At some point someone will talk… and that’s when things will get interesting.
The last four years have been something of a high-water mark for corruption in the US. Whether it’s Solyndra, Congress’s insider trading, MF Global, the countless pork spending bills from Congress, or any number of the other hundred or so incidents that have made decent ordinary people outraged, we’ve definitely entered a period in which everyone knows the deal: the power elite live by a different set of laws than the rest of us.
A record 64 percent of American adults surveyed by Gallup in a poll released Monday rated the honesty and ethical standards for members of Congress as "low" or "very low.
The question all of us are thinking is “when will this change?” The answer has much to do with the nature of corruption itself. Corruption is only possible if the benefits to the parties engaged in it far outweigh the potential consequences.
However, as soon as the potential consequences become real, that’s when everything changes: people start talking/ confessing, and the corruption begins to come unraveled.
We had a taste of this with Ron Blagovich and Jack Abramoff. We’re going to be seeing more of this in the future as well. And it’s going to be the debt deleveraging that forces it.
Let me explain.
For much of the last three decades, the political process in the US has largely consisted of politicians winning votes by promising various social programs and benefits to voters. Once in office, they then showered their high level donors and corporate sponsors with various goodies and handouts through bills and various no-bid contracts, while throwing voters a bone through the various social programs they promised during their campaigns.
This whole game was made possible by the fact that the US could find the necessary funding to meet the near-term needs for the welfare programs promised to voters and there was enough financial largesse to permit the various handouts to corporate sponsors and other crony capitalists.
However, as the great debt implosion picks up steam globally and politicians are forced to renege of various promised social programs (the money simply won’t be there), this game of “vote for me and I’ll give you these handouts” will end.
When this happens, the crony capitalism and rampant corruption that has come to define American politics will change dramatically. Various parties will find that the benefits of “not talking” will no longer be there and they will try to broker deals with authorities and the general populace by going public about the various shenanigans that have been going on.
Let me put this in even more straightforward terms, once there becomes a very real chance that a Wall Street CEO or member of Congress might go to jail, the confessions are going to start coming fast and furious.
This will have a seismic shift on the lobbying/ crony capitalism/ back-room deals that currently define American politics. That shift is already beginning (note that Goldman Sachs’ CEO hired a defense attorney and Ben Bernanke is trying to present himself as a man of the people). Also, consider the recent “slip up” by an MF Global executive under oath.
Granted, we’re not yet at the point where people area actually getting nailed for the crimes they’ve committed (these seismic shifts take years), but we are getting to the point that those “in the know” are preparing for future litigation and lesser figures in the corruption game are starting to come forward and occasionally slip up during their testimony.
Do not be mistaken, the time of cleaning house is coming. It’s only a matter of time. And the debt market is going to be what forces it, just as it will force the necessary purging of the rotten banks and the insolvent financial system.
And when that happens, we’ll finally begin to start fresh and build an economy with real sustained growth.
For more market and geopolitical insights, swing by www.gainspainscapital.com [11]. We offer a number of Free Reports designed to help investors prepare for the necessary restructuring that is coming to the economy and the capital markets.
Best Regards,
Graham Summers
PS. I am not naïve and do realize that corruption will always exist on some level. I am merely talking about the Fall of Rome-like levels of corruption we are witnessing today.