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The Only Way to Save the Economy: Break Up the Giant, Insolvent Banks

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  Break Up the Giant, Insolvent BanksPainting by Anthony Freda: www.AnthonyFreda.com The Government Created the Giant Banks

As MIT economics professor and former IMF chief economist Simon Johnson points out, the official White House position is that:

(1) The government created the mega-giants, and they are not the product of free market competition

 

(2) The White House needs to “regulate and oversee them”, even though it is clear that the government has no real plans to regulate or oversee the banking behemoths

 

(3) Giant banks are good for the economy

This is false … giant banks are incredibly destructive for the economy.

We Do NOT Need the Big Banks to Help the Economy Recover

Do we need the Too Big to Fails to help the economy recover?

No.

The following top economists and financial experts believe that the economy cannot recover unless the big, insolvent banks are broken up in an orderly fashion:

  • Dean and professor of finance and economics at Columbia Business School, and chairman of the Council of Economic Advisers under President George W. Bush, R. Glenn Hubbard
  • The leading monetary economist and co-author with Milton Friedman of the leading treatise on the Great Depression, Anna Schwartz
  • Economics professor and senior regulator during the S & L crisis, William K. Black
  • Professor of entrepreneurship and finance at the Chicago Booth School of Business, Luigi Zingales

Others, like Nobel prize-winning economist Paul Krugman, think that the giant insolvent banks may need to be temporarily nationalized.

In addition, many top economists and financial experts, including Bank of Israel Governor Stanley Fischer – who was Ben Bernanke’s thesis adviser at MIT – say that – at the very least – the size of the financial giants should be limited.

Even the Bank of International Settlements – the “Central Banks’ Central Bank” – has slammed too big to fail. As summarized by the Financial Times:

The report was particularly scathing in its assessment of governments’ attempts to clean up their banks. “The reluctance of officials to quickly clean up the banks, many of which are now owned in large part by governments, may well delay recovery,” it said, adding that government interventions had ingrained the belief that some banks were too big or too interconnected to fail.

 

This was dangerous because it reinforced the risks of moral hazard which might lead to an even bigger financial crisis in future.

And as I noted in December 2008, the big banks are the major reason why sovereign debt has become a crisis:

 

 BIS points out in a new report that the bank rescue packages have transferred significant risks onto government balance sheets, which is reflected in the corresponding widening of sovereign credit default swaps:

 

The scope and magnitude of the bank rescue packages also meant that significant risks had been transferred onto government balance sheets. This was particularly apparent in the market for CDS referencing sovereigns involved either in large individual bank rescues or in broad-based support packages for the financial sector, including the United States. While such CDS were thinly traded prior to the announced rescue packages, spreads widened suddenly on increased demand for credit protection, while corresponding financial sector spreads tightened.

 

In other words, by assuming huge portions of the risk from banks trading in toxic derivatives, and by spending trillions that they don’t have, central banks have put their countries at risk from default.

Similarly, a study of 124 banking crises by the International Monetary Fund found that propping banks which are only pretending to be solvent hurts the economy:

 

Existing empirical research has shown that providing assistance to banks and their borrowers can be counterproductive, resulting in increased losses to banks, which often abuse forbearance to take unproductive risks at government expense. The typical result of forbearance is a deeper hole in the net worth of banks, crippling tax burdens to finance bank bailouts, and even more severe credit supply contraction and economic decline than would have occurred in the absence of forbearance.

 

Cross-country analysis to date also shows that accommodative policy measures (such as substantial liquidity support, explicit government guarantee on financial institutions’ liabilities and forbearance from prudential regulations) tend to be fiscally costly and that these particular policies do not necessarily accelerate the speed of economic recovery.

 

***

 

All too often, central banks privilege stability over cost in the heat of the containment phase: if so, they may too liberally extend loans to an illiquid bank which is almost certain to prove insolvent anyway. Also, closure of a nonviable bank is often delayed for too long, even when there are clear signs of insolvency (Lindgren, 2003). Since bank closures face many obstacles, there is a tendency to rely instead on blanket government guarantees which, if the government’s fiscal and political position makes them credible, can work albeit at the cost of placing the burden on the budget, typically squeezing future provision of needed public services.

The big banks have been bailed out to the tune of many trillions, dragging the economy down a bottomless pit from which we can’t escape. See this, this, this and this. Unless we break them up, we will never escape.

If We Break Up the Giants, Smaller Banks Will Thrive … And Loan More to Main Street

Do we need to keep the TBTFs to make sure that loans are made?

Nope.

USA Today points out:

Banks that received federal assistance during the financial crisis reduced lending more aggressively and gave bigger pay raises to employees than institutions that didn’t get aid, a USA TODAY/American University review found.

 

***

 

The amount of loans outstanding to businesses and individuals fell 9.1% for the 12 months ending Sept. 30, 2009, at banks that participated in TARP compared with a 6.2% drop at banks that didn’t.

Dennis Santiago – CEO and Managing Director of Institutional Risk Analytics (Chris Whalen’s company) – notes:

The really shocking numbers are in the unused line of credit commitments of banks to U.S. business. This is the canary number I like to look at because it is a direct expression of banking and finance confidence in Main Street industry. It’s gone from $92 billion in Dec -2007 to just $24 billion as of Sep-2010. More importantly, the vast majority of this contraction of credit availability to American industry has been by the larger banks, C&I LOC from $87B down to $18.8B by the institutions with assets over $10B. Poof!

Fortune reports that smaller banks are stepping in to fill the lending void left by the giant banks’ current hesitancy to make loans. Indeed, the article points out that the only reason that smaller banks haven’t been able to expand and thrive is that the too-big-to-fails have decreased competition:

Growth for the nation’s smaller banks represents a reversal of trends from the last twenty years, when the biggest banks got much bigger and many of the smallest players were gobbled up or driven under…

 

As big banks struggle to find a way forward and rising loan losses threaten to punish poorly run banks of all sizes, smaller but well capitalized institutions have a long-awaited chance to expand.

