Please read this. For the sake of yourself, your children, and their children

It is not too soon — or too late — to become angry.  Evidence continues to pour in that our government needs to be shaken like a dirty rug.  Are we weaker than the people of Iran?  How much evidence do we need to spark outrage?

To jump-start this process, please read this article:   “The Great American Bubble Machine“, Matt Taibbi, Rolling Stone, 9-23 July 2009 — Hat tip to Zero Hedge

(1)  Opening

From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression – and they’re about to do it again.

The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled-dry American empire, reads like a Who’s Who of Goldman Sachs graduates.

By now most of us know the major players. … But then, any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and a free elections, organized greed always defeats unorganized democracy.

(2)  Conclusion

It’s not always easy to accept the reality of what we now routinely allow these people to get away with; there’s a kind of collective denial that kicks in when a country goes through lately, when a people lose as much prestige and status as we have in the past few years. You can’t really register the fact that you’re no longer a citizen of a thriving first-world democracy, that you’re no longer above getting robbed in broad daylight …

But this is it. This is the world we live in now. … It’s a gangster state, running on gangster economics … And maybe we can’t stop it, but we should at least know where it’s all going.

(3)  Further vollies between Goldman and Taibbi (update)

Best part of this exchange:

Goldman’s rep: “we are painfully conscious of the importance of being a force for good.”

Taibbi: “{That} is not quite the same thing as saying that that bank is a force for good, or wants to be.”

(4)  More evidence about this crisis in the American political regime

I strongly recommend reading all these, so you can tell your children that you were awake when America died.  Or perhaps re-discovered itself.  Depends on what we do now.

(1)  The Big Takeover“, Matt Taibbi, Rolling Stone, 19 March 2009 — “The global economic crisis isn’t about money – it’s about power. How Wall Street insiders are using the bailout to stage a revolution.”

(2)  “Welcome to America, the World’s Scariest Emerging Market“, Desmond Lachman, op-ed in the Washington Post, 29 March 2009.

(3)  “Teabagging Michelle Malkin“, Matt Taibbi, True/Slant, 15 April 2009

(4)  “The Quiet Coup“, Simon Johnson (MIT professor, former IMF chief economist), The Atlantic, May 2009 — Similar thoughts, but more mildly expressed.

(5)  “‘It’s time to enshrine Hank Paulson as national hero’ WTF?“, Matt Taibbi, True/Slant, 8 June 2009

(5)  Articles on the FM site about theft pretending to be solutions

  1. Slowly a few voices are raised about the pending theft of taxpayer money, 21 September 2008
  2. The Paulson Plan will buy assets cheap, just as all good cons offer easy money to the marks, 30 September 2008
  3. A reminder – the TARP program is just theft, 24 November 2008
  4. A solution to our financial problems: steal wealth from other nations, 2 February 2009
  5. Stand by for action – more theft of our money being planned in Washington, 4 February 2009
  6. Update: yes, the Paulson Plan was just theft, 14 February 2009
  7. Now is the time for America to get angry, 24 March 2009
  8. America on its way from superpower to banana republic, 28 March 2009
  9. Bush’s bailout plan is now Obama’s. His quiet eloquence guides the sheep into the pen, 30 March 2009
  10. “The Greatest Swindle Ever Sold”, by Andy Kroll in The Nation, 28 May 2009

(6)  A closing thought

The first step is not knowledge.  Not logic.  But rage, contempt at what we have become.  From that other things can flow, good or bad depending on our character.

“Anger is easy. Anger at the right person, at the right time, for the right reason, is difficult.”
— Aristotle, in the Nicomachean Ethics, book IV, chapter 5 (lightly paraphrased)

“Telemachus, now is the time to be angry.”
— Odysseus, when the time came to deal with the Suitors. From the movie The Odessey (1997)

For us the time is now.  The reason is the preservation of our nation.  The target is ourselves, how we have become less than we were.  Less than we should be.  Less than we can be.

This is the opposite of most proposals offered today, which suggest blaming some combination of the world, the rich, the poor, terrorists, foreigners, or whatever.  Or our leaders, who don’t kiss our boo-boos and cut the cake unfairly.  Everybody is responsible, except us.  Folks proposing such views suggest that we adopt the attitude of alarmed cattle.  Or mice. 

(7)  Afterword

Please share your comments by posting below.  Per the FM site’s Comment Policy, please make them brief (250 words max), civil, and relevant to this post.  Or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).

For information about this site see the About page, at the top of the right-side menu bar.

For more information from the FM site

To read other articles about these things, see the FM reference page on the right side menu bar.  Of esp interest are:

47 thoughts on “Please read this. For the sake of yourself, your children, and their children

  1. I like the Taibbi selections you’ve offered, and I’m off to read the full thing. But first, I accept your challenge to get mad as hell, and to do something about it. In that line, II will be happy to meet you in Washington DC, and together bang on all the doors of every congressperson we can think of. I think we could get a few others of your readers to come along.
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    Fabius Maximus replies: Best of luck. Geographical constraints prevent me attending, but I’ve fired off emails.

  2. FM note: This comment raises a god question — does anyone know the answer?

    Like cockroaches, each bubble cycle forces GS further into the light. They are now fully revealed, and man are they ugly. Feeder industries like Wharton in education, and politicians like Al Gore, should be getting nervous about their reputations. Unlike Goldman, which can see the end coming and pull the rip cord, change their name etc. where does Penn go to hide? How can their faculty claim ignorance of all this? Where are the intellectuals, ethicist’s, and moralists?

