A Plan to Blow Up the Economy (Kissingerian Communism) - Mike Whitney
Mort Zuckerman
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Subject: A Plan to Blow Up the Economy (Kissingerian Communism) - Mike
Whitney
Date: May 3, 2010 11:57 AM
The Communist Wolf in Sheep's Clothing:
http://www.actionlyme.org/index.htm
Henry Kissinger's world view where he will do away with religion and
nationalities (he will create the "chaos" from which he will then reap
his "order") is a form of communism or moral relativism - the rule by
the few and the removal of one's personal property through
"globalization." According to Heiney, the notions in religions and
morality - human rights - must be muted in order to enforce his form
of slavery. 9/11 was staged in order to advance this notion of
"democracy." "Globalization" is World Communism or totalitarianism.
It requires that people accept that the many will be subservient to
the few:
http://www.youtube.com/watch?v=4bKwH3kJew4
<^^^ Heiney Explains>
======================================
http://www.counterpunch.org/whitney05032010.html
Was There a Plan to Blow Up the Economy?
The Subprime Conspiracy
By MIKE WHITNEY
Many people now believe that the financial crisis was not an accident.
They think that the Bush administration and the Fed knew what Wall
Street was up to and provided their support. This isn't as far fetched
as it sounds. As we will show, it's clear that Bush, Greenspan and
many other high-ranking officials understood the problem with subprime
mortgages and knew that a huge asset bubble was emerging that
threatened the economy. But while the housing bubble was more than
just an innocent mistake, it doesn't rise to the level of "conspiracy"
which Webster defines as "a secret agreement between two or more
people to perform an unlawful act." It's actually worse than that,
because bubblemaking is the dominant policy, and it's used to overcome
structural problems in capitalism itself, mainly stagnation.
The whole idea of a conspiracy diverts attention from what really
happened. It conjures up a comical vision of top-hat business tycoons
gathered in a smoke-filled room stealthily mapping out the country's
future. It ignores the fact, that the main stakeholders don't need to
convene a meeting to know what they want. They already know what they
want; they want a process that helps them to maintain profitability
even while the "real" economy remains stuck in the mud. Historian
Robert Brenner has written extensively on this topic and dispels the
mistaken view that the economy is "fundamentally strong". (in the
words of former Treasury secretary Henry Paulson) Here's Brenner :
"The current crisis is more serious than the worst previous
recession of the postwar period, between 1979 and 1982, and could
conceivably come to rival the Great Depression, though there is no way
of really knowing. Economic forecasters have underestimated how bad it
is because they have over-estimated the strength of the real economy
and failed to take into account the extent of its dependence upon a
buildup of debt that relied on asset price bubbles.
“In the U.S., during the recent business cycle of the years
2001-2007, GDP growth was by far the slowest of the postwar epoch.
There was no increase in private sector employment. The increase in
plants and equipment was about a third of the previous, a postwar low.
Real wages were basically flat. There was no increase in median family
income for the first time since World War II. Economic growth was
driven entirely by personal consumption and residential investment,
made possible by easy credit and rising house prices. Economic
performance was weak, even despite the enormous stimulus from the
housing bubble and the Bush administration's huge federal deficits.
Housing by itself accounted for almost one-third of the growth of GDP
and close to half of the increase in employment in the years
2001-2005. It was, therefore, to be expected that when the housing
bubble burst, consumption and residential investment would fall, and
the economy would plunge. " ("Overproduction not Financial Collapse is
the Heart of the Crisis", Robert P. Brenner speaks with Jeong Seong-
jin, Asia Pacific Journal)
What Brenner describes is an economy \that--despite unfunded tax cuts,
massive military spending and gigantic asset bubbles--can barely
produce positive growth. The pervasive lethargy of mature capitalist
economies poses huge challenges for industry bosses who are judged
solely on their ability to boost quarterly profits. Goldman's Lloyd
Blankfein and JPM's Jamie Dimon could care less about economic theory,
what they're interested in is making money; how to deploy their
capital in a way that maximizes return on investment. "Profits",
that's it. And that's much more difficult in a world that's beset by
overcapacity and flagging demand. The world doesn't need more widgets
or widget-makers. The only way to ensure profitability is to invent an
alternate system altogether, a new universe of financial exotica
(CDOs, MBSs, CDSs) that operates independent of the sluggish real
economy. Financialization provides that opportunity. It allows the
main players to pump-up the leverage, minimize capital-outlay, inflate
asset prices, and skim off record profits even while the real economy
endures severe stagnation.
