Rocky Vega

This was a surprising concept to come across in the Wall Street Journal… the “shadow government, the financial industrial complex.” Yet, what sounds at first like conspiracy theorizing is actually a sound criticism of the fact that the US government has basically ignored the lessons of the financial crisis and is more or less gearing up for a round two.

Despite entering into the first downturn so recently, and currently watching the Greek meltdown unfold, the US economy is still a mess. Worse still, the financial system has only grown larger, more complex and interconnected, and increasingly risk-seeking in different and dangerously innovative ways.

As described by the Wall Street Journal:

“Our budget deficit is a problem, but it’s not the core issue.

“Our shadow government, the financial industrial complex, is our potential Greece. High unemployment lingers, higher interest rates are on the horizon and U.S. aid to the mortgage markets is coming to an end. Government guarantees in the markets will be withdrawn leaving them exposed to the whims of confidence.

“Amid that uncertain state, Wall Street is chugging along as if the last few years were merely a blip. At Citigroup Inc., the financial innovators are readying a new, complex derivative that would act as kind of financial crisis insurance. Citigroup believes the derivative, dubbed CLX, won’t put Citi or taxpayers at risk, but they concede the contracts aren’t foolproof, a story we’ve heard before.”

Leave it to Wall Street, still reeling from the fallout of an economic disaster largely brought about by synthetic financial instruments, to continue expanding its arsenal. Worried about problems with complex and nearly-foolproof mortgage and other derivatives? Don’t be. Now Citi’s put into place vastly more sophisticated financial crisis insurance derivatives. Bring ‘em on!

Confidence inspiring… indeed.

Read the full story in the Wall Street Journal’s coverage of how the Greek debt fiasco shows how little has been done to prevent the next crisis.

Rocky Vega

Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let?s Go Publications, Harvard Student Agencies, and The Harvard Advocate.

Recent Articles

Addison Wiggin
A Manifesto, of Sorts

Addison Wiggin

More than a decade ago, Addison Wiggin helped co-found the Daily Reckoning with Bill Bonner. Today, he recalls this life-changing experience, and explains how - despite being rooted in the world of finance - it is and will always be about much more than money. Read on...


4 DIY Halloween Costumes You Can Make in 10 Minutes or Less

Peter Coyne

Halloween is tonight! And just in case you waited until the last second to think about what you're going to wear, here are four costume ideas you can easily put together in about 10 minutes or less. With these costumes you'll be the hit of your friend's party - provided you're friends with a bunch of economists. (Downloadable masks included...) Happy Halloween!


Bill Bonner
4 Basic Truths to Help You Navigate the Financial News

Bill Bonner

The financial news is full of misinformation - reported by unreliable pundits and taken at face value by an easily swayed public that doesn't really no better. That's why today, Bill Bonner relays the four basic truths he's discovered during his 30 year career in the financial industry to help you make sense of it all. Read on...


Extra!
How YOU Can Help Pass the Swiss Gold Referendum

Grant Williams

For those who doubt the effectiveness of the Swiss Gold Initiative, Grant Williams has a few startling charts to show you. Today, he relays just how popular this movement is, and how you can actually influence the outcome... no matter where in the world you call home. Read on...


How Small Cap Stocks Saved the Market

Greg Guenthner

For most of the year, no one wanted small cap stocks in their portfolios. But over the last three weeks, few sectors of the market have performed better than small caps. Greg Guenthner explains how to use this to your advantage... and what to expect for the rest of 2014. Read on...