    I’d like to know how the end game played out in Argentina. Was there an alter ego to GS there leading up to the middle class collapse?
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    Fabius Maximus replies: A cross-cultural perspective would be valuable. Do any readers here know how similar situations evolved in other nations?

  3. Americans look admiringly at Iran but the difference is that Iranians are fighting to reach the reality of untapped potential. Americans are living in an economic bubble and the reality is untapped decay. Completely different dynamic.

    Keeping a lid on things shouldn’t be hard, the Cold War mechanisms of social control are strongly entrenched in America – the ideology of individualism, wealth and when things get tough just faking it are at least a few generations away from being disposed of.

    The pie will keep on shrinking as long as the US is unable to take collective action. And people are faced with both an ideology that says that collective action is wrong and a prisoners dilemma where acting for ones own best interests and screwing everyone else might make you rich and then it doesn’t matter if the pie is shrinking anymore.

    The days we hear Americans calling for America to be just an decent ordinary nation, and not some special dream the recovery will be starting. Thats a long way off.

  4. Anger is almost too hard. Even reading his article I couldn’t allow it to surface because it would also come out, even at my suspicions, that Rolling Stone is a pro-Obama publication and any writer who works for them has a problem. Having said this its hard to question his article not being from the gut.
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    Fabius Maximus replies: Matt Taibbi frequently writes at RS (had a column there for a few years), and is an equal opportunity critic.

    “any writer who works for them has a problem. ”

    That seems to paint with too broad a brush, IMO. I suggest care with such views, which can act as information filters to one’s mind — screening out challenging views or data.

  5. “How much evidence do we need to spark outrage?”

    I think it will require several more things before the anger really begins to well up:

    1) 12+% unemployment for two more years
    2) Massive tax increases via cap and trade and federal income tax
    3) $4+ gasoline
    4) Stock market returns to March 2009 lows and lower
    5) Ten year bond at 10%+
    6) Private sector recognition that the public sector ruling class (including the millions of bureacrats) have fat pensions, easy jobs and never get laid off.

    The last item, #6, will resonate with the unemployed.
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    Fabius Maximus replies: I see your point about economic pain sparking change. This implies that Americans act primarily by their pocketbooks, not their freedoms. It’s a depressing view, but likely correct.

    Three thoughts on these.

    * Obama has acted cautiously to enact new policies, despite his party’s majority in Congress. No major changes to many Bush’s policies about the military (e.g., gays), interrogation techniques, the Iran & Iraq wars, and the financial bailouts. His support for “cap and trade” has been mild, and there are indications it might not even pass the House.

    * The 10 year Treasury bond is unlikely to yield 10% except during a recovery. Inflation is not possible during a long & deep recession like ours, with high unemployment and industrial capacity utilization at post-Depression lows. The exception would be if our currency collapses, which IMO also is unlikely during the crisis (for several reasons, such as our rapidly falling trade deficit).

    * What is the alternative to massive tax increases? Even ignoring the spending during this recession, the Federal government has massive debts, a structural deficit, and mind-blowing future liabilities? Protesting tax increases is IMO the equivalent to saying we should either make massive cuts in government services (there is not sufficient fat or waste) or default. In this respect California might be our future (again).

  6. Several helpful things to vent your anger (at the right people and place):
    1. Cancel all newspapers and cable (propaganda).
    2. Attend TEA PARTIES or organize one in your area.
    3. Avoid purchasing non-essentials.
    4. Save as much money as possible.
    5. Attend local government money and FORCE them to stop accepting matching Federal Funds for projects they can’t afford.
    6. Call your Senators and Representatives EVERY time you are mad about something. Tell them we don’t need them if they let OBAMA run the country.
    7. Tell all your friends and relatives to do the same.
    8. Subscribe to power organizations like NRA and Heritage Foundation.
    9. Vote Independent and Republican (where you can stomach the candidate). Vote with a HEAVY BIAS against Democrats and LIBERAL Democrats especially.
    10. Contribute money to defeat Pelosi, Dodd, Frank, Waxman and their ilk in 2010.
    11. Learn about the Climate Change HOAX and GREEN SHOOTS HOAX being foisted upon us. Challenge everyone you meet to become informed. Google Milankovitch Cycle.
    12. Avoid buying union made products, especially cars.
    13. Pressure your state government to FIRE UNNECESSARY employees BEFORE RAISING TAXES. Get citizens to review what is going on or not going on.
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    Fabius Maximus replies: On what basis do you believe that this is a partisan issue? The policies Taibbi describes continued with equal force for the past two decades, under Administrations and Congresses run by both parties.

    The “green shoots” are not a hoax. They are one perspective on the economic data, held by many experts. Both our economic situation and the current data are confusing. Anyone giving forecasts with high confidence should be laughed at, IMO.

  7. The United States of America needs to restore the system of rights to its citizens. Those rights are to protect us from those who would initiate force against us or our property – either in government or those who abuse government power. As long as people believe that we should be in a democracy, then they open their lives and wallets to slaveholders and looters through the vote. Democracy = slavery and looting. If you allow everything to be subject to vote, it will be voted away from you.

    If you advocate the sovereignty of the individual and a limited government focused upon the limited scope of individual and property rights, then you keep the looters out of our lives and wallets.

