in the Irish case), the fiscal costs overwhelm the government and push it to the brink of default.

15)  The fiscal damage to the United States in that scenario would be immense, including through the effect of much higher long term real interest rates.  It remains to be seen if the dollar could continue to be the world’s major reserve currency under such circumstances.  The loss to our prestige, national security, and ability to influence the world in any positive way would presumably be commensurate.

16)  In 2007-08, our largest banks – with the structures they had lobbied for and built – brought us to the verge of disaster.  TARP and other government actions helped avert the worst possible outcome, but only by providing unlimited and unconditional implicit guarantees to the core of our financial system.  This can only lead to further instability in what the Bank of England refers to as a “doom loop”.

II.                TARP Compared

1)      In the immediate policy response to any major financial crisis – involving a generalized loss of confidence in major lending institutions – there are three main goals:

  1. To stabilize the core banking system,
  2. To prevent the overall level of spending (aggregate demand) from collapsing,
  3. To lay the groundwork for a sustainable recovery.

2)      IMF programs are routinely designed with these criteria in mind and are evaluated on the basis of: the depth of the recession and speed of the recovery, relative to the initial shock; the side-effects of the macroeconomic policy response, including inflation; and whether the underlying problems that created the vulnerability to panic are addressed over a 12-24 month horizon.

3)      This same analytical framework can be applied to the United States since the inception of the Troubled Asset Relief Program (TARP).  While there were unique features to the US experience (as is the case in all countries), the broad pattern of financial and economic collapse, followed by a struggle to recover, is quite familiar.

4)      The overall US policy response did well in terms of preventing spending from collapsing.  Monetary policy responded quickly and appropriately.  After some initial and unfortunate hesitation on the fiscal front, the stimulus of 2009 helped to keep domestic spending relatively buoyant, despite the contraction in credit and large increase in unemployment.  It was also consistent with parallel countercyclical fiscal moves in other countries.  This was in the face of a massive global financial shock – arguably the largest the world has ever seen – and the consequences, in terms of persistently high unemployment, remain severe.  But it could have been much worse.

5)      There is no question that passing the TARP was the right thing to do.  In some countries, the government has the authority to provide fiscal resources directly to the banking system on a huge scale, but in the United States this requires congressional approval.  In other countries, foreign loans can be used to bridge any shortfall in domestic financing for the banking system, but the U.S. is too large to ever contemplate borrowing from the IMF or anyone else.

6)      Best practice, vis-à-vis saving the banking system in the face of a generalized panic involves three closely connected pieces (see chapter 2 of 13 Bankers and the references provided there):

  1. Preventing banks from collapsing in an uncontrolled manner.  This often involves at least temporary blanket guarantees for bank liabilities, backed by credible fiscal resources.  The government’s balance sheet stands behind the financial system.  In the canonical emerging market crises of the 1990s – Korea, Indonesia, and Thailand – where the panic was centered on the private sector and its financing arrangements, this commitment of government resources was necessary (but not sufficient) to stop the panic and begin a recovery.
  2. Taking over and implementing orderly resolution for banks that are insolvent.  In major system crises, this typically involves government interventions that include revoking banking licenses, firing top management, bringing in new teams to handle orderly unwinding, and – importantly – downsizing banks and other failing corporate entities that have become too big to manage.  In Korea, nearly half of the top 30 pre-crisis chaebol were broken up through various versions of an insolvency process (including Daewoo, one of the biggest groups).  In Indonesia, leading banks were stripped from the industrial groups that owned them and substantially restructured.  In Thailand, not only were more than 50 secondary banks (“Finance Houses”) closed, but around 1/3 of the leading banks were also put through a tough clean-up and downsizing process managed by the government.
  3. Addressing immediately underlying weaknesses in corporate governance that created potential vulnerability to crisis.  In Korea, the central issue was the governance of nonfinancial chaebol and their relationship to the state-owned banks; in Indonesia, it was the functioning of family-owned groups, which owned banks directly; and in Thailand it was the close connections between firms, banks, and politicians.  Of the three, Korea made the most progress and was rewarded with the fastest economic recovery.

7)      If any country pursues (a) unlimited government financial support, while not implementing (b) orderly resolution for troubled large institutions, and refusing to take on (c) serious governance reform, it would be castigated by the United States and come under pressure from the IMF.  Providing unlimited implicit guarantees does not help underpin financial stability.

8)      At the heart of any banking crisis is a political problem – powerful people, and the firms they control, have gotten out of hand.  Unless this is dealt with as part of the stabilization program, all the government has done is provide an unconditional bailout.  That may be consistent with a short-term recovery, but it creates major problems for the sustainability of the recovery and for the medium-term.  Serious countries do not do this.

9)      As Larry Summers put it, in his 2000 Ely Lecture to the American Economic Association, “[I]t is certain that a healthy financial system cannot be built on the expectation of bailouts” (American Economic Review, vol. 90, no. 2, p.13).

10)  Seen in this context, TARP was badly mismanaged.  In its initial implementation, the signals were mixed – particularly as the Bush administration sought to provide support to essentially insolvent banks without taking them over.  Standard FDIC-type procedures, which are best practice internationally, were applied to small- and medium-banks, but studiously avoided for large banks.  As a result, there was a great deal of confusion in financial markets about what exactly was the Bush/Paulson policy that lay behind various ad hoc deals.

11)  The Obama administration, after some initial hesitation, used “stress tests” to signal unconditional support for the largest financial institutions.  By determining officially that these firms did not lack capital – on a forward looking basis – the administration effectively communicated that it was pursuing a strategy of “regulatory forbearance” (much as the US did after the Latin American debt crisis of 1982).  The existence of TARP, in that context, made the approach credible – but the availability of unconditional loans from the Federal Reserve remains the bedrock of the strategy.

12)  The downside scenario in the stress tests was overly optimistic, with regard to credit losses in real estate (residential and commercial), credit cards, auto loans, and in terms of the assumed time path for unemployment.  As a result, our largest banks remain undercapitalized, given the likely trajectory of the US and global economy.  This is a serious impediment to a sustained rebound in the real economy – already reflected in continued tight credit for small- and medium-sized business.

13)  Even more problematic is the underlying incentive to take excessive risk in the financial sector.  With downside limited by government guarantees of various kinds, Andrew Haldane of the Bank of England bluntly characterizes our repeated boom-bailout-bust cycle as a “doom loop.”

14)  Exacerbating this issue, TARP funds supported not only troubled banks, but also the executives who ran those institutions into the ground.  The banking system had to be saved, but specific banks could have wound down and leading bankers could and should have lost their jobs.  Keeping these people and their management systems in place serious trouble for the future.

15)  The implementation of TARP exacerbated the perception (and the reality) that some financial institutions are “Too Big to Fail.”  This lowers their funding costs, probably by around 50 basis points (0.5 percentage points), enabling them to borrow more and to take more risk with higher leverage.

16)  The Obama administration argues that regulatory reforms, including the Dodd-Frank Act and associated new rules, will rein in the financial sector and make it safer.  Unfortunately, this assessment is not widely shared.

17)  There was an opportunity to cap the size of our largest banks and limit their leverage, relative to the size of the economy.  Unfortunately, the Brown-Kaufman to that effect was defeated on the floor of the Senate, 33-61, primarily because it was opposed by the US Treasury.  (See https://baselinescenario.com/2010/05/26/wall-street-ceos-are-nuts/, which contains this quote from an interview in New York Magazine: “‘If enacted, Brown-Kaufman would have broken up the six biggest banks in America,’ says the senior Treasury official. ‘If we’d been for it, it probably would have happened. But we weren’t, so it didn’t.’”)

18)  Regulation remains weak and many regulators are still captured by the ideology that big banks are good for the rest of the economy.  Capital requirements will increase but are likely to remain below the level that Lehman had in the days before it failed (11.6 percent tier one capital).  There will be no effective cap on the size of our biggest banks.  They have an incentive to take on a great deal of leverage.  This confers private benefits but great social costs – lowering economic growth, increasingly volatility, and making severe crises more likely.


This testimony draws on joint work with Peter Boone, particularly “The Next Financial Crisis: It’s Coming and We Just Made It Worse” (The New Republic, September 8, 2009), and James Kwak, including “The Quiet Coup” (The Atlantic, April, 2009) and 13 Bankers: The Wall Street Takeover and The Next Financial Meltdown

118 thoughts on ““A Healthy Financial System Cannot Be Built On The Expectation Of Bailouts”

  1. [PDF] External MPC Unit Discussion Paper No. 31 Optimal bank capital

    Excerpt: In Table 9 we report the optimal level of bank capital implied by each combination of cost and benefit estimates. It is remarkable to note that our central estimate for themarginal cost and benefit of higher capital suggests an optimal capital ratio of about 50% of risk weighted assets – which might mean a capital to total assets ratio of around 17% and leverage of about 6. This would be about 5 times as much capital –
    and one fifth the leverage – of banks now.

    Click to access extmpcpaper0031.pdf

  2. The American people are like the lion in an African expression “they feed they lion , they lion grow.” The lion has not only been captured and caged but they are also not even feeding the lion. The Democrats have a party structure set up so they can not be mobilized . Unions yes but not the Democrats , unless its for an election but not for issues like too big to fail, among others. They don’t feed they lion and the lion can’t defend him/herself.
    Someone once called it a “no party system” controlled by interest groups.
    I watched and enjoyed your presentation on CSPAN.

  3. Simon, that clear, rational, perceptive voice of yours falls on deaf ears, as most of the comment-people here realize.

