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The OTHER Reason that the U.S. is Not Regulating Wall Street
Sure, American politicians have been bought and paid for by the Wall Street giants. See this, this and this.
And everyone knows that the White House and Congress - while talking about
cracking down on Wall Street with strict regulation - have actually
watered down some of the most important protections that were in place.
For example, Senator Cantwell says that the new derivatives legislation is weaker than the old regulation. And leading credit default swap expert Satyajit Das says that the new credit default swap regulations not only won't help stabilize the economy, they might actually help to destabilize it.
But the U.S. is not being sold out in a vacuum.
On March 1, 1999, countries accounting for more than 90 per cent of the global financial services market signed onto the World Trade Organization's Financial Services Agreement (FSA). By signing the FSA, they committed to deregulate their financial markets.
For example, by signing the FSA, the U.S. agreed not to break up too big to fails. The U.S. also promised to repeal Glass-Steagall, and did so 8 months after signing the FSA.
Indeed, in signing the FSA and other WTO agreements, the U.S. has legally bound itself as follows:
•
No new regulation: The United States agreed to a “standstill provision”
that requires that we not create new regulations (or reverse
liberalization) for the list of financial services bound to comply with
WTO rules. Given that the United States has made broad WTO financial
services commitments – and thus is forbidden by this provision from
imposing new regulations in these many areas – this provision seriously
limits the policy [options] available to address the current crisis.•
Removal of regulation: The United States even agreed to try to even
eliminate domestic financial service regulatory policies that meet GATS
[i.e. General Agreement on Trade in Services] rules, but that may still
“adversely affect the ability of financial service suppliers of any
other (WTO) Member to operate, compete, or enter” the market.•
No bans on new financial service “products”: The United States is also
bound to ensure that foreign financial service suppliers are permitted
“to offer in its territory any new financial service,” a direct
conflict with the various proposals to limit various risky investment instruments, such as certain types of derivatives.•
Certain forms of regulation banned outright: The United States agreed
that it would not set limits on the size, corporate form or other
characteristics of foreign firms in the broad array of financial
services it signed up to WTO strictures ...• Treating foreign and domestic firms alike is not sufficient: The GATS market-access limits
on U.S. domestic regulation apply in absolute terms; that is to say,
even if a policy applies to domestic and foreign firms alike, if it
goes beyond what WTO rules permit, it is forbidden. And, forms of
regulation not outright banned by the market-access requirements must
not inadvertently “modify the conditions of competition in favor of
services or service suppliers” of the United States, even if they apply
identically to foreign and domestic firms.
In other words, the problem isn't just that Congress and the White House have sold out to the Wall Street giants.
The
problem is also that the U.S. has signed WTO agreements that have given
the keys to the too big to fails, and have neutered their regulators.
Even if some politicians tried to stand up to Wall Street - or even if
we "throw out all of the bums" currently in political roles - the
U.S. would still be locked into the WTO's scheme for helping the
financial giants to grow ever bigger and to take ever-bigger and
ever-riskier gambles.
Indeed, the financial giants are pushing hard for further deregulation, demanding that the WTO's "Doha round" of agreements be signed.
On
the other hand, if the American people stood up for our sovereignty and
demanded that the financial giants be reined in, it would be easy to
fix the WTO agreements which the U.S. has already signed. Public
Citizen notes, "as a legal matter, these problems are easy to remedy ..."
Will the American people stand up and demand that the WTO deregulatory scheme be rolled back?
Or will we continue to let the financial giants destroy our country through buying and selling politicians (with the help of the Supreme Court) and forcing us into more and more draconian WTO treaties which destroy our sovereignty altogether?
Many
people assume that they just have to hang in there until things
improve. But the powers-that-be are grabbing more and more power and -
unless we stand up to them - they will take it all.
