Regardless of one’s politics, a re-enactment of Glass-Steagall to separate the investment banking institutions from the commercial banking institutions (lending to businesses, infrastructure, the real economy, rather than speculating with Monopoly money) is an existential necessity. Since 2007-2008, the majority of the major Wall Street and City of London banks have only been kept afloat thanks to hyperinflationary policies whose effects we are now only beginning to see. These banks are sitting on a quadrillion dollar derivatives financial bubble. The Wall Street and London banks are effectively zombie banks only being kept alive by the repo-market loans and artificial interest rates. They would have all been vaporized a long time ago with these insane bailouts, which are simply bailouts of worthless financial paper. Farmers, industry, the average home owner, no one got a bailout, but these guys have received tens of trillions of dollars. It’s the biggest fraud in history.
There must be an immediate bankruptcy re-organization of the financial system. There is no way to plug the financial black hole created by these private merchant banking interests. Nothing short of REAL fascism will have to be imposed to keep this system going for much longer. And that’s exactly what we’re seeing now with the surveillance beef up and militarization of the capitol. Those who can’t see the writing on the wall are morally unfit to survive at this point.
Glass-Steagall needs to be brought back immediately.
When President Obama took office in 2008, he promised "real change." He had an opportunity to come down of Wall Street and the TBTF commercial banks with fire and brimstone; nationalize all the bankrupt banks, fire the managements, wipe out all their stock and options, recapitalize the banks, appoint trustees, clean up the damage, enact tough legislation, re-float the banks five years later. But he totally supplicated himself to Wall Street. Really, Timothy Geithner takes over as Treasury Secretary from Hank Paulson?! Continuing the domination of the government by the "great vampire squid!" Maybe after the NEXT crash, which is surely coming, an administration will do what should have been done in 2008.
That was never going to happen. One of the perps was Jon Corzine. He was untouchable which made the rest of the perps untouchable. By contrast, the malefactors of the S&L crisis were aggressively prosecuted.
«When President Obama took office in 2008, he promised "real change."y
This is how he was described in a book ("Class notes" by A. Reed) in 2001, several years before he became president:
“In Chicago, for instance, we’ve gotten a foretaste of the new breed of foundation-hatched black communitarian voices; one of them, a smooth Harvard lawyer with impeccable do-good credentials and vacuous-to-repressive neoliberal politics, has won a state senate seat on a base mainly in the liberal foundation and development worlds. His fundamentally bootstrap line was softened by a patina of the rhetoric of authentic community, talk about meeting in kitchens, small-scale solutions to social problems, and the predictable elevation of process over program — the point where identity politics converges with old-fashioned middle-class reform in favoring form over substance. I suspect that his ilk is the wave of the future in U.S. black politics, as in Haiti and wherever else the International Monetary Fund has sway.”
When you say “re-float” do you mean privatize? The last group we should want in charge of banks is politicians. They have already created over $150TRILLION(some say higher) in liabilities, most unfunded. Block long scaffolds and a full week of hangings would send a clear message to any future bankers. No other incentive has worked.
“No matter how exalted a bank may have been, we all know that if assets were marked to market, the net worth of many of the giants of international banking would disappear. Nevertheless these banks are able to sell their liabilities in financial markets, because the buyers believe that they will be protected against losses by the central bank.”
Blissex - Instead of Defunding the police we should organize around defunding the banks.
IT can happen but voters need to organize and boil it into a POLICY that they demand that their elected leaders support. As long as all we are doing is complaining and there is no ACTION that is being demanded then the politicians are going to do what the banking lobbyists tell them to do.
Sanders leadership on M4A has changed the debate on Universal Health Care and we now have leaders in the Senate and Congress working to get something done. They are battling rich insurance companies so it wont happen over night but action is taking place.
We need a similar leader to fight the banks. Elizabeth Warren could be that leader as the banks hate her anyway.
The biggest thing preventing any of this is that Republicans voters do not vote on economic issues ever. They only vote on identity politics so their leaders give the rich and powerful anything (tax cuts to the rich, deregulation etc...) and everything they want and never pay a price at the polls...
«Republicans voters do not vote on economic issues ever. They only vote on identity politics so their leaders give the rich and powerful anything»
That is ridiculous: the majority of Republican voters and a large minority of Democratic ones vote exclusively on economic issues: bigger real estate prices primarily (a humour author even wrote that real estate prices are the american national religion), and also stock prices, and lower taxes. The republican coalition includes other lobbies too, but please read this article and quotes:
«The growth of the investor class -- those 70 per cent of voters who own stock and are more opposed to taxes and regulations on business as a result -- is strengthening the conservative movement. More gun owners, fewer labor union members, more homeschoolers, more property owners and a dwindling number of FDR-era Democrats all strengthen the conservative movement versus the Democrats.»
«But going into November, what actually saved it for the Republicans was the investor vote, which went heavily R. Why? One, they didn't blame Bush for the collapse of the bubble. They were mad at having lower stock prices and 401(k)s, but they didn't say Bush did this and that caused this. Secondly, the Democratic solution was to sic the trial lawyers on Enron and finish it off. No no no no no. We want our market caps to go back up, not low.
The 1930s rhetoric was bash business -- only a handful of bankers thought that meant them. Now if you say we're going to smash the big corporations, 60-plus percent of voters say "That's my retirement you're messing with. I don't appreciate that". And the Democrats have spent 50 years explaining that Republicans will pollute the earth and kill baby seals to get market caps higher. And in 2002, voters said, “We're sorry about the seals and everything but we really got to get the stock market up.»
«And then, our job as conservatives is to wake up every day and say how do we make more of us and fewer of them. And the left's position is the same. I passed out a series of trends here; I'd be very interested in whether people think I'm missing stuff. I would suggest the biggest trend is the number of people who own shares of stock directly. We've gone from 17 percent of Americans owning stock to up over 50 percent of households. According to Mark Penn, two-thirds of voters in 2002, 2004, somebody who owns at least $5,000 worth of stock is 18 percent more Republican and less Democratic. African-American, no stock, 6 percent Republican; $5,000 worth of stock, 20 percent Republican. Every demographic group gets better with share ownership. Rich, poor, all colors, all genders, with the exception of women who earn more than $75,000 a year, who are already thoroughly Republican and don't get any better. [...] The growth of the investor class – those 70 per cent of voters who own stock and are more opposed to taxes and regulations on business as a result — is strengthening the conservative movement.»
Bliss - your source, the two links you sent, are not from reliable sources and consequently your narrative is flawed in so many ways i can hardly name them all
Lets start with some hard facts on stock ownership in this country.
Today the top 10% of American families own 92% of the entire value of the stock market. That means that 90% of American families share in the value of only 10% of the stock market.
Thus when polled 2/3rds of voters in 2019 said the gains in the stock market had no impact on their financial well being.
So claims by Norquist, like this one, are NOT supported by the evidence:
"The growth of the investor class -- those 70 per cent of voters who own stock and are more opposed to taxes and regulations on business as a result -- is strengthening the conservative movement."
As for the equally preposterous claim that voters vote based on real-estate valuations again the evidence does not support such a claim. According to Pew the top 4 issues for voters this year are The Economy, Health Care, The Supreme Court and the Corona Virus.
The stock market is NOT the economy and given how 2/3rds of voters dont feel the stock market impacts their financial lives Norquists claims are laughable.
Voting records show that in January of 2020 hundreds of thousands of Republicans actually left the Republican Party continuing a 20yr decline in the number of registered Republican voters in this country.
I think that if you are trusting someone like Grover Norquist to inform you about voting in the US you are sadly misinformed. But hey, you are not alone that is for sure.
Tens of trillions? Sitting on a quadrillion dollar derivatives financial bubble? REAL fascism? Maybe there's not enough surveillance if this kind of bombast is acceptable!
Is this the first time you're hearing about the financial derivatives bubble? Remember the 2007-2008 crisis with all the mortgage-backed securities tied to all the defaulting mortgages? The biggest problem wasn't people defaulting on their mortages, it was all the MBS and CDO contracts built upon these mortgages, all the various mortgages fitted into nice little ''tranches'' and then ''secularized'' and sold as ''assets.'' This is what Americans have been paying for with 16+ trillion in bailouts...
All the budget cutting and austerity is based on a fraud, the fraud of people not knowing how much has been dished out to save the banks from all their worthless paper.
JP Morgan Chase and Co has an estimated 40+ trillion derivatives exposure. See ''It’s Now Official: The Financial House that Jamie Dimon Built Is the Riskiest Bank in the United States'':
''Among the biggest banks on Wall Street, JPMorgan Chase has the largest exposure to OTC derivatives, with $43.5 trillion exposure, according to the National Information Center data.'' (see the graph by following the link above)
Deutsche Bank has a similar magnitude of derivatives exposure as JP Morgan.
The reason the Fed and central banks are dishing out trillion after trillion is to prevent the unwinding of these monstrous speculative bubbles.
Recommended reading:
Federal Reserve Admits It Pumped More than $6 Trillion to Wall Street in Recent Six Week Period. This is before the pandemic even started. So the whole narrative about the pandemic causing some kind of financial crisis is itself completely deceptive.
This is no joke. The only real joke is that this is what Americans have been made to cover through all the bailouts since the 2007-2008 meltdown. And the problem is a lot worse now.
Hence the need for a Glass-Steagall separation of these behemoths. Several new banks will have to be created, one for the depositors, commercial banks etc... and then we will also have to create what are essentially ''bad banks,'' toxic banks which will hold all the worthless speculative paper. Naturally, these institutions will go bankrupt and disappear, as if before one's eyes...
Fred... The same people that are "warning" of the quadrillion dollar derivatives bubble blowing up the economy were "warning" us that Obama's deficits were going to create hyperinflation... Here we are 10yrs later, more in debt, and any economist who is not "on the dole" from some special interest group will tell you that DEFLATION is a far bigger risk than Inflation. And anyone that can't articulate why deflation is the bigger risk (look at Japan for 20+yrs) has no friggen clue about how the economy or inflation works in the era of fiat currency.
Not saying there may well not be a derivatives bubble. There may be. I am just saying, the people pushing this theory are conspiricy theory types that are wrong all of the time. Hey, a broken clock is right twice day and wrong the other 1,440 min of the day. I don't tell the time looking at broken clocks. nor should you.
Yes…. only a “conspiracy theorist” would talk about the derivatives exposure of the major banks.
Only a “conspiracy theorist” would point out that this was at the heart of the meltdown during the sub-prime mortgage crisis.
Nothing to see here, there is no bubble! Only Nostradamus knows the future!
All we can do is try to encourage consumption by pumping more money into the system!
Great plan…
Even if you believe that, you should still be supporting a break up of the investment banks and commercial banks so that in the event, in case there is another 2007-2008 meltdown, the population doesn’t have to foot the bill, neither through bailouts, nor “bail-ins” (Dodd-Frank Title II-Orderly Liquidation Authority). If you know what you’re talking about you should be in support of a Glass-Steagall banking separation. Everyone should.
David - <<Yes…. only a “conspiracy theorist” would talk about the derivatives exposure of the major banks.>>
Not what i am saying at all.
I am saying that only "conspiracy theorists" view derivatives as the potential CAUSE of Hyperinflation....
Derivatives that are not properly regulated, as was the case with the 2008 crash, are a HUGE systemic risk. Full Stop
There is a good sized cottage industry in media pushing narratives around INFLATION and Hyperinflation. And it comes in many forms. But the goal is not to manage the global economy it is ONLY to sell GOLD... IT is a scam... And the clown you sent as your PROOF is part of it. He writes for media outlet that is proven to push FALSE stories and half truths. No actual experts follow anything that clown says... And the fact that you are sending links to him as your "evidence" shows you don't actually know what you are talking about any more than someone that reads Misses knows about economics.
"Radio and TV personality Glenn Beck hawks gold coins as a business, and sells the gold standard as America’s salvation. President Ronald Reagan’s budget director, David Stockman, has written a 700-page jeremiad lamenting the departure from gold as the root of America’s “great deformation.” Financial magnate Steve Forbes has turned Forbes magazine into a tool of gold advocacy. And the conservative pundit William Kristol has now joined the chorus."
David - Stop consumer propaganda from people getting paid to push gold sales. Stick with sources that have a real track recored for not "predicting the future" but laying down all of the facts rather than cherry picking facts to push a narrative.
With or without hyperinflation, the same systemic problems and financial bubbles exist. That’s the crucial point. What exactly will happen as these things start to unwind once the Fed and central banks can longer keep up their money-printing? No one knows for sure.
What we do know is there is a boundary condition. And whether you believe the ultimate effect will be deflation or hyperinflation doesn’t change the underlying problem: all the banks are holding trillions of worthless toxic paper and they have been requiring emergency bailouts even before the Pandemic started ie when everything was still “fine.” The media is virtually silent on the fact that all the major banks having been getting trillions just to stay afloat today. They are silent because it’s probably known that at this point anything could trigger a panic, let alone hearing the banks received 6 trillion in just a few weeks even before the pandemic began, meaning there was something much more systemic.
To quote Pam Martens from JANUARY 2020:
“The Fed’s minutes also acknowledge that its most recent actions have tallied up to “roughly $215 billion per day” flowing to trading houses on Wall Street. There were 29 business days between the last Federal Open Market Committee (FOMC) meeting and the latest Fed minutes, meaning that approximately $6.23 trillion in cumulative loans to Wall Street’s trading houses had been made in that short span of time.
During the 2007 to 2010 financial collapse on Wall Street – the worst financial crisis since the Great Depression, the Fed funneled a total of $29 trillion in cumulative loans to Wall Street banks, their trading houses and their foreign derivative counterparties between December 2007 and July 21, 2010. At the pace it is currently going, it would eclipse that $29 trillion before the middle of this year.“
There was massive asset inflation - the key to Obamanomics is the same as the GOP. If you only give money to rich people, you inflate bubbles, but since it never makes it to wages, it doesn't move CPI.
And plenty of economists, Krugman among them, have stated a higher inflation rate of 3% is likely better for growth.
Matty - Krugman is right in my view. Sustained wage growth would create higher, though not damaging inflation. It just depends on how we do with productivity. High productivity growth can pay for wage growth and thus keep inflation lower.
Call me a softy, but i think Obama was not well enough informed on economics to realize his advisors were laying out a rescue solution to the housing crash that, like the Republicans in 2020 would inevitably lead to shifts in GDP from the poor and middle class into the pockets of the rich and thus create asset bubbles.
In any case the train wreck that is our banking system may one day cause tax payers higher debt but there is no evidence that they will cause higher inflation. That is just propaganda from the Gold selling industry aimed at a small segment of Americans
David G... the policies are not hyperinflationary they are Deflationary... Huge difference. Giving banks money at zero charge and letting them lend it out is absolutely evidence these banks are zombies. But lets make sure we know the huge difference between hyper inflation and deflation
But for different people: high inflation (prices doubling in 7-10 years) of asset prices for "investors", making things like housing and pensions unaffordable to most people, and stagnation of wages for workers, to reduce the cost of living and increase the profits for "investors".
Bliss - You do realize that asset valuations are not included in inflation numbers. Thus, as we have seen for 40yrs now, assets can inflate in value with out causing interst rates to go up. Where as prices of consumer goods going up can cause the cost of money (IE interest rates) to go up...
If we look at the parallels between today and the lead up to 1923 Hyperinflation in Weimar Germany, all the parallels are there… They’re doing the exact same thing.
