Posts Tagged ‘Summers’

Housing & the Money Trap

November 23, 2013

Economics is a subject founded, and dominated, by philosophy. or rather, it should be. Instead it got to be dominated by gangsters and banksters.

The crisis the western economy comes from what passes for rational economic theory is far plutocratic lunacy. To put it in one sentence: “greed is not just good, but god.”

How did this come to be? Force. Force is what gave meaning to economics. In 1945, Allen Dulles, head of the OSS, was sitting in Berlin, in charge of de-Nazifying his Nazi friends he had made such good business with. A few thugs got tried, but the real friends and business associates were taught to make American style jokes, so they could go back to business. Force works:

Wall Street Golden Calf: Larger Than Life Itself

Wall Street Golden Calf: Larger Than Life Itself

Decades unfolded. The OSS, now called the CIA imposed military men all over the Americas, if not the World, covered up by Harvard, Chicago or Stanford certified “economists”. No god, but greed: an old story, already found in the Bible (the adoration of the gold calf). That was great for We The People of the USA, as riches flowed towards the USA. That comforted USA universities in their knowledge that their vision of economics as all about greed was correct.

The City of London poodle reinforced that notion and that system, after Thatcher came to power.

Then Reagan came to power. His greatest feat was probably to have introduced a tuition in the public University of California. That University had been founded specifically to be free, in contradistinction with the plutocratic universities, where diplomas were paid for, to give the appearance of distinction and qualification on merits to the children of plutocrats. Reagan broke that nasty idea.

From there on, all what was worthy in the USA would be paid for.

Reagan had in his cabinet two twenty-something economists, eager to please and succeed: Larry Summers, hyper connected to plutocratic economists with Nobels, and Paul Krugman. Nowadays Krugman, is viewed, erroneously as the most progressive economist there is. And his blog is the most read in economics, worldwide (complete with my more damaging comments censored).

Summers’ attempt to head the Fed, supported by Obama, was shot down by an Internet born campaign. As far as I know, I am the first to have excoriated Summers from way back. What Summers did under Clinton would have made FDR scream. Summers not only destroyed the Banking Act of 1933, FDR’s most important economic reform, but he allowed the expansion of banking scams to realms never imagined before.

Now, Summers, seconded by Krugman, has embarked in a vast campaign to justify the abysmal economy they helped to create in the last three decades. See:

http://krugman.blogs.nytimes.com/2013/11/16/secular-stagnation-coalmines-bubbles-and-larry-summers/

Recently, Krugman has been trying to explain that Keynes was not an idiot, that Keynes was just joking when he said real stupid stuff. I have long argued Keynes was partly a confirmed idiot, and even a lethal one.

See: https://patriceayme.wordpress.com/2010/09/04/colbert-good-keynes-not-so-smart/

Lord Keynes was just not an idiot, in many ways, he was also a Nazi. A Nazi incubator. a mother hen for Nazism. No wonder he wanted people to fill up holes at the bottom of coal mines; he was inspirational for Nazism.

Krugman is a strange case: on one hand, he is violently and haughtily condemning those who call him, Larry Summers, Alan Greenspan, Robert Rubin Jews, as they originally are, although he admits he is badly estranged from his roots.

On the other hand, Krugman exhibits wild enthusiasm and total devotion to Lord Keynes. Lord Keynes was a rabid partisan of murderous, German fascism, and regretted loudly and extensively that the Versailles treaty had freed enslaved nations subjugated by Prussia and Vienna. Keynes, as early as 1919, wrote down the entire system of thought the Nazis would run away with. Then he published it, as “The Economic Consequences of Peace” and that piece of trashy Nazi propaganda became the Bible of pseudo-progressives plutocratic sycophants throughout the Anglo-Saxon world. Including presumably, that of Krugman as he is all things Keynes, night and day.

To this day, Keynes’ TECP is the source of much anti-French hatred and contempt in the Anglo-Saxon world (something Krugman deplores, another of his charming contradictions). Most cultivated Americans have been brain washed, by a time honored Nazi tradition,  to deplore “Versailles” as the cause of everything bad. Those Americans ought to have to line up, and be spanked vigorously by Poles, Czechs, Slovaks, Romanians, Serbs and assorted others. French judges could assert when USA buns are rosy enough.

So now Krugman is again in love with Summers for all to see (Curiously he does not extend that affection to Summers’ compère, the Maestro of bubbling, babbling and mumbling, Alan Greenspan (Greenspam, Greenmail? who is out with another trash book).

