Sunday, March 29, 2009

The economic doomsday scenario

This is a follow-up to my last post titled "Has the US become an oligarchy?". Once again I return to the rich field of the Simon Johnson article in The Atlantic titled "The Quiet Coup". And once again I encourage all of you to read Johnson's article in its entirety. I just managed to do that myself this morning. True I should have done this before posting my earlier article, but I was struck by the immediacy of Johnson's warning that a financial oligarchy is threatening the very core of our society. After posting my article on Reddit, it recieved over 3,000 hits in one day and became one of the most popular articles in the Politics section. I take this as proof that Johnson's allegations regarding the danger of allowing a small group of financial elites to plunder the US economy reverberates strongly in the collective subconscious of America.

The doomsday scenario

Johnson's article ends with this bleak doomsday warning.
The conventional wisdom among the elite is still that the current slump “cannot be as bad as the Great Depression.” This view is wrong. What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late. 
His views echo my own views which I expressed recently (but before Johnson's article appeared) in an article which I titled "Welcome to the Wall St. jungle".
As bad as you may think that the current financial mess is your wrong. It's worse - far, far worse. Because not only is this a financial mess of biblical proportions, but underlying it all is a level of fraud which is unimaginable. It involves the government and the Wall St. banks. It is a level of corruption that is at first shocking and then nauseating. Welcome to the Wall St. jungle. 
In his article Johnson declares, just as I did, that this is more than just a financial crisis - underlying the financial crisis is a political crisis caused by a "quiet coup" by the Wall St. bankers. While Johnson calls for a breakup of the banks and stripping the financial oligarchy of power he does not explicitly take the next logical step that I take. He does not call for the ruthless and cold-blooded oligarchs to pay their debt to society behind bars as I do.

He does make allusions to imprisonment by repeatedly referring to the Russian's battle against the oligarchs which caused Putin to ultimately imprison Mikhail Khodorkovsky who was the richest man in Russia. Even the very use of the term "oligarchy" brings to mind the Russian situation in the post-Soviet era. Is he, perhaps unconsciously, comparing the current American situation with the fall of the Soviet empire?

Johnson does offer a silver lining, "If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. " There is still a chance that the current economic crisis could have the benefit of crushing the power of the banking elite. But he follows this with a dire warning, "Let us hope it is not then too late." To late for what? Believe me, you don't want to know.

As I see it, America, we have a choice. We can "save the billionaires" or we can save ourselves.

The banker's conspiracy

My conspiratorial mind can't help but notice the perfect timing of the controlled implosion of the economy by the Wall St. bankers - September 2008. After the primaries were over but before the general elections - with a lame duck President and a Congress about to recess. All perfect conditions for Paulson and Bernanke to ram through their big bailout. And just about guaranteeing the election of Barack Obama, the candidate whose biggest campaign contributors included Goldman Sachs, Citigroup, JPMorgan Chase, UBS and Morgan Stanley.

If the banks had collapsed before the primaries then this would have given a chance for a true champion of the people to win. Perhaps the general elections would have been between Dennis Kucinich and Ron Paul. I say this after reading that Putin won elections in Russia "vowing to destroy Russia's oligarchs as a class".

There is a quote that sticks in my mind from an interview with Dennis Kucinich on September 29, 2008.
We had a former head of the FDIC tell a group of congressmen yesterday that the Bush administration has been going around the last few weeks, actually, so tightening up on the practices of banks that they’re forcing them to have bigger reserves, which in a way would, you know, kind of create—help to create the kind of tight money policies that we’re saying we’re trying to alleviate with this bill. So, you know, there needs to be a deeper look at this.

It seems to me there’s a possibility that this crisis has a little bit of manufacture to it. And that really concerns me, because we haven’t had enough time to look at this in an in-depth way, to analyze the impact of it on the economy, to see if it’s going to do anything about a recession that we’re obviously headed into, to see if it’s going to handle the underlying concerns on Wall Street about the speculation and a lack of regulation. The bill doesn’t, by the way, address anything about the speculation, anything about the lack of regulation. The SEC has failed. The Fed has failed. And we’re essentially telling all the same actors, “Go for it. You know, here’s another opportunity,” except this time it’s with taxpayers’ money. 
Kucinich makes the observation that the tight money policies in the weeks leading up to the collapse actually may have helped to precipitate it. He follows this with a comment that this gives the appearance that the crisis was "manufactured". And finally he makes the observation that the bailout bill does nothing to get at the root cause of the "crisis".

The Obama deception?

And now we have Barack Obama as President who just the other day invited all the banker-oligarchs to the White House to reassure them that he is looking out for their interests. Here's how the New York Times described the meeting in an article titled "Bankers Pledge Cooperation With Obama".
In a bit of political stagecraft designed to quiet the public’s anger toward Wall Street, President Obama summoned the heads of some of the nation’s largest financial institutions to the White House on Friday and urged them to accept responsibility for their industry’s excesses.
Indeed, the gathering was carefully choreographed by the White House, which had asked the banks on Thursday to provide broad, public endorsements of the administration’s financial recovery program, according to bank officials. And so, with the White House in the backdrop, one smiling executive after another offered his support for the president’s efforts in several television interviews coordinated by the administration.
It looks like America will have to wait four more years for a chance to put someone in the Presidency with the courage to take on the mighty banking oligarchy, or as I sometimes refer to them the International Bankers. Because other than a few kabuki moments for the benefit of the American public, it does not appear that Obama will do anything to upset his masters by stealing power from this elite class. And as Johnson so forcefully points out in his article, "recovery will fail unless we break the financial oligarchy that is blocking essential reform."

Related Posts


Anonymous said...

There's a great series of videos about this on!

Frank Hope said...

Thanks for the comment. I went to the link and verified that there are some interesting looking videos regarding the economic crisis there.