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Jeff Nielson is from Canada and is a writer/editor for Bullion Bulls Canada (http://www.bullionbullscanada.com/#content). He has a personal background in law and economics. Bullion Bulls Canada provides general macro-economic and political commentary, since the precious metals markets are among... More
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  • Merkel, Sarkozy demand end to bankster “blackmail” 9 comments
    Sep 1, 2009 1:16 PM

    No bank must grow to a size that puts it in a position in which it can blackmail governments.”

    - German Chancellor Angela Merkel (August 31st, Bloomberg)

    These excesses cannot be allowed to be repeated as if nothing has happened.”

    - French President Nicolas Sarkozy (August 31st, Reuters)

     

    It didn't qualify as a news story when I repeatedly characterized the $10 trillion in hand-outs, loans and guarantees which the U.S. financial crime syndicate squeezed out of the U.S. government as “blackmail”. However, when the chancellor of Germany makes that same observation, it suddenly becomes newsworthy.

     

    With the G-20 poised to meet in Pittsburgh next month, notice has been served on the U.S. government (and to a lesser extent, the U.K. government as well): either take control of your government back from the bankers, or expect to become an economic pariah in the global economy.

     

    The two European leaders were focused on regulation as the solution to the bankster problem, which is centered in the United States. They insist on “full implementation” of a set of reforms which were agreed upon last April. Specifically, the agreement calls upon the G20 members to provide regulation and oversight over “all systemically important financial institutions, instruments, and markets” - including hedge funds, derivatives, and the derivatives market.

     

    Merkel and Sarkozy were also adamant that action needed to be taken over what Sarkozy termed the “bonus scandal”. Merkel added, “The riskier banks' business is, the higher the capital requirement should be.”

     

    The United States was not mentioned by name, although there was little doubt about whom the two European leaders were talking. While their intentions are laudable, their approach is both naïve and unrealistic.

     

    The U.S. government is thoroughly corrupt, its so-called regulators even more so. Effectively this would mean expecting one corrupt body (the U.S. government) to draft a set of effective and comprehensive regulations for other corrupt bodies (the regulators), and then also provide sufficient oversight of the regulators to ensure they fully implement the new regulations – not just for a few weeks or a few months, but permanently.

     

    As I have written on a number of previous occasions, the supposed U.S. “democracy” is a two-party dictatorship where neither party can ever be totally removed from power. If centuries of history with democracies has taught our species anything it's that totally removing a political party from power is the only means of purging corruption.

     

    Americans are not more inherently corrupt than the peoples of other nations, but rather they designed a flawed system of government which is more vulnerable to corruption than any other major democracy on Earth. With the Republicans and Democrats having been jointly in power for more than two centuries, corruption has reached a saturation level.

     

    As those with the most money, the banksters own this government – which has been demonstrated on a near-daily basis throughout this banker-created financial crisis. Among the obvious indications of the irredeemable state of the U.S. government:

     

    1) The appointment of Tim-the-tax-cheat Geithner as Treasury Secretary

     

    This is a man who was caught under-paying his taxes. If there was any uncertainty that this was willful tax-evasion (i.e. a crime), Geithner eliminated that uncertainty, himself. Knowing that he had failed to pay his full taxes in other years as well, Geithner did nothing about that for years – until immediately after he was named as the Treasury Secretary nominee.

     

    Geithner was also president of the New York Fed, the administrative body with the sole and direct responsibility to regulate Wall Street financial firms – at exactly the same time they were engaged in the greatest crime-spree in financial history. Yet this same bankster-lackey had the audacity (or stupidity) to testify before Congress that he “was not a regulator”. This is the person to whom Barack Obama handed the keys to the U.S. Treasury.

    2) The reappointment of Ben Bernanke

     

    At the height of the U.S. housing and financial bubbles (the largest asset-bubbles in the history of humanity), Bernanke proclaimed that the U.S. had a “Goldilocks economy” - one that would only keep soaring higher and higher.

     

    Immediately after the housing bubble burst, Bernanke promised Americans (and the world) a “soft landing” for the U.S. economy – insisting that the collapse of the largest asset-bubble in history would have no impact on the broader economy.

