MIchael Lewis and the Heart of the US Economic Policy Failure and Crisis

"Corruption is a tree, whose branches are
of an immeasurable length: they spread
Everywhere; and the dew that drops from thence
Hath infected some chairs and stools of authority."

Beaumont and Fletcher, The Honest Man's Fortune

Michael Lewis has written an excellent pocket analysis of the financial crisis in The New Republic, in his review of Greg Smith's book about why he left Goldman Sachs.  I have to admit some prejudice, because he says all of the things which I have been saying, and says them very well.

Crony capitalism has always been with us, but it took wing in the 1990's, and has brought us to this place where we would not wish to be.

Michael Lewis does an excellent job of distilling the problem and its solution to the basics, without necessarily touching on the need to reform the political campaign process, and the revolving door that enriches the politicians and regulators through betraying the spirit, if not the technical word, of their oaths of office.

Is a policy error still an 'error' if it is done purposefully? 

I had hoped that Obama might have risen above that as an 'outsider' with a mandate for change, but that notion was quickly dispelled in his first 100 days in office.  He has pursued a policy of subsidy and appeasement and failed leadership that is killing the legacy and effectiveness of his administration, but enriching many participants in the process. And it works, because the US has become a culture of personal greed. 

One can speculate on motives endlessly, but we'll leave that one to history.  The end result remains the same.  And the pity is that the 'opposition party' is even worse, even more servile to special interests.

And the oddest thing is that this is almost a general phenomenon throughout the developed world, and not some anomaly of the US. And the culture of greed and economic repression was spread by highly placed political appointments affiliated in many cases with the same handful of US-UK banks.

In the aftermath of the first Great Depression there was a general spread of militant fascism, and a great world war.  So why not a rise of oligarchies employing financial repression this time, with a global currency war?  There appears to be some precedent of corruptible, power mad people rising to the occasion.

The Western governments have come to resemble competing crime families, more than an open democratic process of policy formulation for the good of the entire nation through constructive give and take.  It's mostly take, with the common people being taken, while the media and the pundits weave an alternative reality for them with words and emotion.

So, here we are.

What do you want to do tonight, Marty?

"Stop and think once more about what has just happened on Wall Street: its most admired firm conspired to flood the financial system with worthless securities, then set itself up to profit from betting against those very same securities, and in the bargain helped to precipitate a world historic financial crisis that cost millions of people their jobs and convulsed our political system.

In other places, or at other times, the firm would be put out of business, and its leaders shamed and jailed and strung from lampposts. (I am not advocating the latter.) Instead Goldman Sachs, like the other too-big-to-fail firms, has been handed tens of billions in government subsidies, on the theory that we cannot live without them. They were then permitted to pay politicians to prevent laws being passed to change their business, and bribe public officials (with the implicit promise of future employment) to neuter the laws that were passed—so that they might continue to behave in more or less the same way that brought ruin on us all.

And after all this has been done, a Goldman Sachs employee steps forward to say that the people at the top of his former firm need to see the error of their ways, and become more decent, socially responsible human beings. Right. How exactly is that going to happen?

If Goldman Sachs is going to change, it will be only if change is imposed upon it from the outside—either by the market's decision that it is no longer viable in its current form or by the government's decision that we can no longer afford it. There is a bizarre but lingering aroma in the air that the government is now seeking to prevent the free market from working its magic in the financial sector-another reason that the Dodd-Frank legislation is still being watered down, and argued over, and failing to meet its self-imposed deadlines for implementation.

But the financial sector is already so gummed up by government subsidies that market forces no longer operate within it. Could Goldman Sachs fail, even if it tried? If someone invented a cheaper way to finance productive enterprise, would they stand a chance against the big guys?

Along with the other too-big-to-fail firms, Goldman needs to be busted up into smaller pieces. The ultimate goal should be to create institutions so dull and easy to understand that, when a young man who works for one of them walks into a publisher's office and offers to write up his experiences, the publisher looks at him blankly and asks, 'Why would anyone want to read that?'"

Michael Lewis, The Trouble With Wall Street

Gold Daily and Silver Weekly Charts

There was some top calling after the big run up last week, especially given the ebullient cover of Barron's over the weekend.

Let's see if we get a trend break before the bears come out of the woods to pile on.

The capping on gold and silver is determined. When they break free, then we will see this market wiggle out of the grip of the pigmen, who are using it as their personal ATM.

SP 500 and NDX Futures Daily Charts - Correctamundo

The equity markets corrected today after an extremely overbought run up last week, marked by an obtuse interpretation of the Non-Farm Payrolls report on Friday.

The NDX took it on the chin, but the SP 500 hung stubbornly on to the more aggressive uptrend.

VIX climbed, but did not give any definite signal.

Let's see if this was just a correction, a one day wonder, or something more substantial.

The Triumph of Spectacle

“Sadism dominates the culture. It runs like an electric current through reality television and trash-talk programs...

Washington has become our Versailles. We are ruled, entertained, and informed by courtiers -- and the media has evolved into a class of courtiers. The Democrats, like the Republicans, are mostly courtiers.

Our pundits and experts, at least those with prominent public platforms, are courtiers. We are captivated by the hollow stagecraft of political theater as we are ruthlessly stripped of power. It is smoke and mirrors, tricks and con games, and the purpose behind it is deception...

A culture that does not grasp the vital interplay between morality and power, which mistakes management techniques for wisdom, and fails to understand that the measure of a civilization is its compassion, not its speed or ability to consume, condemns itself to death.”

Chris Hedges, Empire of Illusion: The End of Literacy and the Triumph of Spectacle


"As flies to wanton boys are we to the gods, They kill us for their sport."

