How many times do we have to see the { easy credit/ economic bubble/ capital flight/ crash/ austerity=looting } cycle before we call it what it is: daylight robbery. This scam is as old as Rome:
Marcus Licinius Crassus... acquired an enormous fortune through (in the words of Plutarch) "fire and rapine." One of his most lucrative schemes took advantage of the fact that Rome had no fire department. Crassus filled this void by creating his own brigade—500 men strong—which rushed to burning buildings at the first cry of alarm. Upon arriving at the scene, however, the fire fighters did nothing while their employer bargained over the price of their services with the distressed property owner. If Crassus could not negotiate a satisfactory price, his men simply let the structure burn to the ground, after which he offered to purchase it for a fraction of its value.
- Wikipedia
Sound familiar? Sound like the way Greece, Ireland, Spain, and Cypress have been extorted by the central banks? Yeah, being aware of history can give you that sense of deja vu.
The TBTF banks are extortionists, and neoliberal economic policies are the financial equivalent of arson. Its that simple.
How is what the ECB (European Central Bank) has done to Greece, and now Cypress, any different than what Crassus did to the unlucky souls whose properties were ablaze? Not different at all.
Now, I'm not going to wade into the long-standing historical argument about whether or not Crassus also employed (or winked at) arsonists either to create his own customers or to intimidate or silence his political opponents.
But, there is plenty of evidence that neoliberal economic policieswere the equivalent of setting open buckets of gasoline inside the domiciles of the countries that fell victim to the Banksters' FIRE brigade scheme. (Isn't it ironic that the current acronym, Finance, Insurance, Real Estate, exactly describes how the TBTF/TBTJ crooks play the game.) Those policies included financial deregulation, un-supervised derivatives, massive leverage, unregulated international capital movement - see the bold text in the Krugman quote below - , etc.
Even Adam Smith, the patron saint and creator of modern economics, recognized that the public had to be protected from the banks:
..regulations may, no doubt, be considered as in some respects a violation of natural liberty. But those exertions of the natural liberty of a few individuals, which might endanger the security of a whole society, are, and ought to be, restrained by the laws of all governments; of the most free, as well as of the most despotical. The obligation of building party walls, in order to prevent the communication of fire, is a violation of natural liberty exactly of the same kind with the regulations of the banking trade which are here proposed.
— A discussion of restrictions on bank note issuance in Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations
Isn't Adam Smith just too quaint for the 21st century?
those exertions of the natural liberty of a few individuals, which might endanger the security of a whole society, are, and ought to be, restrained by the laws of all governments
As usual, when draconian punishments are first meted out, victims of dubious legality, like Jose Padilla, are used to get the suckers to buy into the precedent. So, everyone now knows how corrupt the Greek government was, just as this week, everyone has been informed by the PTB that Cypress is a tax haven for Russian gangsters:
Why are Cypriot banks so big? Because the country is a tax haven where corporations and wealthy foreigners stash their money. Officially, 37 percent of the deposits in Cypriot banks come from nonresidents; the true number, once you take into account wealthy expatriates and people who are only nominally resident in Cyprus, is surely much higher. Basically, Cyprus is a place where people, especially but not only Russians, hide their wealth from both the taxmen and the regulators. Whatever gloss you put on it, it’s basically about money-laundering.
- Paul Krugman Treasure Island Trauma
even though, no one said a word about either situation as long as the gravy was flowing.
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I think that the threat of spreading fires was something brand new in the world of ancient Rome. It was only due to Roman engineering (aqueducts, bridges, arches, concrete construction of multi-story buildings, etc.) that a city of the size and density of Crassus's Rome could have been built. And the threat to the city at large from a single fire was a new concept.
Crassus invented a new way to loot. He was way ahead of the law. He used this new way of looting to become the richest and most powerful man in Rome.
Amassing an enormous fortune during his life, Crassus is considered the wealthiest man in Roman history, and among the richest men in all history.
- Wikipedia
To combat Crassus, the city of Rome wised up, accidentally invented fire insurance, and eventually started its own civic fire companies:
Marcus Lucinius Crassus sent his Fire Brigade Chief round to negotiate the purchase of all the houses they were about to demolish, This Fire Chief made a derisory offer, that he hoped would be refused!!!…because when the fire spread, they would need to buy more houses, to demolish in order to prevent the flames spreading even further. Very soon neighbours would chip in to the unfortunate victims, to prevent their own houses being demolished. This was how the first Fire Insurance Scheme began. Marcus Lucinius Crassus was furious! when he discovered Romans were accepting his lowest offers without question.