Summers’ theory is that bubbles are good. It’s nothing new: that “theory” was put in practice by him and Greenspan under Clinton. Now our errant boy, Krugman, is embracing it idly (caveat: although, before anyone, I pointed out 4% inflation was good, I do not embrace bubbles.) In ‘Bubblephobia and Monetary Policy’ Krugman opines that:

How do you know that monetary policy is too loose? The textbook answer is that excessively expansionary monetary policy shows up in rising inflation; stable inflation means money is neither too loose nor too tight…I’m pretty sure the side Janet Yellen is on, says that at low inflation rates this rule breaks down… stable inflation at a low level is consistent with an economy operating well below potential. [I agree with this.]

But there’s a critique from the other side that seems to be gaining a lot of traction with central bankers not named Janet Yellen — namely, the notion that if asset prices are rising, and that this might signal a bubble, it’s time to tighten, even if inflation is low or falling.

And Krugman to inform us than an esteemed colleague at the Swedish Central Bank was fired because he disagreed with rising interest rates. Indeed, it makes no sense:

Killing The Economy: Good, Say The Plutos, We Will Shine More Brightly

Killing The Economy: Good, Say The Plutos, We Will Shine More Brightly

 

The Riksbank raised rates sharply even though inflation was below target and falling, and has only partially reversed the move even though the country is now flirting with Japanese-style deflation. Why? Because it fears a housing bubble.

This kind of fits the H.L. Mencken definition of Puritanism: “The haunting fear that someone, somewhere, may be happy.” But here’s the thing: if we really are in the Summers/Krugman/Hansen world of secular stagnation, things like this are going to happen all the time.”

Krugman, Summers, Greenspan, and the entire economic establishment are barking up the money tree. But an ultra major economies have worked without money. I sent Krugman the following, and, perhaps having understood it, he kindly published it.

Thinking of the economy in terms of money only brings the lowest bounds and deliquescent traps to the economic discourse.

There is a housing problem, from Germany to California. A neighbour’ two full grown, professionally employed children, just moved in to share her small apartment. Why? Because in San Francisco, studios are renting at $3,000 a month.

Real estate prices have tripled in Munich, und so weiter.

Verdict? It’s not about money, or “inflation”, it’s about supply of housing. The old solution is to throw money at banks and to hope them to throw some more money at the housing market.

But bankers, and other rich people, have interest to see housing prices go up: thus they become richer, while doing nothing. That is they have more and the others, relatively less. So housing’s supply diminishes, relatively speaking.

In more than three decades, the population of California more than doubled, but housing did not. Especially not where the jobs are. So prices exploded, especially after international plutocracy bought itself a few adobes. Does that mean there is inflation? No. Just not enough housing.

How was the problem solved after WWII in Europe? Entire cities had been levelled (say Toulon in France). Well, the governments simply decided to build housing. Forget the banks. Just pay the contractors directly, and get on with the work.

This stays true today. Government driven, quality (energy neutral) housing ought to be governmentally decided throughout the West.

That would surely help the economy more wisely that frantic fracking. (Fracking can be considered a Ponzi, or pyramid scheme, because it does not pay for the escalating damage it causes, so it’s a repeat of the “subprime” madness, and a crazed bubble.)

So we need more governmental intervention in the economy. But not by just exacerbating the consuming. Turning “patients” into “consumers”, on the “health marketplace” as the clueless Pelobama did, is the way of error. What we need is a government that brings work where needed, directly. (Although fiscal tools could help, say by cutting taxes on construction, and relaxing some regulations.)

Big time energy policy, both in research (Thorium reactors, Thermonuclear Fusion, etc.) and development (replacing planes by nuclear-electric trains, so to speak, etc.) scientifically driven is needed. There are simply projects only the government is big enough, and free from short term profit enough to engage in; see “Synthesis Found”.

Just throwing money at banksters, so they be good, as Krugman and his colleagues have advocated, forever, is not good enough. It’s just perverse enough.

And measuring inflation, as is done in housing, by lack of supply, is deeply erroneous, indeed.

***

Patrice Ayme

Summers Of Discontent

August 6, 2013

Abstract: Agreed, some people are low lives, and focusing on them distract from more worthies issues. Paraphrasing, Paul Krugman himself said that he regretted to have to worry about idiots so much, but somebody had to do it. All the more as those low lives have been leading civilization, into devastation, to the point they may terminate it.

Lawrence Summers had positions at the apex of the governance of the USA and the world, for more than 30 years; he is a plutocratic mastermind. 

Obama: Summers To Save World Once Again.

Obama: Summers To Save World Once Again.

No conspiracy in the USA, just a central committee (Goldman Sachs-Citigroup-Clinton’s minder, plutocrat Robert Rubin on the left, plutocrat Lawrence Summers on the right of the clown).

Meanwhile crucial economic activity of governmental type, such as science, is cut all over (because of“sequestration”, another smart idea proposed to Congress by another of Obama’s very bank connected wealthy advisers: who needs neoconservatives when one has Obama advisers, the children of Summers?).

