Merkel, Sarkozy demand end to bankster “blackmail”

“No bank must grow to a size that puts it in a position in which it can blackmail governments.”

“These excesses cannot be allowed to be repeated as if nothing has happened.”

It didn't qualify as a news story when I repeatedly characterized the $10 trillion in hand-outs, loans and guarantees which the U.S. financial crime syndicate squeezed out of the U.S. government as “blackmail”. However, when the chancellor of Germany makes that same observation, it suddenly becomes newsworthy.

With the G-20 poised to meet in Pittsburgh next month, notice has been served on the U.S. government (and to a lesser extent, the U.K. government as well): either take control of your government back from the bankers, or expect to become an economic pariah in the global economy.

The two European leaders were focused on regulation as the solution to the bankster problem, which is centered in the United States. They insist on “full implementation” of a set of reforms which were agreed upon last April. Specifically, the agreement calls upon the G20 members to provide regulation and oversight over “all systemically important financial institutions, instruments, and markets” - including hedge funds, derivatives, and the derivatives market.

Merkel and Sarkozy were also adamant that action needed to be taken over what Sarkozy termed the “bonus scandal”. Merkel added, “The riskier banks' business is, the higher the capital requirement should be.”

The United States was not mentioned by name, although there was little doubt about whom the two European leaders were talking. While their intentions are laudable, their approach is both naïve and unrealistic.

The U.S. government is thoroughly corrupt, its so-called regulators even more so. Effectively this would mean expecting one corrupt body (the U.S. government) to draft a set of effective and comprehensive regulations for other corrupt bodies (the regulators), and then also provide sufficient oversight of the regulators to ensure they fully implement the new regulations – not just for a few weeks or a few months, but permanently.

As I have written on a number of previous occasions, the supposed U.S. “democracy” is a two-party dictatorship where neither party can ever be totally removed from power. If centuries of history with democracies has taught our species anything it's that totally removing a political party from power is the only means of purging corruption.

Americans are not more inherently corrupt than the peoples of other nations, but rather they designed a flawed system of government which is more vulnerable to corruption than any other major democracy on Earth. With the Republicans and Democrats having been jointly in power for more than two centuries, corruption has reached a saturation level.

As those with the most money, the banksters own this government – which has been demonstrated on a near-daily basis throughout this banker-created financial crisis. Among the obvious indications of the irredeemable state of the U.S. government:

This is a man who was caught under-paying his taxes. If there was any uncertainty that this was willful tax-evasion (i.e. a crime), Geithner eliminated that uncertainty, himself. Knowing that he had failed to pay his full taxes in other years as well, Geithner did nothing about that for years – until immediately after he was named as the Treasury Secretary nominee.

Geithner was also president of the New York Fed, the administrative body with the sole and direct responsibility to regulate Wall Street financial firms – at exactly the same time they were engaged in the greatest crime-spree in financial history. Yet this same bankster-lackey had the audacity (or stupidity) to testify before Congress that he “was not a regulator”. This is the person to whom Barack Obama handed the keys to the U.S. Treasury.

At the height of the U.S. housing and financial bubbles (the largest asset-bubbles in the history of humanity), Bernanke proclaimed that the U.S. had a “Goldilocks economy” - one that would only keep soaring higher and higher.

Immediately after the housing bubble burst, Bernanke promised Americans (and the world) a “soft landing” for the U.S. economy – insisting that the collapse of the largest asset-bubble in history would have no impact on the broader economy.

To aid us further in evaluating the performance of Bernanke, we can refer to recent remarks by Sir Alan Greenspan (see "Greenspan: spotting a bubble is easy"). We can also refer to a study by the U.K.'s Financial Services Authority - which knew there was a substantial risk of a financial sector meltdown as far back as 2004 (see "Financial sector meltdown was no surprise").

There can only be two interpretations of Bernanke's performance. Either he was (is) the most-incompetent central banker in the history of the global economy (worse even than “Bubbles” Greenspan), or he was lying: a shameless shill for Wall Street who pumps U.S. markets for all he is worth – irrespective of the damage caused to the U.S. economy (and his own reputation).

Firing Bernanke would have left open the possibility that Bernanke was only incompetent – and not a willful accomplice to Wall Street's crime spree, as asserted by former U.S. banking regulator William Black (see “U.S. bank-fraud SYSTEMIC and INTENTIONAL: William Black”). Reappointing Bernanke eliminates all such doubt.

Not only has the U.S. government done nothing to attempt to rehabilitate the Wall Street crime syndicate, instead it has engaged in regressive measures. The U.S. Financial Accounting Standards Board was intimidated into relaxing the U.S.'s already-loose accounting rules at the beginning of April (see “FASB strong-armed into mark-to-fantasy accounting”) - just in time for the Wall Street fraud-factories to claim “miraculous” reversals on their balance sheets when they reported 1st quarter results.