    You’ve been on center of the target the entire time I’ve been reading you, but nothing constructive is going to happen. This is on account of the widely repeated motif seen here: the “government” is completely DOMINATED and SUBORDINATED to the money interests, and there isn’t a Franklin Delano Roosevelt around with a strong, populist, counterpunch….with the tenacity and resolve to stand up to these greedy bast*rds.

    We are in the “doom loop”, and the next crash may be it: as Dandy Don Meredith, the ex-quaterback and TV broadcaster liked to say….”turn out the lights, the party’s over.”

  4. “The overall US policy response did well in terms of preventing spending from collapsing.”

    No, the solution to too much lower and middle class debt is not more lower and middle class debt and not more gov’t debt.

    The problem is not big banks. The problem is what most banks produce, debt. The problem is too much debt and that the way the system is set up now, all new medium of exchange is the demand deposits created from debt, whether private or gov’t.

  5. Simon is the Fed helping bank balance sheets on the liability or asset side? I thought all the “excess reserves” offered by the Fed went to the asset side? It is a huge amount and growing – easily seen on a graph of the monetary base. So does it have the same “insane risk taking” effect by jacking up equity which allows for crazy leverage?

  6. “1) In the immediate policy response to any major financial crisis – involving a generalized loss of confidence in major lending institutions – there are three main goals:

    1. To stabilize the core banking system,
    2. To prevent the overall level of spending (aggregate demand) from collapsing,
    3. To lay the groundwork for a sustainable recovery.

    2) IMF programs are routinely designed with these criteria in mind…”

    Try replacing that with a too much debt crisis and insolvent institutions that you want to help.

    The correct thing to do is run an all currency economy. Abolish the IMF. Then, fire all the people who work at the IMF or have worked there in the past.

    How many times does “lay the groundwork for a sustainable recovery” mean negative real earnings growth for workers and trying to force an economy to become a net or “more net” exporter?

  7. Simon – Regarding TARP being the right thing to do, I find your opinion to be misinformed and refer you to Steve Keen. His work showed that the best sustainable option was to give the TARP money to the people so they could pay off their debt, which would then stabilize the banking system.
    Steve has both lectured and modeled the Global Financial Crisis and understands what most economists do not: an economy = GDP + change in debt. I suggest you do a little reading before your testimony.

  8. Speaking of TARP, it didn’t help the balance sheets of these RICO scam (TBTF) machines, did it? The sludge remains, the radioactivity spews forth, and nothing has changed, except all the free FIAT $$$$ healed the income statements, and got the FAT DEEP BONUS POOL to the optimum level.

    Am I incorrect in believing these “financial products” continue sitting on the balance sheets and that no danger is effectively ameliorated?

    Earle in Florida, where the hell are you?

  9. We should have stablized the system, yes, when the financial sector fell off a cliff in 2008 and dragged the global economy with it.

    But the banking system as it was in 2008 should not have been “saved” because that system was (and remains) utterly corrupted by greed and prone to “excessive risk.”

    Due to bankruptcies and consolidation, our TBTF institutions are even more systemically risky than they were in 2008. We teeter on that cliff once again, but with a federal government in excessive debt now too. That’s what happens when loss is socialized – and profit is privatized. The government and the middle class go broke as the bankers get richer.

  10. Outstanding work again Mr. Simon. Your summary of the fatal flaws in TARP, both bush and Obama economic policies, and the meager tepid efforts toward financial reform, are chilling. Sadly Woop is correct in reminding everyone, that these scathing reports and commentary fall on “deaf ear”.

    Paulsan dashing into a meeting with bushgov and demaninding 700bn immediately to save the markets from “endoftheworld” scenario’s, with a threepage document is damning evidence. My phonebill is eight pages. The den of vipers and thieves on Wall Street ramping up 800pts the day the taxdodger, and spaneil of the predatorclass Geithner was nominated stands as another instance proof that the finance oligarchs, the predatorclass and our socalled government one intertwing interpenetrating many tantacled beast. The predatorclass audacity, supremist ideologies, and ruthless disregard poor and middleclass fellow citizens is blantantly obvious, chilling in it’s expansiveness, and certain proof that the predatorclass, and select predatorclass oligarch have commandeered total control
    of the socalled government, and most of the nations wealth and resources. This dynamic will never change politically or judicially, since quite obviously the predatorclass owns and controls both the political and judicial systems and many key individuals.

    Nothing will change, until the people enmasse stand up to the predatorclass den of vipers and thieves and demand real change. The predatorclass is bent on total domination and control. Beyond economic and political dominance, there is a pervasive campaign dumbdowning the population bruting naked lies, false and twisted perversions of religion and patriotism, and disinformation pimped by wingnut thinktanks, redneckradio, and the gospel according to fox, – and sadly a large population follows redneck Amerika into the pit of ignorance, lies, and disinformation.

    The predatorclass will resist any real change with savage intensity. So if and when real change comes, – it will not be, pretty, peaceful, or bloodless.

    Ashes, ashes, all fall down!

  11. That is a rather lenghty read, I stopped because I relize the secondary real estate market (for example) is extremely propped up by these same large banks. And then are leveraged to boot with derivitives that once those toxic investments are then placed on the taxpayers books are not worth 1/2 of what they were worth as a propped up entity. Trouble ahead and trouble behind for accountants and law firms.

  12. I recall the same group as also promoting Alcoa’s fantastic finishes series, that was fun to watch.

  13. @Simon Johnson: “Independent analysts have established beyond a reasonable doubt that substantially raising capital requirements would not be costly from a social point of view”

    Absolutely wrong! Shame on you Professor Johnson… and on the independent analysts!

    Raising the capital requirements using the current regulatory paradigm of determining the capital requirements based on perceived risk, would be extremely costly from a social point of view.

    In Basel II, with a basic capital requirement of 8percent, loans to small businesses with a risk-weight of 100% generated a capital requirement of 8 percent, while loans to triple-A rated clients with a risk-weight of 20% generated a capital requirement of only 1.6 percent… a difference of 6.4 percent.

    Imagine if that basic capital requirement was to be 50 percent. Then loans to “risky” small businesses would require 50 percent of capital while loans to triple-A rated clients would require 10 percent, a difference of 40 percent… say bye-bye to banks financing small businesses and entrepreneurs… precisely those which the banks should help finance the most. No social cost? Ha!

    This is precisely what happens when PhDs don’t want to be bothered with mundane issues like how the bank regulations work… and speculate wildly from their offices… this is precisely the kind of mentality that brought us the Basel II’s 62.5 to 1 leverages on anything with a triple-A rating and thereby tempted the banks to enter massively triple-A rated waters, where the sharks of the real economy were waiting for them licking… and social disaster ensued.

    Professor Johnson, the capital requirements of 8 percent have proven more than sufficient to cover for any losses in the type of loans that generate an 8 percent requirement… so why do you insist in the little guy carrying the biggest load?
    @Simon Johnson: “Capital requirements will increase but are likely to remain below the level that Lehman had in the days before it failed (11.6 percent tier one capital).”

    Completely irrelevant, as that Tier one capital ratio refers to the risk-weighted assets and since the risk-weights were and are obviously completely wrong, that ratio means absolutely nothing. And Professor Johnson should have been able to pick up that by now… if he had not been so busy.

  14. A problem I am seeing with a number of industries is they make understanding their industry so difficult that people have to reley on and also pay the said recipient of that industry, for any what should be meager type of work. One thing these linear lunatics overlooked though was that mathematics is great equilizer, and that theres is not the only game in town. Once awoken from this sleep they find it more difficult to explain the legitamacy of their tiered industry and its real purpose in life. A simpler tax system would eliminate and reduce this naturally, but the same ones taking a haircut, so to speak, are the only ones who can change the laws, and its obvious that aint gonna happen.

  15. This is how I started I brief speech I gave some hundred regulators during a risk-management seminar – Basel II discussions in the World Bank, May 2003

    “Let me start by sincerely congratulating everyone for the quality of this seminar. It has been a very formative and stimulating exercise, and we can already begin to see how Basel II is forcing bank regulators to make a real professional quantum leap. As I see it, you will have a lot of homework in the next years, brushing up on your calculus—almost a career change…
    But, my friends, there is so much more to banking than reducing its vulnerability”
    I do not know whether some of the linear hotheads in Basel know what they are doing, I doubt it, but let me assure you that the little regulator on the street… the implementer and the supervisor… he has not the faintest idea of what this whole mumbo jumbo means… like to control and supervise for systemic risk? Come on! They’ve got to be kidding… Might this be a highly sophisticated reality show for financial nerds produced with a candid camera? If so, the financial nerds are not showing their best side.

    How much better would we not be if some of the experts just speak out and say “Colleagues I don’t understand a word of what you are talking about? … Instead of just trying to substitute for those colleagues with their own illuminated, and of course also biased, “expertise”. Can you imagine how much more productive a baselinescenario could have been?

  16. I can see where you didn’t have all the tools in the world to work with back then, but to take away tools and then force the benificiary to “manual labor up” in the name of paying regulators, has to have consequences eventually from the top on down. When the time comes to speak for “we the people” many of these same regulators will head for the hills and attempt to send in a battery of lawyers to provide the resistance. But those firms will be on the defensive and punting in short order, and this event will trickle up to the hills and bite them in the rear. And best of all, it will be unannounced as a fever pitch developes.

  17. “The real truth of the matter is, as you and I know, that a financial element in the larger centers has owned the Government ever since the days of Andrew Jackson — and I am not wholly excepting the Administration of W. W. The country is going through a repetition of Jackson’s fight with the Bank of the United States — only on a far bigger and broader basis.”

    FDR june 16, 1933.

    I argue it is orders of magnitude more worse now, than when that brave soul Franklin uttered these words.

    So many presidents throughout our history have warned of these concentrated powers, but to no avail, it would seem.

    There is no loyalty among these “concentrated powers” to the idea of nation, liberty, decency, or morality. The over-riding principle is greater accessions to wealth, and using wealth to completely subvert the body politic. It’s an ugly story, replete with political assassinations, and other criminal plots.

    These people have been called parasites, and it is an apt description. However, unlike many parasites, who have a vested interest in not killing off the host organism, these parasites under test have no interest in this, if this interferes with their addictive, destructive behavior.

    We all saw, and Simon has painstakingly and laboriously documented here and elsewhere, the ineffective and inchoate attempts via “Dodd-Franks”, and the BIS, to curtail the expansionistic and pernicious influences of these institutions, and now we await a further calamity, which is most certainly in the pipeline.

    Now, since neither the anti-trust division of Main Justice, nor the Congress or POTUS are up to the task, what is the solution to the massive looting and planned obsolescence of a viable middle class?

  18. “what is the solution to the massive looting and planned obsolescence of a viable middle class?”

    One place to start is firing all the current principal individual members of the Basel Committee, recruit a new bunch, and order them to come back to us with a clear statement on the purpose for our banks, and that we approve of, before they are allowed to mess-around with and do any regulation of our banks.

  19. Economic disobedience – the party is just beginning :-)

    Play hardball, wouldja? Hold that empty real estate hostage – only way to make the derivatives go up in smoke…think about all the new industries and JOBS that will grow up – renaissance of architecture that is NOT dependent on *oil*

    Issue a new currency that cuts then out simply be DEFINING what the purpose of the regional *BANK* is – they are so NUTZ their corporate personhood doesn’t have an ID card, so to speak…

    It’s a MIND GAME – stop playing it – it’s NUTZ.

    They have “power” because you gave it to them.

    What about OUR personal duty and “moral/ethical” obligation to not be LEAD by the scum of the universe?

    Are we FREE men or not?!

  20. One is only as free as he will let us be, and they have power because they refuse to let you take it from them. “We” never had any power to give them.

  21. Again, thanks for doing all of this. Your explanations are very clear and understandable. Truly appreciate your perseverance.

    Families applying for college financial aid are put through more rigor of accountability than were the banks going for TARP:

    “Seen in this context, TARP was badly mismanaged. In its initial implementation, the signals were mixed – particularly as the Bush administration sought to provide support to essentially insolvent banks without taking them over.”

  22. Per, you are a really bright, smart person, especially as this relates to risk-analysis, capital ratios, and that kind of technical discussion.

    As a generalist, I have a broad-spectrum question, if you’ll permit me: we all know what happened to the world financial system when the regulatory systems in place, such as they were, were inoperable, defeated, or overcome in some way….a world crash, followed by what I see as a world economic depression, the throes of which we still are in.

    OK, here it is: it’s clear the banks are not fulfilling any noble social function, so even with a mission statement by a re-constituted Basel committee, what good would that do (“the banks are organized to do xyz”) in setting forth a better or improved regulatory schemata?

    I have yet to see ANY evidence that any business is capable of any self-regulation, where the bottom line is the sole raison d’etre of the organization.

    I spent years as an auditor of personal and corporate income taxes, and I can testify that without the regulatory muscle in place, the concept of voluntary compliance with law and regulation is as real as the Emerald City.

  23. Thanks for your kind words…

    I am not out to change the world but just to make it a bit more livable with what we got, and so I feel that if the regulators are forced to state a purpose for the banks, and we approve it, then the chances that regulations would somehow have to be somewhat consistent with achieving the stated purpose would be higher.

    As is we are under the thumb of the mother of all purposeless bank regulations ever, that are just out to make what is already financed less expensively, because it is perceived as not risky, cheaper still, and to make what already is financed expensively, because it is perceived as risky, more costly still.

    Sincerely, is this the right track to find all the new jobs the world so urgently need?

  24. They are simply nuts!

    At this moment there are billions of bank liquidity that have painted itself into the corner of public debt and triple-A rated paper because there is not sufficient bank capital to allow that liquidity to move to areas that require more regulatory capital… like the lending to small businesses and entrepreneurs…

    How long could it take to rebuild the necessary bank equity in order to have a 50 percent risk-weighted ratio… and a 50 percent risk-weighted average ratio what does it mean? That a bank would need about 80% capital or more when lending to small businesses and entrepreneurs?

    Sincerely we have all the right in the world of being extremely nervous of the prospects for our economies with experts like these. Could it really be that my http://www.theaaa-bomb.blogspot.com/, written in jest, has more truth to it that I could have ever imagined?

    Of course the banks need to hold more capital… but hold more capital for those operations for which they are obviously holding insufficient capital, like the 0 percent for triple-A sovereigns and 1.6 percent for triple-A private… but they should not need to hold more capital when lending to small businesses and entrepreneurs because that capital, 8 percent, has proved to be quite sufficient, for the time being, among others because these clients already pay higher interests that go into the capital of banks.

  25. There is a fundamental philosophy difference between those that believe in the inherent utility of strong and large banking/financial entities and those who believe in supporting first and foremost the little guy. The outrageous tolerance of the rotten leadership core of the financiers that collectively put us where we are today indicates that the financial lobby is stronger than ever, that denialism persists and is not called-out by the media or mainstream politicians, and that we should expect a larger and larger fraction of our GDP to arise from financial services. We need to look in the mirror and ask if we want our financial sector to go from around 5% to the 10-15 or even the 20% range. If 20% comes to pass, it will crush the little guy.

  26. “There is a fundamental philosophy difference between those that believe in the inherent utility of strong and large banking/financial entities and those who believe in supporting first and foremost the little guy.”

    That does not fully cover the issue.

    When I speak about fairer regulatory terms for small businesses and entrepreneurs I am not saying that banks should support first and foremost the little guy, what I am saying is that the regulatory discrimination of small businesses and entrepreneurs must end.

    Banks should first and foremost support the creation of jobs in the economy and which of course will benefit both the little guy and the big guy. Banks are there to perform a very important capital allocation and risk-taking function for society. Banks are not there to allocate most of the capital to themselves.

  27. @ MB

    “Seen in this context, TARP was badly mismanaged.”

    The housing market euphoria topped in Sept/2005 – the big banks were well informed/aware as early as April/2006 that there was a massive bubble about to implode in the not so distant future. Thing is… market timing is impossible to predict so most Big Bank’s got short the housing market little by little so as not to spook the crowd. This is when AIG got sucked into the fray on the long side – Fannie and Freddie also decided the party had a long run yet to go, so jump in (terrible timing), the more the merrier they say. I can remember Bush #43 telling the public that housing was the best investment a family could make – that if there were a bubble in the housing market the (capitalist free enterprise) markets would certainly telegraph it to the public well in advance! Guess who was Bush #43’s top economic advisor at the time in July/2006? If you’d guessed “Helicopter Ben” (Bernanke) you would be correct.

    The initial implementation weren’t mixed, and neither were the signals cut in stone. The White House had contingency plans well in advance of the coming debacle that would hopefully endure until a democratic president was elected (which was a no-brainer – the public had their fill of Georgie Boy Junior). But as I have mentioned…”Market Timing is a Fool’s Errand” and had it been revealed and placed on Obama’s lap mid first (quite similar to Bush #41/ “Read my Lip’s?” losing to Clinton, and giving Billy Boy the most robust economy with a full head of steam not seen since the roaring 20’s) year in his term the GOP would have been dancing in the streets! Fortunately for Obama it didn’t, so Bush #43 took the hit (Obama hasn’t changed Bush’s policy one iota ,MHO), and President Obama now carries the top-heavy baton!
    All the people involved in the 2008-2009 financial debacle should be behind bars, period! Because there are not any…simply tells me that our country is no longer a democracy, but a sham!
    They were all privy to the data – all should be held accountable – all should be in prison! We are now a country of “Arcane Anarchist”…this/these band of thieves knew what had to be done – the sequential order (laws/document’s,etc.,) must be walked backwards to get the answers the public need not know and what they needed. “Eureka”! “Reverse Engineering of Laws & Rhetoric” will suit the present just fine…tuned at the flick of a switch – as fast as a rogue algorithm goes bad in a google-second “High-Frequency Trade”? Indeed what we have here today, the 6th of February 2011 is that of a American Neo-Political Culture gone terribly bad!
    Bush #43, and Hank “the shank” Paulson “Always”, fully supported the insolvent banks (for God’s sake, Paulson could have lost a half billion dollars, never mind the Bush’s money in Brown Brothers Harriman/ JPMC?) but the problem was getting there cohorts/accomplices on board…just like getting your ducks/house in order before you show your hand. The plot unfolded perfectly with just the right amount of divergence/ convergence and a little sprinkle of believable truths made up to sell the ruse to the american public…with a foray of untouchables to come later in the wee hours of the morning? Always at the hour the devil plots his forlorn vengeance?
    “Indeed…the american people have put to much trust in words – the very breadth spoken behind the corrupted and degenerated grey hair beast, this so called fashioned apologist who win us over in our weakest moments?”

  28. The symbiotic relationship between big business (banks), unions and the government conspires to loot the public’s money and prevents moral hazard from extracting it’s just toll on the transgressors of liberty and property. TARP was a lie that became a slush fund for favored paymasters that would otherwise have to face bankruptcy for there foolish misdeeds.

  29. still stalking, eh?

    If “we” had no power, then where did the freekin’ *assets* come from….?