Don’t worry: Summers’ creatures, such as Sherryl Sandberg, Facebook’s spymaster, and other friends, including the U2’s propagandist Bono, are making more billions than ever. Their wealth, certainly, is not sequestrated.

Larry Summers was, as Clinton Treasury Secretary, the point man allowing unregulated financial derivatives, thus making the real economy derivative ever since. Just on that point, he should be disqualified.

***

FASCISM PROVED EXCELLENT TO (MOST OF) ITS COLLABORATORS:  

The taking over of the world by the same group of people, families and friends is very old: Senator Baucus’ family has reigned over his state for five generations (Baucus had some insurance industry VP write Obamacare).

Plutocracy’s blossoming is older than the BIS (Bank of International Settlements), The BIS was created by Washington in the early 1920s, to safeguard (under Reichsbank’s head H. Schacht’s supervision) the transfer of formidable assets of the Nazi Party, and associated plutocrats, throughout the world, before, during, and after World War Two.

(The BIS is the central banks of central banks; however, due to its blatant Nazi connections, its elimination was evoked for a few seconds after WWII.)

In the end, Germany prosecuted only 13,000 Nazis. However, the Nazi Party reached, by 1945, 8 million members. Considering all those who died, and Nazis in other countries (like international SS, of which there were hundreds of thousands), this means that 99.9% of Nazis were NOT prosecuted.

Many Nazis became rich from spoiling and then killing other people, in particular, Jews.

Many of the most prominent Nazis or their enablers became shining stars of the world after the war (examples: Marshall Von Manstein, hyper industrialist heir Thyssen, the most powerful German corporation, SS Major Von Braun and his close friends the extermination camps managers, Schacht, the Dulles, Prescott Bush, Harrimans, etc.; nota bene: the Federal Republic Deutschland just launched a campaign to catch remaining Nazi executioneers!)

The case of the global corporations (mostly USA based) was telling: although many were the crucial enablers of Hitler, they were not punished. The French Republic tried to arrest IBM directors, in 1945, but secret services of the USA ex-filtrated three of them out of the Republic’s reach. Hitler had given IBM a monopoly for organizing the Reich.

(This was enough of an answer to the question: ‘why is it that there is so much propaganda against France in the USA, and why is it that some French have a problem with USA plutocracy?’)

So many Nazis, and most of their topmost collaborators, thrived after WWII. This fact helped to install the following mood: if the Nazis, their greatest friends, collaborators and enablers could get away with what they did, why not us?

The madness blatant in the Ayn Rand (guru to Greenspan and other neofascists) boiled down to a rage against any regulation, in other words, against any law. But for the law of the jungle. This is not different from the main mode of operation of the Nazis.

***

LET’S TAKE THE WORLD OVER, MORE THAN EVER:

Summers, Sandberg, World Bank 1991. The Worst Rule The World, Because They're Worse.

Summers, Sandberg, World Bank 1991. The Worst Rule The World, Because They’re Worse.

Who elected this people to give them control of the world? Well, their owners. Sherryl Sandberg is Summers’ kind of woman: greed unlimited. Let’s bank on the world, spy on the world, and make taxpayers pay for it. 

http://video.pbs.org/video/1302794657/

More than a decade later, Summers blocked Christina Romer’s pleas for more stimulus in Obama’s administration. Blocking the spirit of empathy, fairness, or just the rule of law, seems Summers’ call in life. He had a horrible fight to oppose Brooksley Born, chairperson of the Commodity Futures Trading Commission (CFTC), an agency supposed to combat fraud.

Greenspan, Rubin and Summers told Ms. Born that fraud in financial derivatives should not be something one inquires about. Neither of these three graces is a lawyer. Ms. Born was a very experienced lawyer, since her star days in Stanford, and as a partner in a prestigious law firm, she spent decades practicing high level finance.

In other words, Greenspan, Rubin and Summers were meta-criminals, people who believe some crimes are self-correcting. A meta-criminal believes that some crimes are not crimes.  

In the “Committee To save The World”, made of Rubin, Greenspan and Summers, Summers was the “enforcer”. Enforcer of the Law of the Jungle.

Summers screamed to Born on the phone that she was going to cause another depression, and that he had “13 bankers in his office” telling him that. In the end Born’s opponents called an “emergency working group”, and a propaganda campaign was organized against her until Congress demolished the CFTC.

Summers’ sycophants are typically Wall Street operators such a Steven Rattner in the New York Times (02 Aug. 13) going delirious about Summers’ extraordinary intelligence: the most brilliant, most analytical and most surgical brain of anyone I’ve ever encountered.”

