Gold Daily and Silver Weekly Charts - RIP Adrian Douglas

I was sorry to hear that GATA Director Adrian Douglas passed away today.

US markets will all be closed on Monday in observance of Martin Luther King day.

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts - Triple Witch Highs, Complacency Reigns

As you probably know today was a triple witch and the put buyers were being beaten soundly especially in the non-tech areas.

VIX, which is a measure of risk sensitivity, took a big dive today. I used this to buy some volatility (long VIX) for a hedge on my long bullion.

I would not jump ahead of this ramp job in equities however since it looks like the debt ceiling confrontation will be deferred into April. This gives the wiseguys more room for antics.

We have a three day weekend in the US with Martin Luther King Day on Monday, on which all markets will be closed.

Have a pleasant weekend.

Hitlerland: Making a Deadly Peace with the Devil

"We cannot look to the conscience of the world when our own conscience is asleep."

Carl von Ossietzky, German editor of Die Weltbühne, awarded the Nobel Peace Prize in 1935


"It would be no sin if statesmen learned enough of history to realize that no system which implies control of society by privilege seekers has ever ended in any other way than collapse."

William Dodd, historian and US Ambassador to Germany, 1933

I am reading a new book titled Hitlerland, by Andrew Nagorski. Thank you to reader Andrew for recommending it. He knows I am very widely read in this period of history and find it fascinating both from an economic, sociological, and political perspective.

I was prepared for a rehashing of things I have already known and read, and I must admit I was initially put off a bit by the title which sounds frivolous. I was pleasantly surprised, even a bit amazed.

The book is highly original, and extraordinarily factual, in that Nagorski spent an extraordinary effort investigating eyewitness accounts, many of them unpublished, by Americans who lived there during the period in Germany from the Weimar Republic to the rise of Hitler and the beginning of the Second War.

He inserts minimal personal opinion and analysis into the writing, being more the journalist than the historian. He does treat the after-the-fact accounts with the proper regard for posturing and self promotion. He does have some very charming vignettes as well that make it a highly readable book.

It is well done, a 'must read' for anyone who wishes to understand that period of time from the perspective of those who lived it.  It adds a new dimension to a much written about period of time.  Remarkably so.

If there is anything that was surprising, it is the abject misery and despair of the German people during the Weimar Republic with the hyperinflation, and how few people actually saw the worst to come politically, after a false economic recovery, with the Crash of 1929. One knows these things, but they do not really understand them, not having lived it.

 Personal accounts help in this. This is why I found the book, When Money Dies by Adam Fergusson so helpful in this regard, as well as Ken Burns masterful documentary, The Civil War.

The fear of the Socialists and the Communists in particular is a key driver for the events of that time, and is not to be discounted.  The cynical dealing and irresoluteness of the Weimar politicians is another factor.  There were open fights in the streets on a regular basis, although they were often surprisingly 'orderly' as this book relates. Some of the passages are quite amusing for those familiar with the German penchant for orderliness, even in the midst of urban warfare.

The capacity for self-delusion and a bad compromise is amazing, especially during periods of confusion, fear, and distraction. And the moral base in Germany at that interwar period was already notoriously relativistic and given to occultism, odd theories, and Nietzchean extremes.  And after war, hyperinflation, and a new Depression, their spirit and will to resist evil was simply exhausted, especially when it was backed by systematic terror and force.

We ought not to be too critical of those people, many of the Americans included, who did not see the worst coming. Did you see the recent financial collapse coming, and what has followed? Do you even understand it yet? History may be amazed at your ignorance. And yet all the signs of trouble were there during the period from 1999 to 2007.

Some people were warning of the credit bubble, the imbalanced financial sector, and widespread fraud.  And the American people were distracted by a 'war on terror,' and not the collapse of their lives and savings after the decimation from a brutal world war that left the flower of their youth dead, crippled, or broken.

And then in Germany there was another Crash, and the onset of Great Depression, and the people thought, no, not again. Anything is better than this. And so the bargain with the devil was made, and after a brief blaze of false glory, hell followed.