    Instead of Rolling Stone, I suggest people read
    * John Locke’s Second Treatise on Civil Government,
    * The Declaration of Independence,
    * Ayn Rand’s “The Objectivist Ethics“.

  8. I’m skeptical about petitioning Government as a means of redress [NYs Rangel: “Why don’t you mind your own business?”] and don’t believe the [traditional] media will be of much more help [Mad Money’s Cramer: “We need a little less democracy”]. We have entered a period of Oligarchical Collectivism.

    It really will come back to us to change things. Mad-as-H has a few good ideas for a beginning, although I doubt Repubs would be any more law-abiding/enforcing.

    The Tea Parties – currently the only protesters I’m aware of involved in this issue – cannot be allowed to devolve into fringe movements and need more people from broader POVs to join in. Some of the groups are doing good work, IMHO.

    It either comes to assuming responsibility ourselves or to shop for another country to live in.
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    Fabius Maximus replies: Petitions are a means of mobilizing support, not a means to directly effect change. As you note, they are usually ignored by the regime in power. But they are a cheap, relative easy, and sometimes effective tool to build support for electoral change.

    Can you point us to something describing the goals of the tea party movement(s)?

  9. Perspective, people! That is what we have lost. Our politicians treat our tax money as if they had no other obligation that to spend it buying votes efficiently. Why is YOUR money subject to W-2 reporting, or IRS-1099’s of various stripes, but they can give it away with no reporting. If ‘income redistribution’ is so important then why is income reporting so absent on the government’s side. If San Francisco believes that a street bum deserves $300 a month for support why do you think they argue about you supporting your own kids? Imagine that street bum filling out any income reporting documents for the Income Reporting Service. Welfare, AFDC, food stamps, the list is just getting longer. It is all income redistribution and should be reported just like monies that you earn. Don’t you think the penalties belong to every citizen, or just the people that, you know, actually work?
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    Fabius Maximus replies: What fraction of the US government’s budget goes to welfare? Quite small. And as unemployment rises to 10%, perhaps beyond, what would you suggest we do with them? In the 1930’s many starved. It’s an odd time to talk about the need for food stamps and such.

    The big ticket items are the military, benefits that have no means tests, government services (there is much waste, but not as a fraction of the overall spending), interest on the debt — and now the trillion-dollar bailouts to the financial sector.

  10. FM: “Can you point us to something describing the goals of the tea party movement(s)?

    They are individualistic in many respects, but I think broadly – and briefly! – the Mission and Goals of the Tea Party Patriots of California would be fairly inclusive:

    The California Tea Party Patriots are dedicated to bringing attention to the fiscal irresponsibility of the State and Federal Governments of the United States. We intend to protest government bailouts, stimulus, increased taxation and government pork in all its forms. We will work tirelessly to force our government to practice fiscal responsibility, and to prevent them from mortgaging our children’s future.

    Additionally, many are shifting emphasis from organised public protest to include group lobbying at the State level. I’ve seen some minor anti-tax and bailout victories and would like to see them successfully petition Congressional members to enforce financial laws. Problem is, if they’re regarded as fringe types, they won’t listened to.

    FWLIW, the ones I’ve met were mostly middle-class sorts, retired engineers and the like. YMMV and yes I’ve met fringeworthies there as well. Best to be tolerant.
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    Fabius Maximus replies: Thank you for providing this. Based on this example, they have two themes.

    * Opposition to many of the government’s efforts to fight the current recession. If it continues, I doubt many people will be opposing additional stimulus programs. It’s been a quarter century since we had a severe recession (e.g., current unemployment levels are aprox 2/3 of the 1973-74 and 1980-82 peaks); I wonder how many of the Tea Party supporters remember those days? I wonder how many of them continue to support this goal once they — or a relative or friend — lose their jobs?

    * Longer term, opposition to “government pork in all its forms.” I wonder how they decide what is pork? In practice it often seems to be government money going to other people, or causes with which I disagree. “Pork” is an easy way to gain superficial support, but as such is unlikely to gain much policy traction.

  11. Fabius, Your points are well noted. However, on the issue of the ten year bond, the yield has already risen almost 50% in face of a serious recession. My concern is that buyers of U S debt will increasingly price inflation risk as the Treasury sells unprecedentd amounts of bonds this year and next.

    On the matter of spending cuts vs default IMO the default is already happening (for example, private sector lenders commonly write loan covenants that contain all manner of default events before an actual payment default occurs….covenant defaults). There simply hasn’t been a payment default yet and there will not be one. Quantitative easing and monetization are the band aides being used until the world markets demand higher yields for the risk of owning U S Treasuries. If there is another scenario I would love to hear it.

    Great post BTW.
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    Fabius Maximus replies: Discussion of markets is off-topic here, but in general markets (and yields) have risen in expectation of a powerful economic recovery (never look at a single market in isolation). This is standard behavior. For more on this see these Krugman articles here and here.

    “There simply hasn’t been a payment default yet and there will not be one.”

    Such certain statements like that are dubious, in economics as with most things in life. I doubt that this is correct, esp if default is broadly defined. Two illustrations.
    * Much of the US government’s $60 trillion in liabilities consists of promised payments for social security and medicare. IMO these will almost certainly be defaulted in some fashion — such as means-testing benefits and restrictions on treatment.
    * If the debt continues to increase, default might become the only available option — as inflation becomes lethal. Look at Japan. Debt almost 2x GDP, very short average maturity. Inflation is no longer a solution, as it would force a quick choice between default or hyperinflation. The government’s interest bill would rapidly skyrocket, among the many horrific consequences.

