Friday, October 28, 2011

Corzine, Former Goldmanite, Uses Goldman Sachs-Inspired Leverage To Blow Up MF Global

Wall Street is systemically-incompetent.   I hammer on this incessantly because I want to shatter false belief systems.  

Wall Street/hedge funds have now traded everyone out of markets.  Now that they are trading against each other as counterparties, someone has to start losing money.   First it will be the weaker, less liquid firms and hedge funds.  MF Global fits that bill.

I just read where we have recently started trading upwards of 50 million equity options contracts a day.  That’s just equities.  And that’s just in the U.S.   These options and other derivatives once never existed.  All they are is a piece of paper.   They aren’t worth the paper they are written on.  The same dynamic of employing derivatives was used in 1987 to hedge risk.  Or so Wall Street thought.    It’s all a mirage.  They aren’t hedging anything.   As we pointed out before, the Nobel Prize-winning inventor of the option has blown up at least three hedge funds and has now publicly stated they don’t work as they were designed.  They appear to work as designed when there are ample bettors.  But when the shit hits the fan…..   The mirage is revealed for what it is. 

This theory that Wall Street is brilliant is based completely in pure propaganda.   Bankers used to make enough to buy a home in a middle class neighborhood.  And bond trading used to pay so little that traders needed a second job to survive.  Now, we have Lloyd Blankfein running what is perceived as the world’s most brilliant financial consulting and banking firm and Bill Gross is perceived as some kind of economic and monetary policy expert.   We wrote that both were not experts and actually pointed out their deficiencies in competence while their views were considered valid.   Then when the tide rolled out, both and many others were exposed as always being naked.

In the real world,  before banking criminals successfully deregulated finance, Blankfein and Gross would be desk jockeys making $70-100,000 a year.   Not a bad gig for a bureaucrat.  Maybe they would run a community bank and be making some amount more than that.   Of course, I doubt in a meritocracy, either would rise to that ability.  But, in the fantasy world created by smoke & mirrors and political fraud & corruption, they have reached the perception of masters of the universe.

Banking could be a virtuous profession.  But, let’s make something clear.  Bankers have never made anything. They don’t  understand how to run a business making anything.  They haven’t created anything of tangible value.  And they surely don’t understand economics.  That they have infiltrated every aspect of our society to how our businesses are run, to becoming politicians, to lobbying our government for how the economy should be regulated and on and on, gives us some indication of why our nation has become systemically-incompetent.   The financialized economy is nothing more than a systemically-incompetent Ponzi scheme of gambling and betting on everything.

What makes Corzine’s actions so egregious is this incompetent dumbass (I use this word judiciously) watched Goldman Sachs and other firms come close to blowing up our entire monetary and banking system.  (They have already destroyed our economy.)  So, what does he do?  After watching bankers create the worst economic crisis in our country’s history, he goes out and duplicates their failed strategies.   I mean WTF?  Anyone who can balance their checkbook could have told Corzine he is being a dumbass.  But the ego is undeniable in its self-delusion.

As we have written incessantly, banks need to be broken up.  No man, or woman, can effectively manage anything as large as the systemic risks on Wall Street.  That is before one even factors in their massively leveraged bets. Derivatives, trading and other Ponzi schemes need to be banned from our banking system.  Even as a hedge.  Any bank insured by society should only be lending deposit money.  Period.    Banking should be a public facility in a democratic capitalist or merit-based economic system.  The primary intent of our banking system should be human development.  Not profit or predation or debt serfdom or gambling or political bribery.   And with that focus, all banking should, therefore, be local.

Instead, the government keeps adding more agencies and regulators to manage an undemocratic banking system build on systemic incompetence.   It’s like watching the movie Dumb and Dumber - bankers and politicians. 

Title link here.

posted by TimingLogic at 11:11 AM

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