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Posts Tagged ‘Wall Street Journal’

The Hunt for MF Global’s Missing $700 Million

Posted by Admin on November 1, 2011

http://news.yahoo.com/hunt-mf-globals-missing-700-million-133012682.html

By Rebecca Greenfield | The Atlantic Wire – 2 hrs 43 mins ago

MF Global, headed by former New Jersey Senator and Goldman Sachs CEO Jon Corzinefiled for bankruptcy yesterday, but reports that $700 million is missing has spooked creditors and others on Wall Street,  reports DealBook’s Azam Ahmad. Best case scenario, the “missing money” is just sloppy “internal controls,” but worst case scenario, the financially unstable MF Global diverted customer funds to back its own trades. Either way, the news has made MF Global’s chance for survival dim, report DealBook’s Ben Protess, Michael J. De La Merced and Susanne Craig. “Customers’ funds must be kept separate from company money,” they write. “One of the basic duties of any brokerage firm is to keep track of customer accounts on a daily basis.” For now, neither Corzine or MF Global have been accused of anything, but the firm has been suspended from trading on the London Mercantile Exchange and futures market CME Group, reports the San Francisco Chronicle.

Related: How Jon Corzine Bankrupted His Firm

Yesyerday the market closed down 276 points, on fears that the trouble at MF Global would spread to other firms, explains Ahmad. “With MF Global filing for bankruptcy on Monday, investors pummeled many financial stocks, fearful that problems were lurking on the books of other Wall Street firms,” he writes. “It was a crisis of confidence, not unlike in 2008 when the markets punished stocks on mere speculation of trouble.” But it might not be as bad as 2008, MF Global’s rocky status didn’t have the same effects as the Lehman Brothers debacle, explain The Wall Street Journal‘s Mike Spector, Jacob Bunge and Aaron Lucchetti. “The ripple effects from MF Global’s collapse were far less dire, though customers and traders who buy and sell stocks, commodities and other investments through the New York company scrambled to move their business elsewhere.”

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U.S. Workers are the Victims of a Speedup

Posted by Admin on September 30, 2011

http://battleofearth.wordpress.com/2011/08/23/u-s-workers-are-the-victims-of-a-speedup/

LA Times, August 14, 2011
Posted here: Tuesday, August 23, 2011 @ 5:00 PM

Juan Sanchez polishes an acrylic bench on the Plexi-Craft factory floor in the Queens borough of New York. To keep profits climbing in tough times, corporations have laid off staff and piled more and more work onto the remaining employees. (Scott Eells / Bloomberg)

By Monika Bauerlein and Clara Jeffery

As employees work harder and longer hours, they face stagnant pay despite the 22% jump in corporate profits since 2007. But being victimized by this ‘speedup’ is not inevitable.

Mind racing at 4 a.m.? Guiltily realizing you’ve been only half-listening to your child for the past hour? Checking work email at a stoplight, at the dinner table, in bed? Dreading once-pleasant diversions, like dinner with friends, as just one more thing on your to-do list?

Guess what: It’s not you. It’s the speedup. To keep profits climbing in tough times, corporations have laid off staff and piled more and more work onto the remaining employees.

Webster’s defines speedup as “an employer’s demand for accelerated output without increased pay,” and it used to be a household word. Bosses would speed up the line to fill a big order, goose profits or punish a restive workforce. Workers recognized it, unions (remember those?) fought it — and, if necessary, walked out over it.

Now the word we use is “productivity,” and pundits across the political spectrum revel in the fact that year after year, American companies are wringing more value out of their employees than they did the year before. Just counting work that’s on the books (never mind those 11 p.m. emails), we now put in an average of 122 more hours per year than Brits, and 378 hours (nearly 10 weeks!) more than Germans. Worldwide, almost everyone except Americans has, at least on paper, a right to at least one day a week off, paid vacation time and paid maternity leave.

Sure, but we all have to do more with less — employers struggling to survive the downturn are just tightening their belts, right?