As
highly-regarded economist (Michael Hudson, Distinguished Research
Professor at the University of Missouri, Kansas City, who has advised
the U.S., Canadian, Mexican and Latvian governments as well as the
United Nations Institute for Training and Research, and who is a former
Wall Street economist at Chase Manhattan Bank who helped establish the
world’s first sovereign debt fund) said:
"You
have to realize that what they’re trying to do is to roll back the
Enlightenment, roll back the moral philosophy and social values of
classical political economy and its culmination in Progressive Era
legislation, as well as the New Deal institutions. They’re not trying
to make the economy more equal, and they’re not trying to share power.
Their greed is (as Aristotle noted) infinite. So what you find to be a
violation of traditional values is a re-assertion of pre-industrial,
feudal values. The economy is being set back on the road to debt
peonage. The Road to Serfdom is not government sponsorship of economic
progress and rising living standards, it’s the dismantling of
government, the dissolution of regulatory agencies, to create a new
feudal-type elite."
And Foreign Policy magazine ran an article entitled "The Next Big Thing: Neomedievalism",
arguing that the power of nations is declining, and being replaced by
corporations, wealthy individuals, the sovereign wealth funds of
monarchs, and city-regions.
We either stand up, or we slip back into a darker age.
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It should be noted that there is one thing corporations cannot yet do, at least overtly. Perhaps we're witnessing the de-linking between military and industrial. It should be noted that certain rogue nations are providing the means to this end as just today Iran again pressed its case to become a nuclear power. This could be the line in the sand that breaks all the current deals, back deals and whisper deals
That neomedievalism reads like a bad thing for the US.
In Europe, people can still claim that the current experiment was a 300 years long mistake and return to the roots but the US?
The US was founded against the principles of the middle ages. No escape for the US save becoming the most duplicious nation in human history.
Will be definitively bad if the environment determines the culture to adopt. A disaster for the US.
I wish they had put in a provision to keep governments from micro-managing interest rates.
The policy of G.W. Bush was to break any treaty that had become inconvenient. Having a treaty is a good excuse for inaction by US Govt. How often have Paulson/Bernanke's explanation for Lehman been "no authority". Lame excuse.
Greed is only the proximate reason for not regulating business.
The monetary system is the reason why under given circumstances, government must not only tolerate but also collude in criminal practices.
Once government makes the deliberate choice to adopt a fiat monetary system, wittingly or not government makes the inherent choice to push inflation faster than GDP growth.
Inflation is a dynamic that has a logic. Inflation must necessarily be exponential thus it must conform to the law of diminishing returns. This simple fact is illustrated most vividly by the money multiplier which shows that inflation has its greatest effect on GDP progression at the beginning of the cycle and gradually tapers off over the decades.
As inflation progressively has less effect on GDP expansion, then the monetary authorities must necessarily attempt to maintain the effects of inflation by stimulating credit and money supply growth. At some point, credit expansion can only be achieved by manipulating economic data and by willingly disregarding the letter of the law (mark to market, capital ratios, off balance sheet vehicles...).
More on my blog here for example:
http://guidoromero.wordpress.com/aims-and-rationale-of-this-blog/
Wall Street regulates Wall Street....even though there might be a several month slant on law....at the end of the day....money talks bullshit walks....
One does not have to just follow the money for the moment....one can see the long term goal of the oil comapnies and Iraq...as a timely example....Look how many years before oil contracts are happening regarding Iraqi ground....This is a 2o year plus prospect....Just because the length of time is long....does not mean that the objective has changed....
The saying is true....the one who has the mony has the power...
Just look at the FASCISM currently present in the USA....
Anyone who denies this is a fool....
Did Greenspan just say stocks are the most important asset for the economy???
the WTO agreements are just gentlemen's agreements put together by economists -- nothing domestically legally binding. The language is purposely vague so as to support a general direction in trade policy.
more ignorant fear-mongering by ZeroHedge posters...
The incredible militarized over-reaction that is always brought to bear on anti-WTO protesters shows how ungentlemanly this organization is, and how deep it goes.
oh puhlez! Why would anyone NEED a "general direction on trade policy"? Why are all the "top negotiators" in GATT/WTO lobbyists for mega-corps like Microsoft, Disney, Monsantto? The idiocy of american copyright right protection would never have been foisted upon the rest of the world if it were merely a "general direction" - how does it enhance trade to have Disney granted 1000 years of milking old racist mouse, or Monsantto allowed to pollute the world with genetic engineered garbage - always touted as a the next fix to world hunger, and hey guess what, the world is no less hungy?
