The little guys may yet stick one to the bankers – Foreclosure gate

The little guys may yet stick one to the bankers (vintage rant Feb 07)

From my original Face Book ranting days…

The little guys may yet stick one to the banksters… for once…

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Wednesday, February 27, 2008 at 8:34am | Edit Note | Delete

Granted; the key word here is “may”. Nonetheless, the greed, the nonchalance and the arrogance displayed by our politicians in the recent past, abetted and enabled by the monetary authorities acting as so many puppeteers, may finally be reaching its logical conclusion and some little guys may, for once, actually benefit to the detriment of those blood sucking, immoral, opportunistic and devious breed of scum that are the bankers. Let me digress for a moment here to say that I am using the term “authority” rather loosely as the term denotes the right of enforcement through presumably superior knowledge and morality. As I am about to show, in this case neither knowledge nor morality ever played a part in the decision making process that brought us to this point.

Too, there is of course a wider moral implication to what may happen as this catastrophe unfolds in that the “little guys” that may benefit from this man made disaster may not necessarily have been in good faith when they ventured into the deals that may turn out to make their fortune. However, if for once the politicians and the banksters can be made to drink some of their own medicine, then I would be inclined to root for all those opportunistic and reckless individuals that thought they were smarter than those of us that adopted a more prudent and less bombastic approach to planning our lives and making a living.

I am talking, of course, about the ongoing real estate debacle that, of course, is no longer circumscribed to real estate because, of course, when you burden a complex system with ever increasing complexity you are bound to run into two of the laws that regularly and inevitably humble the bravest and the most audacious: the first is the law of diminishing returns and the second is the law of the failure of complex systems. Ok, so the latter is not actually a law but it ought to be because complex systems are prone to failure for the simple reason that when an outcome is dependent on an infinite set of prior outcomes, any disruption in the remotest part of the system will bring the whole thing to a halt. The other characteristic of large complex systems is that by its very nature, it does not allow problems emerge in a timely fashion. Therefore, until the problem is not evident, the system is still being fed and expanded so that when the problem does materialize, it backs up the entire system at exponential speed. Think of it as a pile up on a busy highway: traffic is flowing bumper to bumper and at increasing speed – one car slows down with the intention to come to a stop – the car behind sees the guy in front slowing down and begins to slow down too but, crucially, it does not realize the car in front is coming to a stop – the third guy in line slows down too and gets closer to the second guy – and so on and so forth. At one point, the second guy realizes the first car is stopping so he applies progressively more brake – the third guy is caught by surprise because the car in front is slowing down faster than expected and in turn applies more brake. But by now it is too late and the third car runs into the second and the fourth runs into the third and so on and so forth and you have a pile up.

This is pretty much what is happening now in the financial markets with the difference that on the highway the dynamic is linear whereas in the financial markets the dynamic is multi dimensional. But the problem is not strictly financial. Finance happened to be the trigger but it could have been as easily anything else that triggered the day of reckoning and the result would have been the same.

If your second brain cell hasn’t packed in and you haven’t yet glazed over, there is a chance you might actually want to know what I am going on about because I can pretty much guarantee that this pile up will impact our daily lives in a very tangible way. In case you have missed it, the effects are already felt and are all too real and this time there is no hiding for anyone anywhere. Everyone is in for a share of the pain and painful it will be.

Since I’m a nice guy and realize this has already been a long rant to read, I’ll cut to the chase. This is the article that prompts this tirade:

http://www.bloomberg.com/apps/news?pid=20601109&sid=aejJZdqodTCM&refer=home

To be sure this is not strictly news. There has already been at least one case that I know of whereby Deutsche Bank had a similar problem in Ohio around November 2007 or thereabouts. The irony of course is that the banksters that devised what can only be described as a Ponzi scheme should have omitted to observe the very first law of accepting collateral against a loan; that is to keep the deed to the ownership of said collateral in a safe place. Serves them right and I truly hope that all those seriously stupid bums that naively threw themselves into the real estate market with purely speculative intent will prevail over the banksters.