***

WHERE IT IS SHOWN SUMMERS IS DUMB:

Summers hyper intelligent? Summers is simply no scientist, being only a vulgar economist (at best).

However Summers, not a scientist, insulted all women scientists by saying that women are not as capable as men. He said this as Harvard President, presiding over a vast assembly of professors who had come to listen to him, in his function as Harvard president.

Yet, several of the very greatest scientists of the 20th century were women. Example: the Curies (Marie and Irene), the towering mathematician Emmy Noether, the discoverer of jumping genes, Barbara MacClintock. Hence Mr. Summers is crass ignorant, arrogant, and not smart (to say the least). Besides being sexist to the point of imbecility.

All the female scientists I just mentioned are not just famous, but turned out to have been brazen geniuses: they introduced science so revolutionary, that it was viewed as completely wrong, sometimes for decades. That, in combination with their genders, made their careers very difficult.

What is a genius to Wall Street has, unsurprisingly, just the mind of a leech, for those endowed with common sense.

***

SUMMERS: FOR CO2, & ALL IMAGINABLE CORRUPTION:

Summers is a condensed parody of plutocracy. He started as a twenty something PhD in Reagan’s cabinet. This stellar career springs from hereditary plutocracy: two of Summers’ uncles were Nobel Prizes in economics.

By 1991, Summers was chief economist at the World Bank, escorted by Sandberg. This is what he said, in his official quality as the world’s guiding economist:“There are no… limits to the carrying capacity of the earth that are likely to bind any time in the foreseeable future. There isn’t a risk of an apocalypse due to global warming or anything else. The idea that we should put limits on growth because of some natural limit, is a profound error and one that, were it ever to prove influential, would have staggering social costs.”

More Summers as chief economist world bank: “the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that…. I’ve always thought that under-populated countries in Africa are vastly underpolluted.” [This statement does not sound correct nowadays, even to the clueless, so Summers, smart as ever, now, claims it was meant to be a parody. Sure: Summers himself is a parody.]

But Summers’ position on CO2 was certainly serious. Lethally serious. He was the leading voice within the Clinton Administration arguing against the USA doing anything about greenhouse gases, and against US participation in the Kyoto Protocol (according to internal documents made public in 2009). This demolished Kyoto, as the European Union went at it alone, to staggering unilateral cost, causing the EU an important trade disadvantage.

Big Sister Sandberg: Already Your Boss In The 1990s

Big Sister Sandberg: Already Your Boss In The 1990s

Why to mention Sandberg all the time? Because she is typical of the corruptocracy around Summers. She was sent by the government (what else?) to the top of Google, obviously part of a Faustian bargain. Industrial spying for the government by Google and company started about that time (before 9/11).

Some of Summers’ creatures are expensive, and not just to the Constitution of the USA. Bob Rubin, that wise leech, cost taxpayers 100 billion dollars… So far. Not counting interest. 100 billions, personally, just for his little hobby (Citigroup).

Hence the importance, for the powers that be,  of putting Summers at the top of the central bank: Summers will make sure that his friends the top plutocrats are not left holding the bag. (Remember: he is the brightest croc alive, he will find something…)

Summers’ career is in orbit around the theme that greed is all the need we have. In 2000 Summers, Clinton’s Treasury Secretary,  teamed up with Greenspan and Enron CEO to claim California energy crisis was dues to “excessive regulation”. (They pushed the impudence to lecturing California’s republican governor Gray Davis!)

In truth Enron criminally organized shortages and made a fortune from Summers’ just authorized mood of doing whatever bets with derivatives. “(Conveniently Enro’s CEO Lay had a “heart attack” before sentencing; his conviction, just as conveniently, was then “vacated”.) 

Summers pontificated that “…increased government involvement in the health care sector is a risky idea.” But apparently financial derivatives are not a risky idea. Is the rest of the world, with its nationalized health care risky? Yes! Obama wealthcare is safer for those who enjoy it!

On Pinochet loving, libertarian economist Milton Friedman’s death, Summers said that “…any honest Democrat will admit that we are now all Friedmanites.” if honest democrats believe this, one fears to imagine what dishonest ones such as Summers believe.

Summers pressured the Korean government to raise its interest rates and balance its budget in the midst of a recession, right in the middle of the South-East Asian crisis. During this crisis, Summers, along with Paul Wolfowitz, pushed for regime change in Indonesia (See the book The Chastening, by Paul Blustein).

By the way, this shows that neoconservatives are, truly, neofascists, and that the distinction between left and right is irrelevant (as it already was in the fascism of the 1930s: then, all the fascists, including Stalin, were allied with each other, either officially, or secretly, at one point or another!)

