Thursday, August 8, 2013

Goldman Sachs is Not the Problem

Well, that title should score me some points with the big boys…. 

Paul Farrell has written a commentary with a very hopeful title: “Big Banks Conspiracy is destroying America: All markets manipulated, capitalism getting killed.”

There is a conspiracy.  It does involve the big banks.  But there is one significant actor that makes such a conspiracy possible.  Let’s see what Farrell has to say:

Example: early on in this indictment, Taibbi focused on a chapter in John Kenneth Galbraith’s classic “The Great Crash, 1929,” titled “In Goldman Sachs We Trust” where the Harvard economist singles out Goldman’s “Blue Ridge and Shenandoah trusts as classic examples of the insanity of leverage-based investment. The trusts, he wrote, were a major cause of the market’s historic crash; in today’s dollars, the losses the bank suffered totaled $475 billion.”

That’s quite a loss.  How did Goldman survive such a financial disaster?  Farrell offers no insight.

Goldman possesses a certain bold madness and borderline ethical behavior that today has not only been adopted by all its competitors on Wall Street but has also become the moral code running the collective brain of capitalists everywhere, corporate CEOs and Washington politicians.

Goldman Sachs did this?  All on their own?  Goldman Sachs has corrupted everyone?  All capitalists, all CEOs, and even Washington?

And today it is being rapidly adopted by business and political leaders across the developed world, wannabes all competing, fighting to be the next Goldman Sachs.

Farrell suggests that today, every bank wants to be a Goldman “wannabe”:

Get it? Every bank in the world is now a Goldman wannabe. A subtle conspiracy. That’s globalization and capitalism at its best, all competing for a piece of the action, for the top spot formerly held by Goldman Sachs. Yes, a few short years ago Goldman Sachs was “the world’s most powerful investment bank.”

Today’s world includes four Wall Street banks each with assets over $1 trillion, each more than Goldman. Plus eight other big global banks each have over $2 trillion total assets, including, among the 100 largest, Barclays, HSBC, Deutsche, ICB-China and Japan’s Mitsubishi.

Farrell is correct, there is a conspiracy, but there is nothing subtle about it.  It may be capitalism as it is practiced today, but it has nothing to do with true competition.  Will he give us a peak under the tent?

But thanks to their Trojan Horse in Washington, Treasury Secretary Hank Paulson, a former Goldman Sachs CEO, the banks were able to deceive, con and manipulate Congress into bailing out not only Paulson’s old firm, but all his buddies in the Wall Street banking community, by giving away over $30 trillion of free cheap money, to be paid for by future generations of taxpayers, investors and a high-unemployment, weak recovery.

But official Washington only “gave” $700 billion of TARP.  Where did this $30 trillion come from?  Please, tell us.

The banking industry is engaged in a subtle conspiracy of unethical, immoral, dishonest, corrupt, illegal, and outright criminal behavior, for profits ... cheating investors and taxpayers, conning the government, buying off politicians and setting America up for a massive crash, bigger than 2000 and 2008 combined.

But how?  Why?  I am ready to explode with anticipation.  I am waiting for the bomb to be dropped – where is there any mention of central banking, the root and enabler of the conspiracy?

Today, “big banks manipulate every market they touch ... huge government subsidies were used for speculation ... throwing money at banks doesn’t help the economy.” In fact, despite his delusion of saving the world economy, Fed Chairman Ben Bernanke’s policies were “a major source of the crisis.” To stabilize the economy we need to “break up the banks,” but unfortunately “the big banks own D.C. politicians.”

Well, Farrell is getting close – at least throwing in a passing reference to the Fed.  But Farrell does not go where this clue leads.  Instead, we get this:

Yes, the Goldman Bubble Machine phenomenon turned into a rapidly spreading virus after 2008, infecting all banks worldwide. How? Pure capitalism, competition grounded in basic human psychology, behavioral economics and neuroscience research.

Really?  Take all those fancy psychobabble terms and boil them down to their essence:  greed.  Farrell is suggesting that this conspiracy is given life based on greed.  Apparently this characteristic of human behavior, this “rapidly spreading virus,” only reared its ugly head in 2008.

Farrell’s conclusion?

Bottom line: Goldman Sachs has become just another second-stringer in the new global Big Banks Conspiracy….

That’s it? 

Goldman Sachs was always a second stringer.

The problem with commentaries such as Farrell’s, and I include in this Taibbi, Ambrose, Forbes, and many others who offer critical comments about today’s banking system, is that they won’t touch the root.  They effectively describe the peripheral issues.  They castigate people that deserve castigation.  Yet they don’t go far enough.

The root?  All of this is possible for one reason only: there is a legally enforced monopoly of money and credit.

Strike the root.  End the Fed.

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