That’s true for some. But in the big picture, the data show a more insidious pattern. After a sharp dip in 2008 and ’09, U.S. economic output quickly recovered to near pre-recession levels. The United States did better than most of its fellow G-7 economies. But U.S. workers didn’t see the benefit: During the recession far more people here lost their jobs than anywhere else, and far fewer were hired back once the recovery began. And who knows what will happen now that the economy has made another downward turn?

Yes, some positions always get “rationalized” away, thanks to technological or organizational improvements — and, of course, offshoring remains a major factor. But increasingly, U.S. workers are also falling prey to what we’ll call offloading: cutting jobs and dumping the work onto the remaining staff. Consider a recent Wall Street Journal story about “superjobs,” a nifty euphemism for employees doing more than one job’s worth of work — more than half of all workers surveyed said their jobs had expanded, usually without a raise or bonus. All that extra work helped fuel nearly a sixfold increase in U.S. productivity from 2008 to 2010.

Workforce down, output up: No wonder corporate profits are up 22% since 2007, according to a new report by the Economic Policy Institute. To repeat: Up. Twenty-two. Percent.

To understand how we got here, first consider the Ben Franklin-Horatio Alger-Henry Ford ur-myth: To balk at working hard — really, really hard — brands you as profoundly un-American. All well and good. But today, the driver is no longer American industriousness. It’s something much more predatory. As Rutgers political scientist Carl Van Horn told the Associated Press recently: “The employee has no leverage. If your boss says, ‘I want you to come in the next two Saturdays,’ what are you going to say — no?”

Which brings us to another shared delusion: multitasking. It seems the obvious fix — I’ll just answer this email while I help with your homework. But research shows most of us cannot actually multitask. And not only that: If you attempt to multitask constantly, your mental circuitry erodes and your brain loses its ability to focus.

Think you’re the exception? Nope, warns Stanford sociologist Clifford Nass. “You’re really lousy at it. No one talks about it — I don’t know why — but in fact there’s no contradictory evidence to this for about the last 15, 20 years.”

Actually, it’s not hard to guess why no one talks about it: We need to believe there’s a personal workaround for what we’re conditioned to see as a personal shortcoming. When, in fact, the problem is the absurd premise that our economy can produce ever more with ever less.

How have we been so brainwashed? For a lucky few, money and perks help sugarcoat the daily frenzy. But for most Americans, it’s just fear — of being passed over at best, downsized at worst. Even among college grads, unemployment is twice what it was in 2007. McDonald’s recently announced that it had gotten more than 1 million applicants for 62,000 new positions. Enough said.

Not that there aren’t winners in the speedup economy. Although incomes for 90% of U.S. workers have stagnated or fallen for the last three decades, the wealthiest 0.1% are making 6.4 times as much as they did in 1980. And that 22% increase in profits? Most of it accrued to a single industry: finance.

In other words, all that extra work you’ve taken on — the late nights, the skipped lunch hours, the missed soccer games — paid off. For them.

This will keep up as long as we buy into three fallacies: One, that to feel crushed by debilitating workloads is a personal failing. Two, that it’s just your company or industry struggling — when in fact what’s happening to hotel maids and salesclerks is also happening to project managers, engineers and doctors (visit our website to read their tales). Three, that there’s nothing anyone can do about it.

We got to this point because of decades of political decisions. We’ve turned over the financing of elections to wealthy interests; we’ve made it harder for unions to organize; we’ve deregulated Wall Street and then completely wimped out on reregulating it after the financiers nearly destroyed the global economy.

But there is another way. European companies face the same pressures that ours do — yet in Germany’s vigorous economy, for example, six weeks of vacation are de rigueur, weekend work is a last resort, and companies’ response to a downturn is not to fire everyone, but to institute Kurzarbeit — temporarily reducing employees’ hours and restoring them when things start looking up. Sure, they lag ever so slightly behind us in productivity. But ask yourself: Whom does our No. 1 spot benefit?

Exactly. So maybe it’s time to come out of the speedup closet. Rant to a friend, neighbor, co-worker. Hear them say, “Me too.” That might sound a little cheesy. But if you’re in an abusive relationship — which 90%-plus of the U.S. currently is — the first step toward recovery is to admit you have a problem.

