YOU CAN BANK ON THIS (redux)
by Greg Forest
October 27, 2011
You hear a lot from politicians of all creeds and the media about, “Taking America Back.” The question begged in such a statement is, “From who?” Who is it that owns America? Who do we need to take it back from? The math is pretty simple on this question. The 1% who own 38% of the wealth and 70% of the equity in our nation. The 99% aren’t sitting on enough to repossess (unless you count the last citizen economic redoubt the banking and insurance industries are wringing their hands and drooling over- the $2.7 trillion Social Security Trust Fund). It doesn’t take a rocket scientist to realize that working class Americans do not set monetary policy – billionaires do. It is just as clear that citizens don’t elect our politicians – billionaires do. And guess who this huge national debt is owed to. Billionaires.
Now, across the nation thousands of Americans are protesting that very cause. They are in the streets to take America back from the banking, insurance and corporate oligarchy and return a portion to it’s rightful owners, the citizens. Trying to level the playing field for working Americans is no easy task – especially when those who originally called for such change now oppose it. Many of the sentiments of the Occupy Wall Street movement regarding bankers and the FED could have been heard at any early Tea Party gathering three years ago. Somehow gay people and birth certificates have again pushed the economic reform agenda of the Tea Party to the back burner.
Don’t you just love that old tired chestnut about how the rich pay the lion’s share of all taxes? Those using that argument never mention that the rich also garner the lion’s share of income and equity. The elephant’s share too. The word “disproportionate” comes to mind. The investment class creates nothing but ephemeral paper wealth that has no basis in real things or true equity. They are not in business to expand the workforce so, please quit with the corporate, “job creator” mantra. They aren’t trying to create or grow anything – they just want to flip it and get out while the gettin’ is good. Creating jobs affects the bottom line negatively and is only done so grudgingly. Many seem to forget that jobs are created by consumer demand, not corporate cutbacks.
There is easily as much financial incentive to destroy a company as to make it succeed. Tanking companies for profit is what many venture capital groups specialize in. It is a tried and true formula. Get a group of money people to buy a successful company. Once acquired, leverage the company’s assets to borrow for further acquisitions, “growing” the company. Once all credit has been expended, the newly consolidated super company undertakes draconian methods to cut costs. Layoffs and cheaper manufacturing help bring the costs down. The long term devaluation of the company brand as product quality and customer service plummet is not considered as, in this investment model, there is no long term.
The real property, the beef in the burger, so to speak, is so far removed from the 3rd or 4th level of leveraging and a default swap or two, that it is, in essence, worthless or non-existent. These mythical assets are a powerful force, pulling us past the economic event horizon of common sense into the insatiable black hole of global investment banking. Fifty Wharton, Yale and Harvard MBA wiseguy biznezmen, each with the same $10 lien on a $5 asset all want to cash out and pat themselves on the back for insuring against the loss.
This is the primary engine of 21st Century capitalism – not innovation, hard work, products and demand, but acquiring, leveraging and scavenging what someone else has built with the fruit of their invention and labor. It is not the American consumer or worker that is creating CDO’s and default swaps as “products.”
A CDO (credit debt obligation) is just a product. Like toothpaste to some. Anyone who bought one should take their licking. It is very similar to the FED printing paper that only has value as long as people have faith in its worth. A faith-based economy, so to speak.
Little is heard about the other side of the “haves” and the “have nots.” It is not just economic or political power that the top 1% has an unfair advantage in acquiring and wielding. The future will be as much or more about information as a commodity than it has ever been. The 1% are privy to a great deal of information that we, the great unwashed, don’t have access to. Another dividing line is created between, “those in the know” and the clueless. Its pretty easy to turn a buck if you know what the next trend will be and how it will play out. It is pretty easy to make investments when the public is covering your back. But to excel in global banking, one must engage in so many hare-brained financial schemes that failure would bring ruin to the world economy. Politicians have the gun of total economic collapse placed against their skulls by the central banks and are threatened with pulling the trigger – and it is no idle threat – this is something they can do.
The huge bank bailout did little if anything to create jobs. The goal of the government providing the money might have been to free up credit for small business and get things moving but it didn’t work out that way. Why give small business a loan when the FED provides you money at no interest that you can turn around and by government bonds and t-bills at 3%. Wouldn’t it be great if the rest of us could go into a bank, borrow $100,000,000 at 1% or less and then put it back in the same bank in a 3% CD? You might even get a free toaster. We don’t have to worry a bit, because just like credit default swaps, the FDIC has our back. All we have to do is roll it over awhile and we are all zillionaires. What you say? That won’t work 99% of the time. Hmmm. Got me there.
On top of the fact that banks are now making access to your own money a fee-based service when you want to use your debit card, the latest outrage to come into play is Bank of America’s movement of, hold on to your hats, $74 TRILLION dollars in risky derivatives into FDIC-insured accounts. In a October 18th article in Bloomberg reporters Bob Ivry, Hugh Son and Christine Harper revealed that BOA, on the bring of insolvency and recently downgraded by the ratings agencies and owner of derivative heavy Merryl Lynch, is moving derivative accounts from Merryl Lynch into BOA FDIC insured banks – putting the risk of their CDO crap shoot again on the shoulders of taxpayers should the investments go further south. For you banking boosters and naysayers, if anything underlines the fact that the banks are not in this for the health of the U.S. economy, this should do it. The Tea Party can scream all they want about the $14 trillion dollar U.S. debt but why are they are silent as BOA puts the taxpayers on the hook for $74 trillion? It is astounding that one company alone, on the brink of bankruptcy, can have more debt than our entire economy is worth. There is something very wrong with this picture.