Gap - Tyler Durden is a pundit of ill repute. He is neither an economist nor even a well informed thinker. He writes to get clicks by telling frightened people that he knows the real problems are when his track recored shows he is laughably misinformed on almost everything. He's the Rush Limbaugh of finance. But hey, it gets him clicks and he get paid... Just like Rush..
You’re talking a lot of theory, but I asked a simple question which you should be able to answer. If you can answer the simple question, we could cut through a lot of the tit-for-tat stuff. And for the record, the article cited from zero hedge is not written by Tyler Durden lol, it’s written by Mathew Ehret, who frankly has a much better analysis of the economic crisis than these financial gurus and economic priests that you talk about. But if you like them and believe you understand the issues, you should be able to answer this simple question:
You’re the president, it’s 3:00am and you get the call that the financial markets are about to crater at the opening bell with 80 trillion dollars that will be wiped out in the span of 6 hours. What do you do? What would your financial gurus do?
You’ve been talking a lot of theory, but just like a scientist throwing around all sorts of theories, it takes an actual real-time experiment that can put it to the test. So I repeat the question:
You’re the president, it’s 3:00am and you get the call that the financial markets about to suddenly crater with 80 trillion dollars that will be wiped out in the span of 6 hours. What do you do?
If you know what you’re talking about you should be able to provide a coherent and systemic answer to that real life scenario.
I think the immediately foregoing conversation is about the old world -- a world where distributed information made some difference, i.e. ''markets''. That world started to come to an end in 1987, when Mr. Reagan told the specialists at the NYSE that they could borrow all the money they wanted as long as they kept the markets from cratering. In other words, a new principle was established: although specific persons could get wiped out, investors as a class would never be wiped out. Today, we call this principle ''too big to fail''.
After that there were two kinds of money: poor people's money, which was based on labor, which might be called 'the real economy''; and rich people's money, which is created from nothing and is mostly unrelated to labor, goods, commodities, and so on.
This works as long as you keep the two kinds of money apart. However, if there is a crossover, the poors' economy gets too much money and there is inflation, which is politically unpalatable and may also offend foreign lenders. Then something breaks. A good example was the crisis of 2008-9, which actually started around late 2005. Interest rates went up, adjustable rate mortgages couldn't be paid, many defaulted, and after awhile the system froze up. (Plus, there was a lot of fraud going on, but there always is.) Obama and company thereafter put everything back the way it was, so it could happen again, I guess.
Now, however, whatever is going to happen is in the heads of a small number of people, unlike the last time around when there was still some market/public influence. The poors' money is still based on labor, but the rich's money is totally fictional and if it rushes into the poors' economy they'll be wiped out. There are already dangerous crossover points, for instance, real estate as before. At a certain point the poor can't pay enough, borrow enough, steal enough to stay in the game. But people mostly have to live in a house. There's not enough room under the freeways for all of us. So then what?
So there is a reason for all the military, all the militarized cops, all the surveillance, all the propaganda. Exactly what the big guys will do is probably planned already, but if not I'd guess they're working on it, and you'll find out about it when its moment comes. Glass Steagall and so on are so 20th-century,... or, as George Carlin used to say, ''They got a club, and you ain't in it.''
If you are Sanders or Warren you have put on place a far different economic advisory team than Obama or Trump or Biden put on place so your choices for action are far different than Wall Street and the Fed over the last 30yrs
David G. - My apologies, you are right, I got the authors name wrong, I did click on Eherts narrative.
No he is not correct. Actual economists like Paul Krugman and Joseph Steiglitz, not pundits like Eherts, back in 2010 had the empirical evidence that the problem in the EU and US economy after the housing crash was a lack of demand. Government spending pumps up demand and thus boosts economic growth.
Eherts argument today in 2021 is the exact same as the arguments in 2010 claiming the world was about to have hyper inflation because US and EU were growing debt so rapidly. He has not learned from the mistake people like him made back then. We did not see anything like inflation much less hyper inflation back in 2010. The evidence is clear on that. What the evidence also shows is that what we did see was slow growth. And the cause of the slow growth was that governments spent to LITTLE not too much to increase demand for goods and services.
Fool me once shame on you fool me twice shame on me.
Demand was the economic problem then and it is the problem today. Government spending increases demand and thus helps the economy grow faster(Steiglitz 2010) Increased government spending doe not have to cause deficits. All you have to do is TAX the people with the money.
We chose policy that cuts taxes to the rich which leads to higher deficits.
Eharts is a pundit and not an economist. His argument for higher inflation is the same as people like him used in 2009 and is refuted by empirical evidence and the research from Nobel prize winning economists like Steiglitz and Krugman he told Obama in 2009 his policy was TERRIBLE and they were ignored by Geitner and Paulson.
Your question is foolish. You go the emergency room with a 106 temperature and the doctor must first know WHY you have that temperature if she is going to cure you.
If you cant include the WHY in your question then you there is zero chance that you know the right answer because there is none
The doctor must first bring down the body temperature to avoid frying the brain. That happens at 106. Second she must collect additional information such as blood pressure in all four limbs, a STAT CBC, perhaps a STAT CMC and a quick neuro exam. She then probably has sufficient information to pursue why.
If the patient is in pain she may administer an analgesic to bring down BP and temp, she'll continue a gross exam and do a bunch of other things.
At least, that's what I learned in medical schosol.
The difference this time is that every major central bank around the world (and most of the minor ones, too) are all degrading their currencies as fast as possible. It’s a competitive race to the bottom. So we are all in the pot together and the water is warming up. Abandon fiat currencies for your own protection.
William - Fiat currency did not cause the US to under tax its self thus creating massive deficits. Fiat currency did not force the US to wage a wasteful war in the middle east. Fiat currency did not cause bank regulators to turn a blind eye as he CDO market blew up our economy.
Tax cuts, war and unregulated banking are the PRIMARY causes of virtually all of the debt the US has created since the budget surpluses of the late 1990's. And none of that was caused by FIAT money it was ALL caused by corporate control of the Democratic and Republican party.
Policy in the US and Europe is the reason we have so much government and private debt, not fiat money. The empirical evidence has been produced on how the and Europe handled the stock market crash in 1929 and the government trying to balance the budget made this far worse. Fiat money would have reduced the impact to GDP of the 29 stock market crash. I'm not giving my opinion here, every economist who is not Shilling for corporate interests would agree with me, including the conservatives at Hayak an Friedman's University of Chicago. Infact University of Chicago regularly polls the top economists in the country and 40 out of 40 agree with me that Fiat is better than Gold Standard when the economy tanks whether it is because Wall Street floats a bunch of tech stocks that are never going to make money (2001), Wall Street issues a shit load of worthless bonds (2008) or a Pandemic (2020). And the result is that when the fed used FIAT money to flood the economy with cash the economy recovers far more quickly than if we were chained to something like Gold or the newest right wing scamp crypto currency/ Block Chain currency.
Nothing i am saying is even debated by the top economists. And as the three examples i noted above have proven, flooding the economy with cash reduces the drop in the economy that, as we saw after the 29 market crash, results in labor producing less and thus real declines in wealth.
YOu do realize that despite the Pandemic in 2020 the US economy produced as much as it did in 2019. And in 2021 will see huge growth. That is the opposite of what happend in 29 when Hoover tried to balance the federal budget by slashing spending. You do know that, right? None of this is possible with out Fiat Currency...
Debt is NOT the problem with the US or global economy. A lack of consumption is the problem and it has been for 30+yrs. Again none of this is even debated by the experts. What IS debated by the experts is HOW to get consumption higher. Higher consumption means more products and services sold and thus faster GDP growth. What is debated is HOW to increase consumption given that the decline is caused by too much of GDP going to too few people.
Fiat currency may not have been the *cause* for these misadventures, but a fiat global reserve currency/petrodollar most certainly *enabled* them. Also, it's simply a gross misnomer to characterize the crypto/blockchain world as 'right wing scam' - my first hand experience shows that this realm includes all wings. To avoid stepping in a can of worms, I'm not stating any of this as an argument against MMT. I'm personally somewhat agnostic about MMT vs hard money approaches.
Hier - The challenge with hard money, as we learned during the depression, is that when the economy tanks for what ever reason if workers lose their income there is no mechanisim to push income out to them. That drop in income slows spending in the economy and creates even worse damage. There is tons of research on this.
Fiat allows the government to push money out to diseffected workers thereby keeping money flowing through the system and reducing the harm to the economy. In 2020 GDP was what it was in 2019 even though lots of workers stayed at home collecting checks from the government. That is why recovery of the economy. (not small businesses and workers impacted by covid) is going to be fairly painless.
Fiat is not going anywhere as long as the US remains the reserve currency to the world. And given the 40yr shift in GDP out of the pockets of the poor and middle class and into the pockets of the top .1% (Piketty) there is tons of cash sitting on the sidelines looking to be parked. Treasures are the safest thing on the planet today. Add to that Oligarchs in Russia and China getting their cash out of those authoratarian countries and the Treasury will be flush with cash as long as the US does not implode on itself and stop being the reserve currency...
Shifting GDP from the top .1% to the poor and middle class creates more consumption and stimulates the economy, as we have seen during Covid. That can be done in a lot of ways and the conservatives and liberals both have ideas that are better than what we are doing to day. The only BAD ideas are the ones that Amazon and Walmarts lobbyists are handing to Congress to keep GDP flowing to the top .1%
1. Weimar funded a war they LOST with borrowed money.
The US has a military that is 5Xc stronger than the next 10 countries combined.
2. Due to 40yrs of growing income inequality shifting GDP from poor and middle class to the the top .1% the world is swimming in cash. And that cash is desperate for a safe place. Weimar was not a safe place to loan your money post WW2. The US today is the safest place.
3. Deflation is a far higher risk in the US in 2021 than hyper inflation. The Japanese example is much closer. Zombie banks and tons of debt and low wages... The US has it all....
I called you out on that because the body of evidence on this is overwhelming. Deflation has been the biggest threat to the US for 20yrs now not inflation. Unless the US loses our position as the Default Global currency our debt is not the problem, GDP growth is our problem.
Basically all true. The debt load is now so burdensome that taking on additional debt does not contribute to GDP. The huge debt is a drag on economic growth. In that sense it is deflationary. On the other hand, the vast money printing by all central banks since 2008 is definitely debasing currencies. The fact that money printing is not working can clearly be seen in the amount of excess reserves that banks are pushing back to the Fed, now $1 trillion, in the RRP program. So who knows what the future holds? I certainly haven’t found anyone who has a clue. Perhaps high inflation will follow a deflationary period? All I know is, anyone who remains in fiat at 0% interest rates is becoming poorer by the minute!
William - The current debt load is in no way slowing GDP growth. The government is borrowing at near zero % interest.
The stagnation in the economy has nothing what so ever to do with government debt.
There are books written on this by Noble prize winners like Steiglitz and Krugman (Who Geitner and Paulson ignored in 2008) showing that what is slowing the economy is low consumption caused by increasingly lower wages paid to poor and middle class workers who are also consumers. Their consumption is now being eaten up by credit card interest and debt and RENT seeking industries like College, Housing and many consumer goods.
Combine that with growing monopolization and financial globalization of industries we have seen less and less competition and thus slower and slower Productivity growth, which is they KEY to growing in any economy (PRODUCTIVITY GROWTH). Again, books written on this and not disputable in the least. Not a partisan issue just a economic issue.
Right after WW2 the US had as much debt (as a % of GDP) as we have today and no where near as much CASH sitting on hand with rich people. Financially the US is in better shape today than we were after WW2..
After WW2 We reduced the debt as a % of GDP by GROWING fast. Really fast.
That growth was fueled by productivity gains. We had far fewer monopolies and far more small and medium businesses which created great competition and great innovation which led to real productivity growth. Monopolies don't have to compete and as such innovate far less than competitive markets, hence slower GDP growth.
Everything from the national highways being built out to woman coming into the workforce to war time technologies being converted to civilian use resulted in rapid growth of a middle class and thus rapid increase in demand for goods and services (IE GDP growth). It was as echo system that produced the greatest increase in wealth the world has ever seen...
Today we need only shift GDP from the top .1% back into the pockets of the poor and middle class and break up the Monopolies that are crushing productivity growth and we will see higher demand for goods and services and thus faster growth.
There are great ideas for doing this from conservatives like Luigi Zengalis and Richard Thaler to liberals like Joseph Steiglitz and the late Alan Kreuger.
It is not a partisan issue it is a political issue because Elected leaders are more focused on serving corporate masters than growing the economy if they want to hold their office.
How to get growth and manage the debt is easy the politics is much more difficult.
If the US stops being the reserve currency of the world then the Debt level can turn the US into Weimar. But that is not going to happen unless something very unexpected happens. Chinese blillionaires and Russian Oligarchs along with American and European billionaires all want their money held in US dollars so zero interest rates are not going away today any more than they were going away in 2009 when we had to load up on debt.
I think that ultimately the best way to situate these kinds of discussions is from the standpoint of the solution. Many people might agree on the general nature of the problem, but the real axiomatic issue is revealed when we find out what the person believes should be done.
Arguably, the soundest approach is common sense Glass-Steagall bankruptcy re-organization of the system, followed by the issuance of new credit linked to long-term investment in infrastructure, energy (including thorium and breeder reactors), industry, with Lincoln-style Greenbacks as the new national credit mechanism.
I could go about taking issue with some of your individual arguments, including yo claims about the state of the bloated US military and all the endless wars, but what if I just asked you: ok, even if you’re right, how does that change the need for an immediate Glass-Steagall bankruptcy re-organization of the system? How does that change the necessity of separating out the investment banking institutions from commercial banking institutions? How does that change the fact that once you have such a bankruptcy re-organization, you’re going to need to issue new credit tied to productive long term investment?
If you support a Glass-Steagall banking re-organization of the system, that has a lot of implications and consequences. If we don’t have such a banking reorganization and separation, you’re talking about a systemic collapse of the Trans-Atlantic banking system.
You’re the president, it’s 3:00am and you get the call that the financial markets about to suddenly crater with 80 trillion dollars that will be wiped out in the span of 6 hours. What do you do?
If you know what you’re talking about you should be able to provide a coherent and systemic answer to what you would do.
David - Agree our military is bloated and near useless. But it serves its purpose. It maintains the US as the worlds reserve currency.
So yes i would support something like Glass Steagall but for the 21st century which means, like our Monopoly laws, needs to be updated.
As for the 3am call lets just say if i have Tim Geitner and Hank Paulson as my advisors i will make the wrong moves. All they care about is protecting capitol owners.
If i don't know WHY the financial markets are cratering i cant be expected to make rational choices. And if my adivisors are CAPTURED by the banks then i cant get good advice from them.
If you neglected to identify WHY the financial markets are cratering i seriously doubt you know the right solution yourself.
Its like a patient going into the emergency room with a 106 temperature, it will kill them for sure. Quick, tell me how you are going to CURE them? Hint: First find out what the CAUSE is. With all due respect a question that shows very little knowledge of the global finance or economic system.