In truth fascists and plutocrats are after getting as much power on other men as they can, with whatever methods come in handy.

Hitler explained that the obsession with power, doing whatever to get more power, without ethics or mental coherence, was fascism’s main strength.

Hitler had to re-iterate this explanation after he made a spectacular alliance with the Polish colonels in January 1934, standing on its head the main axis of the Nazis’ implicit program (re-subjugating the nations Germany used to occupy, and had lost because of the Versailles Treaty).

Strength, of course is everything for those who affect to believe the Will to Power is (nearly) everything.

Summers set up a project through which the Harvard Institute for International Development advised the Russian government between 1992 and 1997. It emerged later that some of the Harvard advisers had invested in Russia, to profit from their own advice. Summers encouraged then-Russian leader Boris Yeltsin to use the same “three-‘ations'” of policy he advocated in the Clinton Administration– “privatization, stabilization, and liberalization.”

It got to the point that a USA Federal judge ruled that, by investing on their own accounts while advising the Russian government, Harvard professor Shleifer (and Moscow-based assistant Jonathan Hay) had conspired to defraud the US Agency for International Development (USAID), which had been paying their salary.

Harvard had to pay $26 million and Shleifer $2 million in fines. (Why is it that fat cats mostly pay fines and rarely go to the slammer?)

The Russian-born 45-year-old Shleifer is another superstar of the economics profession. Like Summers, he won the Clark Medal, the award of top economist under 40. Shleifer became the editor of Harvard’s Quarterly Journal of Economics at the age of 28, and became editor in 2006 of the American Economic Association’s Journal of Economic Perspectives. What we are facing is a galaxy of greed from second knives, below the old money and Wal Mart family class (worth around 100 billion dollars, same order as the Gates’ control  of 120 billion dollars).

Instead, Learn to Love Plutocracy.

Instead, Learn to Love Plutocracy.

The perspective, ladies and gentlemen, is something akin to what happened 1,000 years ago, when the richest plutocrats instituted the feudal order in Europe. Plutocracy is what happens when the Dark Side breeds with the mathematics of the exponential. It’s not about brains, or being right, or wrong. It’s about who you know, power, and breed.

1,000 years ago elective processes were replaced first by money, and then, heredity. The best intellectuals, inside the Church, objected in vain that the Church used elections to select the best, and that secular society ought to go on that way. But it was not about being the best, and selecting the best. It was about power that be.

That’s why Obama loves Summers. Not because Summers is lovely (even Obama cannot be that clueless!). But because Obama is scared.

Want fun? Greenspan finally came in front of congress in 2009 and recognized that there was a “flaw” in his perception of “reality” and his “ideology”. He looked ready to puke, complete with quivering lips and bulging eyes. Tough for an addict of the mad Ayn Rand to admit that the law is of some use.

More fun? Sandberg, Summers’ pet, who used to live (in some pictures at least) inside Summers’ arm pit at Harvard, after being installed at the apex of Clinton, Google and Facebook, and making billions, now gives lessons to women of the world to preach to them the exact opposite of what she did.

A word of wisdom from an expert? “…the grossly impudent lie always leaves traces behind it, even after it has been nailed down, a fact which is known to all expert liars in this world and to all who conspire together in the art of lying.”

[Adolf Hitler , Mein Kampf, vol. I, ch. X]

Want hope? The (mostly) Franco-American robot Curiosity, as large as a small truck, just had its first birthday. The scientific results are considerable; they demonstrate that there were streams on Mars, with chemical conditions suitable for life.

Curiously, Mars is anticipated to be so favorable to present Earth life, that the Mars missions are sterilized at huge cost (as much as half a billion dollars for a future life searching mission!). Some suggest to cease that policy. And I agree! One should view Mars as a colonization target, and we may as well send as much life there as possible, in the hope it will adapt (and then we can bioengineer the survivors to produce oxygen).

If it is not lost to treason, civilization will be saved by reason.

***

Patrice Ayme

Derivative World Sucks Real World Dry.

December 21, 2009

 

THERE OUGHT TO BE A FUNCTIONAL ETHICS IN FINANCE. HERE IS WHY.

***

Abstract: the leaders of the USA have diverted, through otherworldly derivatives and exaggerated compensation for themselves, so much capital in a socially and economically useless way, that the economy could only falter. Larry Summers, the plutocratic genius, has been in command of the wrecking of the ship of state for 30 years.

***

"I did not run for office to be helping out a bunch of fat cat bankers on Wall Street." says Obama. So far, though, it’s exactly what has happened. If you run for office and then eat poison, of your own volition, it means you ran for office to eat poison.