  12. As a real estate professional, author, radio host, and developer, I agree with this post!

    Nearly everyone in my industry is blindly talking about a recovery in the next year or two…HA! How is that going to really occur? What changes are we going to make to become an economic superpower, increase trade, eliminate corruption, empower entrepeneurs, and eliminate all the factors that got us into this mess.

    The Roman Empire, English Empire and Spanish Empires all had their runs….America is seeing the end of her’s.

    I am generally a positive person. There are solutions to this mess, but I regret that our politicians and business leaders will not take them. For my interests, I am building a financial fortress offshore. See my blog post here.
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    Fabius Maximus replies: The American “Empire” was never the real America, and in many ways antithetical to it. I will not mourn its passing. As for your other questions, the answer is that we can– and I believe we will — find a way to get back on our true path.

    As to folks who wish to run “offshore”, you too are part of the problem. I bid you adieu. The rest of us will stay and surmount these challenges, as have previous generations of Americans.

  13. You {Matt Taibbi} said: “a society governed passively by free markets”. Where is this society? We haven’t had free markets in the USA since the Sherman Act over 100 years ago. And they became progressively less free with each election: from TR to Wilson to FDR to LBJ to ad nauseam. The money supply was nationalized in 1913 by the creation of the FED. Our livelihoods were nationalized in 1916 by the passage of the Federal Income Tax amendment. Who controls the money supply? The government. Who controls interest rates? Ultimately the government. Who pumped all that money into the mortgage market? Quasi governmental bodies called Fannie Mae and Freddie Mac – under direction of the Community Reinvestment Act of 1977. Government is the cause of this financial debacle;, but who gets the blame? “Free markets”. There are no free markets!
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    Fabius Maximus replies: There are no absolute versions of anything in the real world. We use these words with the understanding that they are labels, partial versions of Platonic pure forms.

    (1) I assume you are saying that during the 20th century the US moved away from free markets. Which is true, of course. Everybody did, around the world. The swings of unregulated markets are so large that they cause not only economic problems but also social instability.

    (2) The Community Reinvestment Act had a small, almost nill, in this crisis. Many studies have shown this. In reply we have people giving as evidence sound bites from past speeches. Matthew Yglesias gives a nickel summary about this urban legend:

    “The technical term for this argument is ‘bullshit.’ For one thing, the timeline is ludicrous. The Community Reinvestment Act was passed in 1977. Are we supposed to believe that CRA was working smoothly throughout the Carter, Reagan, Bush I, and Clinton years and then only under Bush II did overzealous anti-”redlining” enforcement come into play, perhaps a result of Dubya’s legendarily close relationship with ACORN? Or maybe overzealous enforcement back in the late 1970s is somehow responsible for a real estate blowout that only materialized 30 years later? It doesn’t even come close to making sense.”

    For a more detailed analysis see the following:
    (a) The Community Reinvestment Act: A Welcome Anomaly in the Foreclosure Crisis“, Traiger & Hinckley, 7 January 2008 — “Indications that the CRA Deterred Irresponsible Lending in the 15 Most Populous U.S. Metropolitan Areas” (PDF, 21 pages).
    (b) Did Liberals Cause the Sub-Prime Crisis?“, Robert Gordon, American Prospect online, 7 April 2008 — “Conservatives blame the housing crisis on a 1977 law that helps-low income people get mortgages. It’s a useful story for them, but it isn’t true.” (Gordon is a senior fellow at the Center for American Progress)
    (c) No, Larry, CRA Didn’t Cause the Sub-Prime Mess“, Ellen Seidman, New American Foundation, 15 April 2008. Seidman headed the Office of Thrift Supervision from 1997 – 2001, and has long experience in this area (bio), and this article has links to additional evidence.
    (d) It’s Still Not CRA“, Ellen Seidman (see above), blog of the New American Foundation, 22 September 2008
    (e) Most subprime lenders weren’t subject to federal lending law“, Orange County Register, 16 November 2008 — “An analysis of more than 12 million subprime mortgages worth nearly $2 trillion shows that most of the lenders who made risky subprime loans were exempt from the CRA”
    (f) The Community Reinvestment Act and the Recent Mortgage Crisis“, speech by Fed Governor Randall S. Kroszner, 3 December 2008.
    (g) Speech by FDIC Chairman Sheila C. Bair (Republican), 4 December 2008
    (h) Did the CRA cause the mortgage market meltdown?“, Neil Bhutta and Glenn B. Canner (staff economists), Federal Reserve Bank of Minneapolis, March 2009

    Update: “The Role of Government Affordable Housing Policy in Creating the Global Financial Crisis of 2008“, 7 July 2009, issued by the Republican members of the House Oversight and Government Reform Committee. It contradicts the findings of every other study of the subject, most done by far more impartial and expert groups.

    (3) On a larger scale, the GSE’s played a role in the mortgage bubble, but — as Taibbi explains — a small one. Private sector entities were the key drivers at every point: securitization, collapse of lending standards by mortgage originators, corruption of the appraisal system, collusion by ratings agencies and mortgage insurerers, feckless institutional investors. The government’s contribution was a massive failure to regulate — too much reliance on free markets. Also, as Taibbi discusses, regulatory changes allowed banks to increase their leverage to insane levels — again, too much free markets, too little government supervision.