     

    To aid us further in evaluating the performance of Bernanke, we can refer to recent remarks by Sir Alan Greenspan (see "Greenspan: spotting a bubble is easy"). We can also refer to a study by the U.K.'s Financial Services Authority - which knew there was a substantial risk of a financial sector meltdown as far back as 2004 (see "Financial sector meltdown was no surprise").

     

    There can only be two interpretations of Bernanke's performance. Either he was (is) the most-incompetent central banker in the history of the global economy (worse even than “Bubbles” Greenspan), or he was lying: a shameless shill for Wall Street who pumps U.S. markets for all he is worth – irrespective of the damage caused to the U.S. economy (and his own reputation).

     

    Firing Bernanke would have left open the possibility that Bernanke was only incompetent – and not a willful accomplice to Wall Street's crime spree, as asserted by former U.S. banking regulator William Black (see “U.S. bank-fraud SYSTEMIC and INTENTIONAL: William Black”). Reappointing Bernanke eliminates all such doubt.

     

    3) “Mark-to-fantasy” accounting

     

    Not only has the U.S. government done nothing to attempt to rehabilitate the Wall Street crime syndicate, instead it has engaged in regressive measures. The U.S. Financial Accounting Standards Board was intimidated into relaxing the U.S.'s already-loose accounting rules at the beginning of April (see “FASB strong-armed into mark-to-fantasy accounting”) - just in time for the Wall Street fraud-factories to claim “miraculous” reversals on their balance sheets when they reported 1st quarter results.

     

    This was followed by the infamous Geithner “stress tests”, and that was followed by Wall Street once again successfully scamming investors for tens of billions more in capital investments at precisely the same time that all categories of U.S. bank loans were soaring to all-time records for delinquencies. In short, it is absurd to believe that a government which is still assisting Wall Street in perpetrating scams could be relied upon to create effective regulations – let alone actually enforce such regulations.

     

    4) Maintaining and increasing the powers of the Federal Reserve

     

    As was previously noted, the Federal Reserve has been the primary banking regulator during the largest financial sector crime-wave in history. While some might be charitable enough to claim that these private bankers were merely “asleep at the wheel” while Wall Street ran amok, consider this.

     

    During 2008, after the U.S. housing bubble had burst, and after the world had become aware of the multi-trillion dollar Wall Street “Ponzi-scheme” (see again “U.S. bank-fraud SYSTEMIC and INTENTIONAL...”), mortgage-fraud increased in the U.S. by 23%. Yet Ben Bernanke claims the Fed is “the best” institution to continue to provide “consumer protection” with respect to the financial sector (yes, the best for Wall Street).

    As of this date, the Obama regime has shown no inclination to strip the Federal Reserve of consumer-protection oversight, indeed Obama has made it clear that he favors expanding the authority of the Federal Reserve – by making it the explicit guardian against “systemic risk”.

     

    By “systemic risk”, what Obama is referring to is the risk which existed (for example) when former Fed Chairman Alan Greenspan created the U.S. housing bubble through his reckless policies, and then “Helicopter” Ben pretended that bubble didn't exist. Yes, the Federal Reserve is a perfect choice as a “guardian”.

     

    It is unrealistic – to the point of absurdity – to expect the U.S. government to effectively terminate the reckless gambling of Wall Street, given that they continue to demonstrate their servitude to these bankers. There is, in fact only one realistic solution.

     

    As many have observed, “too big to fail” means “too big to exist”. There is nothing shocking about this doctrine, given that it dates all the way back to the origins of capitalism – where the same theorists we revere to this day warned of the dangers of monopolies and oligopolies. Indeed, if we look back to the era where the United States was the genuine champion of capitalism, at that time it had the world's strongest and most-effective anti-combines legislation.

     

    It should not be seen as a coincidence that the U.S. economy has been steadily deteriorating at exactly the same time that the U.S. has effectively ended its enforcement of those rules.