BusinessWeek notes:

As big banks struggle, community banks are stepping in to offer loans and lines of credit to small business owners…

 

At a congressional hearing on small business and the economic recovery earlier this month, economist Paul Merski, of the Independent Community Bankers of America, a Washington (D.C.) trade group, told lawmakers that community banks make 20% of all small-business loans, even though they represent only about 12% of all bank assets. Furthermore, he said that about 50% of all small-business loans under $100,000 are made by community banks…

 

Indeed, for the past two years, small-business lending among community banks has grown at a faster rate than from larger institutions, according to Aite Group, a Boston banking consultancy. “Community banks are quickly taking on more market share not only from the top five banks but from some of the regional banks,” says Christine Barry, Aite’s research director. “They are focusing more attention on small businesses than before. They are seeing revenue opportunities and deploying the right solutions in place to serve these customers.”

Fed Governor Daniel K. Tarullo said:

The importance of traditional financial intermediation services, and hence of the smaller banks that typically specialize in providing those services, tends to increase during times of financial stress. Indeed, the crisis has highlighted the important continuing role of community banks…

 

For example, while the number of credit unions has declined by 42 percent since 1989, credit union deposits have more than quadrupled, and credit unions have increased their share of national deposits from 4.7 percent to 8.5 percent. In addition, some credit unions have shifted from the traditional membership based on a common interest to membership that encompasses anyone who lives or works within one or more local banking markets. In the last few years, some credit unions have also moved beyond their traditional focus on consumer services to provide services to small businesses, increasing the extent to which they compete with community banks.

Thomas M. Hoenig pointed out in a speech at a U.S. Chamber of Commerce summit in Washington:

During the recent financial crisis, losses quickly depleted the capital of these large, over-leveraged companies. As expected, these firms were rescued using government funds from the Troubled Asset Relief Program (TARP). The result was an immediate reduction in lending to Main Street, as the financial institutions tried to rebuild their capital. Although these institutions have raised substantial amounts of new capital, much of it has been used to repay the TARP funds instead of supporting new lending.

On the other hand, Hoenig pointed out:

In 2009, 45 percent of banks with assets under $1 billion increased their business lending.

45% is about 45% more  than the amount of increased lending by the too big to fails.

Indeed, some very smart people say that the big banks aren’t really focusing as much on the lending business as smaller banks.

Specifically since Glass-Steagall was repealed in 1999, the giant banks have made much of their money in trading assets, securities, derivatives and other speculative bets, the banks’ own paper and securities, and in other money-making activities which have nothing to do with traditional depository functions.

Now that the economy has crashed, the big banks are making very few loans to consumers or small businesses because they still have trillions in bad derivatives gambling debts to pay off, and so they are only loaning to the biggest players and those who don’t really need credit in the first place. See this and this.

So we don’t really need these giant gamblers. We don’t really need JP Morgan, Citi, Bank of America, Goldman Sachs or Morgan Stanley. What we need are dedicated lenders.

The Fortune article discussed above points out that the banking giants are not necessarily more efficient than smaller banks:

The largest banks often don’t show the greatest efficiency. This now seems unsurprising given the deep problems that the biggest institutions have faced over the past year.

 

“They actually experience diseconomies of scale,” Narter wrote of the biggest banks. “There are so many large autonomous divisions of the bank that the complexity of connecting them overwhelms the advantage of size.”

And Governor Tarullo points out some of the benefits of small community banks over the giant banks:

Many community banks have thrived, in large part because their local presence and personal interactions give them an advantage in meeting the financial needs of many households, small businesses, and agricultural firms. Their business model is based on an important economic explanation of the role of financial intermediaries–to develop and apply expertise that allows a lender to make better judgments about the creditworthiness of potential borrowers than could be made by a potential lender with less information about the borrowers.

 

A small, but growing, body of research suggests that the financial services provided by large banks are less-than-perfect substitutes for those provided by community banks.

It is simply not true that we need the mega-banks. In fact, as many top economists and financial analysts have said, the “too big to fails” are actually stifling competition from smaller lenders and credit unions, and dragging the entire economy down into a black hole.

The Failure to Break Up the Big Banks Is Causing Rampant Fraud

  Break Up the Giant, Insolvent Banks

Painting by Anthony Freda: www.AnthonyFreda.com

Top economists and experts on fraud say that fraud is not only widespread, it is actually the business model adopted by the giant banks. See this, this, this, this, this and this.

In addition, Richard Alford – former New York Fed economist, trading floor economist and strategist – showed that banks that get too big benefit from “information asymmetry” which disrupts the free market.

Nobel prize winning economist Joseph Stiglitz noted in September that giants like Goldman are using their size to manipulate the market:

“The main problem that Goldman raises is a question of size: ‘too big to fail.’ In some markets, they have a significant fraction of trades. Why is that important? They trade both on their proprietary desk and on behalf of customers. When you do that and you have a significant fraction of all trades, you have a lot of information.”

 

Further, he says, “That raises the potential of conflicts of interest, problems of front-running, using that inside information for your proprietary desk. And that’s why the Volcker report came out and said that we need to restrict the kinds of activity that these large institutions have. If you’re going to trade on behalf of others, if you’re going to be a commercial bank, you can’t engage in certain kinds of risk-taking behavior.”

The giants (especially Goldman Sachs) have also used high-frequency program trading which not only distorted the markets – making up more than 70% of stock trades – but which also let the program trading giants take a sneak peak at what the real (aka “human”) traders are buying and selling, and then trade on the insider information. See this, this, this, this and this. (This is frontrunning, which is illegal; but it is a lot bigger than garden variety frontrunning, because the program traders are not only trading based on inside knowledge of what their own clients are doing, they are also trading based on knowledge of what all other traders are doing).

Goldman also admitted that its proprietary trading program can “manipulate the markets in unfair ways”. The giant banks have also allegedly used their Counterparty Risk Management Policy Group (CRMPG) to exchange secret information and formulate coordinated mutually beneficial actions, all with the government’s blessings.

