Tuesday, November 10, 2009

Senator Bernie Sanders Introduces Legislation To Break Up The Wall Street Mobster Monopoly

An unintended consequence of this legislation would be to break up of the Washington monopoly along with it. Let's explain this dynamic.

I have talked about this for nearly a year now but it remains unreported. Wall Street banks are likely not being broken up because they serve the state. They are a massive repository for new issuances of government debt. Wars, stimulus programs, funding massive foreign interventions and other policies which are related more to power and control need to be financed. With global trade collapsing and foreign entities unable to finance the U.S. deficit at its record levels, Washington needs to find domestic purchasers of its debt. The fact that Bernie mentions these mega banks are now substantially larger than before this crisis started creates an even larger repository for the Federal government to self-fund its own deficits without foreign purchasers. This is another dynamic also not clearly understood. The growing asset base of these banks also allows them to mint massive profits buy plowing enormous sums of money into a completely risk-free (conceptually) purchase of Treasuries. Get money at zero percent and invest it at 3.5% all day long. This dynamic allows these firms to continue to fund their Frankenstein financial market inventions as well.

Yet all of these dynamics and more are destroying the American economy. As we have said numerous times, it is Washington killing our economy. It is the President, the Congress, the Treasury, the Federal Reserve and anyone else who supports current policies. This surely is not malicious of intent, but is an unintended consequence of propping up these massive firms. In a world of finite capital, the U.S. government is crowding out the individual, the small business and even the large business for this country's resources. And because these firms are now effectively government-supported on every level, they too are crowding out capital which would otherwise support the operation of community banks and regional banks. What does that mean? We the People will continue to scavenge for capital and subsequently become poorer at the expense of the state. Bankruptcies will continue unabated. Unemployment will continue to rise. Small businesses will continue to fail. The economy will not recover.

Many people believe we are on the path of Japan and cite numerous meaningless comparatives including decades of low growth with low interest rates. That is absolutely incorrect. We are on the path to collapse without a change in economic policy. Japan's economy, unlike the U.S., was still a net producer of capital throughout their decades of comparable policies. And the global economy went without any substantial slowdown during their malaise thus providing a healthy outlet for their goods and services. So they could fund their government intervention. Today, comparatively, globalization is dead regardless of the rhetoric.

The U.S. has a reprieve of some length beyond what an initial crisis would have developed by allowing these mega banks to continue to grow in girth but a repeat of Japan is completely impossible in the U.S. without a massive economic transformation we have been stating for years must take place. It will take place whether elitists want it or not. It's only a matter of when and if it is adopted by necessity through collapse or through proactive policy. Only time will tell.

There are many solutions to our crisis . Solutions that mandate constructive government involvement. But current policy isn't one of them. Why would we expect it to be? As we have written Schumpeter told us ages ago that the only way to recover from economic crisis is to rid ourselves of the prior generation's foolish leadership and their faulty thinking which led to the collapse in the first place. And, indeed this collapse lies completely in the hands of elitists in government and business who have forsaken society's trust. They have forsaken We the People for morally bankrupt reasons. Were society enlightened to this fact, we would not consider any possible solutions involving a perpetuation of the status quo. But, in fact, all we are doing is perpetuating the status quo. Why? Because the status quo owns the microphone and the wealth taken from society in this great fraud. Wealth needed to control the microphone. Sound familiar?

A major change is headed Washington's way. What Schumpeter said is manifesting itself into today's political reality - Incumbents, regardless of party, are marked for removal as we saw in the elections last week. That's not a surprise on here. It is something we have been expecting for years as we have written of our self-correcting society. It's time for Washington to decide. Politicians are either part of the problem or part of the solution. It's time to stand to account and convince the voters of their merit as our public servants. Merit afforded by action. By true leadership. Not by rhetoric. Not as our overlords promising a new America while dictating the economically unpopular and morally bankrupt status quo. Or just as bad, accomplishing nothing.

Link here.
posted by TimingLogic at 8:53 AM