Monika Bauerlein and Clara Jeffery are co-editors of Mother Jones. Their extended essay about the speedup, along with charts and first-person tales, can be found at Motherjones.com.

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The Greater Threat: ET or NSA

Posted by Admin on June 18, 2011

http://exopolitics.blogspot.com/2011/01/greater-threat-et-or-nsa.html

The Greater Threat: ET or NSA
By Ed Komarek
1/16/11
Copy and Distribute Freely
My blog: http://exopolitics.blogspot.com/

If we are to understand the UFO/ET cover-up and its severe consequences to human evolution and national security we need to carefully study the evidence and documents available in credible books like, UFOs and the National Security State, Clear Intent and Above Top Secret. We can see that with hindsight the greatest threat to the human species and national security may not be ET colonization and subjugation, rather our global leaders past and present violent overreaction to contact in the 1940’s and 1950’s that continues to this day. To get a flavor of the paranoia of the times check out the Fontes Briefing.http://exopolitics.blogspot.com/2007/11/1958-fontes-saucer-briefing.html

There is considerable evidence that global allied leaders like Roosevelt,http://seekingmoinfo.com/default.aspx Churchill,http://www.foxnews.com/scitech/2010/08/05/churchill-ordered-ufo-cover-up/ Truman and Eisenhower (lots of documents herehttp://www.majesticdocuments.com/ ) felt that extreme measures were needed to resist the threat of invasion and subjugation. In 1947 the National Security Act began the process that created the National Security Apparatus that today I believe has become more a threat to human survival and evolution than the original threats associated with ET contact. Is this a classic case of the medicine being worse than the cure?

Eisenhower realized only to late the danger of the military-industrial complex that he helped create.
http://www.theatlantic.com/magazine/archive/2011/01/the-tyranny-of-defense-inc/8342/1/?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed%3A+kow-reading+%28Kings+of+War-Reading%29&utm_content=Twitter#
These allied leaders seemed to exclusively had threats on their mind rather than opportunities, and so they inadvertently unbalanced human evolution by cutting out those of us who might have advised against fearful hasty reactions and those who would point out the benefits of contact.

Many allied civilian and military leaders were students of history like Churchill and looked to Japan‘s successful use of extreme measures against the colonial invaders that included playing one against the other, isolating trade to certain restricted ports, and even death to civilians and Europeans having unauthorized contact with each other in Japan.http://www.markville.ss.yrdsb.edu.on.ca/history/west/ch9.ppt#256,1,Imperialism, Fearful global leaders failed to appreciate that even though Japan successfully resisted European invasion, the runaway national security apparatus Japan constructed to do so caused the almost total destruction of Japan and the death of millions of people in World War Two.

Evidence for this draconian Japan model of colonial resistance shows up in government documents. In Richard Dolan‘s UFO’s and the National Security State, pages 348-349, The unknown author in the NSA document wrote. “If ‘they’ discover you it is an old but hardly invalid rule of thumb. ‘they’ are your technological superiors.” Dolan writes, “Human history surely demonstrates the danger to weaker cultures when confronted by a technologically superior civilization, a loss of identity and absorption by the others. Citing the example of Japan (the NSA author says.) “He noted, that it is at least theoretically possible for a “weaker” society to survive such a confrontation.” The NSA document from the NSA website.http://www.nsa.gov/public_info/_files/ufo/ufo_hypothesis.pdf

Today with hindsight some global political leaders and even some in the MJ 12, NSA, CIA, NRO runaway security apparatus created to address the ET threat are beginning to realize their draconian reactions to the perceived extraterrestrial threat have now created an even bigger threat to national security and human evolution. I have in the past suggested that this mismanagement of ET contact is quite similar to the mismanagement of fire in natural ecosystems as in Yellowstone National Park. In self delusion the very people that created the problem, the huge accumulation of fuel through fire suppression, tried to alleviate the problem on their own. Without outside help from competent controlled burning specialists they tried to control burn and again this incompetence allowed the fire to get out of control and burned Yellowstone to the ground in catastrophic fire.

