Tuesday, April 21, 2009

The Quiet Coup: How the Finance Industry Captured Our Government

"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."

Investment bankers running the Treasury. Former Goldman Sachs' employees at every high level policy post that affects the economy. A belief that the United States must preserve its financial sector and keep it the most dominant in the world because, somehow, that equates to national power.

"But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them."

What has this led to?

The failure to understand the banking system and how to fix it. Efforts to sustain a financial sector that adds little value to the real economy. A perverse misallocation of our capital, particularly human capital. Incentvizing non productive work--essentially, paper flipping--for obscene compensation. The fostering of a "casino economy," where the production of real assets is declining relative to the dollar amount of traded contracts that, again, add no real value.

"Policy changes that might have forestalled the crisis but would have limited the financial sector’s profits—such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the Commodity Futures Trading Commission, in 1998—were ignored or swept aside."

I'm no big fan of the IMF, however the author of this article,who is a former IMF economist, has it absolutely right on this point. Unless we take apart the financial sector and reduce its influence on policymaking, we will run our nation into the ground in a cataclysm of financial speculation.


googleheim said...

I am getting feedback from people and they are saying that the government does not work or earn any money - that is it all taken from the tax payers.

I mentioned the bonds - and he said "who pays for those bonds when they mature - taxpayers".

I mentioned forex swaps on collosal scales - he did not understand or even register.

I mentioned interest paid back from the main banks who make loans to businesses and people. Not a peep.

The "tax payer on the hook" actually is a giant smoke screen for all different kinds of agendas:

a. no healthcare for nobody
b. no GI / veteran health bills
c. no protection for investors
d. etc

Nobody understands how the Tsy and Reserve create the baseball diamond and maintain the field.

They all think the world series is paid for by their parking fees.

If we taxpayers really paid for everything, then we'd be at tax levels beyond European nations.

googleheim said...

Tysons corner outside of Fairfax is a good example -

1. farm land sold to investors at very cheap price due to zoning type ( farm ) and low taxes.
2. financial type deregulates the local area by lobbying local gov officials to change status of the land - which immediately raises the value, and slowly the taxes.
3. over development leads to rapid financial expansion and concentration of wealth in the financial groups.
4. consumers are hit with taxes and traffic problems.
5. consumers are smoked screened into having their taxes pay for roads and infrastructure to make it all possible for the financial groups.
6. overdevelopment leads to deflation spiral due to traffic, taxes and destruction of regional environment & ecology.

tax payers are on the hook due to the deregulationists and not spending from the centralists.

Matt Franko said...

And now the Co. that owns the Crown Jewel of Tysons Corner, The Galleria Mall, is in bankruptcy!
(General Growth Properties)