In other words, a handful of giants doing it, it can manipulate the entire economy in ways which are not good for the American citizen.

The Failure to Break Up the Big Banks Is Dooming Us to a Derivatives Depression

All independent experts agree that unless we rein in derivatives, will have another – bigger – financial crisis.

But the big banks are preventing derivatives from being tamed.

We have also pointed out that derivatives are still very dangerous for the economy, that the derivatives “reform” legislation previously passed has probably actually weakened existing regulations, and the legislation was “probably written by JP Morgan and Goldman Sachs“.

As I noted last year

Harold Bradley – who oversees almost $2 billion in assets as chief investment officer at the Kauffman Foundation – told the Reuters Global Exchanges and Trading Summit in New York that a cabal is preventing swap derivatives from being forced onto clearing exchanges:

 

There is no incentive from the moneyed interests in either Washington or New York to change it…

 

I believe we are in a cabal. There are five or six players only who are engaged and dominant in this marketplace and apparently they own the regulatory apparatus. Everybody is afraid to regulate them.

That’s bad enough.

But Bob Litan of the Brookings Institute wrote a paper (here’s a summary) showing that – even if real derivatives legislation is ever passed – the 5 big derivatives players will still prevent any real change. James Kwak notes that Litan is no radical, but has previously written in defense in financial “innovation”.

Here’s a good summary from Rortybomb, showing that this is yet another reason to break up the too big to fails:

Litan is worried about the “Dealer’s Club” of the major derivatives players. I particularly like this paper as the best introduction to the current oligarchy that takes place in the very profitable over-the-counter derivatives trading market and credit default swap market. [Litton says]:

 

I have written this essay primarily to call attention to the main impediments to meaningful reform: the private actors who now control the trading of derivatives and all key elements of the infrastructure of derivatives trading, the major dealer banks. The importance of this “Derivatives Dealers’ Club” cannot be overstated. All end-users who want derivatives products, CDS in particular, must transact with dealer banks…I will argue that the major dealer banks have strong financial incentives and the ability to delay or impede changes from the status quo — even if the legislative reforms that are now being widely discussed are adopted — that would make the CDS and eventually other derivatives markets safer and more transparent for all concerned…

 

Here, of course, I refer to the major derivatives dealers – the top 5 dealer-banks that control virtually all of the dealer-to-dealer trades in CDS, together with a few others that participate with the top 5 in other institutions important to the derivatives market. Collectively, these institutions have the ability and incentive, if not counteracted by policy intervention, to delay, distort or impede clearing, exchange trading and transparency

 

Market-makers make the most profit, however, as long as they can operate as much in the dark as is possible – so that customers don’t know the true going prices, only the dealers do. This opacity allows the dealers to keep spreads high…

 

In combination, these various market institutions – relating to standardization, clearing and pricing – have incentives not to rock the boat, and not to accelerate the kinds of changes that would make the derivatives market safer and more transparent. The common element among all of these institutions is strong participation, if not significant ownership, by the major dealers.

 

So Bob Litan is waving a giant red flag that the top dealer-banks that control the CDS market can more or less, through a variety of means he lays out convincingly in the paper, derail or significantly slow down CDS reform after the fact if it passes.

 

***

 

If you thought we’d at least get our arms around credit default swap reform from a financial reform bill, you should read this report from Litan as a giant warning flag. In case you weren’t sure if you’ve heard anyone directly lay out the case on how the market and political concentration in the United States banking sector hurts consumers and increases systemic risk through both political pressures and anticompetitive levels of control of the institutions of the market, now you have. It’s not Matt Taibbi, but it’s much further away from a “everything is actually fine and the Treasury is in control of reform” reassurance. Which should scare you, and give you yet another good reason for size caps for the major banks.

53246864840716464 2380196514216991388?l=georgewashington2.blogspot The Only Way to Save the Economy:  Break Up the Giant, Insolvent BanksMoreover, the big banks are still dumping huge amounts of their toxic derivatives on the taxpayer. And see this.

Why Aren’t They Be Broken Up?

So what is the real reason that the TBTFs aren’t being broken up?

Certainly, there is regulatory capture, cowardice and corruption:

  • Joseph Stiglitz (the Nobel prize winning economist) said recently that the U.S. government is wary of challenging the financial industry because it is politically difficult, and that he hopes the Group of 20 leaders will cajole the U.S. into tougher action
  • Economic historian Niall Ferguson asks:
    Guess which institutions are among the biggest lobbyists and campaign-finance contributors? Surprise! None other than the TBTFs [too big to fails].
  • Manhattan Institute senior fellow Nicole Gelinas agrees:
    The too-big-to-fail financial industry has been good to elected officials and former elected officials of both parties over its 25-year life span
  • Investment analyst and financial writer Yves Smith says:
    Major financial players [have gained] control over the all-important over-the-counter debt markets…

    It is pretty hard to regulate someone who has a knife at your throat.

  • William K. Black says:
    There has been no honest examination of the crisis because it would embarrass C.E.O.s and politicians . . .

    Instead, the Treasury and the Fed are urging us not to examine the crisis and to believe that all will soon be well. There have been no prosecutions of the chief executives of the large nonprime lenders that would expose the “epidemic” of fraudulent mortgage lending that drove the crisis. There has been no accountability…

    The Obama administration and Fed Chairman Ben Bernanke have refused to investigate the nature and causes of the crisis. And the administration selected Timothy Geithner, who with then Treasury Secretary Paulson bungled the bailout of A.I.G. and other favored “too big to fail” institutions, to head up Treasury.

    Now Lawrence Summers, head of the White House National Economic Council, and Mr. Geithner argue that no fundamental change in finance is needed. They want to recreate a secondary market in the subprime mortgages that caused trillions of dollars of losses.