One is lead to wonder if our present leaders inside and outside of the runaway shadow government military-industrial-political process bubble are making a similar mistake managing ET contact as did the managers of natural ecosystems in Yellowstone National Park. The Japan model seems to have had two very disastrous outcomes. The runaway national security state in Japan pushed Japan into a disastrous war while in the USSR the runaway national security state tried to maintain technological and defensive parity with the U.S. with causing collapse and disaster.

National Security people tend to ignore those of us that say, ” The means is the end, and the a destructive means cannot and will not give a long term positive outcome.” Contrary to many in the National Security State there there is a very important place for the rule of law and ethics! Ethics and oversight keep things from getting out of control. The means fashions the end result. Duh.

Evolution proceeds no matter the poison we choose. ET is not standing still and the present slow progress of government disclosure is in my opinion too little too late. Instead of slow conservative official acknowledgment of ET contact through global document dumps of low level material and the official academic bodieshttp://www.redorbit.com/news/space/1976546/experts_call_on_un_to_prepare_for_extraterrestrials/slow release of information, we need much more radical and rapid solutions to disclosure.

It is the NSA http://www.abovetopsecret.com/forum/thread48687/pg1that really holds the keys to the Kingdom near the apex of the extraterrestrial control pyramid and if they will not willingly themselves give public access to the huge accumulation of data some of us believe they have in their vaults on ET civilizations, culture, science, politics, exopolitics, technology etc., they must may forced by the citizenry to give access as in the WikiLeaks way for the overall good of society. The NSA’s huge database is the repository of the information the Shadow Government has on ET, and I believe it comes from, hacked computers obtained from crashes and maybe even the alien’s own computer networks, alien interrogations, diplomatic channels, cultural and technology exchanges, treaties and trade etc.

Our species survival from ET contact is at stake alright, but maybe not so much from ET directly, but by from our leaders own well meaning dysfunctional destructive reactions to that contact. My father was fond of saying. “The road to hell is paved with the best of intentions.” Not until we have full and open disclosure will these threats diminish as ordinary citizens and officials not at the apex of society become part of the contact paradigm.

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Prosecuting Wall Street Fraud: The US Economy is A Giant Ponzi Scheme

Posted by Admin on December 31, 2010

http://www.globalresearch.ca/index.php?context=va&aid=22395

Global Research, December 14, 2010
 

Bill Gross, Nouriel Roubini, Laurence Kotlikoff, Steve Keen, Michel Chossudovsky and the Wall Street Journal all say that the U.S. economy is a giant Ponzi scheme

Virtually all independent economists and financial experts say that rampant fraud was largely responsible for the financial crisis. See this and this.

But many on Wall Street and in D.C. – and many investors – believe that we should just “go with the flow”. They hope that we can restart our economy and make some more money if we just let things continue the way they are.

But the assumption that a system built on fraud can continue without crashing is false.

In fact, top economists and financial experts agree that – unless fraud is prosecuted – the economy cannot recover.

Fraud Leads to a Break Down in Trust and Instability in the Markets

As Alan Greenspan said recently:

Fraud creates very considerable instability in competitive markets. If you cannot trust your counterparties, it would not work

Similarly, leading economist Anna Schwartz – co-author of the leading book on the Great Depression with Milton Friedman told the Wall Street journal in 2008: 

“The Fed … has gone about as if the problem is a shortage of liquidity. That is not the basic problem. The basic problem for the markets is that [uncertainty] that the balance sheets of financial firms are credible.”

So even though the Fed has flooded the credit markets with cash, spreads haven’t budged because banks don’t know who is still solvent and who is not. This uncertainty, says Ms. Schwartz, is “the basic problem in the credit market. Lending freezes up when lenders are uncertain that would-be borrowers have the resources to repay them. So to assume that the whole problem is inadequate liquidity bypasses the real issue.”

***

Today, the banks have a problem on the asset side of their ledgers — “all these exotic securities that the market does not know how to value.”