More spurious propaganda by interloping DC lobbyists!
The BEAST (financial industry)has grown exponentially by feasting on public savings and it will die as public turns famish. Money does not grow on trees ( IPO s ?) in wall street jungle.
The solution is simple. Let the free markets run. No regulation. No bailout. No FDIC. No FED.
Read this free report to understand adverse effects of FDIC:
http://www.tradingstocks.net/html/2010_stock_market_forecast.html
FDIC gives a false sense of security. Depositors do not question bank actions and banks get a green light to pursue excessive risk. FDIC is broke. It cannot possibly insure all bank deposits.
Why no FED? FED interferes with free markets. For decades FED made credit easy and people borrowed. The current deflationary crash is the result of excessive credit inflation FED has fostered. Here is the debt problem:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
I agree that govt intereference is a problem, but if we have no rules, then we have finanicial, economic anarchy. Its like saying, hey, the king was tyrannical, so instead of replacing him with a democratic state, let's have no govt at all. Seems likely some muscle men of some type will always take over in the absence of controls. Even if we had not interfered with AIG, the derivative markets, completed unregulated, would have been, are, a huge problem...derviatives alone will/would have crashed the financial system, due to fraud, lack of transparency, over-leverage, no govt needed. Only solution I think is democratic controls, checks and balances, but no regulation of markets is just anarchy.
I agree there need to be rules, but the presence of regulation makes the markets seem safer than they are, and the presence of bailout / guarantees introduces moral hazard. The absence of regulation forces each individual to to evaluate risk on their own. It's the difference between blindly trusting the markets and making an informed choice (GLD vs CEF/GTU). If the individual cannot adequately evaluate risk, then the individual will choose to withhold capital until the markets come up with a solution to the individual's dilemma. The role of the government is to enforce contracts: "Your prospectus says you hold unemcumbered gold bullion in vaults, but an independent audit revealed that your bullion has been lent into the market. You are under arrest."
In the old days, bankers that over leveraged and went bust were dragged into the street and hung from lampposts; now, having stolen money from depositors, they steal more money from taxpayers instead. Makes one pine for the old days.
The markets came up with a solution to the dilemma faced by the individual you describe. In true Lenninist fashion, they fucked everyone so hard that they created a consensus in favor of regulation by Leviathan. Then they spent 50 years rolling it back so they could start over again.
Easy fix.
Kill 'em all and let (their) god sort 'em out. Done.
work for the government. get a license to kill.
It is really sad that you all are just figuring this out now.
Hudson has been saying this for over a decade.
Sad.
Well, better late than never. I just hope it's not TOO late.
Not just figuring it out, just venting.
This is so frustrating. Forget philosophy, this is simple, we allow banks to create money and loan it to us at interest. The inevitability of lurching headlong from bankruptcy to bankruptcy is certain. What other possible outcome could there be?
It defies imagination that we continue accept this situation.
Rick64, no doubt about the lobbyists. However, the depression of the 30's probably wouldn't have been as deep or as long if Hoover's team and then Roosevelt's team hadn't tried to "fix" it. It's easy to be an armchair quarterback and any of us can say what we would or wouldn't have done but the issue going forward is a political issue. We either deal with the issue or we keep postponing the problem. Most want to postpone, make the car payment, the mortgage and the country club dues and life goes on.
I can't blame the banks, they are acting rationally given the deck they have to play with. If failure isn't a consequence, why not go all in? But then the next question has to be, how long does the cartel go on? The banks get bailed out cause the Fed wants to keep the system intact. When you run the monopoly you want to keep it going. So, politically, until the pain is too great, we march on...
Unfortunately true.