There is a short and long version of the answer to your question about the causes. Regardless of historical in-depth analysis, the obvious problems that need immediate response can be stated relatively simply in the following manner:
The private merchant banking system has been looting the physical economy and productive sectors of the economy for over 40 years of globalization. In order to feed the increasingly large and cancerous financial growth that has resulted from the specutive orgy run by Wall Street and the City of London, more and more of the income streams of the productive sectors of the real had to be looted and diverted away from real productive investment into this financial casino game, largely run by Wall Street and the City of London. The flows of investment were increasingly diverted into speculation, creating bubbles, bubble atop of bubble. With the introduction of financial derivatives and other financial instruments by the wizards of Wall Street under Allen Greenspan and the oligarchs that he served in the late 80s (when financial craters were already appearing), they were able to create new instruments where one could now place a bet on a bet on a bet on a bet on a bet on a bet etc… this created a whole new world of speculation, which in order to keep growing, required more and more of the income streams of the population to be diverted. This was achieved through all sorts of deregulation, all the way up to the removal of Glass-Steagall under the Gramm-Leach-Bliley Act, where now the investment banks could directly use the vast store of deposits and savings within the commercial banking system to create evermore vast and great bubbles in order to keep the speculative casino system going.
We are now at the end of that game. There is no way to pay the monopoly debts that have been created by this game.
Were I an advisor to the president, I would say “Mr. President, you need to call for a banking holiday, we need to restructure the banking system because we cannot pay this 80 trillion dollar black hole that is now surfacing in the system. We need to get China, Russia, the Europeans, and various other officials into a meeting ASAP. Tell them you are going to go into bankruptcy re-organization, we’re calling a banking holiday. The banks will be on holiday for a few days as the restructuring happens. You’ll have to do one of those fireside chat-type speeches informing the public of the restructuring, and most importantly, of the programs that you will launch in concert with that structural re-organization.
We have several major vital infrastructure programs that need to be immediately launched in order to rebuild our rotted economy which has been neglected for over 40 years. These include mass irrigation and agriculture programs to stave off the impending famines, high speed rail, water transfer programs (like China’s “Move South Water North), new cities etc…
Naturally, the federal reserve is bankrupt and needs to be shut down and re-organized like the rest of the banking system. If it’s too far gone, we’ll just create a new national banking institution like Hamilton did and we’ll support vital continental-wide projects, including things like the Bering Strait Tunnel, building 100 new fourth generation nuclear power plants (which barely produce any co2, to shut up those insane green Malthusian ideologues), and we will find areas of cooperation with China’s One Belt One Road in order to rebuild the Middle East, which we completely destroyed and bear the moral responsibility of reconstruction.
Oh, and we need a new Pecora commission where we will jail the criminal bankers that made this possible and stand in the way of implementing our structural reforms.”
Well, the system is very fragile right now. As Wall Street on Parade and other outlets have reported, the banks have secretly been receiving trillions in bailouts from the repo-markets in order to stay afloat. Most of the big banks on Wall Street are all zombie banks.
As Wall Street on Parade reported:
“Since the Fed began its repo loan operations on September 17, the tally of the Fed’s cumulative loans to Wall Street’s trading firms comes to more than $9 trillion”
It just takes a few sane voices to call for the breaking up of the banks and the protection of depositors before they go belly up.
We are in unprecedented times. Anything could happen. So the saner voices should step up and call Wall Street’s bluff. They really are bankrupt. It just hasn’t yet set in for everyone. The point should be for there to be a plan before that realization comes, because when it does, it could mean an overnight meltdown. The 2007-2008 problems never went away. They are much bigger now. In 2007-2008 the Congress was threatened with marshall law if they didn’t immediately approve the TARP bailouts to rescue the banks who were holding trillions in worthless toxic paper. They are now holding many trillions more of that same toxic paper.
David - As for hyper inflation. Sure the US could accidentally drop a nuclear bomb on itself or it could turn out Amazon and Google are the next Enrons just cooking their books. There is a greater than zero chance of both.
But asside from things such as those the US is not going to stop being the default currency to the world and as such, based on what we know today, there not a high probability of inflation. Krugman was saying that in 2009 and was IGNORED by the press and by politicians. In 2020 Trump and his team did not credit Krugman with being right about spending MORE not less during a down turn in the economy. Its not that Debt does not matter, it is that if you don't spend during a down turn in the economy the economy gets worse not better and you end up with MORE debt not less.
It is 2021 and the world is learning how to work with Fiat Money. And one day we will make mistakes and learn and improve, just like with did with Gold Standard during the depression. THat is how economics works. Test and Learn...
I would strongly advice you stop following UN Trustworthy sources to learn about economics and finance because it is almost impossible to unlearn that shit once you immerse your mind in it. I see this with people that immersed themselves in Gold Standard for the past 20yrs. They learned a bunch of PROPAGANDA and know can't figure out how finance works because the much dreaded inflation never ever appears.
Corruption is our biggest problem, not Fiat money. Expose the corruption and you can start taking steps to address it. And that is what elected leaders like Sanders and Warren and Katie Porter and others have been doing. And banks have really hurt these people (Warren was thrown out of the consumer protection agency she founded and Porter was thrown off of the banking committee after gutting Jamie Dimon from Chase).
In the real world there are things that can and should be done. But crack pots writing non sense that when fact checked is regularly FACTUALLY WRONG are not going to improve things any more than the GOLD BUGS over the last 20yrs have. All they are doing is selling entertainment.
David - There is a major problem with Zombie companies in the US and i'm sure you are aware of he reporting that Matt, Pro Publica and The Intercept have done on CMB loans...
I am not going to argue that there are issues in the financial system. Of course there are and they could cause problems at anytime.
Additionally, i totally agree we "should have a plan" ahead of time.
Please tell me what elected officials that you support are willing to fight the banks on things like this to protect tax payers?
Is it not the job of the responsibility of the Vice Chair of the Federal Reserve to over see banks and their loan activity? Did the Trump administration do what it should have been doing to examine these loans?
You say you want to see a "plan" yet i don't really hear any insights from actual experts on how to discovers what is HYPE (which you seem attracted to) and what is real?
Elizabeth Warren and Bernie Sanders have taken on big banks and big banks beat them everytime. If you want something done i would pivot from consume reports from less than respected sources to supporting candidates that have the courage to FIGHT the banks. I do agree, the banks are our biggest threat to the economy.
Buy the way i have purchased PUTS on several of these large Reits that own properties that are not occupied and are most likely over valued.
I support candidates that are actually fighting the banks and i have put my money where my mouth is. And i don't read media ranked LOW for factuality to form my views. How about you?
Judith - The way to do it is always the same in a democracy. VOTE. You have to vote in the primaries because the one thing even politicians need more than money from donors is votes. If you don't vote in the primary, as we saw in 2020 you end up with the PARTY choice (Biden). Trump proved that if people vote in the Primaries they can override what the party leaders want. Just DO NOT vote based on Identity Politics. VOTE YOUR POCKET BOOK
DG, Restoring Glass-Steagall is not a bad idea. However, it won't solve the problem. Since the 1930s too many new financial institutions and mechanisms have been created for a restoration of Glass-Steagall to solve the problem. For example, would restoring GS solve the zero-doc, low-doc, no down-payment loan problem? Would restoring GS, make CDS any less risky? In a bygone era, companies like AIG were not involved in financial markets. Now they are and subject to little or no regulation. Restoring GS won't fix this.
We have to start with the basics: the Trans-Atlantic financial system is systemically bankrupt. It’s being propped up with a variety of essentially illegal and insane bailout policies and artificially low rates. The whole system is currently organized to prevent the derivatives bubble from popping. That’s what the game is. People have to start wi the knowing what the game they’re playing actually is. The game is keep the derivatives bubble from popping for now… We can put aside the more nefarious plan for dealing with the inevitable bursting of the bubble down the road.
The way to deal with this is to first implement a bankruptcy re-organization. A re-organization won’t even work on a national level. If the US goes into bankruptcy re-organization, the entire transatlantic system has to essentially be re-organized.
What happens in a bankruptcy re-organization? The accountants come in, they say what can be paid and what cannot? Which debts are legitimate and should be honoured and which ones shouldn’t?
This is where a lot of people start to have emotional freak outs and start tossing around insane free market libertarian garbage. This is where the Glass-Steagall standard of banking has to be applied. Legitimate debts are those debts that are actually tied to the real economy, debts required for agriculture, industry, infrastructure, small and medium-sized businesses, pensions. That means many banks will be broken up into several financial institutions, including bad banks which will be made to carry the brunt of the toxic debt.
The FDIC and government can only guarantee legitimate debts which meet the Glass-Steagall standard. The quadrillion dollar bubble of derivatives contracts tied to these obligations, the CDS and CDOs, all of that is trashed. You literally write it all off because it has no legitimacy. The fact that there are hundreds of trillions of dollars worth of this stuff doesn’t make a difference.
The 2007-2008 crisis was not even really about mortgages and people defaulting on their payments, it was about all the MBSs and CDOs tied to these obligations. It was the unwinding of the whole derivatives bubble tied to that.
The Fed and related institutions literally churned out tens of trillions of dollars JUST to stop the whole system from being vaporized overnight. This is why the Congress was threatened with Marshall law in the streets the next day if they didn’t immediately pass the TARP bailouts. All the merchant banking families on Wall Street and the City of London have done is buy themselves time. And that’s what these interests are jittery about, because there’s no way to actually cover that financial black hole once it re-emerges. They don’t have any tools left in their “tool box.”
With that said, once the bankruptcy re-organization is done, new credit does have to be issued, and this is another place where all the insane libertarian free market types will go completely ape. The reality is the only reason the system hasn’t collapsed is because of all these covert bailouts, so their whole schtick against government intervention is nonsense, that ship sailed a long time ago. The whole system would have literally collapsed into dark age conditions a long time ago had it not been for the government bailouts. The only distinction being made here is who should get bailed out and how. There is no possible scenario where the government doesn’t intervene, the only question is how and according to what method will debts be evaluated as honourable to illegitimate. So this is completely above the pay grade of all these monetarists and free market ideologues.
Lincoln’s greenbacks and Roosevelt’s Reconstruction Finance Corporation are two examples of how the issuance of new credit would work, which the US Congress uniquely has a right to issue, not private merchant banks like the Federal Reserve. The new credit has to be government-issued and tied to real physical economic development, meaning infrastructure, industry, manufacturing, agriculture etc… The government has to be barred from supporting or bailing out any of the speculative merchant banking interests. That’s the point of Glass-Steagall.
Time to repeal all the tax breaks and tax dodges and make the wealthy pay for the country they expect to protect them from international pirates at home and abroad.
Don - Absolutely True... The value in doing that is clear. The question is politically how do you accomplish that. Republican voters vote strictly on identity politics and don't vote, ever, based on economic policy. The Democratic party is controlled by Corporate Tools like Pelosi and Schumer and Biden who are as interested in keeping corporate money coming into party coffers as helping the poor and middle class. True some Democrats are not corporate tools but most are.
How can voters hold Washington accountable for voting in the policy needed to get the rich to pay for what they are consuming.
Educating the voters is the only answer. And changing the campaign finance laws. And we have been beating our heads against this wall since Ronald Reagan and Alan Greenspan found the school of Greed is Good.
Don - Yup... Think about it. All it takes of the the poor and middle class to start organizing and voting as a block.
When you consider what MLK and civil rights leaders had to do to force LBJ to support Civil Rights i dont think this is that difficult. Same with what woman had to do to get to vote and what Labor had to do to get unions.
What we need to do today to beat back the big companies at the voting booth is absolutely doable.
David G... where is your evidence that interest rates are "artificially" low? You do realize the global economy is swimming in cash right now with extremely slow growth for demand in goods and services caused by growing income inequality. Right?
From US and EU billionaires to Chinese Billionaires to Russian Oligarchs there is more CASH in the hands of fewer people than ever before. In a low growth economic environment how could you expect high interest rates. There is no investment demand for their cash. That is what happens when consumers (IE: the middle class have wage stagnation, they go into debt and consume less other than interest on debt). I suggest you read Nobel Prize winner Joseph Steigletz on this issue. His emperical research validates it but government politicians have to ignore him less they anger their donor base.
The evidence does not supports your first hypothesis. The link you sent is little more than a narrative from a pundit paid to get clicks. He has no empirical evidence validating your claim. Joseph Steiglitz research was not done to get clicks it was done to get at the truth and prove that CAPTURED Economists like Lawrence Summers and finance people like Hank Paulson F*$ed things up in 2009 because they were serving banks not citizens.
When I was talking about artificially low interest rates, I was talking about lending rates for the major merchant banking interests, the repo-loans and related bailout mechanisms, not interest rates for businesses and the general population.
You speak of income gaps and such, but these are more an effect than a cause… the reason for these income gaps and all the related problems is because the US and Europe are run by a financial oligarchy, and the real physical economy has been increasingly looted and cannibalized in order to feed the zombie banking system.
While you mention folks like Stigliez, something tells me he isn’t actually calling for the jailing of all the criminal bankers and the bankruptcy re-organization of Wall Street. I read that he supported Glass-Steagall a while back, but the former World Bank chief economist seems pretty quiet these days. Even Bill Gates and Warren Buffet talk about “income inequality” and “income gaps.” That doesn’t really mean much. And when you cite individuals as “Nobel Laureate” economists, I just think to myself, “who still believes that’s a reputable title?”
The pundit Ehret has regularly been calling for a Glass-Steagall bankruptcy re-organization of the system and collaboration on major infrastructure programs across the world, which would require new international credit mechanisms like the BRICS bank, a New Bretton Woods fixed exchange agreements etc…
The other point that should be made is that the US and Europe will not get out of this alone. There is serious delusion about this. They’re going to have to work with things like China and their Belt and Road Initiative—another thing that sends shivers down the spine of London and Wall Street. Most of the Western media talk about Russian and China is pure unadulterated nonsense and propaganda. The reality is that the Western oligarchs have tried everything to overthrow Russia and China, and it hasn’t worked, and now their economic system is melting down. Hence the crazies over at the Pentagon are openly talking about the likelihood of nuclear war with Russia and China, and saying they are becoming more “aggressive”—this despite the fact that anyone who is not a moron can look at a map and see US and NATO encirclement of China with military bases and ABM systems all along Russia’s perimeter. The financial crisis question also has to be situated within this broader geopolitical context.
David - The West has seen the greatest creation of wealth ever in the recorded history of the planet over the past 200 or so years. The economic framework for this growth has come from the insights of ACTUAL EXPERTS (from Adam Smith to David Ricardo to Carl Marx to Hayak and then to Keynes). None of these experts were 100% correct about 100% OF what they wrote about and over time the world learned from our mistakes and made improvements as is possible in democracies. Hence the massive creation of material wealth.
None of the economic frameworks that created this wealth came from Pundits sitting in their mother basement regurgitating what they read on the Misses web site and googling furiously to manufacture some narrative lacking actual peer reviewed insights and data. In Fact the Strategic Culture Organization is ranked as EXTREME right wing in its BIAS and VERY Low for simple factual accuracy... So it is essentially a propaganda platform much like Misses and not an actual intellectual organization.
All of these economists for the last 200yrs when the greatest amount of wealth ever was created and their advice followed used the best evidence available (facts and data from government and business) at their time to frame their insights and the result has been un paralleled economic growth, longer lives for humans, less physical work and more intelligent people with more freedom than ever before.
If you want to discuss finance and economics in a serious manner you will have to read actual books by actual experts. You cant learn about such things trolling propaganda outlets ranked VERY LOW for factual quality and with any real research behind them.
