The full page ad in Ruppert Murdoch’s Wall Street Journal for its “Future of Finance Initiative” starts off by saying that the financial system has stopped working.
I completely disagree.
The financial system is working for the first time since Bob Rubin and his colleagues created the “strong dollar policy” complete with gold market manipulation and mortgage bubble. It is working because a wide group of market participants do not want to invest capital in unproductive activities or banks, lawyers and accounting firms that intentionally engage in criminal fraud.
To date, the Fed and Treasury theory is that $10 trillion of central bank and government guarantees and subsidies will permit a fraudulent system to continue to function. The answer is, of course, no it won’t. Hence, the proposal for a new initiative to make sure markets are not allowed to work.
I got my MBA at Wharton. I have heard it all my life and I know it is true. When something is unproductive, overpriced or unhealthy, markets shift capital away. That is a good thing.
A market is like a human body in trauma. It moves the blood away from the toes and preserves it for the heart, brain and lungs.
However, the institutions that made this mess—the likes of Goldman Sachs, Sullivan & Cromwell, The Carlyle Group, and the academic institutions that give them air cover and many more – are now persuaded that a financial system that no longer trusts them needs “fixing” and they are the men for the job. They want to show us how we can shift more blood out of the heart, lungs and brain and into them and their fellow toes.
This conundrum of keeping the unproductive in control is why the Administration is proposing a massive defense and enforcement budget. Only financial totalitarianism can keep something this expensive and destructive going.
Such arrogance proves that we do indeed need markets to continue to work. We need those who need $10 trillion of bailouts (and counting) to fail and, as legendary investor Jim Rodger suggests, learn how to drive a taxi, or better yet a tractor.
Related Reading:
2023 Annual Wrap Up: Water (148 pages) 
Financial Transaction Freedom (14 pages) 
It sounds like you’re creating problems yourself by trying to solve this issue instead of looking at why their is a problem in the first place
Catherine – Thanks for your support of the working people – When Charlotte Littlefield Brown and I were in Washington D.C. in November covering The Financial Summit, a very poignant experience occurred. We were getting ready to cross Dupont Circle from the north side of the circle. We observed two D.C. workers with pick and shovel digging 2-4 feet below grade down to probably repair or replace a utility line maybe sewer or Water line out in the street of the circle in front of us. Just at the moment we were ready to cross a loud noise of sirens, lights, limousines and security suvs moved through the circle within 2-3 feet of the men and then out around the circle existing to the northwest. These were obvious government related important personages of course. My thoughts were in a micro-second that this is the New America downtown Washington D.C. the workers in the street laboring for a financial system, that continues to corruptly rob and pillage the good citizens of America – this an example right before my eyes. george butler
Catherine,
I suspect that the money that AIG is paying out for collateral calls does not end up at the European Banks. Those banks held real paper and hedged their risk with CDS.. The CDS made them market neutral. They used the CDS to go beyond their investing limits because they were “insured”.. They were long with the bonds and then neutral when they bought the CDS. I’m guessing that they then took on the role of insurer to get some quick money, underwriting more CDS which would put them back into a long position in the housing market. They could create SPV to hide their positions from the regulators. These banks would then be neutral as far as CDS, but would have to raise the collateral to send to their short counterparties. The money could be going to the European banks and back to those who are manipulating the housing market here. Somebody has to be short the housing market in a really big way. The decision that were made supported a short position. The M2M rule has not been changed, shorting and naked shorting has not been curtailed, and instead of letting AIG fail,(now I learn that all assets would be second class to claims by counterparties).. All these decisions favor a really big short position… and who was in control?
Shwayn:
Nationalize the NY Fed under the Treasury and nationalize or state-ize the remaining Fed banks. That gives you control of all the clearance and wire systems. Have Treasury issue currency subject to the authority of the Congress. Move government accounts to sound banks. Encourage states and municipalities to issue local currencies. Send the large banks bills for the $4 trillion missing from the US government.
Think this is not doable? It is. Special arrangements would need to be made for international issues that result. After all, we are far from the only country that has a Tapeworm problem.
Someone said the other day that the financial system has created $600 trillion promises to pay on $60 trillion of real assets and activities. Now the question is who gets the real stuff. I would say the people need to get the real stuff and the banks can get their own paper. We do not need to slowly give them all the real stuff while we get left with the paper — which is what you are proposing.
Catherine
George:
I have the highest regard for people who do real, useful things. That certainly includes driving a taxi, which is a category that also includes friends of mine as well. So the idea of the switch was to switch from something not useful to something useful like driving a taxi or a tractor. If you link to Rogers quote, his comment on the tractor was because of the importance of food.
BTW, I once did a survey of what professions added the most economic value relative to their compensation (net energy plus to total economic return.) My estimation was that, by that definition, housecleaning and janitors were the most honorable professions on the US. I am prejudiced as one of my best friends owns an awesome cleaning company in NYC called “Partners in Grime” which was instrumental in saving my life in 1998-2000. I paid them to set up a subsidiary in Washington to handle my business when I moved there. When you have lots of sensitive data in your computers, it pays to have spiritual warriors do your cleaning at night when no one is watching.