One of the root problems of the system is the lobbyists ability to accomplish what ever they want and to corrupt the system. This is not restricted to the financial institutions but extends to all sectors. These Companies and Institutions are protecting their foreign investments as well as their domestic investments. There are enough regulatory agencies, but they do not enforce the regulations. The FDA approving drugs for the drug companies only to have some of those drugs recalled later and having no responsibility for approving them in the first place. The SEC ignoring problems until they blow up. The SEC was handed a written report(Markopolos) that showed the Madoff ponzi scheme twice the second one even more indepth. No accountability is another problem. The examples are too numerous.
The derivitives market valued at a ridiculous 600 trillion is so complicated now that it would take yrs. to unravel in an orderly fashion. They (congress,banks,treasury) rallied against any regulation in the 90's and until today. I believe it would have caused a huge panic in the markets to let these institutions fail and would have caused a depression rivaling the 1930's and people would have complained and protested even more than they are now, but they are compounding the problem instead of fixing it. First step is getting rid of the lobbyists and make accountability an issue. They are blocking anything substantial from passing. I'm not under any impression that they will not try to replace the lobbyists with some other form of coercion but its a start. This is a constant battle that has been going on since the birth of the U.S.A. . Our politicians have been dirty for a long time.
Maybe its just me but I'm getting a little tired of the "we need more regulation" talk. The problem isn't that we don't have G/S anymore it is that we won't let them fail. When you keep pumping the currency there has to be a correction at some point. The longer it goes the worse it gets. We are so afraid of the correction we are willing to just keep on keepin' on.
Hudson sounds like one of those guys who wants to tell everyone else what to do 'cause he is the "expert". Go jump! There are a lot of economists who believe the Gov't should regulate this or that and things would normalize. How about not blaming the market anymore, instead, novel idea, let it do its work. Sometimes the function of the market is to cleanse the cankers (rhymes with bankers).
The Enlightenment era was one where debtor's prison was an accepted institution in the developed world: not until the twentieth century did it finally become a relic of the past. Slavery was abolished much earlier in the British empire, and modern bankruptcy law rose on the coattails of the anti-slavery campaign. [So, interestingly, did the battle against prostitution: its code name was "white slavery."] Had Distinguished Professor Hudson boned up on the time he wrapped himself in, he would have seen that Enlightenment thinkers were, almost to a man, skeptical of universal-suffrage democracy. The eighteenth century was one where educated people knew what "ochlocracy" meant. They would also be quick to identify many of today's self-styled heirs of the Enlightenment as ochlocrats at heart.
If I wanted to be cheeky, I would say that Enlightenment thinkers foresaw the mess we're in with almost embarrassing perspicacity. The consensus in the European breed was that enlightened monarchy was the best system under which liberty thrived.
When will people realize that regulation is just a political band-aid for a problem that was created by prior meddling? Does anybody understand how ridiculous it is to harp about evil bankers and their supposed power when the market would have laid them low years ago and, very recently, nearly did?
"Hey Lloyd," sayeth Bernanke, "put it all on black, if you lose we'll print up a few Bil and eat the loss for you."
"Thanks dawg!"
Fiat dollars and moral hazard. Get it through your heads people, those are the problems. None of the past several decades' chicanery is even possible without government intervention. It is sheer idiocy to increase the complexity and scope of regulations when these problems have their roots in the very institution that propounds to "fix" them.
The bankers know it's a sweet deal because they get rich off it, the plebs who advocate these measures are being lured to a panel van and molested.
while I agree with much of what you say, that is some ways state mechanims to protect markets/people, once co-opted can be worse than what businesses alone may have accomplished, I do think there is major problem in saying regulations are the problem. I see no way free, transparent, competitive markets do not devolve into cartels, monopolies, fraud machines if there is no regulations.
But if you do have regulators and regulations, they can be captured and warp to serve the purpose of advantages of one business over another or over labor or consumer.
