Bear Stearns and moral bankruptcy

Actually, the bias towards bigness is largely a consequence of "fiat money", when money is created by a government or central banking system, instead of being something which "can't" be rigged, whether it's gold or silver, or even something like cowrie shells that used to be used once in West Africa. In practice, it not only means continual inflation (masked in our own days by fiddling the inflation index by leaving out things that are going up too fast) but a growth of government regulations, and the undermining of small traders and small communities as well.

Basically, fiat money means those who borrow (over the long term) make a profit at the expense of those who save, especially the small people who can only put money in the bank. Ultimately, those who can borrow most will end up buying everything, because they never have to pay back the full amount. And those who borrow are the people that have easiest access to credit, the government or the banking system: in other words, the big boys.

What's worse, though, is that it's undermined local government. Because ultimately, if the central goverment prints the money, that's where the power lies, and it has the financial resources to penetrate local society and institutions as it pleases, and to evade any constitutional safeguards that may theoretically exist. Whereas if money is something that "can't" be printed, like gold or silver, and a central government has to extract it from (usually reluctant) local communities, then not only will the government (in practice) always take a rather smaller slice of the national cake, as it were, but it will be forced to consider local wishes and compromise with local communities. And will not churn out huge numbers of new laws and regulations. It means that even in a supranational empire, local communities in practice have a very high degree of autonomy - whereas in a paper (or electronic) money system even a legally independent country can in practice be manipulated or co-opted by outside powers - something that the US has often done very successfully since the war. And ideas like "democracy", whether good or bad in themselves, become increasingly meaningless, because the system gets sown up by vested interests, once they have the money to do it.

It's also meant that the small-government conservatism you champion is a hopeless case, and always will be, as long as a central banking system can create money out of thin air. In fact, this sort of conservatism has been in retreat ever since this money system was invented, and it is no accident. It's because the big boys (and the government especially) can easily pay for all their big programs, and bribe (or sometimes coerce) the population without much immediate cost - putting off the bill till later.

Basically, the system came about as part of the price we all paid for the two world wars and the cold war, a price we are continuing to pay, because however justified one may think them, such wars do "not" come cheap, and the full reckoning (and cultural costs) many not be visible to contemporaries. It's no accident that this period has in practice seen the gradual retreat of conservatism. The first war (and in the US, which came into it late, the lending to other participants and the credit the Federal Reserve kept plowing into the markets through the twenties) broke the interchangability of bank notes and gold coinage, because the banks had lent more money than could actually be repaid in gold. We ended up with currencies "fixed" to gold, but not interchangeable. The second war broke even that, through most of the world, ending with almost all other currencies fixed not to gold but to the dollar (the Bretton Woods agreement), which allowed the Americans to more or less "buy" up control of the rest of the world, simply by increasing the money supply. The third war, the "cold" war, of course, broke the link to gold altogether, and though the US continued to be able to indirectly tax the world by inflating the dollar, it's been a much more chancy process, dependent (I think) on a mixture of threats and propaganda, and which looks like it's finally coming to an end. Hence the current crisis, because not only the US, but western countries generally have been living beyond their means. It's the only way, for instance, that the US has been able to outspend the rest of the world in military terms, and (until recently) could appear to afford it. But my main point is that each stage of this process of replacing precious metal with fiat currency has made it much easier for bigger businesses to raise the money to buy smaller ones.

To some extent, small countries, who had to defend their currencies with high interest rates, were in a somewhat more old-fashioned position, and smaller shops and businesses were more normal. I've noticed in Greece, for instance, that the growth of big chains has made great strides, since the introduction of the Euro!

As for how all this came about? It's a sad truth that countries that were able to borrow successfully to fight wars were able to defeat countries that weren't, and (if they were lucky) the profits of victory (new territories and revenues to tax) could pay the interest on the debt. That's (mostly) the true reason for the growth of the British Empire in the 18th century, which outborrowed, outspent and out-taxed the French and Spanish and several others, until the French finances finally cracked, the principal cause of the revolution.