“Why are they ‘toxic’?” Ms. Schwartz asks. “They’re toxic because you cannot sell them, you don’t know what they’re worth, your balance sheet is not credible and the whole market freezes up. We don’t know whom to lend to because we don’t know who is sound. So if you could get rid of them, that would be an improvement.”

And economics professor and former Secretary of Labor Robert Reich wrote in 2008:

The underlying problem isn’t a liquidity problem. As I’ve noted elsewhere, the problem is that lenders and investors don’t trust they’ll get their money back because no one trusts that the numbers that purport to value securities are anything but wishful thinking. The trouble, in a nutshell, is that the financial entrepreneurship of recent years — the derivatives, credit default swaps, collateralized debt instruments, and so on — has undermined all notion of true value.

Robert Shiller – one of the top housing experts in the United States – said recently that failing to address the legal issues will cause Americans to lose faith in business and the government:

Shiller said the danger of foreclosuregate — the scandal in which it has come to light that the biggest banks have routinely mishandled homeownership documents, putting the legality of foreclosures and related sales in doubt — is a replay of the 1930s, when Americans lost faith that institutions such as business and government were dealing fairly.

Nobel prize-winning economist Joseph Stiglitz says about the failure to prosecute Wall Street fraud:

The legal system is supposed to be the codification of our norms and beliefs, things that we need to make our system work. If the legal system is seen as exploitative, then confidence in our whole system starts eroding. And that’s really the problem that’s going on.

***

I think we ought to go do what we did in the S&L [crisis] and actually put many of these guys in prison. Absolutely. These are not just white-collar crimes or little accidents. There were victims. That’s the point. There were victims all over the world.

***

Economists focus on the whole notion of incentives. People have an incentive sometimes to behave badly, because they can make more money if they can cheat. If our economic system is going to work then we have to make sure that what they gain when they cheat is offset by a system of penalties.

Wall Street insider and New York Times columnist Andrew Ross Sorkin writes:

“They will pick on minor misdemeanors by individual market participants,” said David Einhorn, the hedge fund manager who was among the Cassandras before the financial crisis. To Mr. Einhorn, the government is “not willing to take on significant misbehavior by sizable” firms. “But since there have been almost no big prosecutions, there’s very little evidence that it has stopped bad actors from behaving badly.”***

Fraud at big corporations surely dwarfs by orders of magnitude the shareholders’ losses of $8 billion that Mr. Holder highlighted. If the government spent half the time trying to ferret out fraud at major companies that it does tracking pump-and-dump schemes, we might have been able to stop the financial crisis, or at least we’d have a fighting chance at stopping the next one.

Economics professor James Galbraith says:

There will have to be full-scale investigation and cleaning up of the residue of that, before you can have, I think, a return of confidence in the financial sector. And that’s a process which needs to get underway.

No wonder Galbraith says that economists should move into the background, and “criminologists to the forefront”

Failure to Stop Fraud and Prosecute Criminals Causes a Loss of Trust in Government, Which Makes Government Less Effective

As Shiller stated in the quote above, the failure of government officials to stop fraud and prosecute the financial fraudsters has caused a lack of trust in government itself.

Indeed, polls show that people no longer trust our economic “leaders”. See this and this.A psychologist wrote an essay published by the Wharton School of Business arguing that restoring trust is the key to recovery, and that trust cannot be restored until wrongdoers are held accountable:

According to David M. Sachs, a training and supervision analyst at the Psychoanalytic Center of Philadelphia, the crisis today is not one of confidence, but one of trust. “Abusive financial practices were unchecked by personal moral controls that prohibit individual criminal behavior, as in the case of [Bernard] Madoff, and by complex financial manipulations, as in the case of AIG.” The public, expecting to be protected from such abuse, has suffered a trauma of loss similar to that after 9/11. “Normal expectations of what is safe and dependable were abruptly shattered,” Sachs noted. “As is typical of post-traumatic states, planning for the future could not be based on old assumptions about what is safe and what is dangerous. A radical reversal of how to be gratified occurred.”

