...and as the dollar sinks to the value of Confederate money, even the Chinese will have to pull the plug on our debt. This is why government manipulation of the currency always fails.
Was that QE2 yesterday?
George Washington, Washington's Blog
Nov. 4, 2010, 7:57 AM
As economists such as William Black and James Galbraith have repeatedly said, we cannot solve the economic crisis unless we throw the criminals who committed fraud in jail.
And 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. See this, this and this.
Nobel prize winning economist Joseph Stiglitz just agreed. As Stiglitz told Yahoos Daily Finance on October 20th:
This is a really important point to understand from the point of view of our society. 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 thats really the problem thats going on.
***
A lot of the predatory practices in automobile loans are going to be able to be continued. Why is it OK to engage in bad lending in automobiles and not in the mortgage market? Is there any principle? We all know the answer to that. No, theres no principle. Its money. Its campaign contributions, lobbying, revolving door, all of those kinds of things
***
The system is designed to actually encourage that kind of thing, even with the fines [referring to former Countrywide CEO Angelo Mozillo, who recently paid tens of millions of dollars in fines, a small fraction of what he actually earned, because he earned hundreds of millions.
***
I know so many people who say its an outrage that we had more accountability in the 80s with the S&L crisis than we are having today. Yeah, we fine them, and what is the big lesson? Behave badly, and the government might take 5% or 10% of what you got in your ill-gotten gains, but youre still sitting home pretty with your several hundred million dollars that you have left over after paying fines that look very large by ordinary standards but look small compared to the amount that youve been able to cash in.
So the system is set so that even if youre caught, the penalty is just a small number relative to what you walk home with.
The fine is just a cost of doing business. Its like a parking fine. Sometimes you make a decision to park knowing that you might get a fine because going around the corner to the parking lot takes you too much time.
***
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. Thats the point. There were victims all over the world.
***
So do we have any confidence that these guys who got us into the mess have really changed their minds? Actually we have pretty [good] confidence that they have not. Ive seen some speeches where they said, Nothing was really wrong. We didnt get things quite right. But our understanding of the issues is pretty sound. If they think that, then we really are in a sorry mess.
***
There are many aspects of [deterring people from committing crime]. 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.
And thats why, for instance, in our antitrust law, we often dont catch people when they behave badly, but when we do we say there are treble damages. You pay three times the amount of the damage that you do. Thats a strong deterrent. Unfortunately, what weve been doing now, and more recently in these financial crimes, is settling for fractions fractions! of the direct damage, and even a smaller fraction of the total societal damage. That is to say, the financial sector really brought down the global economy and if you include all of that collateral damage, its really already in the trillions of dollars.
But theres a broader sense of collateral damage that I think that has not really been taken on board. And that is confidence in our legal system, in our rule of law, in our system of justice. When you say the Pledge of Allegiance you say, with justice for all. People arent sure that we have justice for all. Somebody is caught for a minor drug offense, they are sent to prison for a very long time. And yet, these so-called white-collar crimes, which are not victimless, almost none of these guys, almost none of them, go to prison.
***
Let me give you another example of where the legal system has gotten very much out of whack, and which contributed to the financial crisis.
In 2005, we passed a bankruptcy reform. It was a reform pushed by the banks. It was designed to allow them to make bad loans to people to who didnt understand what was going on, and then basically choke them. Squeeze them dry. And we should have called it, the new indentured servitude law. Because thats what it did.
Let me just tell you how bad it is. I dont think Americans understand how bad it is. It becomes really very difficult for individuals to discharge their debt. The basic principle in the past in America was people should have the right for a fresh start. People make mistakes. Especially when theyre preyed upon. And so you should be able to start afresh again. Get a clean slate. Pay what you can and start again. Now if you do it over and over again thats a different thing. But at least when there are these lenders preying on you should be able to get a fresh start.
But they [the banks] said, No, no, you cant discharge your debt, or you cant discharge it very easily.
***
This is indentured servitude. And we criticize other countries for having indentured servitude of this kind, bonded labor. But in America we instituted this in 2005 with almost no discussion of the consequences. But what it did was encourage the banks to engage in even worse lending practices.
***
The banks want to pretend that they did not make bad loans. They dont want to come into reality. The fact that they were very instrumental in changing the accounting standards, so that loans that are impaired where people are not paying back what they owe, are treated as if they are just as good as a well-performing mortgage.
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.
***
The result of this is, as long as we keep up this strategy, its going to be a long time before the economy recovers
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Whatever happened to that alleged audit of the Federal Reserve Banks?..<br.
Was it killed?.. By Whom?.. When?.. Why NOT BRING IT BACK TO LIFE?..
This $HIT needs to STOP!
I knew Screwy2 would further drive the dollar into the toilet......I couldn’t figure out why Gold was down yesterday.
It’s showing almost a $40 leap. If the Fed keeps this up....Gold will be $2000 next week.
QE2 was the Progressive nuclear option...set in motion things that cannot be turned-around.
The massive redistribution of wealth on a global scale is now under way.
sfl
Invest HEAVILY in LEAD!