- an obscure (but prominent on the net) comment on a Max Keiser program
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By analogy, I think that, today, the idea of using banks to loot entire nations is a new concept to almost everyone except the banksters. It is a concept that could not exist without central banks capable of controlling credit on a global basis.
Central banks are a little over a century old. They spent the first half of the 20th century dealing with two world wars. They spent the next thirty years profitably rebuilding from the wars and building-out the middle class. It was only in the 1980s that the sociopathic concept of looting began to rise to the prominence it has today.
NOTE: After I wrote this, I found Paul Krugman reciting the exact same facts in his column today.
It wasn’t always thus. In the first couple of decades after World War II, limits on cross-border money flows were widely considered good policy; they were more or less universal in poorer nations, and present in a majority of richer countries too. Britain, for example, limited overseas investments by its residents until 1979; other advanced countries maintained restrictions into the 1980s. Even the United States briefly limited capital outflows during the 1960s...
But the truth, hard as it may be for ideologues to accept, is that unrestricted movement of capital is looking more and more like a failed experiment.
It’s hard to imagine now, but for more than three decades after World War II financial crises of the kind we’ve lately become so familiar with hardly ever happened. Since 1980, however, the roster has been impressive: Mexico, Brazil, Argentina and Chile in 1982. Sweden and Finland in 1991. Mexico again in 1995. Thailand, Malaysia, Indonesia and Korea in 1998. Argentina again in 2002. And, of course, the more recent run of disasters: Iceland, Ireland, Greece, Portugal, Spain, Italy, Cyprus.
Because of the destruction of regulation brought about by disastrous neoliberal policies, sociopaths (of whom Mitt Romney is a prominent aristo example) infiltrated positions of power. Their superficial personalities were given cover by the impersonality-conferring computerization of all things financial and the unfamiliarity of the new global financial markets. They then added to that sociopath-hiding chaos with leveraged buyouts, asset stripping, and corporate destruction. All in all, the last thirty years have been a golden age for sociopathic financial pirates.
Just as Crassus, with his private fire department, contributed heavily to the final destruction of Roman democracy - such as it was, with its noble qualifications for the vote - so today, the Masters of the Universe have bankrolled the destruction of democracy in America. We have a privatized banking system that dictates to the ostensible government - much the same way that Crassus dictated to the government of Rome. He was so rich and powerful, he became the government.
We came close to that with the Romney candidacy. But, despite his loss, we still have a growing number of private prisons and private fire departments. Super-rich crooks are trying to take entire cities (Belle Isle, Michigan) private. Obama is 100% in favor of privatizing our schools. And this country has never had public health insurance. Loan sharking (i.e., payday loans) and usury (30+% interest rates) are perfectly legal and a major source of profits for the banksters. Middle-class democracy, at home and abroad, is being slowly strangled with a golden garotte right in front of our eyes.
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We have had forty years of neoliberal looting, starting in the South American dictatorships of the 1970s and 1980s, proceeding on to the 1998 financial crises in East Asia and Russia, then on to the post-2008 string of financial crises and suicidal austerity regimes. The evidence is in.
Deregulation is (the financial equivalent of) arson, and austerity is extortion of entire nations by ruthless banksters.
You can quote me on that.
It is way past time for the victims of the neolibs and banksters to band together and create an honest lender of last resort, an honest financial fire department. Iceland showed these gangsters can be beaten. In the 1990s, Argentina defaulted on its IMF-imposed debt, and they made out just fine.
Access to credit, like access to fire protection (and health care, and education), has to be a public good. Because we have ample evidence that when those things are privatized, they have been and will always be used for criminal purposes. Besides, as the MMT people point out, sovereign governments can create as much credit as they want. The banksters had no problem with the US materializing $11 T to cover their busted asses. But, when we need a couple of billion to keep states solvent in a depression, then its austerity time. I call bullshit.
The neolibs want to blame this on citizens, on savers, on people who took out risky mortgages, on too generous pension plans. In short, they want to blame people and governments for tripping over the arsonists' traps.
Blaming the little guy for looting by the aristos is the biggest lie out there for the last twenty years. I don't buy it. Repeat after me:
Deregulation is arson, and austerity is extortion.