MONEY CREATION BY THUGS = CIVILIZATIONAL COLLAPSE.
People of more than zero influence are waking up to the fact that they have to admit that there is something wrong with the banking system as it is. A delicate task: something has to be revealed, but not so much that the pyramid upon which the wealthy rest, would crumble.
Paul Krugman, long extremely partial to private banks, wrote an editorial in the New York Times on the subject of how outrageous banking, as presently practiced, is. Krugman could have written this years ago. But he did not. Instead he waited until the plutocratic party went one outrage too far.
In Dimon’s Déjà Vu Debacle, Krugman focuses on the fact that the state insures the banksters. Of course the state does much more: it reassures the banksters, thus encouraging them in their crimes. But not just that. The state gives trillions to banks so that they can play with each other. Krugman will not tell you that. For years he has been pushing stridently for Quantitative Easing, giving trillions to banks, no strings attached.
Same idea as Reaganism, or Sarkozism: give to the rich, so that the rich will give to you.
The bank JP Morgan Chase lost 3 billion, or maybe 5, or 100 billion. No problem, says Romney: it’s not their money, it’s theirs! If it’s not to some banks, that money, it’s to some other guys. Guys like me, guys, say romney, and he beams with pride.
In truth, though, that money is neither to the banks, nor to those other guys. That money is yours. Private banks are in charge of creating public money, in guise of private credit.
Some will say: this is how capitalism works. No, that’s how a particular form of fractional reserve based financial parasitism works. Proof: the Nineteenth and Twentieth century revolutionaries (Marx, etc.) did not talk about it. Instead they mostly talked about the abuse of workers by great capital. (Now there are not even workers to abuse…) At most Marx complained a bit about the monopoly of banks. The scam existed already at the time, but it was discrete.
Romney lauded the plutocratic doctrine in relation with JP Morgan’s loss. Milder partisan of the established order, such as many in the democratic party, feel that Romney is going too far. More importantly, he wants to take their place. So, to their regret, they have to mention a bit of what’s wrong with banks.
Romney said that JP Morgan’s loss was excellent, because it benefited somebody else, namely an evil plutocrat laughing all the way to his private jet. Romney conveniently forgot to mention that, ultimately, it’s the taxpayer who foot the banks’ bill (as Krugman finally points out, when, as I already said, he could have done it years ago). Romney is pedagogical.
Extolling the theft of taxpayer money by hedge funds may look like a blunder on Romney’s part, but of course it’s not. Romney and his operators are clever, they know what they are doing. What they are doing is to prepare the minds to finding this sort of reflections part of the natural order of things. Instead of a blunder on Romney’s part, it’s an attempt to have all Americans become friendly to the notion of rising, shining, and boasting in the glory of that evil plutocracy is best to bring a better world.
In other words, Romney is not just running for himself, but also, deliberately, on the behalf of plutocracy. It looks clumsy, but it’s crafty, and manipulative at the emotional, “subconscious” level.
I immediately sent (a version) of the following comment, which put the problem in a wider context, to the New York Times (a context readers of this site will be familiar with). It should have appeared among the very first comments, thus influencing thousand of readers, and endangering the established order. Instead something happened, and it was published in # 195 position (!) Typical treatment given to my comments, when they are too clever by half.
“It is of foremost importance for the plutocratic order that the following is not understood by the masses. What Romney and the class he campaigns for do not want the simple minds of the People to comprehend, is that BANKS ARE ACTUALLY PUBLIC INSTITUTIONS.
OK, if a number of individuals put money together, and then lent it, that, and only that, would be a true private bank. Instead what is happening is that banks, especially very large banks, lend much more capital than they truly possess. They can do that, thanks to the full complicity of the government, which, then, in turn, become their accomplice and creature.
Such is the nature of the Fractional Reserve Banking System. Banks, using leverage, something only possible with the backing of the state, create all the credit, and therefore, most of the money. Money creation, a basic public function, has been farmed out to private individuals.
Just as tax collecting was farmed out to “general farmers” under (some of) France’s Ancient Regime, and (some of) the Roman empire. However, in France and Rome, money creation stayed an exclusive activity of the state.