    The Supreme Bank Being?

    @Simon Section I-7 – “Our six largest bank holding companies currently have assets valued at just over 63 percent of GDP (end of Q4, 2010). This is up from around 55% of GDP before the crisis (e.g., 2006) and no more than 17% of GDP in 1995.”

    Liars thieves and murderers – and the scum took it during a decade long “fog” of war against one Saudi long haired hippie dude – freekin’ stoned on Afghan opium and – well, who was HE a prophet for – who was HE channeling…? Oh wait, and why are WE now in Afghanistan…?

    Seriously, Herbie, stfu about *POWER*, you troll.

    You ain’t SEEN it yet – *POWER* that is…

  30. @Bob “The symbiotic relationship between big business (banks), unions and the government”

    I have not enough knowledge about the American society to agree or disagree on that.

    What I do know though is that there are others who should have spoken up… like all those tenured PhDs. I was truly amazed to see since I arrived here in November 2002 and started to be more active on the issue of financial regulations, how extremely silent and uninterested academia was about how their banks were being regulated. I have even read several financial professors speaking out and comparing historical capital ratios with the current capital/risk-weighted assets ratio without even knowing those are not even apples and oranges.

    With or without a conspiracy, the truly negligent silence of the academia played a huge role in generating this crisis.

  31. @Forest, “Nothing will change, until the people enmasse stand up to the predatorclass den of vipers and thieves and demand real change.”

    magic word – *CHANGE*

    Uh, Tony Dahling, I want the LAWS back in force. There was nothing WRONG with those LAWS to begin with – was there?

    Are you listening – we don’t want any more freekin’ shape-shifting *change*

    Now, I sincerely wish I was a witch – I’d definitely cast a spell on that enronista who slithered into health insurance CORPORATION and came up with that schtick of telling everyone OVER THE PHONE FROM FLORIDA – the scum bag – that their COBRA payments were SHORT 21 cents and so they were cut off –

    and this is the part that I will NOT forgive

    he picked out a quote from the BIBLE to slam me when I had both the last bill and a copy of the check I sent and said I would be happy to fax it to him to PROVE I was not short

    he accused ME of being the cheat with a BIBLE quote to back up his accusation…

    betcha that dude is with the Tea Party now…

    HE had all this personal information about ME and my health – all I know is his PHONY telemarketing name

    How is that FAIR play when it comes to *POWER*…?

    Way to much sadistic, insane and gross fraud has gone down for there to be a way out for the “elite” and their hooligans…

    I am not a conjured up in a monkey brain communist conservative witch who can make that 21 cent short dude take off his headset and proceed to follow my detailed and complicated SOP to shove it up his plumbing…

    That’s what a GOVERNMENT created by CIVILIZED and sane citizens is supposed to be about…

    Whatever counter-revolutionary SOP you’ve got going against the mounting pressure from “below” – you better stop telling us we need “change*…

  32. “What about OUR personal duty and “moral/ethical” obligation to not be LEAD by the scum of the universe?”

    And as one prominent, French movie actor would say in films made years ago, “But, of course”. However, the depth of the screwing we’re getting must be widely perceived before the people will be moved to outrage. Most are still trying simply to make the best of the situation in which they now find themselves economically. There is absent any widespread consciousness of having been made victims of wholesale theft by the upper rungs of society and of having been cuckolded by politicians at every level in whom they had so casually placed their trust. But it is coming. Not unlike the Egyptian, Tunisian, Yemeni and other Arabian masses oppressed by corrupt rulers into sullen acquiescence in the teeth of illegal Israeli land grabs and fascist ethnic cleansing in Palestine, the American people will have their “moment” and their opportunity for morality. And it is precisely in the justice that they will then mete out that these filth will come to know it.

  33. @Bob “The symbiotic relationship between big business (banks), unions and the government”

    @Per, “I have not enough knowledge about the American society to agree or disagree on that.”

    Don’t feel bad about it, Per, neither does “Bob” :-)

    Bob’s light bulb flickered on for a second and the revelation of the NATURAL relationship between capital, labor and government so blinded him, that he thinks he found the “problem” instead of realizing he’s about to dismantle the *SOLUTION* – the proper balance of *power*.

    That should help answer your question about whether there is a bona-fide “academia” in American society, silent or not, if the conversation about “for-profit” student loans hasn’t…

    I found the story in Belgium today interesting – Belgium now holds the record for the country with the longest amount of time (in days) without a “government” – street music, carnival atmosphere, free french fries and beer – all in all a nice celebration :-)…just create a new language out of Flemish and French – *Flench* or *Fremish* and stay Belgiumish…

  34. Polanyi (1944:20, The Great Transformation) noted in his work that the true nature of the international system was not realized until it failed. The same is true today. How can you bail out corruption and Looting strategies?

    The real question is truly “…what exactly are we financing?


    Put Goldman Sachs CEO Lloyd Blankfein in jail for six months, and all this will stop, all over Wall Street and America, a former congressional aide tells Matt Taibbi

    Taibbi’s right, everyone knows Wall Street’s run by a bunch of dictators who are doing more damage to democracy and capitalism than North Africa’s dictators. But jail the CEOs of Goldman, Citi, B. of A. or my old firm Morgan Stanley? Too late.





  35. F..ing A Annie.

    17% in 1995! Gee what a suprise..

    Five of the six are on Every Freaking Corner, in every city. Just look.

    The deed is done, but the 17% to 63% stat is a good one to convert the ignorant.

  36. “With or without a conspiracy, the truly negligent silence of the academia played a huge role in generating this crisis.”

    Per, you are so right about this.

    The first time I was made aware of what I would call a conspiracy — perhaps a kinder way to frame it is as “capture” — of the academic economists was in the film “INSIDE JOB,” which just won an Oscar for best documentary.

    You see most of these academics are consulting for Wall Street or other corporate entities on the side, and guess what? Their consulting gigs are far more remunerative than their university salaries. So do you really think they would even nibble at the hand that feeds them? No, I don’t think so, either.

    SEE “INSIDE JOB” everybody, if you haven’t already. The DVD will be released this Tuesday, March 8.

  37. How are the unions accountable Bob? Unions have given wages and benefits, seen their numbers radically diminshed, and endured an allout assault on their very legitimacy. Mind you that Union Square in New York was born out of battles won for workers rights against industries that abuse employee’s and even children, prosecuting slavelabor, – which the people then, would not standfor. Tragically Amerika’s stupid, wildly mis or disinformed publick is apathetic and bendsover and takesit. And we will all takeit good and proper, – until the day when we refuse.

    When we stand up and say – enough with the abuse, and oppression and ruthless robbing and pillage of the workerclass, and the relenstless lying, and criminal activity and unaccountability -and then – we will demand change! Real change! “And someday a real rain will come, and wipe all this scumb off the streets”.

    A balancing and a reckoning is coming for the predatorclass.

  38. I just re-read your post Annie and feel your pain. You suffer and injustice as many Americans do, because there is no justice. Justice in Amerika is just-us. Everyone else is dashed off to the largest prison system on earth, and a privatized prison system at that! It’s an instance of injustice and rampant abuse. Amerika’s predatorclass are a den of vipers and thieves, a ruthless, heartless, savage brood of monsters who are actively working and succeeding mind you, – in crushing the life and blood out of poor and middleclass Americans. They want us all slaves! They seek to dominate and crush our spirits and hope and any future we may dream for our children. This is the change I am calling for, – this is the real change that is necessary – the current systems are toxic and predatory and totally absent any moral or legal legitimacy. The entire system must be stopped, reengineered, and a new more equitable more legal, and more moral system must be erected in it’s place.

    Our founding fathers said it best:

    “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.”

    Real change is won in the streets, not in the halls of socalled justice, or some backroom or bar frequented by politicians.

    The people either standup and demand change, or we don’t. If we don’t – then get ready for your bio ID card, and ruthless oppression of poor and middleclass Americans and a grim future for our children. If we do – then get stocked, locked, cocked, and ready to rock Americans – because these conflicts will won in the streets when all of us standup and say nomore predatorclass biiiiiaaaatches!!!!

  39. I saw the “Inside Job” the film about “The Global economic crisis of 2008 cost ten millions of people their savings, their jobs, and their home. This is how it happened”.

    The movie is promoted as “Scarier than anything Wes Craven and John Carpenter have ever made”

    It covered in a good and well financed production almost all under the sun, like money laundering by Riggs bank for Pinochet, academicians writing papers without disclosing that they have been paid to do so, the role of prostitutes and cocaine in finance, as well as most of the other actors we have seen related to this crisis over the last couple of years.

    Yet the movie does not mention, not even once, the Basel Committee and it brethren the Financial Stability Board where your banking regulations are developed; just like the recent over 2.000 pages of financial reform approved by the US Congress does not mention them either.

    Since the current crisis was provoked by those truly silly infinitesimal capital requirements for banks the Basel Committee allowed for in Basel II when a triple-A rating was involved, and they are now preparing Basel III, that seems to dig us even deeper in the hole…. and that is indeed as scary as it gets!

    Mary and Richard Corliss of the Time opine “If you´re not ENRAGED by the end of the movie, you weren´t paying attention”. I paid attention and I was enraged at the movie, it did not explain how it happened… it just used it as an opportunity to go after some of the favorite usual suspects… and I think the hundreds of millions of people around the globe deserve better.

  40. You can derail your own train or express, its completely up to you, and your extremely troubled mind. Don’t you feel like a POW, or prisoner of war? Who needs to visit the er or emergency room? You and your statistics have over analiysied the situtation to the point of insanity, enjoy your surroundings while you still can or the gypsies, tramps, and thieves will come to take you away.