This is not to excuse anything that was done, or permitted to happen. Far from it. But it is to place this sort of tragedy within its human context, and to remind us that we are all capable of such confused cowardice and acquiescence in the face of evil.  We must remain steadfast and resolute against it, especially before resistance demands the type of heroism of which few are capable.

The consensus of those who met Hitler was that he was a most ordinary person, with little charisma or appeal.  Dorothy Thompson called him 'the very prototype of the Little Man.'  He seemed nondescript, but inwardly mad, illogical and ineffective, and they were incredulous that he could rise to power.

A key tenet of the Nazis was the rejection of objective fact and reason in favor of the passions of 'the blood' and of instinct.  Truth was not an impartial consideration or serious limitation to conclusion and action.  That is a familiar refrain amongst ideologues and the more extreme elements of both left and right on the political continuum.

There are a few heroic figures in this book, and prominent among them is the Pulitzer prize winning journalist Edgar Ansel Mowrer, whom I had never heard about before this, which is a shame. I will let you read about him for yourself.

I had not realized how badly the prospects of the National Socialist party had fallen in the years after Hitler's imprisonment for the abortive putsch and before his sudden rise to power as chancellor.  They were essentially done.  But they served a purpose as a cat's paw for those wealthy bankers and industrialists who feared the Communists and Socialists, and for cynical Weimar pols who were too busy fighting for power amongst themselves to see the rising threat of fascism.

I had not remembered that during the Night of the Long Knives not only the SA leadership was taken on shot, but old political rivals as well, some of whom were retired from political life. Hitler's ruthlessness was exhaustive, and examples were often made. Again, we ought not to discount the regular use of domestic terror as party policy from the very onset of its ascendancy.

That rise to power was supported by the fresh fears and concerns brought on by the Great Depression which knocked Germany back off course, and the craven weakness of spirit of the politicians of his day. In the manner of Mussolini he gained power almost by default, and then secured it with a brutal iron fist. I am now convinced that without that terrible economic collapse after 1929 to provide a ready platform, he would have died a relatively forgotten crank.

One thing that I wonder about often is the attention given to Hitler because of his abominable atrocities, and the relatively little time spent on his role model, Mussolini. I have read a bit more on him, and he was despicable, a ruthless thug. The early Nazis were referred to by the Americans as the fascisti.  

Here is a brief excerpt from the accounts of the American journalist Edgar Mowrer. It is not anything I had not known from other readings but gives one a sense of the style in which Nagorski allows events to unfold through the words of his witnesses to history, and how he weaves their testimony into a rich tapestry.

If You Remember Nothing Else About the Financial Crisis, Remember This

Few knowledgeable people talk about the need for financial reform anymore, just a few short years after the financial crisis and collapse.

The right talks about getting tough on the weak and settling old scores, and the left is losing its way in obtuse gimmickry and quack economics that promote their own statist agendas. Pile enough rancid margarine on the bread and you won't see its thinness or the mold.

The broad center, independents, and progressives are largely silent, having averted one almost certain disastrous choice in the most recent national election, only to find themselves still on unsteady ground with a weak and wavering 'champion' who may once more betray their trust for his own interests, and the deal.

And yet this is not nearly our darkest hour. That may be yet to come.

All the reform that has occurred so far has been largely window-dressing. Financial and political corruption is a tax that the real economy cannot support or endure while remaining free.

 Until there is substantial reform, there will be no sustainable recovery. This is only the appearance of recovery in the empire of illusion.

"From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent.

Simon Johnson, 13 Bankers


"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."

Simon Johnson, The Quiet Coup

Gold Daily and Silver Weekly Charts

It is interesting to see stocks and the metals moving back together again.

I would very much like to see gold and silver return to and take out the pre-December levels. And if there is a stock market correction I would like even more to see a divergence and a flight to safety in the precious metals.