    Traditional neo-classical economic theory, particularly “modern finance theory,” has been proven false but economists have failed to replace it. No fundamental reform can be passed when the proponents are pretending that there really is no crisis or need for change.

  • Harvard professor of government Jeffry A. Frieden says:
    Regulatory agencies are often sympathetic to the industries they regulate. This pattern is so well known among scholars that it has a name: “regulatory capture.” This effect can be due to the political influence of the industry on its regulators; or to the fact that the regulators spend so much time with their charges that they come to accept their world view; or to the prospect of lucrative private-sector jobs when regulators retire or resign.
  • Economic consultant Edward Harrison agrees:Regulating Wall Street has become difficult in large part because of regulatory capture.

But there is an even more interesting reason . . .

The number one reason the TBTF’s aren’t being broken up is [drumroll] . . . the ‘ole 80?s playbook is being used.

As the New York Times wrote in February:

In the 1980s, during the height of the Latin American debt crisis, the total risk to the nine money-center banks in New York was estimated at more than three times the capital of those banks. The regulators, analysts say, did not force the banks to value those loans at the fire-sale prices of the moment, helping to avert a disaster in the banking system.

In other words, the nine biggest banks were all insolvent in the 1980s.

Indeed, Richard C. Koo – former economist at the Federal Reserve Bank of New York and doctoral fellow with the Fed’s Board of Governors, and now chief economist for Nomura – confirmed this fact last year in a speech to the Center for Strategic & International Studies. Specifically, Koo said that -after the Latin American crisis hit in 1982 – the New York Fed concluded that 7 out of 8 money center banks were actually “underwater” and “bankrupt”, but that the Fed hid that fact from the American people.

So the government’s failure to break up the insolvent giants – even though virtually all independent experts say that is the only way to save the economy, and even though there is no good reason not to break them up – is nothing new.

William K. Black’s statement that the government’s entire strategy now – as in the S&L crisis – is to cover up how bad things are (“the entire strategy is to keep people from getting the facts”) makes a lot more sense.

 

 


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Sun, 10/23/2011 - 16:22 | Link to Comment ivars
ivars's picture

This was a productive weekend!

I think I finally managed to match them!

Now I have a really superb forecasting /history study interest tool . Have a look at exercise behind matching GREAT DEPRESSION and GREAT RECESSION timelines for the first time ( once  I managed to patternalize ( ?) OUT FED's grip on USA stock market prices)  and, as usual, better visibility charts plus explanations here:

http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&p=34732#p34730

And here:

http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&p=34732#p34732

The supplement chart for rereading the history of GREAT DEPRESSION and rethinking the future as time line can be extended as well:

http://farm7.static.flickr.com/6055/6273870574_8de9d22b08_o.png

http://farm7.static.flickr.com/6217/6273870954_52bd042a99_o.png

http://farm7.static.flickr.com/6232/6273871980_62a22ec234_o.png

Sun, 10/23/2011 - 15:59 | Link to Comment JPR
JPR's picture


As a former finance profession­al, I tell you YES, the banking/lending system is predatory, rigged against the middle and working classes, and the time is now to collapse it.

Wide-scale DEBTORS’ REVOLT — DEFAULT-EN­-MASSE is the answer, or at least part of it.

The fact remains that the black hole of debt will destroy the working and middle classes. These “contracts­” are not inviolable things; they were made during a *different era*, a *different economy*, and the ability to pay them back has evaporated­. Therefore, cancel student and other types of predatory debt, or the revolt en-masse will occur, and soon.

The momentum grows. Join us. Walk away from your debt instruments and help speed up the desirable collapse of the predatory banking system. Rebuild from there, under fair rules – responsible capitalism that recognizes the need for a economically strong workforce and middle class.

DEBTORS’ REVOLT – DEFAULT EN MASSE. The critical mass is closer than you think.

 

...And to the folks who will immediatel­y answer with "pay what you owe. end of story!", let me just preempt by answering that the analysis is more structural and macro in scope than that. It's not just a matter of whose "fault" it is - regardless of that, it's become a macroscale systemic distortion that, if allowed to continue, will prevent any sort of mobility in the long term. We, as a nation, need to simply suck it up, recognize that these contracts were made in what is essentiall­y a different economic era, and recognize that they are incompatib­le with the new situation. It has to simply be zeroed. 

And yes, it will cause widespread systemic collapse, but this will be temporary, we will adjust and rebuild, and will have cleansed out the massive DISTORTIONS that currently plague the system.

 

DEBTORS' REVOLT -- DEFAULT EN MASSE. The momentum grows. Spread it.

Sun, 10/23/2011 - 14:41 | Link to Comment proLiberty
proLiberty's picture

A better scheme would be to just slowly ratchet up the reserve requirements on a published schedule for the bigger banks.  The bigger the bank, the more reserves they would be required to hold.  This would be orderly and self-liqudating over time.

 

Sun, 10/23/2011 - 15:16 | Link to Comment TheAkashicRecord
TheAkashicRecord's picture

Agree.

The more a bank poses a systemic risk (the metrics of which can be debated), the higher tier 1 capital ratios the bank ought to have - disincentivize becoming "too big."

Sun, 10/23/2011 - 14:17 | Link to Comment steelrules
steelrules's picture

This is what I'd do to save the economy.

A paralell currency.

Create 10 regional banks, fund them with 10 billion each of a new silver/gold backed treasury notes "executive order 11110" that they can then by law leverage up 10 times but no more.

This creates an alternate to the Federal reserve fiat and and sets the big banks on their well deserved course to the dust bin of history.

