The looting in Ferguson, Missouri is bad. The looters are giving the peaceful protesters against the shooting of Michael Brown a bad name, and provoking an armed (and over-militarized) response by the police.
But let’s put things in perspective …
Wall Street’s crimes and fraud have cost the economy tens of trillions of dollars.
The big banks are still engaged mind-blowing levels of manipulation and crime.
Nobel prize winning economist Joe Stiglitz and well-known economist Nouriel Roubini say that we’ve got to jail – or perhaps even hang – some bankers before they’ll stop looting the economy.
Nobel prize winning economist George Akerlof has demonstrated that failure to punish white collar criminals – and instead bailing them out- creates incentives for more economic crimes and further destruction of the economy in the future.
We explained in 2009:
As Examiner.com pointed out in May (it is worth quoting the essay at some length, as this is an important concept), looting has replaced free market capitalism:
Nobel prize-winning economist George Akerlof co-wrote a paper in 1993 describing the causes of the S&L crisis and other financial meltdowns. As summarized by the New York Times:
In the paper, they argued that several financial crises in the 1980s, like the Texas real estate bust, had been the result of private investors taking advantage of the government. The investors had borrowed huge amounts of money, made big profits when times were good and then left the government holding the bag for their eventual (and predictable) losses.
In a word, the investors looted. Someone trying to make an honest profit, Professors Akerlof and Romer
[co-author of the paper, and himself a leading expert on economic growth] said, would have operated in a completely different manner. The investors displayed a “total disregard for even the most basic principles of lending,” failing to verify standard information about their borrowers or, in some cases, even to ask for that information.
The investors “acted as if future losses were somebody else’s problem,” the economists wrote. “They were right.”
The Times does a good job of explaining the looting dynamic:
The paper’s message is that the promise of government bailouts isn’t merely one aspect of the problem. It is the core problem.
Promised bailouts mean that anyone lending money to Wall Street — ranging from small-time savers like you and me to the Chinese government — doesn’t have to worry about losing that money. The United States Treasury (which, in the end, is also you and me) will cover the losses. In fact, it has to cover the losses, to prevent a cascade of worldwide losses and panic that would make today’s crisis look tame.
But the knowledge among lenders that their money will ultimately be returned, no matter what, clearly brings a terrible downside. It keeps the lenders from asking tough questions about how their money is being used. Looters — savings and loans and Texas developers in the 1980s; the American International Group, Citigroup, Fannie Mae and the rest in this decade — can then act as if their future losses are indeed somebody else’s problem.
Do you remember the mea culpa that Alan Greesnspan, Mr. Bernanke’s predecessor, delivered on Capitol Hill last fall? He said that he was “in a state of shocked disbelief” that “the self-interest” of Wall Street bankers hadn’t prevented this mess.
He shouldn’t have been. The looting theory explains why his laissez-faire theory didn’t hold up. The bankers were acting in their self-interest, after all…Think about the so-called liars’ loans from recent years: like those Texas real estate loans from the 1980s, they never had a chance of paying off. Sure, they would deliver big profits for a while, so long as the bubble kept inflating. But when they inevitably imploded, the losses would overwhelm the gains…
What happened? Banks borrowed money from lenders around the world. The bankers then kept a big chunk of that money for themselves, calling it “management fees” or “performance bonuses.” Once the investments were exposed as hopeless, the lenders — ordinary savers, foreign countries, other banks, you name it — were repaid with government bailouts.
In effect, the bankers had siphoned off this bailout money in advance, years before the government had spent
it…Either way, the bottom line is the same: given an incentive to loot, Wall Street did so. “If you think of the financial system as a whole,” Mr. Romer said, “it actually has an incentive to trigger the rare occasions in which tens or hundreds of billions of dollars come flowing out of the Treasury.”
In fact, the big banks and sellers of exotic instruments pretended that the boom would last forever, siphoning off huge profits during the boom with the knowledge that – when the bust ultimately happened – the governments of the world would bail them out.
As Akerlof wrote in his paper:
[Looting is the] common thread [when] countries took on excessive
foreign debt, governments had to bail out insolvent financial institutions, real estate prices increased dramatically and then fell, or new financial markets experienced a boom and bust…Our theoretical analysis shows that an economic underground can come to life if firms have an incentive to go broke for profit at society’s expense (to loot) instead of to go for broke (to gamble on success). Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations.