So far gold has made a bottom at a 60% correction off the prior range, aka the 'cup.' Yes, I am still keeping an eye on that one.

So let's see what happens.

SP 500 and NDX Futures Daily Charts - Managed Volatilty at Relative Complacency

Things were coming up rosy today as housing starts and new unemployment claims had the bulls snorting, even while they shook off the Philly Fed.

Intel turned in mediocre results after the close, except perhaps for gross margins.

Complacency is not quite the word for this market overall.

Take a look at the VIX chart at the bottom, and the Relative Strength Index which has flatlined since the first of the year.

Perceived volatility is well-managed, but for how long, by whom, and why?

I do tend to think this is a 'pool operation' as a set up for a takedown, but one cannot be sure. I don't think it is anything official or quasi-monetary, but time will tell.

The View of the US From Glennbeckistan

Or RushLimbonia for that matter.

And then there is the view from the borderless one percent.

Imprisonments Will Continue Until Freedom Reigns

This level of incarceration per 1000 of population in the US is the highest in the world, finding no parallel in the developed nations except in Russia, and to a lesser extent South Africa, according to the last chart.  Winning.

Perhaps this is the logical outcome of a Darwinian environment, and a blindly self-rationalizing and self-reinforcing world view, that by the design of a relatively small elite creates 'winners' and 'losers,' where the winners always win, and the losers are cattle or prey.

And it may also be a consequence of a misguided social policy tool with regard to certain types of drug enforcement and criminal deterrence from the bottom up, the 'three strikes' rule, repression as a general policy bias, and the privatization of the prison system. 

The watershed year for an increase in imprisonment levels seems to be 1980.   Did anything significant happen that year?  One can only wonder.

The distribution of imprisonments by state is also interesting. It seems to be a 'warmer weather' phenomenon with Louisiana and Mississippi clearly in the lead. As noted below, Texas has recently fallen from second to fourth place because of some policy changes.

Perhaps it also involves a 'failure to communicate.' It is beyond all doubt and indication that something is wrong in the system, and festering.

As an aside, in case you had missed this, Slavery in the US Continued Until WW II.

If there is any good news in this, it is that the overall rates of incarceration have flattened and even decreased a bit since 2006.   Even Texas, which had been number two in prisoners per 1000, has been able to reduce its state prison population using several policy measures according to McClatchy.

A year ago, Texas had more than 156,000 prisoners in 111 state prisons.

Though Texas, with more than 25 million residents, has more inmates than any other state, it has fallen from second to fourth place in the number of people imprisoned per capita. Louisiana tops the per capita list.

Texas' prison population has dipped because of diversion programs lawmakers invested in five years ago, ranging from halfway houses to specialty courts that address cases involving mentally ill people and drunken drivers, said Jason Clark, a spokesman for the Texas Department of Criminal Justice...

A decrease in crime rates, changes in demographics and an aging general population also have a role in emptying Texas' prison beds, experts say.

Or perhaps this overall decline in the US is just an artifact of the migration of more criminal activity to the financial sector where indictments, much less imprisonments, are few and far between.  See, economic incentives do have their positive effects.

"Our incarceration rate is by far the highest in the world. The United States has less than 5 percent of the world’s population. But it has almost a quarter of the world’s prisoners. However you draw it, we need to change the shape of this curve.

Drug laws are probably the place to start. Three strikes rules would be next. Preventing the privatization of prisons — which creates a lobby for more incarceration — is another good move."

American Incarceration Rates Are Out of Control

Charts from Incarceration in the United States:

As of 2009, the three states with the lowest ratios of imprisoned people per 100,000 population are Maine (150 per 100,000), Minnesota (189 per 100,000), and New Hampshire (206 per 100,000).

The three states with the highest ratio are Louisiana (881 per 100,000), Mississippi (702 per 100,000) and Oklahoma (657 per 100,000).

Gold Daily and Silver Weekly Charts - On the Brink of a New Currency War

Intraday commentary on the 'brink of a fresh outbreak of currency war' here.

