Fantasyland II: Betrayal, C'est Rien (it is nothing)
or, RMS Titantic: Lifeboats shifted from steerage to 1st Class, stock market cheers(September 26, 2008)
In the Bailout-Fantasyland members of Congress are being pressured to enter, betrayal of trust, betrayal of integrity and betrayal of fiscal responsibility are, as the French would say, "c'est rien"--it is nothing.
In other words, all the conditions which created a debt bubble of some $51 Trillion--yes, that's the Fed's own total of consumer, commercial and corporate debt in the U.S.--that is, fraud, collusion, disinformation, leverage, trillions in derivatives, risky assets held off the balance sheets, and all the rest of the practices which constitute the largest fraudulent wealth transfer in human history--are all no big deal. That the financial sector betrayed its clients and the nation's citizenry--it's nothing. Let's repair those balance sheets like nothing ever happened.
Not so fast. Betrayal of trust is a most serious offense; once our trust has been violated, most of us can never ever trust that person/institution again; and the rehabilitation process, if rehabilitation is even possible, takes many years, or even decades.
Hey, forgive and forget. Let's move on, people, and start trusting the very banks and institutions which created, aided and abetted a debt and credit bubble of astounding, unprecedented size and reach.
Have you ever been betrayed? Were you ready to trust the person who betrayed you a week later? The world can no longer trust the U.S. financial sector, and with good reason--and neither can U.S. citizens.
Absolutely nothing in the bailout bill addresses the root causes of the "crisis." (Quotations denote just how contrived the whole "emergency" really is; they had a year to do something useful and all they did was throw tens of billions down various ratholes and then lie, lie and lie about how "sound" the U.S. financial system was.)
The SEC, FDIC, the Fed and the Treasury--all agencies sworn to protect the citizenry-- all failed miserably in their sworn duty: bank reserve requirements were lowered to near zero (1%), leverage limits were relaxed (30-to-1, no problem! Go for it!), Fannie and Freddie were given free passes to 150-to-1 leverage, the Fed kept interest rates so low that when inflation was figured in, rates were actually negative, zero oversight of the ratings agencies--we got your AAA rating right here--the list goes on and on.
Common sense and prudence were discarded; now a price will be exacted, and we the people are supposed to pay it rather than the crooks, embezzlers, colluders, fraudsters and Wall Street gurus who perpetrated the betrayal. Yes, those who borrowed more than they could afford deserve what they get, too--but they're getting it. They're losing their houses, their credit is being impaired, etc. They are paying the price for their folly (or in many cases, fraud via liar-loans).
Unfortunately, the same cannot be said of Paulson and his pals. (Paulson reportedly has $700 million in Goldman Sachs stock--shouldn't he be banned from office for simple conflict of interest?)
Note to Congress: you are feeling the outrage of a nation betrayed by its government and by its financial system. Do not assume the betrayed are ready to trust the betrayers just yet--or ever.
So how do we strike back at the betrayers? Pay off your credit cards and then cut them in half. Save up and buy your next auto with cash. If you have a credit card with zero balance, pay it off every month--leave them no way to make money except the transaction fee. And you can take that away by paying cash.
If possible, pay off your mortgage early; or just rent and opt out of the "ownership society i.e. debt serf" scam. Move your funds to an online account like Ameritrade; leave nothing in former investment banks' accounts for them to manage and leverage.
Oh, and you can walk away from debt serfdom. Since nobody's proposing a $700 billion bailout for you, then why remain a debt-serf? Correspondent/author Ken Kappel just published a guide, Choose Foreclosure: The Case For Walking Away. Ken says:
The book is easy reading and gives a comprehensive overview of the financial situation today, particularly why we are in such acute financial straits. Whether you’re a homeowner right now or not, you’d be very well served to read the 19 page Free Book Excerpt in the upper right corner.Funny, isn't it, how the "sanctity of debt" is on every banker's lips when the borrower defaults, but when the banker is about to lose his/her bonus, stock options and investments in debt, then the first words out of his/her mouth is "give us a taxpayer bailout, or we'll kill the U.S. economy!"
This is the very acme of hubris, hypocrisy and chutzpah.
If Congress foolishly passes this travesty of a mockery of a sham of a bailout, we must hold them accountable for the unintended consequences, i.e. the final destruction of global trust in the U.S. and the takedown of the U.S. economy.
Our president and Fed Chairman Bernanke are fomenting fear by stating that if we don't bail out the corrupt banking sector, then we'll suffer a recession.
Note to Bush and Bernanke: we are already in a recession which is gathering downward momentum, and you are the only two liars left claiming otherwise. (OK, three liars--there's Paulson.)
We are threatened and cajoled with the specter of recession--as if that's not already baked into reality by a massive housing and credit bubble, higher energy prices, etc. It's already here, Mr. President, so your threats sound astonishingly moronic.
On to analogy 2: the Titanic. The "crew" of the RMS Titanic, i.e. the U.S. government, is truly shameless. They have stripped steerage/3rd class of all lifeboats and shifted them all to 1st Class, drawing huge cheers from the stock market for this betrayal.
We are told in endless propaganda loops that this is all about "restoring trust." If your business partner just ripped you off, and did so on the sly, continuously and without remorse, are you going to focus on his pleas to "restore confidence and trust"? How about focusing first on the betrayal of trust?
Here are a few reader comments on the same topic: of trust violated and then "hurry up, pass the bailout before the world implodes!"
Did you watch Bush's speech last night? This is one where watching is just as important as reading the transcript. The scared-looking group of democrats earlier this week (especially Pelosi on the viewer's right) is another good example. This entire "emergency" has been avoidable from the start. There could have been a gradual tighterning of the credit spigot, but there wasn't. "Why?" becomes the big question.Meanwhile, in the real world inhabited by real Americans, here is one reader's account:
After last night's pitiful address to the nation, I came into work this morning feeling like a hopeless american. I am one of the millions struggling with an out of control mortgage and could have used a break long ago. I have taken a substantial loss in my income, while trying to gain control of my ever rising mortgage. I cannot afford my mortgage now, and will soon begin the process of removing my three boys from their childhood home as well as their schools.
My own proposal for a bank bailout is based on "do unto others as you would have them do to you": let's give each bank or institution $21, and require them to fill out all kinds of forms and disclosures to get the $21. Oh, and let's also require that they return every cent of profit they "earned" in the past seven years as a condition of qualifying for their bailout.
If they no longer have the money, that's OK--you can owe it to us taxpayers, with interest. Say, prime plus five?
More reader comments:
What we are seeing plays out in the markets all the time. Analysts and economists are wrong and yet people still listen to them. All the people who have been proven wrong 100% of the time now insist that they are right about what we must do and how fast we should do it. This is absurd.
Shah of Plano gave me a good laugh with this one:
Bush says if we don't sign onto his BAILOUT it's a SLAM DUNK that WE are going to all SUFFER (sounds familiar)
And the Shah's latest:
The Gangsters of Wall St & D.C. tried to make it look like a DONE DEAL but it was NO DEAL.Unix Ronin
So, the "grand plan" these geniuses have come up with seems to be, in broad strokes, $700bn to buy up all these mortgage backed securities, and, through some magic of the market, expect that they'll get some kind of return on the investment, so that it ultimately doesn't cost us $700bn; perhaps only $200-300bn.Albert R.
Years ago, here in Argentina, there were two remarks credited to wealthy people who did not have the palest idea of what would happen should communism ever take over it our country. The first was "if communism comes I will go and live in the ranch" . Wealthy people in Argentina normally owned large ranches...the other was "if communism comes I will be all right, adding to what I own now what I will get in the sharing". I have not hear either of these in many years now, but they were brought to mind when I think of so many people in the United States right now who seem to have no idea of what is going on. A lot of thing which many people take for granted will just disappear completely. If there is a collapse there will be no retirement funds, no government health benefits,etc. And I see people concerned about student loans! There will be no student loans! And that is just one thing there will no more of...
CHS--my latest letter to my senators:
A few books of related interest:
The Black Swan: The Impact of the Highly Improbable
by Nassim Nicholas Taleb
Manias, Panics, and Crashes: A History of Financial Crises
by Charles Kindleberger
According to several sources the market for so-called “credit default swaps” last year alone was nearly equal to the total global GDP, around 70 trillion dollars by some estimates. Yet these derivatives have no discernible “origin” or value.
The MacRib is Back!
(Chris Sullins, Septmber 23, 2008)
I want to assure you this is not a viral ad campaign. There is going to be a point to the title because it contains a small story within a much larger one. Also, the title contains a unique spelling for a reason.
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