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xcurmudgeon

Lemmings and Sheep

by: Teddy Goodson

Tue Mar 09, 2010 at 23:42:31 PM EST


( - promoted by Teddy Goodson)

Are we, the American people, sheep, stupidly deluded repeaters of talking points we do not really understand, baaing trustingly after cruel masters who clip us over and over of all our pelf?  Or, are we Americans more like lemmings, blindly and frantically swarming over the cliffs of a broken system, unable or unwilling to see where we are headed, convinced we can continue doing as we've always done, following nose-to-tail in what we believe has been a heretofore successful script? Fair and balanced, consider the following, and you decide:
Teddy Goodson :: Lemmings and Sheep
After Wall Street blew up the global economy, we have been offered a multitude of explanations, starting with absolute denial that anything really happened, that if anything did happen it was definitely not the fault of Wall Street and the little hiccup of "adjustment" would soon be over, that if Wall Street was somehow implicated it was actually the mortgage brokers who did it, and they wouldn't have made all those bad loans but for the fact the Clinton government forced them to lend to people who were not qualified and should not have been pretending they were qualified, and if they were not qualified they should not have asked for the money so it was all the fault of those minorities---- never mind the Bush "ownership society" which also encouraged those liar loans and created unimaginably huge profits for lenders who forced naive borrowers into strange new high-fee loans instead of ordinary low-fee loans for which they were actually qualified---- and anyway, it was the innovative quants on Wall Street who financed globalization with all their exotic new financial instruments based on the booming housing market that turned Wall Street into the whole world's financier and enabled American companies to participate in making incredible profits by developing the third world and financing wars overseas to Save Capitalism, extend the benefits of liberty (that means, American-style capitalism) and eliminate threatening Islamist terrorists and dictators everywhere who hate America and thus  protect our way of life including ready access to oil and besides, the Wall Street institutions are TBTF (Too Big To Fail) no matter what, and any problems were actually caused by too much government regulation because the same members of Congress responsible for regulating us into the crisis are now trying to regulate us out of it, and....  

If you got lost somewhere in the middle of the preceding rant, do not feel bad; the Powers That Be never intended to be coherent from the get-go, just to jerk your chain and keep you distracted and confused. It all provided a bottomless well of talking points for the system's apologists in both political parties.

The one constant in our current economic morass is, indeed, Wall Street.

Cutting through the froufrou it is clear we have just lived through a gigantic raid by barbarians, an enormous transfer of wealth from average Americans to the pockets of those same Wall Street masters of the universe financiers and their counterparts around the globe, with nice dribbles and drabs flowing into the always open and greedy mouths of such capitalists as clever health insurance execs and international oilmen.... in short, the new global elite. The rape continues, by the way; "they" must believe we still have a few pennies left, and they want them.

When the black swan of collapse arrived, the first reaction was triage, save the sacred system, so: marry off Bear Stearns overnight, kill off Lehman Brothers, nationalize AIG, force a shotgun wedding for Merrill Lynch, and pump billions into the savable favorite children like Goldman Sachs. This was the policy of both Bush and Obama. Naturally, some of the attending paramedics and most of the American public, shocked at the bill, demanded some sort of reform to re-structure the system, a kind of vaccination which would prevent a recurrence of the illness. Senator Chris Dodd therefore proposed that bank regulation be moved from the Federal Reserve, notably unfriendly toward consumers and historically lax on regulating, to a separate, free-standing new Consumer Protection Agency designed specifically to protect consumers.

The banksters are so far blunting all such reform efforts: the bipartisan compromise has arranged for banks with more than $100 billion in assets (i.e., the very ones most needing supervision, including all 19 recipients of TARP money) to stay under the Fed.  The promise is that, in the future, big banks will be "allowed to fail"---- but the reality is that most big banks are traders so embedded in the global system with foreign counterparties, they could never be shut down in an orderly fashion, as explained by Yves Smith in nakedcapitalism.com.  According to Smith, even if "Lehman 2.0" were allowed to fail because of political expediency, the harsh results would spook politicians into much greater bailouts the next time.

So far, the system remains unchanged. So far, banksters are back to their casino-like old tricks, and are not lending to Main Street small businesses. So far, the touted recovery is on very unsteady legs, shows little to no job creation (just like the 2001 jobless recovery), consumer spending consequently is still low, and the whole shebang may not therefore be sustainable. Commenter Andy Xie has pointed out that "regulatory reform is a key precondition to a sustained recovery." No real reform, no real recovery.