The wiseguys want to get an asset bubble going in stocks in the worst way, probably to suck in the funds and the small specs for a hand off at the top, ahead of the debt ceiling confrontation.

And the clamp is down on gold and silver, to discourage money from flowing in that direction, in favor of equities and the killing fields of financial assets paper.

Let's see what happens.

SP 500 and NDX Futures Daily Charts - A Curious Complacency

The VIX chart is included below.

The complacency looks a bit overdone. The wiseguys want stocks to go higher very badly. And they might, until something happens to pop this risk mispricing.

Central Bankers: World Is On Brink Of Fresh Outbreak of Currency War

The Vogons, Hitchhiker's Guide to the Galaxy

The global trade and currency regimes are becoming even more dangerously unstable the longer that the real problems underlying the enormous imbalances in the world economy and rigging of the markets to hide that continues.

A war ended the last Great Depression, it is not surprising that this one may end similarly as well.

The finanical engineers have failed, repeatedly.  But rather than admit their failures and corruption it is likely that they will consistently seek more and broader power to manipulate and allocate the wealth of the world.  Fiat is like a Ponzi scheme that must keep enlarging its span of control in order to remain viable.

'Give us more power, suspend the ridiculous constraints of human rights and justice, and we will save you from this peril.'  

To get your way, first you scare them, and then ignore them. The tune may change, but the song remains the same.

Bloomberg
Russia Says World Is Nearing Currency War as Europe Joins
By Simon Kennedy & Scott Rose
Jan 16, 2013 11:24 AM ET

The world is on the brink of a fresh “currency war,” Russia warned, as European policy makers joined Japan in bemoaning the economic cost of rising exchange rates.

“Japan is weakening the yen and other countries may follow,” Alexei Ulyukayev, first deputy chairman of Russia’s central bank, said at a conference today in Moscow.

The alert from the country that chairs the Group of 20 came as Luxembourg Prime Minister Jean-Claude Juncker complained of a “dangerously high” euro and officials in Norway and Sweden expressed exchange-rate concern.

The push for weaker currencies is being driven by a need to find new sources of economic growth as monetary and fiscal policies run out of room. The risk is as each country tries to boost exports, it hurts the competitiveness of other economies and provokes retaliation.

Yesterday “will go down as the first day European policy makers fired a shot in the 2013 currency war,” said Chris Turner, head of foreign-exchange strategy at ING Groep NV in London.

G-20 Clash

The skirmish may lead to a clash of G-20 finance ministers and central banks when they meet next month in Moscow, three months after reiterating their 2009 pledge to “refrain from competitive devaluation of currencies.”

While emerging markets have repeatedly complained about strong currencies as a result of easy monetary policies in the west, the engagement of richer nations is adding a new dimension to what Brazilian Finance Minister Guido Mantega first dubbed a currency war in 2010.

After Switzerland blocked the franc’s appreciation against the euro since September 2011, Japan has reignited the latest round of rhetoric as newly elected Prime Minister Shinzo Abe campaigns to spur growth via a more aggressive central bank. The yen has slid 11 percent against the dollar since December and this week touched its lowest level in two years.

Now other policy makers are speaking out. Juncker, who leads the group of euro-area finance ministers, said yesterday that the euro’s 7 percent gain against the dollar in the past six months poses a fresh threat to the European economy just as it shows signs of escaping its three-year debt crisis...

‘Negative Impacts’

In Norway, Finance Minister Sigbjoern Johnsen said in an interview that a strong krone challenges the economy and that the government must ease pressure on the Norges Bank to avoid krone strengthening by conducting a “tight” fiscal policy. Norges Bank Deputy Governor Jan F. Qvigstad said yesterday that if the krone remains strong until policy makers meet in March, “that of course has an obvious effect on the interest rate.”

That pushed the currency, which has emerged as a haven from the European crisis, to its lowest level in more than two months versus the euro...

If Japan continues to pursue a softer currency, reciprocal devaluations would hurt the global economy, Russia’s Ulyukayev said today. That echoes recent concern from other international policy chiefs.

