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 Government guarantees in the markets will be withdrawn leaving them exposed to the whims of confidence.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 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.
none of this is a secret for those of us living in tinhat town….obama is but a sock puppet to these stealth powers….
risky returns are sought because interest rates have persistently fallen to zero over the past 20 years which in turn has destroyed vast tracts of capital…. regulation has driven the cost structure of business so high that reckless means of return are required….
the fire economy has been given carte blanche and thus greed becomes a major factor….business schools incite this type of behavior….
it is truly the collapse of civilization due to the chronic debasement of the currency and money….
The core problem is the USA has not been able to generate the kind of real wealth, through products and services, and through exports, necessary to maintain a standard of living it is accustomed to.
It has delayed this reckoning for over a decade by creating fake wealth though manipulations of the money system. As if that system has intrinsic value. The people in-charge of the money manipulations, who has lost a great deal of their fake wealth, is desperately trying to revive it. To save nothing but their own skins.
We have seen this scenario played out in the industrial economy before. As one after another company failed to compete and to innovate, many went bankrupt. To do a quick fix they started outsourcing to developing countries. This is a fix that does not require hard work and big minds. It worked for a while, just like the new Wall Street tricks. Then there are no more tricks. Remember this is exactly how the USSR got busted up? Perhaps the USSR crash is exactly what the USA needs. All signs point that way.
“It has delayed this reckoning for over a decade by creating fake wealth though manipulations of the money system.”
A decade! A decade? A DECK! ADE! You think this has been going on for a mere 10 years?! Ever hear of the gold standard? The Fed and 1913? A new fangled thing called fiat currency (hint, it’s not an italian car)? Yeah. 100 YEARS of this crap, and because everyone thought all that green meant we had A LOT of something, it didn’t matter that it was slowly losing it’s value. Time for a little Economics 101.
Go look up an inflation calculator on the U.S. Bureau of Labor Statistics website.
Now try comparing a dollar from 1971 to a dollar in 2009. A 1971 dollar would have the purchasing power of $5.30 cents in 2009. Likewise, a 2009 dollar would buy 19 cents worth of goods back in 1971.
Now try 1913. The dollar from the year the Fed was invented would have the purchasing power of $21 and freaking 67 cents in 2009. *$21.67!* I could buy well over an troy ounce of silver in today’s market with that much purchasing power. In other words, a 2009 dollar would buy 5 cents worth of goods back in 1913. THAT is what weaning us off the gold standard has done. It’s only taken 100 years, but our currency is nearly 95% obliterated.
We will have the misfortune of seeing the dollar 100% unravel in OUR LIFETIME. We won’t have to wait 30 years for this. Imagine the Model T of our economy heading downhill along Devaluation Road on Prosperity Mountain since 1913. FDR switched us from leaded low grade gas to high octane back in 1934. Nixon dropped some nitro in the tank back in 1971. Now Obama has dropped some cinder blocks in the trunk, filled up the tank with NASA rocket fuel, and thrown a lit signal flare in the gas tank.
Now go by some gold, silver, food, guns, and just STUFF to get your remaining pittance of dollar value locked in NOW before the jet fuel of inflation these idiots have dosed us with hits the tank. If Obama can’t get you to give him most of your money . . . he’ll just make it completely worthless instead.
The most important letters in the BLS are “B.S.” My parents built a brick bungalow in 1973 with 2 car detached garage on a semi-rural lot for $19,800. To build that same house today in a similar location would cost well over $280,000. This is the simplest measure if inflation (dollar devaluation) I can think of. Translated: a 1973 dollar is worth 7 cents today. No B.S., just plain facts. But your premise is entirely correct – the fiat money system is a Ponzi scheme, a scam. It is reaching it’s limits today, and the big bankers will soon own most of the developed countries in the world. Welcome to serfdom.
And, I might add (I know this is not a “political” site…but….) the latest Supreme Court decision precipitated by the right wing nuts on that court that expands the power of corporate money….
Kiss you A@# goodbye!
It really doesn’t take a genius to know that the dollar is worth only what “confidence” it can garner from the rest of the world…and don’t forget a very important fact:
Our military backs the dollar!
And, most of all, too many people in this country haven’t a clue…..
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