Financialization provides a path to wealth creation, which is why the
sector's portion of total corporate profits is now nearly 40 per cent.
It's a way to bypass the pervasive inertia of the production-oriented
economy. The Fed's role in this new paradigm is to create a hospitable
environment (low interest rates) for bubble-making so the upward
transfer of wealth can continue without interruption. Bubblemaking is
policy.
As we've pointed out in earlier articles, scores of people knew what
was going on during the subprime fiasco. But it's worth a quick
review, because Robert Rubin, Alan Greenspan, Timothy Geithner, and
others have been defending themselves saying, "Who could have known?".
The FBI knew ("In September 2004, the FBI began publicly warning that
there was an "epidemic" of mortgage fraud, and it predicted that it
would produce an economic crisis, if it were not dealt with.") The
FDIC knew. ( In testimony before the Financial Crisis Inquiry
Commission, FDIC chairman Sheila Bair confirmed that she not only
warned the Fed of what was going on in 2001, but cited particular
regulations (HOEPA) under which the Fed could stop the "unfair,
abusive and deceptive practices" by the banks.) Also Fitch ratings
knew, and even Alan Greenspan's good friend and former Fed governor Ed
Gramlich knew. (Gramlich personally warned Greenspan of the surge in
predatory lending that was apparent as early as 2000. Here's a bit of
what Gramlich said in the Wall Street Journal:
"I would have liked the Fed to be a leader" in cracking down on
predatory lending, Mr. Gramlich, now a scholar at the Urban Institute,
said in an interview this past week. Knowing it would be controversial
with Mr. Greenspan, whose deregulatory philosophy is well known, Mr.
Gramlich broached it to him personally rather than take it to the full
board. "He was opposed to it, so I didn't really pursue it," says Mr.
Gramlich. (Wall Street Journal)
So, Greenspan knew, too. And, according to Elizabeth MacDonald in an
article titled "Housing Red flags Ignored":
"One of the nation’s biggest mortgage industry players repeatedly
warned the Federal Reserve, the Federal Deposit Insurance Corp. and
other bank regulators during the housing bubble that the U.S. faced an
imminent housing crash....But bank regulators not only ignored the
group's warnings, top Fed officials also went on the airwaves to say
the economy was "building on a sturdy foundation" and a housing crash
was "unlikely."
So, the Mortgage Insurance Companies of America [MICA] also knew. And,
here's a clip from the Washington Post by former New York governor
Eliot Spitzer who accused Bush of being a ‘partner in crime’ in the
subprime fiasco. Spitzer says that the OCC launched “an unprecedented
assault on state legislatures, as well as on state attorneys general
just to make sure the looting would continue without interruption.
Here's an except from Spitzer's article:
"In 2003, during the height of the predatory lending crisis....the
OCC promulgated new rules that prevented states from enforcing any of
their own consumer protection laws against national banks. The federal
government’s actions were so egregious and so unprecedented that all
50 state attorneys general, and all 50 state banking superintendents,
actively fought the new rules. (Washington Post)
So, the Fed knew, the Treasury knew, the FBI knew, the OCC knew, the
FDIC knew, Bush knew, the Mortgage Insurance Companies of America
knew, Fitch ratings knew, all the states Attorneys General knew, and
thousands, of traders, lenders, ratings agency executives, bankers,
hedge fund managers, private equity bosses, regulators knew. Everyone
knew, except the unlucky people who were victimized in the biggest
looting operation of all time.