England had an almost insurmountable debt at the end of the Napoleonic Wars, but managed to pay it - principally because we weren't a democracy. But the price of a generation of austerity budgets (high taxes and low spending) to pay off the debt was a breaking of the authority and legitimacy of England's Ancien Regime, until it cracked in 1832. By the end of the first world war, we had democracy, and this sort of austerity neccessary to pay off such war debts was politically quite impossible.

(Actually, that's one of the principal weaknesses of democracy as against older hereditary-based systems: it has an in-built bias towards the short term, and I don't know what can be done about it).

If Britain's finances "had" cracked, and the debt not been repaid, it's difficult to imagine what would have happened, except that the whole of nineteenth century history would have been quite different. My personal belief is that the nearest model would have been Spain, which had actually recovered and modernised substantially in the eighteenth century, but where overborrowing and imperial bankrupcy at the end of the Napoleonic Wars led to the unravelling of the entire Spanish empire (in a rather messy way) political instability in both homeland and colonies, and massive delay in industrialisation. The unravelling of the Spanish empire (and the instability and wars that punctuated it) may be precisely what will happen to the American empire, now that financial reality seems to be catching up with it. I don't know. I'm sure it's going to be unpleasant and messy for all concerned, though.

Still, as with Britain at the end of the Napoleonic wars, massive spending cuts and high food prices (which allowed land to be highly taxed, by protecting its profits) were able to gradually restore the country's finances, and in the long run to free capital for technological development, even though the austerity was politically extremely costly.

What made the 20th century different (apart from the oil age of cheap energy, which meant that more people were freed up from economic subsistence to do other things, like govern each other, and tax each other) was that in order to fight a series of wars, governments started to borrow more money than they would "ever" be able to repay without some sort of default. Sometimes governments continued to do this in peacetime, creating a false prosperity to win votes. And partly because of democracy, even trying to repay it was politically impossible. And this carried massive long-term cultural costs that weren't immediately visible, like the undermining of local government and small traders generally, a bias towards the short-term in government and big business alike, and a massive growth in badly-made law and regulation.

