The Metastasis of Moral Hazard and its Effect on Gold … There is accumulating evidence that the Washington – Wall Street moral hazard experiment has gone disastrously wrong, and that just like any other accidental discharge of a deadly virus, the moral hazard virus is now loose and swiftly propagating throughout society. By so blatantly colluding with Wall Street, Washington has lost all moral authority, and the people now have only one place to turn: themselves.
An ethic of, "If they can do it, so can I," is spreading, as people realize that fabric of American society has been shredded and replaced by a free-for-all mentality whereby everyone must fend for oneself in order to survive. If this is so, it is a serious game changer for America. Evidence of the spread of moral hazard is noticeable everywhere. Despite government reports that the economy contracted only 1% last quarter and is now stabilizing, 13% of all home mortgages were either delinquent or in foreclosure in the second quarter, 2009, an all-time record. Credit card write-offs hover near 10%, also a record. Automobile, home equity and personal loan defaults are at or near record levels.
Fiscal year 2009 federal personal tax receipts have declined 22% and corporate receipts have plunged by 57%, even though the economy has supposedly declined by only a fraction of that amount. Compared with January through April, 2008, state personal income tax receipts have plummeted by 26% in 2009, with eight states seeing declines ranging from 30% to 54.9%. Prime and Alt-A mortgage delinquencies and foreclosures are climbing rapidly, and are the true canaries in the banking industry mineshaft.
Homeowners evicted by foreclosure trash their homes in rage on the way out the door, with an estimated 50% of such dwellings damaged. Looters and squatters destroy many of the rest, stealing copper pipes, wiring, granite counter tops and anything else of value.
Dozens of Internet sites such as "youwalkaway.com" provide calculators to help homeowners decide whether or not to "strategically" default on their mortgages.
Shoplifting costs retail businesses $35+ million per day, as 27 million shoplifters go on the hunt. Drug addicts who have become shoplifters say that the activity is equally as addicting as drugs, leading to a continuing cycle of theft. Insurance fraud is a systemic financial risk, with 25% of fires caused by arson or suspected arson, making this the greatest cause of property damage in the United States. Even before this financial crisis, which has bankrupted millions, 10% of respondents said it was acceptable to submit a false insurance claim. Medicare fraud exceeds $60 billion per year. Phony automobile and other bodily injury claims cost billions annually, and are difficult to control since it is impossible for a court to tell someone they are not in pain.
Despite a massive consumer education campaign designed to thwart it, Identity Theft rose 22% in 2008, to 10 million cases, a record. It takes the average victim 330 hours to repair the damage to their personal reputation. Identity Theft is estimated to cost individuals and businesses $221 billion per year. Each day, 175,000 phony checks are presented as payment. The cost of check fraud is estimated to exceed $50 billion annually. And on and on it goes. The stress tests never envisioned this. The people, whose predictive instincts have been uncannily accurate throughout this crisis, sense that trouble is coming: 80% of them say they expect crime to increase due to the deteriorating economy. – Market Oracle, Stewart Dougherty
Dominant Social Theme: Moral breakdown?
Free-Market Analysis: Wow, wow, wow … talk about being "slapped upside the head." We just were with this terrific article that was sent to us by the author himself apparently – who is one clever cookie (even though he has a degree from Harvard).
In fact, here's his bio:
"Stewart Dougherty is a specialist in inferential analysis, the practice of identifying patterns and trends from specific, contemporary events, and then extrapolating their likely effects upon the future. Inferential analysis can be highly predictive. Dougherty was educated at Tufts University (B.A.) and Harvard Business School (M.B.A., and an academic Fellow)."
Now we are not smart enough to know all the ins and outs of inferential analysis, but we do know that Dougherty hit directly on a point that we seem (gulp) to have missed regarding the Internet and the immodest financial spectacle that has daily paraded itself upon our TV and computer screens and within our newspapers and magazines.