Obama and his little helpers HAD to save the banks, and even the bank holding companies. As institutions. They did not have to help the individuals who created the problem, but that is what they have done so far. Actually saving those who caused the problem, some of whom belong in prison, is the one thing the administration should not have done. (Since those who promoted and encouraged torture are not under investigation, but still role models or professors of the American justice system, this goes with the territory, namely poor actors are left in place, as sacred icons).

More than G. W. Bush, and arguably, more than anybody else, it is Larry Summers who created the problem. After all, he was on the scene before Rubin. (See Annex on Summers.)

Summers was internal economic affair advisor at the WHITE HOUSE under Feldstein, chair of Reagan’s economic advisers. He was twenty something, then Harvard made him a full professor at 28 years of age. Of these things American genius is made. Ten percent short term unemployment rate, a stalled economy, a disappearing middle class, the rich so rich that they get money from the poor: this is Summers for you.

"What’s really frustrating me right now is that you’ve got these same banks who benefited from taxpayer assistance who are fighting tooth and nail with their lobbyists up on Capitol Hill, fighting against financial regulatory control" Obama added. The word "bank" has to be considered carefully here. What Obama means is actually the upper management of said banks.

The bottom line is that finance is supposed to be the link between savers and entrepreneurs. Savers save, producing capital. Then entrepreneurs are lent said capital. In the 1920s, this failed: banks invested in Wall street, then lost a lot of money, as Wall Street crashed due to overproduction, and the rise of tariffs by 50%, which collapsed international trade. The Banking Act of 1933 was passed to outlaw the practice of having banks play at the casino of Wall Street.

Why? Because there is actually a limited quantity of capital. Capital is produced, through the fractional reserve system, as a multiplier of how much banks are allowed to lend, relative to the reserves they keep. The looser the regulation, the greater the multiplier, the more capital is created, true. But still, in the end, the capital is finite.

Notice that THE VERY EXISTENCE OF THE REGULATION OF THE MULTIPLIER BY THE STATE MAKE BANKS INTO AN ARM OF THE STATE. So, basically BANKERS ARE CIVIL SERVANTS. Banks are given a fiduciary prerogative, and duty, that of creating money, a function the state used to have, for a few millennia, and nobody else had, under the penalty of death. Modern bankers investing in derivatives are basically counterfeiters. The fact is they don’t really own that money, they were entrusted in creating it, they have no right to lose it all, especially after paying themselves bonuses, and profits for a few individuals at hedge funds and the upper class attached to them exclusively.

Indeed finance became, thanks to the deregulation work of Rubin, Summers and Greenspan, under Clinton, not just as bad as in the 1920s, but much worse. In the 1920s, banks could just invest in stocks, which are ownerships in companies, something real. Financial derivatives did not exist .

The craziness of the 1920s was outlawed by the Banking Act of 1933 ("Glass-Steagall"). Rubin, Greenspan, Summers repelled the Banking Act. clip_image002

It was actually the committee to sink the world. Or more exactly the committee to make the world irrelevant. The committee to derivate the world. Indeed, the difference with the 1920s is that an extra worldly concept, that of financial derivatives, had blossomed and disconnected with all economic justification, although it connected with completely fraudulent contracts, that all top bonus bankers knew very well were fraudulent.

Derivatives are bets on the evolution of the price of whatever. Derivatives, thus, can be whatever. Differently from a real casino, which is regulated, and where one knows what one is betting about, Summers (see his inspiring face higher up and lower down), was adamant that derivatives ought not to be regulated.

Why did Summers think that? Well, why does the crocodile thinks the way it does? Well, Summers does not hide rotten carcasses up the river bank; he is way more sophisticated than that, but, otherwise, just the same. Same morality: I eat you, therefore I am. A genius, plutocratic style.

Summers lives on top of the world, he owns mansions, made at least eight million dollar income in 2008, the American oligarchs think he is a genius, and the president of the USAs eats in his hand and coos. Summers would say what Obama did say:"Look where I am!" (Namely you are nothing, I am everything, the mark of someone who has decided the measure of man is the measure of power, on other men, thus forsaking all what makes the genus Homo special; hence the comparison with crocodiles above; crocs don’t a civilization make, they just eat their way through it).

Derivatives are only justified if and only if they play the role they were originally made for as they evolved around Chicago, long ago: as insurance for commercial operators. ALL AND ANY OTHER USAGE OF DERIVATIVES OUGHT TO BE OUTLAWED. Or regulated away, whatever.

As I said, capital is limited. Big banks have been investing most of the world’s capital in bets not connected to the physical world, and did so while it was not justified as insurance. Total world yearly GDP is about 50,000 billion dollars. Before the crash of 2008, the total derivatives market was about 600,000 billion dollars. Now it has been reflated, and it is about 800,000 billion dollars. Yes, about 16 times world’s GDP. In other words, the world has become hostage to something that does not exist. Any small negative fluctuation of that world that does not exist, that world of derivatives, will, and did crash completely the real economy. Moreover, if there is no negative outcome but further "profits" in the derivative world, it means that more capital will be diverted there, starving further the real world.

