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Guest Post: Fraud and Complicity Are Now the Lifeblood of the Status Quo (Banality of Financial Evil, Part 2)
Submitted by Charles Hugh Smith (part of the series can be found here)
Fraud and Complicity Are Now the Lifeblood of the Status Quo (Banality of Financial Evil, Part 2)
The status quo would collapse were systemic fraud and complicity banished. Rather than the acts of evil conspirators, they have become the foundation of the U.S. economy and financial system.
Though fraud and complicity are presented in the mainstream media as isolated conspiracies outside the status quo, the truth is that the status quo is now entirely dependent on fraud and complicity for its very survival. Every level of the status quo would immediately implode were fraud and complicity suddenly withdrawn from the system.
How is this true? let me count the ways.
1. The mortgage market. As I reported recently in this Daily Finance story, the private market for mortgage-backed securities is dead. Now that we all understand the entire mortgage is not just riddled with fraud and misrepresentation of risk, but it is entirely dependent on fraud and misrepresentation of risk to function, no one is willing to touch any of this debt--except if it is guaranteed by the Federal government (and thus by its taxpayers).
Now that the systemic fraud and misrepresentation of risk have been exposed, the $10 trillion mortgage market has ceased to function except as a dumping ground where private players can dump 100% of their losses on the taxpayers (profits were privatized, losses are socialized).
2. Foreclosures and our Banana Republic system of "law". There are two sets of laws (and two sets of books) in status quo America: one set of laws for "too big to fail" banks and Wall Street, and one for the rest of us peons.
Courts Helping Banks Screw Over Homeowners.
3. Housing and commercial real estate (CRE). Does anyone seriously think housing is recovering from organic demand? Does anyone seriously think housing wouldn't fall off a cliff if the Central State withdrew its collusive propping-up of the real estate market?
As I reported in These Numbers Paint a Bleak Picture for Housing, there is essentially no evidence that housing is recovering due to "organic" (that is, non-State-manipulated) supply and demand.
Rather, Home Prices Fall in Nearly Half of U.S. Metro Areas and the percentage of underwater homeowners rises.
4. Wall Street. Perhaps no finer example of a system totally dependent on fraud and misrepresentation of risk exists than Wall Street. To pluck but a few from dozens of recent examples:
J.P. Morgan, BofA Report Perfect Trading Quarters.
Proprietary Trading Goes Under Cover: Michael Lewis.
Want to get away with murder? Become a bank.
SIGTARP Report: Treasury Hid AIG Losses.
5. The stock market. As I outlined in Dependency, The Fed and the Market (November 8, 2010), the stock market would roll over and crater without constant intervention and manipulation by the Federal Reserve and other Power Elite/Central State agencies.
Astute reader Russ R. and Zero Hedge pointed me to this interview with Jeremy Grantham in which he rightly identifies the Fed's goal as controlling the economy rather than the money supply, and the Fed's only avenue for this manipulation is the "wealth effect" which it believes is triggered by a rising stock market.
But as I laid out in Are the Fed's Honchos Simpletons, Or Are They Just Taking Orders? (November 1, 2010), the "wealth effect" and its discredited cousin, the "trickle-down" theory, are both doomed to fail.
The stock market gained over 50% in 2009, adding trillions of dollars in "wealth effect," yet the median household income fell 0.7% to $49,777 in 2009. So much for the "wealth effect" from rising stocks having any positive effect on actual household incomes.
In essence, the Fed is counting on an illusion of temporary wealth to ignite a firestorm of new borrowing and spending. Unfortunately for the Fed, 90% of American households don't own enough financial assets to feel even the illusion of newfound wealth, and those that do have been burned twice this decade when all that "wealth" in stocks vanishes (NASDAQ down almost 80% in 2000-02, S&P 500 down 45% from October 2008 to March 2009).
6. Corporate accounting. With pro-forma earnings, off-balance sheet assets, derivatives booked as "mark to fantasy," much of Corporate America's accounting is dependent on fraud and misrepresentation of risk to plump up the all-important quarterly earnings.
I have written extensively on this recently:
U.S. Financial Markets: The Well Has Been Poisoned (Anger of the Honest Part II) (October 23, 2010)
The Loss of Trust and the Great Unraveling To Come (October 18, 2010)
The Normalization of Sociopathology in America (October 16, 2010)
The Rot Within: Our Culture of Financial Fraud and the Anger of the Honest (October 15, 2010)
7. Politics. I addressed this recently in two entries:
Concentrated Wealth and the Purchase of Political Power: Democracy's Death Spiral (October 29, 2010)
The Stealth Coup D'Etat: U.S.A. 2008-2010 (October 28, 2010)
8. The entire status quo, from worker bees to Power Elites and the Political Class.
The Banality of (Financial) Evil (November 9, 2010)
(The present) state is marked by the rise of the pygmy leader, the sovereign as dolt, the CEO as figurehead that knows little, who has no real need of knowing. It is in this gimlet-eyed tone that Hegel should be read when he says that "no reference to particularity of character" is necessary in the leader of an advanced state or in this case, large bank in an advanced money economy. Hegel continues:
"In a completed organization we have to do with nothing but the extreme of formal decision, and that for this office is needed only a man who says 'Yes,' and so puts the dot upon the 'i.' The pinnacle of state must be such that the private character of its occupant shall be of no significance."