So let me rephrase it: instead of calling banks private, one should realize that any bank using leverage is a public institution. It’s a fact, not an opinion. It’s a crucial fact. That is why, on his first day in office, president Roosevelt could, and did, close all banks in the USA.
Insisting that banks are private is like insisting that public money making is private, a monopoly the state give to unsupervised, unelected individuals.
That public character of leveraged banks makes all bankers, including Mr. Dimon, head of JP Morgan, and loudly admired by Obama, into public servants. As they lend to their friends (in finance, or their collaborators in their class (hedge fund managers who use leverage, as they all do), that makes those bankers and the banking they do, fundamentally corrupt.
When banking executives pay themselves immense amount of money, they do so with public money. The head of the unit of JP Morgan which was playing with derivatives, Ina Drew, a blue eyed blonde, earned more than 31 million dollar in 2010-2011 alone. (She has now been fired to the regret of Dimon, who did not want to fire his “sister“… Said the New York Times.)
This nature of banking, the exploitation of the public sphere, by a few self selected private individuals, has grave implications on Quantitative Easing and the like. The USA’s central bank gave (or lent at such low rates, it was like giving) trillions of dollars to the very banks and managements which caused the 2008 financial crisis (example: Goldman Sachs). It was quite a bit like paying off the mobsters who just burned your house. Payments are ongoing, and explain why the likes of Dimon fill Obama’s mind with awe.
In Europe, the central bank lends at 1% to banks which then lend that exact same money to the states at 6% or 7% (Spain, Italy) or well above 50% (Greece). In other words, the public finances the plutocrats rather than the real economy.
Merkel then barks, and push to cut off funding for public transportation in Greece, so common people cannot go to work anymore, but can, instead, be accused of laziness (feeder trains from suburbia into Athens have been often stopped, and the tracks overgrown with weeds. Meanwhile Merkel sells Porsches to her friendly plutocrats in Greece). Why does she do all that? Because she is protecting the leveraged banks by shifting blame to the common Greeks.
(Not that the Greeks were blameless: tax avoidance was a tradition in Greece, something that forced the country to live on credit more than could be sustained.)
The fundamental nature of the present crisis is the rise of plutocracy, naturally accompanied, as it always is, by the crushing of democracy (see all students having to pay colossal tuitions, so that only the children of the hyper rich can study, just like in the middle Ages; and if you protest, the Quebec government will come to arrest you, so please, approve!)
The present “fixes” only make the situation worse. (As was demonstrated, say in Greece!) Those “fixes” consist into shuffling ever more money to banks which then lend that money to their friends, or then to states at usurious rates, while augmenting stratospherically the public debt to said banks. This only augments the power of banks, hence of the financial plutocracy, and thus the crisis.
Is it deliberate? Probably. I have mentioned it on Krugman’s blog for years, but Krugman, who is very intelligent does as if he did not notice. Why? because if he did, he knows he would sitting in the hot, ejection seat. So he bids his time while munching on caviar, and sipping champagne.
The only way out is a general default, as advocated in:
Radical, sure. We have to grab the problem by its roots. Otherwise, we face collapse of civil society, while drowning and boiling.
Accompanied by a stiff regulation of banking, along the lines of president Roosevelt in 1933. Instead the Roosevelt laws were dismantled under president Clinton, a greedy critter, well rewarded since.
A few little men of modest extraction, get absolute power, and they want to keep some thereafter. That echo of power is provided by the Lords of Finance. As long as they took the right decisions. Singing hypocritically with U2 lead singer, the so called Bono (not his real name, just a bon mot to make him sound good, bon, bono, bueno, etc.) will help.
Bono, like Bill Gates, sings about the misery in Africa, while raking the billions in one of Goldman Sachs’ latest conspiracy (he was on the Facebook IPO, and made nearly two billion). Warren Buffet has served the public buffet of forbidden evil foods, and they splurge. Those all too visible plutocrats also make the same lethal mistake as the tiger in Kipling’s Jungle Book… Hopefully their public splurging may attract attention from the destituted commons. They don’t know that the Lord of the Underground, Pluto, makes itself invisible, for very good reasons. They are blinded by the very goodness they perceive in themselves, after inverting all values.