Federal Reserve Bank of St. Louis President James Bullard said Jan. 10 that he’s “a little disturbed” by Japan’s stance and the risk of “beggar-thy-neighbor” policies.  (China has been doing it for about fifteen years, but the imbalances generated favored the American oligarchs. - Jesse)

Reserve Bank of Australia Governor Glenn Stevens said Dec. 12 that there is a “degree of disquiet in the global policy- making community,” while Bank of England Governor Mervyn King said Dec. 10 that he worried “we’ll see the growth of actively managed exchange rates..."

Andrew Nagorski: Hitler's Little Eichmanns

The opposite of love is not hate, but callous apathy and uncaring.  Hate is a passion, a counterpart to lust.

And tragedy occurs when such heartlessness is advantaged by careerism, and an ideology that rationalizes unconscionable expediency, sanctioned privation, organized repression, and eventually murder, on a massive scale. 

This is not how monsters are created, but how their enablers and supporters are formed, so that they too can, over time, become as beasts to escape their unbearable shallowness, and the emptiness of their souls.

These are not the Hitlers, but the little Eichmanns. And they are abroad again, making and influencing policy on an alarming scale, today.

"The sad truth is that most evil is done by people who never make up their minds to be good or evil...

The trouble with Eichmann was precisely that so many were like him, and that the many were neither perverted nor sadistic, that they were, and still are, terribly and terrifyingly normal. From the viewpoint of our legal institutions and of our moral standards of judgment, this normality was much more terrifying than all the atrocities put together...

He [Eichmann] was in complete command of himself nay he was more: he was completely himself. Nothing could have demonstrated this more convincingly than the grotesque silliness of his last words.

He began by stating emphatically that he was a Gottgläubiger to express in common Nazi fashion that he was no Christian and did not believe in life after death. He then proceeded: “After a short while gentlemen we shall all meet again. Such is the fate of all men. Long live Germany, long live Argentina, long live Austria. I shall not forget them.”

In the face of death he had found the cliché used in funeral oratory. Under the gallows his memory played him the last trick: he was 'elated' and he forgot that this was his own funeral.

It was as though in those last minutes he was summing up the lesson that this long course in human wickedness had taught us: the lesson of the fearsome word-and-thought-defying banality of evil.”

Hannah Arendt

h/t Andrew

Gold Daily and Silver Weekly Charts

Gold or silver need to take out the intermediate downtrends in order to set up the next major move. This might not occur until the debt cliff plays out.

They can only keep the price down so long.

Germany is said to be announcing the repatriation of much of their gold tomorrow. Let's see if that actually happens.

The Treasury is apparently tapping its employee pension funds to avoid a problem with its debts, in the manner of modern US corporations and past debt limit crises. Thank God there is no commingling of customer (citizen) accounts to raid as was done at MF Global. Or at least not yet.  When you own the currency and the printing press such direct and brutish methods are unnecessary.

I suspect that the currency wars will be rocking and rolling by this summer.

SP 500 and NDX Futures Daily Charts - Wall St. In Denial

The Wall Street wiseguys would like to hand this rally off to mom and pop and their funds. But mom and pop are still largely sitting this one out. And it is making them nervous.

Wall St. blames the government, and the uncertainty over the debt and the currency.

But this is the usual deflection and denial. The markets are so obviously foul that normal honest people want little or nothing to do with them. And they are voting with their feet.

It could be that the Fed and the Administration will choose to inflate another stock bubble, and people will, as some ex-Fed governor turned stock analyst used to snigger, will drive the baby boombers back into stocks because they have no choice.

Those who remember the market doldrums of the 1970's will know that you can cheat the people only so much, and then tend to go away for quite some time, until the next gimmick shows up.

Money Supply Figures: Monetary Inflation But Real Economy Is Dysfunctional

"He that gives good advice, builds with one hand; he that gives good counsel and example, builds with both; but he that gives good admonition and bad example, builds with one hand and pulls down with the other."

