Wednesday, November 20, 2013

The Crash of 2016?

Is the response to the 2008 financial meltdown a band-aid fix that "punished none of the financial abusers, propped up the major culprits at the expense of consumers and taxpayers, and brought us closer to an even worse disaster?" That is the question radio host Thom Hartmann, author of “The Crash of 2016: The Plot to Destroy America and What We Can Do to Stop It,” answers on NPR's  show, The Takeaway..

Hartmann claims the crash of 2008, that really began in 2006 when housing started to collapse, is still ongoing, despite the over-the-top performance of the stock market.  Millions of people have fallen out of the middle class since the 1980s, including 700,000 in the last couple of years, driving wealth inequality to an all time high. These enormous concentrations of wealth are not being used productively in the economy as they are invested internationally and stored in Swiss bank accounts.

One of the main problems is that banking has replaced manufacturing as the fundamental impetus of our economy, yet it creates no wealth, not to mention, Glass-Steagall Act (1933) has never been replaced so the banks are still gambling with our deposits.  Then there is the the quantitative easing program that's devaluing our currency more and more every day.  Half of the program is buying toxic securities--junk--from the banks to the tune of $35-$40 billion per month.  That is they're  buying junk left on the books of the banks left over from the unregulated derivatives market that Phil Gramm created in 1999 and 2000 when the Gramm-Leach-Bliley (GLB) Act of 1999 was passed and even more importantly, the Commodities Futures Modernization Act (CFMA) a law that opened the door to unregulated trading of credit default swaps, the financial instruments blamed, for the 2008 economic meltdown.  The passing of this Act catapulted the derivatives market to $800 trillion in 2008! (Keep in mind, the GDP of the entire planet is $65 trillion.) Right after the crash in 2008, It fell to $500 trillion, but according to the Bank of International Settlements it's back up to $800 trillion!

Since the wheels of commerce started to spin, there's always been some sort of  commodities futures market in play, where farmers and merchants could lock in on actual physical things--pork bellies, wheat, oil, etc.--in advance at a fixed price. Up until 2000, the commodities futures market ran through the Chicago Board of Trade and has always been transparent.  For example, airlines could hedge their bets by buying futures in oil.  With the CFMA it became possible to make these kind of bets on the non-physical, and it became possible to make bets on bets on bets.  In other words, they've created an economy that has absolutely no value!


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