Sorry but you get a FAIL for understanding the real economy not some narrative from a propanda web site.
Sorry, you just keep talking as if “facts’ are what the economist priesthood sanctions as “fact.”
My arguments are very straight forward man, the system is built upon a giant cancerous financial bubble. You make claims like “debt is not an issue” but rather spending. This is a rather silly argument. Are you not aware of the 17 trillion dollar bailouts from the 2007-2008 period? The whole system would have been vaporized then, because of the astronomical derivatives bubble tied to all the defaulting mortgages. The only thing that has kept the system was distingrating with all the zombie banks being vaporized (without Glass-Steagall that means all depositors and other stakeholders will go down into the same financial black hole).
The emergency repo-market loans started to be issued in January 2020 BEFORE the pandemic hit. I repeat: the Wall Street banks needed immediate liquidity in order to stay afloat starting before the pandemic.
If you want some empirical data to support these obvious obvservations, the zerohedge article had several graphs detailing the collapse of production and Wall Street on Parade has detailed reports of the secret emergency liquidity pumping that the fed has been involved in in order to keep the banks afloat. They are all hopelessly bankrupt my friend. From buying back stock to just sitting on the cash, it’s all because there is nothing really left to loot, they’ve destroyed everything. So they’re buying back their own stock, trading in worthless financial paper at the repo markets for hundreds of billions in cash. That’s literally what’s keeping them alive.
They are finished.
Read this Wall Street on Parade piece and then you’ll understanding why I’m harping on the need for the immediate bankruptcy and collapse of the merchant banking system.
TO, GS should be capitalized and the answer to your question is Bill Clinton. However, the Republicans weren't exactly opposed. A few Democrats (notably Dorgan) opposed the repeal of GD to the bitter end. However, must (of the Democrats) just wanted (and got) payoffs in the form of the enhancements to the CRA as their price. So the American people were doubly screwed. First, by the repeal of Glass-Steagall, Second, by the burdens of the CRA.
It's not justhat there's no mechanism to force regulation; there is no WILL to regulate. Because everybody in the game is just giddy at getting away with it. And once they do, they do more, and more, and more. Until their house burns down in a forest fire, or the sea inundates their basement, or their child dies from asthma, or their son kills himself. Yeah, then maybe they find their integrity again.
I enjoyed this interview because it didn't get bogged down in macroeconomics, and because it focused on the character of those making financial decisions. Too often exercises in economic prognostication become technical exercises. I'm not even convinced this is an effective forecasting technique.
It's helpful to explain the economy as not just a collection of numbers balancing out in the end, but as a collection of people, some of whom are wise or foolish, good or bad. You could say that elides a lot, that it is rhetoric. But so does the technocratic explanation, and so it is.
If an institution is inhabited by good people trying to do the right thing, the form that the institution takes doesn't matter much; good things will probably happen. Likewise an institution inhabited by bad people trying to cheat will probably produce bad outcomes no matter how clever the institutional arrangements.
It's refreshing to hear the economy spoken of with such moral clarity and conviction. Some have said that greed cuts through and clarifies. A conscience can do that too.
On this episode of Going Underground, we speak to legendary film director Oliver Stone about his new film ‘JFK Revisited: Through The Looking Glass’. He discusses JFK’s often overlooked campaigns for peace with the Soviet Union and Cuba prior to his assassination, as well as work furthering civil rights, the details exposing an alleged cover-up of the assassination of JFK, including rapid policy changes from the successor LBJ administration, and alleged CIA involvement in the assassination, why larger powers wanted John F. Kennedy dead, JFK’s preparations to shatter the CIA and his belief that the war in Vietnam was a mistake, how the events leading up to the assassination of JFK were meticulously planned and the CIA’s involvement on the day, Lee Harvey-Oswald’s supervision by the CIA, and much more!
You have just fell from Mars? We live in a nightmare -- we have not been a democracy for 70 years. But we need to bring freedom and democracy to China, Cuba, Bolivia, Syria, etc., etc. FREE Assange
"We" don't need to bring anything to China, Cuba, Bolivia, Syria, etc.
The government's genocidal campaign that masquerades as "foreign policy" is responsible for the implementation of this situation, at the behest of the world's wealthiest.
You and I had and will continue having nothing to do with it's outcome.
Thank you once again Matt! I followed your coverage of the GFC in Rolling Stone from day one. As someone who was working at GS at the time, I had first-hand knowledge of the veracity of your reporting. It was truly great reporting.
I am one who highly values in-depth investigative reporting that takes time and money to develop; that is why I am a paid subscriber to your substack blog. I do not need to hear from you every day and, frankly, there are some authors who I admire very much, like Caitlin Johnstone, who nonetheless begin to sound like broken records with more or less the same daily lecture on American empire and the narrative matrix. I forward an article from her that I think is particularly good about once every few weeks; like "Society Is Made of Narrative."
Perhaps online authors fear their audience will forget about them if they don't hear from them every day; or that subscribers will wonder what they are paying for if they don't get their daily bread? I don't believe they are best served by behaving like newspaper columnists that need to churn out 1000 words/day.
Keep up the great work, and please continue to take the time to work on investigative reports that readers can really sink their teeth into.
It is unclear if a repeat of 2008 is coming or not. Some folks claim that corporate debt will bring down the financial system at some point in the relatively near future. I read claims to this effect with some regularity. Since my work if very far removed from corporate debt markets, I have no idea if this is true or not.
However, a quick glance at the NASDAQ shows a stunning similarity to the 1999-2000 period. Is MSFT really worth $2.128 trillion? Is Apple really worth $2.49 trillion. I have my doubts. Is a NASDAQ crash coming. I will/would never claim to have a crystal ball. However, I would be surprised if the NASDAQ didn't crash.
Discussions such as this are obviously heartfelt. I’ve spoken with Adam Taggart and I respect him a lot. But, for me, this analysis is infuriating.
Imagine a ship is taking on water – worrisome. Top physicists, mathematicians and scientists of all sorts work tirelessly to analyze the flows and eddies of the water in the hull, hull hydrostatics, structural chemistry, propeller physics, historic weather patterns, and dozens of other factors. This is economics today. This is Bloomberg, MarketWatch, Investors Business Daily, blah, blah, blah, working on this enormously complex problem of economics and reporting to us so we can regulate and protect our businesses, investments, homes, IRAs, pensions, etc. The ship is in danger of sinking -- thank God we have the top experts in government and academia working on this impossibly complex problem!
Oh, yes, a few passengers did point out long ago that there was a hole in the hull.
Economist John Kenneth Galbraith wrote in 1975 (Money: Whence it Came, Where it Went) that “the study of money, above all other fields in economics, is the one in which complexity is used to disguise truth or evade truth, not to reveal it.”
There is a hole in the ships of sovereign state and world economies. It is called M-O-N-E-Y. To be precise, the hull substance that USED to be there is called money. The hole is, well, a hole, a carefully concealed hole. It was drilled there intentionally by international and central banking. Economists and governments depend on it. Indeed, they say, “how could any ship possibly navigate the high seas without a hole in the hull?”
Sound money does not exist on earth, except, perhaps, in a few primitive cultures. Sound money is a fundamentally simple concept. You and a few others on an island could develop the basic principles of a sound money system and all would go well – unless some clever chap decided it would be best if he defined, created and controlled the “money” on the island. Oh, dear.
Sound money is a civil right, no different from any other civil right. A CIVIL RIGHT! Oh, you don’t think of it that way? Why not?
So, we can complain all we want about inflation/deflation, interest rates, the horrible cancellation of Glass-Steagall (I agree), regulation/deregulation, credit default swaps, the coming boom/collapse, blah, blah, blah: the furiously sloshing water rising in the hull. But understand that most are being fucked over primarily because their lives utterly depend upon this energy manifestation known as money and they don’t have the slightest idea what it really is. If I could control the nutritional content and value of the food you eat, you could have any sort of diet you choose and I could make your body sick or well, fat or skinny, alive or dead, at my discretion. And so is your economic energy and health manipulated – “for your own good”. Using “money”.
"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
Yes, that is an oldie and a goodie, but not exactly my point. There is no record of Ford actually saying these words, but they were attributed to him by former Nebraska representative Charles Binderup. However, Ford did write this in his 1922 autobiography, My Life and Work:
“The people are naturally conservative. They are more conservative than the financiers. Those who believe that the people are so easily led that they would permit the printing presses to run off money like milk tickets do not understand them. It is the innate conservation of the people that has kept our money good in spite of the fantastic tricks which financiers play-and which they cover up with high technical terms. The people are on the side of sound money. They are so unalterably on the side of sound money that it is a serious question how they would regard the system under which they live, if they once knew what the initiate can do with it.”
My point was not so much about the monetary system, per se, but money itself.
Thats an interesting take. And why do you think "Sound Money" as you call it would fix this? Why did we move away from "Sound Money" in the first place? Is money just one thing? A store of value? Isn't "Sound Money" deflationary? What happens when you have an economic shock/crash when you have "Sound Money"?
You’ve nicely asked me to address several specifics in “defense” of my take. I’m very much in the learning stages. Trying to clearly understand our current monetary system and policy is very difficult for me. The fact is I am not knowledgeable enough to do a good job defending my views. I will fumble, but I will do my best; I have that responsibility. I feel like there is truth in what I’m saying, but I am more than happy to be challenged with specifics that I might examine to see if they are valid, and if my take is flawed.
I suppose we would first have to have agreement on what constitutes “sound money”. I agree with “a store of value”. So it seems safe to say that we have not had sound money in most parts of the world for a very long time. The currency in my pocket, in my bank, does not store value. It’s value, buying power, has gone down dramatically in my life. That is not rational or fair. If a person works hard and receives money for valuable products and services provided to others, then the value received for that labor should not diminish. So I would think that any facet of monetary policy that defeats money as a store of value would have to be eliminated.
I think the value of money needs to be tied to something so it cannot be manipulated. I’m not sure the best way to do this. Different proposals have been made, primarily gold. Government monetary policy embodies the principle that one can lend out money one does not have. That one can literally create money with loans, ad infinitum. I think Chris Martenson explains the situation well here: https://www.peakprosperity.com/money-under-fire/ See especially the chart of US Debt as a percentage of GDP. This is pure insanity I think. Perhaps someone here can explain how this does not end badly. I can’t see it.
Please clarify your point on sound money being deflationary. Try to keep it simple. At my simple level of understanding, it seems that if one had stable money, and then one’s business did poorly, one’s money supply would crash – no income, paying off debts, etc. Too bad – don’t make the same mistake next time. One would have to take personal responsibility for this and work to create something of value in order to increase one’s supply of money. When the stock market collapsed in 2008, there should have been no bailouts for anyone. Figure out what you did wrong, do your time in prison if warranted, and don’t do the same thing again. I think this forces an economy, any economy at any scale, to recover only by actually producing valuable products and services. By exchanging fairly. Wealth inequality can be fair or unfair. If one's greater wealth comes from creating greater value than someone else - not always easy to assess - that is fair. If one gains wealth when creating no value, or creating harm, this is unfair or criminal.
I might summarize by saying that sound money fixes the problem by forcing an individual or economy to create valuable products and services to survive, thrive or to recover, that being the only solution.
Your approach sounds well reasoned to me. Lately I have been looking into our currency's devolution from being "Gold Certificates" to "Federal Reserve Notes"; and wondering when the "fiat currency*" thing happened.
*Fiat money gives central banks greater control over the economy because they can control how much money is printed. Most modern paper currencies, such as the U.S. dollar, are fiat currencies.
The rentier classes are running the world, @ least the western world. They are parasitic in the same way they're been for millennia. They are a load on all of us who build wealth or perform useful services. If financial was reduced to ~10% or less of it's current size the real world would be much better off. Banking in particular should be a public utility; as long as private sector actors conjure up the money supply, they will own us as they do now.
Matt, on the question of what other journalists are doing good work on the financial system and Wall Street, I was hoping you would have mentioned the folks over at "Wall Street On Parade." Their daily newsletter is a must read for me. I'm not sure why they don't have a Twitter feed as it would greatly expand their reach. I would love to see them promoted more.
Regardless of one’s politics, a re-enactment of Glass-Steagall to separate the investment banking institutions from the commercial banking institutions (lending to businesses, infrastructure, the real economy, rather than speculating with Monopoly money) is an existential necessity. Since 2007-2008, the majority of the major Wall Street and City of London banks have only been kept afloat thanks to hyperinflationary policies whose effects we are now only beginning to see. These banks are sitting on a quadrillion dollar derivatives financial bubble. The Wall Street and London banks are effectively zombie banks only being kept alive by the repo-market loans and artificial interest rates. They would have all been vaporized a long time ago with these insane bailouts, which are simply bailouts of worthless financial paper. Farmers, industry, the average home owner, no one got a bailout, but these guys have received tens of trillions of dollars. It’s the biggest fraud in history.
There must be an immediate bankruptcy re-organization of the financial system. There is no way to plug the financial black hole created by these private merchant banking interests. Nothing short of REAL fascism will have to be imposed to keep this system going for much longer. And that’s exactly what we’re seeing now with the surveillance beef up and militarization of the capitol. Those who can’t see the writing on the wall are morally unfit to survive at this point.
Glass-Steagall needs to be brought back immediately.
https://www.google.ca/amp/s/risingtidefoundation.net/2021/02/06/how-to-overcome-todays-crisis-a-lesson-from-fdr/amp/
When President Obama took office in 2008, he promised "real change." He had an opportunity to come down of Wall Street and the TBTF commercial banks with fire and brimstone; nationalize all the bankrupt banks, fire the managements, wipe out all their stock and options, recapitalize the banks, appoint trustees, clean up the damage, enact tough legislation, re-float the banks five years later. But he totally supplicated himself to Wall Street. Really, Timothy Geithner takes over as Treasury Secretary from Hank Paulson?! Continuing the domination of the government by the "great vampire squid!" Maybe after the NEXT crash, which is surely coming, an administration will do what should have been done in 2008.
Forgot to mention; and throw the perps in jail!!!
That was never going to happen. One of the perps was Jon Corzine. He was untouchable which made the rest of the perps untouchable. By contrast, the malefactors of the S&L crisis were aggressively prosecuted.
True dat. S&L crisis was the last time any financial execs did prison time.
Do think the ENRON scams pilfering of civil service trust funds and other financial crimes should be included in this discussion?
«When President Obama took office in 2008, he promised "real change."y
This is how he was described in a book ("Class notes" by A. Reed) in 2001, several years before he became president:
“In Chicago, for instance, we’ve gotten a foretaste of the new breed of foundation-hatched black communitarian voices; one of them, a smooth Harvard lawyer with impeccable do-good credentials and vacuous-to-repressive neoliberal politics, has won a state senate seat on a base mainly in the liberal foundation and development worlds. His fundamentally bootstrap line was softened by a patina of the rhetoric of authentic community, talk about meeting in kitchens, small-scale solutions to social problems, and the predictable elevation of process over program — the point where identity politics converges with old-fashioned middle-class reform in favoring form over substance. I suspect that his ilk is the wave of the future in U.S. black politics, as in Haiti and wherever else the International Monetary Fund has sway.”
When you say “re-float” do you mean privatize? The last group we should want in charge of banks is politicians. They have already created over $150TRILLION(some say higher) in liabilities, most unfunded. Block long scaffolds and a full week of hangings would send a clear message to any future bankers. No other incentive has worked.
