Tag Archives: Banking

You Got Zucked!

27 Sunday May 2012

Posted by in Consumerism, Inequality, Wall Street Fraud

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Mark Zuckerberg saved $111m by selling … 

“…A major point of contention is the claim that a “severe reduction in revenue growth” – linked to the growing numbers of users accessing the website on mobile phones rather than computers – was concealed.

Facebook, which is being sued as a company along with Mr Zuckerberg, other leading executives at the company and its lead underwriters – Morgan Stanley and Goldman Sachs – has denied the claims. Another lawsuit filed in California claims Facebook and its banks actively misled investors. The banks deny any wrongdoing.

However, the claim that Mr Zuckerberg was able to profit by selling his shares in the knowledge that the share value would likely decline, while others bought in without the benefit of the facts, has heightened the controversy.

It has even led to the term “Zucked” being coined to describe what happened to the investors who lost money.

The US Senate Banking Committee has announced it is to investigate the affair, after which its chairman, Senator Tim Johnson, will decide if public hearings should be held.”

– source

 

Liberty through better Shopping & Consumerism as Hegemony

24 Thursday May 2012

Posted by in Consumerism, Corporate State, Peak Oil

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“Most people [Americans] have been reduced to a market demographic. They’re consumers, they’re not citizens. No matter how active they are within the system [employment, religion, government, etc.] the system is the problem.” – Joe Bageant

The ideology we have today permeating every aspect of life in America is neoliberal capitalism which takes its ultimate expression in the form of megacorporations or multi-national corporations whose tentacles of power and influence reach deep into government and other nations as well, considering that their wealth and budgets are larger than that of many small countries. Indeed in America the government and the corporate world are one, merely separated by a revolving door.

As long as you conform to what they have programmed you to be, an obedient consumer, then behavior which is in line with that mindset is deemed permissible or legal. Similar behavior which questions the consumer culture and the power structure behind it is deemed illegal and is either squashed or otherwise corralled through State violence and coercion. In an article in the early 1980s in which he referred to the American people as ‘consumer-depositors’ in thrall to the financial elite, Gore Vidal saw into this aspect of the system decades ago.

Consumerism as Hegemony:

By hegemony, Gramsci meant the permeation throughout society of an entire system of values, attitudes, beliefs and morality that has the effect of supporting the status quo in power relations. Hegemony in this sense might be defined as an “organizing principle” that is diffused by the process of socialization into every area of daily life. To the extent that this prevailing consciousness is internalized by the population it becomes part of what is generally called “common sense” so that the philosophy, culture and morality of the ruling elite comes to appear as the natural order of things.

With government and corporations merging as one we now have what is called the Corporate State. Neoliberal capitalism is essentially unfettered, unrestrained capitalism, the very thing that caused the financial meltdown of 2008:

 It was Wall Street banks and hedge funds, not home buyers, who created the enormous demand for high-risk mortgages to pool, to securitize, and to turn into Ponzi-like gambling structures with names like CDOs, CDO squared and synthetic CDOs. It was the money-grubbing rating agencies that blessed these pieces of garbage with AAA ratings. As a result, trillions of dollars of worthless toxic assets polluted our financial system. When the bubble they induced burst, our system crashed, causing 8 million working people to lose their jobs in a matter of months due to no fault of their own. Anyone who still blames low-income home buyers, or regulations or Greece — or anyone other than Wall Street — should be checked for dementia.

This deregulation of capitalism into a more predatory and destructive form has occurred at the same time as our government has slowly militarized this nation’s domestic police force and turned our country into a Security and Surveillance State. We are paying for our own enslavement. The rapacious corporate forces that were behind the meltdown of our economy in 2008 are now backed in power by this strengthened Authoritarian State. The inverted totalitarianism that Sheldon Wolin talked about has come to fruition. The great irony is that this totalitarianism is not coming from some socialist revolution as feared by the far right, but from Neoliberal Capitalism, the very system that Fox news and the corporate mainstream media trumpet.

