At least twenty oversized American banks have histories of reckless behavior, including bad lending and gambling with derivatives, that have left them insolvent, in fact, bankrupt. They have poisoned the economy and should pay the price for their mistakes just like every other business.
However, because their machinations affect so many investors, depositors and other businesses, they have been given a pass, saved by massive injection of federal government funds. By basic capitalist standards, this is a gross violation of business integrity, weakening the structure of our economic system. The violated principle is summarized as “Too big to fail.” One Nobel Prize winning economist called it “looting”.
The managers of such institutions knew how to take advantage of their special status. They took excessive risk for mountainous profits that would entitle them to massive bonuses if successful – or a government bailout if the investment failed. The techniques were often complicated; but some were based on inadequate reserves that purposely underestimated the financial exposure. The managers were in financial clover: heads I win, tails you lose, “Too big to fail.”
In the current crisis, the government is rescuing the managers once again, lending $700 billion as bailout money. That amount, leveraged on an accepted basis of ten to one, could have supported $7 trillion of lending capacity in a new or reorganized bank, more than enough to serve the nation’s business. We didn’t go that route; they are “Too big to fail.” President Obama has given primary responsibility for the financial crisis to Lawrence Summers, head of the National Economic Council, and Timothy Geithner, Secretary of the Treasury. The president can do better than these two conventional figures stuck in the past.
There may be an uncomfortable analogy in the position of the United States in world affairs: “Too big to fail.” Decade after decade we overspend on military equipment, organize the largest military budget the world has ever seen, enter failed military quagmires in Vietnam, Iraq and Afghanistan, yet we get token troop support from nations around the world even though their populations disapprove of our military invasions. A remarkable 737 American military bases with hundreds of thousands of American troops are situated in 130 countries, a worldwide presence that protects the governing elites on virtually every continent. Is the U.S.A. “Too big to fail” because its collapse would upset the political and military status quo all over the world?
Where does the U.S. get the money to finance its domestic and foreign errors? In large part from China, Japan, Saudi Arabia and the other countries that buy U.S. Treasury bonds in the hope that they will be redeemable despite our enormous national debt of $10,942,165,294,650.89 or roughly eleven (11) trillion dollars. China’s economy depends on the sales of goods to the U.S. The Saudis have big investments in the U.S. and depend on U.S. military power to protect them from their own people and keep the oil flowing. The Japanese are inheriting our automobile business
In spite of their mistakes, the banks and the U.S. maintain their prime positions in the world because they are “Too big to fail.” How long can it last? Their gross errors of management are too expensive, depressing profits and living standards by forcing greatly increased costs on the entire world. Adam Smith, the patron saint of capitalism, would tell the nation and the world that these arrangements are too inefficient and unstable to be continued indefinitely.
10 comments ↓
Seems like anyone and everyone who can afford a big lobbying organization are “too big to fail”
Awesome article.
Josh. The thing is those who are killing the USA financially are positioning themselves in the future World to continue to function as the “Elite” after the fall. They are acting like Company buyers who grab a company, strip it of its assets, then move on to the next victim, leaving the damage behind for someone else to pay the repair costs.
They don’t care who fails as long as they make money. I call them the Shadow Government. They run the United States.
Some call them the Kleptocracy, others call them the Oligarchy, but whatever you call them, they are users.
A last Century Economist once made the observation that once the Elite grabbed all but a minuscule share of the wealth, then change would only occur among the elites.
They definitely don’t care who fails – if those are just little people like you and I. But, if they have political influence, they’ll get every last one of our dollars to make sure they can continue living high on the hog.
To examine the power and influence of the International Money Cartel let me bring a couple of quotes.
First though, this all started with Amschel Moses Rothschild who was born in 1744 in the Frankfurt, Germany Jewish Ghetto. He had five sons and after he became successful, he sent each to a different European country to set up a bank with a business plan that they would do business with anyone but the business unit was kept within the family and within their family control. Over the years the business prospored with this arrangement and they became very powerful in Europe and eventually across the world. They became the International Bankers for the World.
Napoleon Bonaparte in 1815 said about the Rothschilds and International Banking:
“When a Government is dependent upon bankers for money, they and not the leaders of the government, control the situation, since the hand that gives is above the hand that takes…Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”
In 1911 John F. Hylan, Mayor of New York said that ” the real menace of our republic is the invisible government which, like a giant octopus, sprawls its slimy length over our city, state, and nation. At the head is a small group of banking houses, generally referred to as “International Bankers”.
These people plus their confederates is who I refer to as the “Shadow Government” . And the quotes of Napoleon and Hylan are even more true today than they were when they were uttered. This small group have as a simple goal -elitism. You may have read what I say about the Elites.
Great quote about the Rothschilds, Cliff. Reminds me of one of my favorites, from Lysander Spooner of course:
“The Rothschilds, and that class of money-lenders of whom they are the representatives and agents — men who never think of lending a shilling to their next-door neighbors, for purposes of honest industry, unless upon the most ample security, and at the highest rate of interest — stand ready, at all times, to lend money in unlimited amounts to those robbers and murderers, who call themselves governments, to be expended in shooting down those who do not submit quietly to being robbed and enslaved.”
Wondered about that name Spoonerite.
Spooner, in so many words, said they were International Finance was staffed by financial thugs. Kind of like the Mafia.
Since Spooner is famous for his Postal Mail competition to the U S Postal Service, I have an anecdote concerning me.
Many years ago I wrote the Postmaster General of the United States about my idea for a more efficient postal system. My Idea was for the Postal Department to have standard envelopes (several sizes and shapes ) made available with a type of bar code for electronic readers. The bar code was to be in the form of a circle with 10 wedges ( Like a pie ) inside each wedge are 6 circles numbered ( 0,1,2,4,8,9 ) . Each of the little circles were to be marked with a pen to sum a number from 0 to 9. Ten wedges. Ten possible numbers per wedge, means that the number of combinations of those numbers would total ten to the tenth power giving a possibility of using 10 Billion unique numbers.
For packages I suggested peel and paste labels using the wheel.
Everyone would have to have a mailing address like a phone number ( actually could be a phone number is the database had a field for the corresponding address).
This way all mail could be electronically scanned and routed, wouldn’t have to be touched by human hands.
They wouldn’t answer my letters.
Hyperinflation and the crash of the Keynesian model could be in the offing soon if the Chinese drastically draw down.
http://tinyurl.com/da295v
mB
MJB – I didn’t get a chance to read your article yet. I do see a great chance for a crash of this statist keynesian system.
But, would hyperinflation be caused by the chinese? I think not. That can only be caused by the fed and the banks inflating the money supply.
The New World Order, an Ideal of Elitists, is now being structured to realize their Ideal. It is a World Financially dominated by their Consortium and enforced by countries like the United States.
Never, you say?
Give it a lot of thought. Just what would have to occur to get you to consider such an Elitist Utopia? Your kids starving? Threats to your family by an oppressive government? What would it take?
Of course if the people of the United States take back their Government from the Elitist, then of course it can’t happen.
The question is – are we too still too comfortable in the heating water to realize that soon it will be boiling. and when we realize it, is it then too late?
We’re definitely in the water, and it’s getting hotter and hotter every year, every month, every day. Will we wake up without a complete catastrophe? I’m not holding my breath.
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