The Quiet Coup (by Wall St. oligarchy)

The Atlantic ^ | May, 2009 | Simon Johnson

[TigerLikesRooster]

The Quiet Coup

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

[TigerLikesRooster]

finance industry has effectively captured our government

I suspect that this has a lot to do with government negligence to deal with festering geopolitical problems, from N. Korea to Iran. Afraid to upset China, which has been essential for sustaining financial bubble. Afraid in general that any local conflict would pop the ultra-fragile bubble. Let's keep happy and push out any anxieties. Pretend everything is perfect and let the bubble inflate further....

[TigerLikesRooster]

Ping!

[arthurus]

Consider the representation Goldman Sachs has in the government. Just about all, if not actually all, of the Executive Branch finance honchos and “economists” are Goldman Sachs people.

[Tempest]

I’m going to miss the free America.

[GOP Poet]

bookmark

[Redbob]

The little-known secret to financial success as a nation:

Get the IMF prescription for your problems;

Do the exact opposite.

Success is guaranteed!

[Oldexpat]

So the Atlantic actually used “banana republic” to describe our situation. The banana republic label is more than just the financial and govt control..it is also a cultural mind set. From the poor to the oligarch’s. The demographic shift in the US is dictating part of it.

[Ciexyz]

Most interesting.

BTW, here's an aside on our consumer markets and how desperate the stores are to make sales. I stopped by a small neighborhood clothing store ten minutes before closing, and the two salesladies kept pushing me to shop even when it was ten minutes past closing time. I ended up buying three items and leaving fifteen minutes past closing time. Is the customer King/Queen in this downturn, or what?

[Quix]

Thanks.

Perceptive article, imho.

[Lancey Howard]

America had a great run. Remember it fondly. At least we can do that. Future generations will only be able to read about it. Or not.

[Sandreckoner]

This article has been absolutely savaged on many econ, finance and political blogs, and for good reason.

[PGalt]

Very interesting article. Thanks for posting.

[KarlInOhio]

This article has been absolutely savaged on many econ, finance and political blogs, and for good reason.

Because it is false or because it is far to uncomfortably true?

Obamanomics: all the negatives of a banana republic, but without the climate to grow bananas.

[KarlInOhio]

to->too

[Mad_Tom_Rackham]

Putsch bump.

[DannyTN]

"I suspect that this has a lot to do with government negligence to deal with festering geopolitical problems, from N. Korea to Iran."

I don't, it has little to do with festering geopolitical problems, with the possible exception of Mexico. It does have to do with:

• Globalization and global competition. I believe that's why we repealed Glass Steagall, allowing the Banking industry to take on more risk. Instead of bringing global competitors up, we lowered our standards.
• political desire to offset recessions with more and more stimulus. That's why the risky housing loans were pushed and not well regulated in the first place, to promote the housing industry. That's also why bank reserve rates were allowed to fall to historic lows, because it's a way of increasing the money supply.
• a deregulation mindset that did not keep up with the financial products like the credit swaps. A lot of regulation is ineffective and costly. But regulation in the banking and securities sectors is necessary to avoid this kind of mess.
• campaign finance and outright political corruption with mega finance companies paying off politicians.
• The government's failure to protect against anti-trust. In 1932 we had over 14,000 financial institutions. In 1970 we had over 14,000 financial institutions. By the end of the 80's we were down to under 7000 and are still shrinking. That's how we got "too big to fail" type institutions. They were allowed to buy up everything under the sun.
• Failure to investigate and prosecute market manipulation. If Bulgaria can catch Soros' funds manipluating the market, do you really believe his funds weren't manipulating the market here? It's just no one has the political will to investigate and call him on it.

[DannyTN]

"I suspect that this has a lot to do with government negligence to deal with festering geopolitical problems, from N. Korea to Iran."

I don't, it has little to do with festering geopolitical problems, with the possible exception of Mexico. It does have to do with:

• Globalization and global competition. I believe that's why we repealed Glass Steagall, allowing the Banking industry to take on more risk. Instead of bringing global competitors up, we lowered our standards.
• political desire to offset recessions with more and more stimulus. That's why the risky housing loans were pushed and not well regulated in the first place, to promote the housing industry. That's also why bank reserve rates were allowed to fall to historic lows, because it's a way of increasing the money supply.
• a deregulation mindset that did not keep up with the financial products like the credit swaps. A lot of regulation is ineffective and costly. But regulation in the banking and securities sectors is necessary to avoid this kind of mess.
• campaign finance and outright political corruption with mega finance companies paying off politicians.
• The government's failure to protect against anti-trust. In 1932 we had over 14,000 financial institutions. In 1970 we had over 14,000 financial institutions. By the end of the 80's we were down to under 7000 and are still shrinking. That's how we got "too big to fail" type institutions. They were allowed to buy up everything under the sun.
• Failure to investigate and prosecute market manipulation. If Bulgaria can catch Soros' funds manipluating the market, do you really believe his funds weren't manipulating the market here? It's just no one has the political will to investigate and call him on it.

[OneWingedShark]

?This article has been absolutely savaged on many econ, finance and political blogs, and for good reason.

Which reason is that?

[TigerLikesRooster]

I think you misunderstood my comment. Geopolitical problems did not contribute to the financial crisis. I was arguing the opposite. ‘Don't rock the boat while the bubble is ballooning” mindset pretty much prevailed and vetoed any real action to confront geopolitical threat. Their mantra: Significant geopolitical conflicts —> bad for market.

[DannyTN]

Oh, I see.
Yeah, that’s probably true. Like the Clinton coverup and refusal to deal with terrorist attacks.