President Barack Obama said Wednesday no one in his administration created the mess at insurance giant AIG, including the much-maligned executive bonuses, but that "the buck stops with me" to fix it. Standing on the White House lawn as he prepared to go to California, Obama vigorously defended his embattled Treasury secretary, Timothy Geithner. … He said he and his economic team have begun discussions with leading congressional players to fast-track legislation creating another regulatory entity to govern the dissolution of large financial institutions such as AIG, which if merely liquidated could reverberate disastrously through the financial system. … Obama said the new authority would be part of a broader regulatory reform agenda that his administration is preparing to send to Congress in an effort to deal with lax oversight that many blame for creating the current financial crisis, the worst to hit the country in seven decades. The broad outlines of the overhaul are expected to be unveiled before Obama attends the Group of 20 meeting of major industrial countries and developing nations in London on April 2. European countries have pushed the administration to take a tougher approach to financial regulation, believing it was lax enforcement in the United States that led to the crisis that has now pushed the global economy into recession. … Obama also issued a warning about the go-go mentality gleaned from the boom years. He said the problem goes deeper than "outrageous" bonuses. – UK Guardian
Dominant Social Theme: Wall Street's greed must stop.
Free-Market Analysis: It has been a great privilege to live through the unwinding of the Western world's fiat-money economy. The last real unwinding was in the 1930s and one can see how what no doubt occurred in the 1930s has been twisted by the powers-that-be to conform with Keynesian theory in order to empower government solutions. It is kind of like being an archeologist in a time machine. There are moments when one can SEE the rhetoric being manipulated and history being rewritten in real time to perpetuate this myth or that. It is all to benefit the spending system of paper, debt-based money – and it does not work so well right now in this Internet era. The monetary elite may have a great affection for it, but they are going to have to travel a far piece to sustain it this time. The Internet has wrought too much damage.
The memes are too great to sustain. The yelps of the 1930s have morphed, in the 2000s, into the screams of a train whistle, and that train is leaving the station. The last time round, the yelp was encapsulated in the Wizard of Oz, written by a brilliant man who went to his grave maintaining that what he had created was just a children's story. Never mind that Hollywood changed Dorothy's silver shoes to "ruby." The yelp resounded, but for a time in the 20th century you could hardly find a criticism of the Oz book that mentioned it was actually a monetary fable. Now of course, interpretations of the book are everywhere on the ‘Net. And so it goes. The Internet is indeed a proverbial game changer. Monetary education hasn't been this high in the Western world since the 1800s. It is disastrous for those who want to maintain the status quo.
Want more proof? Alan Greenspan, the high priest of fiat money — a man who looked and spoke so much like a central banker that he might as well have been imported from Hollywood central casting – had to write an article recently explaining that the great economic crisis of the 2000s was not the result of the Federal Reserve easy money policies. Instead, he pointed out, the reason for the worldwide inflation somehow had something to do with great Asian powers finding their prosperity and flooding the world with money. The article wasn't even convincingly written; the hyper-euphemisms were employed unenthusiastically. It was hardly a defense and has had nary a ripple of effect. It was a desperate coda to a highly visible career. It also marks a sea-change in the way these things are viewed. If Greenspan doesn't have the credibility to float an alternative monetary hypothesis, who does? Ben Bernanke?
What has the great unwinding of the 2000s taught us? That there were indeed reasons for the Great Depression and these had everything to do with fiat money and little to do with whatever else supposedly caused the Great Depression. When fiat money unwinds powerfully, as it is doing now, there is nothing that can be done to hold back the process. We have also learned that all the regulations put into place to prevent what has just occurred did not prevent it – or were changed due to the blinding expansion of fiat money. New regulations now being put into place will have no more effect than the old. They will last just until the peak of the next fiat-money mania, whenever that is, at which point they will be promptly removed as "old fashioned."
The monetary stimulation of Franklin Delano Roosevelt could not possible have worked, anymore than Barack Obama's stimulation will work. How can one pass trillions of dollars through corrupt governmental authorities and expect a market-based outcome? How can one expect that by digging a useless hole in the ground, the economy will be advanced. Ridiculous. A myth. The prosperity of the United States was probably not re-started until the mid 1940s after a great world war that virtually decimated every great power with the exception of the United States. That allowed the US to declare the dollar as the "reserve" currency and virtually force it on the world. Enter prosperity, for some anyway.
But none of this monetary history has much to do with the narrative now being constructed. In this fanciful neo-narrative, which accompanies the reality of fiat money as marginalia accompanies a main text, the real culprits are greedy bankers, the real heroes are politicians and presidents and the real solutions inevitably revolve around yet more "regulation." And, yes, just as in the 1930s, here it comes again. …
"Just as outrageous is the culture that these bonuses are a symptom of, that has existed for far too long: excess greed, excess compensation, excess risk-taking," [President Obama] said. "As we work towards getting ourselves out of recession, I hope that Wall Street and the marketplace don't think that we can return to business as usual. The business models that created a lot of paper wealth but not real wealth in the country and have now resulted in crisis can't be the model for economic growth going forward."
The mythos – like preparations to entomb a mummy – is being painstakingly prepared. The wrappings are steeped in preservation fluids. The body is hollowed out. Certainly, the Federal Reserve could print all the money the "bailout" needs, but that would interfere with the preparation, wouldn't it? And for this same reason, taxpayer money has also been leveraged. In fact, there is no need to disperse taxpayer revenue, but having done it government can now fulminate about such funds being at risk. Yes, surely, the reason to use taxpayer money is only to establish that the federal government has the moral obligation to produce further regulation to ensure that "greed" does not again run rampant.
Really, as we have tried to point out above, and in other articles, it is seemingly a kind of shadow play, intended to consolidate control, not to make things better. A gold standard would make things better. A global fiat money standard will make things worse. Let's see which side the G20 comes down on in April. Our bet is on more fiat money, more global regulation and an expansion of the current version of central-bank oriented regulatory capitalism. Unlike the 1930s, the Internet may have something to say about the evolution of all this, this time.