Francis Bacon

The growth in the MZM and M2 money supplies are very strong, almost remarkably so given the very slack growth in employment and GDP.

So why do we not see any serious inflation in prices?  Or real gains in employment for that matter.

As an aside, I think some of the more 'modern'  and aggressively modified measures of price inflation, like chained CPI, do not measure price inflation at all, but the consumer behaviour of product substitution under increasingly trying circumstances as people cope by reducing their standard of living. That is a measure of gradual deprivation, not inflation.

I would like to see a system where no social policy is passed that the leadership of a country does not accept first.  If there is to be austerity, pension cuts, reductions in medical services and food, let them accept it first for the good of the country and an example to their citizens.  I do not say this out of meanness, but charity.  For the double standard with selective justice is the slow and silent killer of oligarchies.

The velocity of money tells part of the story. Please note that those charts below are based on much longer timeframes to show that they are a trend, and not a short term affect of the collapse.

The 'velocity of money' is a calculation that shows the relationship between money supply and real economic activity as a ratio. It is falling to new lows. Some might even use the word 'plummet.' There is lots of new money, but not so much real activity.

The standard economic answer would be that the US is in a liquidity trap, and the recovery will have lags in employment gains.   The money is added, and then recovery follows, with employment showing the longest delay.  The standard remedy would be to create more jobs, artificially if necessary.  But that is not much different than unemployment insurance and programs like food stamps.  It is kind, and sensible, but not sustainable. 

A liquidity trap is described by Keynesian economics as a condition in which injections of money can support zero interest rates, but fail to generate real economic activity.

I think the current situation in the US and UK in particular involves a serious policy error in the failure to address the problems and imbalances that caused the financialization of the real economy, and its subsequent collapse under the weight of malinvestment and corruption.

Aggregate demand is not stimulated because sufficient money does not reach consumers, as it passes through a corrupt and broken financial and political system, being diverted largely to insiders at 'the top.'  Nothing could be more clear than looking at the statistics regarding income inequality.

Any gains by the large middle and lower classes will tend to be short term and illusory, involving more household balance sheet problems and debt until the system is reformed.  Some of this has to do with a policy bias that considers the vast mass of the people as consumers, but not as workers.

Merely adding more financialized money into an unreformed system will further compound the problems, and ultimately force a more significant crisis and change.  This is true whether done does it via more debt issuance or flashier gimmicks like modern monetary totems.

The underlying social tensions can only be ignored by the comfortable for so long.  As a corollary, applying austerity without reform is insanely self-destructive.  The proof of this is forthcoming.

Japan has been able to hold their system together for a protracted period of slack recovery due to their demographics, their industrial policy position in the world economy, and a largely homogeneous and communal society that cares for its own.  The US and the UK will have a shorter half life I am afraid.

The situation is Europe is a bit different, and likely to result in serious dislocations in their organizational fabric fairly soon if some of the problems there are not addressed.  The monetary union without fiscal cohesion is inherently unstable.  Only fraud allowed it to last as long as it did.

There is a possibility that the current policies in the US may succeed if austerity if not applied, and something happens in the currency war to affect the balance of trade.  I am not optimistic  So let's see what happens.

The UK may provide a good counter example to the US  Some new school of economic thought may find some useful data from that, if they can free themselves from the 'say for pay' mentality that currently impairs the public policy discussion in a disgraced profession.

Gold Daily and Silver Weekly Charts - Fire Up the Crazy Train

This entire 'platinum coin' discussion was a bit surreal.  I was entirely disappointed with many of the arguments in favor of it. 

Be prepared to hear very conflicting views of the economy and the monetary system from various and so-called 'authoratative' sources.  Especially unsupported assertions and somewhat hysterical forecasts of doom and gloom, and just blatant talking of books.

The worst thing we have to fear is fear-mongering from those who lust for power.