This was followed by the infamous Geithner “stress tests”, and that was followed by Wall Street once again successfully scamming investors for tens of billions more in capital investments at precisely the same time that all categories of U.S. bank loans were soaring to all-time records for delinquencies. In short, it is absurd to believe that a government which is still assisting Wall Street in perpetrating scams could be relied upon to create effective regulations – let alone actually enforce such regulations.

As was previously noted, the Federal Reserve has been the primary banking regulator during the largest financial sector crime-wave in history. While some might be charitable enough to claim that these private bankers were merely “asleep at the wheel” while Wall Street ran amok, consider this.

During 2008, after the U.S. housing bubble had burst, and after the world had become aware of the multi-trillion dollar Wall Street “Ponzi-scheme” (see again “U.S. bank-fraud SYSTEMIC and INTENTIONAL...”), mortgage-fraud increased in the U.S. by 23%. Yet Ben Bernanke claims the Fed is “the best” institution to continue to provide “consumer protection” with respect to the financial sector (yes, the best for Wall Street).

As of this date, the Obama regime has shown no inclination to strip the Federal Reserve of consumer-protection oversight, indeed Obama has made it clear that he favors expanding the authority of the Federal Reserve – by making it the explicit guardian against “systemic risk”.

By “systemic risk”, what Obama is referring to is the risk which existed (for example) when former Fed Chairman Alan Greenspan created the U.S. housing bubble through his reckless policies, and then “Helicopter” Ben pretended that bubble didn't exist. Yes, the Federal Reserve is a perfect choice as a “guardian”.

It is unrealistic – to the point of absurdity – to expect the U.S. government to effectively terminate the reckless gambling of Wall Street, given that they continue to demonstrate their servitude to these bankers. There is, in fact only one realistic solution.

As many have observed, “too big to fail” means “too big to exist”. There is nothing shocking about this doctrine, given that it dates all the way back to the origins of capitalism – where the same theorists we revere to this day warned of the dangers of monopolies and oligopolies. Indeed, if we look back to the era where the United States was the genuine champion of capitalism, at that time it had the world's strongest and most-effective anti-combines legislation.

It should not be seen as a coincidence that the U.S. economy has been steadily deteriorating at exactly the same time that the U.S. has effectively ended its enforcement of those rules.

Smashing the Wall Street crime syndicate into little pieces is obviously the only practical solution – since it simultaneously addresses several problems. First, it eliminates systemic risk by eliminating too-big-to-fail institutions. Secondly, severely reducing the size of Wall Street firms severely reduces the amount of money they can use to buy the U.S. government. This can only mean a reduction of their influence/control over Washington.

Most importantly, it addresses a subject about which U.S. politicians have talked endlessly, yet done nothing: “moral hazard”. If you want to discourage bankers from engaging in reckless gambling, then obviously handing them $10 trillion in loans, hand-outs, and guarantees is the wrong way to do that. “Warning” Wall Street that if they ever engaged in such behavior again that the U.S. government would be forced to hand them another $10 trillion will not discourage unacceptable behavior.

Conversely, taking the Wall Street mega-banks, and turning them into two dozen or three dozen smaller (and much less powerful) institutions is something which the banksters would remember – for a very long time. It remains to be seen if anything constructive will be accomplished at the Pittsburgh summit.

I think they should do the perp walk just like anyone else if they are guilty. Heres another good one.

http://organizedexploitation.blogspot.com/2009/09/refuting-economic-suicide.html

Inflation is always and everywhere a monetary phenomenon. These are the words of Milton Friedman in A Monetary History of the United States. The meaning of those words is that no matter what, inflation is a function of the amount of money available. Inflation occurs when more money is introduced into the supply. When this happens, the real value of the money goes down. This is the reality. The face value perception is that things begin to “cost more.” Physical things actually still hold their same value, it is the money, due to inflation, that has lost its value, meaning that it takes more of that money to buy the same thing. Nowhere was the phenomenon of inflation, and indeed hyperinflation, more evident than in the Weimar Republic, where we find the famous historical incident of it costing a wheelbarrow full of money to buy a loaf of bread.

