At the risk of confirming my critics' dumbest charge ― that I am a "doomer" ― the mandate of clarity requires me to ask: to what state of affairs do we expect to recover? If the answer is a return to an economy based on building ever more suburban sprawl, on credit card over-spending, on routine securitized debt shenanigans in banking, and on consistently lying to ourselves about what reality demands of us, then we are a mortally deluded nation. We're done with that, we're beyond that now, we've crossed the frontier and left that all behind, and we'd better get our heads straight about it.
I maintain that there are countless constructive tasks waiting to occupy us on a long national "to do" list for rebuilding a national economy, but they are way different than the ones currently preoccupying government and the mainstream media. The Obama White House, Congress, and The New York Times are hung up on exercises in futility ― "rescuing" banks and insurance companies that cannot be rescued (because they are hopelessly trapped in "black hole" credit default swaps contracts), and re-starting a "consumer" binge that was completely crazy in the first place, based, as it was, on a something-for-nothing standard-of-living.
Meanwhile, if the buzz on the blogosphere is a measure of anything ― and I think it is ― then a new consensus is forming out there about where to start doing things differently. Unfortunately after less than two months in office, President Obama finds himself awkwardly behind-the-curve on this. It begins with the understanding that a general bank rescue is hopeless and, going a step further, that the people who caused the train wreck of "innovative" securities have to be prosecuted. The public's collective voice on this is muted but growing. It has been muted by the general air of blackmail that the banks have used to enthrall policy and opinion ― the "too big to fail" idea ― in effect holding the nation's future for ransom.
Last week, New York State Attorney General Andrew Cuomo hauled Bank of America chief Ken Lewis into his office to explain who, exactly, received an aggregate several billion dollars in bonuses late in 2008 after the US Treasury forked over billions of dollars in TARP money to his bank. That was a good start. Mr. Lewis, being lawyered-up to the max, had the temerity to reply that answering the question would compromise his ability to keep talented people in his employ. For that impertinence alone, Mr. Lewis ought to be dragged over fifteen miles of broken chardonnay bottles behind a GMC Yukon ― but that is not how we do things in American jurisprudence. To be more realistic, a simple indictment would be in order, and then Mr. Lewis can answer this question, and a few others, in the comfort of an air-conditioned courtroom. Ultimately, that might lead to Mr. Lewis becoming the wife of a bodybuilder in one of New York State's houses of correction ― a just outcom e that would go far in rejiggering the nation's expectations about how people in authority ought to behave. And such an outcome might lead to the conviction of many other brides-to-be from the Wall Street debutante pool.
Now it has come to light, just last week in the wake of AIG's latest bail-out, that previous AIG bail-out money to the tune of $50 billion was distributed to a set of banks including Goldman Sachs (former employer of then Treasury Secretary Hank Paulson and then New York Federal Reserve Governor Tim Geithner), plus Morgan Stanley, Merrill Lynch, Mr. Lewis's Bank of America, and a long list of European banks with operations in the USA. Since the transactions took place in New York State, the investigation of these irregularities alone could solve the unemployment problem here if NY Attorney General Cuomo were given a free hand in hiring staff to depose everyone involved ― including the hiring of caterers to bring in coffee and meals for round-the-clock proceedings.
All of this raises another awkward question: where is United States Attorney General Eric Holder in this situation? Surely the federal statutes offer some grounds for inquiring about the misuse of Treasury funds ― and many other issues arising from Wall Street's stupendous orgy of misbehavior. What I'm hearing out in the blogosphere is a growing clamor to call people to account before we are really able to move on to the massive task-list that awaits us in rebuilding our economy.
The bigger question for now is whether any of these authorities will act effectively before the public simply goes apeshit and starts burning down Greenwich, Connecticut. The dangerous shift in public mood is liable to occur with shocking swiftness, in the manner of "phase change," where one moment you see a bewildered bunch of flabby clown-citizens vacuously enraptured by "American Idol," and the next moment they are transformed into a vicious mob hoisting flaming brands to the window treatments of a hedge funder's McMansion. The moment of opportunity for avoiding that outcome is looking sickeningly slim right now.
Another thing that President Obama can set into motion anytime ― and pull himself back to the head of the curve of leadership ― is to either by executive order or by proposal to congress, shut down the credit default swap system for a period of time while procedures are drawn up to place all these dubious contracts in a "clearing" market, where the holders of them will have to come clean about what they're sitting on. The lack of this procedure is allowing zombie banks to hold the United States hostage for never-ending bailout ransoms. None of these banks are going to survive another six months anyway, so the basic blackmail motif that the whole money system will collapse if ransoms are not paid is a bluff that has to be called sooner or later in any case. So Mr. Obama might as well get on with it.
Once these two matters are dealt with ― an earnest start-up of prosecutions and disabling the credit default swap blackmail racket ― then perhaps a stressed-out and impoverished public might be induced to not go apeshit and instead get on with the mighty task of rebuilding our nation along lines that have a plausible future.
It's awfully quiet out there, Shooters.
In response to Bill Bonner's treatise on Baltimore and Detroit:
"But I guess corporate welfare is OK. Give the banker terrorists all the money they want. After all, they've treated the world to a wonderful crisis. They deserve whatever we can give them. Too bad you were born with the dreaded Conservative gene. But soon modern medicine will be able to block it. Then you may be free to evolve into the full potential that human beings are capable of."
Oh, right, because we've championed corporate welfare repeatedly…wait, no, actually we didn't. In fact, we say that all welfare is bad and we say it several times per week.
I find that people who believe in evolving into full human potential are usually vegan daydreamers…or Canadians…
"I'm a Canadian and reside in the interior of British Columbia (if you even know where that is). The more I read about the beleaguered American state, the more thankful I am to be a Canadian. Study our model, and flirting with socialism isn't the root of all evil as you yanks have been taught to believe. Our greatest fear is the lock step we've embraced with our biggest trading partner to the south, of a fear-based police state coupled with one of the soon to be worthless fiat currencies."
We here at Agora Financial know very well where British Columbia is. We ― and one thousand of our dearest readers ― fly up there every year for the Agora Financial Reserve held in Vancouver. In fact, it's the Symposium's 10th anniversary as well as the 10th anniversary of our flagship e-letter The Daily Reckoning. For details, just call Barb at (800) 926-6575…and tell her the guys at the Whiskey Bar sent you.
We all know the love of money is the root of all evil…and we also know that taking things by force will land you in hell…even if you rationalize your theft…and especially if your intentions are good. Good intentions make for really good asphalt.
The irony of good intentions is that they have the worst results. We refer you to the welfare war zones that used to be our nation's urban powerhouses.
The U.S. is indeed on its way to becoming a full-fledged police state with a worthless fiat currency…and it will be a socialist leader who takes us there. More on this to come (and I expect to hear your opinions on this, Shooters), but in the meantime you may want to take a few precautions by clicking here.
A Shooter chides, "Greg [sic], pretend to be paying attention to the articles and e-mail me once in awhile with a remark that sounds intelligent!!!"
It's…er…"Gary"…but thanks for writing anyway. I look forward to hearing from the rest of you, too.
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