Don’t believe one optimistic word from any public figure about the economy or humanity in general. They are all part of the problem. Its like a game of Monopoly. In America, the richest 1% now hold 1/2 OF ALL UNITED STATES WEALTH. Unlike ‘lesser’ estimates, this includes all stocks, bonds, cash, and material assets held by America’s richest 1%. Even that filthy pig Oprah acknowledged that it was at about 50% in 2006. Naturally, she put her own ‘humanitarian’ spin on it. Calling attention to her own ‘good will’. WHAT A DISGUSTING HYPOCRITE SLOB. THE RICHEST 1% HAVE LITERALLY MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. Don’t fall for any of their ‘humanitarian’ CRAP. ITS A SHAM. THESE PEOPLE ARE CAUSING THE SAME PROBLEMS THEY PRETEND TO CARE ABOUT. Ask any professor of economics. Money does not grow on trees. The government can’t just print up more on a whim. At any given time, there is a relative limit to the wealth within ANY economy of ANY size. So when too much wealth accumulates at the top, the middle class slip further into debt and the lower class further into poverty. A similar rule applies worldwide. The world’s richest 1% now own over 40% of ALL WORLD WEALTH. This is EVEN AFTER you account for all of this ‘good will’ ‘humanitarian’ BS from celebrities and executives. ITS A SHAM. As they get richer and richer, less wealth is left circulating beneath them. This is the single greatest underlying cause for the current US recession. The middle class can no longer afford to sustain their share of the economy. Their wealth has been gradually transfered to the richest 1%. One way or another, we suffer because of their incredible greed. We are talking about TRILLIONS of dollars which have been transfered FROM US TO THEM. All over a period of about 27 years. Thats Reaganomics for you. The wealth does not ‘trickle down’ as we were told it would. It just accumulates at the top. Shrinking the middle class and expanding the lower class. Causing a domino effect of socio-economic problems. But the rich will never stop. They just keep getting richer. Leaving even less of the pie for the other 99% of us to share. At the same time, they throw back a few tax deductible crumbs and call themselves ‘humanitarians’. Cashing in on the PR and getting even richer the following year. IT CAN’T WORK THIS WAY. Their bogus efforts to make the world a better place can not possibly succeed. Any 'humanitarian' progress made in one area will be lost in another. EVERY SINGLE TIME. IT ABSOLUTELY CAN NOT WORK THIS WAY. This is going to end just like a game of Monopoly. The current US recession will drag on for years and lead into the worst US depression of all time. The richest 1% will live like royalty while the rest of us fight over jobs, food, and gasoline. So don’t fall for any of this PR CRAP from Hollywood, Pro Sports, and Wall Street PIGS. ITS A SHAM. Remember: They are filthy rich EVEN AFTER their tax deductible contributions. Greedy pigs. Now, we are headed for the worst economic and cultural crisis of all time. Crime, poverty, and suicide will skyrocket. SEND A “THANK YOU” NOTE TO YOUR FAVORITE MILLIONAIRE. ITS THEIR FAULT. I’m not discounting other factors like China, sub-prime, or gas prices. But all of those factors combined still pale in comparison to that HUGE transfer of wealth to the rich. Anyway, those other factors are all related and further aggrivated because of GREED. If it weren’t for the OBSCENE distribution of wealth within our country, there never would have been such a market for sub-prime to begin with. Which by the way, was another trick whipped up by greedy bankers and executives. IT MAKES THEM RICHER. The credit industry has been ENDORSED by people like Oprah Winfrey, Ellen DeGenerous, Dr Phil, and many other celebrities. IT MAKES THEM RICHER. Now, there are commercial ties between nearly every industry and every public figure. IT MAKES THEM RICHER. So don’t fall for their ‘good will’ BS. ITS A LIE. If you fall for it, then you’re a fool. If you see any real difference between the moral character of a celebrity, politician, attorney, or executive, then you’re a fool. No offense fellow citizens. But we have been mislead by nearly every public figure. WAKE UP PEOPLE. THEIR GOAL IS TO WIN THE GAME. The 1% club will always say or do whatever it takes to get as rich as possible. Without the slightest regard for anything or anyone but themselves. Reaganomics. Their idea. Loans from China. Their idea. NAFTA. Their idea. Outsourcing. Their idea. Sub-prime. Their idea. High energy prices. Their idea. Obscene health care charges. Their idea. The commercial lobbyist. Their idea. The multi-million dollar lawsuit. Their idea. The multi-million dollar endorsement deal. Their idea. $200 cell phone bills. Their idea. $200 basketball shoes. Their idea. $30 late fees. Their idea. $30 NSF fees. Their idea. $20 DVDs. Their idea. Subliminal advertising. Their idea. Brainwash plots on TV. Their idea. Vioxx, and Celebrex. Their idea. The MASSIVE campaign to turn every American into a brainwashed, credit card, pharmaceutical, love-sick, celebrity junkie. Their idea. All of the above shrink the middle class, concentrate the world’s wealth and resources, create a dominoe effect of socio-economic problems, and wreak havok on society. All of which have been CREATED AND ENDORSED by celebrities, athletes, executives, entrepreneurs, attorneys, and politicians. IT MAKES THEM RICHER. So don’t fall for any of their ‘good will’ ‘humanitarian’ BS. ITS A SHAM. NOTHING BUT