Why would the bankers commit the same crimes when Obama/Holder put them all in jail after the first time they……oh, wait.
«The Wall Street and London banks are effectively zombie banks only being kept alive by the repo-market loans and artificial interest rates.»
Nothing new there (except the enormity of the scale) there is this candid quote from political economist Hyman Minsky in 1986:
https://digitalcommons.bard.edu/hm_archive/144/
“No matter how exalted a bank may have been, we all know that if assets were marked to market, the net worth of many of the giants of international banking would disappear. Nevertheless these banks are able to sell their liabilities in financial markets, because the buyers believe that they will be protected against losses by the central bank.”
Blissex - Instead of Defunding the police we should organize around defunding the banks.
IT can happen but voters need to organize and boil it into a POLICY that they demand that their elected leaders support. As long as all we are doing is complaining and there is no ACTION that is being demanded then the politicians are going to do what the banking lobbyists tell them to do.
Sanders leadership on M4A has changed the debate on Universal Health Care and we now have leaders in the Senate and Congress working to get something done. They are battling rich insurance companies so it wont happen over night but action is taking place.
We need a similar leader to fight the banks. Elizabeth Warren could be that leader as the banks hate her anyway.
The biggest thing preventing any of this is that Republicans voters do not vote on economic issues ever. They only vote on identity politics so their leaders give the rich and powerful anything (tax cuts to the rich, deregulation etc...) and everything they want and never pay a price at the polls...
«Republicans voters do not vote on economic issues ever. They only vote on identity politics so their leaders give the rich and powerful anything»
That is ridiculous: the majority of Republican voters and a large minority of Democratic ones vote exclusively on economic issues: bigger real estate prices primarily (a humour author even wrote that real estate prices are the american national religion), and also stock prices, and lower taxes. The republican coalition includes other lobbies too, but please read this article and quotes:
http://www.enterstageright.com/archive/articles/0903/0903norquistinterview.htm
«The growth of the investor class -- those 70 per cent of voters who own stock and are more opposed to taxes and regulations on business as a result -- is strengthening the conservative movement. More gun owners, fewer labor union members, more homeschoolers, more property owners and a dwindling number of FDR-era Democrats all strengthen the conservative movement versus the Democrats.»
http://web01.prospect.org/article/world-according-grover
«But going into November, what actually saved it for the Republicans was the investor vote, which went heavily R. Why? One, they didn't blame Bush for the collapse of the bubble. They were mad at having lower stock prices and 401(k)s, but they didn't say Bush did this and that caused this. Secondly, the Democratic solution was to sic the trial lawyers on Enron and finish it off. No no no no no. We want our market caps to go back up, not low.
The 1930s rhetoric was bash business -- only a handful of bankers thought that meant them. Now if you say we're going to smash the big corporations, 60-plus percent of voters say "That's my retirement you're messing with. I don't appreciate that". And the Democrats have spent 50 years explaining that Republicans will pollute the earth and kill baby seals to get market caps higher. And in 2002, voters said, “We're sorry about the seals and everything but we really got to get the stock market up.»
«And then, our job as conservatives is to wake up every day and say how do we make more of us and fewer of them. And the left's position is the same. I passed out a series of trends here; I'd be very interested in whether people think I'm missing stuff. I would suggest the biggest trend is the number of people who own shares of stock directly. We've gone from 17 percent of Americans owning stock to up over 50 percent of households. According to Mark Penn, two-thirds of voters in 2002, 2004, somebody who owns at least $5,000 worth of stock is 18 percent more Republican and less Democratic. African-American, no stock, 6 percent Republican; $5,000 worth of stock, 20 percent Republican. Every demographic group gets better with share ownership. Rich, poor, all colors, all genders, with the exception of women who earn more than $75,000 a year, who are already thoroughly Republican and don't get any better. [...] The growth of the investor class – those 70 per cent of voters who own stock and are more opposed to taxes and regulations on business as a result — is strengthening the conservative movement.»
Bliss - your source, the two links you sent, are not from reliable sources and consequently your narrative is flawed in so many ways i can hardly name them all
Lets start with some hard facts on stock ownership in this country.
Today the top 10% of American families own 92% of the entire value of the stock market. That means that 90% of American families share in the value of only 10% of the stock market.
Thus when polled 2/3rds of voters in 2019 said the gains in the stock market had no impact on their financial well being.
https://www.ft.com/content/7fdedb5e-152f-11ea-9ee4-11f260415385
So claims by Norquist, like this one, are NOT supported by the evidence:
"The growth of the investor class -- those 70 per cent of voters who own stock and are more opposed to taxes and regulations on business as a result -- is strengthening the conservative movement."
As for the equally preposterous claim that voters vote based on real-estate valuations again the evidence does not support such a claim. According to Pew the top 4 issues for voters this year are The Economy, Health Care, The Supreme Court and the Corona Virus.
The stock market is NOT the economy and given how 2/3rds of voters dont feel the stock market impacts their financial lives Norquists claims are laughable.
Voting records show that in January of 2020 hundreds of thousands of Republicans actually left the Republican Party continuing a 20yr decline in the number of registered Republican voters in this country.
I think that if you are trusting someone like Grover Norquist to inform you about voting in the US you are sadly misinformed. But hey, you are not alone that is for sure.
https://centerforpolitics.org/crystalball/articles/registering-by-party-where-the-democrats-and-republicans-are-ahead/
Absolutely! thank you for this comment
Tens of trillions? Sitting on a quadrillion dollar derivatives financial bubble? REAL fascism? Maybe there's not enough surveillance if this kind of bombast is acceptable!
Is this the first time you're hearing about the financial derivatives bubble? Remember the 2007-2008 crisis with all the mortgage-backed securities tied to all the defaulting mortgages? The biggest problem wasn't people defaulting on their mortages, it was all the MBS and CDO contracts built upon these mortgages, all the various mortgages fitted into nice little ''tranches'' and then ''secularized'' and sold as ''assets.'' This is what Americans have been paying for with 16+ trillion in bailouts...
All the budget cutting and austerity is based on a fraud, the fraud of people not knowing how much has been dished out to save the banks from all their worthless paper.
JP Morgan Chase and Co has an estimated 40+ trillion derivatives exposure. See ''It’s Now Official: The Financial House that Jamie Dimon Built Is the Riskiest Bank in the United States'':
https://wallstreetonparade.com/2021/06/its-now-official-the-financial-house-that-jamie-dimon-built-is-the-riskiest-bank-in-the-united-states/
To quote:
''Among the biggest banks on Wall Street, JPMorgan Chase has the largest exposure to OTC derivatives, with $43.5 trillion exposure, according to the National Information Center data.'' (see the graph by following the link above)
Deutsche Bank has a similar magnitude of derivatives exposure as JP Morgan.
The reason the Fed and central banks are dishing out trillion after trillion is to prevent the unwinding of these monstrous speculative bubbles.
Recommended reading:
Federal Reserve Admits It Pumped More than $6 Trillion to Wall Street in Recent Six Week Period. This is before the pandemic even started. So the whole narrative about the pandemic causing some kind of financial crisis is itself completely deceptive.
https://wallstreetonparade.com/2020/01/federal-reserve-admits-it-pumped-more-than-6-trillion-to-wall-street-in-recent-six-week-period/
This is no joke. The only real joke is that this is what Americans have been made to cover through all the bailouts since the 2007-2008 meltdown. And the problem is a lot worse now.
Hence the need for a Glass-Steagall separation of these behemoths. Several new banks will have to be created, one for the depositors, commercial banks etc... and then we will also have to create what are essentially ''bad banks,'' toxic banks which will hold all the worthless speculative paper. Naturally, these institutions will go bankrupt and disappear, as if before one's eyes...
Fred... The same people that are "warning" of the quadrillion dollar derivatives bubble blowing up the economy were "warning" us that Obama's deficits were going to create hyperinflation... Here we are 10yrs later, more in debt, and any economist who is not "on the dole" from some special interest group will tell you that DEFLATION is a far bigger risk than Inflation. And anyone that can't articulate why deflation is the bigger risk (look at Japan for 20+yrs) has no friggen clue about how the economy or inflation works in the era of fiat currency.
Not saying there may well not be a derivatives bubble. There may be. I am just saying, the people pushing this theory are conspiricy theory types that are wrong all of the time. Hey, a broken clock is right twice day and wrong the other 1,440 min of the day. I don't tell the time looking at broken clocks. nor should you.
Yes…. only a “conspiracy theorist” would talk about the derivatives exposure of the major banks.
Only a “conspiracy theorist” would point out that this was at the heart of the meltdown during the sub-prime mortgage crisis.
Nothing to see here, there is no bubble! Only Nostradamus knows the future!
All we can do is try to encourage consumption by pumping more money into the system!
Great plan…
Even if you believe that, you should still be supporting a break up of the investment banks and commercial banks so that in the event, in case there is another 2007-2008 meltdown, the population doesn’t have to foot the bill, neither through bailouts, nor “bail-ins” (Dodd-Frank Title II-Orderly Liquidation Authority). If you know what you’re talking about you should be in support of a Glass-Steagall banking separation. Everyone should.
David - <<Yes…. only a “conspiracy theorist” would talk about the derivatives exposure of the major banks.>>
Not what i am saying at all.
I am saying that only "conspiracy theorists" view derivatives as the potential CAUSE of Hyperinflation....
Derivatives that are not properly regulated, as was the case with the 2008 crash, are a HUGE systemic risk. Full Stop
There is a good sized cottage industry in media pushing narratives around INFLATION and Hyperinflation. And it comes in many forms. But the goal is not to manage the global economy it is ONLY to sell GOLD... IT is a scam... And the clown you sent as your PROOF is part of it. He writes for media outlet that is proven to push FALSE stories and half truths. No actual experts follow anything that clown says... And the fact that you are sending links to him as your "evidence" shows you don't actually know what you are talking about any more than someone that reads Misses knows about economics.
"Radio and TV personality Glenn Beck hawks gold coins as a business, and sells the gold standard as America’s salvation. President Ronald Reagan’s budget director, David Stockman, has written a 700-page jeremiad lamenting the departure from gold as the root of America’s “great deformation.” Financial magnate Steve Forbes has turned Forbes magazine into a tool of gold advocacy. And the conservative pundit William Kristol has now joined the chorus."
https://www.reuters.com/article/us-gold-standard/why-conservatives-spin-fairytales-about-the-gold-standard-idUKBRE98G07E20130917
David - Stop consumer propaganda from people getting paid to push gold sales. Stick with sources that have a real track recored for not "predicting the future" but laying down all of the facts rather than cherry picking facts to push a narrative.
https://www.bloomberg.com/news/articles/2021-03-04/why-hyperinflation-won-t-happen-in-u-s-like-in-venezuela-or-zimbabwe
With or without hyperinflation, the same systemic problems and financial bubbles exist. That’s the crucial point. What exactly will happen as these things start to unwind once the Fed and central banks can longer keep up their money-printing? No one knows for sure.
What we do know is there is a boundary condition. And whether you believe the ultimate effect will be deflation or hyperinflation doesn’t change the underlying problem: all the banks are holding trillions of worthless toxic paper and they have been requiring emergency bailouts even before the Pandemic started ie when everything was still “fine.” The media is virtually silent on the fact that all the major banks having been getting trillions just to stay afloat today. They are silent because it’s probably known that at this point anything could trigger a panic, let alone hearing the banks received 6 trillion in just a few weeks even before the pandemic began, meaning there was something much more systemic.
To quote Pam Martens from JANUARY 2020:
“The Fed’s minutes also acknowledge that its most recent actions have tallied up to “roughly $215 billion per day” flowing to trading houses on Wall Street. There were 29 business days between the last Federal Open Market Committee (FOMC) meeting and the latest Fed minutes, meaning that approximately $6.23 trillion in cumulative loans to Wall Street’s trading houses had been made in that short span of time.
During the 2007 to 2010 financial collapse on Wall Street – the worst financial crisis since the Great Depression, the Fed funneled a total of $29 trillion in cumulative loans to Wall Street banks, their trading houses and their foreign derivative counterparties between December 2007 and July 21, 2010. At the pace it is currently going, it would eclipse that $29 trillion before the middle of this year.“
https://wallstreetonparade.com/2020/01/federal-reserve-admits-it-pumped-more-than-6-trillion-to-wall-street-in-recent-six-week-period/
There was massive asset inflation - the key to Obamanomics is the same as the GOP. If you only give money to rich people, you inflate bubbles, but since it never makes it to wages, it doesn't move CPI.
And plenty of economists, Krugman among them, have stated a higher inflation rate of 3% is likely better for growth.
Matty - Krugman is right in my view. Sustained wage growth would create higher, though not damaging inflation. It just depends on how we do with productivity. High productivity growth can pay for wage growth and thus keep inflation lower.
Call me a softy, but i think Obama was not well enough informed on economics to realize his advisors were laying out a rescue solution to the housing crash that, like the Republicans in 2020 would inevitably lead to shifts in GDP from the poor and middle class into the pockets of the rich and thus create asset bubbles.
In any case the train wreck that is our banking system may one day cause tax payers higher debt but there is no evidence that they will cause higher inflation. That is just propaganda from the Gold selling industry aimed at a small segment of Americans
David G... the policies are not hyperinflationary they are Deflationary... Huge difference. Giving banks money at zero charge and letting them lend it out is absolutely evidence these banks are zombies. But lets make sure we know the huge difference between hyper inflation and deflation
Maybe Hyper-stagflationary - the worst of all worlds.
«Maybe Hyper-stagflationary»
But for different people: high inflation (prices doubling in 7-10 years) of asset prices for "investors", making things like housing and pensions unaffordable to most people, and stagnation of wages for workers, to reduce the cost of living and increase the profits for "investors".
Bliss - You do realize that asset valuations are not included in inflation numbers. Thus, as we have seen for 40yrs now, assets can inflate in value with out causing interst rates to go up. Where as prices of consumer goods going up can cause the cost of money (IE interest rates) to go up...
Gap - Hyper stagflation is ugly...
If we look at the parallels between today and the lead up to 1923 Hyperinflation in Weimar Germany, all the parallels are there… They’re doing the exact same thing.
https://www.zerohedge.com/geopolitical/financial-blowout-ahead-lobotomized-economists-clash-deck-titanic
Gap - Tyler Durden is a pundit of ill repute. He is neither an economist nor even a well informed thinker. He writes to get clicks by telling frightened people that he knows the real problems are when his track recored shows he is laughably misinformed on almost everything. He's the Rush Limbaugh of finance. But hey, it gets him clicks and he get paid... Just like Rush..
You’re talking a lot of theory, but I asked a simple question which you should be able to answer. If you can answer the simple question, we could cut through a lot of the tit-for-tat stuff. And for the record, the article cited from zero hedge is not written by Tyler Durden lol, it’s written by Mathew Ehret, who frankly has a much better analysis of the economic crisis than these financial gurus and economic priests that you talk about. But if you like them and believe you understand the issues, you should be able to answer this simple question:
You’re the president, it’s 3:00am and you get the call that the financial markets are about to crater at the opening bell with 80 trillion dollars that will be wiped out in the span of 6 hours. What do you do? What would your financial gurus do?
You’ve been talking a lot of theory, but just like a scientist throwing around all sorts of theories, it takes an actual real-time experiment that can put it to the test. So I repeat the question:
You’re the president, it’s 3:00am and you get the call that the financial markets about to suddenly crater with 80 trillion dollars that will be wiped out in the span of 6 hours. What do you do?