The situation, as it is, is grotesque: the collaborators of Roosevelt who outlawed the violation of its fiduciary duty by the banking industry in 1933, would have found the present situation not just way worse than what they outlawed, but completely demented.

For example American International Group, AIG, sold derivatives posing at insurance, without making anything resembling sufficient provisions. Nor could it have. Those private engagements were honored by poor people in the USA , because so decided the Wall Street operators at the White House.

In particular, 12.9 billion dollars went given to Goldman Sachs, in the name of the American People. Goldman then called that a profit, and used all of it for bonuses (total government gifts to Goldman Sachs were several times that). Goldman Sachs is not a poor homeowner, incapable of paying his debt, but, it, and its kind, are the future paymaster of a lot of the individuals leading the American government.

Ethics was not invented to please philosophers. Ethics did not come out of God. Ethics comes out of what is customary (its etymology says). In other words, it has got to be sustainable. WHAT WE HAVE NOW, THE ENTIRE MONEY OF THE WORLD SENT BY CORRUPT CIVIL SERVANTS (ALL WHAT BONUS BANKERS ARE) TO A DERIVATIVE WORLD IS NOT SUSTAINABLE, SO IT CAN’T EVER BECOME CUSTOMARY, SO IT IS NOT ETHICAL.

If Obama wants bankers to finance the real economy, as they are supposed to do, it’s no use begging them to do so. Instead, it’s time to become ethical.

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Patrice Ayme

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Annex 1: DERIVATIVES RUIN THE ECONOMY, SO DO EXAGGERATED TOP EXECUTIVES’ COMPENSATIONS:

The US pay czar limits the pay of executives at companies receiving a bailout. Without undercutting the ability of the firm to secure talented management.  ”It’s a delicate balance!  Very difficult indeed.”  To which Sherry Jarrell replies: "Well, Mr. Czar, difficult for you, maybe, but a piece of cake for the labor market.  That’s exactly what the labor market does, day in and day out, quite naturally.

Compensation should not be the purview of an appointed administrator serving at the pleasure of the executive branch of the U.S. Government."

But I say:

1) Self referential loops have proven a problem in logic. Should not they be a problem in the market, or is it that the market has nothing to do with logic?

The CEO class, in the USA, is self referential.

2) Europe has now more big companies than the USA. Still, big European executives are paid at least ten times less than their USA equivalents. How come the market is so different in Europe? Is the fact that more compensation in Europe goes to talent located on lower rungs of companies, related to the higher performance of European companies in the last decade? After all, the total compensation being finite, paying more for talent at the CEO level means paying less for talent just below.

An interesting aside is that CEO in the USA are much taller than average. Are size and compensation the only way they can dominate their subjects?

A few years ago, Renault was all set to buy General Motors. At the last minute, though, Renault executives learned that GM executives intended to pay themselves more than ten times what Renault-Nissan executives were paid. So Renault scuttled the deal. US taxpayers are left with the bill: more than 60 billion dollars, no? (And GM will fail within a year or two.)

It is true there are markets, and they can deal. But they are more or less free.

There are not just markets. There are also classes too, and they can dominate, with extra market mechanisms. The CEO class in the USA sits on each others’ boards, determining each others’ compensations. In some other countries, this sort of incest is more limited (in others, it’s worse: China). In Germany, union representatives sit on boards.

Generally those who really love their jobs will do them for free. Too much compensation is actually a distraction. And bad markets, thus exists. They are not just bear markets, they can lead to captive markets, and oligarchies…

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Annex 2: In crocs we trust:

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Why He Falters

A plutocratic genius, Summers has long been considered by the reigning oligarchy a top U.S. economic brain. As head of the National Economic Council (NEC), Summers exerts maximum sway over U.S. economic policy as the top White House economic adviser during the worst economic crisis since the Great Depression. That was a long time coming, since Summers and company worked hard dismantling the USA as Reagan economic advisers.

The former Clinton Treasury secretary’s name topped the list for a return trip to head the Treasury department in 2009. Instead, that slot went to a Summers’ protégé: New York Fed Chairman Geithner.

DELIBERATELY VIOLATING THE LAW.

