It Can Happen and It Did

The economy is sound... It could never happen... They're too big to fail...

Did you trade in any of these empty clichés last year? As someone who bought gold more than ten years ago, my skepticism about the world economy was firmly entrenched. Rampant speculation in assets and derivatives and massive public and private debt were swamping the economy. Free trade agreements like NAFTA were sending our jobs overseas. For almost forty years we watched manufacturing in America dwindle away, replaced by paper pushing and fast food chains. No real wealth was being created. What else could’ve happened except for the bubbles to burst and the walls to come tumbling down?

No, this isn’t End of Days. It has nothing to do with Mayans neglecting to finish their calendar. This was the result of bad policy, all the way around. From left to right, from Democrats to Republicans. And the people who pull their strings: the speculators, centered mainly in places like Wall Street and London's "City" district and the offshore banking empire. They did this to us, and now some of their minions are trying to blame it on YOU. You the homeowner. You the mortgage holder. You the schlub who was tricked into adjustable-rate mortgages or coaxed to refinance so that your paper could be sold off to some other institution. When the bubbles burst, they lost little. YOU lost a place to work and live--or at least a huge chunk of your savings.

These deregulation rats found ways to make a whole lot of quick bucks at the expense of our homes and our savings. And then they emptied the Treasury to ply the same financial institutions with bailouts while we helplessly watched.

Most of us aren’t sophisticated enough to know how the economy works--or why it no long does. This is not because we're stupid. Naïve perhaps, but not stupid. As ordinary grunts who work for a living, pay our mortgage or rent on time, budget our expenses, etc., most of us don’t understand financial speculation. We can't conceptualize making money on debt. But that is in fact what Wall Street and other speculators do every day. They make money out of thin air, off of computer screens, and concoct oddball investment "products" meant to make profits for everyone smart enough to sell them to the next sucker before the mystique is unraveled--and the last man holding the bag takes the fall. And for this we reward them by bailing them out.

Remember Enron? The entire world of finance and regulation agreed Enron was a miracle company until someone had the guts to point out that the emperor was naked. Enron's asset values were grossly inflated through mark-to-market accounting principles; i.e., assign values to company assets based on what you hope to make when they are sold. Enron not only did this, they traded energy like a futures trader would trade pork belly contracts, bid up the price, created blackouts in California, and then stuck customers in that state with gouging prices. Even the emails and recorded phone calls of Enron traders showed they knew it was a house of cards, and that when it collapsed, they hoped someone else would be holding the bag.

Only the most dishonest among us operate this way. Yet this type of thinking was standard for top executives of what was on its way to becoming the world's largest corporation!

President Obama should not continue the Bush-Cheney policy of trying to resuscitate lending by looting our Treasury. It's criminal, and it won't work.

Mission Statement:

This Web log is devoted to thinking individuals who know that what's behind today's news is what matters. Rather than accept verbatim explanations drummed at us daily by major media outlets, both liberal and conservative, The Truth Sleuth seeks to turn the important issues of the day inside out to examine the facts, the motives, and the myths.