If gold does get hit in a panic sell off due to the debt ceiling impasse, it could be a spectacular longer term addition to a portfolio.  It may not, as it is hard to tell how this will unfold at the moment.  There may be a sell off and then a flight to quality.  These markets are no longer reliable indicators and reflections of reality except for the long term.

I own no miners at this time.  To me that is owning bullion with leverage.  There will be a time for that.

The fog of currency war is descending.

SP 500 and NDX Futures Daily Charts

Bullish news out of China had the markets up initially but the reality of the debt ceiling confrontation is starting to weigh on the market.

The market is a bit richly priced. I think we may see another leg up to try and suck in some additional funds before they short it and ride it down on reality.

Democracy Now: Taibbi and Black on the Bailouts

Baker: Wall Street Thanks You For Your Service, Mr. Geithner

"The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic."

Peter Drucker

I would of course add 'with self-serving dishonesty' to Mr. Drucker's prescription. But I think in a better age that sort of thing was understood.

The manner in which the financial crisis was handled, and is still being managed, is a policy error that will be studied by history, and hopefully the next school of Economics that will rise out of the ashes of their failure to provide meaningful reform for what really went wrong.

The worst of the economists and politicians have been acting as hacks in support of a massive fraud for the usual benefits.   And some of what we might have hoped would be the better ones have been mindlessly applying old remedies, or at least a portion of them without understanding and admitting the underlying problems, caught up in a credibility trap of dull atavism and careerism.

The intellectual and political leadership of this generation has been weighed and found wanting. A great generation often produces one that lapses into crisis, before the next rises to the challenge of the occasion.

So I have some hope that a new school of Economics and policy making will rise out of the abject failure of the old.  Not a school that has better and more intricate tools, broader power, and flashier gimmicks, but one that aspires to wisdom and virtue, especially the value of open honesty.

"The best lack all conviction, while the worst are filled with passionate intensity."

This crisis has been all about the failure of the best to uphold their oaths, and to let justice be done, at the urging of the worst. And now they compound their errors and dissemble in their embarrassment and shame. Or at least those who are still capable of feeling such emotions.

There will be no real and sustainable recovery without reform.

The Guardian
Wall Street thanks you for your service, Tim Geithner
By Dean Baker
11 January 2013

Treasury Secretary Timothy Geithner's departure from the Obama administration invites comparisons with Klemens von Metternich. Metternich was the foreign minister of the Austrian empire who engineered the restoration of the old order and the suppression of democracy across Europe after the defeat of Napoleon.

This was an impressive diplomatic feat – given the widespread popular contempt for Europe's monarchical regimes. In the same vein, protecting Wall Street from the financial and economic havoc they brought upon themselves and the country was an enormous accomplishment.

During his tenure as head of the New York Fed and then as treasury secretary, most, if not all, of the major Wall Street banks would have collapsed if the government had not intervened to save them. This process began with the collapse of Bear Stearns, which was bought up by JP Morgan in a deal involving huge subsidies from the Fed.

The collapse of Lehman Brothers, a second major investment bank, started a run on the three remaining investment banks that would have led to the collapse of Merrill Lynch, Morgan Stanley, and Goldman Sachs if the Fed, FDIC, and treasury had not taken extraordinary measures to save them. Citigroup and Bank of America both needed emergency facilities established by the Fed and treasury explicitly for their support, in addition to all the below market-rate loans they received from the government at the time. Without this massive government support, there can be no doubt that both of them would currently be operating under the supervision of a bankruptcy judge.

Of the six banks that dominate the US banking system, only Wells Fargo and JP Morgan could conceivably have survived without hoards of cash rained down on them by the federal government. Even these two are questionmarks, since both helped themselves to trillions of dollars of below market-rate loans, in addition to indirectly benefiting from the bailout of the other banks that protected many of their assets.

Had it not been for Geithner and his sidekicks, therefore, we would have been permanently rid of an incredibly bloated financial sector that haunts the economy like a horrible albatross...

Read the entire article here.

Bill Moyers: The Crony Capitalist Blowout