Friday, October 16, 2009

Is the Transfer of Wealth Complete?

Well, if there is any truth to Goldman Sachs plan to deliver total pay and bonuses in excess of $22 billion, after profits more than tripled last quarter, it appears the transfer, if not complete, is well on its way. Reducing interest rates to near zero, bolstering big banks with taxpayer money, guaranteeing billions of dollars of financial institutions’ debts helped set the stage for this new era of Wall Street wealth,
as if they really needed it.

Is there any doubt that we, the taxpayers have been scammed on the most massive scale ever to occur in history? We, the taxpayers, who bailed them out, saving them from facing the consequences of their own criminal behavior can't afford housing, can't afford health care, can't afford to pay our bills, can't find a job, meanwhile, the guilty parties are getting ready to divvy up billions of dollars.

But, are we, the taxpayers totally innocent? Not really. Although most of us did not directly participate in creating this systemic ponzi scheme that makes Madoff's devious contrivance look like child's play, we did cultivate the environment, over the last 30 years, that made it possible for these banksters, corporate criminals and our own government to get away with sucking the wealth of our country into their greedy paws.

Decades ago, when we bought into trickle down, supply side Reaganomics, that scapegoats the so-called "welfare queen", we made the decision that the value of money trumps all other values, and encouraged young minds to follow the money, and only the money, rather than allowing the endogenous process to occur - regarding education and career choice - that would facilitate true laissez-faire equilibrium, we planted the "seeds" of destruction. By promising a world of perpetually increasing returns, "we the people" promoted a "Gordon Gekko" value system where "greed is good", because the only fuel this promised "world" required was greed.

Take the increasing flow of graduates from top colleges into the world of finance. According to Laurence Katz , professor of economics at Harvard University and former chief economist at the U.S. Department of Labor, in 1970, three to five percent of Harvard graduates went into the finance industry. That percentage grew to fifteen percent in 1990, and in 2006, a whopping forty percent of Harvard grads pursued a career in finance. Why was there such a dramatic increase? Because, Harvard graduates who chose careers in finance made three times the pay of their peers.

So, what's the problem? Well, lack of diversification, for one. Rather than innovating products and services that actually contribute to society, all of the educated brainpower collects to create and develop monstrously complex financial products, that are, for the most part, worthless, mostly because the process of finding out their true value is close to impossible. These "financial frankenstiens" are often composed of so many layers of different investments - each one with a whole new set of rules, that operate in opposing and convoluted ways - that it would take an infinite amount of time to unravel their worth.

In good times, these monstrosities consume themselves or decompose, however, in times of crisis, these extraordinarily complicated debt securities are more like bundles of tiny little pieces of Styrofoam, plastic, disposable diaper fill, fiberglass, aluminum, and every other non-biodegradable material you can imagine, all twisted, entangled and knotted together. These exotic "brainchilds" - not understood by regulators, buyers, or even their inventors - have only served one purpose: to clog up the financial arteries of our economic system.

In addition to Wall Street and the financial industry - with so much money on the table - collecting brainiacs, like Dick Cheney collects arterial plaque, the entire credit derivatives market was deregulated. The melding of greed, an abundance of brainpower, and deregulation, erases the lines between legitimate business and crime or criminal behavior; in effect, institutionalizing crime within the "mainstream" economy.

So, is it any surprise that the "Frankenstein" economy emerged? Not really. But, that doesn't mean it's too late, but we better act fast because it's only a matter of time before we, the taxpaying people, find ourselves in a third world country, pledging our allegiance to the United States under Goldman Sachs.


Anonymous,  16:24  

Always blaming Reagan.

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