We begin with a Davos wrap up… First, you need to follow the money. Our financial system collapses in 2008. This was the Lehman bankruptcy and the credit crunch that followed, liquidity crisis if you prefer. Large and small corporations outside the financial sector were forced into lay off’s, something in the order of 15 million people in the USA…many still without any prospects for work. There were many possible solutions to this crisis, tools we could have elected to use other than the tools that were selected. Most of the policy actions that were taken were financial in nature, having more to do with trying to repair the financial system. Any economist could explain how the repair of the system could have been a bottom up repair rather than a top down fix. Next, we use extremely low interest rates and loan bankers money that they can buy Treasury Bonds with. Borrow money at one quarter of one percent and buy bonds that pay you one percent perhaps two percent, pocket the difference and like magic their balance sheets begin to look better. The money used to repair the system sits at the Federal Reserve in the form of debt and at the Treasury also in the form of debt to be paid back by the taxpayers. That would include corporate taxes as well as individuals.
A few years pass the 6 largest banks are getting back on their feet while sticking us with their debts and complaining to us about our not feeling so good about how high their compensation packages are. They say this isn’t fair, that they have done us all a favor and are ready to help the economy again. Then, it turns out that these large Bond buying banks are going to start demanding higher interest payments to buy the bonds used to finance the debt that they created…
Unemployment benefits, social security, Medicare, and other forms of government services need to be cut back, yes it is true that we had a debt problem before the crisis, but they have added at least 3 trillion to 5 trillion dollars all by themselves…
So, it is morally despicable that they are now going to demand that we cut our social security system, curtail our Medicare system, begin to cut unemployment benefits off all so that we the very people they screwed in the first place can pay down the debt that was caused by them!
One last point…some will point to individuals who exploited the system to enrich themselves while this game was going on. But, you see it is sort of like an airplane pilot. You put people in charge of something and they should be expected to fly the thing without becoming greedy and enriching their own accounts or behaving so recklessly that they crash and kill everyone on the plane. Our bankers, regulators and politicians acted in collusion with one another. Bankers captured both politicians and regulators.
The financial system remains broken, dangerous and the world has an enormous debt hangover…. I believe the titans of finance have every reason to continue to remain in a kneeling position and to ask us for forgiveness, reform the banking system…
What does this have to do with Bankrupt Heart? Hope you will read the book.