Indeed, Akerlof predicted in 1993 that the next form the looting dynamic would take was through credit default swaps – then a very-obscure financial instrument (indeed, one interpretation of why CDS have been so deadly is that they were the simply the favored instrument for the current round of looting).
Is Looting A Thing of the Past?
Now that Wall Street has been humbled by this financial crash, and the dangers of CDS are widely known, are we past the bad old days of looting?
Unfortunately, as the Times points out, the answer is no:
At a time like this, when trust in financial markets is so scant, it may be hard to imagine that looting will ever be a problem again. But it will be. If we don’t get rid of the incentive to loot, the only question is what form the next round of looting will take.
Indeed, one of America’s top experts on white collar fraud – the senior S&L prosecutor who put more than 1,000 top executives in jail for fraud (Bill Black)- says that we’ve known for “hundreds of years” that failure to punish white collar criminals creates incentives for more economic crimes and further destruction of the economy in the future. And see this, this, this and this.
Review of the data on accounting fraud confirms that fraud goes up as criminal prosecutions go down. Indeed, extensive evidence shows that failing to prosecute looting by Wall Street is killing our economy.
And yet the U.S. government admits that it refuses to prosecute fraud … pretty much as an official policy. Indeed, the government helped cover up the crimes of the big banks, used claims of national security to keep everything in the dark, and changed basic rules and definitions to allow the game to continue. See this, this, this and this.
Indeed, Wall Street – with the help of Washington – has robbed (and raped) America.
The Fish Is Rotting from the Head Down
Moreover, corruption at the top leads to lawlessness by the people. As we noted in 2011, in the middle of the London riots:
Corruption and lawlessness by our “leaders” encourages lawlessness by everyone else. See this, for example.
Peter Oborne – the Daily Telegraph’s chief political commentator – wrote yesterday:
The criminality in our streets cannot be dissociated from the moral disintegration in the highest ranks of modern British society. The last two decades have seen a terrifying decline in standards among the British governing elite. It has become acceptable for our politicians to lie and to cheat. An almost universal culture of selfishness and greed has grown up.
It is not just the feral youth of Tottenham who have forgotten they have duties as well as rights. So have the feral rich ….
***
The so-called feral youth seem oblivious to decency and morality. But so are the venal rich and powerful – too many of our bankers, footballers, wealthy businessmen and politicians.
***
The sad young men and women, without hope or aspiration … have caused such mayhem and chaos over the past few days. But the rioters have this defence: they are just following the example set by senior and respected figures in society. Let’s bear in mind that many of the youths in our inner cities have never been trained in decent values. All they have ever known is barbarism. Our politicians and bankers, in sharp contrast, tend to have been to good schools and universities and to have been given every opportunity in life.
Something has gone horribly wrong in Britain. If we are ever to confront the problems which have been exposed in the past week, it is essential to bear in mind that they do not only exist in inner-city housing estates.
The culture of greed and impunity we are witnessing on our TV screens stretches right up into corporate boardrooms and the Cabinet. It embraces the police and large parts of our media. It is not just its damaged youth, but Britain itself that needs a moral reformation.
Osborne also gives specific examples of corruption, such as the prime minister’s involvement in the Murdoch scandal, and members of parliament abusing expense accounts.
Indeed, the rioters themselves agreed. As Reuters notes:
Speaking to Reuters late on Tuesday, looters and other local people in east London pointed to the wealth gap as the underlying cause, also blaming what they saw as police prejudice and a host of recent scandals.
Spending cuts were now hitting the poorest hardest, they said, and after tales of politicians claiming excessive expenses, alleged police corruption and bankers getting rich it was their turn to take what they wanted.
“They set the example,” said one youth after riots in the London district of Hackney. “It’s time to loot.”
As Max Keiser noted at the time, harshly cracking down on British youth looting a $1 bottle of water or a candy bar while letting the financial looters go free is hypocritical.
As we noted in 2011, failing to prosecute financial fraud – on either side of the Atlantic – is extending the economic crisis. In 2012, we pointed out that European (and American) governments were encouraging bank manipulation and fraud to cover up insolvency … trying to put lipstick on a pig.
As a result, Europe is still in a depression … and America has the highest levels of inequality in history. And that’s killing our economy.
Postscript: Perverse money incentives are what led to the distrust in Ferguson police in the first place.
Did I miss any?
# 10 the tax codes
#9 forced transactions ie mandatory insurance
# 8 blatent fraud
#7 compliance fees.
#6 Immagration H1B and illegal.
