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Until This is Fixed... There Will Be No Recovery
A few weeks ago I penned a series of articles relating to the “cancerous” policies of the Federal Reserve and how said policies are killing the basic principles of Democratic Capitalism.
Of those basic principles, one stands out as being absolutely vital in order for business to thrive. That principle is the principle of trust.
Without trust, Democratic Capitalism cannot function. One’s clients remain one’s clients because of trust. Business partnerships are based on trust. Indeed, trust is the underlying principle of every capitalist action whether it be:
- Trust that a product is what it claims to be
- Trust that the business is legit
- Trust that the other party involved is not trying to take advantage of you
- Trust in quality control.
Etc.
This trust is established by reputation and by the legal system. The former is earned by businesspeople through consistent work and repeated examples of being trustworthy and producing items of quality. The latter is in place to punish those individuals/ businesses who are fraudulent or breaking the law.
When the Financial Crisis hit in 2008, trust was damaged in a tremendous way. We found out in clear terms that many companies, mainly financials, were lying about their balance sheets. We also found out that many companies were actively engaged in fraud (as they themselves admitted in their Congressional testimony after the fact).
None of these companies or these individuals were punished or prosecuted. Instead, they were given taxpayer money. The argument for this was economic in nature: “if we do not save these businesses, the entire system will collapse.”
This argument completely underestimates both the strength of capitalism and the entrepreneurial spirit in the US. The entire system would collapse and we’d never recover? Really? Dust off your history books, even a brief review of US history shows that this country has been in a perpetual state of collapse and renewal ever since commerce began in this country.
There has never been a collapse from which the US did not recover nor has there ever been a boom that has not been followed by some sort of collapse. That is the nature of Democratic Capitalism: boom and bust.
Businesses collapse and new businesses take their place. This would have happened in 2008 had we let the fraudulent banks go under. Yes, we would have experienced severe short-term pain, but there were hundreds of smaller regional banks that didn’t commit fraud and which could have grown to replace those larger entities that should have failed.
We’ve just witnessed a process quite similar to this in Iceland, which did the following between when a Crisis hit it in 2008 and 2011:
- Had its banks default on $85 billion in debt (the country’s GDP is just $13 billion).
- Jailed the bankers responsible for committing fraud during the bubble.
- Gave Icelandic citizens debt forgiveness equal to 13% of GD.
Today, just a few years later, Iceland is posting GDP growth of 2.9%: above that of both the EU and the developed world in general. In plain terms, the short-term pain combined with moves that reestablished trust in the financial system (holding those who broke the law accountable) created a solid foundation for Iceland’s recovery.
In the US, we instead chose to undermine capitalism and the economic cycle. In the process we’ve undermined trust in the system. Until this is remedied there will be not REAL recovery.
Best Regards,
Graham Summers
PS. For more market commentary and economic analysis, swing by www.gainspainscapital.com. We offer several FREE Special Reports on how to navigate the market and preserve your wealth.
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This is such a timely article... While teh guvmnt bails out TBTF banks and the criminals who run them, they fuck the little guy on Main Street. I lost my house in a foreclosure, not because I had too big a of a loan or was a speculator, but because my business shut down when banks closed off credit to anyone but the large corporations. After two years of giving me hope that they would do a loan mod, even though I told them I would not qualify for HARP or HAMP, even after I had exhausted my retirment account to pay my bills and mortgage, even after milking me for everything I had, they foreclosed on me. I just filled out a package from the 'Independent Reviw Administrator' which asked questions about how I was treated during my foreclosure. The return envelope is addressed and a has prepaid postage. The AMAZING thing is that the forms I filled out do not fit into this envelope!!! Typically when you fold 8 1/2 x 11 inch paper over into thirds, it goes right into a letter sized envelope, the return envelope is about 8 1/4 inches wide! TRULY FUCKING AMAZING! It's a small thing, but it forces anyone who wants to return the forms to find a letter sized envelope, address it and add postage...I will do this, but how many people won't. FUCK, I hate our government and Geithner and Obama and their lies and ass kissing ways for the big criminals. Time for these fuckers to go...and I wish our press would really start asking some hard questions of the candidates and Obama. BTW, the crooks who ran the op that fucked me were none other than Jamie Dimon and his dirtbag bank JPM/Chase.
Greg Smith, Ex-Goldman Sachs Rogue Executive, Lands Book Deal With $1.5 Million Advance
http://www.imackgroup.com/mathematics/795608-greg-smith-ex-goldman-sachs-rogue-executive-lands-book-deal-with-15-million-advance/
[snip]
The Johannesburg-born Smith worked at Goldman's London office in equity derivatives as an executive director.
His op-ed piece was highly unusual because Goldman employees shy away from publicly criticizing the bank, both because it breaks the Goldman code of silence and because non-disparagement agreements signed by many employees bar them from speaking negatively about the firm.
Goldman responded to the op-ed by saying Smith's views did not reflect the way the business was run.
"Without trust, Democratic Capitalism cannot function."
I'll add a simple thought...
Without trust, not much of anything can function (or survive) for long.
A hearty "Bravo" to you, Mr. Summers.