People now feel more gratified saving money than spending it, Sachs suggested. They have trouble trusting promises from the government because they feel the government has let them down.

He framed his argument with a fictional patient named Betty Q. Public, a librarian with two teenage children and a husband, John, who had recently lost his job. “She felt betrayed because she and her husband had invested conservatively and were double-crossed by dishonest, greedy businessmen, and now she distrusted the government that had failed to protect them from corporate dishonesty. Not only that, but she had little trust in things turning around soon enough to enable her and her husband to accomplish their previous goals.

“By no means a sophisticated economist, she knew … that some people had become fantastically wealthy by misusing other people’s money — hers included,” Sachs said. “In short, John and Betty had done everything right and were being punished, while the dishonest people were going unpunished.”

Helping an individual recover from a traumatic experience provides a useful analogy for understanding how to help the economy recover from its own traumatic experience, Sachs pointed out. The public will need to “hold the perpetrators of the economic disaster responsible and take what actions they can to prevent them from harming the economy again.” In addition, the public will have to see proof that government and business leaders can behave responsibly before they will trust them again, he argued.

Government regulators know this – or at least pay lip service to it – as well. For example, as the Director of the Securities and Exchange Commission’s enforcement division told Congress:

Recovery from the fallout of the financial crisis requires important efforts on various fronts, and vigorous enforcement is an essential component, as aggressive and even-handed enforcement will meet the public’s fair expectation that those whose violations of the law caused severe loss and hardship will be held accountable. And vigorous law enforcement efforts will help vindicate the principles that are fundamental to the fair and proper functioning of our markets: that no one should have an unjust advantage in our markets; that investors have a right to disclosure that complies with the federal securities laws; and that there is a level playing field for all investors.

If people don’t trust their government to enforce the law, government will become more and more impotent in addressing our economic problems. If government leaders take action, the market will not necessarily respond as expected. When government leaders make optimistic statements about the economy, people will no longer believe them.

Trying to Cover Up the Truth Extends Financial Crises

Elizabeth Warren, William Black and others say that attempting to cover up the truth extended Japan’s financial problems into an entire “Lost Decade”.

As Joseph Stiglitz said about Wall Street fraud:

So the whole strategy of the banks has been to hide the losses, muddle through and get the government to keep interest rates really low.

***
As long as we keep up this strategy, it’s going to be a long time before the economy recovers ….

Pam Martens – who worked on Wall Street for 21 years – writes:

The massive losses by big Wall Street firms, now topping those of the Great Depression in relative terms, have yet to be adequately explained. Wall Street power players are obfuscating and Congress is too embarrassed or frightened to ask, preferring to just throw money at the problem and hope it goes away. But as job losses and foreclosures mount and pensions and 401(k)s shrink, public policy measures to address the economic stresses require a full set of unembellished facts…

It was four years after the crash of 1929 before the major titans of Wall Street were forced to give testimony under oath to Congress and the full magnitude of the fraud emerged. That delay may well have contributed to the depth and duration of the Great Depression. The modern-day Wall Street corruption hearings in Congress … must now resume in earnest and with sworn testimony if we are to escape a similar fate.

To the extent that the government tries to cover up – instead of openly discuss – financial fraud, it will only extend America’s economic malaise.Failing to Prosecute Fraud Encourages Financial Players to Take Bigger and More Blatantly Illegal Actions

Nobel prize winning economist George Akerlof has demonstrated that failure to punish white collar criminals – and instead bailing them out- creates incentives for more economic crimes and further destruction of the economy in the future. Joseph Stiglitz, Professor Black, and many others agree. See this, this and this.

It was largely fraud which brought down the financial system in 2008. Unless we prosecute the fraudsters, they will do even bigger, stupider and more blatantly illegal things in the future which will lead to even bigger crises.

Failure to Prosecute Fraud Exacerbates the Sovereign Debt Crisis

The governments of the world have spent trillions trying to paper over the fraud and prop up the big, insolvent banks, instead of forcing them to restructure and forcing bondholders and shareholders to take a haircut.