  41. We don’t have sane citizens here, so your premise is false. All this country has is a majority that is wrong about a ton of things, I proved it already, and now the pain of it all is coming home to roost. And “change ” in the 30’s was meant to get it all right with communism. Years later when we did get it all right, they rose up in anger. Go figure.

  42. Your 3rd paragraph is reason for the word hypocrisy. And there are far scarier scenerios in the future, of which I can not currently divulge.

  43. LOL @ “….just create a new language out of Flemish and French – *Flench* or *Fremish* and stay Belgiumish…” :)

  44. That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.”

    I agree, but there is no clause in the constitution for your solution. Or any solution for that matter, the constitution does not even have a clause for what to do if only say, only 1% of the population votes, (the others are discussted and disdain politics). The one percenters would still vote and make the laws in their favor. American spirit and strength would be limp in the streets with so little as a rider on horse back and a whip. So rock and cock on, but you won’t see it in the streets of America.

  45. Those who have been following baselinescenario for some time may agree with me on this observation:
    we have lost several posters who discussed the technical aspects of finance. A few remain. Most now appear to post emotional responses which reflect outrage and fear of hopelessness for real change.

    I can definitely relate to the latter but strongly miss the former. I greatly appreciate reading technical analysis of proposed solutions. May I encourage more? I value a blend of the two.

    In terms of the intense anger that is oft in our posts, may I again encourage posters to channel this energy to a positive end. It actually DOES make a difference to write a guest column for your local paper etc- explaining some simply concepts and expressing your opinion. I have done so over the past two years and am now seeing a definite increase in the number of editorials, news articles and letters to the editor in my local paper that are questioning gov stats, fin. reg. and so on. Yes, seems like a minute step. I borrow the quote that a journey begins with a single step. Try it. Write a guest column. Posters here are all intelligent, well-read individuals who could write a terrifc column in an easily understood format. Please consider this suggestion.

  46. Herb, guess you’re referring to ‘coke and ‘tutes’ in finance?..
    Now, if you have a Charlie-Sheen-future in store for all of us, just go ahead and let us know.
    Could be worse I guess…and is it on the Government dole?

  47. @ Per

    Please kind sir…your consistent impalpable trite and underlying urbane tone to degenerate Johnson and Kwak into this foray of academia is absurdly invidious!
    If that is your mission,…?

  48. @Earle, florida “Please kind sir…your consistent impalpable trite and underlying urbane tone to degenerate Johnson and Kwak into this foray of academia is absurdly invidious! If that is your mission,…?”

    I have no idea what you mean… but let me explain one little part of the mission… It is to get some of the academia to understand that you do not interfere with capital allocation and with risk-taking as the current bank regulators have done without very serious consequences for the society… I have not had any luck with the owners of baselinescenario for about two years now… but one of these day´s they might get it… now if that is “absurdly invidious” I am sorry.

    By the way why do not monsieurs Johnson and Kwak speak for themselves… why would they need the help of earle, florida to stop me from “degenerate” them?

  49. I have nothing of the sort in store on that level for all. But I do know the pick me uppers are in for an unpleasent surpise when they finally relize the unsystainable rise in health care costs stems from there abuse of the truth. And needless to say the law has overstepped its bounds and continues to be worse as each day goes by.

  50. Aside from the owners of baseline there are some extremely sophiscated links which I have noticed go completely unnoticed by all but a couple readers. Your mission can be totally off track in many minds but your own, so to attempt to “degenerate” anyone will most likely fall on deaf ears, just as your eyes are not falling on the real sophiscation of the blog.

  51. @Herb,
    Is there any way I can persuade you to tell us more plainly what you’re talking about with the “sophisticated” references? Do they need to remain sophisticated? I hope not, because I’d really like to learn wth you’re talking about.

  52. Not that they need to remain sophiscated, but not all information is published information. You have to not only use your imagination, but put aside some highly believed in published material. For instance, and just by a stroke of luck, I came to find out who was responcible for the creation of the english alphabet. Try to convince the know it all wealthy, and you will be hauled in the kahoots before you can take another breath. So we allow the know it alls to operate just as they wish, knowing one day they will fall like a puppet whos strings have been cut. And not until then will we have decreased the resistance to become so greedy that that is all many know and live for. So the learning part is up to you, or you can live a simple life and take your blessing that way, for nothing in life, is an actual guarantee.

  53. All we can look forward to in the near future from Wall Street is TOTAL COLLAPSE OF USA where money alone will not save it from the abyss of horrendous social, political, economic and governance contradictions.

  54. it’s hard to tell when you get down to the last level of “reply” :-)

    ‘erbie must be talking to YOU, 1 Kings, LOL

    cause no real Brit would be sayin’ that to a woman he DOES NOT KNOW FOR REAL

    he’s a troll reject…

    MERS – the mortgage FRAUD group – wait ’till the “ignorant” hear about those 50 people laying claim to owning over 60% of the titles to property in USA – Ms. Selman, calling Ms. Selman…

    Stop me if you’ve heard this one before…what are the 3 main categories of *lies*?

    There’s lies.

    There’s damn lies.

    And then there’s *statistics*….

  55. Point taken, cedar.

    But when I do turn people on here and there to the *facts* – well, look at it this way – it’s so outrageous that whatever violence does erupt is in no way different than the category – “crime of passion”.

    So if we are – sincerely – seeking to avoid a massive wave of “crimes of passion” – we can’t be dwelling FOR OVER TWO YEARS on the DETAILS of how they did it – that’s not an “education” that is going to help the situation, imo.

    Economic disobedience and grow the “underground” economy…and LIE LIE LIE about everything PERSONAL on the internet…

    We’re having that Constitutional Convention and we’re BURNING the Patriot Act…

    50 people working for a Ms. Selman DO NOT OWN the “title” to over 60% of all real estate in USA – FRAUD on steroids…

  56. 50 people working for a Ms. Selman DO NOT OWN the “title” to over 60% of all real estate in USA – FRAUD on steroids…

    I think you are the only one who believes that, I mean just look at the tax bill those 50 individuals would have to fork up. Next you will tell me that those 50 people are real estate appraisal agents and tax collecting regulators, you know, the ones that belong in jail right now but instead own 60% of, was that notes or titles? More like fraud on wallet growth hormones.

  57. http://www.washingtonpost.com/wp-dyn/content/article/2011/03/06/AR2011030603595.html

    Hacked e-mails show Web’s usefulness in dirty-tricks campaigns

    By Dan Eggen
    Washington Post Staff Writer
    Monday, March 7, 2011

    “Although much of K Street spends its time plying the halls of Congress on behalf of well-heeled clients, there is a growing dark side to Washington’s lobbying and public relations industry: figuring out new ways to undermine and sabotage opponents.

    This little-discussed aspect of the influence business came into view in recent weeks with the release of thousands of hacked corporate e-mails, which detail a pair of high-tech dirty-tricks campaigns aimed at supporters of WikiLeaks and foes of the U.S. Chamber of Commerce.

    The plans were pitched by three federal contractors to lawyers at Hunton & Williams, a top-flight D.C. law and lobbying firm that works for the Chamber. Proposed tactics included creating fake personas online to fool Chamber critics, planting false electronic documents to undermine the credibility of activists…”

    CORPORATE RINGERS harass their blogging detractors and attempt to disrupt real communication with essential disinformation tactics; a subject of an earlier baseline that had some great discussion.

    It is interesting that some topics bring out the same old diversions and false issues that go nowhere but create a great deal of smoke and mirrors. The same people show up on the Wall Street blogs and may even have corporate interest counter-intelligence books published pushing the corporate sub-plots of rational market expediency and anti-regulation.

  58. Click to access hit_budget_cuts.pdf

    “Regulation remains weak and many regulators are still captured by the ideology that big banks are good for the rest of the economy.
    … There will be no effective cap on the size of our biggest banks. They have an incentive to take on a great deal of leverage. This confers private benefits but great social costs – lowering economic growth, increasingly volatility, and making severe crises more likely.”

    and those social costs are multiplied by the dramatic desperation of the fundamentals of the GOP strategy to disenfranchise the American working middle class:

    Click to access hit_budget_cuts.pdf

  59. It’s good to have Simon and others still pounding away at this. That’s exactly what it will take. Anyone who thought, early on, that this would change overnight is ignorant about the history of the country and its politics. The 1880’s were surely just as bad and it took years to get any sort of change.+

    The insular and self-sustaining system of campaign graft with its concomitant takeover of Washington through campaign briber, has been a long time coming. It will take a long time to tear it down. This is just one more grappling hook on the edifice. I make it my business to turn as many conversations as I can to this subject. The continuing devastation of labor makes it easy to do just that. With almost 14 million out of work, people listen.

    Just keep talking.

  60. “The 1880′s were surely just as bad and it took years to get any sort of change.”

    And just look what we got: in 1913, we got the Federal Reserve!

    I know some very interesting people. One of them puts out a weekly “Monetary History Calendar.”

    The entry for March 7 seems quite relevant to our current situation.

    MARCH 7


    “When our Federal Government, that has the exclusive power to create money, creates that money and then goes into the open market and borrows it and pays interest for the use of its own money, it occurs to me that that is going too far. I have never yet had anyone who could, through the use of logic and reason, justify the Federal Government borrowing the use of its own money… I am saying to you in all sincerity, and with all the earnestness that I possess, it is absolutely wrong for the Government to issue interest-bearing obligations. It is not only wrong: it is extravagant. It is not only extravagant, it is wasteful. It is absolutely unnecessary.