  14. FM note: an esp valuable comment. Bold emphasis added.
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    I think back to the times of the founding fathers of this once great nation and asked what they would have done? If taking the Eric Cartman senario, by going back in time to speak to them of the corruption within the government they created. I think back to what sparked their anger to rise up against the brittish empire. How they were seen as inspiring men attempting to champion their people, yet today’s american see any outcry against our failing government as a threat against america itself.

    I don’t think most of us truly see ourselves as america. We see the government as america and we’re just going along for the ride. We’re like whores, being used, beaten down, demoralized, and forced to work our asses off for less than what we’re worth for an insensitive pimp that cares only about it’s own ends. Bail out wallstreet, but let the people suffer. It’s ok to let americans file for bankruptcy, but heaven forbid general motors and chrysler be allowed to do it.

    We’ve come a long way as a nation, and we did it as a people united. We need to understand that we control the fate of america and not the government. We need to get some backbone and take put this wild dog back on a leash where it belongs.

  15. You might want to look into filing lawsuits against every senator and congressman(individually and as a group) for ethics violations. As the RS article points out the Federal Reserve is allowed to collect interest on TAXPAYERS money through an act of Congress which has the force of law behind it but it is very questionable how legal that is because it has never been challeged.
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    Fabius Maximus replies: Not only is this unlikely to work, it takes us fundamentally in the wrong direction. It’s not up to appointed Federal priest-kings to reform America. We elect the legislative and executive leaders, and that’s the powertool to use.

  16. The stage has been set, the stakes are high. Our country is being destroyed from within. What can we do?
    Be there; or be square: 9/12/2009 National Taxpayers Protest.

    I’ll be there, with many others. ‘The whole world is watching…’
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    Fabius Maximus replies: I find this disturbing. What exactly is being protested? The only thing on see on this site is the following, on the About page:

    “April 15th was a historic day for those who love freedom. Hundreds of thousands of Americans came out to protest the massive government spending that is burdening our country with huge debt and future tax increases.”

    What spending do they want cut? Defense? Social security? The Bureau of Weights and Measures? Until they specify what to cut, this has zero meaning. It’s like demonstrating in favor of Mom and apple pie.

  17. on the comment about the offshore people, it’s not difficult to see why they’re part of the problem. still it kind of strikes me ironic that the nation US of A began somewhat because some people decide to go offshore. i ain’t saying they’re not part of the problem, and i’m not trying to put things out of historical context, but at the risk of sounding like a brainfart academic who sucks up to nietzsche, it’s so perspectively arbitrary.

  18. Getting angry without knowing the facts is like being a little child throwing a temper tantrum when he is not allowed to do something. Knowledge is power. If you don’t understand why you are being angry, how can you effectively channel that anger in a direction that leads to change? I’m not going to get angry just because you say so. That leads to a mob mentality. You don’t seem to like what’s going on but where are the real solutions, the viable, workable ones? It must make you feel good to sit back and play Monday morning quarterback. It’s much easier than the real job.
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    Fabius Maximus replies: Next time you criticize a post, I recommend reading it all the way to the end. If you had done so you would have seen the heading “For more information from the FM site”, with the following text…

    To read other articles about these things, see the FM reference page on the right side menu bar. Of esp interest are:

    About Financial crisis – what’s happening? how will this end?
    About America – how can we reform it?
    Good news about America, a collection of articles!

    These sections contain the answers to your questions. In considerable detail.

  19. Our government is bailing out the greedy bankers who exploited regulatory indifference and Congressional pandering which permitted the huge bubble that has destroyed our financial system. Since we allowed OPEC to set oil prices we have become a permanent debtor nation, depending on others to finance our consumption. We destroyed our industrial base to evade our own wage and environmental laws.

    These terrible and avoidable developments continue to be overseen by the same people who created and nurtured them. We have fought numerous foreign wars since 1950 at vast cost, each of which contributed nothing to our security and well being. The Pentagon is out of control, the Congress is corrupted, and the Administration is not in control of government. Homeland Security is an excellent example of the power of bureaucracy to protect itself. Our borders are not secure. And now the government wants to extend its control over healthcare when it cannot even deliver proper services to our veterans.

    WE NEED A CONSTITUTIONAL CONVENTION, TO RESTORE REAL FEDERALISM IN AMERICA. It may take a generation to achieve, but we need new voices in our politics from the bottom up, or we are going to continue to decline, faster and faster.
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    Fabius Maximus replies: IMO that would be certain death to the Republic, as it relies on a misunderstanding of our problem.
    * Citizens who cannot use the ballot box to govern themselves almost certainly cannot control a Constitutional Convention.
    * If we use the machinery provided to elect representatives and Presidents, I doubt that a Convention would be necessary.
    * If we cannot muster the willpower to do so, no magic words in a new document will help us do so.

  20. Check out Chris Pinto’s videos on you tube and you will see how far this nefarious conspiracy goes……America is a Phoenix.
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    FM note from Youtube: “Award winning film maker of ‘Secret Mysteries of America’s Beginnings’, Chris Pinto talks about the connections between ancient Atlantis and the United States of America. …”

  21. So, re comment 2: “‘Capture’ Explained“, Patrick Byrne, at Deep Capture, January 2008.

    Argentina, ussia, Great Britain, Asia and many other places that have had their economies heated, looted, and destroyed by a tidal flood of mobile capital can point to the same Soros cabal of mobile capitalists. Two PLA Colonels write about ‘global mobile capital’ as a weapon in “unrestricted warfare”. In other words, the foreigners came, overheated the economy, and fled with their sacks of loot before the country burned down, typically parking it in the US dollar. In the US, the looters are residents, and truly have nowhere to run with their loot, which is why the situation is semi-stable at the moment, the ‘flight of foreign investment’ that signals the death knell of a country going through this ‘looting cycle’ has not happened in the US.