If you know what you’re talking about you should be able to provide a coherent and systemic answer to that real life scenario.
I look forward to your answer.
If you're the current president, you slide into your slippers and wander down the hall to the kitchen where you dig out some ice cream for a snack.
You know that the wizards on Wall St. and the Fed will manage this and all you'll have to do is read off the card.
I think the immediately foregoing conversation is about the old world -- a world where distributed information made some difference, i.e. ''markets''. That world started to come to an end in 1987, when Mr. Reagan told the specialists at the NYSE that they could borrow all the money they wanted as long as they kept the markets from cratering. In other words, a new principle was established: although specific persons could get wiped out, investors as a class would never be wiped out. Today, we call this principle ''too big to fail''.
After that there were two kinds of money: poor people's money, which was based on labor, which might be called 'the real economy''; and rich people's money, which is created from nothing and is mostly unrelated to labor, goods, commodities, and so on.
This works as long as you keep the two kinds of money apart. However, if there is a crossover, the poors' economy gets too much money and there is inflation, which is politically unpalatable and may also offend foreign lenders. Then something breaks. A good example was the crisis of 2008-9, which actually started around late 2005. Interest rates went up, adjustable rate mortgages couldn't be paid, many defaulted, and after awhile the system froze up. (Plus, there was a lot of fraud going on, but there always is.) Obama and company thereafter put everything back the way it was, so it could happen again, I guess.
Now, however, whatever is going to happen is in the heads of a small number of people, unlike the last time around when there was still some market/public influence. The poors' money is still based on labor, but the rich's money is totally fictional and if it rushes into the poors' economy they'll be wiped out. There are already dangerous crossover points, for instance, real estate as before. At a certain point the poor can't pay enough, borrow enough, steal enough to stay in the game. But people mostly have to live in a house. There's not enough room under the freeways for all of us. So then what?
So there is a reason for all the military, all the militarized cops, all the surveillance, all the propaganda. Exactly what the big guys will do is probably planned already, but if not I'd guess they're working on it, and you'll find out about it when its moment comes. Glass Steagall and so on are so 20th-century,... or, as George Carlin used to say, ''They got a club, and you ain't in it.''
Scott- if you are Trump
Or Biden that is about accurate.
If you are Sanders or Warren you have put on place a far different economic advisory team than Obama or Trump or Biden put on place so your choices for action are far different than Wall Street and the Fed over the last 30yrs
David G. - My apologies, you are right, I got the authors name wrong, I did click on Eherts narrative.
No he is not correct. Actual economists like Paul Krugman and Joseph Steiglitz, not pundits like Eherts, back in 2010 had the empirical evidence that the problem in the EU and US economy after the housing crash was a lack of demand. Government spending pumps up demand and thus boosts economic growth.
Eherts argument today in 2021 is the exact same as the arguments in 2010 claiming the world was about to have hyper inflation because US and EU were growing debt so rapidly. He has not learned from the mistake people like him made back then. We did not see anything like inflation much less hyper inflation back in 2010. The evidence is clear on that. What the evidence also shows is that what we did see was slow growth. And the cause of the slow growth was that governments spent to LITTLE not too much to increase demand for goods and services.
Fool me once shame on you fool me twice shame on me.
Demand was the economic problem then and it is the problem today. Government spending increases demand and thus helps the economy grow faster(Steiglitz 2010) Increased government spending doe not have to cause deficits. All you have to do is TAX the people with the money.
We chose policy that cuts taxes to the rich which leads to higher deficits.
https://www.crfb.org/blogs/deficit-financed-tax-cuts-may-be-counterproductive
We chose policy that reduces wage growth for the poor and middle class by shifting GDP to the top 1% That slows down GDP growth
https://www.epi.org/publication/secular-stagnation/#:~:text=Inequality%20is%20slowing%20U.S.%20economic%20growth%20Faster%20wage%20growth%20for,wage%20workers%20is%20the%20solution&text=EPI%20estimates%20that%20rising%20inequality,GDP%20annually%20in%20recent%20years.
Eharts is a pundit and not an economist. His argument for higher inflation is the same as people like him used in 2009 and is refuted by empirical evidence and the research from Nobel prize winning economists like Steiglitz and Krugman he told Obama in 2009 his policy was TERRIBLE and they were ignored by Geitner and Paulson.
Your question is foolish. You go the emergency room with a 106 temperature and the doctor must first know WHY you have that temperature if she is going to cure you.
If you cant include the WHY in your question then you there is zero chance that you know the right answer because there is none
The doctor must first bring down the body temperature to avoid frying the brain. That happens at 106. Second she must collect additional information such as blood pressure in all four limbs, a STAT CBC, perhaps a STAT CMC and a quick neuro exam. She then probably has sufficient information to pursue why.
If the patient is in pain she may administer an analgesic to bring down BP and temp, she'll continue a gross exam and do a bunch of other things.
At least, that's what I learned in medical schosol.
The difference this time is that every major central bank around the world (and most of the minor ones, too) are all degrading their currencies as fast as possible. It’s a competitive race to the bottom. So we are all in the pot together and the water is warming up. Abandon fiat currencies for your own protection.
William - Fiat currency did not cause the US to under tax its self thus creating massive deficits. Fiat currency did not force the US to wage a wasteful war in the middle east. Fiat currency did not cause bank regulators to turn a blind eye as he CDO market blew up our economy.
Tax cuts, war and unregulated banking are the PRIMARY causes of virtually all of the debt the US has created since the budget surpluses of the late 1990's. And none of that was caused by FIAT money it was ALL caused by corporate control of the Democratic and Republican party.
Policy in the US and Europe is the reason we have so much government and private debt, not fiat money. The empirical evidence has been produced on how the and Europe handled the stock market crash in 1929 and the government trying to balance the budget made this far worse. Fiat money would have reduced the impact to GDP of the 29 stock market crash. I'm not giving my opinion here, every economist who is not Shilling for corporate interests would agree with me, including the conservatives at Hayak an Friedman's University of Chicago. Infact University of Chicago regularly polls the top economists in the country and 40 out of 40 agree with me that Fiat is better than Gold Standard when the economy tanks whether it is because Wall Street floats a bunch of tech stocks that are never going to make money (2001), Wall Street issues a shit load of worthless bonds (2008) or a Pandemic (2020). And the result is that when the fed used FIAT money to flood the economy with cash the economy recovers far more quickly than if we were chained to something like Gold or the newest right wing scamp crypto currency/ Block Chain currency.
Nothing i am saying is even debated by the top economists. And as the three examples i noted above have proven, flooding the economy with cash reduces the drop in the economy that, as we saw after the 29 market crash, results in labor producing less and thus real declines in wealth.
YOu do realize that despite the Pandemic in 2020 the US economy produced as much as it did in 2019. And in 2021 will see huge growth. That is the opposite of what happend in 29 when Hoover tried to balance the federal budget by slashing spending. You do know that, right? None of this is possible with out Fiat Currency...
Debt is NOT the problem with the US or global economy. A lack of consumption is the problem and it has been for 30+yrs. Again none of this is even debated by the experts. What IS debated by the experts is HOW to get consumption higher. Higher consumption means more products and services sold and thus faster GDP growth. What is debated is HOW to increase consumption given that the decline is caused by too much of GDP going to too few people.
Fiat currency may not have been the *cause* for these misadventures, but a fiat global reserve currency/petrodollar most certainly *enabled* them. Also, it's simply a gross misnomer to characterize the crypto/blockchain world as 'right wing scam' - my first hand experience shows that this realm includes all wings. To avoid stepping in a can of worms, I'm not stating any of this as an argument against MMT. I'm personally somewhat agnostic about MMT vs hard money approaches.
Hier - The challenge with hard money, as we learned during the depression, is that when the economy tanks for what ever reason if workers lose their income there is no mechanisim to push income out to them. That drop in income slows spending in the economy and creates even worse damage. There is tons of research on this.
Fiat allows the government to push money out to diseffected workers thereby keeping money flowing through the system and reducing the harm to the economy. In 2020 GDP was what it was in 2019 even though lots of workers stayed at home collecting checks from the government. That is why recovery of the economy. (not small businesses and workers impacted by covid) is going to be fairly painless.
Fiat is not going anywhere as long as the US remains the reserve currency to the world. And given the 40yr shift in GDP out of the pockets of the poor and middle class and into the pockets of the top .1% (Piketty) there is tons of cash sitting on the sidelines looking to be parked. Treasures are the safest thing on the planet today. Add to that Oligarchs in Russia and China getting their cash out of those authoratarian countries and the Treasury will be flush with cash as long as the US does not implode on itself and stop being the reserve currency...
Shifting GDP from the top .1% to the poor and middle class creates more consumption and stimulates the economy, as we have seen during Covid. That can be done in a lot of ways and the conservatives and liberals both have ideas that are better than what we are doing to day. The only BAD ideas are the ones that Amazon and Walmarts lobbyists are handing to Congress to keep GDP flowing to the top .1%
All of the parallels are not there.
1. Weimar funded a war they LOST with borrowed money.
The US has a military that is 5Xc stronger than the next 10 countries combined.
2. Due to 40yrs of growing income inequality shifting GDP from poor and middle class to the the top .1% the world is swimming in cash. And that cash is desperate for a safe place. Weimar was not a safe place to loan your money post WW2. The US today is the safest place.
3. Deflation is a far higher risk in the US in 2021 than hyper inflation. The Japanese example is much closer. Zombie banks and tons of debt and low wages... The US has it all....
I called you out on that because the body of evidence on this is overwhelming. Deflation has been the biggest threat to the US for 20yrs now not inflation. Unless the US loses our position as the Default Global currency our debt is not the problem, GDP growth is our problem.
Basically all true. The debt load is now so burdensome that taking on additional debt does not contribute to GDP. The huge debt is a drag on economic growth. In that sense it is deflationary. On the other hand, the vast money printing by all central banks since 2008 is definitely debasing currencies. The fact that money printing is not working can clearly be seen in the amount of excess reserves that banks are pushing back to the Fed, now $1 trillion, in the RRP program. So who knows what the future holds? I certainly haven’t found anyone who has a clue. Perhaps high inflation will follow a deflationary period? All I know is, anyone who remains in fiat at 0% interest rates is becoming poorer by the minute!
William - The current debt load is in no way slowing GDP growth. The government is borrowing at near zero % interest.
The stagnation in the economy has nothing what so ever to do with government debt.
There are books written on this by Noble prize winners like Steiglitz and Krugman (Who Geitner and Paulson ignored in 2008) showing that what is slowing the economy is low consumption caused by increasingly lower wages paid to poor and middle class workers who are also consumers. Their consumption is now being eaten up by credit card interest and debt and RENT seeking industries like College, Housing and many consumer goods.
Combine that with growing monopolization and financial globalization of industries we have seen less and less competition and thus slower and slower Productivity growth, which is they KEY to growing in any economy (PRODUCTIVITY GROWTH). Again, books written on this and not disputable in the least. Not a partisan issue just a economic issue.
Right after WW2 the US had as much debt (as a % of GDP) as we have today and no where near as much CASH sitting on hand with rich people. Financially the US is in better shape today than we were after WW2..
After WW2 We reduced the debt as a % of GDP by GROWING fast. Really fast.
That growth was fueled by productivity gains. We had far fewer monopolies and far more small and medium businesses which created great competition and great innovation which led to real productivity growth. Monopolies don't have to compete and as such innovate far less than competitive markets, hence slower GDP growth.
Everything from the national highways being built out to woman coming into the workforce to war time technologies being converted to civilian use resulted in rapid growth of a middle class and thus rapid increase in demand for goods and services (IE GDP growth). It was as echo system that produced the greatest increase in wealth the world has ever seen...
Today we need only shift GDP from the top .1% back into the pockets of the poor and middle class and break up the Monopolies that are crushing productivity growth and we will see higher demand for goods and services and thus faster growth.
There are great ideas for doing this from conservatives like Luigi Zengalis and Richard Thaler to liberals like Joseph Steiglitz and the late Alan Kreuger.
It is not a partisan issue it is a political issue because Elected leaders are more focused on serving corporate masters than growing the economy if they want to hold their office.
How to get growth and manage the debt is easy the politics is much more difficult.
If the US stops being the reserve currency of the world then the Debt level can turn the US into Weimar. But that is not going to happen unless something very unexpected happens. Chinese blillionaires and Russian Oligarchs along with American and European billionaires all want their money held in US dollars so zero interest rates are not going away today any more than they were going away in 2009 when we had to load up on debt.
Van Hoisington and Lacy Hunt would disagree with you. These two have been spot on with regard to the economy for a decade. https://hoisington.com/pdf/HIM2021Q1NP.pdf
I think that ultimately the best way to situate these kinds of discussions is from the standpoint of the solution. Many people might agree on the general nature of the problem, but the real axiomatic issue is revealed when we find out what the person believes should be done.
Arguably, the soundest approach is common sense Glass-Steagall bankruptcy re-organization of the system, followed by the issuance of new credit linked to long-term investment in infrastructure, energy (including thorium and breeder reactors), industry, with Lincoln-style Greenbacks as the new national credit mechanism.
https://www.strategic-culture.org/news/2020/09/09/how-to-save-a-dying-republic-lincoln-and-the-greenbacks/
I could go about taking issue with some of your individual arguments, including yo claims about the state of the bloated US military and all the endless wars, but what if I just asked you: ok, even if you’re right, how does that change the need for an immediate Glass-Steagall bankruptcy re-organization of the system? How does that change the necessity of separating out the investment banking institutions from commercial banking institutions? How does that change the fact that once you have such a bankruptcy re-organization, you’re going to need to issue new credit tied to productive long term investment?
If you support a Glass-Steagall banking re-organization of the system, that has a lot of implications and consequences. If we don’t have such a banking reorganization and separation, you’re talking about a systemic collapse of the Trans-Atlantic banking system.
You’re the president, it’s 3:00am and you get the call that the financial markets about to suddenly crater with 80 trillion dollars that will be wiped out in the span of 6 hours. What do you do?
If you know what you’re talking about you should be able to provide a coherent and systemic answer to what you would do.
David - Agree our military is bloated and near useless. But it serves its purpose. It maintains the US as the worlds reserve currency.
So yes i would support something like Glass Steagall but for the 21st century which means, like our Monopoly laws, needs to be updated.
As for the 3am call lets just say if i have Tim Geitner and Hank Paulson as my advisors i will make the wrong moves. All they care about is protecting capitol owners.
If i don't know WHY the financial markets are cratering i cant be expected to make rational choices. And if my adivisors are CAPTURED by the banks then i cant get good advice from them.
If you neglected to identify WHY the financial markets are cratering i seriously doubt you know the right solution yourself.
Its like a patient going into the emergency room with a 106 temperature, it will kill them for sure. Quick, tell me how you are going to CURE them? Hint: First find out what the CAUSE is. With all due respect a question that shows very little knowledge of the global finance or economic system.
This seems like a very healthy exercise.