    “Now, I believe the system should be changed. The Constitution of the United States does not give the banks the power to create money. The Constitution says that Congress shall have the power to create money, but now, under our system, we will sell bonds to commercial banks and obtain credit from those banks.

    “I believe the time will come when people will demand that this be changed. I believe the time will come in this country when they will actually blame you and me and everyone else connected with this Congress for sitting idly by and permitting such an idiotic system to continue. I make that statement after years of study.

    “We have what is known as the Federal Reserve Bank System. That system is not owned by the Government. Many people think that it is, because it says `Federal Reserve’. It belongs to the private banks, private corporations. So we have farmed out to the Federal Reserve Banking System that is owned exclusively, wholly, 100 percent by the private banks – we have farmed out to them the privilege of issuing the Government’s money. If we were to take this privilege back from them, we could save the amount of money that I have indicated in enormous interest charges.”
    – Congressional Record, 1941

    If you’d like to receive the Monetary History Calendar each week, email monetarycalendar@yahoo.com

  61. Well spoken cedar! But know this: this anger you sense is real and pervasive! It is born out of genuine concern, and pain, and hopelessness. This anger and pain is not the product of radicals, or anarchists, or revolutionaries, – no – what you see and hear and feel now is a result of massive swaths of the population being pushed into situations of very real, very painful dispair and hopelessness, and a searing realization that there are no goodguys, no superhero’s, no champion defending the peoples best interests. I would love to abide by your civility and nobility, and hope beyond hope that wise minds recognize the hardship and terror being wrought on the streets of America, but I am a student of history, – and history proves – that no matter how civil or noble may or just may be the underlying cause, – these battles are never resolved peacefully, or through political or judicial means. History informs us that real change is won on the streets, with massive public commitment to exacting that change. Show us the peaceful way to resolve these horrors, and right these horrible wrongs, and we will follow you. But simply hoping for goodends is fruitless and for us at the bottom, painfully timeconsuming and unrealistic. Look to the workersrights, civilright, womensrights, gayrights movements for proof. Politicians and judges are intregal to the problem and NOT the solution. The people must change this system, and combat these evils, or the system and the evils will continue unadulterated and even more ruthless.

    Show us a way, and we will follow. But today – there is no way forward for America’s poor and middleclass outside of revolution.

    I pray I am wrong, and hope for someone or something to renew our hopes and provide some Balm in Gilead, – but history teaches me, – we are all – likeitornot – in for a contest!!!!

  62. http://therealnewsjournal.com/?p=4938

    [Cass Sunstein]…infamously demanded that the United States government deploy groups of covert operatives and pseudo-independent agents of influence for the “cognitively infiltration of extremist groups” – meaning organizations, activists and Internet websites who espouse beliefs which Sunstein chooses to classify as “false conspiracy theories.”

    [Cass]… Sunstein’s program for “cognitive infiltration” shock troops to counteract and overwhelm any real mass understanding of oligarchical domination in the modern world, and any discussion of what kind of economic policies are needed to secure a recovery from the present world depression.”


    (the point here is that the idea of “cognitive infiltration” is not new and is certainly a covert idea well established in what is now “mainstream” (Harvard / University of Chicago and the White House certainly constitutes “mainstream).

    “This is the same Sunstein who today heads Obama’s White House Office of Information and Regulatory Affairs.” http://therealnewsjournal.com/?p=4938

  63. “It actually DOES make a difference to write a guest column for your local paper etc- explaining some simply concepts and expressing your opinion.”

    Maybe a “minute step”, but take heart from the last line of “Middlemarch” by George Eliot:

    “But the effect of her being on those around her was incalculably diffusive: for the growing good of the world is partly dependent on unhistoric acts; and that things are not so ill with you and me as they might have been, is half owing to the number who have lived faithfully a hidden life, and rest in unvisited tombs.”

  64. @cedar “It actually DOES make a difference to write a guest column for your local paper etc- explaining some simply concepts and expressing your opinion.”

    Doing that may be a “minute step”, but take heart from the last line of “Middlemarch” by George Eliot:

    “But the effect of her being on those around her was incalculable diffusive: for the growing good of the world is partly dependent on unhistoric acts; and that things are not so ill with you and me as they might have been, is half owing to the number who have lived faithfully a hidden life, and rest in unvisited tombs.”

  65. One creepy stalking predator, ain’t ya, ‘erbie…?

    From CNBC article posted yesterday – a snippet:

    “That world largely collapsed under the weight of its improbabilities in 2008.

    But a piece of that world survives on Library Street in Reston, Va., where an obscure business, the MERS Corporation, claims to hold title to roughly half of all the home mortgages in the nation — an astonishing 60 million loans.

    Never heard of MERS? That’s fine with the mortgage banking industry—as MERS is starting to overheat and sputter. If its many detractors are correct, this private corporation, with a full-time staff of fewer than 50 employees, could turn out to be a very public problem for the mortgage industry.”

  66. Show us a way, and we will follow. But today – there is no way forward for America’s poor and middleclass outside of revolution.
    I pray I am wrong, and hope for someone or something to renew our hopes and provide some Balm in Gilead, – but history teaches me, – we are all – likeitornot – in for a contest!!!!

    In all likelyhood you are wrong, just because the full effects of God are presently missing in society, does not mean that Gods intentions go away at any ones will. Love needs to grow, and during that time the full extent of the law will be exerted on the people by the justice system. And then the full extent of the Gods will be exerted on the justice system, and those that walk away from both will be the ones you are looking for. The poor, courageous, and even middle class will walk side by side with the humbled rich and so called famous elite. Of course it can’t happen fast enough for me, or even you, but in this case patience is a virtue and gluttony a sin.

  67. I doubt it, but I will look into it, and if they need stalkin, you’ll be the first I call.

  68. @ Carla

    “If I owe you $10,000 dollars it’s my problem, but, if I owe you a $1,000,000,000,000 (Trillion) dollars it’s your problem now!”

    Basically in a nutshell this is what President Nixon had instructed Treasury Secretary Connelly (by the way was Gov.of Texas in vehicle when Kennedy was assassinated?) to tell the world especially the European’s by decommissioning the “Bretton Woods Act (1944)”. Thus taking the United States off the “Gold Standard” and making America the premier “Fiat Currency Hegemony” in the world in 1971!

    Years later many bad things happened throughout the world with economies (not enough time here to get into) of a lesser scale? Thusly as things would have it…extortion must be dealt with? Eventually (time to implement change is timely to say the least if you so choose doing it correctly) monetary change came. We now compete head to head with the Euro, and the Chinese Yuan, and both currencies are throughly versed in what happened to Japan’s Economy, and the South American Fiscal (multiple) Crises created by a “Dying Hegemony Currency” gone wild?

    Today as I write…Tiny Tim is mumbling into Trichette deaf ear that raising rates is not the correct thing to do. Unfortunately for Geithner…Mr. Trichette will hollow out the rhetoric of the past to present reality, with an aptly response, “It’s Your Problem Now”! JMHO

    Thankyou Simon, and James :-)

    God Bless You, Julian Assange!

  69. http://steadystate.org/growth-of-gdp-and-discontent-in-egypt-and-tunisia/

    GREAT ARTICLE at that link on true measures for an economy bases upon a more genuine and authentic progress indicator; measured by the Cantril Self-Anchoring Striving Scale, developed by a researcher named Hadley Cantril. It’s a survey research tool that puts real analysis back into real society itself.

    definitely worth a reading and the forthcoming book should be bookmarked:
    Eric Zencey
    The Other Road to Serfdom: Essays in Sustainable Democracy.

    The article is over at CASSE:

  70. I’m with T. Boone Pickens, emotionally, based on his email to the “army” today

    basically *BORED* with the intellectual stupidity of greed and nihilism – time to get on with it!

    As for justice, permit me a giggle on International Woman’s Day after last night’s WRECKING CREW amen fest in Iowa:


    It is important for men to remember that as women grow older, it becomes harder for them to maintain the same quality of housekeeping as when they were younger. When you notice this, try not to yell at them. Some are oversensitive, and there’s nothing worse than an oversensitive woman.
    My name is John. Let me relate how I handled the situation with my wife, Lin. When I retired a few years ago, it became necessary for Lin to get a full-time job along with her part-time job, both for extra income and for the health benefits that we needed. Shortly after she started working I noticed she was beginning to show her age. I usually get home from the golf club about the same time she gets home from work.

    Although she knows how hungry I am, she almost always says she has to rest for half an hour or so before she starts dinner. I don’t yell at her. Instead, I tell her to take her time and just wake me when she gets dinner on the table. I generally have lunch in the Men’s Grill at the club so eating out is not reasonable. I’m ready for some home-cooked grub when I hit that door.

    She used to do the dishes as soon as we finished eating, but now it’s not unusual for them to sit on the table for several hours after dinner. I do what I can by diplomatically reminding her several times each evening that they won’t clean themselves. I know she really appreciates this, as it does seem to motivate her to get them done before she goes to bed.
    Another symptom of aging is complaining. I think. For example she will say that it is difficult for her to find time to pay the monthly bills during her lunch hour.

    But, boys, we take ’em for better or worse, so I just smile and offer encouragement. I tell her to stretch it out over two or even three days. That way she won’t have to rush so much. I also remind her that missing lunch completely now and then wouldn’t hurt her any — if you know what I mean. I like to think tact is one of my strong points.