What is known in the literature as "moral hazard" creates an ecology that results in moral lassitude rather than evil. Thus our bankers are no robber barons, no blood suckers, but rather "dot the i" dolts, and at their best, their very best, they are performers who pantomime what a leader should look like in order to "dot the i" or appear to.
I think that sums up the foreclosure crisis, the banks, the courts, the regulatory agencies, Wall Street, the Fed, the Treasury, and the rest of the Political Class.
When a system becomes dependent on fraud and misrepresentation of risk for "business as usual," then all that is required of the complicit is to "dot the i's" and fill out the report, court order, balance sheet, act of Congress, etc., just like everyone else does.
Thus does the banality of (financial) evil come to full flower.
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CHS - At long last it isn't just folks off S. Main sayin' it. Now that the obvious is all so obvious it's time to chart a course outta this hell hole
Are you driving, cause I call "shotgun".
Co-Pilots duties are to keep the tunes flowing, the charts handy and the commo up. I know you can handle it. The question is are you ready & willing to do relief driving when required? A h/t for yaz. Best
Slo is smooth, smooth is fast - A soldiers axiom
I know that we can't do worse than the current crop ... especially since these backwarded fools insist upon heading 272 magnetic
http://www.youtube.com/watch?v=i415QwSj0Og
That's hilarious. You are a true gem, Miles. I was kind of thinking this:
http://www.youtube.com/watch?v=xZ5fJaUXuJk&feature=fvsr
But I've had way too much coffee this morning, plus I'm heavy on the short side staring a POMO in the eye.
This is the real deal .. learned about these at the Ranger course.
http://www.youtube.com/watch?v=If-oQXk0oI4
Great balls on a pomo day!
"Spooky" for sure. I would have loved to been in the room when someone said, "Can we put a howitzer on it, too?" Pound for pound and round for round, those are tops.
ya 'lil Old Fashioned, you.
Let us not forget that these illusory earnings are, as Bill Black points out, fundamentally necessary to allow continued looting of the firms by the name of "bonuses."
Options and shares provide nice tax relief...ask any insider over the past month.
Bob, don't forget that "recovery" along with "financial stability" are now national security imperatives ... So the 10Q/K action should be considered suspect. Just sayin'. Plus this has the added benefit of covering these executives and boards with blanket immunity. As if prosecution was ever a concern for the acolytes of judicial exclusion
http://www.businessweek.com/bwdaily/dnflash/may2006/nf20060523_2210.htm?...
nice!!!
The internet has become a great forum to present articles, issues as has been done here. It has been a welcome place to exchange thoughts, ideas and concepts. Unfortunately, this alone will not be enough to change the problems of the world. We all know this. It's nothing new. Sometimes it seems as though the power elite have provided the internet as a way to monitor the pulse of the masses. It also acts as a pacifier to the masses. People that disagree with the establishment feel good by commenting on the net. I know that I do.
Think of the founding fathers that were under similar persecution from Brittain. They organized and fought without the net. How can that happen today ? Will it ever happen today ? The difference between then and now seems that during the Revolution, there was a common enemy. Today there are too many. The Banks, The Fed, The US Politicians, IMF, Word Banks etc. Where does it begin ? How does it begin ? Will it begin ?
It begins with the simplest of acts.
Withdraw your consent. Just say NO.
if every1 put 10% of their net wealth in gold/silver the system would collapse, it's that simple, even better if you went 'bartering' your gold/silver, Deny them their source of control over you
Well said, sir!
Oh hell ya. +!
http://diabeticallyspeaking.com/wp-content/uploads/2010/08/just_say_no.gif
CD - Exactly.
The powers-that-be have everyone brain-washed. It's really absurd when you think back just a decade or two.
Pay cash. Keep your money out of the bankster hands. Don't buy stuff just because some focus group/marketing guru has crafted some ad that makes you feel discredited if you don't have it or powerful and sexy if you do.
Don't turn it off - look at the machine for what it is. And, don't buy into it.
It's a bunch of junk we former citizens trade for our precious credit and attention. The Vampire Squid is a Vampire for a reason.
Without our blood, the machine dies.
i.
Yes!