Of course, my position is morally objectionable if for no other reason that I am rooting for those people that recklessly but willingly ventured into dodgy get-rich-quick schemes to the detriment of those people that actually tried to save and build a secure foundation for their children, their own pensions and society at large.

For the best part of the last fifteen years the banksters in collusion with the corporations, collectively known as the “Powers That Be” (PTB) have, through manipulation of the politicians, pillaged and ransacked society in a huge scheme aimed at transferring wealth from the common folk to themselves. And they have been rather successful I might add. As evidence of my contention, take a look at the level of savings in the West. If you don’t know where to look, I can tell you that the rate is very close to zero and, in the case of the USA it is below zero by a substantial margin.

If you don’t find this fact alarming then you have obviously not understood the extent of the problem. But that’s not surprising really because even some of the most eminent brains directly involved in the system admit to not knowing the mechanics or the ramifications of the system we have built. I say “we” because we collectively have allowed this to happen.

How we got here is at once a fantastic tale of creative deception and so blatantly transparent that nobody thought could be true and nobody bothered to check. The illusion is so complete that most people mired into a situation where they have to run faster and longer just to stay in place don’t realize what is happening. Everyone just assumes that is “normal” life. It’s what you have to do because everyone else does the same thing.

The truth is that most people are better versed in the life and relationships of the glitterati and more readily recall cool Hollywood one liners then they realize the predicament we are in. But whereas previous generations may have been faced with similarly difficult junctures, they at least had the advantage of living at a time when the socio/economic cycle was either growing or plateauing. Today, we are living in an end-of-cycle era. The upshot is that we are only about 15 years away from coming full circle. But the intervening years are assured to be characterized by political strife, economic hardship and war. I know you think this is not much of a prediction because there are already a number of wars in progress. I also know that you feel these wars haven’t really touched you from near and haven’t really affected your daily life. If you are reading this and you are an expatriate, you are probably feeling the effects of war more intimately because chances are you work in an embassy or an international organization. But considering how little you think this is affecting you, try to imagine how minimal the impact is on someone living thousands of miles away in Europe or the USA.

Give me some license here and allow me to just lay out what I believe to be the problems that brought us to this point along with some of the ramifications. As I am writing off the cuff, the reasons I present will not necessarily be in sequential order. I understand this may create some confusion but I haven’ the time nor the inclination to structure this rant in a cause-effect fashion. If you wish to discuss this further with me you can write back and I’ll explain in greater detail.

If you paid attention you will recall that I mentioned that we are living in and end-of-cycle era. Keep this in mind as we proceed. For practical purposes I’ll limit the discussion to Western society and to the period of time going from the Renaissance to today. You’ll be glad to know that I am only going to mention the renaissance because that is the seminal point in time when the centralized power structure of the PTB began to erode. Since then, society has been locked in a constant internal struggle where the PTB, civic structures, private enterprise and lay people fight for the acquisition of a larger slice of the power pie. The struggle can at times be armed but as we move in time towards the 21st Century and as the actors in the struggle acquired an ever more comfortable material and political existence, we prefer to shift armed conflict off our shores. Though necessary, war is still messy business and we’d rather not see it first hand. WWII is, after all, if not fresh than at least still vivid in most Westerners minds. The struggle for the power pie ebbs and flows as the parties to the struggle acquire progressively and in alternating cycles more power prompting their adversaries to come up with ever more ingenious strategies to take the power back and so on and so forth round and round we go.

And this is the beauty of the Democratic system. Churchill said that though by no means perfect, it (democracy) is the best we’ve got. Democracy is not perfect for the simple reason that it differs from Despotism in terms of size of the ruling body. Democracy is the imposition of the will of the many over the few. Despotism is the imposition of the will of the few over the many. But whichever way you slice it, you always have segments of society that are unhappy and, sometimes, oppressed; it’s just a matter of degree. Some of you will argue that Despotism is far worse because it also threatens the life of individuals for no particularly valid reason if not rule by terror and I would agree. But it changes nothing to the equation and, I would counter argue, in the end-of-cycle phase, Democracy can be pretty scary too. I’ll spare you the examples as I am sure you can think of a bunch yourself.