A study of 124 banking crises by the International Monetary Fund found that propping banks which are only pretending to be solvent drives up the costs to the country:

Existing empirical research has shown that providing assistance to banks and their borrowers can be counterproductive, resulting in increased losses to banks, which often abuse forbearance to take unproductive risks at government expense. The typical result of forbearance is a deeper hole in the net worth of banks, crippling tax burdens to finance bank bailouts, and even more severe credit supply contraction and economic decline than would have occurred in the absence of forbearance.

Cross-country analysis to date also shows that accommodative policy measures (such as substantial liquidity support, explicit government guarantee on financial institutions’ liabilities and forbearance from prudential regulations) tend to be fiscally costly and that these particular policies do not necessarily accelerate the speed of economic recovery.

***

All too often, central banks privilege stability over cost in the heat of the containment phase: if so, they may too liberally extend loans to an illiquid bank which is almost certain to prove insolvent anyway. Also, closure of a nonviable bank is often delayed for too long, even when there are clear signs of insolvency (Lindgren, 2003). Since bank closures face many obstacles, there is a tendency to rely instead on blanket government guarantees which, if the government’s fiscal and political position makes them credible, can work albeit at the cost of placing the burden on the budget, typically squeezing future provision of needed public services.

The American banks and government have certainly pretended that all of the big banks are solvent. As ABC wrote in October 2009:

The Treasury Department and the Federal Reserve lied to the American public last fall when they said that the first nine banks to receive government bailout funds were healthy, [the special inspector general for the Troubled Asset Relief Program] states in a new report released today.

Similarly, the stress tests were a complete and utter sham.The government has given the giant banks huge amounts in loans and guarantees based upon their false representations about their financial health. The Fed has larded up its balance sheet with toxic assets from the banks.

Debt levels are also getting dangerously close to the level that they become a drag on the economy. See this and this. When Keynesian economists argue that debt does not harm the economy, they are talking about debt incurred to pay for stimulus and productive things for the economy. But throwing trillions at the giant banks – who are mainly using the money to gamble – is not stimulus. It helps the executives of the big banks and their shareholders and bondholders, butnot the broader economy.

Indeed, attempting to prop up big, insolvent banks is preventing stimulus from getting out into the economy.

Fraud Causes Growing Inequality, Which Undermines the Economy

Growing inequality is very harmful to our economy. Indeed, if wealth is concentrated in too few hands, the “poker game” ends, as only too few fat cats are left with all of the chips. See this, this, this and this.

Fraud benefits the wealthy more than the poor, because the big banks and big companies have the inside knowledge and the resources to leverage fraud into profits. Joseph Stiglitz noted in September that giants like Goldman are using their size to manipulate the market. The giants (especially Goldman Sachs) have also used high-frequency program trading (making up between 40- 70% of all stock trades) which not only distorts the markets, but which also lets the program trading giants take a sneak peak at what the real traders are buying and selling, and then trade on the insider information. See this, this, this, this and this.

Similarly, JP Morgan Chase, Bank of America, Goldman Sachs, Citigroup, and Morgan Stanley together hold 80% of the country’s derivatives risk, and 96% of the exposure to credit derivatives. They use their dominance in the market to manipulate the market.

Fraud disproportionally benefits the big players (and helps them to become big in the first place), increasing inequality and warping the market.
Fraud Increases the Severity of Boom-Bust Cycles

More and more people – such as the Bank of International Settlements and Barons – are saying that bubbles inevitably lead to busts, thus destabilizing the economy.

Professor Black says that fraud is a large part of the mechanism through which bubbles are blown.

Without strong laws against fraud, bubble after bubble will be blown, guaranteeing that the financial system cannot be stabilized in a fundamental sense.

Failure to Prosecute Fraud Is Worsening the Housing Crisis

Finally, failure to prosecute mortgage fraud is arguably worsening the housing crisis. See this and this.


The Global Economic Crisis

Michel Chossudovsky
Andrew G. Marshall (editors)
This book can be ordered directly from Global Research

Global Research Articles by Washington’s Blog

 

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