There is a short and long version of the answer to your question about the causes. Regardless of historical in-depth analysis, the obvious problems that need immediate response can be stated relatively simply in the following manner:
The private merchant banking system has been looting the physical economy and productive sectors of the economy for over 40 years of globalization. In order to feed the increasingly large and cancerous financial growth that has resulted from the specutive orgy run by Wall Street and the City of London, more and more of the income streams of the productive sectors of the real had to be looted and diverted away from real productive investment into this financial casino game, largely run by Wall Street and the City of London. The flows of investment were increasingly diverted into speculation, creating bubbles, bubble atop of bubble. With the introduction of financial derivatives and other financial instruments by the wizards of Wall Street under Allen Greenspan and the oligarchs that he served in the late 80s (when financial craters were already appearing), they were able to create new instruments where one could now place a bet on a bet on a bet on a bet on a bet on a bet etc… this created a whole new world of speculation, which in order to keep growing, required more and more of the income streams of the population to be diverted. This was achieved through all sorts of deregulation, all the way up to the removal of Glass-Steagall under the Gramm-Leach-Bliley Act, where now the investment banks could directly use the vast store of deposits and savings within the commercial banking system to create evermore vast and great bubbles in order to keep the speculative casino system going.
We are now at the end of that game. There is no way to pay the monopoly debts that have been created by this game.
Were I an advisor to the president, I would say “Mr. President, you need to call for a banking holiday, we need to restructure the banking system because we cannot pay this 80 trillion dollar black hole that is now surfacing in the system. We need to get China, Russia, the Europeans, and various other officials into a meeting ASAP. Tell them you are going to go into bankruptcy re-organization, we’re calling a banking holiday. The banks will be on holiday for a few days as the restructuring happens. You’ll have to do one of those fireside chat-type speeches informing the public of the restructuring, and most importantly, of the programs that you will launch in concert with that structural re-organization.
We have several major vital infrastructure programs that need to be immediately launched in order to rebuild our rotted economy which has been neglected for over 40 years. These include mass irrigation and agriculture programs to stave off the impending famines, high speed rail, water transfer programs (like China’s “Move South Water North), new cities etc…
Naturally, the federal reserve is bankrupt and needs to be shut down and re-organized like the rest of the banking system. If it’s too far gone, we’ll just create a new national banking institution like Hamilton did and we’ll support vital continental-wide projects, including things like the Bering Strait Tunnel, building 100 new fourth generation nuclear power plants (which barely produce any co2, to shut up those insane green Malthusian ideologues), and we will find areas of cooperation with China’s One Belt One Road in order to rebuild the Middle East, which we completely destroyed and bear the moral responsibility of reconstruction.
Oh, and we need a new Pecora commission where we will jail the criminal bankers that made this possible and stand in the way of implementing our structural reforms.”
https://www.google.ca/amp/s/canadianpatriot.org/2020/10/06/how-to-break-the-kneecaps-of-wall-street-sociopaths-before-its-too-late-ferdinand-pecora-revisited/amp/
I'm sure King Theoden thought Grima Wormtongue was a competent advisor, too.
Completely agree. But how to get rid of those who would prevent this repair from happening?
Well, the system is very fragile right now. As Wall Street on Parade and other outlets have reported, the banks have secretly been receiving trillions in bailouts from the repo-markets in order to stay afloat. Most of the big banks on Wall Street are all zombie banks.
As Wall Street on Parade reported:
“Since the Fed began its repo loan operations on September 17, the tally of the Fed’s cumulative loans to Wall Street’s trading firms comes to more than $9 trillion”
https://wallstreetonparade.com/2020/03/the-fed-has-pumped-9-trillion-into-wall-street-over-the-past-six-months-but-mnuchin-says-this-isnt-like-the-financial-crisis/
It just takes a few sane voices to call for the breaking up of the banks and the protection of depositors before they go belly up.
We are in unprecedented times. Anything could happen. So the saner voices should step up and call Wall Street’s bluff. They really are bankrupt. It just hasn’t yet set in for everyone. The point should be for there to be a plan before that realization comes, because when it does, it could mean an overnight meltdown. The 2007-2008 problems never went away. They are much bigger now. In 2007-2008 the Congress was threatened with marshall law if they didn’t immediately approve the TARP bailouts to rescue the banks who were holding trillions in worthless toxic paper. They are now holding many trillions more of that same toxic paper.
David - As for hyper inflation. Sure the US could accidentally drop a nuclear bomb on itself or it could turn out Amazon and Google are the next Enrons just cooking their books. There is a greater than zero chance of both.
But asside from things such as those the US is not going to stop being the default currency to the world and as such, based on what we know today, there not a high probability of inflation. Krugman was saying that in 2009 and was IGNORED by the press and by politicians. In 2020 Trump and his team did not credit Krugman with being right about spending MORE not less during a down turn in the economy. Its not that Debt does not matter, it is that if you don't spend during a down turn in the economy the economy gets worse not better and you end up with MORE debt not less.
It is 2021 and the world is learning how to work with Fiat Money. And one day we will make mistakes and learn and improve, just like with did with Gold Standard during the depression. THat is how economics works. Test and Learn...
I would strongly advice you stop following UN Trustworthy sources to learn about economics and finance because it is almost impossible to unlearn that shit once you immerse your mind in it. I see this with people that immersed themselves in Gold Standard for the past 20yrs. They learned a bunch of PROPAGANDA and know can't figure out how finance works because the much dreaded inflation never ever appears.
Corruption is our biggest problem, not Fiat money. Expose the corruption and you can start taking steps to address it. And that is what elected leaders like Sanders and Warren and Katie Porter and others have been doing. And banks have really hurt these people (Warren was thrown out of the consumer protection agency she founded and Porter was thrown off of the banking committee after gutting Jamie Dimon from Chase).
In the real world there are things that can and should be done. But crack pots writing non sense that when fact checked is regularly FACTUALLY WRONG are not going to improve things any more than the GOLD BUGS over the last 20yrs have. All they are doing is selling entertainment.
David - There is a major problem with Zombie companies in the US and i'm sure you are aware of he reporting that Matt, Pro Publica and The Intercept have done on CMB loans...
I am not going to argue that there are issues in the financial system. Of course there are and they could cause problems at anytime.
Additionally, i totally agree we "should have a plan" ahead of time.
Please tell me what elected officials that you support are willing to fight the banks on things like this to protect tax payers?
Is it not the job of the responsibility of the Vice Chair of the Federal Reserve to over see banks and their loan activity? Did the Trump administration do what it should have been doing to examine these loans?
You say you want to see a "plan" yet i don't really hear any insights from actual experts on how to discovers what is HYPE (which you seem attracted to) and what is real?
Elizabeth Warren and Bernie Sanders have taken on big banks and big banks beat them everytime. If you want something done i would pivot from consume reports from less than respected sources to supporting candidates that have the courage to FIGHT the banks. I do agree, the banks are our biggest threat to the economy.
Buy the way i have purchased PUTS on several of these large Reits that own properties that are not occupied and are most likely over valued.
I support candidates that are actually fighting the banks and i have put my money where my mouth is. And i don't read media ranked LOW for factuality to form my views. How about you?
Judith - The way to do it is always the same in a democracy. VOTE. You have to vote in the primaries because the one thing even politicians need more than money from donors is votes. If you don't vote in the primary, as we saw in 2020 you end up with the PARTY choice (Biden). Trump proved that if people vote in the Primaries they can override what the party leaders want. Just DO NOT vote based on Identity Politics. VOTE YOUR POCKET BOOK
DG, Restoring Glass-Steagall is not a bad idea. However, it won't solve the problem. Since the 1930s too many new financial institutions and mechanisms have been created for a restoration of Glass-Steagall to solve the problem. For example, would restoring GS solve the zero-doc, low-doc, no down-payment loan problem? Would restoring GS, make CDS any less risky? In a bygone era, companies like AIG were not involved in financial markets. Now they are and subject to little or no regulation. Restoring GS won't fix this.
We have to start with the basics: the Trans-Atlantic financial system is systemically bankrupt. It’s being propped up with a variety of essentially illegal and insane bailout policies and artificially low rates. The whole system is currently organized to prevent the derivatives bubble from popping. That’s what the game is. People have to start wi the knowing what the game they’re playing actually is. The game is keep the derivatives bubble from popping for now… We can put aside the more nefarious plan for dealing with the inevitable bursting of the bubble down the road.
The way to deal with this is to first implement a bankruptcy re-organization. A re-organization won’t even work on a national level. If the US goes into bankruptcy re-organization, the entire transatlantic system has to essentially be re-organized.
What happens in a bankruptcy re-organization? The accountants come in, they say what can be paid and what cannot? Which debts are legitimate and should be honoured and which ones shouldn’t?
This is where a lot of people start to have emotional freak outs and start tossing around insane free market libertarian garbage. This is where the Glass-Steagall standard of banking has to be applied. Legitimate debts are those debts that are actually tied to the real economy, debts required for agriculture, industry, infrastructure, small and medium-sized businesses, pensions. That means many banks will be broken up into several financial institutions, including bad banks which will be made to carry the brunt of the toxic debt.
The FDIC and government can only guarantee legitimate debts which meet the Glass-Steagall standard. The quadrillion dollar bubble of derivatives contracts tied to these obligations, the CDS and CDOs, all of that is trashed. You literally write it all off because it has no legitimacy. The fact that there are hundreds of trillions of dollars worth of this stuff doesn’t make a difference.
The 2007-2008 crisis was not even really about mortgages and people defaulting on their payments, it was about all the MBSs and CDOs tied to these obligations. It was the unwinding of the whole derivatives bubble tied to that.
The Fed and related institutions literally churned out tens of trillions of dollars JUST to stop the whole system from being vaporized overnight. This is why the Congress was threatened with Marshall law in the streets the next day if they didn’t immediately pass the TARP bailouts. All the merchant banking families on Wall Street and the City of London have done is buy themselves time. And that’s what these interests are jittery about, because there’s no way to actually cover that financial black hole once it re-emerges. They don’t have any tools left in their “tool box.”
With that said, once the bankruptcy re-organization is done, new credit does have to be issued, and this is another place where all the insane libertarian free market types will go completely ape. The reality is the only reason the system hasn’t collapsed is because of all these covert bailouts, so their whole schtick against government intervention is nonsense, that ship sailed a long time ago. The whole system would have literally collapsed into dark age conditions a long time ago had it not been for the government bailouts. The only distinction being made here is who should get bailed out and how. There is no possible scenario where the government doesn’t intervene, the only question is how and according to what method will debts be evaluated as honourable to illegitimate. So this is completely above the pay grade of all these monetarists and free market ideologues.
Lincoln’s greenbacks and Roosevelt’s Reconstruction Finance Corporation are two examples of how the issuance of new credit would work, which the US Congress uniquely has a right to issue, not private merchant banks like the Federal Reserve. The new credit has to be government-issued and tied to real physical economic development, meaning infrastructure, industry, manufacturing, agriculture etc… The government has to be barred from supporting or bailing out any of the speculative merchant banking interests. That’s the point of Glass-Steagall.
https://www.strategic-culture.org/news/2020/09/09/how-to-save-a-dying-republic-lincoln-and-the-greenbacks/
Time to repeal all the tax breaks and tax dodges and make the wealthy pay for the country they expect to protect them from international pirates at home and abroad.
Don - Absolutely True... The value in doing that is clear. The question is politically how do you accomplish that. Republican voters vote strictly on identity politics and don't vote, ever, based on economic policy. The Democratic party is controlled by Corporate Tools like Pelosi and Schumer and Biden who are as interested in keeping corporate money coming into party coffers as helping the poor and middle class. True some Democrats are not corporate tools but most are.
How can voters hold Washington accountable for voting in the policy needed to get the rich to pay for what they are consuming.
Educating the voters is the only answer. And changing the campaign finance laws. And we have been beating our heads against this wall since Ronald Reagan and Alan Greenspan found the school of Greed is Good.
Don - Yup... Think about it. All it takes of the the poor and middle class to start organizing and voting as a block.
When you consider what MLK and civil rights leaders had to do to force LBJ to support Civil Rights i dont think this is that difficult. Same with what woman had to do to get to vote and what Labor had to do to get unions.
What we need to do today to beat back the big companies at the voting booth is absolutely doable.
David G... where is your evidence that interest rates are "artificially" low? You do realize the global economy is swimming in cash right now with extremely slow growth for demand in goods and services caused by growing income inequality. Right?
From US and EU billionaires to Chinese Billionaires to Russian Oligarchs there is more CASH in the hands of fewer people than ever before. In a low growth economic environment how could you expect high interest rates. There is no investment demand for their cash. That is what happens when consumers (IE: the middle class have wage stagnation, they go into debt and consume less other than interest on debt). I suggest you read Nobel Prize winner Joseph Steigletz on this issue. His emperical research validates it but government politicians have to ignore him less they anger their donor base.
The evidence does not supports your first hypothesis. The link you sent is little more than a narrative from a pundit paid to get clicks. He has no empirical evidence validating your claim. Joseph Steiglitz research was not done to get clicks it was done to get at the truth and prove that CAPTURED Economists like Lawrence Summers and finance people like Hank Paulson F*$ed things up in 2009 because they were serving banks not citizens.
https://www.weforum.org/agenda/2016/04/joseph-stiglitz-on-whats-wrong-with-negative-rates/
When I was talking about artificially low interest rates, I was talking about lending rates for the major merchant banking interests, the repo-loans and related bailout mechanisms, not interest rates for businesses and the general population.
You speak of income gaps and such, but these are more an effect than a cause… the reason for these income gaps and all the related problems is because the US and Europe are run by a financial oligarchy, and the real physical economy has been increasingly looted and cannibalized in order to feed the zombie banking system.
While you mention folks like Stigliez, something tells me he isn’t actually calling for the jailing of all the criminal bankers and the bankruptcy re-organization of Wall Street. I read that he supported Glass-Steagall a while back, but the former World Bank chief economist seems pretty quiet these days. Even Bill Gates and Warren Buffet talk about “income inequality” and “income gaps.” That doesn’t really mean much. And when you cite individuals as “Nobel Laureate” economists, I just think to myself, “who still believes that’s a reputable title?”
The pundit Ehret has regularly been calling for a Glass-Steagall bankruptcy re-organization of the system and collaboration on major infrastructure programs across the world, which would require new international credit mechanisms like the BRICS bank, a New Bretton Woods fixed exchange agreements etc…
The other point that should be made is that the US and Europe will not get out of this alone. There is serious delusion about this. They’re going to have to work with things like China and their Belt and Road Initiative—another thing that sends shivers down the spine of London and Wall Street. Most of the Western media talk about Russian and China is pure unadulterated nonsense and propaganda. The reality is that the Western oligarchs have tried everything to overthrow Russia and China, and it hasn’t worked, and now their economic system is melting down. Hence the crazies over at the Pentagon are openly talking about the likelihood of nuclear war with Russia and China, and saying they are becoming more “aggressive”—this despite the fact that anyone who is not a moron can look at a map and see US and NATO encirclement of China with military bases and ABM systems all along Russia’s perimeter. The financial crisis question also has to be situated within this broader geopolitical context.
https://www.strategic-culture.org/news/2021/06/25/russia-wants-to-be-relevant-feels-squeezed-by-china-and-other-popular-delusions-of-a-dying-technocracy/
David - The West has seen the greatest creation of wealth ever in the recorded history of the planet over the past 200 or so years. The economic framework for this growth has come from the insights of ACTUAL EXPERTS (from Adam Smith to David Ricardo to Carl Marx to Hayak and then to Keynes). None of these experts were 100% correct about 100% OF what they wrote about and over time the world learned from our mistakes and made improvements as is possible in democracies. Hence the massive creation of material wealth.
