Too Big To Fail
David Stockman’s New York Times Op-Ed has ruffled a lot of feathers. Paul Krugman dislikes it, saying Stockman sounds like a cranky old man, and criticising Stockman for throwing out a load of meaningless numbers that sound kind of scary, but are less scary in context. What Krugman overlooks is Stockman’s excellent criticism of crony capitalism, financialisation, systemic rot and Wall Street corruption of Washington, something Stockman has seen from the inside as part of the Reagan administration. There are plenty of other writers who have pointed to this problem of propping up casino finance, including myself. But very few of them are doing so on the pages of the New York Times. In the long run, I think it will become patently clear that throwing liquidity at the financial system won’t solve anything other than immediate liquidity concerns. The rot was too deep. The financial sector needed real reform in 2008. It still needs it today.
By manipulating the price of money through sustained and historically low interest rates, Greenspan and Bernanke created an era of asset mis-pricing that inevitably would need to correct. And when market forces attempted to do so in 2008, Paulson et al hoodwinked the world into believing the repercussions would be so calamitous for all that the institutions responsible for the bad actions that instigated the problem needed to be rescued -- in full -- at all costs. David Stockman, former director of the OMB under President Reagan, lays out how we have devolved from a free market economy into a managed one that operates for the benefit of a privileged few.
With all the recent chatter about an overhaul and dismantling of Too Big To Fail banks (spoiler alert: it will never happen, but it will take a lot of theater before that is made quite clear) many can be excused for believing the balance of power has shifted away from the megabanks (and their tens of trillions in over the counter derivative "weapons of mass financial destruction" so ably facilitating the Stockholm Syndrome of global mutual assured destruction with each passing day) and in the favor of the people, represented by the legislative and the judicial. Last night we got a quick reminder that absolutely nothing has changed in the true lay of the land, that the adjusted golden rule is still in place (yes, the banks still have all the gold and set all the rules), and that banks are still the undisputed rulers of the land when U.S. District Judge Naomi Reice Buchwald agreed to dismiss claims that the 16 banks targeted by various LIBOR lawsuits broke federal antitrust laws. In so ruling, the potential cost to the banks from an adverse overall resolution would be crippled. The ruling also is likely to reduce the financial inventive for new plaintiffs to join investors, cities, lenders and other parties that have already filed lawsuits. In brief, the banks won again just when it mattered, just when it seemed they may, for once, be on the defensive, and just when the concept of accountability and responsibility for years of conspiratorial and criminal collusion to manipulate a rate impacting hundreds of trillions of IR-sensitive instruments, was about to rear its ugly head. Because in the New Normal crime and punishment is simply a book by Dostoyevsky.
Reclaiming the Founding Fathers' Vision of Prosperity
Hopefully the memory of the new Eurogroup head, who in a one day lost more credibility than his admittedly lying predecessor Juncker ever had, will be jogged courtesy of this full transcript provided by Reuters and the FT of what he told two reporters - on the record - and for the whole world to read. Because, by now, we are confident everyone has had more than enough with watching the entire Eurozone rapidly and tragically turn itself into a complete and utter mythomaniac, kletpocratic circus.
It is not just that there is a monetary union without a fiscal union, but European monetary union itself is incomplete.
And the Stock Rally Is Due to Money-Printing
How Far Will the Government Go to Defend the Too Big to Fail Banks?
No, American Banks DON'T Need to Be Big to Compete with Bigger Foreign Rivals
Why Jamie Dimon is richer than you...
We addressed the systemic ills of U.S. healthcare, a.k.a. sickcare most recently here. Nobody likes any of the practical solutions because everyone wants unlimited care and unlimited choice. Expectations in a system where the government can just borrow another $1+ trillion to pay the bills are high, and the feedback from reality, i.e. price, has been eliminated in the cartel/fiefdom system that is sickcare. Everyone talks about "reform," but real reform is impossible in a bought-and-paid-for "democracy" like ours. There is no one solution to something as complex and costly as healthcare; the solution is to let 100 solutions blossom and compete openly for citizens' money and trust.
The State has monopolized all authority, giving it essentially unlimited power to make things worse. Since concentrations of centralized capital, authority and power does not relinquish control easily, if ever, the Status Quo will have to decay and implode before authority can be pushed down to more responsive, appropriate levels.
In plain terms, the stock market has become totally detached from economic realities. There is a term for when asset prices become detached from fundamentals, it’s called “A BUBBLE.”