Sun, 10/23/2011 - 19:44 | Link to Comment the grateful un...
the grateful unemployed's picture

way off base, in the first place why would you back your currency with gold if you were trying to destroy it? and once the genie is out of the bottle and other countries start backing their currency with gold the US will find that it has way too much paper out there, and not enough gold to make a difference. small countries with small amounts of fiat paper and large gold holdings would immediately lead in the race for the new reserve currency.

but its also impossible to run a reserve currency that way.

however if the US were to either implement the AMERO, and use the gold reserves from Canada and Mexico, that might work. i also propose that to count gold as reserves you merely have to identify it, you don't have to actually mine and assay the finished product. like oil "reserves"

or they might try floating the hard currency against the notional money. i think that would work, and also firewall the real economy, main street, from wall street, and if Congress would get off its ass and take control of the money supply they could do that, or something similar. in other words Bernanke could print all the "notional' money he wanted, but he would have to float that against the "hard" currency, and CONGRESS would control that, checks and balances

as for gold no one wants a strong currency, so no country is going to do that right now.

Thu, 11/10/2011 - 16:46 | Link to Comment steelrules
steelrules's picture

wrong! there is plenty of gold it's just a question of price.

With the amount of fiat that's been printed / the total Toz held by all central banks we have a price of between $25,000 & $45,000 US /troy oz.

As for the Bernank and his band of banksters their fiat system would unwind as the Treasury would issue their own gold backed currency. 

Sun, 10/23/2011 - 09:36 | Link to Comment Mr.Kowalski
Mr.Kowalski's picture

Here's whats needed-- a new constitution:

The Federal Reserve shall, each quarter, determine if there is a need to print more money. The growth in the money supply shall not exceed the growth in GDP. If money does need to be printed, it shall be distributed evenly to the people. Banks will need to then compete for capital from the citizenry. This will be the world's first bottom-up credit based monetary system.

http://themeanoldinvestor.blogspot.com/2011/07/kowalski-constitution.html


 

Sun, 10/23/2011 - 11:10 | Link to Comment SilverDoctors
SilverDoctors's picture

Or, we could always return to using the Constitutionally required money- real silver!  Novel concept, right??

http://silverdoctors.blogspot.com/

Sun, 10/23/2011 - 10:52 | Link to Comment TheAkashicRecord
TheAkashicRecord's picture

//Banks will need to then compete for capital from the citizenry. This will be the world's first bottom-up credit based monetary system.//

I like that idea; however, TPTB loathe anything bottom-up because bottom-up is the antithesis to the way power is distributed.  My opinion is that the nature of information today, and the fact that we have instantaneous access to the sum of human knowledge at our fingertips makes most hierarchical forms of government unnecessary for planning purposes (as much as in previous times this was true, it is even more true today in the context of technology enabling access to information).  

It's a similar argument that Hayek made concerning individual actors making better decisions than central planning because central planners do not have the information that market actors do, and pretending that they do is where folly starts.  The difference is, now, in terms of culture, his argument can be taken to another level because the actors have even more information and that information is widely distributed.  With that in mind, what benefit does central planning have when the same information is available to everyone?  In this circumstance, the system of central planning, more than ever, becomes a hinderance to human progress.  

Check this article out, from Iceland's president

http://tiny.cc/k9rsh 

 

"This so-called social media has transformed our democratic institutions in such a way that what takes place in the more traditional institutions of power -- congress, ministries, even the White House or the presidency and the cabinet in my country -- has become almost a sideshow," Olafur Ragnar Grimsson, Iceland's president, said in an interview with CNN on Thursday at the PopTech conference here in coastal Maine.

"I know it's a strong statement, especially coming from someone who spent most of his life within those institutions. But the power of the social media is, in my opinion, transforming the political process in such a way that I can't see any chance for the traditional, formal institutions of our democratic systems to keep up."

I think that the way power is structured is threatened by the contemporary nature of the way information is distributed.  This structure intrinsically knows this and is trying to grasp on to relevancy and preserve itself.  Sort of like in the death throes of a relationship where you try and grasp harder to salvage it, only realizing later that it was futile.  

Essentially, what we are seeing now is that the power structure of society and the way information is distributed and can be accessed are opposed to each other and societal friction is caused as a result.  When our institutions and power mimick the nature of information, harmony will be created as a result.  Reading the above article on Iceland, I think that they recognize that fact and are going down the right path.  

"Don't fight forces, use them"

Buckminster Fuller

The force of power is fighting the force of information, and will eventually lose, unfortunately, it will not go quietly into the night and will put up quite the fight.

 

Sun, 10/23/2011 - 14:22 | Link to Comment JOAT
JOAT's picture

The pen has influence!

The sword, spear ,knife, gun! have definition!.

Never mistake words for purpose!

Demo's,marches,revolt,insurrection,

only feed the evil that they  are !

stock up on what you use,for a minimum of 60 days! & stay home.

When the truth unfolds there will be no more time left to, re-position your family !

Translate any savings into base coinage, 900/1000 silver . or your choice !

Caveat Emptor !

Sun, 10/23/2011 - 15:32 | Link to Comment TheAkashicRecord
TheAkashicRecord's picture

The truth has been out there for quite some time for those who have tried and seek it, it's just that the bread is becoming stale and the circuses can no longer distract from real issues so even the non-seekers are becoming confronted with it.  The cost of maintaining the illusion for The State is becoming too great, the real rules of the game are becoming transparent, and govcorp's PR is becoming increasingly ineffective (ie "green shoots") as the reality in front of us offers a stark contrast to their branded message.  

I would like to think that people are waking up to the neofeudalistic society they have found themselves in, what neoliberalism is doing to wealth and power concentration, the influence of the military-industrial complex on the legislative process, and the impotent form of change that is realized through voting - though I may be just projecting some wishful thinking of my own there =)

 

Sun, 10/23/2011 - 04:23 | Link to Comment macro-economist
macro-economist's picture

The mega-banks problem is a symptom and the root-cause is the current Protestant-inspired Anglo-Saxon capitalist model which took off around the turn of the 20th century:

"the have's have it because they are smart, and Jesus wants you to make money" ! ridiculous if you examine Jesus' lifestyle where he did not amass any wealth.....