    Unique to the current situation, ‘capture’ does not just refer to the influence of the regulatory body ‘monitoring’ the field in question, but also the journalists supposedly covering the story (published on deepcapture), and the academics supposedly researching it objectively (see Taleb, Hanson, and any flood trader on the NYSE or CBOE for a discussion of the sad state of the ‘science of economics’).

    Additionally, please take a look at the history of the Springfield Armory and Harpers Ferry Armory for insight into the situation with GM.

    Oh whoops, I forgot to point out these particular idiots are to be blamed for the sub-prime explosion. They used the influence tactics at the state, local, and national level, and worked closely with Wachovia to develop the ‘market’ in sub-primes. Wikipedia about the Center for Community Self-Help.

    They were quite proud of their accomplishments in lobbying governments at all levels, across the country to deal with a ‘problem’ that existed in their own minds. This book, written shortly before it was generally accepted that the economy was in free-fall, details their aims, methods, and ‘achievements’: Forces for Good: The Six Practices of High-Impact Nonprofits.

  22. FM note: a valuable comment!

    FM: “The first step is not knowledge. Not logic. But rage, contempt at what we have become. From that other things can flow, good or bad, depending on our character.

    Without character (a set of internal restraints) rage will only duplicate the emotional logic of the individuals and institutions primarily responsible for our financial/economic crisis. These individuals and institutions appear to have no conception of restraint either as institutions or as individuals. Their power is all that matters and what they fear most is constraint on that power.

    A mobilized citizenry that does not encase its anger in a set of internal restraints is not a threat to this present system of power because without such constraints there is no collective backbone to say what should not be done.

    What are the elements of such backbone?
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    Fabius Maximus replies: I agree on all points, as did the Founders. But without faith in the American people, there is no point to saving the American Republic. We did govern ourselves well, as such things go on Earth, building a superpower. I believe we remain capable of going so now and in the future.

    This particular crisis results, IMO, from a period of slackness. By us. Now its time to again take the reins and put the carriage back on the path. I believe we can do so.

  23. FM: “and I believe we will — find a way to get back on our true path.

    Dear FM, What precisely do you consider our true path to be?
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    Fabius Maximus replies: Why do you ask?
    * If curiosity, it will remain unsatisfied for the present. Answering this would be quite a project, and I have dozens of more actionable posts in the pipeline — requiring more time to prepare than I spare for this website.
    * If you don’t know the answer — your answer — will you promise to adopt and live your life by my answer?

    The answer is that you know what is oru true path. All I ask is that you act on your answer. I have faith. Not in your answer, specifically, but in our collective answer. You and I might fundamentally disagree, but I have confidence that we can work out a course that will work for America.

    Inaction — whether from complacency, dispair, or sloth — are our greatest enemies.

  24. Taibbi is a schmuck. Anybody who writes sick crap like this (“Teabagging Michelle Malkin“, Matt Taibbi, True/Slant, 15 April 2009) I have a hard time taking seriously.

    Nevertheless, this is decent reporting and he makes valid points here. It continues apace and we need to take control of it, but if we thought it was bad in the last few years when there was still at least a nominal division between the financial world, big industries like automakers, and the government, it can only get worse now that that division is being erased.
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    Fabius Maximus replies: Why do you consider that article “sick crap”? He makes good points, IMO. The personal attacks on Malkin are IMO bad taste, but that’s a commonplace in UK/US politics going back to Jonathan Swift.

    I agree fully with your second paragraph. We have to act fast, as things will probably get worse.

  25. As was once quoted to me by a Brit back before the 2004 elections on Kevin Drum’s pre-MoJo days, “The problem with you yanks is that you still think you are living in a functional democracy.”

    The problem here is our Government … they’re all in on the take. They’re all getting a taste, and as long as they all obey the “masters voice” they’ll keep on getting their taste. Just take a look at who is “donating” money to your congress critter…where the money comes from, so goes your congress critters loyalty.
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    Fabius Maximus replies: What’s your point? We still hold elections. You have friends and neighbors, the ability to meet and organize, and free communications. We can act together to retake the reins, if we but have the willpower. If we don’t, then we don’t deserve liberty. That’s the harsh reality of life.

  26. Re: Jim M’s comment #14 and FM’s assertion that the CRA had little or no role in the meltdown —

    Rather than taking on faith that longstanding federal housing policies did not make key contributions to the financial crisis, readers might want to scan Steve Sailer’s writings on the Housing Bubble. Recent article here, catalog here. Sailer is Matthew Yglesias’ nemesis on this point; Yglesias rarely comes off well in their exchanges.
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    Fabius Maximus replies: Yglesias and Sailer fighting about CRA is combat between unarmed opponents.

    (2) “FM’s assertion that the CRA had little or no role in the meltdown”

    An assertion is “a declaration that is made emphatically, as if no supporting evidence were necessary.” In my reply to #14 I cited 3 articles, of the dozen or so on the subject. All provide considerable evidence that CRA was a tiny factor in the housing bust.