I think of it like the local cops that get corrupted by drug dealer. Corrupt cops take out drug dealer's competition while they look like they are enforcing drug laws. They guy with cops in his pocket may even ask for more draconian laws against drugs knowing they won't be enforced on him. In this way govt, local police are making problem worse...but I say the solution is not to say no policing, but rather clean up the cops and consider what is truly in the interest of the people to police. If there are no cops, we eventually end up with Mexico drug towns, as at first they corrupted cops, now the cops don't even exist to them they have their own armed men. Should Mexico just leave the drug dealers be?
Speaking of subversion...is the Super Bore on yet?
Y'know folks...this is gonna take decades to unfold, but the realities---the mathematical realities---are ever so clear. Real financial regulation = economic contraction. We have grown our economy for decades based upon fraudulent accounting, the abuse of fiat money, the development of 'exotic' financial instruments that amount to nothing more than new and creative pyramid schemes. Rein in these abuses, and the result is contraction. But the government (U.S.) cannot allow contraction to occur, lest economic depression deepens and national security risks become impossible to navigate. And so the *only* solution is more and better Ponzi schemes, more subversion of the already shrinking middle class, and all-out rejection of the Enlightenment ideals of fairness and communitarianism that formed the foundation for the creation of the USA.
Bye bye baby...
Y'know folks...this is gonna take decades to unfold, but the realities---the mathematical realities---are ever so clear. Real financial regulation = economic contraction. We have grown our economy for decades based upon fraudulent accounting, the abuse of fiat money, the development of 'exotic' financial instruments that amount to nothing more than new and creative pyramid schemes. Rein in these abuses, and the result is contraction. But the government (U.S.) cannot allow contraction to occur, lest economic depression deepens and national security risks become impossible to navigate. And so the *only* solution is more and better Ponzi schemes, more subversion of the already shrinking middle class, and all-out rejection of the Enlightenment ideals of fairness and communitarianism that formed the foundation for the creation of the USA.
Bye bye baby...
Y'know folks...this is gonna take decades to unfold, but the realities---the mathematical realities---are ever so clear. Real financial regulation = economic contraction. We have grown our economy for decades based upon fraudulent accounting, the abuse of fiat money, the development of 'exotic' financial instruments that amount to nothing more than new and creative pyramid schemes. Rein in these abuses, and the result is contraction. But the government (U.S.) cannot allow contraction to occur, lest economic depression deepens and national security risks become impossible to navigate. And so the *only* solution is more and better Ponzi schemes, more subversion of the already shrinking middle class, and all-out rejection of the Enlightenment ideals of fairness and communitarianism that formed the foundation for the creation of the USA.
Bye bye baby...
He must be a corporate lord. He hasn't got debt all over him.
I wonder if the other end of the perspective will change as well. will the serfs associate, organize and act in groups no longer defined by geography? Sites like this. The best weapon against disinformation is cutting off its three lettered head
So what was it that prompted regulations (glass steagall etc) during the great depression ? or have our moral standards fallen so low that we will never be able get out of this spiral of boom and bust ?
some history guys claim we are destined to it, that good economies always end up getting financialized, booms also lead to technological advancements that are disruptive (30s, see machines doing farming, so land and food prices drop, 2000s see internet) so between financial excesses and disruptions via technology and often natural disasters say like drought, we crash and re-regulate, form unions, do other populist things. Then we start all over again with eventual honest boom times when technology gains results in good times until we get out of control (way over simplifying)
Steven Keen makes an interesting point that we shold make more simple brake son investsment rather than relying on regulators, but I figure folks would find a way to repeal those too.
Biblical times in middle east we had jubilees and the royalty using populist moves to keep merchant class in check...so it seemswe have had this problem for a few thousand years..
Great points, financial and trade reforms have always been sold as being good overall for populations of all countries, and yet no evidence of this. I had considered the protected industry issues before but not the financial regulation....its all anti-populist stuff, for everyone, everywhere, just as free trade has proven to be....capital and money can move more than people, so those with money get better and better deals and labor gets worse and worse deals...and of course, self-determination is out-the-door.