April 6, 2009

THE BUSH ADMINISTRATION VIOLATED THE LAW, AND IT WAS OBVIOUS, BUT NOT THAT BLATANT.
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By refusing to close insolvent banks, the Obama administration is violating an important law, the “Prompt Corrective Action Law” [US Code, Title 12, Chapter 16, sec 1831]. That law, in particular, mandates explicitly to minimize the cost to the FDIC (hence the “prompt” closure of “undercapitalized” banks). The law defines in detail what “undercapitalization” means, and mandates the “appropriate Federal banking agencies” to find it out (because if a bank defaults, the FDIC is left holding the bag). They have a limit of ninety days. By the way, unrestricted bonuses are unlawful too, it is explicitly mentioned, and so on.

In other words Obama and Geithner have been debating the law, as if they had a choice. Geithner, in particular, because he has been in an oversight role forever, should be subject to prosecution, for having deliberately ignored and violated the law (having failed “to resolve the problems of insured depository institutions at the least possible long-term loss to the deposit insurance fund” in spite of “Prompt corrective action required”).

Now the Geithner plan is providing welfare for hedge funds, and their associated corrupt banks. Geithner calls that the PPIP. The PPIP works better, in its generic case with a positive outcome for the insolvent banks and greedy hedge funds, when the FDIC maximizes its losses. The PPIP also violates the ‘Prompt Corrective Action Law” (Sec. 1831), and its spirit.

The way it works is this: an agent can borrow from the FDIC, and then it can buy worthless assets with the funds it has borrowed. Next, it could then walk away, since the Geithner loan is “nonrecourse”. “Nonrecourse” means that if the agent defaults, no part of the loan can be recovered by seizing some collateral of the agent. The agent does not need any collateral. The agent can buy something for a billion dollars one day, and then walk out the next day, no question asked by anyone.

The agent can be anything: Geithner just has to like the agent (so it’s the Paulson plan in disguise, except the funds are much greater; the arbitrariness is the same, though: it’s all about the love and esteem that the Treasury Secretary has for the potential agent). The agent could be a corrupt, insolvent bank, or a greedy desperate hedge or a corrupt insolvent private equity fund (there are some of the later holding a lot of worthless real estate, such as one the columnist Thomas Friedman has invested in, explaining his constant, glowing propaganda for the Geithner plan). Then agents could exchange each others’ bids, and favors. It would be perfectly legal, as far as Geithner is concerned (not as far as the Constitution is concerned, because the equality clause would be violated).
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Bill Moyers interviewed WILLIAM K. BLACK, Senior Regulator for the Savings and Loans crisis under Reagan and Bush Senior, a criminologist, law, economics and business professor [April 5, 2009].

WILLIAM K. BLACK: In the Savings and Loan debacle, we developed excellent ways for dealing with the frauds, and for dealing with the failed institutions. And for 15 years after the Savings and Loan crisis, didn’t matter which party was in power, the U.S. Treasury Secretary would fly over to Tokyo and tell the Japanese, “You ought to do things the way we did in the Savings and Loan crisis, because it worked really well. Instead you’re covering up the bank losses, because you know, you say you need confidence. And so, we have to lie to the people to create confidence. And it doesn’t work. You will cause your recession to continue and continue.” And the Japanese call it the lost decade. That was the result. So, now we get in trouble, and what do we do? We adopt the Japanese approach of lying about the assets. And you know what? It’s working just as well as it did in Japan.

BILL MOYERS: “Yeah. Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?”

WILLIAM K. BLACK, Senior Regulator for the Savings and Loans crisis: “Absolutely.”

BILL MOYERS: You are.

WILLIAM K. BLACK: Absolutely, because they are scared to death. All right? They’re scared to death of a collapse. They’re afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we’ll run screaming to the exits. And we won’t rely on deposit insurance. And, by the way, you can rely on deposit insurance. And it’s foolishness. All right? Now, it may be worse than that. You can impute more cynical motives.”
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There is an easy way to prevent panic: in France all deposits are insured by the government, in any bank, whatever the amount. But this is not the way chosen by Summers and Geithner. Potential panic is thus just a pretext for them: the USA could do like France, and no panic would be imaginable. Now the cynical motives are in plain sight: Summers got eight million dollars, just like year, in 2008, from the very people he wants to give two trillion dollars to, in 2009. Maybe the adjective is venal, not cynical.

What does PPIP stands for? According to Geithner, Public Private Investment Plan. According to me, Public Pays for Impudent Plutocrats. Interestingly, the size of PPIP is supposed to blossom to two trillion dollars, the exact size of the hedge fund “industry”. Does that mean the hedge fund “industry” is broke too, and has to be fully recapitalized by taxpayers, lest the ultra rich would not be ultra rich anymore?
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Patrice Ayme
http://patriceayme.com/
http://tyranosopher.blogspot.com/

 

Addendum: 747 banks were nationalized (“put in receivership”) during the S&L crisis (the average bank was kept in government custody for three to four months; bad assets were yanked out, and put in the RTC).