#5 Trade policies
#4 Policing for profit aka piracy
# 3 Price fixing.
# 2 Monopolizing all industries by regulatory capture.
Mises DailyNovember 11, 2014Joseph T. Salerno
War is the outcome of class conflict inherent in the political relationship — the relationship between ruler and ruled, parasite and producer, tax-consumer and taxpayer. The parasitic class makes war with purpose and deliberation in order to conceal and ratchet up their exploitation of the...
How are they looting us all? Let us count the ways.
#1 debasement of the coin.
Thank you for putting some images in that do not require Java to see.
The advertising and forced Java popups have gotten so bad on ZH that I have to turn Java scripts off to comfortably read ZH.
Unaddressed point.
Yesterday I read snippets about how gold popped 200$ in a few minutes and then dropped.
What about the looting of America by the welfare entitlement culture-state? Sure, Lloyd, Jamie, and their merry band of bankers took a couple hundred billion. The the welfare state loots TRILLIONS each and every year.
U think they only got several hundred billion??
More like twelve trillion and counting.
All the welfare programs in all the states, including that one over in the Red Sea, Israel, in all the time since FDR nearly a hundred years could ever match what the jewish mafia on wall street was given without even having to go down to the welfar office, was igiven in 3 short years, and is being given every day with ZIRP and lending it at 5%.
You really really need to forsake your welfare entitlement culture-state mentality and embrace the fact that the uber wealthy have been permitted to go scott free, and that Eric Holder is an unindicted conspirator.
I wonder if those trillions had been created to begin the repair and new infrastructure improvements we are in dire need of all over the country if they had been earmarked to go to those great job creating purposes where we would be today instead of into the bank accounts of those black-eyed, black hearted, bastards disguised as the sons of Shem.
Your math is more than a little off. The bankers stole tens of trillions and continue to steal through quantitative easing, as well as through
debt-financing for bloated military expenditures.
Remember that the film, The International, pointed out that he who controls the debt controls the country, and bankers control us through debt.
Wars are not possible without debt financing, and banks provide that financing. And it is only with a fiat-based system in which endless money printing is allowed that debt can be accrued. Therefore, bankers are behind all wars, and they are the primary beneficiaries of those wars.
What's even more pernicious is that they didn't actually 'steal' anything, they arranged to gut the law the kept them from engaging in the type of activity---- that the separation of deposit banks from gambling houses---- was designed to prevent.
Gramm Leach and Bliley, aided and abettted by the most popular silver tongued rapist in chief did not veto that bill.
"There are more crimes committed in and around the courthouse hourly, than on our meanest streets, after dark".
Actually the welfare state was relatively cheap until the banksters crashed the world. To forestall riots and Every city becoming Ferguson, the welfare costs increased to keep the serfs quiet.
The Bankster were the orginal cause, don't mistake that!
Thing is, Wall Streeters are not rampaging through my mall, trying to pull me out of my car, or holding up my mom's pharmacy at gunpoint.
No. Instead they use Law Enforcement to steal your house and throw you on the street.
They send Armies to rampage through Foreign Countries looting and stealing their wealth....at gunpoint.
They willingly send people to their horrifying deaths so that they may profit. They even murder their own to cover up their horrendous crimes against humanity.
But that is okay because it is not happening to you and you benefit from the theft, right?
You know...as long as you are cut in for some of the loot, then that is okay, right?
Better get on the phone and tell them you're not happy.
Let us know how you make out.
owned
Not really. I am a little more explosive than that.
The real looting is happening everywhere. When a society gets corupted from the top down everyone is on the take.
...and the real killing
A man with a truer perspective than those ZH zombies crying "kill the mob who cries injustice lives".
Yeah, those dumb ZH zombies probably never stole cigars, attacked a cop and tried to take his gun and then charged him when he was told to drop.
Silly bastards.
With all the steroid addled cop-shoots to pick from, they manage to use one of the few where the guy was doing his job.
I guess you don't remember all the riots breaking out everywhere with the OJ Simpson aquittal?
Oh, wait...
Thankfully thru the actions of that 'peace' officer the streets are safer today.
Oh wait,....
How to transform an independent country into a banksters colony
http://failedevolution.blogspot.gr/2014/04/how-to-transform-independent-...
I guess that "borrow your way to prosperity" ain't working out so well.
At least you have plenty of company in the Neo-Keynesian paradise.
Uncle Sam might guarantee a loan from Goldy for a few $1.00 /yr leases on a few military bases.
Everybody likes the money military bases brings in.
Problem solved.