William Shakespeare, King Lear

They would be as gods, and so revel in violence and death which, unable to create life, is their greatest power.   These will live and prosper, and those will live miserably, and die.  And the winners will owe their allegiance to the system.

They seek to master death with their illusions.  The prospect of their own death drives their fears into madness.

And they hide their nakedness with spectacle, and fill their empty being with excess, fads, and distractions.

Welcome to the Hunger Games. And may the odds be ever in your favor.

“Why do you think we have a winner?,” Snow asks while cutting a white rose.

"What do you mean?,” Seneca asks. “I mean, why do we have a winner?,” Snow repeats, before pausing. “Hope.”

“Hope?,” Seneca replies slightly bewildered.

“Hope. It is the only thing stronger than fear. A little hope is effective, a lot of hope is dangerous,” Snow declares.

“A spark is fine, as long as it’s contained. So, contain it,” Snow warns.

Suzanne Collins, The Hunger Games

Net Asset Value Premiums Of Certain Precious Metal Trusts and Funds

Not exactly a crowded trade, and enthusiasm for silver seems subdued.

Gold made new highs in the Japanese yen.

Each currency takes its turn on the downward spiral of competitive devaluation and printing. The central bankers which to 'coordinate' this more closely, and silence gold as best they can.

They can only 'print' paper gold, and only for so long.

Weekend Reading: The Touchstone of Faith Is Love

For all the people of God, love is the touchstone of our faith, the way to know if what we believe is with Him, or with something else, if we are walking with Him, or with something else, if the one who speaks is speaking for Him, or for something else.

Love cannot be pretended for too long, but always shows itself to be genuine or not. It does not speak with hate or anger or fear, but with a fullness of existence that can only be counterfeited but never achieved by that which is opposed to His existence.

When you are in doubt or confused, look for the light of love. And if it is not there, if it is wrapped in the hardness of pride disguised as 'love,' then you will know what it is.

Love is not easy; it is not a natural state. It seems weak and foolish, and even despicable to the fallen. 

It is a conscious disposition of the mind and the heart, an act of will. It is a habit of acting and looking at things, that becomes easier and more comfortable as we carry that yoke on our weaker nature and our emotions.   Over time that yoke becomes light, and a light to steady us in life's darker moments. But it is never easy or natural.

This is how the people of God may judge themselves and their own actions along the way. If there is no love evident in the words and the heart, then the words and the actions are not of God, but of something else.

Love is not what we do, but how we do what we do.  Love is found in the most practical things, not in grand gestures and sacrifices, but in the small daily acts, done lovingly, and with care, for His sake.  It is how we carry our cross, not in front of a crowd, but in the quiet, little things. 

We do not need to hate and reject the world, and despise His creation. They are a gift from God, to which we bring our good use and order, and wonder. We can work with His gifts lovingly, and not abuse them from self-absorption and greed.

It is not the world that is a source of evil, but the willfulness of our hearts, hardened with pride. Only love is productive.  And the pity is, not to love.

God is the essence of all existence, which is love.

"If I speak in the tongues of mortals and of angels, but do not have love, I am a noisy gong or a clanging cymbal. And if I have prophetic powers, and understand all mysteries and all knowledge, and if I have all faith, so as to move mountains, but do not have love, I am nothing. If I give away all my possessions, and if I hand over my body so that I may boast, but do not have love, I gain nothing.

Love is patient; love is kind; love is not envious or boastful or arrogant or rude. It does not insist on its own way; it is not irritable or resentful; it does not rejoice in wrongdoing, but rejoices in the truth. It bears all things, believes all things, hopes all things, endures all things.

Love never ends. But as for prophecies, they will come to an end; as for tongues, they will cease; as for knowledge, it will come to an end. For we know only in part, and we prophesy only in part; but when the fullness comes, the partial will come to an end.

When I was a child, I spoke like a child, I thought like a child, I reasoned like a child; when I became an adult, I put an end to childish ways. For now we see in a mirror, dimly, but then we will see face to face. Now I know only in part; then I will know fully, even as I have been fully known. And now faith, hope, and love abide, these three; and the greatest of these is love."


“You shall love the Lord your God with all your heart and with all your soul and with all your strength and with all your mind, and your neighbor as yourself.”

A Secret History: The Ku Klux Klan

"The new generation has to hear what the older generation refuses to tell it."

Simon Wiesenthal


“Man’s capacity for justice makes democracy possible; but man’s inclination to injustice makes democracy necessary.”

Reinhold Neibuhr


"Keep America American."

Ku Klux Klan slogan from the 1920's

Most nations have things in their past which they wish to forget.

And they obscure them in a mythos, with a false memory of their own self-righteousness.

But to forget them is to invite their return, in words that are echoes of the past, and the objectification of 'the other' as they choose to define them.

Like financial frauds, the sins of the past keep coming back with new names, but the same old words and false propositions.

Gold Daily and Silver Weekly Charts - The Failure to Reform

"But there is a sort of 'Ok guys, you're mad, but how are you going to stop me' mentality at the top."

Robert Johnson

Audacious oligarchy.

This will not end well.

And a preview of Matt Taibbi and Bill Moyers discussing Why We Can't Let the Banks Off the Hook.

Ignoring such pervasive white collar crimes, which are still ongoing by the way, creates a climate of extreme moral hazard, festering corruption, and teaches felony by example.

I think they give Obama, the regulators, and the Congress far to much credit in ignoring these crimes 'for the good of the system.' It is all about careerism, the credibility trap, and going along to get along.

They cannot reform the system because they are the system, and the political and financial elite are doing just fine with the system the way that it is, thank you very much. They do not want things to change.