    When doing simple jobs, she seems to think she needs more rest periods. She had to take a break when she was only half-finished mowing the yard. I try not to make a scene. I’m a fair man. I tell her to fix herself a nice, big, cold glass of freshly squeezed lemonade and just sit for a while. And, as long as she is making one for herself, she may as well make one for me too.

    I know that I probably look like a saint in the way I support Lin. I’m not saying that showing this much consideration is easy. Many men will find it difficult. Some will find it impossible! Nobody knows better than I do how frustrating women get as they get older. However, guys, even if you just use a little more tact and less criticism of your aging wife because of this article, I will consider that writing it was well worthwhile. After all, we are put on this earth to help each other.


    John died suddenly on February 7 of a perforated rectum. The police report says he was found with a Calloway extra-long 50-inch Big Bertha Driver II golf club jammed up his rear end, with barely 5 inches of grip showing, and a sledge hammer laying nearby. His wife, Lin, was arrested and charged with murder. The all-woman jury took only 10 minutes to find her Not Guilty, accepting her defense that John, somehow without looking, accidentally sat down on his golf club.”

    I think our jury of 12 here and there on this baseline are capable of delivering an equally swift verdict about the “financial system”


  71. @earle,florida: I think we have some fundamental problems. IMHO, a big one is the fact that our “central bank,” the Federal Reserve, is owned by the private banking industry.

    I do not believe that the “gold standard,” which was quite a fiction even when it “existed” will ever be reinstituted. It’s immaterial. Bringing the money system under public control and accountability, however, is essential to any kind of orderly governance on this part of the continent.

    Totally with you on Julian Assange, tho!

  72. You have no eyes and no ears, Capt. Ovious. People are suffering. Their childrens future is in peril. I realize this sad fact is of absolutely no or zero concern to the predatorclass, fat and spoiled, living in oppulent luxury, – but for the restofus, for themany – life is quite harsh and brutal my brother. There is real suffering and dread concern, and fear.

    The mistake the predatorclass makes is imagining all of us will walk peacefully or sheepishly into the HomelandSecurityDentionCenters, or some other form of slavelabor, or the certain tortures of Gitmo, or Abu Gharabh. “You got another thing coming!!!”

  73. I wish and pray some god or goddess would intervene to help us Herbert Wetherby, but alas – it’s not in the cards. We are subject and witness to the work of evil men. Evil and ruthless, heartless, savage, and brutal men rule this earth. The godz and goddesses are not in play. If they exist, – they have abandoned us, and allow monsters, predators, a den of vipers and thieves to rule this nation and this earth.

    When the godz or goddesses come, – and I pray it is soon – there will be a reaping and reckoning, and all the scum will be wiped off the face of the earth. Until that day, – buckleup – because the scum and the predators and vipers and thieves rule this earth, and will ruthlessly crush the rest of humanity into the dust.

    “The war is actually begun! The next gale that sweeps from the north will bring to our ears the clash of resounding arms! Our brethren are already in the field! Why stand we here idle? What is it that gentlemen wish? What would they have? Is life so dear, or peace so sweet, as to be purchased at the price of chains and slavery? Forbid it, Almighty God! I know not what course others may take; but as for me, give me liberty or give me death!”

  74. I don’t buy into that whole End Times *FICTION* – it’s just a great excuse for not doing anything that takes courage.

    “God” has not abandoned humanity – humanity has abandoned “God”….and saying that you *found* God just to get POWER OVER OTHERS

    so that you can bible thump the JUST when they seek justice – look it up – that’s INIQUITY.

  75. I’ll need five minutes to eat my sandwich, but will easily beat the Lady Dozens’ time..

  76. Tony, you seem to want to be the next one to get your 15 minutes, what exactly is the plan, do you, as I, work alone? You need help from somewhere to accomplish all those lofty goals. I wish you the best young man, and no it won’t be soon, by your standards. But 5 years to me flys by like nothing, and yes, those evil people you speak of are currently being told to consider right from wrong, rather than who owns what and who doesn’t. It will take awhile but it will sink in.

  77. There probably will have be some sort of currency compromise, the amount of worthless counterfit bills continues to grow. At the same time the electronic money system is just waiting to drain the accounts of many. During the revolutionary war the brits made 10 counterfit bills for every American (or State) bill, in order to make the domestic currency worth less, much less. A totaly new currency was created with bonds sold to England and the Netherlands after the founding of the country to eliminate the inflated by products of war. But today the well armed wealthy control the way and means of currency and do as they wish. Only a trade war will interupt flows of currency and that day is not to near or clear for anyone.

  78. @ Bruce Woych, thanks for so many insightful posts, and great links, your presence here is appreciated.

  79. The only way to get any action out of Congress is to shame them into action, just as Jon Stewart had done with the Republicans and the First Responders bill.

    That means that Simon and others will have to lobby all the major media outlets (notwithstanding the morons at Fox) to actively and repeatedly call out each and every congressperson who has failed to act in the public’s best interest.

    It’s not going to be an easy job, but it’s the only way anything is going to get accomplished. Because, regrettably, humiliation is the only thing our pathetic legislators understand.

  80. @John Smith: “Because, regrettably, humiliation is the only thing our pathetic legislators understand.”

    Actually, they have the campaign cash thing down pretty well. And thanks to Citizens United, corporate coffers are wide open to them. And corporations make the unions into pikers.

    The public interest will not be served until we amend the Constitution: http://www.MoveToAmend.org.

  81. When is a congressman going to ask a regulator the following quite simple and straightforward question?

    “We as a nation subscribed to the Basel Accord, and in that respect we are supposed to follow the recommendations issued by the Basel Committee on Banking Supervision as much as we can.

    Now, the Basel Committee, with Basel II, approved in June 2004 that a bank when lending to or investing in anything private related to a triple-A rating needed to hold only 1.6 percent in capital, meaning they authorized banks to leverage 62.5 to 1… and, if lending to triple-A rated sovereigns… like Spain, they do not need to hold any capital at all.

    And so let me ask you… are these the kind of regulators we want to coordinate our regulations with?”

  82. @ PER, and we all know how worthless rating agencies have been….these people too should have been indicted, yes?

  83. The credit rating agencies were given the gun… but is it really their fault that they could not shoot, that they knew not how to aim, or that the target moved very fast?

  84. I doubt they were given any such thing, they might have stole the gun, that they later could not shoot. But heck, who cared by then, they stole the money too and simply wanted more of a good thing. Its just more layers of corruption.

  85. @ PER, your reply suggests this was a competency issue, a training issue, and lastly, a speed issue.

    Perhaps this was a part of it, but I think Herbie nailed it with his: “Its just more layers of corruption” remark.

  86. Oh no!… they were given the gun all right.

    The credit rating agencies had been around for ages using a slingshot that no one really took excessive notice of, but, when the regulators ordered that what the banks were required to have in capital depended on what the credit rating agencies opined, they turned the slingshot into a real .375 Magnum, and also “made the credit rating agencies day”.

  87. It is absolutely not a competency issue, a training issue, or a speed issue. The credit ratings opinions should not be used by the regulators first and foremost because the risks that are measured in the credit ratings represent just one small part of the risks for society… but also because those credit rating opinions are already out there in the market… and the regulators are not there so much to guard for known risks than to guard for all the unknown risks.

  88. And then my mother and their fluzies mismanaged the whole scene and let the Mag run wild. Its gonna catch up to ya one day Boo Boo.

  89. @ Carla

    FDR had the universally excepted precious metal gold confiscated from all U.S. Citizens at the start of WWII. Why gold? It makes lousy bullets, tanks, airplanes, bombs…in fact, anything for military use (eg. the Roman’s paid their soldiers/armies in salt?). Where’s the common denominator, the rational logic so to say?
    Simply said, Gold is the “Great Equalizer” predicated on pure common sense (common sense being quite rare also)!
    The only way gold can/could be confiscated by the american citizens today is if a war were too come about is null-n-void today. What the powers to be have in place to circumvent the past laws would be through the changes in eminent domain by the supreme court ruling in 1980’s. There are several loop holes built in currently…but gold coins aren’t considered…strange?

    China, Saudi Arabia, and many countries are now making it easy for their people to buy gold. The answer is simple – wheelbarrows of paper money are only good for starting fires – inflation will/ is crushing our dollar (please don’t believe the deflationary data ie. computers, cell phones ,i-pads, etc., are subsidized by third parties, and dollar tree stores are going the way of the dinosaur – therefore CPI is fraudulently malfeasance. Eventually sovereign countries buying our debt will have buried it in the Forex for solid currencies backed by gold! It’s happening now where the export of our debt means less because of the advancement of fledgling emerging markets feeling their growth hormones kicking in and going elsewhere to market (buy/sell) their goods which spells doom for whom?
    Ref: “Utah to Reinstate Gold as a Currency (3/4/11)”

    PS. Please realize that “All” currencies must have a “Tangible Asset” to set parameters/ benchmarks in the “Real World”! :-)

  90. @ Annie

    The eye’s have it, but not for a myopic kinda guy or gal?

    My favorite song…Bernadette Peters, “Gee Whiz”!
    Makes this guy feel good,…

  91. Now Earle, most respectfully, I am going to hike that trail, but my wish there most likely will be subverted some 10 feet under and bring us right back to where we are today. Which is where ever you need to be to get to where ever it is that you want to go.
    Most people won’t want to get that involved but you know me, I can’t help myself, and delay or subverson is no answer at all.

  92. From Wikipedia – Just War:

    “The concept of justification for war under certain conditions goes back at least to Cicero.[3] However its importance is connected to Christian medieval theory beginning from Augustine of Hippo[4] and Thomas Aquinas.[5] The first work dedicated specifically to it was De bellis justis of Stanisław of Skarbimierz, who justified war of the Kingdom of Poland with Teutonic Knights.”