Instead, we are presented with the narrative that says we did not follow the rather brutal socialist Swedish model of the 1990's when they nationalized their failing banks, restructured them, and re-privatized them---- but the Swedes in the 2009 calamity did not follow their own earlier course, either. No, we are more like Japan, which had its own collapse twenty years ago, and tried to save the system with bailouts and Keynesian-style stimulus spending. Japan has stimulated until its national debt is 200 percent of its GDP, but its economy is still in the dumps. Where the Japanese went wrong, it is claimed, was that they did it in slow motion, too little too slow. What we should do is vigorously "stimulate until prosperity returns." The truth, says Smith is that "what ails Japan is a lack of reforms, not stimulus...."

One problem here is that the U.S. under Greenspan stimulated repeatedly to end the 2000-2001 downturn, but that method is just plain not working so well this time around. Another problem is that we should finally accept the fact that Obama is not just "ill advised;" he chose his advisors (Geithner et al) because he agreed with their Wall Street Free Marketeering approach. Do not look to Obama for meaningful transformation of the financial sector.  

What we need is reform, not stimulus. Given the failure so far of even the mildest of reforms of the financial sector, the failure of cap and trade, the failure of the public option and other endless problems with passing any health care legislation, one must ask: Under our current system, can we ever create any meaningful reform? Congress repeatedly shows evidence of being bought and paid for. Lou Dubose in The Washington Spectator for March 2010 says Senator Charles Schumer was paid $15,105,046 by the FIRE industries (finance, insurance, real estate); Senator Dodd, $13,985,872; Senator Evan Bayh, $4,410,497, and so it goes---- all this is before the Supreme Court decision permitting unlimited political contributions from corporate treasuries. Status quo forever!

How about tackling the greedy big bullies directly? Some have proposed breaking up the TBTF institutions like Citibank and Bank of America: Sell off their credit card operations, for example, strip them of their retail banking including those FDIC-insured deposits with which they like to gamble, maybe even separate their quant-ridden trading desks into separate entities---- perhaps even be honest about their situation and, one weekend, send in the Feds and declare them bankrupt outright (they really are), treating them like any little local over-extended bank or savings and loan.

To be sure, there are plenty of "reasons" this cannot work because, again, Citi and BOA and the other TBTF are so inextricably bound up with counterparties worldwide. Citi, says Ives Smith, has $500 Billion in uninsured foreign deposits, and all of them form the core "global debt market trading machine," and it requires every part of the subject institution to bring off such mammoth trading.  Meddling with them would truly collapse the world economy (and undoubtedly end American dollar dominance forever---- not that China, Russia and so on are not already working toward that end, you understand). On the other hand, maybe the federal government could spend money directly guaranteeing the trades while they were unwound or the trading desks were sold off, instead of making block grant bailouts of the TBTF institutions whenever they cried for help. International finance is a modern Gordian knot. Yet geographically limited nation-states must somehow figure out how to regulate the shenanigans of these global giants, or a modern bigger barbarian will come along and slice the knot, that is, use violence to "fix" it, and not to the advantage of the average citizen.

Well, stymied again.

Any other no-reform ideas to achieve economic recovery? Why not quit fiddling with the banks and just divide up the billions in stimulus and give every citizen their share, letting each one decide how to spend or invest it? Straight across the board, no income or age qualifications.  We could hardly do worse; it sure would pump up the economy almost instantly, and it would be a typically American short-term burst without bothering to think more than one move ahead.  Talk about privatization.... but, even so, Republicans would never, ever, agree.

So, which is it: lemmings or sheep?    
 

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Multiple choice
You deserved more than two choices to describe the average American's sense of civic responsibility. There's sheep, there's lemmings.... but what about obese sloths who cannot be bothered to do much of anything, no matter what? There is also a small group of wolves in sheep's clothing who roam the landscape, feasting on the unwary, and we can guess who they are.

It's small comfort, but I am sure the basic citizen will survive the continued loss of the dignity of personal freedom, which he has been too self-occupied to bother to defend, and who is likely a little confused about who it is nibbling away at his rights. This "sloth" will sink deeper into his private life, anxious about making enough money or winning enough lotteries to buy beer and the latest television set so he can watch his favorite bread and circuses on the screen. He will have no time to do anything else but perhaps bellyache and gripe. Hasn't he always?


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