With the dawning of an age of depletion and peak resources, Consumerism and the antisocial behavior of neoliberal capitalism can no longer survive and are simply being propped up and enforced by the iron fist of the Corporate State. Peak oil had a hand in bursting Wall Street’s housing bubble. This scenario of an ever-growing oppresive State in the face of an energy-starved future bodes ill for the rest of us who are not so privileged to be sitting in ivory towers, oblivious to the coming storm. Author Brian Davey describes this disconnection with reality that the elite suffer from, ensconced as they are in their own world of narcissism and luxury:

…There is nothing new in the phenomena of power arrogance and hubris. Since the earliest civilisations, rulers have made decisions and overreached their power in the confident belief that they had God on their side. In more modern times our rulers have believed that nature rewards the fittest, in other words, them.

Irrespective of what point in history they emerge, the starting point of most elites is the comfortable assumption that, as things have typically gone right for them in the past, they will continue to go right in the future. This belief is compounded by the fact that for a long time it has been the “little people” who bear the costs while those higher up the food chain reap the benefits. Power means that they are effectively cocooned from the negative kick-back from their actions. Long before the rulers themselves are successfully challenged and fall — and this typically happens only in the final stages — millions of others have already lost out badly and immense damage has been done.

What we term hubris is the cruel arrogance that arises from a failure of bottom-up feedback in systems where vast social and geographical distances exist between the powerful and the powerless. The punishment of Nemesis, the Greek goddess who was supposed to re-impose limits on those who overstepped their power, typically befalls entire societies before it befalls the rulers. Today the vast distance that separates the global elite from ordinary people is magnified further by the high-power technologies of communications, transport, production and weaponry. Nemesis, when she comes, will be global….

Andrew Haldane

22 Tuesday May 2012

Posted by in Peak Oil

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In my last post The Armageddon of the Financial Arms Race, I featured Andrew Haldane and one of his speeches, highly critical of the banking sector. I thought it odd that a top official in banking, the British version of Ben Bernanke, would be so forthright about the malfeasance and recklessness of the sector that he is a part of. Isn’t he supposed to be propagandizing for the banks and subservient to their interests like our own Ben Bernanke and his predecessor Greenspan? I looked a little deeper and found that those same thoughts have come to other Americans. Here is Justin Fox, editorial director of the Harvard Business Review Group and author of The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street:

…Several times over the past couple years he has called into question the industry’s most basic philosophical and financial underpinnings. Which is an interesting thing for the executive director of financial stability at the Bank of England to be doing.

…Why isn’t anybody in the U.S. writing stuff like this? I don’t know of any official at the Fed or the bank regulatory agencies doing the kind of searching examination of how the world works that Haldane has become known for (maybe Ben Bernanke’s upcoming lecture series will be a start, but I doubt it) — and I don’t know of any non-government economists or journalists here doing it in quite the sweeping, convincing way he has, either (if I’m just missing out, let me know in the comments). I think part of it is politics. In the UK the notion that something was flawed about the way financial markets and big banks were organized seems to be universally shared, allowing Haldane to take that as a starting point and then leap into his investigations. In the U.S. there’s still a substantial minority (even among economists) that attributes all our problems to Fannie and Freddie, the Federal Reserve, or some other malign Washington force. Which makes it much harder to move forward with the discussion…

(3-14-2012)The Regulator Who Explained the World – Justin Fox 

The Armageddon of the Financial Arms Race

22 Tuesday May 2012

Posted by in Peak Oil

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In Paul Craig Robert’s latest essay he mentions that according to a May 18 Rob Urie CounerPunch article, the executive Director for Financial Stability at the Bank of England, Andrew Haldane (the UK’s version of Bernanke and the Federal Reserve), said the 2008 financial crisis will in the end cost the world economy between $60 trillion and $200 trillion in lost GDP.

A recent speech by Haldane likens our current financial system to an arms race, creating ever-more systemic instability. Haldane describes three kinds of ‘arms races’ in banking and the financial markets (as explained by writer/investigator Nicholas Shaxson):

“….he said these arms races (I prefer to call them races to the bottom) are prevalent throughout human behaviour then adds:

“Finance is plainly no exception. In fact the very structure of finance means that these arms race type behaviours is even more prevalent than in other aspects of human behaviour.”