    (3) Why did you cite the Sailer post? It is just low-grade political rhetoric. All he says about CRA is the following, which provides nothing remotely like evidence:

    “Further, the government can excommunicate with anti-discrimination lawsuits anybody who expresses his skepticism on paper (or pixels). Imagine if a financial executive’s private emails turned up in discovery for a lawsuit had read: “Why are we lending so much money to Mexicans in the Inland Empire? How can Mexicans ever pay off these huge mortgages?” He would have been flayed alive in the press and in the courts.”

  27. Without reading every last scrap of this blog, I can only say GS is the wrong target. The real target is the fourth branch of government, the one that never receives any blame but is due much of it–the Federal Reserve–which is complicit with Congress and the President in creating boom and bust cycles. The solution is not more government, but less, whatever that takes, whatever pet projects are thrown out. The true business of government is defense and protection, not education, not health care, not welfare, not energy policy, and on and on. Big government creates more problems than it solves.

  28. Quick comments from an economist of the Hayekian tendency on the Taibbi article:

    First, Taibbi is convincing when laying out the details of the corrupt crony capitalism in which Goldman Sachs swims, and the particulars of the GS shenanigans in the tech bubble and the housing craze. I would especially like to see much greater public scrutiny of the AIG swap and bailout scam. It stinks to high heaven.

    But Taibbi is much less convincing in trying to argue that GS caused – in some fundamental sense – these bubbles, especially the commodity price spike and collapse of last year, but even the housing bubble. Economists will say that behavior of the GS type certainly exacerbated things, it does not explain the dozens of trillions of dollars apparently “lost” in US and world markets. They will ask, where do all the stupid investors come from? Where do they get their money? How can GS go on for decades fooling so many rich idiots?

    Haven’t you heard of rational expectations? Now you might ask, if economists can find holes in Taibbi’s argument, do they have a better explanation? Most conventional economists – demand siders, supply siders, monetarists or whatever – will refer to what will ultimately be a Keynesian model, and wander around, eventually saying something about animal spirits. Depending on their level of statist passion, some economists will blame Bush and poor regulations when talking to the rubes, but they do not really take seriously such excuses in academic work. Perhaps they might gesture toward loose credit, the Greenspan put, and the unfortunate errors of an otherwise Important Institution, the Fed. But they will shy from appearing like cranks and mentioning fiat money, legal tender laws and fractional reserve banking. But I will. So, while doing a good job at showing GS as a manipulating insider and skilled in the fine arts of securities fraud and blood sucking, Taibbi does not appear to grasp the deeper corruption of our very legal and highly respectable banking cartel.
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    Fabius Maximus replies: It’s always possible to take an analysis and say that the author could go deeper. While true, so what? Taibbi is not writing a Theory of Everything. Every analysis has limits. He’s written an article that explains one aspect of the situation — not Life, the universe, and Everything.

    “Haven’t you heard of rational expectations?”

    Yes, it is the thinking of a rational actor. They’re found in the Zoo, next the hippograf and phoenix in the Zoo. There is nothing in this that economists have any difficult explaining. Rational behavior is a simplification used to prepare models, the best that can be done at this state of the economic science. Economists do not believe that this is a full representation of the world.

  29. Well, I’ve been Googling away, reading up on Argentina, and other historic meltdowns. The commonality it seems is not amoral institutions like GS. These are symptoms. The corrosive acid that burns through the moral fabric of a nation is, it seems, always a variation of inflation. Argentina “cured” 3000% inflation by pegging the Peso to the dollar. This brought inflation to a screeching halt, but did not provide discipline over insane fiscal policy by government. Debt as a percentage of GDP soared until a run on the banks took down the system. Before the peg, powerful elites used leverage to gain from the inflation, just as GS did here.

    Our own crisis was fueled by asset inflation largely confined to housing price inflation. Bankers like GS used leverage to profit from this highly predictable runaway increase in prices. They used political influence to escape the reckoning when the music stopped, but the core problem, inflation, was induced by the Fed losing control over the effective money supply. David Roche is cited on this site with a good explanation of what happened this cycle. If government does its job guarding against inflation in all its forms, banks like GS have a hard time profiting. In the current deflationary environment, it is not surprising GS is forced to change modes, going now for direct wealth transfer to themselves by govt. fiat. If this works, the Republic is indeed in trouble.
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    Fabius Maximus replies: This is IMO certainly not correct. Inflation is a monetary phenomenon, a result of public policies. It’s just an intermediate step in a chain of events rooted in a political and social situation.

    Saying inflation is the problem is like saying bullets are a cause of murder.

  30. But what if monetary phenomena, including liquidity (money supply) become not the result of public policies, but instead move outside the control of public institutions like the Fed. If this loss of control is willfully engineered by venal bankers at GS, then you are right, we have a moral integrity problem, but if the expansion of liquidity, and resulting inflation is beyond the economic ken of all the players, if it just “happens” out of failure to understand the inherent dangers of derivatives through lack of historical experience, then we have not a moral failing so much as a failure of understanding. Here, David Roche argues the latter case: “The Global Money Machine“, David Roche, op-ed inThe Wall Street Journal, 17 December 2007.
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    Fabius Maximus replies: The government has near-absolute control over the money supply, both narrow and broad. Their control over “liquidity” (an absurd term, IMO) comes from their regulatory authority over banks and brokers. In the past cycle the government elected not to use that authority, but they have it nonetheless. The inevitable new laws during the next few years will strengthen it, needlessly.