I agree. In my younger days I was a believer in free trade and comparative advantage, but the more I look at the results the more I come to believe that globalisation is simply a way for the owners of capital to weaken the position of the owners of labor and thus divert more of the income from the productive work of the masses to the owners of capital.
By increasing the supply of labor they can reduce its price.
They also engage in tax shopping which forces governments everywhere to reduce taxes on income from capital and thus increase it on those less mobile, i.e. the workers.
This to me is a tragedy of the commons situation as its rational for every holder of capital to do this, but the end result is that the systems that allow them to profit in this way will be destroyed. When the US is a middle income country who will have the clout to force protection of intellectual property worldwide? Who will have the global navy to keep sea lanes safe for container ships? Who will be building and maintaining the infrastructure that allows businesses to more efficient? Who will be ensuring that capital and investtments aren't seized by other countries? Who will be investing in the fundamental science and technology from which commercial technologies are derived? Who will have the clout to ensure that legal systems work and contract law can be enforced both at home and throughout the world?
Make no mistake, just as Marx stated that capitalism carried the seeds of its own destruction, globalisation, by weakening the most powerful states relative to others, also carries the seeds of its own destruction, and every participant will be acting rationally every step of the way to ruin
When the US is a middle income country who will have the clout to force protection of intellectual property worldwide? TBTF CORPORATIONS.
Who will have the global navy to keep sea lanes safe for container ships? TBTF CORPORATIONS.
Who will be building and maintaining the infrastructure that allows businesses to more efficient? TBTF CORPORATIONS.
Who will be ensuring that capital and investtments aren't seized by other countries? TBTF CORPORATIONS.
Who will be investing in the fundamental science and technology from which commercial technologies are derived? TBTF CORPORATIONS.
Who will have the clout to ensure that legal systems work and contract law can be enforced both at home and throughout the world? TBTF CORPORATIONS.
Sorta like Halliburton or Black Water but on steroids. Make no mistake, private TBTF Corporations are slowly, but surely, taking over "government" until the day arrives when they will control all and the illusion of "government" & "power of the people" will slip away as the illusion it always was.
HWC: You're close.
Land + Labor + Capital = Wealth.
Return to Land is Rent
Return to Labor is Wages
Return to Capital is Interest.
If we stop taxing labor and capital then they are free to produce.
If we tax land only, and we should, then they can't have what they don't produce. Further, Land is ours not theirs. We should tax it back to fund our governance.
For more read Progress and Poverty by Henry George. He got it right.
That is an interesting idea. It's very counter intuitive but seems like it would work.
Excellent! Be careful though, it maybe called socialism!
From a prison planet....where do we escape to?
If not escape, do we resign ourselves to our fate?
And what can be done to fight this?
Is it better to succumb and ignore?
Will it all fall from within? And when/if it falls will the same players still be in charge?
I for one am thankful that my stay on earth is temporary.
Glad i was here to visit, lovely planet filled with selfimportant, selfserving and selfish folks.
Poor opinion formed over time with experience
Hmmmm, those WTO protesters in Pittsburgh don't look nearly so out of touch, and the tactics the cops used on them look even more sinister...
Ha! Ain't it so....
Not convincing at all.
Congress can change these agreements, if they wanted to, claiming grave danger to the whole financial system. Which country in your opinion will disagree with that?
It is pure and simple. Wall Street has embarked in the worst extortion of all time. I am afraid that it goes beyond mere reelection contributions.
"La Mano Nera" may be the best description.
Most thinkers agree that this is not going to end well. I am also sure that you yourself think the same. Admit it.
No disrespect or challenge to your intellect. Just my opinion.
Bruce you're doing God's work but check your spelling. It's not "...through the bums out..." but "...threw the bums out.
I wish it were threw....it's still throw.
In our world of multi multi tasking give the guy a 'brake.'
I saw an AP article a couple of days ago talking about the upcoming problem with Prius 'breaks'. You would think those guys could get it write.
You're right. It could have been worse. It could have been a CheekyBastard submission.
"through out all of the bums"
through? really?
All this great work and the only thing you can focus on is a mispelling? You are a troll, a mole or worse.