The Global Weimar Phase
Stern warnings from English political scientist and activist Nafeez Ahmed:
We’re not back in the 1930s, but structurally - systemically - we’re in a far worse condition. The problem is that the three main parties on offer today lack a fully-formed understanding of the real structural issues behind the concurrent crisis of world capitalism. They fail to realise that they’re in a catch-22. The symptom-led solution to the massive deficit is inevitably massive cuts in spending. The problem is that those cuts, structurally necessary within the given system to stabilise our credit rating and currency value so that the government can keep borrowing, will inevitably contract the real economy massively to such an extent that it will create a serious socio-political crisis in this country in the next 5-10 years. We’ve heard as much from the Bank of England.
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the trillion-dollar fraud
Via:
Salon.Com
BY JOHN R. TALBOTT
SATURDAY, MAY 1, 2010
Why is the Fed so opposed to being audited, and what does it have to hide?
….I believe the reason Paulson didn’t pursue his original toxic-asset purchasing plan is because such a purchase would have created a market price for these assets, and then all of the banks would have had to mark their poor-quality assets to this low market price. This would have resulted in the bankruptcy of almost all the major commercial and investment banks, because their leverage was so high that they couldn’t withstand such a hit to their equity.
When Paulson couldn’t achieve one of his objectives during the crisis, he typically called on Ben Bernanke to see if the Fed could be of assistance. Paulson was in a difficult position and needed Bernanke’s help. He had, just two weeks earlier, told Congress that if they didn’t approve TARP and deal with the banks’ toxic assets, the entire financial system would collapse. Now he was about to be exposed as either a liar or just completely wrongheaded, because the toxic assets were still on the banks’ books and he was using TARP money elsewhere. What I believe the Fed did next was fraudulent and deceitful, its full impact still hidden from the American public, who want bank reform.
The Fed, I am convinced, went to these commercial banks and offered to take many of their toxic mortgage assets off their books, often accepting them as collateral for loans to the banks. In exchange, the Fed credited the commercial banks with an increase in the reserves held at the Fed, so long as the banks agreed not to withdraw the excess reserves immediately. Magically, the Fed was able to take a bad asset like a CDO and transform it into a sparkling good asset: bank reserves at the Fed. The irony is that the CDO itself began as a compilation of leaden BBB subprime mortgages and had been transformed into a golden AAA security only through the alchemy of the CDO process. And I think the record will show that the Fed intentionally overpaid for these securities, so that the banks wouldn’t have to acknowledge life-threatening losses on the sales or the remarking of their inventory of similar assets. The Fed also began buying mortgage securities directly in the marketplace in an attempt to create demand in the absence of a healthy securitization program.
Read Entire Article at Salon.com
Who Got Our $1,000,000,000,000?
Asks Congressman Alan Grayson in the Huffington Post.
Time to Audit the Fed
The second stage of the global capitalist crisis
The second stage of the global capitalist crisis
By Nick Beams
12 April 2010
[article synthesized by Jodi Dean @ I cite]
Financialisation grew rapidly in the advanced capitalist economies. In other words, profits accrued increasingly through financial channels rather than through trade and commodity production. In the US, the share of finance in total corporate profits went from less than 10 percent in 1980 to around 40 percent in 2007.
A recent survey of 10 major capitalist countries, including the US and the UK, conducted by the McKinsey Global Institute, found that since 2000, gross debt in these countries increased by around $40 trillion, a rise of 60 percent. Total debt ratios—private and government—increased on average from around 200 percent of gross domestic product in 1990 to more than 330 percent by 2008. In the UK over the same period, the debt ratio increased from 200 percent to 450 percent. Much of the debt was incurred, not to finance industrial production, but to finance financial operations.
The rise in debt fuelled the growth of financialisation and claims of a new golden age.
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What the Mafia can teach us about corporate fraud
William K. Black - Professor of Economics and Law
Executive Director of the Institute for Fraud Prevention from 2005-2007 and author of The Best Way to Rob a Bank is to Own One.
From Slate’s The Big Money
The Bust-Out
What the Mafia can teach us about corporate fraud.
By Mark Gimein
Posted Sunday, March 21, 2010
Excerpts:
On a rainy day in New York last week, a man named William Black stood in front of a roomful of fellow law professors trying to sum up in a minute what had gone wrong with financial regulation over the last two decades. Actually, Black didn’t have even a minute. His breathless spiel had (obviously as usual) already gone over its allotted period, leaving Black with just enough time to toss at his audience a number that encapsulated how slipshod and generally crazy-making federal efforts at dealing with fraud in the financial markets had become.
The number that Black practically shouted out was the grand total of mortgage and securities fraud related convictions the government had managed to secure in the wake of the financial crisis. It was zero. With that startling statistic Black sat down, politely if impatiently waited for the other panelists to finish their brief speeches, and immediately ran off to catch a flight back to Kansas City, trailing a half-open umbrella and a jumble of bags.
…..
The work of Bill Black—who spent a decade as a federal bank regulator—is about how bad economic theory has given people whose jobs should be understanding fraud a screwy sense of how fraud works in the real world. One way of seeing this, as Black describes in a terrific article, is to think about the mob “bust-out.”
The bust-out is what happens when the mob moves in to take control of a business that’s heavily indebted to a loan shark. As Black tells it, why the heck a mobster would ever want to take over a bar or liquor store in this way is incomprehensible to a classical economist. Why take over the business when you’re already getting every cent of profit and more in your weekly vig?
Except that in the real world, things don’t work that way, explains Black, a professor at the University of Missouri-Kansas City. The reason to take over the business is to loot it 1,000 ways to Sunday, from buying vast amounts of liquor on credit to, ultimately, torching the place for the insurance money. Prosecutors and mobsters know this. Economists who think the mob operates like a bank that happens to charge high interest rates miss it.
The problem here is that none of the ugly realities of how a business can be stripped of everything valuable make their way into the economic and regulatory theories that have been ascendant for the last two decades. How did we get to this point? Well, here’s a story:
Read Entire Article at
The Big Money
Economics for a New Century
By Ann Lee
Lee is an economics professor at NYU
and a former investment banker and bond trader.
Posted: March 30, 2010 to Huffington Post
With personal and national debt reaching record levels and unemployment at its most severe since the Great Depression, now may be the opportunity to abandon growth economics and come up with economic models for shrinking economies. Why not consider doing more with less and returning more to the environment than taking from it? Today, more energy is consumed on a daily basis in New York City alone than in the entire African continent. U.S. per capita energy consumption is multiples of that of India and China, and if we let those two countries catch up to our levels, the world will implode.
——-Cut——-
The U.S. needs to get religion in the form of a new economic ideology to realign our priorities. Instead of tracking growth statistics and other economic data, we can start by figuring out a way to measure and report such things as human dignity, creativity, and degrees of freedom, and reward behavior that enhances those values we cherish. It does not make sense that most artists, teachers, and doctors - those who deliver the greatest value to society - are the least paid individuals, while investment bankers and speculators who earn the most amount of money are adding minimal value to society at best, and at worst, destroying value. We ought to find the political will to start funding research in universities that support a new way of thinking about economics.
Read entire article, it’s worth it.
How Moody's sold its ratings - and sold out investors
By Kevin G. Hall
McClatchy Newspapers
October 18, 2009
As the housing market collapsed in late 2007, Moody’s Investors Service, whose investment ratings were widely trusted, responded by purging analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the country into its worst financial crisis since the Great Depression.
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Moody’s In the News this week:
