Thursday 25 August 2011

Bail Out, the biggest Heist in History (2008)

I tend not to buy into great conspiracies masterminded by James Bond story style ueber villains. Reality produces a lot more mistakes and forgetfulness. Winston Churchill lost his fortune in the 1929 crash, no insider warnings there. Churchill learned another relevant lesson when he was a driving force of the Royal Navy’s conversion from coal to oil before WW1; Oil availability is of strategic significance for navies and for global trade. The underlying oil reserve depletion that became visible with the unprecedented and unexplained oil price run of 2008 caught the globalization dreamers off guard in their financial ivory towers. Prior to the Wall Street crash the speculators lost control, they couldn’t contain themselves any longer with the swelling load of garbled electronic listings and bad debt and consequently they never made it to the post election bathroom. Had the profiteers been able to hold things together just a few short weeks longer they could have received an even more generous pampering especially from neocon governments. The Canadian banks are doing their best right now in damage control to protect Harper’s reputation while quietly stopping and slowing bank to bank lending, which is very bad for business. With sure to come follow up bail outs, the Wall Street crash followed by worldwide bail out action may be worth trillions of dollars.
No help for people who loose their roof, so therefore nice houses are appearing on the market for five thousand dollars as is the case in the Detroit area. Often those houses are stripped of copper wire, plumbing, roofing and fall beyond repair and don’t even make five grant for the property and all. I don’t know how much economic sense that can make, rent or emergency shelter for one family over a year costs more than five thousand dollars. People already have paid dearly with a quarter century of income losses and loss of democratic freedoms. History shows that loans that were installed based on deceptive presentations, partly in violation of consumer protection laws, eventually will be forgiven. The Financial Times in London made it clear last week that the US will have to let the debts go to bring back trust into North American markets.
The question is, how much destruction will happen on that road? Of course it makes no sense to devastate people’s lives for a few hundred bucks. Its the action of drunken criminals who kill for pocket change. This whole political context of bringing back the old European system of a radical class society is madness.
But the sub prime mortgages in the states appear to be only a part of the problem.
At the core is the failure of a politicized financial system which was predicted by the acclaimed author John Ralston Saul in his 1992 international bestseller “Voltaire’s Bastards“.
In the chapter “The Hijacking of Capitalism” he writes on page 362:
“The purpose of a stock market is to provide a regulated forum in which current owners of the means of production may either sell to new owners by putting their own shares on the market or expand their means of production by raising additional financing through the issue of new shares. A rise in the market should be a sign of the rising value of the means of production, thanks to increased sales and new investment. Neither of these things happened between 1982 and 1987 (referring to the 1987 stock market crash).
And yet enormous sums of money were poured into the market (as happens now).
Where did the money go? It seemed to disappear in some sort of paper-printing maze in which speculators and managers chased each other around in a directionless circle with nothing in mind except control of the management levers ... “
Lets be clear, in a market economy watch dog of the management are the business owners and the regulators, not management themselves. In a lawful society a CEO is an employee, not a prince.
It also means what we are observing is not capitalism, it is the revival of financial fraud and pyramid schemes similar to the Great “South Sea Bubbles” of 18th century feudalism.
For a quarter century now much of the rewards of our economy were not going any longer to the generators of wealth, the workers and the owners of production means, the business people, the capitalists, the shareholders. It is taken away by fake capitalists who talk up the “competitive markets”. These CEOs and their overpaid boards usually have never taken so much entrepreneurial risk as running a falafel stand. They are usually business school graduates who despise knowledge from industry specific sources and from the economics departments of the universities. As corporatist anorexics they tend to fire the most qualified people first because abstract management training told them to fear critical thoughts, they sell the production tools and are foolishly proud to boost the quarterly financial statements in this way. Personal income, money that is not part of productivity, in those postmodern executive dimensions is meaningless in economic terms. How many golden toilette bowls and yachts with chopper fleets parked on them can one really enjoy? Where it makes sense is as a representation and as a tool of anti democratic political power.
As far as simplifications go, they proved to be more true than I wanted. During the more isolated economic troubles of the recent past as well as this time around many CEOs still extract one million $ per day while the stockholders and workers are loosing their shirt. And again these executives will have control of huge bail out funds. The crash is no meteor strike, chronic criminal practices, like “Enron Accounting”, like Conrad Black style media empires implementing censorship, were coming to a head. The Wall Street bail out is predominantly a package to finance organized crime. The care and time was not taken to provide safeguards, to protect citizens and investors. As far as I can see all the participants in the “Progressive Democratic Caucus” who don’t see themselves as quasi Republicans as well as in another group, the “Conservative Caucus”, (congress women and men of the Republican Party who don’t see themselves as neocons) voted against the deal both times. They seemed to be the best informed ones because they have talked to economists like Michael Hudson, former advisor of Cleveland congressman Dennis Kucinich. Among the ones who warn are James Galbraith, son of the late Canadian economics giant Kenneth Galbraith and Nouriel Roubini who timed the coming crash precisely two years ago. The US government won’t have any of this, it is already hiring half a dozen so called management asset firms who at least mismanaged investor’s funds prior to the crash. Their job is to create a firewall against any form of accountability or scrutiny of what goes on as the bail out money starts flowing. Bush’s economic disaster plans cut deep into the experience of Americans. For what else might he be remembered? According to New Yorker magazine writer and investigative journalist Seymour Hersh George W. Bush already has the authority from congress and very well might attack Iran to improve his legacy between the US election and leaving office in January.
The concern is that especially the US bail out will deepen a long term recession, because the money that is now lining pockets is lost as incentive for the economy. The Wall Street business plans are beating a dead horse with the idea of wealth creation from compound interest of long dead loans that are build into the bail out. Overseas banks do not believe it, capital has started to flee North America, hyper inflation may set in. Its big lies and fear mongering all over again to confuse people just as their pockets are being lifted. There are no grounds for panic and speed, lack of thought will do us in. It was the same with the Iraq war, another trillion $ deal. Market bail out without intentions to gradually correct the trade deficit, without reducing defence spending, more fiction. Economic optimism because of stock market hysteria following the bail outs, fiction. The job losses, and capital losses are real. US government and pro bail out congress members had the worst of the profiteers, the defence contractors for example, by the scruff of the neck like never before and they did nothing.
The fantasy character of the hand out already has triggered a wave of financial trust loss around the globe as well as hastened bail outs overseas. Carefully observing a variety of analysis it is clear that the guarantees for bank deposits by governments and snap nationalization actions of banks were more so a reaction to the bail out than to the crash. The disappearing of capital in the Bermuda Triangle of the bail out is very bad news for the building of green infrastructures. But also for Asian economies like Japan and China whose leaders know that speculation bubbles cannot replace essential productivity. China never wanted 10% growth rates and one way globalization with a huge US trade deficit; it was forced on the Asian Tigers by Western “free trade” ideologues. The Asian countries don’t want so called free trade and they don’t allow it.
The bail out has been dismissed by governments and economists worldwide because it strengthens the reasons further that created the crash and seemingly forced other countries to jump in with their own measures. Michael Hudson, James Galbraith and other scholars recognize that Keynesian capitalism with meaningful regulations and incentives was able to not only win WW2 but also heal its economic wounds. It never went out of fashion with serious scholars of the economy. In contrast, one way or the other fans of Milton Friedman’s model for disaster capitalism like the former US Republican Tom Flanagan and his personal disciple Stephen Harper will have to face the hard won knowledge.
The investment direction in such an anti capitalist trend is also interesting, it went to debt creating deadbeats. Arms manufacturing is big, so is the agribusiness. A good  example of a false economy that destroys more than it produces is the leader in genetically engineered food crops, Monsanto, who absorbed a lot of phony investment with fraudulent interest expectations based on fictitious claims regarding the characteristics of GM foods. No better is Monsanto’s activity as the lead lobbyist in advocating to impose colonization or globalization rules on the poor countries trying to force them to cheaply export the grains they need to feed hungry bellies. Monsanto advocated for and achieved the implementation of two sets of rules in the WTO. If an African country helps their farmers it is an illegitimate subsidy that is met by severe sanctions, if the US or the EU do the very same its a laudable incentive. That was the reason that a part of the developing world walked out on the 2008 trade talks in Doha and Geneva, for the first time ever. Large regions of rural India are successfully boycotting Monsanto’s claims to own patent rights on all their seeds. Ethical and Green funds are generally doing well because they exclude these robber barons from their portfolios.
The Wall Street crash could become especially expensive to Yukoners. Government leader Dennis Fentie is the butt of jokes in the Yukon now, his gullibility compares to someone who sent 30 million $ to a Nigerian pyramid schemer. No wonder he advised Yukoners to vote for Harper. It was kind of his Coming Out as a “bushed” neocon, in stark contrast to the Premier of Newfoundland and Labrador, Danny Williams, who actually has conservative values. Before the electronic speculation once again will destroy people’s savings and revs up towards another seizure lets remember the Toban Tax proposal which would have introduced some sanity to the inflated speculation game. The Iraq and Afghanistan war profiteers occur expenses and have to work hard in the delivery of death. This trillion $ hand out will be different, its pure cash to the top.
Even a slim one trillion dollar “Give Away” (Dr. Michael Hudson) globally, which equals one million dollars one million times (12 zeros, I approximated that its enough to pave tightly with loonies in a sort of shingled way like fish large fish scales a 60 feet wide highway right around the planet), will easily go down as the biggest heist in history.

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