TAX DEDUCTIBLE PR CRAP. In many cases, the 'charitable' contribution is almost entirely offset. Not to mention the opportunity to plug their name, image, product, and 'good will' all at once. IT MAKES THEM RICHER. These filthy pigs even have the nerve to throw a fit and spin up a misleading defense with regard to 'federal tax revenue'. ITS A SHAM. THEY SCREWED UP THE EQUATION TO BEGIN WITH. If the middle and lower classes had a greater share of the pie, they could easily cover a greater share of the federal tax revenue. They are held down in many ways because of greed. Wages remain stagnant for millions because the executives, celebrities, athletes, attorneys, and entrepreneurs, are paid millions. They over-sell, over-charge, under-pay, outsource, cut jobs, and benefits to increase their bottom line. As their profits rise, so do the stock values. Which are owned primarily by the richest 5%. As more United States wealth rises to the top, the middle and lower classes inevitably suffer. This reduces the potential tax reveue drawn from those brackets. At the same time, it wreaks havok on middle and lower class communities and increases the need for financial aid. Not to mention the spike in crime because of it. There is a dominoe effect to consider. IT CAN'T WORK THIS WAY. But our leaders refuse to acknowledge this. Instead they come up with one trick after another to milk the system and screw the majority. These decisions are heavily influensed by the 1% club. Every year, billions of federal tax dollars are diverted behind the scenes back to the rich and their respective industries. Loans from China have been necessary to compensate in part, for the red ink and multi-trillion dollar transfer of wealth to the rich. At the same time, the feds have been pushing more financial burden onto the states who push them lower onto the cities. Again, the hardship is felt more by the majority and less by the 1% club. The rich prefer to live in exclusive areas or upper class communities. They get the best of everything. Reliable city services, new schools, freshly paved roads, upscale parks, ect. The middle and lower class communities get little or nothing without a local tax increase. Which, they usually can't afford. So the red ink flows followed by service cuts and lay-offs. All because of the OBSCENE distribution of bottom line wealth in this country. So when people forgive the rich for their incredible greed and then praise them for paying a greater share of the FEDERAL income taxes, its like nails on a chalk board. I can not accept any theory that our economy would suffer in any way with a more reasonable distribution of wealth. Afterall, it was more reasonable 30 years ago. Before Reaganomics came along. Before GREED became such an epidemic. Before we had an army of over-paid executives, bankers, celebrities, athletes, attorneys, investors, entrepreneurs, developers, and sold-out politicians to kiss their asses. As a nation, we were in much better shape. Strong middle class, free and clear assets, lower crime rate, more widespread prosperity, stable job market, lower deficit, ect. Our economy as a whole was much more stable and prosperous for the majority. WITHOUT LOANS FROM CHINA. Now, we have a more obscene distribution of bottom line wealth than ever before. We have a sold-out government, crumbling infrastructure, energy crisis, home forclosure epidemic, 13 figure national deficit, and 12 figure annual shortfall. The cost of living is higher than ever before. Most people can't even afford basic health care. ALL BECAUSE OF GREED. I really don't blame the 2nd -5th percentiles in general. No economy could ever function without some reasonable scale of personal wealth and income. But it can't be allowed to run wild like a mad dog. ALBERT EINSTEIN TRIED TO MAKE PEOPLE UNDERSTAND. UNBRIDLED CAPITALISM ABSOLUTELY CAN NOT WORK. TOP HEAVY ECONOMIES ALWAYS COLLAPSE. Bottom line: The richest 1% will soon tank the largest economy in the world. It will be like nothing we’ve ever seen before. The American dream will be shattered. and thats just the beginning. Greed will eventually tank every major economy in the world. Causing millions to suffer and die. Oprah, Angelina, Brad, Bono, and Bill are not part of the solution. They are part of the problem. THERE IS NO SUCH THING AS A MULTI-MILLIONAIRE HUMANITARIAN. EXTREME WEALTH MAKES WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. WITHOUT WORLD PROSPERITY, THERE WILL NEVER BE WORLD PEACE OR ANYTHING EVEN CLOSE. GREED KILLS. IT WILL BE OUR DOWNFALL. Of course, the rich will throw a fit and call me a madman.. Of course, they will jump to small minded conclusions about 'jealousy', 'envy', or 'socialism'. Of course, their ignorant fans will do the same. You have to expect that. But I speak the truth. If you don’t believe me, then copy this entry and run it by any professor of economics or socio-economics. Then tell a friend. Call the local radio station. Re-post this entry or put it in your own words. Be one of the first to predict the worst economic and cultural crisis of all time and explain its cause. WE ARE IN BIG TROUBLE.

correction: my 3:06PM posting "(never before granted to a non-cash-deposit bank)" is factually imprecise - seven months ago the Fed granted the brokerage arm of CitiBank an identically large bail out, but since it was funnelled thru the commerical banking business it was "legit" see Pam Martens "Too Big to Bail- The Fed's Wall Street Dilemma" at http://www.counterpunch.org/martens03172008.html