None of the economic frameworks that created this wealth came from Pundits sitting in their mother basement regurgitating what they read on the Misses web site and googling furiously to manufacture some narrative lacking actual peer reviewed insights and data. In Fact the Strategic Culture Organization is ranked as EXTREME right wing in its BIAS and VERY Low for simple factual accuracy... So it is essentially a propaganda platform much like Misses and not an actual intellectual organization.
Not my opinion. Here is the proof:
https://mediabiasfactcheck.com/strategic-culture-foundation/
All of these economists for the last 200yrs when the greatest amount of wealth ever was created and their advice followed used the best evidence available (facts and data from government and business) at their time to frame their insights and the result has been un paralleled economic growth, longer lives for humans, less physical work and more intelligent people with more freedom than ever before.
If you want to discuss finance and economics in a serious manner you will have to read actual books by actual experts. You cant learn about such things trolling propaganda outlets ranked VERY LOW for factual quality and with any real research behind them.
Sorry but you get a FAIL for understanding the real economy not some narrative from a propanda web site.
Sorry, you just keep talking as if “facts’ are what the economist priesthood sanctions as “fact.”
My arguments are very straight forward man, the system is built upon a giant cancerous financial bubble. You make claims like “debt is not an issue” but rather spending. This is a rather silly argument. Are you not aware of the 17 trillion dollar bailouts from the 2007-2008 period? The whole system would have been vaporized then, because of the astronomical derivatives bubble tied to all the defaulting mortgages. The only thing that has kept the system was distingrating with all the zombie banks being vaporized (without Glass-Steagall that means all depositors and other stakeholders will go down into the same financial black hole).
The emergency repo-market loans started to be issued in January 2020 BEFORE the pandemic hit. I repeat: the Wall Street banks needed immediate liquidity in order to stay afloat starting before the pandemic.
If you want some empirical data to support these obvious obvservations, the zerohedge article had several graphs detailing the collapse of production and Wall Street on Parade has detailed reports of the secret emergency liquidity pumping that the fed has been involved in in order to keep the banks afloat. They are all hopelessly bankrupt my friend. From buying back stock to just sitting on the cash, it’s all because there is nothing really left to loot, they’ve destroyed everything. So they’re buying back their own stock, trading in worthless financial paper at the repo markets for hundreds of billions in cash. That’s literally what’s keeping them alive.
They are finished.
Read this Wall Street on Parade piece and then you’ll understanding why I’m harping on the need for the immediate bankruptcy and collapse of the merchant banking system.
https://wallstreetonparade.com/2020/01/federal-reserve-admits-it-pumped-more-than-6-trillion-to-wall-street-in-recent-six-week-period/
And who was president when glass-steagall was repealed?
It believe it was Bill Clinton who had another vampire squid (Robert Rubin) as Treasury Secretary.
It's a hilarity to imply that this mattered even the slightest bit.
TO, GS should be capitalized and the answer to your question is Bill Clinton. However, the Republicans weren't exactly opposed. A few Democrats (notably Dorgan) opposed the repeal of GD to the bitter end. However, must (of the Democrats) just wanted (and got) payoffs in the form of the enhancements to the CRA as their price. So the American people were doubly screwed. First, by the repeal of Glass-Steagall, Second, by the burdens of the CRA.
It's not justhat there's no mechanism to force regulation; there is no WILL to regulate. Because everybody in the game is just giddy at getting away with it. And once they do, they do more, and more, and more. Until their house burns down in a forest fire, or the sea inundates their basement, or their child dies from asthma, or their son kills himself. Yeah, then maybe they find their integrity again.
Yep! It's called "Regulatory Capture."
I enjoyed this interview because it didn't get bogged down in macroeconomics, and because it focused on the character of those making financial decisions. Too often exercises in economic prognostication become technical exercises. I'm not even convinced this is an effective forecasting technique.
It's helpful to explain the economy as not just a collection of numbers balancing out in the end, but as a collection of people, some of whom are wise or foolish, good or bad. You could say that elides a lot, that it is rhetoric. But so does the technocratic explanation, and so it is.
If an institution is inhabited by good people trying to do the right thing, the form that the institution takes doesn't matter much; good things will probably happen. Likewise an institution inhabited by bad people trying to cheat will probably produce bad outcomes no matter how clever the institutional arrangements.
It's refreshing to hear the economy spoken of with such moral clarity and conviction. Some have said that greed cuts through and clarifies. A conscience can do that too.
Follow the money. The ethical shortfalls lead you to the trail. But you're right. Moral clarity and conviction are necessary.
Thank you -- also this is worth hearing & seeing:
Going Underground: Oliver Stone exposes JFK assassination cover-up -- OUTSTANDING
Oliver Stone Exposes JFK Assassination Cover-Up (JFK Revisited) - YouTube
https://www.youtube.com/watch?v=qVso_wpata4
On this episode of Going Underground, we speak to legendary film director Oliver Stone about his new film ‘JFK Revisited: Through The Looking Glass’. He discusses JFK’s often overlooked campaigns for peace with the Soviet Union and Cuba prior to his assassination, as well as work furthering civil rights, the details exposing an alleged cover-up of the assassination of JFK, including rapid policy changes from the successor LBJ administration, and alleged CIA involvement in the assassination, why larger powers wanted John F. Kennedy dead, JFK’s preparations to shatter the CIA and his belief that the war in Vietnam was a mistake, how the events leading up to the assassination of JFK were meticulously planned and the CIA’s involvement on the day, Lee Harvey-Oswald’s supervision by the CIA, and much more!
Listen on Apple Podcasts: https://podcasts.apple.com/us/podcast/rt/id1457821689?i=1000528833406
WTF???
You have just fell from Mars? We live in a nightmare -- we have not been a democracy for 70 years. But we need to bring freedom and democracy to China, Cuba, Bolivia, Syria, etc., etc. FREE Assange
"We" don't need to bring anything to China, Cuba, Bolivia, Syria, etc.
The government's genocidal campaign that masquerades as "foreign policy" is responsible for the implementation of this situation, at the behest of the world's wealthiest.
You and I had and will continue having nothing to do with it's outcome.
Apples and oranges.
You have just discovered "warm water" although both of your fruits are delicious.
Haha -- you must have seen the dossier prepared against me. The "golden showers" accusation is a LIE. I have never participated in sprinkly things.
Hillary is mad because I broke up with her before she married Bill. To this day, she wants revenge.
That was funny and good...
Thank you once again Matt! I followed your coverage of the GFC in Rolling Stone from day one. As someone who was working at GS at the time, I had first-hand knowledge of the veracity of your reporting. It was truly great reporting.
I am one who highly values in-depth investigative reporting that takes time and money to develop; that is why I am a paid subscriber to your substack blog. I do not need to hear from you every day and, frankly, there are some authors who I admire very much, like Caitlin Johnstone, who nonetheless begin to sound like broken records with more or less the same daily lecture on American empire and the narrative matrix. I forward an article from her that I think is particularly good about once every few weeks; like "Society Is Made of Narrative."
Perhaps online authors fear their audience will forget about them if they don't hear from them every day; or that subscribers will wonder what they are paying for if they don't get their daily bread? I don't believe they are best served by behaving like newspaper columnists that need to churn out 1000 words/day.
Keep up the great work, and please continue to take the time to work on investigative reports that readers can really sink their teeth into.
Safest astrological prediction ever: The 2008 global financial crisis didn't change anything and the whole thing is going to repeat.
Riskiest astrological prediction ever: Next global financial crisis will happen at 9:03am on 14 July 2023.
It is unclear if a repeat of 2008 is coming or not. Some folks claim that corporate debt will bring down the financial system at some point in the relatively near future. I read claims to this effect with some regularity. Since my work if very far removed from corporate debt markets, I have no idea if this is true or not.
However, a quick glance at the NASDAQ shows a stunning similarity to the 1999-2000 period. Is MSFT really worth $2.128 trillion? Is Apple really worth $2.49 trillion. I have my doubts. Is a NASDAQ crash coming. I will/would never claim to have a crystal ball. However, I would be surprised if the NASDAQ didn't crash.
"Show me the incentive and I will show you the outcome.” -Charlie Munger
Discussions such as this are obviously heartfelt. I’ve spoken with Adam Taggart and I respect him a lot. But, for me, this analysis is infuriating.
Imagine a ship is taking on water – worrisome. Top physicists, mathematicians and scientists of all sorts work tirelessly to analyze the flows and eddies of the water in the hull, hull hydrostatics, structural chemistry, propeller physics, historic weather patterns, and dozens of other factors. This is economics today. This is Bloomberg, MarketWatch, Investors Business Daily, blah, blah, blah, working on this enormously complex problem of economics and reporting to us so we can regulate and protect our businesses, investments, homes, IRAs, pensions, etc. The ship is in danger of sinking -- thank God we have the top experts in government and academia working on this impossibly complex problem!
Oh, yes, a few passengers did point out long ago that there was a hole in the hull.
Economist John Kenneth Galbraith wrote in 1975 (Money: Whence it Came, Where it Went) that “the study of money, above all other fields in economics, is the one in which complexity is used to disguise truth or evade truth, not to reveal it.”
There is a hole in the ships of sovereign state and world economies. It is called M-O-N-E-Y. To be precise, the hull substance that USED to be there is called money. The hole is, well, a hole, a carefully concealed hole. It was drilled there intentionally by international and central banking. Economists and governments depend on it. Indeed, they say, “how could any ship possibly navigate the high seas without a hole in the hull?”
Sound money does not exist on earth, except, perhaps, in a few primitive cultures. Sound money is a fundamentally simple concept. You and a few others on an island could develop the basic principles of a sound money system and all would go well – unless some clever chap decided it would be best if he defined, created and controlled the “money” on the island. Oh, dear.
Sound money is a civil right, no different from any other civil right. A CIVIL RIGHT! Oh, you don’t think of it that way? Why not?
So, we can complain all we want about inflation/deflation, interest rates, the horrible cancellation of Glass-Steagall (I agree), regulation/deregulation, credit default swaps, the coming boom/collapse, blah, blah, blah: the furiously sloshing water rising in the hull. But understand that most are being fucked over primarily because their lives utterly depend upon this energy manifestation known as money and they don’t have the slightest idea what it really is. If I could control the nutritional content and value of the food you eat, you could have any sort of diet you choose and I could make your body sick or well, fat or skinny, alive or dead, at my discretion. And so is your economic energy and health manipulated – “for your own good”. Using “money”.
True but not new:
"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
-Henry Ford
Yes, that is an oldie and a goodie, but not exactly my point. There is no record of Ford actually saying these words, but they were attributed to him by former Nebraska representative Charles Binderup. However, Ford did write this in his 1922 autobiography, My Life and Work:
“The people are naturally conservative. They are more conservative than the financiers. Those who believe that the people are so easily led that they would permit the printing presses to run off money like milk tickets do not understand them. It is the innate conservation of the people that has kept our money good in spite of the fantastic tricks which financiers play-and which they cover up with high technical terms. The people are on the side of sound money. They are so unalterably on the side of sound money that it is a serious question how they would regard the system under which they live, if they once knew what the initiate can do with it.”
My point was not so much about the monetary system, per se, but money itself.
Thats an interesting take. And why do you think "Sound Money" as you call it would fix this? Why did we move away from "Sound Money" in the first place? Is money just one thing? A store of value? Isn't "Sound Money" deflationary? What happens when you have an economic shock/crash when you have "Sound Money"?
I'd be interested in your take.
You’ve nicely asked me to address several specifics in “defense” of my take. I’m very much in the learning stages. Trying to clearly understand our current monetary system and policy is very difficult for me. The fact is I am not knowledgeable enough to do a good job defending my views. I will fumble, but I will do my best; I have that responsibility. I feel like there is truth in what I’m saying, but I am more than happy to be challenged with specifics that I might examine to see if they are valid, and if my take is flawed.
I suppose we would first have to have agreement on what constitutes “sound money”. I agree with “a store of value”. So it seems safe to say that we have not had sound money in most parts of the world for a very long time. The currency in my pocket, in my bank, does not store value. It’s value, buying power, has gone down dramatically in my life. That is not rational or fair. If a person works hard and receives money for valuable products and services provided to others, then the value received for that labor should not diminish. So I would think that any facet of monetary policy that defeats money as a store of value would have to be eliminated.
I think the value of money needs to be tied to something so it cannot be manipulated. I’m not sure the best way to do this. Different proposals have been made, primarily gold. Government monetary policy embodies the principle that one can lend out money one does not have. That one can literally create money with loans, ad infinitum. I think Chris Martenson explains the situation well here: https://www.peakprosperity.com/money-under-fire/ See especially the chart of US Debt as a percentage of GDP. This is pure insanity I think. Perhaps someone here can explain how this does not end badly. I can’t see it.
Please clarify your point on sound money being deflationary. Try to keep it simple. At my simple level of understanding, it seems that if one had stable money, and then one’s business did poorly, one’s money supply would crash – no income, paying off debts, etc. Too bad – don’t make the same mistake next time. One would have to take personal responsibility for this and work to create something of value in order to increase one’s supply of money. When the stock market collapsed in 2008, there should have been no bailouts for anyone. Figure out what you did wrong, do your time in prison if warranted, and don’t do the same thing again. I think this forces an economy, any economy at any scale, to recover only by actually producing valuable products and services. By exchanging fairly. Wealth inequality can be fair or unfair. If one's greater wealth comes from creating greater value than someone else - not always easy to assess - that is fair. If one gains wealth when creating no value, or creating harm, this is unfair or criminal.
I might summarize by saying that sound money fixes the problem by forcing an individual or economy to create valuable products and services to survive, thrive or to recover, that being the only solution.
A fellow named Bill Bonner has a “daily diary” that you might like. He keeps it simple and straightforward.
Re: Bob Warner
Your approach sounds well reasoned to me. Lately I have been looking into our currency's devolution from being "Gold Certificates" to "Federal Reserve Notes"; and wondering when the "fiat currency*" thing happened.
*Fiat money gives central banks greater control over the economy because they can control how much money is printed. Most modern paper currencies, such as the U.S. dollar, are fiat currencies.
As Usual,
EA
I hope you've all read David Graeber's _Debt_, if only on the subject of how money was invented and developed.
Thanks for the reference.
The rentier classes are running the world, @ least the western world. They are parasitic in the same way they're been for millennia. They are a load on all of us who build wealth or perform useful services. If financial was reduced to ~10% or less of it's current size the real world would be much better off. Banking in particular should be a public utility; as long as private sector actors conjure up the money supply, they will own us as they do now.
Should lobbying be considered bribery? Corruption? Should lobbyists be publicly known? Who are they? What's their background? Who do they work for?
Thanks Matt!
great interview, liked the first 1 back in Jan 2020 as well.
big fan of you supporting other alt media to raise their profiles!
hopefully looking forward to more of your analysis on the the fed & financial services/banking
Matt, on the question of what other journalists are doing good work on the financial system and Wall Street, I was hoping you would have mentioned the folks over at "Wall Street On Parade." Their daily newsletter is a must read for me. I'm not sure why they don't have a Twitter feed as it would greatly expand their reach. I would love to see them promoted more.
Great watch. Enjoy details on the similarities of past financial crisis with the current pig-out going down.
Yes, the villains won and continue winning.