Anyway, once the banks, over time, managed to control a lot of the financial strings to powerful governments, industry, etc. they began to exercise undue influence in the socio-political dimension. This problem started in the US and then easily spread to Europe and the European colonies around the continents so that by the time WW2 ended, the foundations for banks' mischief were set. In fact the early signs were present in late 1800s colonial Egypt as well where the British were keen to sell "bonds" through banks to the general public and so the banks and the Crown began to collude to ensure that the bonds would be sold no matter what.

All this talk of blaming Obama, etc. is nonsense. IF anything, Obama inherited this mess from the Republicans' 8-year Empire!

And let's not forget: there was a crisis in this country with respect to the banks  in the early 1980s and the hero of the GOP, Ronald Reagan, bailed them out and everyone said: "it's unAmerican, it won't happen again" and even the Banks said "sorry, we'll be more careful next time; thanks for socializing our losses this time around".

Alas: history does repeat itself.

Unless the lobby-power and disproportionate importance and obsession with money is broken, we'll keep finding ourselves in the same situation.

Heck: lobbying clouds our foreign policy actions at state and country levels so what's the big deal that it happens at domestic corporate levels!!!  

 

Sun, 10/23/2011 - 06:56 | Link to Comment nmewn
nmewn's picture

Anglo-Saxon Protestant capitalist model?...the next question follows...what model do you prefer?

"sorry, we'll be more careful next time; thanks for socializing our losses this time around".

How many times do we have to bail out Chrysler...and why?

Why are taxpayers asked to subsidize solar and wind so that the connected can prosper?

When its subsidize what I want subsidized its ok...right?

Sun, 10/23/2011 - 18:57 | Link to Comment earleflorida
earleflorida's picture

chrysler isn't even publicly owned to boot!

we bailed out everybody in the known universe except the u.s. homeowners,... and if we had taken that $13trillion sander's exposed and put it towards marking-down-to-market the good gse's, the public would be well lubricated and moving along quite nicely 

it all stinks to high heavens' 

Sun, 10/23/2011 - 19:19 | Link to Comment nmewn
nmewn's picture

The homeowner (more properly said renter), the savers, the taxable income wage earners are never part of any positive equation...as they are the host for the parasites.

You do not own your home unless it costs you nothing except for its upkeep...painting etc. Try not paying your mortgage or your property tax bill and see who owns it ;-)

This is not to be snippy with you...this is to explain things as I see them.

Sun, 10/23/2011 - 07:57 | Link to Comment macro-economist
macro-economist's picture

my dear hardcore tea party supporter,

Chrysler, GM, wind power, solar power crooks breed as much under the "evangelical protestant anglo-saxon model" as much as crooked bankers. Its a rotten system: if you have the connections and had the cash once, then you join an exclusive club that twists truth to coin terms like "Too big to fail", "key banks", "national security issue", etc. so that no one questions the under the table dealings.

US of A and not any particular industry in the USA are modelled on the protestant/capitalist ethic: work hard, make money, fund your evangelical church, and you are a model citizen. But Jesus wouldn't approve killing of the innocent and putting guns in the hands of 18-year olds! "hey, did you make money?" , "yes", "then its gotta be okay!

its this mentality that has to go. Industry regulators should be like technocrats and not pro-GOP or pro-Democrat: that has nothing to do with their civic duty to serve all Americans.

The problem is that "big boys club" (or until lately white boys club") think they can do anything they want because they have contributed to 200 years of progress in this country and so 50 years of screwing is okay in the grand scheme of things!

 

Sun, 10/23/2011 - 08:08 | Link to Comment nmewn
nmewn's picture

What model do you prefer?...it was a direct question.

We can deal with your version of religion and what Mohamed might or might not approve later.

Sun, 10/23/2011 - 08:13 | Link to Comment macro-economist
macro-economist's picture

I have clearly spelt out what needs to change - if you are too lazy to read through it or deduce the gist: that power-lobbying by industry should cease, then its your issue. I won't go to Fox News and feed them this so that you can get the dumbed-down version!

Sun, 10/23/2011 - 08:17 | Link to Comment nmewn
nmewn's picture

"I have clearly spelt out what needs to change - if you are too lazy to read through it or deduce the gist: that power-lobbying by industry should cease, then its your issue."

Yes you have.

"All this talk of blaming Obama, etc. is nonsense. IF anything, Obama inherited this mess from the Republicans' 8-year Empire!"

Its all Bush's fault.

Sun, 10/23/2011 - 13:00 | Link to Comment TheMerryPrankster
TheMerryPrankster's picture

You see the world through your own lens. If you are to discover truth, however beautiful or ugly it be, you must first abandon dogma.

Sun, 10/23/2011 - 16:26 | Link to Comment nmewn
nmewn's picture

I just explained that to Mr."macro-economist."

Sun, 10/23/2011 - 01:03 | Link to Comment Grand Supercycle
Grand Supercycle's picture

SP500 weekly chart shows megaphone wedge and looks bullish.

Market consensus became clearer on Friday so back to the original bullish analysis and SP500 weekly chart reverts to bullish/neutral.

MORE
http://stockmarket618.wordpress.com

Sun, 10/23/2011 - 07:05 | Link to Comment Bendromeda Strain
Bendromeda Strain's picture

Yo Spamcycle - you really ought to go back to the Demon Clown Prophet avatar. It just felt so right for you... 

Sun, 10/23/2011 - 00:46 | Link to Comment bill1102inf
bill1102inf's picture

A BAC branch office would make a super hot dungeon for S&M parties !!

Sat, 10/22/2011 - 23:30 | Link to Comment High Plains Drifter
High Plains Drifter's picture

http://www.nytimes.com/2011/10/20/us/5-held-in-break-in-at-san-antonio-c...

http://www.opinion-maker.org/2011/10/media-and-the-us/#

5 israelis caught breaking into san antonio courthouse complex. possibly getting ready for false flag event............carrying french passports and claiming to be muslim moroccans.....yeh sure pal.

