Why Is This Bubble Different From All Other Bubbles?

This Bubble is different from all other bubbles not because of its size, which is truly enormous, but because home ownership is much more broadly held by the public and more integral to the real economy than all the other bubble components which the lunatic Fed has nutured in the US in the last 100 years.

This is going to leave a mark.

The Word for This Week

Demagoguery refers to a strategy for gaining political power by appealing to the popular prejudices, emotions, fears and expectations of the public — typically via impassioned rhetoric and propaganda, and often using nationalist or populist themes, usually singling out a group or groups.

Also see Demagogue

The word for this week, and likely for this year, and the next.

No, not demagogue or demagogy. The Word for the Week is "them."

Why should we help them.

We are being dragged down by them.

Blaming them feels good. It makes one feel as if they were successful, not part of the problem.

It wasn't us, it was them.

They caused their own problems. They caused our problems. It is unfortunate but they would be better off somewhere else, out of sight, no longer an impairment or competition for scarce resources.

They are the scapegoats, usually singled out by the group or groups that caused the problems, and even those who benefited indirectly, made some money out of the bubble, less deservedly than they might like to imagine.

They are the weak, the poor, the defenseless, the different, the other.

And the circle of the ones that are considered them spreads wider and wider.

Because even those shouting and waving their fists in the crowds against them are also them to someone else higher in the power structure. Useless eaters is a relative objectification of the human.

And then someone will come and take them away, where they do not wish to go.

And then comes the descent into madness and destruction, for all.


One might ask, "But Jesse, you have inveighed against the Bankers on numerous occasions. How is that different? Aren't you a demagogue too, with just a different opinion?

No. All banks are not bad. All who work at banks, even the biggest Wall Street banks, are not bad. Even all those who turned a blind eye to what went on around them are not bad, just weak, distracted, overwhelmed.

But there were prime actors in this tragedy. The first objective is to stop it, to reform the system, to end the imbalances. And it would be disingenuous to not notice that the big Wall Street Banks, and the rating agencies and accounting firms, were at the epicenter of the financial crises for the past ten years. They were the lobbyists, the financial engineers, the architects of fraud, the enablers of many frauds going back to Enron and beyond.

Cui bono? Who benefited the most?

It was not so much the poor slob acting foolishly on bad advice. It was the joker taking millions off the table time after time by gaming the system, and actively promoting the bubble culture and deep capture that knocked out the regulatory process and the rule of law.

And then the law can deal with individual transgressions, and the emphasis here is "individual." Not a lynching of the bystanders. A serious investigation with individual accountability and equal protection.

That is not demagoguery. That is justice, because it is based on law and individual actions.

Volcker's Vision of a Return to Narrow Banking

A return to 'narrow banking' is in the cards. This is the kind of bank which takes depositors funds and originates and services loans to its own customers.

These banks will be separate from investment banks and hedge funds, which will perform the speculation and packaging, and what can loosely be called financial engineering.

But look for much more uniform regulation and transparency to appear in these non-banking operations, and less acceptance for 'dark pools' and opaque market manipulation.

And for those who say we will lose this type of person to less regulated overseas venues, there will be a new attitude to cross border banking and restrictions on the activity of institutions that do not adhere to a uniform set of standards.

It will be an even greater step in the right direction if we can realize that this same sort of regime should prevail in overseas trade as well. There will be little taste for the toleration of sweatshops, child labor, and the virtual slavery that multinational business craves, and justifies with the most venal and shallow of arguments.

AP
Volcker sees crisis leading to global regulation
By Eileen Aj Connelly, AP Business Writer
Friday February 20, 6:29 pm ET

Volcker sees greater international cooperation on regulations growing from economic crisis

NEW YORK (AP) -- "Even the experts don't quite know what's going on."

Speaking to a number of those experts Friday, Paul Volcker, a top economic adviser to President Barack Obama, cited not only the lack of understanding of the global financial meltdown but the "shocking" speed with which it had spread across the world.

"One year ago, we would have said things were tough in the United States, but the rest of the world was holding up," Volcker told a conference featuring Nobel laureates, economists and investors at Columbia University in New York. "The rest of the world has not held up."

In fact, the 81-year-old former chairman of the Federal Reserve said, "I don't remember any time, maybe even the Great Depression, when things went down quite so fast."

He noted that industrial production is falling in countries across the globe faster than in the U.S., one result of the decline caused by the breakdown of unbridled financial markets that operated on a global scale.

"It's broken down in the face of almost all expectation and prediction," he noted.

Volcker didn't offer specifics on how long he thinks the recession will last or what will help start a recovery. But he predicted there will be some lasting lessons from the experience.

"I don't believe it will be forgotten ... and we will revert to the kind of financial system we had before the crisis," he said.

While he assured his audience of his confidence that capitalism will survive, Volcker said stronger regulations are needed to protect the world economy from such future shocks.

And he said he is concerned about the amount of power central banks, treasuries and regulatory agencies have acquired while trying to contain the meltdown.

"It is evident in the United States, and not just in the United States, the central bank is taking on a role that is way beyond what a central bank should be taking," he said.

Volcker stressed the importance of international cooperation in creating a new regulatory framework, particularly for major banks that operate across national boundaries -- the reverse of what's happened in recent years.

"The more international agreement we have on where we want to get to, the better off we'll be," Volcker said.

And while major banks should be more tightly controlled and less able to make the sort of risky bets that led to their current debacle, Volcker said there should also be more oversight of some kind for hedge funds, equity funds and the remaining investment banks.

He scoffed at the notion that those entities must be free to innovate -- stating that financial "innovations" like asset backed securities and credit default swaps have brought few benefits. The most important "innovation" in banking for most people in the last 20 or 30 years, he maintained, is the automatic teller machine.

Charts for Market Close February 20