So far bank and governments have bail out executive bonuses, golden parachutes, end of the year bonuses, but hey have left holding the bag to around 6,000,000 families.
The problem with the present situation and all the talk about recession and probably depression is that a massive amount of money has been redistributed from most people to a few using a system of wealth transfer that is based in ideological falsehoods.
How much financial garbage needs to be dumped to the always trusting and always unsuspecting citizen.
The math is quiet simple the governments around the planet allowed financial institutions to move out of their books trillions of dollar financial garbage in the form of products that were called investment s to a rate of 32 times the actual asset value of the investment.
So far we have siphoned around $6 trillion to $10 Trillion into banks and other institutions and the stock markets around the planet have eliminated around $32 Trillion of wealth. So how much more is left?
The answer common answer these days is: unknown the amount of leverage left in the system.
I think I have an answer based in the amount of financial garbage “exports” generated as part of the profits reported by Wall Street firms.
The magic number lay between $210 trillion to $250 trillion, so far of that amount 35% is consider to be “toxic” in other words worthless no even to profit as garbage dump, the rest has three components, and have been performing so far. First, is considered prime government debt obligations –here is where you are expected to pay your taxes to pay the bondholders-. Second, corporate operating debt –here is where workers are expected to work for less to pay bondholders. Third, is your mortgage and other consumer debt – here is where you are expected to pay your mortgage and credit cards as you have been doing all you life.
The scary Halloween components of such debt are the toxic part, so far we have only clean up around 20% of the considered toxic. We have around $22 to $25 trillion of garbage to clean up, basically the wealth accumulation of the country for the next 50 years or so as long as we do not get more in debt, in that case the USA will have to default on its debt obligations and more serious global disaster will occur. No a likely event in the next 20 years but a very probable event after that, unless a massive program of government intervention takes place around the planet.
Who in heavens would have ever thought that the right wing of the conservative party under Bush Jr. will make the global economic situation evolve into a massive interventionism that will create the largest socialization of the economy?
It started by the federal government under the auspices of the financial lending lobby, and continue with banking lobby to permit leverage of those assets more than the 12 times that the law had on the books and allowed to increased to 32 times leverage. Today there is not a single government in the planet who is not in the brink of disaster thanks to the control by lobby and the elected official’s lack of independence.
Sunday, November 02, 2008
Selling Golden Garbage
How so many smart Ph.D.s MBAs and government institutions failed to control the amount of financial garbage sold to the public., destroying people's futures and pensions.
The answer is no simple, but the intentions are, the main intention was to create something that will generate commission thus bottom line profits from which those paid for running those outfits will get billions of dollars in pay.
Thus the answer is greed. Because greed is good for those who can have access to the money of people’s pensions assets, offered by the managers of those pensions, who usually are golf buddies of the sellers of financial garbage.
Here where is lies the problem to the potpourri of obsolete controls. When humans are left to run amok the results are obvious, they can range from plain thievery to noble laureates creating untested theories that can be catastrophic for the rest of society.
When Milton Freedman the economist Nobel Laureate in the 1950’s from the school of Chicago economics, started to launch his theories it took its laureate status for schools to start to teach the premises of government regulation was bad, and the market will be self-regulation mechanism will correct themselves. The problem is that both premises cannot work without allowing destruction and there is not will to allow destruction of capital when affect those who are the wealthiest and control 80% of the national assets of a country. Much less when there is no economic security for very large part of the population. Specially, for those who are over their productive life, most people after age above 65 to 70 is a very difficult endeavor to earn a decent living. When the Freidman theories are apply to society at large they fail to account for very large part of the population as variables. Politically they are theories that are easy to manipulate and create thriving fallacies that seem to be of pleasant tone fueling the need for greed.
Today, we are confronted with a massive privatization of risk driven under the Friedman economic theories, has made the speculative market a large part of the economic global structure, this risk pervasiveness is proving toe be pernicious to human lives and pursue of a society well-being at large and individual’s social development.
The solution is quiet simple, as Freidman pointed out let the consequences of greed be dire and stop the government intervention. Politics of convenience have allow Freidman be use when usurpation of wealth participation is convenient but stop the full application of the theory when is not.
It begs the question, why in heavens you want to elect politicians who are constantly working against your economic interests?
The answer is no simple, but the intentions are, the main intention was to create something that will generate commission thus bottom line profits from which those paid for running those outfits will get billions of dollars in pay.
Thus the answer is greed. Because greed is good for those who can have access to the money of people’s pensions assets, offered by the managers of those pensions, who usually are golf buddies of the sellers of financial garbage.
Here where is lies the problem to the potpourri of obsolete controls. When humans are left to run amok the results are obvious, they can range from plain thievery to noble laureates creating untested theories that can be catastrophic for the rest of society.
When Milton Freedman the economist Nobel Laureate in the 1950’s from the school of Chicago economics, started to launch his theories it took its laureate status for schools to start to teach the premises of government regulation was bad, and the market will be self-regulation mechanism will correct themselves. The problem is that both premises cannot work without allowing destruction and there is not will to allow destruction of capital when affect those who are the wealthiest and control 80% of the national assets of a country. Much less when there is no economic security for very large part of the population. Specially, for those who are over their productive life, most people after age above 65 to 70 is a very difficult endeavor to earn a decent living. When the Freidman theories are apply to society at large they fail to account for very large part of the population as variables. Politically they are theories that are easy to manipulate and create thriving fallacies that seem to be of pleasant tone fueling the need for greed.
Today, we are confronted with a massive privatization of risk driven under the Friedman economic theories, has made the speculative market a large part of the economic global structure, this risk pervasiveness is proving toe be pernicious to human lives and pursue of a society well-being at large and individual’s social development.
The solution is quiet simple, as Freidman pointed out let the consequences of greed be dire and stop the government intervention. Politics of convenience have allow Freidman be use when usurpation of wealth participation is convenient but stop the full application of the theory when is not.
It begs the question, why in heavens you want to elect politicians who are constantly working against your economic interests?
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