Forget about trust because we all know that we're being lied to. TPTB realize that when the victims of their lies reach the end of their rope, they're not going down alone. Not here in the U.S. anyway. Take that incident a couple of years ago when that guy who had his SSDI rejected, walked into the SS bldg and opened fire. Now, think about what is going on today. THE EPA has stopped watching out for Japan's radiation. When a hundred thousand or so come down with cancer in years to come, are those people going down alone? When the TBTF banks go under and the FDIC doesn't pay, are those people going down alone? When the government decides to implement austerity because they stole the SS & medicare funds and can no longer pay out, are those cut off from their only income going down alone? They're scared. Remember when Goldman had their people apply for carry permits? Look at the new laws passed to detain or kill what they think are terrorists. They know what's happening and what's coming. Problem is that they can't lock up the 100 million individuals who leagally own guns. It won't be a civil war that crushes TPTB, it will be a few million individual terminal people.
True GOS. I have been f the same mind for about 2 years. I simply did not believe it would go on this long, the lying and corruption, and the lack of anything resembling "enforcement of laws".
THEY WILL NOT GO DOWN ALONE! Exactly, and there are a bunch of people that are getting ready as we speak, and there are bombs prepared, and long rifles at the ready, by individuals that HAVE HAD ENOUGH OF THE LYING SOCIPATHIC CRIMINALS to have a belly foll of vile revenge, and wanting to spill blood.
And in my mind, rightly so. These assholes do not hold "special privilege" in our society to rip us off, and to abbrograte the rule of law. The deserve the death and pain coming their way, they have "earned it".
Until BANKERS GO TO JAIL for BLATANT and OBVIOUS FRAUD, there will be no recovery. Why? Because the shit won't stop!
Thanks for looking after the little guy instead of the "fat cat bankers" like you said you would, Mr. prez....
Pirate Myfilm Presents: Terror Trading
Posted on March 31, 2012 by stacyherbert|
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http://www.piratemyfilm.com/projects/353
Ahem, in the eyes of the Fed, who needs a recovery as long as the Fed can keep the markets moving sideways to up and rates sideways to down.
BTW this is in their play book to nurture banks et al back to health, ie LTCM, S American crisis ect.
How old are you. Why don't you know this. Shesssss
Spot on because I have NO TRUST in the system and the most basic tenets of individual rights going back to the Magna Carta that have been rescinded by the Kleptoligarchy.
Banking system has been replaced by Kleptomaniarchy
Be sure your shit is nailed down.
Missed one:
Trust that if you give your money to a financial institution to hold for you, they will not steal it!!! Broker/dealers, wake up.
“Trust is gone, it now has to be earned.”
Trust is the number 1 principal to a great society. Unfortunately people are flawed. People are greedy. Some greed is good. But at some point, a tipping point is triggered that causes corruption.
If we could find the happy medium, it would be great. Unfortunately we are human!
Trust is the number 1 principal to a great society. Unfortunately people are flawed. People are greedy. Some greed is good. But at some point, a tipping point is triggered that causes corruption.
If we could find the happy medium, it would be great. Unfortunately we are human!
Only some of us. Some are alien cyborgs, like Al Gore, and others (Lloyd Blankfein) are orcs. And then there's Tim the Treasury Elf.
Pitiful but true. Trust is the glue in society. When the "elite" violate all conventions and laws routinely - it gives the lesser orders the excuse they need. When politicians blatantly lie and no one calls them on it - more trust is eroded. Right now - I wouldn't believe our business leaders or politicians if they said day was light and night was dark.
I will not even think about Wall St.
Somehow Bozo Ben thinks that all will be well if he just pumps up the stock prices some more - what a laugh.
Stay close to home - do business with "friends" - forget broader society.
Oh, and vote all scumbag incumbents out - even if you have to vote against your "party"...
Regards.
The change in trust in my lifetime has been astronomical. Growing up, we all wanted to go to Wall Street and make tons of money. Rich folks were admired for their hard work, ingenuity and generosity. We respected political figures - even those we disagreed with. Trust is the flip side of perception - the key element in market economies. This lack of trust explains much of how markets react to the EU debt crisis.
I do business with those who I trust whether they be local, relatives or friends. Big B has been wrong so many times on so many things I wonder how he speaks without a sense of shame. If Ben is an "expert" on depressions then Geitner is a law-abiding taxpayer and Obama wants to "bring us together".
Great piece Mr. Summers
It's a much wider expanded version of what I posted few weeks ago:
IF USA WANTS TO ABOLISH LAW, THAN LET'S GET TOGETHER AND ELECT A KING TO RULE UPON US.
Ancient greeks and romans, middle ages in europe were full of King Election Processes.
And as I voted at that time, I propose that we elect Barney Frank as King.
All right, you got it wrong - kings ARE NOT ELECTED. Basically what you said is that we are heading back to the bullshit "Divine Right of Kings". Just so that you know - the first world war was a POLITICAL UPHEAVAL in throwing the yoke of these true vampires off of the common man. Imagine the size of the political upheaval that would happen to those countries trying to re-instate that type of political system??? I, as a free man, will not allow any person, group of persons to equate me or mine to the equivalent to a "farm animal" with as much rights. It will never happen! However, as a free man, I have acquired real and personal property that is MINE.