And people need to say "no" to their children. Hell, they really need you to. Parents have become fear-riddled wimps.
Anatomy of a UCC City Penalty
The last week of September I received a contract in the mail from the local city government giving notice that a penalty will be assessed for not mowing the weeds in a small courtyard of my commercial property.
The city will assess $100 dollars per day for each day that the violation is outstanding beginning October 11, 2010.
I received a presentment on October 12 dated October 11 for a penalty of $100. I received a presentment on October 13 dated October 11 for a penalty of $100. I received a presentment on October 20 dated October 11 for a penalty of $100. I received a presentment on November 1 for a penalty of $100 for October 11. Four presentments for October 11 for $400 in total. And the same presentment changed the amount due each day to $200 per day starting on November 1, 2010.
The city has assessed my account for $2,600 of credit for the month of October through November 1. This is for a few weeds. The Statement of Account for November reads that I owe only $300.
The city contract makes it clear that a claim against my credit for $100 a day was assessed for the remaining 20 days of October. The total amount of credit claimed is $2,600 for the month of October through November 1, 2010.
The $2,600 is a nontaxable income to me for the month of October through November 1, 2010.
I have written an affidavit of Truth to the City. They are not permitted to make a legal determination regarding me. They are noticed to cease and desist their billing practices based on TILA Usury and General Claims Laws.
They are noticed that I will conditonally accept for value all of the nontaxable income for October through November 1 for $2,600 when they send each presentment for each day and each instrument for each day as makers of the presentment.
I have asked for their oath of office.
They are noticed to perform their duties and responsibilities. They are noticed that I will be sending them a Statement of Account at the end of each month for the total amounts of credit that they are using from my account until the presentments and transfer instruments are returned for value and discharged for full settlement and closure of the account.
I will be filing 1099B or 1099C forms, depending on whether they respond to my claims for the discharge of debt.
They are noticed that I will pursue an Administrative Remedy in relation to their response and dishonor of my letter.
I have no intention of cutting down the few weeds in the courtyard of the commercial property and intend to gather as much nontaxable income as possible until the end of 2010.
The full amount of assessment of claims against my credit will be $17,400 through December 31, 2010. This is called enrichment under TILA legislation.
I have noticed the city that I will send them a monthly statement for all the credit they are using from me, and I will file the 1099s accordingly. There is no controversy between us and I am ready to discharge the debt as soon as they will send me presentments and instruments to discharge the debt.
The California UCC Division 3 code makes it clear that the businesses and companies operating under the UCC may defraud men, women, and babies unless they are aware of the fraud and speak up.
So yes, I am speaking up and will send the details of this transaction to all interested parties.
Under the Common Law, no crime has been committed, since no victim can stand as a witness against me to say under oath that the few weeds in my courtyard have harmed them.
Do you need more information on the methods, means, and manner in which the fraud continues to the city level?
Not only to monitor the pulse of the masses, as you say, but to persecute, track, invisibly and unconstitutionally monitor, and prosecute them.
"How does it begin ?"
here's an idea: it begins by crafting an email this weekend to your family & friends letting them know that you will not be buying them anything from any 'traditional' outlet for Xmas and that you kindly but firmly request for them to do the same for you. nor will do be driving any farther than 50 miles to see them, nor do you want them to go fill up their tank to come visit you.
rather than being a grinch about it, begin to consider & suggest alternatives: making something for them, doing something for them, going to a local artisans market and buying something from them (beware though, there's an entire racket revolving around many "artisans' markets" so consider your purchase & where it's made carefully).
or you can always go the max keiser route and 'purchase' everyone some silver 'dollars' or better yet if you really want to make a statement and get people thinking, just give them cash, but in the form of 'lawful money' aka Sacagawea Golden Dollar Coins and begin their education as to what a FRN actually is.
http://www.smalldollars.com/
Unfortunately, I don't think incremental methods would work. They would just slowly transfer their losses to the taxpayer as they have already done and NOT so slowly, BTW.
No, the "reset button" as far as the consent withdrawal method would have to be as CD has previously stated: an instantaneous, _total_ withdrawal of consent by a certain percentage of people (he stated 20-30%, but didn't cite supporting data). That would reset the system because the losses simply could not be transferred to the taxpayers without the revolt spreading to near 100%.
I give away silvers as gifts. They need to feel real money in their hands.
positive news: peak of crime was reached, so only deleveraging is possible.
nobody expected that, even our spell checker doesn't know word 'deleveraging'
Neither does it recognize "rulership". Check it out.
H E L P
Nothing will come of any of this. At the end of the day the proletariat will be screwed to no end. Largely due to the fact that most of the population is massively ignorant and easy to rob. No point in fighting.
You don't believe me? Go sit in on jury duty and see how retarded americans really are.