Sun, 10/23/2011 - 16:51 | Link to Comment Bob
Bob's picture

Five young men were arrested early Wednesday morning in connection with a break-in at the Bexar County Courthouse here that raised fears of a terror plot but appeared instead to be a prank.

Sun, 10/23/2011 - 10:20 | Link to Comment tamboo
tamboo's picture

theyre probly already on an el al flight back to tel aviv a la the 5 dancung israelis.

Israel's Mossad: Black Ops and False Flags
Sat, 10/22/2011 - 23:10 | Link to Comment MFL8240
MFL8240's picture

Obama has no interest in fixing America, he is hell bent on detroying this country.  His plan is to become our dictator but underestimates what he is up against as do the big greedy banks.  

Sat, 10/22/2011 - 23:52 | Link to Comment Vic Vinegar
Vic Vinegar's picture

No one here is a big fan of Barack.  But to say he is hell bent on detroying this country is a bit of an exaggeration.  I doubt he has much more of a plan other than when to sneak out for his next smoke.

Sun, 10/23/2011 - 10:32 | Link to Comment tamboo
tamboo's picture

get a clue, go back and read that link to the protocols of the elders of zion.

Sordid Circumstances of Obama's Birth
Sat, 10/22/2011 - 22:59 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

Well the bare mininun that should be done to TBTF's is to lay some CRIMINAL chareges as needed,against TBTF's and the SEC,and the CFTC.And have them tried and conVICTED FOR THIER CRIMES.

This would be a good start before breaking them up,so the truth would come out(or some resemblance) in the court hearings.

And then bust thier A$$'s up,along with the Non Federal No Reserves banks..

Ps....

FUCK YOU TBTF's and Benny and Tiny Tim....!!!

Sat, 10/22/2011 - 22:57 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

Coming soon to a theater...er, bank, near you

FIAT RUN  ("Raided" PG)

Sat, 10/22/2011 - 22:55 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

Narrow the list to those who made this call in 2008.  Then do it again for those who made this call during the bubble-blowing 1990s.  And one last cut for the truly clairvoyant who spoke up when we broke away from the gold in Nixon's reign.

I just have to LOL at the notion of "orderly" break up of these institutions.  C'mon now...

Sat, 10/22/2011 - 21:55 | Link to Comment Justawhoaman
Justawhoaman's picture

I'm a newbie here. In the 80's, I was married to an American Options Exchange seat holder and spent my days watching the ticker tape and the news to warn him of the rumor... This was just as the computer was starting to affect the market. The people everyone hates to hate were just figuring out how to turn puts and calls into derivatives... They were simply bridge players.... Poker players in the biggest casino of all.

Thank you GW for this enlightenment... If only it was possible. The fact that we have have allowed all the illegal crap to carry on like business as usual, an ignorant usurper in the WH and idealists our fathers would have prosecuted, if not put on trial and executed, long ago in Congress who pass laws allowing the BAC and other banksters to steal from all of us... Well...

The future will be interesting if not challenging...

Sat, 10/22/2011 - 23:02 | Link to Comment mayhem_korner
mayhem_korner's picture

The fact that we have have allowed all the illegal crap to carry on like business as usual, an ignorant usurper in the WH and idealists our fathers would have prosecuted, if not put on trial and executed, long ago in Congress who pass laws allowing the BAC and other banksters to steal from all of us...

 

Don't forget that these people were elected, or appointed by those elected.  They are not random outcomes.

Sun, 10/23/2011 - 18:46 | Link to Comment earleflorida
earleflorida's picture

check out the manufacturer's such a diebold, and where they outsource -

then check out who writes the source codes -

check-out absentee balloting, and how an election can be called before the first electronic ballot is 'sent' to the trash bin,... it works wonders in local regional elections, and was perfected by governorr gerry from massachusetts [1812], called redistricting/ gerrymandering because it looked like a salamander when originally drawn  up - (impossible to lose an election once nominated, how democratic?)

lastly, the electronic 'gaming' machines are woefully inadequate, and easily corrupted,... time to go back to paper ballots and wait it out - that is true voting democracy called trust & verify! 

Sat, 10/22/2011 - 23:59 | Link to Comment Justawhoaman
Justawhoaman's picture

Maybe... But the generational brainwashing has gotten so absurd that these criminals think they are entitled to trash the rule of law; that election fraud IS the rule so that appointing tax cheats and ivy league socialists to make decisions is neither random nor legal; and that covering up the facts with doublespeak makes TPTB think we are all too stupid to know what is happening....

I personally am glad to find this group that proves them wrong.

Sun, 10/23/2011 - 16:51 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

How do you know what these criminals think?  Unless you are one of them, I believe you overstate what you know about "them," whomever you believe "them" to be.

(BTW, I'm not defending anyone.  I'm just pointing out the void of precision and definition in all of the rage.)

Sat, 10/22/2011 - 20:22 | Link to Comment UP4Liberty
UP4Liberty's picture

Hey GW,

Thanks for this information - and all of the effort you are making to bring these facts to light.

Have you heard about Harry Markopoulos?

Check this out:

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/10/8_Harry...

As Eric King states, "Harry is a modern day "Elliot Ness", and his team the modern day "Untouchables".

We have to be UNRELENTING in our intellectual assault on these a**hats.

On behalf of my family and my children - thank you!

Sun, 10/23/2011 - 07:13 | Link to Comment Bendromeda Strain
Bendromeda Strain's picture

Yes - the top/bottom ticking of institutional orders is grand theft from pensions, etc.

Sat, 10/22/2011 - 19:23 | Link to Comment JustACitizen
JustACitizen's picture

If the "TBTF" banks needed "scale" to compete globally (as they have said many many times) - they should be asking the "global customers" to freakin' pay for those services and size. All of the true believers in free market capitalism should be able to agree on that...

"F" these companies - their shareholders - their bondholders and anyone else that acts on their behalf. Honestly - I am tired of hearing about the blood sucking low life scumbags.