For the purpose of this discussion, the other key moment in the socio-economic life of the West would have to be the creation of the Federal Reserve in 1913. Although not immediately significant for the entire Western world at the time, the creation of what was and is portrayed as a civic structure tasked to regulate and smooth the ebb and flow of the economy would become the lynch pin of the financial and economic architecture of the world shortly thereafter. And here is the rub. A country that was born of rebellion against the ubiquitous and oppressive power of the state; a country that set out to build a society free to worship whichever God suited one, free to engage in enterprise and to acquire property; a country where citizens could freely settle where most suited them; a country that strives to achieve a system of checks and balances so that no one government or institution could act unilaterally; a country that set out to build the type of democracy that would be the envy of the world …. and they went and relinquished monetary power to a central institution with governmental ties.

In case you are not versed in the arcana of economics, there are two overriding concepts at opposite ends of the spectrum in terms of running a country: statism or capitalism. Statism was/is championed by countries such as the former Soviet Union, Cuba and to a significant degree still today China. Capitalism of course was championed by Western countries all be it in varying degrees with the USA considered the more extreme proponent. In simple terms, Statism in its purest form calls for fully centralized control of economic and social activity: i.e. The government decides what to produce and how much, what to sell and how much, how much workers will be paid, where people can live, where and when people can meet if at all, where people can study… you get the picture. Of course it was claimed that Statism failed and, as a consequence, the Berlin wall came tumbling down. In the opposite corner Capitalism advocates free markets and freedom of movement: i.e. Let people decide what they want to buy and how much, where they want to live, what they want to do or where they wish to go, with the State acting as a benevolent and non interventionist overseer.

Every country in the world falls somewhere in between those two extremes with the USA as the self proclaimed champion of Capitalism in chief.

And that’s where the cookie crumbles. How free can markets really be (markets intended as the full spectrum of economic activity and people in a country and not only the stock market) if the quantity and the velocity of money is not within their control? The answer to that question of course is that they aren’t. So, in the final analysis, relinquishing monetary control to a central power is tainted by shades of Statism especially if the people haven’t asked for that to happen.

At this point you are probably confused. “How”, you are thinking, “is it possible that the West or, worse still, the USA could be Statist economies? That’s obviously baloney because I know I can work where I want and I will be paid according to my ability and I can use my money to purchase what I wish and I am free to travel… “ and that is all true.

However, in terms of enabling the PTB to regain control of your lives, the creation of the Federal Reserve, and subsequently central banks in other countries, was a watershed and in one swift move the PTB took back a whole bunch of till then hard earned independence and freedom.

Right out of the gate, the Fed got to work on its magnum opus that was to be revealed in its full glory within the decade. By 1923 America had emerged victorious and energized from WWI and, courtesy of the Fed, was about to embark on one of the most legendary and still talked about social and economic booms of modern times: the 1920s or the “go-go” years. Without going into detail, the go-go years were defined by an “anything goes” attitude in society. Of course, anything went due to generous helpings of that miraculous lubricant called “money”. Money was readily available and cheap and banks couldn’t give it out fast enough. Nobody ever stopped to think much less ask where the money was coming from. And since nobody ever asked the question, the PTB through its enablers the politicians felt no moral constraint either. Quite the contrary; they gave out increasing amounts of money at ever decreasing rates of interest effectively handing out rope for people to hang themselves with. And hang themselves they did and what ensued was the first grand transfer of wealth of the modern era in favor of the PTB.

Money has been around off and on for millennia. In effect, money is the one and true weapon of mass destruction and so it has been in the past; always, without fail. Proof of my contention is in the fact that no currency has ever lasted in its original form over the ages. All currencies ever created by any society anywhere in the world have eventually failed and, when they did, they took away the possessions, the dreams and the life of the masses they were meant to help. Recent examples of defunct currencies abound. Before Zimbabwe, the poster children of failed currency management were in South America with Argentina holding a place of distinction. Zimbabwe or Argentina too exotic for you to wrap your head around? How about the Euro then. At some point in the year 2000, 280 million Europeans lost anywhere between 25 to 50% (depending on the country) of their purchasing power when their individual currencies were converted into the Euro. And in one swift, audacious and stealthy move, the governments of Europe slashed their obligations towards pensions and other fixed expenses that were already then detracting too much from the money they allot to themselves. That was move number 1 in what is the second grand theft of the modern era in progress as I type.