All the best,
Catherine
Catherine I am part of the alternative media and have been broadcasting for over two years on Genesis Communications Network http://www.thesecrettruth.com. I have been a student of the world system for most of my life. I beg to differ in the way you described the wall street bunch relegating them from wall street to cab driving. I have one co-host on another one of my programs http://www.worldreview.tv who is a full time cab driver a fine person and is fighting the hell out of The New World order including Toll roads etc. The way you ended this blog could easily be misconstrued and I hope you were not casting a pall on cab driving
sincerely,
george butler
Well said and so accurate. Heads I win tails you lose is the bankster game and unfortunately the present administration in Washington appears ready to continue the same criminal game. I’ve opposed every bailout and funding to these financial frauds since day one. I sincerely hope that justice will have its day and that the race to zero is won by those who took our nation and the global economy down this rabbit hole. Thank you for your good work over these many years.
Why can’t these buggers fall on their swords? Oh that’s right, no honor and no will to give up their power.
So why won’t Obama slide them down their swords? Oh right, campaign contributions.
the one response i have to this is that the analogy of broken financial institutions are like the extremities of the body is flawed. The institutions which are failing are the ones that are closest to the center of the economy of America, even if they are diseased they are still vital organs (at least at this point in time). What can be done is a “transplant” with other institutions to replace them, but America cannot simply let them fail without any work to fix it, doing so would be suicide of the human body you were using as an analogy.
Catherine-
A wonderful analysis. What we are seeing is malinvestment in banking and the automobile industry. And underinvestment in sustainable agriculture and small industry. Until everything collapses, it’ll continue.
The current financial problem can be summed up from a lunch last week with a good friend that I don’t see much anymore. He’s a Wharton grad and former trustee who is flat scared. He made his living brokering seats on the NYSE, AMEX & Pacific Exchanges. He thought he was set for life after the NYSE went public, as he and his wife each owned a seat. He’s worried out of his mind now because he trusted his next door neighbor’s advice on the banking crisis, who told him not to worry. Last time we had a drink, about 7-8 months ago, I would tell him that his neighbor was BSing him because he had no choice and his friend knew the system was doomed. I was told I was crazy.
His next door neighbor? Ken Lewis.
I’m headed to Food Dawg (oops, Lion) to buy another 20 lb bag of rice, which is a good investment, IMO.
Now I know why I feel like we, the real people in the real economy will win out in the end. I think you summed it up nicely. I am not a very spiritual person but I’ve always liked the quote “Blessed are the meek for they shall inherit the Earth.”
I am glad to be alive. Boy will I have one hell of a story to tell my grandchildren.
my dear Catherine: Greetings! I begin by asking: Do you really suppose that the powers that be will allow another ( outsiders?? ) viewpoint to enter the zeitgeist for a renewed, reinvigorated financial system?? Is this a way George Soros can say: “Well we tried?” and then go along with the inner circle???…Frankly the model that seems to be in place is extremely miopic…more for the wealthy insiders; damn the torpedoes and full speed ahead…I can only imagine that in the minds of those who have had the monicker: MASTERS OF THE UNIVERSE have no room for a system for the masses…The commercial banks still accept deposits daily…no loans though…currently both of my employers want an answer from me to participate in a 401(k) plan–one employer accepts part time employees–HUH!!?? All the reports I read suggest that the Market is headed lower ( one plan offers an employer contribution of 3 to 1). Just maybe we will have to face a rather bleak and violent world ahead of us ( ala MAD MAX-THUNDERDOME ???)…I recall stories about the Moscowvites who at the end of a dismal Moscow winter and as the spring approached walked out of the city to plant potatoes in the countryside when the Soviet system collapsed just to provide a source for vodka and a meal..At that time the Soviets abandoned their remote biological warfare site in Kyrcistan; and only for the arrival of an American scientific team who quarantined and salvaged the site did we most likely prevent a potential biological pandemic…in today’s news is a report that thousands of vials of H5N1, H5N2 and H3N1 bird flu virus strains have been ( accidentally??/mysteriously?? ) combined in such a way to take advantage of the airborn ( H3N1 ) strain; then shipped from an Austrian pharmaceutical ( Baxter ?? founded by a former US marine ?? ) warehouse in Czech Republic; intercepted and tested in time by an intermediary contractor for toxicity who then found it to be a lethal combination when the innoculated ferrets died; most likely many of the vials may have already been sent throughout Europe ( but to whom?? ). This is not the comment you may have wanted concerning the proposed erudite meeting of professional financial wizzards…I’m certain a very cogent, well thought out plan will evolve from this conference….So I ask: Who will rise up and verbally call for the end of the existing partially functioning system??—then call for a bank holiday and name a clean slate of participants of impeckable character to run the new institutions?? That’s what the Obama Cabinet was supposed to achieve–lo and behold a set of retread Clinton Era cronies were instead put in place ( several actually contributed to the ingredients of the fiasco )…unfortuneately not one of them can admit the collateralized SIV market accompanied with tens of trillions of guarantees ( CDS’s ) then highly leveraged globally cannot stand!! and further calling for this factor to be deemed null and void rather than funneling all our central bank assets ( soon to be treasury/FED monetized? bonds requiring new taxes ) through a pinhole to write down these hundreds of trillions of instruments will we begin to see the tunnel let alone the light at the other end…I sincerely doubt anyone will stand and be counted to do that…Yes it is broken and those who broke it will most certainly be nearby to repair it!!! Will you be attending?? Richard