    “instead move outside the control of public institutions like the Fed”

    This was not possible in our system during the past cycle, nor will it be in the next. Government-loving folks will craft elaborate excuses for the regulatory failures of the past decade, but they remain moonshine none the less.

    Also, “asset price inflation” is not “inflation” — a general increase in the prices of goods and services. It’s a bastard cousin, an example of the semantic confusion which confounds discussion of economics.

  31. When I watch Chris Dodd and Barney Frank pontificating about economics, it’s like watching a baby play with a razor blade. In the anger department, are we to rise up because our leaders are venal genius, or galactically stupid? I guess the important thing is the anger, both are unacceptable.
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    Fabius Maximus replies: Everyone must find their own source of motivation. I believe the target of our anger should be ourselves. Our problem results from our own passivity.

  32. I’m quite positive we’re many generations away from any solution, as the outraged are still clamoring to get the “right people” into office, or trying to “reform the system”. Until the general populace recognizes the invalidity of ANY statist government (i.e. monopolized force), democracy will continue to be upheld as the highest form of political organization. This smokescreen will continue to conveniently shroud the actions of the elite as they rob the populace.
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    Fabius Maximus replies: That’s mind-bendingly utopian, one of the more clever excuses for inaction of the many floated on this site. If you live a very good life, death will take you to a realm that meets your high standards (although, on second thought, its an absolute perpetual monarchy). Please stay out of the way while the rest of us attempt to make a go of things in this world.

  33. Action in the wrong direction is worse than inaction. However, I don’t call for inaction; to the contrary, though I think it will take a great while, I think educating people on the impossibility of ever “reforming” statist government and the very possible opportunity for the shedding of it altogether is of utmost importance. I’m sure you disagree, so I can only wish you the best in your efforts. I assure you I have every intention of staying out of your way. :)

  34. Sound and fury, signifying nothing. All that rage, and we’re supposed to direct it at…ourselves? Shall I offer seppuku on behalf of the house flippers, or will a bullet to the temple suffice?

    I have no response to someone who wants to stoke me to righteous anger while pretending that target and action are unknowable, except to point out the tedium of such. To be blunt, I trust it not

    This “regulation” you speak of is fool’s gold. Those doing the regulating are precisely those who need the resources of the regulated. It is the definition of insanity to expect regulation to be done ethically or efficiently. Put simply: when buying and selling is controlled by legislation, the first things bought and sold are legislators.

    Doubtless this makes me a cynic in your eyes, and part of the problem. Perhaps. And perhaps scouring the earth with empty rage doesn’t make one exactly the mark that the politicians and the pinstripers are looking for. And perhaps simians will soar out of my posterior.
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    Fabius Maximus replies: I have no idea what you are saying. Fancy rhetoric, meaning nothing, is my guess. Fine excuses for doing nothing. Also, you do not appear to have read the text very well. Here is a brief comment to each paragraph.

    (1) House flippers are the problem? That’s nuts.
    (2) In a democracy we are responsible, hence the solution is in our hands.
    (3) Do you have any proof for this absurd statement about “regulation”? Much of the reason the US is not Sudan comes from the western structure of regulatory law. It’s not perfect; nothing on Earth is.
    (4) What is this “empty rage” nonesense? I just asked people to get more involved, to take seriously their civic duties.

  35. (Based on 2005 data) The Lifelong Endowment (LE) is a tax-exempt and tax-free monthly redistribution of 16% of national income, equal shares to all adult citizens and quarter shares to minor citizens. Collection and disbursement is done by the banks. Its initial tax rate is based on the severity of the problems it addresses.

    It replaces Social Security OASDI at current total benefit levels, coming up $2.6 trillion short over thirty years with all OASDI contributions going back to employees. Current OASDI is $12.8 trillion short with contributions.

    Most other assistance spending becomes redundant. Current clients will enjoy the same environment of personal, economic, and political liberty as every other American. Its benefit lifts almost every American family out of poverty (2004).

    It dominates political opposition, replacing widely deplored policies with transparently effective alternatives and increasing the after-tax income of over 80% of voters. A two-adult two-kid family with $45K earned income gets 43% more income (net) and pays 11% less income tax.

    A growing coalition (C) of voters depend on government for their livelihood, and their political power grows with their numbers. The LE shrinks C dramatically and creates a new interest group (L) of all citizens, bound by tangible economic self-interest in national prosperity. Whenever L-C can prevail politically over C to reduce costs imposed by government on the private sector, they increase their relative political effectiveness and the LE benefit increases.

    The LE raises the value to L-C of informed civic engagement and continually lowers its cost.
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    Fabius Maximus replies: Proposals like this are dross unless we see the numbers. It means nothing without the numbers. For a longer version of the proposal by Philip Jackson see here.

  36. Trace it back further..Bill Clinton 1993.Barry Frank, George Sorros. Have the government eliminate the competition. Marxcism-facisism on parade. Read the stimulis bill. The secretary of the treasury has all the power. The idiots who signed the bill never read the bill. God help us. The last to go when a society rots from the inside is the ecomonic. Check out the Bible. It’s spiritual in nature. Bobby Gee.. Check out my associated content source page.

  37. Cap and trade passed today, how long before Goldman starts trading ‘carbon derivatives’ and blows up the economy with them.
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    Fabius Maximus replies: A smart parasite does not kill the host.

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