USSA. Wish I couldn't see the truth.
Air ports are my indicator. When the public no longer allows itself to be fondled and humiliated at the airport then at last a love for truth will return. Until then , most live a lie.
Pessimistic "realists" are the most effective cheerleaders TPTB could ever wish for. They don't even have to be paid!
Fact is, there are always, in my experience, at least 1/3 of any group that are not "retarded." At least one of every dozen is undisguised (you perhaps) and another two that are quietly hip, with another who is straddling the fence, wishing that someone would push them in the right direction.
The "sheeple" meme is the single most corrosive element to the social consciousness. It feeds inaction and actively promotes the notion that nobody is aware but you and a precious few others like you . . . so why expect anything better, right? Better and "smarter" to argue against it.
If that's what it takes to be "right," I'd rather be wrong. But after 55 years of watching the world around me, I know I'm not wrong about my "1/3 Rule." The primary thing that keeps the truth from emerging is the pernicious influence of the pragmatic "realists."
I have to agree. 1/3 sounds about right from my experience, too. It's a percentage of that 50% on the right hand side of the IQ bell curve. Unfortunately, too many who aren't "retarded" still believe too much of the BS foisted upon them daily by the mainstream "news" and financial media. Another portion of them are in the "screw everyone else, I'll just get mine" camp.
What passes for IQ is highly over-rated. Surely real intelligence must be pegged to the ability and willingness to see things for what they are--being able to recognize a spade as a spade?
Sophistication has become a substitute for basic intelligence. The working class officially has, on average, lower IQ's, but don't short-change their understanding of the simple basics that we geniuses make so complicated.
IQ is definitely over-rated. Nice to have, but if the brain is full of crap ideas, you still get crap results.
LOL... I developed the 1/3 rule myself! Cool!
Depressions have a curative effect. In essence, they are a re-set wiping out the frauds and the bad investments. The Fed trying to intervene to try to stave off the Depression will only make it worse. Morality returns when people stop shuffling paper for a living and return to work that actually produces something of value. Perhaps we are witnessing the end stage of fraud and corruption. Unfortunately, we may need to go through a long period of hardship before getting to the promised land of a more moral society.
Right - it is the length of such periods that scares me.
I've been a follower of Charles Hugh Smith for a long time. Compare the journalistic value of his posts with those of our supposed MSM "news" magazines Time, Newsweek, etc. Charles built up his blog completely on his own. The only sponsors he has are people who donate to his website. Because of this, he has the freedom to write the truth as he sees it without any spin forced on him by any corporate entity. Thank God for the blogosphere, because while there is a lot of clutter on the Internet it is the only place to get real journalism these days.
More coals to Newcastle, same as the OldCastle.
Of course. Of course.Of course.
Off course.
Systems in terminal decline show signs of weakness, leakage, softness, brittleness, stiffness.
All the signs are there. Bigger question, in a fractal world, what does that say for us?
ORI
http://aadivaahan.wordpress.com
You need look no further than the GM IPO, how shares are not being allocated to the Schwabs and Etrades of the world, to confirm the thesis.
Kudos on the article. I am in the camp of those who believe [know] that the stock market simply CANNOT recover in any real way until the system is cleaned.
Perp walks...or buyers simply continue to scorn the criminal syndicate known as Wall Street.
Perhaps the retail investor is being protected from the IPO. GM is DOA.
GM IPO is being "pushed" by CNBC... Small retail investors are being told they are not able to participate...I will never buy a GM car or shares in "Government Motors". Good luck to all who swallow the CNBC "CoolAid"!
I wonder how many of you out there feel as I do that we are again being set up for a horrendous crash. Thankfully, I'm almost totally out except for some jr miners; my cash went to physical bullion. Even though the last few days have hammered the PM sector, I still feel that the "games" will eventually have to end, especially with the ETFs. Anyone else feel the same?
i've been short this market - and underwater - for months - I believe it has to fail at some point - all cash otherwise -
we appear to all intents and purposes to have reached peak oil....
did hubbard, by any chance, postulate on when we might expect peak fraud?
I really think you should have included these couple points:
Talk about "entitlements"....
It's pretty clear if we remember that the current efforts are a death bed push to pump up house prices. Of course Fannie and Freddie were not mentioned. They will be needed to provide the market.
There seems to be widespread support for the status quo amongst the American public. Even as the sheep shears cut deep into the hide. Is the American public a bunch of morons or what?
They are afraid to face the possibility of things never returning to the "good old days."
They think that if they don't say anything bad, and hope real hard, they can avoid the hard work of facing reality directly.
see no evil, hear no evil, speak no evil
Hmmm... you mean... just like... For-eva!!!
Behind every great fortune - is a great crime.
And the gangster have been running this since the beginning of recorded history!
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