Currencies have always inevitably failed because in the particular case of money, less really is more. And although economists and politicians will know that, office and power can only be obtained with more money and the gullibility of the public. And democracy allows the PTB to create as much of the stuff as they wish and for as long as they keep feeding you the entertainment you want, you are gullible.

The modern concept of money is only about 300 years old really. Modern money is defined by money based on “fractional reserves”. Briefly, this means that the value of the currency that is in circulation is greater than the value of whatever that money is based on. Once upon a time, the value of the currency was based on gold. Today, the value of a currency is based on… well… the value of another currency… which, in turn, is based on the value of another currency… If you were already aware of this gem of trivia and it did not worry you, you probably have not fathomed the ramifications of the greatest pyramid scheme ever devised by man.

Fractional reserve money was first tried by a Scottish economist and financier by the name of John Law employed at the court of King Louis XIV (???) in France. Though brilliant in its beginning stages, fractional reserve banking quickly turns as it did for Law into a crisis and then a fully fledged debacle. Law was lucky to escape from France with his life in the end.
A man of keen insight, Thomas Jefferson born a few years before John Law would die, immediately saw through the scheme of fractional reserve banking and warned: “If the American people ever allow the banks to control the issuance of their currency, first by inflation, and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property, until their children wake up homeless on the continent their fathers conquered. The issuing power of money should be taken from banks and restored to Congress and the people to whom it belongs. I sincerely believe that the banking institutions having the issuing power of money are more dangerous to liberty than standing armies.”

More than ever before, this warning should be heeded by all of you whom may still be reading.

We are living an end of cycle era. The PTB have hypnotized you and are manipulating you by giving you ever increasing quantities of ever more devalued money and increasing debt maintaining the illusion of wealth. You are working harder and longer just to stay in place. Simultaneously, the PTB distracts you with outrageous entertainment, tells you that it is your right and warns you that if you want to keep getting more of the same you have to safeguard this right by waging war to defend it against people that resent your life style.

I honestly believe the PTB have given out all the rope we need to hang ourselves and then some. And we’re sheepishly slipping the noose around our necks in the misplaced desire to appear cooperative and patriotic.

The carpet is about to be pulled from under us. The PTB has already picked up the side of the carpet and it is now in the process of lifting its shoulders as it prepares to raise its forearms for the final downward and forceful tug.

Proof that things are reaching a climax can be found in the whingeing and whinings of the banking and finance industry. After having lobbied so vehemently and fought so hard for deregulation and lessened oversight ostensibly to foster increased economic activity and abolishing the boom-bust cycle, today banks are calling for a government bail out for their reckless, immoral and criminal behavior of the past 20 years and, more specifically, for pyramid schemes they have designed, glorified and foisted on the public in the past eight years. They have made out like bandits and now that the Ponzi scheme is crumbling, they want you and me to pick up the tab and clean up the mess. The troubling thing is, of course, that they are likely to get their way.

“A confidential proposal that Bank of America circulated to members of Congress this month provides a stunning glimpse of how quickly the industry has reversed its laissez-faire disdain for second-guessing by the government — now that it is in trouble.
The proposal warns that up to $739 billion in mortgages are at “moderate to high risk” of defaulting over the next five years and that millions of families could lose their homes.”

http://www.nytimes.com/2008/02/23/business/23housing.html?_r=2&ref=business&pagewanted=all&oref=slogin

So, yes, I am happy for those reckless assholes that willingly ventured in what they thought would be get-rich-quick schemes to keep their houses and for the PTB to eat shit on this one. But I know that even if that were to happen for some miracle, the banksters will come out of it all right.

We are living in an end of cycle era. The course is set for political and social strife and, very probably, a war or the expansion of one that is already in progress and that will directly affect all of us.

….. Hello?… Are you still reading?

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