     

    Smashing the Wall Street crime syndicate into little pieces is obviously the only practical solution – since it simultaneously addresses several problems. First, it eliminates systemic risk by eliminating too-big-to-fail institutions. Secondly, severely reducing the size of Wall Street firms severely reduces the amount of money they can use to buy the U.S. government. This can only mean a reduction of their influence/control over Washington.

     

    Most importantly, it addresses a subject about which U.S. politicians have talked endlessly, yet done nothing: “moral hazard”. If you want to discourage bankers from engaging in reckless gambling, then obviously handing them $10 trillion in loans, hand-outs, and guarantees is the wrong way to do that. “Warning” Wall Street that if they ever engaged in such behavior again that the U.S. government would be forced to hand them another $10 trillion will not discourage unacceptable behavior.

     

    Conversely, taking the Wall Street mega-banks, and turning them into two dozen or three dozen smaller (and much less powerful) institutions is something which the banksters would remember – for a very long time. It remains to be seen if anything constructive will be accomplished at the Pittsburgh summit.



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Comments (9)
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  • Dirtnap
    , contributor
    Comments (102) | Send Message
     
    Jeff, while I most definitely agree that "too big to fail" institutions cannot be allowed to exist, I don't know how this could ever be implemented. You call for breaking them up, at the same time as our gov't doesn't even have the balls to make them raise their own capital or regulate them in an honest manner.

     

    I'm afraid that while what you propose could be a helpful step, the breaking up of these entities is far from implementable. I'm not claiming to have a better idea, rather, I'm just lamenting that I don't.
    1 Sep 2009, 05:04 PM Reply Like
  • Jeff Nielson
    , contributor
    Comments (2449) | Send Message
     
    Author’s reply » Hi Dirtnap.

     

    Actually, breaking them up was not my own preferred option. I've pointed out several times in the past that for the TRILLIONS spent and pledged by the U.S. government, they could have created a BRAND NEW banking system - which would be better-capitalized AND unencumbered by the "financial weapons of mass destruction" (derivatives).

     

    The Wall Street crime syndicate would have (and should have) just been left to drown in its own feces.

     

    However, because that would be so politically unpalatable, the slightly less problematic dismemberment of these fraud-factories is the next-best option.

     

    On Sep 01 05:04 PM Dirtnap wrote:

     

    > Jeff, while I most definitely agree that "too big to fail" institutions
    > cannot be allowed to exist, I don't know how this could ever be implemented.
    > You call for breaking them up, at the same time as our gov't doesn't
    > even have the balls to make them raise their own capital or regulate
    > them in an honest manner.
    >
    > I'm afraid that while what you propose could be a helpful step, the
    > breaking up of these entities is far from implementable. I'm not
    > claiming to have a better idea, rather, I'm just lamenting that I
    > don't.
    1 Sep 2009, 05:39 PM Reply Like
  • Michael Clark
    , contributor
    Comments (11578) | Send Message
     
    I'm pleased someone in a position of power is saying it. I'm a bit sad that our president (I voted for Obama) has not taken the lead in this. I do believe that any politician in America who takes a forthcoming lead on this will probably be assassinated IF he/she has any hope of actually succeeding.
    2 Sep 2009, 04:09 AM Reply Like
  • Michael Clark
    , contributor
    Comments (11578) | Send Message
     
    American history has numerous examples of trust-busting. Remember when ITT was the telephone monster gobbling up all the start-ups that threatened them? Not any more.

     

    Remember Teddy Roosevelt. He swung a heavy axe to break up Rockefeller's Standard Oil trust.

     

    The government can change. We can throw the bastards out.

     

    On Sep 01 05:04 PM Dirtnap wrote:

     

    > Jeff, while I most definitely agree that "too big to fail" institutions
    > cannot be allowed to exist, I don't know how this could ever be implemented.
    > You call for breaking them up, at the same time as our gov't doesn't
    > even have the balls to make them raise their own capital or regulate
    > them in an honest manner.
    >
    > I'm afraid that while what you propose could be a helpful step, the
    > breaking up of these entities is far from implementable. I'm not
    > claiming to have a better idea, rather, I'm just lamenting that I
    > don't.
    2 Sep 2009, 04:14 AM Reply Like
  • Dirtnap
    , contributor
    Comments (102) | Send Message
     
    We can throw one party out, in exchange for the other party. In America, that means following the same macroeconomic policies which enrich the wealthy disproportionately, and again makes is very unlikely things will change.

