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The financialization of America was a conscious decision by the oligarchs. They controlled the issuance of credit. They controlled the currency and level of inflation inflicted upon the masses. They controlled the corporations selling consumer goods on credit. They controlled the Congress, courts, and government agencies with their deep pocket lobbying and buying of influence. Lastly, they controlled the media messages and molded the opinions and tastes of the masses through their Bernaysian propaganda techniques perfected over the decades. In one of the boldest and most blatant acts of audacity in world history, the Wall Street/K Street oligarchs wrecked the world economy in their insatiable thirst for profits, shifted their worthless debt onto the backs of taxpayers and unborn generations, threw senior citizens and savers under the bus by stealing $400 billion per year of interest from them, and enriched themselves with bubble level profits and bonus payouts. Meanwhile, median household income continues to fall, real GDP is stagnant, true unemployment exceeds 22%, and 47 million people are living on food stamps.
–Jim Quinn of The Burning Platform blog, Oct 8, 2012, excerpt (brilliant) article, “Decline, decay, denial, delusion, and despair”
The policy of the Status Quo since 2008 boils down to this assumption: if we prop up an artificial economy long enough, it will magically become real.This is an extraordinary assumption: that the process of artifice will result in artifice becoming real. This is the equivalent of a dysfunctional family presenting an artificial facade of happiness to the external world and expecting that fraud to conjure up real happiness. We all know it doesn’t work that way; rather, the dysfunctional family that expends its resources supporting a phoney facade is living a lie that only increases its instability.
–Charles Hugh Smith from Of Two Minds, October 2, 2012, excerpt article, “If You Prop Up An Artificial Economy Long Enough, Does It Become Real?”
There is no nonsense so errant that it cannot be made the creed of the vast majority by adequate governmental action.
“Capitalism is a vehicle that helped bring the banksters to absolute power, but they have no more loyalty to that system than they have to place, or to anything or anyone…they think on a global scale, with nations and populations as pawns. They define what money is and they issue it, just like the banker in a game of Monopoly. They can also make up a new game with a new kind of money. They have long outgrown any need to rely on any particular system in order to maintain their power. Capitalism was handy in an era of rapid growth. For an era of non-growth, a different game is being prepared.”
–Richard K. Moore, Thunder Road Report, Dec 19, 2011
At a time of universal deceit, telling the truth is a revolutionary act.
Not ignorance, but ignorance of ignorance, is the death of knowledge
–Alfred North Whitehead
Corruptissima republica, plurimae leges (The more corrupt the state, the more laws)
“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
–Ludwig Von Mises
The US has been led down a dark alley and strangled in what history may recognize as a financial coup d’etat, and a campaign of economic war against the common people.
– Jesse, at Cafe Americain
The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it.
–John Kenneth Galbraith
If liberty means anything at all, it means the right to tell people what they do not want to hear
“Politics is the gentle art of getting votes from the poor and campaign funds from the rich by promising to protect each from the other.”
When the people lose faith and don’t know what to believe in, they don’t believe in nothing, they believe in anything.
Some ideas are so stupid only an intellectual can believe them
Some people say that Americans are ignorant and apathetic. But I don’t know and I don’t care.
–joke, provenance unknown
The hottest places in hell are reserved for those who remain neutral in time of great moral crisis.
A constant in the history of money is that every remedy is reliably a source of new abuse
–John Kenneth Galbraith
Economic forecasting was invented to make astrology look respectable
–John Kenneth Galbraith
The only time a nation destroys itself is when it becomes efficient in enforcing mediocrity.
– Lyndon Larouche
What will collapse really be like? I expect the event will be spectacular in some ways, but subdued and subversive in many other ways. Triggers may be swift and startling, but the reactions of the populace slow, uncertain, and presumptive. There will be fissures in our foundation, but the complete extent of the danger may take a few more years to become evident. While the public continues to maintain its fixation on some Mad Max nightmare scenario, the real collapse will be taking place right under their noses in the form of 25%-50% increases in food and fuel, tightened job availability with pensions swallowed by austerity, food lines hidden by food stamps until the government finally defaults and pulls the rug out from under entitlement programs, etc. For a time, it will look and feel like a slightly darker version of today, and not the cinematic melodrama that we have come to envision. The worst of times that we often find extolled in the pages of history books come at the cost of years of almost equal disparity, and usually, the lead up is far more difficult to handle than the finale…
–Brandon Smith from Alt-Market, August 6, 2012, excerpt article, “Has the perfect moment to kill the dollar arrived?”