This does not change until the sheeple wake up in masses, organize and starve the beast.
The sheep have sat back and watched local law enforcement become militarized by the feds. What do they think they are gearing up for?
Go for it JR...
If you have a kevlar vest...
I'm right behind you.
The Ferguson looters and the Wall Street looters are two sides of the same coin. As one Jew told me once.
"When you come for us, which you will because we will never change what we do to you, we will throw the blacks out in front. They will be our army because they will do what we tell them to do because we have their leaders in our pocket."
How much real cash has inner city welfare cost us? The lost business revenue? The cost of jail and increased police presence?
Total welfare payments are over $1 trillion a year, and it has been going on for decades. The welfare for the 1% must stop along with the welfare for the bottom 30%.
Make no mistake the Ferguson looters along with the rest of the free shit army are just as bad as the Fed. To say otherwise is incredibly naive.
+10,000 Happy Thanksgiving! It ALL MUST CHANGE
Happy Thanksgiving? Surely you jest and it is written as sarcasm. Just what is there to be thankful for?
Do not even respond that I have lived to see another year. Because all which I have witnessed is human suffering on a scale that would make Hitler, Stalin and Mao feel justified. Am I to be thankful for that? Not only no, but hell no. There is nothing to be thankful for. Nothing.
Sorry, Tom, but I will give thanks. Having reached maturity, you should be well aware that things can always get worse. Be thankful for what you have.
Yes, you must have gratitude for all that you have, otherwise you are miserable by your own hand, and no one else is to blame. It heals your soul. Those of riches have corrupted souls and will never be at peace and I am also thankful for that and say go jump you fuckers....
It is not that they can get worse. You can wager that it WILL get worse and be on the winning side of that bet. In fact there are overwhelming odds that things will get worse.
AS for what I have? LOL. I have nothing but my mind. And it seems that I may have even lost that at times.
No. I will not be celebrating. Knock yourself out.
Put aside your many concerns and distract yourself from the dismal and abysmal reality. Enjoy "the Game" after you binge.
And think not about any of the World's...oh...how shall we say...less fortunate...yeah...good euphemism, right?
Things always get worse physically and then you die. Everyone has to do it.
My mother is dying and has physical pain for decades. She is being medicated and somewhat comfortable, so I am thankful.
Also I had a physical today and doc said they were aggressive with prostate exams, treatment etc. SO NO FINGER UP MY ASS. I am thankful, or did the doc decline the exam because he saw my head was in the way?
Tom, go read tolle's "power of now", three times like I did. You will realize your perception of what's real is all that matters.
At the end of the day you must realize you are exactly where you put yourself.
I was so upset in 2007 with the bankster debacle, playing into all this doom shit. Yep, I got generators, silver, guns, food etc, but with no neighbors that are prepared, at all, figure that it is only good for moderate emergencies. Why ruin a good "now" moment worrying about future events. No more fear for it has no useful purpose, EVER>>>
Our media presents a Theater of Multiple Deceptions. Ferguson is a playact to cause many to praise the totally corrupt legal system, its police, its courts, its grand jury procedures and to foment racial strife as a diversion.
The media's stock market theater promises endless profits, where a government sanctioned Fed endless props up stock prices without consequences. The government's justice system excuses all higher corruption because of the nobility of the banker's calling.
The media's theater presents war as the noble oblige of the USA. Superman, or Captain America, or some other hero, always saves America.
Life in America is in an endless theater, wherein the pick pockets steal, while the trusting audience smiles.
To quote Gen. Maximus Decimus Meridius:
"Are you not entertained?"
This asshole should be hanged for abusing the name "George Washington", founder of a once-great nation.
SIC- you are obviously in the financial industry and have a chip on your shoulder. What is it about this post that riles you so? It simply highlights that the financial industry has a free pass. That looting is allowed when it is done by those who wear suits. Is it the comparison that hurts? OK- maybe this will help. It takes a lot more brain power and planning to loot in the financial sector than it does to loot in the streets- which is pure brawn and impulse. Does that make it feel better? Either way SIC- it is looting.
How so? A lot of what he says is truth.
So you support the collective treatment of the people of this country by bankers and politicians with the largest jar of Vaseline the world has ever seen?
They only use the Vaseline so the ground glass will stick.
I doubt you know much about our beloved present day G.W.
And, you up voted yourself, you douche.
I very much doubt you understand what Socialism is.
It's actually pretty simple.
You forcibly take money from a producers pocket and put it in a non-producers pocket.
Voila.
Socialism.