Sat, 10/22/2011 - 19:16 | Link to Comment Earl of Chiswick
Earl of Chiswick's picture

this is interesting out of Canada MSM

Arab Spring?

 

http://www.globaltoronto.com/qampa+the+future+of+the+arab+spring/6442506...

On Libya and the death of Q

Everything.  Everything died with him.  And this is what is barbarity.  This is not civilization.  I’m saying look at what they are doing to black Africans in Libya.  They’re shooting them on the street.  Look at what happened in Egypt.  They’re killing Christians.  What sort of Spring is this?!  And what sort of Western talking heads on television can’t a utter a simple word that ‘We’re outraged… at this slaughter.’  It seems nobody is.  Which suggests to me that in the West they’re practicing the racism of lowered expectations.  Basically saying, ‘Well, Arabs are basically not human beings so why should we hold them to the same standards as we hold ourselves?’.

 

I think there will be far more chaos than Obama can manage.  There’s nothing there.  The Muslim Brotherhood and the Islamists have billions of dollars.  The jean-clad, western secularists have to worry about their girlfriends, and their New York Yankee hats and every silly stuff, and Twitter and Facebook.  While the real world is moving on.  All these guys will come back to New York, and Boston, and Toronto and say, ‘Oh, we went there for sabbatical and had fun in Cairo.’  While the Muslim Brotherhood is deeply entrenched.  Not a single black face in all of Arab Spring.  What does it say to you?  20% of the Arab population is black, but you can’t see a single black face.  It’s a completely racist movement.   It says non-Arabs in the Arab Spring have no rights.  IF you’re Bangladeshi, Filipino, Indonesian…you have absolutely no rights.  This is worse Apartheid.  That’s why Africans are fleeing Libya, dying in the Mediterranean, to get to Italy or to Israel.

© Shaw Media Inc., 2011. All rights reserved. Read it on Global News: Global Toronto | Q&A: The future of the Arab Spring?
 
Sun, 10/23/2011 - 06:49 | Link to Comment macro-economist
macro-economist's picture

What a load of racist crap and propoganda!

Did you see pictures of people celebrating in Tripoli: there were hundreds of black people waving Libyan flags and celebrating side by side with their berber brothers.

The real reason behind the nonsense is clear:

1. Who supported tyrants like Hosni Mubarak, Saddam Hussain and Baathist secularist dicatoars in Syria? : Western democratic govts. spearheaded by the USA.

2. Why? because like it or not, all these secularists promised the US that they would keep Iraq, Egypt, Syria, etc. free from "Muslim" "Islamist" government (regardless of people want!) Even Qadhafi in March said that he was fighting rebels who want to turn Libya into an Islamic State (a ploy he tried in vain to get Western support!)

3. Who supports the Tunisian and Algerian secularists generals who annulled elections as they pleased? Answer: US and the EU, etc.

So, yes, the right-wing West is worried but not becasue of the nonsense you put here but becasue the plan to keep the free will of the people caged has tumbled: there is no single charasmatic leader inspiring the Arab Spring but the general masses who said enough is enough. And you'd be surprised as to how many average Arabs (regardless of race) on the street know who put dictators in power in their countries, and why! I have been to coffee shops in Cairo and people mention how successive US administrations talked about Mubarak being a "key asset for the USA in Middle East" while he won elections with 95% electorate voting for his guys!!

So better to abandon such lies and face reality: you reap what you sow. The people had 4 decades of this crap and now they are rising up.

I am sure those who subscribe to or believe in such  proponganda felt as insecure when the African-Americans in USA won civil rights and equality!

 

Sun, 10/23/2011 - 08:44 | Link to Comment Bendromeda Strain
Bendromeda Strain's picture

So better to abandon such lies and face reality: you reap what you sow

Dear Islamist tool - do not let the mask slip again or your brothers may deal with you harshly. The Pew reports coming out of Egypt are incontrovertible. The Copts are in danger, and anyone who denies this is a deceiver who spreads lies and denies reality.

Sat, 10/22/2011 - 19:08 | Link to Comment honestann
honestann's picture

Don't break them up, destroy them.  Hang all the executives for treason, massive theft/fraud and crimes against humanity.  Then effectively put any assets through a bankruptsy process that is prevented from obligating or taking-from taxpayers (via any government).  This is the only kind of "broken up" that makes sense - to sell the assets to whoever offers the highest price, and FIRST pay off any taxpayer obligations, bailouts or loans.  Take all assets of all current and past executives and divide equally to all adults or all living humans in the country.

Sat, 10/22/2011 - 22:29 | Link to Comment fleur de lis
fleur de lis's picture

So let me understand this -- the perps who set this up and systematically looted every treasury and money source they could get their grubby hands on are all of a sudden advocating the break-up of the banks that they set up for systematic looting? Did I get that right?

Then they want to manage the system that follows?  Why is anyone listening to them?

 Better yet, why are they not banned from the industry since it is abundantly evident that they set up these banks for the sole purpose of looting them?

Or maybe looting is now legal? Please reference which law.  Can everybody loot or does it need a permit? Does loot get taxed?  Is looting restricted to banks or does it apply to anything not nailed down?

I'm confused. Someone please explain. 

 

Sun, 10/23/2011 - 01:16 | Link to Comment honestann
honestann's picture

I'm not sure - maybe you accidentally posted your message as a reply to mine.  If so, I'm not sure how yours relates to mine.

The perps should be hung, not listened to, not allowed to "solve the problem", not allowed to do anything except hang from trees until their bones turn to dust.  That would also have the effect of banning them from their industry, or any industry, or any activity, or any further abuse of their fellow human.

I hope you don't need to be told WHY these cretins deserve to be hung.  They are the perps, as you said.  The entire financial system IS IS treason, IS fraud, IS criminal, IS organized crime, IS crime against humanity, IS an attempt to enslave the entirety of mankind for the benefit of those who control government.  If that isn't justification for the death penalty, nothing is.

Sun, 10/23/2011 - 10:45 | Link to Comment tamboo
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