Once again, looking for conspiracy, just diverts attention from the
nature of the crime itself. Here's a statement from former regulator
and white collar criminologist William K. Black which helps to clarify
the point:
"Fraudulent lenders produce exceptional short-term ‘profits’
through a four-part strategy: extreme growth (Ponzi), lending to
uncreditworthy borrowers, extreme leverage, and minimal loss reserves.
These exceptional ‘profits’ defeat regulatory restrictions and turn
private market discipline perverse. The profits also allow the CEO to
convert firm assets for personal benefit through seemingly normal
compensation mechanisms. The short-term profits cause stock options to
appreciate. Fraudulent CEOs following this strategy are guaranteed
extraordinary income while minimizing risks of detection and
prosecution." (William K. Black, "Epidemics of'Control Fraud' Lead to
Recurrent, Intensifying Bubbles andCrises", University of Missouri at
Kansas City - School of Law)
Black's definition of "control fraud" comes very close to describing
what really took place during the subprime mortgage frenzy. The
investment banks and other financial institutions bulked up on garbage
loans and complex securities backed by dodgy mortgages so they could
increase leverage and rake off large bonuses for themselves. Clearly,
they knew the underlying collateral was junk, just as they knew that
eventually the market would crash and millions of people would suffer.
But, while it’s true that Greenspan and Wall Street knew how the
bubble-game was played; they had no intention of blowing up the whole
system. They simply wanted to inflate the bubble, make their profits,
and get out before the inevitable crash. But, then something went
wrong. When Lehman collapsed, the entire financial system suffered a
major heart attack. All of the so-called "experts" models turned out
to be wrong.
Here's what happened: Before to the meltdown, the depository
"regulated" banks got their funding through the repo market by
exchanging collateral (mainly mortgage-backed securities) for short-
term loans with the so-called "shadow banks" (investment banks, hedge
funds, insurers) But after Lehman defaulted, the funding stream was
severely impaired because the prices on mortgage-backed securities
kept falling. When the bank-funding system went on the fritz, stocks
went into a nosedive sending panicky investors fleeing for the exits.
As unbelievable as it sounds, no one saw this coming.
The reason that no one anticipated a run on the shadow banking system
is because the basic architecture of the financial markets has changed
dramatically in the last decade due to deregulation. The fundamental
structure is different and the traditional stopgaps have been removed.
That's why no one knew what to do during the panic. The general
assumption was that there would be a one-to-one relationship between
defaulting subprime mortgages and defaulting mortgage-backed
securities (MBS). That turned out to be a grave miscalculation. The
subprimes were only failing at roughly 8 percent rate when the whole
secondary market collapsed. Former Treasury Secretary Paul O'Neill
explained it best using a clever analogy. He said, "It's like you have
8 bottles of water and just one of them has arsenic in it. It becomes
impossible to sell any of the other bottles because no one knows which
one contains the poison."
And that's exactly what happened. The market for structured debt
crashed, stocks began to plummet, and the Fed had to step in to save
the system. Unfortunately, that same deeply-flawed system is being
rebuilt brick by brick without any substantive changes.. The Fed and
Treasury support this effort, because--as agents of the banks--they
are willing to sacrifice their own credibility to defend the primary
profit-generating instruments of the industry leaders. (Goldman, JPM,
etc) That means that Bernanke and Geithner will go to the mat to
oppose any additional regulation on derivatives, securitization and
off-balance sheet operations, the same lethal devices that triggered
the financial crisis.
So, there was no conspiracy to blow up the financial system, but there
is an implicit understanding that the Fed will serve the interests of
Wall Street by facilitating asset bubbles through "accommodative"
monetary policy and by opposing regulation. It's just "business as
usual", but it's far more damaging than any conspiracy, because it
ensures that the economy will continue to stagnate, that inequality
will continue to grow, and that the gigantic upward transfer of wealth
will continue without pause.
Mike Whitney lives in Washington state. He can be reached at
fergie...@msn.com
"[Real] scientists are *fiercely* independent. That's the good
news."-- NIH's Top Fool, Anthony Fauci
Richard
Mort Zuckerman
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Some folks is jealous and wish
they had a brain.
KMDickson
http://www.actionlyme.org