And a short, short story:
It is the month of August, on the shores of the Black Sea. It is raining, and the little town looks totally deserted.
It is tough times, everybody is in debt, and everybody lives on credit.
Suddenly, a rich tourist comes to town.
He enters the only hotel, lays a 100 Euro note on the reception counter, and goes to inspect the rooms upstairs in order to pick one.
The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher.
The Butcher takes the 100 Euro note, and runs to pay his debt to the pig grower.
The pig grower takes the 100 Euro note, and runs to pay his debt to the supplier of his feed and fuel.
The supplier of feed and fuel takes the 100 Euro note and runs to pay his debt to the town’s prostitute that in these hard times, gave her “services” on credit.
The hooker runs to the hotel, and pays off her debt with the 100 Euro note to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.
The hotel proprietor then lays the 100 Euro note back on the counter so that the rich tourist will not suspect anything.
At that moment, the rich tourist comes down after inspecting the rooms, and takes his 100 Euro note, after saying that he did not like any of the rooms, and leaves town.
No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism.
And that, ladies and gentlemen, is how the governments of the world are doing business today.
JUST TO SAY TO ALL YOU FAITHFUL SUBSCRIBERS, and the hangers-on, and all the others, that Quantum Pranx will be taking a well-earned rest for a couple of weeks, starting about now… So nothing new or topical will be coming onstream in that time, but please feel free to trawl the archives. You might find an interesting or challenging article to rearrange your critical faculties, or else get you reaching for the loaded emergency pistol that you keep close by in a handy drawer… Of course, we are all well aware of a somewhat critical time frame coming up (yes, of course, it came up a long while back): the Greek crisis, the Eurozone crisis, the U.S. deficit crisis, the dollar crisis, the end of the road crisis, the future of the world crisis, blah blah. Yeah, well, that’s why QP is taking some time off… Stay safe, stay sane. –Aurick
by Gonzalo Lira
Originally posted April 4, 2010
Recently, William Black has more or less pointed out the same thing, as reported by Mish Shedlock, August 14, here: With the financial industry having pressured Congress, the accounting rules have been softened to the point where they cannot discern a healthy bank from an insolvent one. Hence, zombie banks, and a Japanese-style lost decade.
In 1982, many of the banks hit by the Latin American debt crisis were effectively insolvent. Paul Volcker, as the then-Chairman of the Federal Reserve—charged with overseeing the banking system—effectively cast a blind eye on this banking insolvency.
Volcker’s reasoning seems to have been that the US banks were not broke—they were just getting temporarily squeezed. Volcker seems to have concluded that time would heal the balance sheet wounds caused by the Latin American defaults. Therefore, to hold the banks to the letter of the accounting rules would likely drive one or more of them broke, to no useful purpose—and it could potentially cause a bank panic and general financial crisis. But to pretend (for a while) that all was right with the US banks would avoid a potential panic—so long as the crisis sorted itself out and the banks repaired themselves by writing off and renegotiating their toxic Latin American debt.
Volcker gambled, and won: The US banks indeed took the Latin American debt hit, but grew their way out of their hole. None of the large American banks were pushed to bankruptcy in 1982, and by 1983, the worst had passed. By 1984, the biggest chunks of Latin American debt had either been renegotiated or written off—so far as the American banking system was concerned, the crisis was over, with not a single name bank going broke. And most importantly, stability and calm reigning all the while. Score for Volcker and what we could say was the Volcker Call.
In 2008, when Lehman went bankrupt because of all the “toxic assets” on its balance sheet, the severe credit crisis that happened as a result was because everyone realized that Lehman was the canary in the coal mine. All of the American banking system was insolvent, for more or less the same reason: Assets on their books simply were not worth anything close to their nominal value. These assets were clustered around CDO’s, mostly in the real estate and commercial real estate markets.
To relieve the credit crunch that peaked in September, 2008, the Federal Reserve Board opened the money spigots—all kinds of lending windows were opened, with a dizzying array of acronyms, all of them doing basically the same thing: Lending out wads of cash at zero interest to the American banking system, all in an effort to keep it from going broke.
Between September, 2008, and March 2009, the Fed backstopped the entire US banking system—but it still wasn’t enough. The losses were too great, the holes in the balance sheets too big. So on April 2, 2009, a key FASB rule was suspended: Specifically, rule 157 was suspended, related to the marking of assets to market value—the so-called “mark to market” rule.