What he's hit upon (we will grant him originality until we know better) – and did we ever say it this plainly – is that the Internet, in exposing the spectacle of the elite's crisis management (dumping trillions into the market through central bank manipulations) has pro-offered a spectacle that may result in something approaching the end of Western civilization.
Now, we have hinted at this in many of our articles about the money elite and its dominant social themes. We have pointed out that the Internet – the most profound invention since the Gutenberg Press – has made it easy for 'Net surfers to perceive the untruths that are promoted to them at the behest of the modern elite. We have pointed out time and again that the central banking meme itself is a victim of this process. We think central banking will not long survive in its present form – nor will many other dominant social themes that the elite presents to generate wealth and consolidate social control.
But as clever as we think we are, dear reader (and no, we do not REALLY think we are all that clever) we seem not to have hammered as much as we should have on this one, most salient point – that the Internet, in exposing the breathtaking money manipulations of the monetary elite, is likely in the process of reducing social morality to rubble.
Or at least it will have by the time the reverberations are thoroughly felt.
In all fairness to the Daily Bell, we have pointed out that the realization that central banks can – and have – printed trillions to "avert" a crisis has created within the larger populace an ever broadening realization that they have been living in a kind of dream-time. Here's what we wrote months ago:
Western society has indeed been badly warped by the endless issuance of paper money … It seems to encourage false choices on numerous levels. For one thing, there are only so many articles you can read about exciting and luxurious city living before you leave the farm. Then, unbeknownst to you, you have traded your self-sufficiency for a lifestyle that is going to survive only so long as the next ruinous boom. You may believe the system is the real-thing, but likely it's not.
We have written that the current situation is analogous to the days of the Gutenberg press: Finally, people could read the Bible and see priestly untruth. Today, of course, the West's establishment religion is monetary. Think about it. Are we so wrong? The mainstream media prints the every utterance of the central banking class with breathless reverence. The miens of these bankers are often ascetic; they are portrayed as good family men, patriotic and responsible. They are priests with a vocabulary all their own – as incomprehensible, nearly, as Latin. Their expensive, bespoke, business suits are a uniform akin to vestments. The gorgeous conference rooms in which they convene may be regarded as grave vestibules. Utterances, revealed in "minutes," have the resonance of commandments from on high. Regulators, media mavens and politicians are acolytes, expressing hosannas as they wish.
Say God is dead and no one will blink an eye. But try to launch a critique of our current central banking regime and see how amenable the mainstream media is to transmitting your message. Sacrilege these days (or until recently, anyway) has little to do with damning the almighty and a great deal to do with bashing Ben Bernanke.
After 100 years, this sort of religiosity may be crumbling. The faith fading. The political class, snuffling the sea change, is seemingly less fawning. Through the Internet, and as a result of the current grave crisis, people are certainly becoming aware, once more, that all is not as it seems. No, heaven on earth cannot really be purchased; sins cannot be purged by indexing; self-sufficiency is perhaps a better approach to life than stock-picking. And holding precious metals is preferable to paper money during this leg of the business cycle.
But even though we have often commented on the faux spirituality that seems to surround central banking, we likely never hit on the point of raw IMMORALITY. (Didn't we? How could we have missed it?) The spectacle of central bankers reaching into their back pockets and pulling out trillions would surely fragment the world as we knew it – yes, we pointed out that plenty of times – but we likely never came out and presented the argument that these actions would inevitably destroy the MORAL fiber of society. Oh, it likely seemed an obvious point, and somehow, somewhere we must have stated it in our own way, but Dougherty has hit the point hard. It is an intense intellectual endeavor. It is an award winning observation. Gold star to Dougherty and all that. (It is the highest endeavor in fact, in our humble opinion, this sort of commentary.)
You know, way back after the bad, old USSR fell, there were archly fashionable observations about the end of history. But Dougherty has written a REAL article of REAL observations about the end of Western civilization. Sheesh, we do this all day (and night) for a living and here comes Dougherty and he's written Spengler's Decline of the West in three darn pages.