     

    We won't even regulate the financial powers, so how in the world do we break them up??

     

    Plain and simple, the U.S. needs a third party that is a real challenger, and we need it immediately.

     

    On Sep 02 04:14 AM Michael Clark wrote:

     

    > American history has numerous examples of trust-busting. Remember
    > when ITT was the telephone monster gobbling up all the start-ups
    > that threatened them? Not any more.
    >
    > Remember Teddy Roosevelt. He swung a heavy axe to break up Rockefeller's
    > Standard Oil trust.
    >
    > The government can change. We can throw the bastards out.
    2 Sep 2009, 10:13 AM Reply Like
  • Buckoux
    , contributor
    Comments (9065) | Send Message
     
    Wait a minute! Somethings wrong with this article! Where's Nielson's ubiquitous remarks about Americans and their "billion's" of guns and a spiel about the virtues of Canadian precious metals. Other than a prose that is written like his hair (?) is on fire, this is not his usual diatribe/sales pitch. Perhaps this is a fake. /sarcasm.
    2 Sep 2009, 01:33 PM Reply Like
  • Jeff Nielson
    , contributor
    Comments (2449) | Send Message
     
    Author’s reply » Dirtnap, now it's my turn to point out your "Catch-22". Yes, the U.S. must have a "third party" - a choice outside of the two-party dictatorship.

     

    However, as the virtual censorship of Ron Paul shows (in the Republican primaries, and despite being the best fund-raiser in the Party), it's not even possible for an independent-minded candidate to get coverage when he BELONGS to one of the two parties. How could a third-party EVER get enough media coverage to be relevant in the election?

     

    IMO, there is no possibility of REAL change without REAL reform...and real reform means completely over-hauling the entire dysfunctional system and dissolving the two, thoroughly corrupt parties.

     

    On Sep 02 10:13 AM Dirtnap wrote:

     

    > We can throw one party out, in exchange for the other party. In
    > America, that means following the same macroeconomic policies which
    > enrich the wealthy disproportionately, and again makes is very unlikely
    > things will change.
    >
    > We won't even regulate the financial powers, so how in the world
    > do we break them up??
    >
    > Plain and simple, the U.S. needs a third party that is a real challenger,
    > and we need it immediately.
    2 Sep 2009, 03:16 PM Reply Like
  • Dirtnap
    , contributor
    Comments (102) | Send Message
     
    You're absolutely right; I brought up an impossible political scenario that parallels the corporate scenario you originally mentioned. Both require changes that are seemingly beyond the scope of possibility.

     

    Here's a question then: if there is to be a major change in our political-economic super structure, does the change originate with the democratic process, through the election of a true reformist, or does it come from within the current government through regulation, thus altering the financial/media corporate landscape and actually allowing for working democracy?

     

    We have a 'chicken and egg' conundrum which I haven't yet decided where I stand, but I have my guess that whichever way it happens (if it does) that the origination will be the anger of upper-middle class persons losing their standard of living.
    2 Sep 2009, 03:39 PM Reply Like
  • winjr
    , contributor
    Comment (1) | Send Message
     
    "The two European leaders were focused on regulation as the solution to the bankster problem, which is centered in the United States. They insist on “full implementation” of a set of reforms which were agreed upon last April. Specifically, the agreement calls upon the G20 members to provide regulation and oversight over “all systemically important financial institutions, instruments, and markets” - including hedge funds, derivatives, and the derivatives market."

     

    Well, shoot, who forgot to email the memo to Geithner?

     

    "The United States is prepared to listen to its G20 partners about economic exit strategies and bank bonus reform proposals, but does not expect action on any new initiatives, Treasury Secretary Timothy Geithner said Wednesday."

     

    www.marketwatch.com/st...
    2 Sep 2009, 10:58 PM Reply Like
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