There have been a lot of diaries about the Financial Crisis and there should be, NOTHING, no issue, election, office, project, plan, job, person is unaffected by the Economic Crisis. Every one of our hopes and dreams...our fears and nightmares are directly tied to this Economic Crisis.
It is not too late to save something of that dream, it is not too late to save something of our country, but we must act now!
We must STOP trusting those we founded this Crisis to fix it.
I call these people, who are doing more destruction to American and Democracy than Bin Laden would have dreamed of, ECONOMIC TERRORISTS.
If that is too strong a word for you...how about RAPISTS!
Are You Tired Of Your Children Being Raped?
Ok, that's an incendiary title.
Intentionally.
But what is our financial system today?
I suggest you read Karl Denninger’s post at the market ticker.
http://market-ticker.org/...
As such a financial system (ordinary consensual sexual intercourse) is necessary for the propagation and prosperity of an economy (the species.)
But some people get money-crazy (sex-crazy.) Unable to satisfy their desire for more money (sex) through consensual and honest means, they turn to theft (rape.)
Yes, Karl I do agree they are raping our children blind. It is not too incendiary, in fact it is worse than rape, because in American Rapists usually go to jail, but these guys have been given the keys to the house.
But, instead of arguing for jail time and dishonor for those who have committed these acts in the financial system, our Treasury Secretary, Fed President and even President Bush have instead argued for both amnesty and the lining up of yourself, your children and grandmother so that the thieves (rapists) can have more free shots (rapes), not only intentionally disregarding the outrageous and even unlawful conduct of the past but offering free future offenses!
And make no mistake, that is exactly what has happened.
The "why" is simple - bonuses and other compensation (including dividends) has been inextricably tied to "earnings."
Karl Denninger again lays out a way to stop the insanity, a way to STOP enabling the Criminals!
I have good news and bad news.
The good news is that we must (and can) protect the financial system without protecting any of the existing players. The means for doing so is in fact quite simple:
Government should set up ten (10) new federal banks. Capitalize each with $20 billion dollars and immediately IPO off the bank to the public. The capitalization would carry a preferred coupon of 9%, incenting the bank to immediately replace that government capital with private capital, with dividends, executive bonuses and pay beyond $200,000 per annum (total compensation) being prohibited until the government capital is repaid in full.
This would provide an immediate aggregate lending potential of two trillion dollars into the economy just off the Government Tier Capitalization alone. Private capital would fly into these institutions since they would be established with no debt of any sort.
At the same time, withdraw all existing support programs by Congressional mandate. This includes Fannie, Freddie, the existing alphabet soup mess and all other taxpayer-funded backstops. The FDIC would be directed to provide deposit insurance only to the extent that it can document the safety and soundness, and expose same to public view, of the institutions it insures.
If The Fed (which is technically unable to be compelled to comply) refuses, revoke their right to regulate the money supply and replace them, leaving them as simply another private bank forced to compete for funds in the open market like everyone else. They will go along rather than die.
The consequence of this set of actions would be to force an immediate default of the excess (unservicable) debt in the private sector. Both banks and debtors would go bankrupt immediately, but the lending function would remain intact as the newly-chartered banks would exist to replace the "busted" institutions.
At the same time Glass-Steagall must be reinstanced, reserve requirements for banks reinstated and enforced without exception, and leverage in the financial system must be strictly controlled at no more than 12:1.
This set of actions would almost-immediately clear the system of excess debt load, defaulting over $10 trillion in bad loans within months and allowing the bankruptcy process to do its job.
There would be an enormous number of both firms and individuals who would go bankrupt, but in the place of bankrupt firms new competitors would immediately arise to serve the demand from consumers and businesses who were freed from paying 15, 20 or even 30% of their income towards debt service.
Cleansed of excess debt service the economy could once again function and begin to grow at a sustainable rate.
The bad news:
A Depression has been assured; that $12 trillion in false GDP growth will and must come back out as the unservicable debt defaults; adding yet more unservicable debt to the pile will simply make The Depression deeper and longer.
If we do not stop this insanity now we will face a catastrophic downward GDP adjustment in the next two to three years that could reach between 30-50% in what some economists call a "sudden stop." The consequence of such an event, were it to occur, would be unemployment of 30% or more and Depression that would make the 1930s look like a cakewalk.
Worse, with our government having consumed all its borrowing capacity in a futile attempt to prevent this outcome we would not be able to provide necessary and basic human needs such as food, shelter and clothing to the displaced.
This is mathematics folks, not ideology. We can either face the math now and lock up the financial rapists or we will all suffer from financial AIDS.
http://market-ticker.org/...
Do something Kossacks: try to save your children, and yourself.