He's right, he has gotten the morality right. It's not just the culture of the West, or its promotions, or even its social organization that is finished. You CANNOT, as a society, witness a couple of guys pull a trillion out of their back pockets without feeling, well … snookered. And after feeling snookered, something else begins to percolate. "Hey," you say, "wait a minute. I sit here with my debts and my job and my house in foreclosure and this guy – THIS GUY – throws around trillions? Wait a minute. WHEN DO I GET MINE!"
And so it begins. You have seen the essential immorality of the system. You have felt it deep in the gut, just the way they did once they began to read Bibles (courtesy of the Gutenberg press) 500 years ago and began realizing that the Roman Catholic Church was profoundly immoral – that its entire ethic (you can buy your way into heaven) was built on a kind of lie. Just as society is today. Yes, he's right. This financial crisis and the "outside the box thinking" (President Obama's term) of Ben Bernanke and others has not just doomed the elite's dominant social themes, it has probably doomed the freakin' CIVILIZATION.
Even stranger, Bernanke and the rest have not yet likely realized this. They are too busy patting themselves on the back. Do Bernanke et. al. really believe that the average joe is awestruck and thankful for his chicanery. No, the average joe has suddenly realized that he lives in a society where a few people control trillions while he controls thousands. This is not just going to lead to a breakdown of society, over time it is going to lead to a meltdown of western civ.
At least, that's Dougherty's point, seemingly. And we think we agree.
After all, the Reformation, ultimately, was a moral reaction. Human beings, among other things, live within various ethical environments. When these are shown to be false, there is trouble brewing. We've written this over and over, that the old financial order, based on central banking, is basically finished. But THIS is WHY. The moral order that supported this sort of society is kaput. It's been found out. On the way is increased chaos, increased immorality and eventually A NEW MORAL ORDER.
Dougherty believes it will be based on honest money, gold and silver. We couldn't agree more. We could have written it ourselves. Didn't we? Why not?
Here's some more from Dougherty …
The colossal miscalculation made by Washington and Wall Street is that they could control the moral hazard genie once they removed it from the bottle. They believed they could use the genie to enrich themselves with trillions of dollars' worth of taxpayer money, and then replace it in the bottle before its magic spell of immorality metastasized throughout society at large. They assumed that the people would be too stupid to see what was going on. And that even if the people did figure things out, they would willingly wear the thick, choking chains of debt being welded to their necks by the financial elite and its Washington enablers.
Instead, thanks to the Internet and the democracy of information and insight it affords, the people were instantly wise to what was happening, and it stirred them. The concept of "an eye for an eye, a tooth for a tooth," harkens to the Bible. And perhaps Shylock was speaking for all of humanity when he said, "If you prick us, do we not bleed? If you tickle us, do we not laugh? If you poison us, do we not die? If you wrong us, shall we not revenge?"
Hey, you, dear reader … Go read Coulter and you will read left versus right. Read World Net Daily and you will be reading about Western civilization versus Eastern. Go read Rockwell (far more profound) and you will read about free-markets versus socialism. We would submit that OUR paradigm (the Internet has exposed the promotions of the monetary elite and ushered in free-market thinking) has got it goin' on. Like sad, sweet Mike Tyson once stammered in an Ali-inspired rant, "I'm the best ever. I'm the most brutal and most vicious and most ruthless champion there's ever been … My style is impetuous. My defense is impregnable!"
See, we take on all comers. We get knocked down and we get up again! Dougherty sent us this article for a reason. (He reads our publication with "great interest", he emailed us, and we're honored.) Not only did he apparently pick up on our paradigm, in our estimation, anyway, he elaborated on it. He wrote the Decline of the West (or maybe the Decline and Fall of the Roman Empire) in a few short pages. And he wrote BEFORE it happened. Wow, wow, wow. This is better than the UFC. Better than a rap song. Better than a Disney movie or a talk radio rant. Better than a fast ride in a new car? Better even than sex? You decide. Anyway, you read truth here, sometimes, in our humble opinion, and now and then (thank you, Dougherty) it seemingly spreads.