I bring up a brief discussion on the nature of inflation in response to possibly one of the most foolish articles I have seen lately. At Seeking Alpha, Henry Bee writes that Auditing the Fed is Economic Suicide. In an incredible feat of intellectual gymnastics, Bee lays down the accusation that somehow the public knowing what is happening with the money supply will be the end of the free market:

The free market understands that auditing the fed is a very dangerous line to cross. If crossed, U.S. inflation will likely skyrocket over the next decade to unseen levels. U.S. economy tanks. Bond investors lose money as interest rates rise. Stock investors earn negative real return as equity risk premium rises and aggregate PE ratio tank. The US Dollar erodes due to higher domestic inflation relative to foreign inflation. Gold and commodity prices rise.
Perhaps we can forgive Mr. Bee for being Canadian, and therefore not understanding the history of the Federal Reserve and monetary policy in the United States. Or perhaps we can direct him to the aforementioned Milton Friedman, or maybe Murray Rothbard, or F.A. Hayek, for some simple education on monetary policy. Remember, “gold and commodity prices rise” only in terms of the value of the money itself. They are physical, tangible things. They always retain the same value, and it is the value of the money itself that changes due to inflation. After beginning with the Vault, Bee continues and moves on to the Balance Beam:

How Does Auditing the Fed Cause Inflation?

Inflation is caused by a central bank that loses control of its money supply. There are two ways that a politically compromised central bank can lose control of its money supply.

I’ll interrupt Mr. Bee while he’s still doing some of his simple posing, and before he really gets going with the tumbling. Inflation is caused by a central bank that loses control of its money supply? I think not. Remember, inflation is always and everywhere a monetary phenomenon. Inflation is caused by the introduction of more money into the supply. Who introduces more money into the supply? The central bank. The Federal Reserve is our central bank. Incidentally, Mr. Bee might be interested to know that since its inception, the Federal Reserve has practiced nothing but inflationary monetary policy and, in about 100 years, has managed thereby to devalue the dollar by approximately 97%. It would seem then, that the Federal Reserve itself has been the cause of inflation all along. But I will allow Mr. Bee to continue:

Road to Inflation #1: Repeating the Political Cycle

When the central bank is not independent, politicians have historically pumped up the money supply (for temporary economic boost) shortly before an election to buy votes with a lower unemployment rate. After the election, the effects wear off, returning the economy to its natural rate of unemployment but at a higher inflation rate than before. Because it is hard to fight off inflation quickly, by the time the next election rolls around the economy has not been squeezed back to its original inflation rate. Politicians pump up the money supply again, this time from a higher base inflation. As this cycle repeats itself, the central bank loses control of the money supply.

Bee makes a good point here in defending the separation of church bank and state. However, akin to a balance beam backflip, Bee here asserts that an audit of Federal Reserve will allow politicians direct control of the money supply. Since the discussion surrounding HR 1207 has been one of simply getting a look at the books, Bee’s arguments, while valid conceptually, are unfounded in reality. Indeed, both Barney Frank and Ron Paul have agreed with Bee’s own argument, and intend to be disciplined in making the audit one that trails real time by enough that exactly what Bee purports to be the danger will not happen.

That said, I would like to ask Mr. Bee a simple question. What makes you suppose, Mr. Bee, that the Federal Reserve is not already unduly influenced by politicians? As I have explained in the past, the Fed is largely a conglomeration of private banking institutions, overseen by a Board of Governors, headed by the Chairman of the Federal Reserve, currently Ben Bernanke. The Board of Governors is a seven-member panel appointed by the President of the United States. This means, Mr. Bee, that seven people who, through their appointment, answer to the President, and the President alone, control all that is our monetary policy, all that is our money supply, and therefore all that is our inflation. If Ben Bernanke and six others answer only to the President, how exactly is the Federal Reserve not influenced by politics in the manner you suggest already?

Bee goes on to discuss a second road to inflation:

Road to Inflation #2: Financing Government Spending

A central bank that lacks independence from politicians makes it tempting for the government to finance an inappropriately large portion of its spending through printing money. A central bank that promises to finance too much government spending also loses control of the money supply.

Now honestly, there is only just so much we can forgive of Mr. Bee for his being Canadian. This really represents a complete lack of attention to current events. Inside of a four month period, the Federal Reserve just financed a $700 billion bailout of the US Financial industry through TARP, an effort, mind you, that resulted in all that money going to the noble purpose of, well, nobody really knows, followed by the $800 billion stimulus package. Based on Barney Frank’s admission in the video found in this post, Ben Bernanke indicated to him when the bailouts began with AIG, that he had $800 billion to play with. Well that covered TARP. The only logical inference then is that the Fed printed the rest to finance the stimulus. Our central bank is already following this road, Mr. Bee. The only question is, how much have they inflated the money supply?

Well the answer from the Fed has been, to this point, simple. Silence.

When seven men who answer to one man control the entire money supply, and hold no accountability, they can do as they please. Adding a check to this highly centralized power by making their actions transparent to the public cannot be a bad thing.

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