    Peter Jennings, in a style all his own, followed the Evangelical Movement from it’s beginnings in the 1980s in Dallas Texas as a Men-Who-Stare-At-Goats tyoe of social experiment with a “legal” chemical compound who’s common street name today is “extasy”(sp?) Jenning’s lifetime of news reporting work was buried soon after 911, along with his body, under a tombstone with a fer-shame, fer-shame announcement – “He was a cigarette smoker who died of lung cancer.” There’s the forgiving Bloomberg-god of NYC for you.

    Good luck trying, a mere decade later, to dig up that body of work Jennings had about the Evangelical Movement.

    I think we’re going to have another Kingdom vs. Teutonic Knights cold war waging from now until 2012 Presidential elections.

    All’s fair in love and war….

    The “Kingdom” is coming together – particle physics, no doubt :-) – and then the wave stage of particles…

    Real believers in the teachings of Jesus Christ know that they currently don’t have a “church” to call their own…

    A friend of mine asked for assistance in getting her “tweens” to stop believing in all the End Times 2012 crap – I got a framed copy of that New Yorker cartoon where the customer asked the artisan who just finished the “Aztec” circular calendar, “Why does it end at 2010?. The artisan replied, “I ran out of rock.”



  93. I meant “2012” – sorry for the typo…

    Why does it end at 2012? The sculptor ran out of rock on which to carve…

    So if you use the whole surface of the Earth (third rock from the sun) on which to run that “aztec” calculation of “time” – we still have a lot of time to go through before an “End Time”.

  94. Read it again, Bruce…doesn’t he first use the GDP to calculate “wealth”, then shows how inequitable today’s distribution of wealth is using the GDP, and then makes the case for not using the GDP to do what he just did so well with it – measure wealth production and it’s distribution…?

  95. The RatMan and Mauldin are going to give out a quarter of a million green cards so that fresh suckers can move in to the empty, foreclosed homes…

    Considering how China needs all of Africa to live “middle class”, the Chinese businessmen were the first ones to high tail it out of Libya when the “subsaharan” mercenaries were brought in by Momar…no fight in them for their own food? Chinese army is chicken…?

  96. Well, earle, florida, I notice that you trended right onto the gold track and did not respond to my point about the Fed. Hhhmmm….

  97. I am reading the book. Questions comes to mind why is it that Bernie is the only one in jail? What happens to CDO when mortgages are payed off and refinanced? I believe I already know the answer “nothing”. Why do ordinary people vote for rich people in government? It is the same as putting the wolfs in charge of the the sheep.
    Further more, my extrapulation of what I have read the real money is not even invested in the stock market and would be completely over if it was not for the individual investor and fund managers. This explains why GWB wanted to end SSI in favor of 401 k’s to keep the sinking ship “the market” a float. The increased present of private markets make it very clear that the public stock market is the milking grounds for the super wealthy.

    I am disgusted and wish I could see a brighter side.

  98. @DonJ: “Why do ordinary people vote for rich people in government?”

    Because ordinary people can’t afford to run for office. And if a few candidates of “ordinary means” do slip through, they have to spend all of their time groveling for campaign cash. Then who do they owe? Not the voters.

    Senator Sherrod Brown of Ohio (not a poor man, but not super-wealthy) plans to raise $50 million for his re-election campaign.

    Relatively speaking, Sherrod is one of the best people we have in the Congress. But a.) he has to spend most of his waking hours fundraising, so how much time is left for actually doing his job, and b.) it is humanly IMPOSSIBLE for him–or anyone–to remain uninfluenced by big donors.

    We have to amend the Constitution to reverse Citizens United and restore the potential for democratic governance (www.MoveToAmend.org) AND we have to fundamentally reform the monetary system (www.monetary.org).

    Perhaps if we do these two things, we will be able to institute full public funding of campaigns, so that voters and campaign funders are one and the same. Some people call it “Voter-owned elections.”

    But these things will not be accomplished by sheep.

  99. Below what I hold in my home country (Venezuela) but I guess it applies universally

    “As always it is not a question of how willing they might be to govern us better, but a question of how willing we are to make them govern us better.”

  100. @ Carla

    “respond to my point about the Fed”

    Indeed Carla, I glossed over some important parts for reasons?
    The Fed lends out its gold to the “Big Six” too hedge the market as people now have become aware of – JPMC has a humongous position on the short side of silver. They are all shorting gold throughout the world with the “Global Clearing House of Commodities”, Bank of Int’l Settlements (BIS) manipulating the physical-hard-markets to the nth degree. Thus we have China, India, Russia, Oil Rich Countries buying through third parties or directly (miner’s, dirt rich countries, etc., leveraging through LT Options) so they can buy/ hoard more while maintaining the absurd low-ball cost of gold that currently should be priced at $2k +/+!

    Bernanke follows in perfect lockstep with his predecessor Greenspan in manipulating the gold market through this contract of “Laddered Borrowed Gold Short and Long Terms with Unlimited Quantities” – the “Bank of England (BOE)” also shares are precious gold reserves to boot! Such a generous arcane FED System we have here in america at the publics expense?

    Gold and Silver what good are they except for industrial use? eg. The Chinese loved their hard assets, especially silver in the 18th century. But they couldn’t in all practicality carry it around without being robbed, simple stuff…so they made banks/ safe-houses and were given personal notes as currency – but having the Gold/Silver backed it up! Yes, indeed…not my word against your word or a handshake but the real tangible McCoy? I used China just as an example, but this has been the modus-operanda for notes/ paper money for millenniums throughout the world. We could use sea shells, trinkets, hollowed out stones, silk, slaves[?], oil…for all is arbitrary. Is it not?
    What Bernanke doesn’t want the public to know is that “Fort Knox’s Gold” is now owned by foreigners and that we don’t have any gold. The world knows this now – why has gold/silver gone up exponentially in the last score (~20 years) and nobody seems to have taken notice? I don’t think so…fool me once shame on you – fool me twice shame on me! Currently as I write the OPEC countries will want to be paid in Euro’s (Yuan [?] could definitely appear in the future?), as they feel is the world’s most stable, and disciplined currency.
    “Fiat Currency must be anchored…analogous to inflation blowing in the wind – a toxic mix of material fiber laced with emboldened arrogance we [we have] call a stable, and prudent monetary system of “Imperialistic Hegemony” – a wanna-be stability stalwart naught! But in reality it’s decompressing and collapsing in the stratosphere under the physical laws of (monetary fiduciary axiom’s) the world’s raw cold hearted factual truth’s!”

  101. A wise man once said to the grasshopper ‘Gold is for spendin, not buryin, if you want to bury something, bury a stone, that is more worthy of buryin.”

  102. Re: @ Herbert Wetherby

    “Gold is for spendin, not buryin”

    Here’s the correlation: demographic’s; expansionism; – solidified the country from “East to West – North to South” and made us “Whole”!
    We had now become a bonafide nation, “by not burying our heads in the sand”?
    The “Louisiana Purchase (1803)” opened up the through`way for immigration and integration making america’s population a more homeostasis entity with great diversity and a willingness to thrive on realistic “Hope”! The great puzzle was filling in the spaces by some kind of divine intervention of the 3rd kind?
    Coincidentally, what happens next is the “California Gold Rush (Jan/1848-1855)”; all within the timeline of america’s fledgling (Lewis and Clarke Expedition/ Pacific NW?) infrastructure infancy. Our country was now financially solvent, and a fiscal powerhouse yet to come even more wealthy.
    Amazingly what happens next is pure destiny, or did we make it happen (life is amazing if we don’t turn our back on it’s vicissitudes?)? The “Klondike Gold Rush (Aug/1896-?) which by the way was reluctantly purchased from Russia in March/1867 for $7.2 ml in Gold (a gift from the Riggs Bank was their way of telling america how much they loved what we stood for throughout the world, and how special we were). The puzzle was made just about whole thanks too buried Gold used for spending, and eventually the cornerstone of our monetary system, and subsequently causing america’s treasury to burst at the seems!
    *{Sure there was “Black Gold”, and that had its day, but this stuff about “Drill-Baby-Drill” is foolish. If we dig a hole/ bore on land/ water, america has at most 3-5 years of a total useful supply.}*
    Please don’t bury your head in the sand, “Wise Grasshopper ;-))
    Ref: “The California Gold Rush” & The Klondike Gold Rush”

  103. Please don’t bury your head in the sand,

    I most certainly won’t, I am well aware of the complexities that brought about the gold standard of 1896. And I would invite those to live on the land that there ancestors so arduously tendered in its infancy. Since I am not currently self funded though, I can not make those promises and must strike out on my own and hope for the best, as would any one intereseted in the pros and cons of the gold standard.

  104. You get what you incentivize. Bailouts REWARD failure and PUNISH success, as such you will get more of it until the entire system collapses in an insolvent heap.

  105. This article sums it up succinctly. http://www.nytimes.com/2011/03/14/opinion/14krugman.html?_r=1 Read it and weep.

    There are two systems of justice: one for the rich where there is absolutley no accountability and a purchased system, and another for the rest of us which is ruthless, brutal, and lawless if you abide by that goddamn piece of paper we call the Constitution.

    From my pedestrian perspective, – because of this duplicity and purchased system, – effectively – there is no justice and no laws, and no rule of law.

    Know this – in a world where there are no laws, – there are no laws for anyone predatorclass biiiiiaaaatches!!!

  106. People should work together for the betterment of their country. Our government should also think of strategies that will help build a healthy financial system.

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