OK lets have a referendum: table a vote on the following:
A. Political Upheavel - where civil war is certain;
or
B. Financial Upheavel - where people who count their wealth in the stacks of paper are beggered and turn into paupers; and where enterprising and thoughtfull poor people may gain affluence and reach the top of the highest social/political/economic circles.
I am voting for B!
Thx for commenting.
You are reading my post too literally. It is mostly metaphorical.
I agree with you mostly except for the following: "However, as a free man, I have acquired real and personal property that is MINE".
Govenment can easily take property away. I have lived in such a system
Sorry, I'm going to have to disagree: Kings CAN be elected. It's called "elective monarchy", and it goes back a long way. In the ancient Kingdom of Rome, kings were elected by the assemblies, as well as in medieval France, the Kingdom of Hawaii and Malta, and even in Poland kings were elected by assemblies of nobles between 1400 and 1800 A.D.
And let's not forget that the Caliphate of California elected Peter King, and Bernice King was elected to head the Southern Christian Leadership Conference (mostly because her father, Martin Luther, was also a King).
I vote for option B, too. But then let's elect Lloyd Blankfein King and behead him immediately before he has a chance to escape to Mordor.
Correct.
Everybody that's a muppet has left the market.
They're tired of being hosed. Everybody that's over 45, who had a nest egg has seen a value of their investments, return to where they were, almost.
They're tired of the upset stomach looking at the 401K statement each month.
They're out. And it's getting worse.
Only when trust has returned to people like my 81 year old mother, will she return to the markets.
Fool me once...
Great piece. Liked it a lot.
•?•
V-V
Totally agree, I lost a bundle during the dot bomb meltdown. I regained about a third and have it in a credit union and mom is 85 and all of us keep telling her to stay out of the casino....she almost got suckered into facebook and we pulled her back.
I find it interesting/sad that whille people in power (however they achieved it) have a wide range of positive actions available to them; including lifting up others, not through charity, but through education and empowerment; the thing they most often choose is to take every action available to them to stay in power and prevent others from gaining power.
Senseless greed, wars, oppression, subversion of government and the education system are all actions chosen by those in power to prevent others from realizing their potential. Is that because they are, at their core, insecure and weak ... or simply evil?
The other night I was struck by a terrible thought and it went like this: All those people incarcerated in the USoA... it's a big business. Largely regarding possession of drugs for personal use. Or smaller amounts to share around for small change. BigPictureBarry had a fine breakdown the last week. Instead of education for 8K/yr they were spending 40K/yr to hold 'em. And, who is running these Afghanistan ops? The "border wars? etc? copvcia, anyone?
Why? money, of course. But then emerged a larger, scarier picture. Yadda, yadda revenue stream. Yadda, yadda renters. Debters. 1%'ers.
Then it hit me. White guys getting out. Like the old south...(no caps). Only not just white guys - colored guys (every color) and their families. The criterion was Us v Them. Let the miserable suckers turn into soylent green.
Is this possible, I wondered? And, I once again recalled the memories of the old south... yearning for the yesteryear... that seemed so vile yet...
Just saying...
Trust was broken when laws were passed before they were read.
Trust was broken whe Congress traded on inside information.
Trust is broken every time one of our elected officials vote convenience instead of what they promised.
Trust is broken when the government spends more than it can ever pay back.
this list will get long!!!
Yeah, the list could go on and on, but there's no need. Trust has been destroyed and it's not coming back while these psychopaths remain in power.
Greedscam and Bernocchio in the same prison cell, with Tax Cheat, Paulson, Mozilo and a few thousand others. In a Turkish prison.
"In God We Trust"
That is about the only thing left, and being an agnostic it aint looking good (from my perspective).
Trust was broken when people walked away from mortgages that were bundled into a failing group of "asets" and sold to foreign suckers by "Fab" fender pounders who were only hired because they spoke the lingo.
Trust was broken when $1.2 billion was stolen and no one was arrested.
Trust was broken when over 100 years of bankrupcy law was circumvented for votes.
Trust was broken when an administration is more concerned with it's agenda and not the America it is supposed to serve.
Spot on bro! You can’t have trust without accountability and fair retribution.
MF Global! Down with the dick taters..
"That is the nature of Democratic Capitalism: boom and bust."
that may be true in fact, but is not true of necessity - and thus is not the nature of capitalism
How to Restore Trust by Returning to Real Money.
The real reason you pay an income tax, is for the privilege of using a private currency.
Also known As A: Federal Reserve Note
Demand from your bank or brokerage, lawful money and the tax goes away, with a tax exemption on lawful money, all of your money is yours.
http://www.21silver.com/?show=merrill&read=federal_reserve_act_remedy
http://stormthunder.com/federal-reserve-act/
Tax Exemption: http://stormthunder.com/federal-reserve-act/#ixzz1pOYzDgEm
Web search these three different phrases:
Redeemed in Lawful money or
Redeemed in Lawful money Pursuant to Title 12 USC §411 or
deposited for credit on account or exchanged for
non-negotiable federal reserve notes of face value