Saturday, July 9, 2011

"There's No Recovery Because the Government Made it Official Policy Not to Prosecute Fraud"

Washington's Blog: There's No Recovery Because the Government Made it Official Policy Not to Prosecute Fraud
Fraud caused the Great Depression and it has caused the current financial crisis. But fraud is not not being prosecuted, and so it will occur again and again, and prevent a sustainable economic recovery.

Numerous economists have been saying this for years.
Not enough attention is being paid to this. Of course, the situation is highly complex and there were man causal and contributory factors. But the proximate cause of the Great Depression and the Global Financial Crisis (GFC) was Ponzi finance, typical at the culmination of a financial cycle according to Hyman Minsky's financial instability hypotheses. So far, much too little attention has been paid to this and and as a result the crisis is lingering and far from resolved.

MMT is well aware of this. MMT economist and developer L. Randall Wary was a PhD student of Hyman Minsky, for example. William K. Black was one of the earliest and loudest voices warning about massive control fraud."

Owing to capture, those responsible for oversight were suborned, Black charges. Owing to the same influence, politicians conveniently lost the plot and erected strawmen to attack. The result is a problem that continues to fester.

UPDATE: Randy Wray explains the gory details:
But that is easy to overlook in Washington/Wall Street since the biggest financial institutions escaped with barely a scratch, and have returned to the same practices and rewards that caused the GFC. By hook and by crook, Wall Street also escaped re-regulation as the flaccid Dodd-Frank Act avoided any fundamental reform. In any case, the Republicans have made clear that they will not provide new funding to regulatory agencies, so even the weak rules in the Act will never get enforced. And, so far (fingers crossed!) none of the big Wall Street crooks has been prosecuted for high crimes. Yes there have been some fines and civil cases, and a few lesser criminals like Bernie Madoff were sacrificed, but all the big banksters are not only free—they are still running their criminal organizations (called “chartered banks” in polite conversation), advising the White House, and gearing up to fund the next presidential campaign.

All of that is to say that financial reform is deader than Elvis. Nothing can be done until the next Wall Street-induced crash. But I am an eternal optimist—the crash will come soon—and so it is time to enumerate the lessons we should have learned from the GFC so as to prepare the reforms that should have been adopted.


googleheim said...

Looks like we are not turning Japanese but turning Italian and Argentina.

Argentina led the way actually 50 years ago. The once richest per capita country in the world retreated over time where the 10,000 ruling families who controlled wealth sought to hold on to the wealth by all means - dictatorships, hyperinflation, capital flight, ponzi schemes, de-industrialization, selling of public municipalities, and the final devaluation.

Italian is retreating much like this. An article in the times detailed either a special taylor in Italian which used to be a manufacturer who has underground caves with their fabric which is washed and stored and treated in a special way - he detailed the similarities between Italian and Argentina.

Argentina is the closest thing to a former colony of Italy. Bennetton man bought out much land and harvested sheep for his clothes there.

They should know.

googleheim said...

Finally - mostly no one pays any taxes in either of Argentina and Italy. Greece is similar, and it has already arrived to it's default. Italy is buttressed for more years to come some how.

See August 1 2010 article in NY Times "Is Italy too Italian?" by David Segal if you have a time to spare and nothing else to do but worry about Italian Aristocrats.

Question is if this is pertinent to Republican tax dodging ?