“The arm’s race from the past relates to banks’ Return on Equity (ROE). This was:

“an arms race, not just a case of keeping up with the Joneses, but of keeping up with the Goldmans. If Goldman posted a ROE of 20 percent, everyone else felt they needed to leapfrog ahead. The simple way that leapfrogging was achieved was by taking on leverage. The result of this arms race on returns on equity was that everyone converged to a high ROE and therefore high leverage and therefore a high risk equilibrium, which sowed the seeds of crisis of the last 3-4 years.
. . .
(drawing on) Philippon and Reshev, important work on returns in finance and non-finance: for investment and universal banking this was a period that isn’t even close to any historical precedent, not even the 1920s.”

“Strong stuff, and there is a similar dynamic going on with top bankers’ pay – with the difference that whereas ROE fell off a cliff in the crisis; bankers’ pay hasn’t. Haldane and others have analysed this dynamic before (see this newspaper article and longer paper, for example), but it helps make his overall case here.

“The next arms race, from the present, concerns high frequency trading. And here he produced some astonishing statistics:

“Those traders now dominate mainstream financial markets, accounting for between a half and three quarters of volumes transacted for example in the world’s major equity markets. One reason they dominate is that they submit huge volumes of quotes in the market, most of which are never exercised: the firms cancel them before they are ever exercised. For every order executed, 60 are cancelled.”

“My emphasis added. This is about stuffing the bandwidth full so that others can’t trade, and aggressively taking advantage of those fleeting moments of superiority. The Flash Crash of May 2010 is one example, but there have been hundreds of mini-crashes since then, he said. Here is another case of an arm’s race producing a public bad.

“The third race is less intuitive, and concerns a flight to safety. In essence, investors in banks all want to have their claims secured against solid collateral, because of their fears about banks’ eventual solvency. But there is only so much collateral to go around.

“It, too, is an arms race: it too comes with a cost. It results in banks’ balance sheets being progressively more encumbered. They are signing away those assets to an increasing number of investors: those assets cannot be signed away indefinitely.”

“I think Haldane’s arguments need to be complemented with further discussions of arms’ races. Financial actors deliberately encourage arms’ races between jurisdictions. “Don’t tax or regulate us too much or we’ll fly off to London / Geneva / Singapore / Hong Kong / New York” the bankers cry, and regulators as a result fail to put in place those capital requirements or other regulatory devices to make the system safer. More on this kind of ‘competition’ here.

“So we have the regulators failing to regulate, leading to unhealthy arms races; and the bankers growing ever more powerful, and using an arms’ race between jurisdictions to tie the regulators’ hands, making them yet more powerful, and . . . so on. A circular race to the bottom. Where will it ever stop? We now have regulatory fatigue, and a public ground down by the sheer weight of awfulness spewing endlessly out of the financial sector.

“This is the trap the world has fallen into. We are in a downwards spiral. Who is going to break this dynamic?”

———————

In the Paul Craig Roberts essay mentioned at the beginning, Western civilization’s very survival has been put into question over our deregulated financial market. It’s clear in my mind where this phony world of paper is going. Unfortunately we are all being taken down the drain with it:

It is ironic that the outcome of financial deregulation in the US is the opposite of what its free market advocates promised. In place of highly competitive financial firms that live or die by their wits alone without government intervention, we have unprecedented financial concentration. Massive banks, “too big to fail,” now send their multi-trillion dollar losses to Washington to be paid by heavily indebted US taxpayers whose real incomes have not risen in 20 years. The banksters take home fortunes in annual bonuses for their success in socializing the “free market” banks’ losses and privatizing profits to the point of not even paying income taxes.

In the US free market economists unleashed avarice and permitted it to run amuck. Will the disastrous consequences discredit capitalism to the extent that the Soviet collapse discredited socialism?

Will Western civilization itself survive the financial tsunami that deregulated Wall Street has produced?

Ironic, isn’t it, that the United States, the home of the “indispensable people,” stands before us as the likely candidate whose government will be responsible for the collapse of the West.