"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."
- Ludwig von Mises

Friday, January 21, 2011

Volcker Out, Immelt In... and the Corporate Takeover of USA, Inc. Is Just About Complete

When Obama won the Presidential election in 2008, he soon after appointed Paul Volcker, former Federal Reserve Chairman, as his Chairman of the Economic Recovery Board.  Volcker is a heavyweight, and well remembered for his tough handling of the dollar crisis of the late 1970s.  He was able to raise interest rates to fight inflation.

Soon after becoming Obama's Chairman of the Economic Recovery Board, he was marginalized by Timothy Geithner and Larry Summers. From Bloomberg, 2009:
Paul Volcker has grown increasingly frustrated over delays in setting up the economic advisory group President Barack Obama picked the former Federal Reserve chairman to lead, people familiar with the matter said. 
Volcker, 81, blames Obama’s National Economic Council Director Lawrence Summers for slowing down the effort to organize the panel of outside advisers, the people said. Summers isn’t regularly inviting Volcker to White House meetings and hasn’t shown interest in collaborating on policy or sharing potential solutions to the economic crisis, they said. 
You want to know why Volcker was only to be used as window dressing, to just make the Obama Administration look good, while Wall Street via Summers and Geithner took over? Because this giant tells it like it is. Back in December of 2009, Paul Volcker was addressing the Wall Street Journal Future of Finance Initiative and said:

“I wish somebody would give me some shred of evidence linking financial innovation with a benefit to the economy.” 
Mr. Volcker’s favorite financial innovation of the past 25 years? The ATM. “It really helps people, it’s useful.” 
In addition, he railed against financial system compensation plans and said it had grown too large. 
His idea of reform? A return of something like Glass-Steagall. Commercial banks should be tightly regulated as well as protected. Trading, speculation and financial innovation should live outside those companies so that if they fail, they fail. 
While many resist this idea, Mr. Volcker had few doubts. “I’m not alone in this and I think I’m probably going to win in the end.”


Unfortunately, it doesn't look like Volcker's views prevailed.  So now, Obama has appointed someone else to replace a sidelined Volcker.  Introducing:

This is Jeffrey Immelt, former CEO of General Electric.  A Captain of Industry.  So whhat are his accomplishments?

Here are some headlines:

How a Loophole Benefits GE in Bank Rescue Industrial Giant Becomes Top Recipient in Debt-Guarantee Program

GE is quiet bailout recipient

You see, GE is not just a manufacturer of light bulbs and jet engines. It also owns GE Capital - which was an over-leveraged, speculative, sub-prime lending, derivative cranking financial piece of garbage of a "bank" that needed taxpayer money to survive.

And this guy is going to help the average American unemployed worker?


OKL said...

yeah, this is like a bad joke isn't it...

i was reading some monetary history stuff and it seems that while it is true that no issuer of currency ever went bankrupt, the one thing that brings about a change in the medium of exchange is when the money itself becomes "too common"; this applies to cowries, beads, grains, yaks and whatnot...

Misthos said...

yes, true, but cowries, beads, grains etc... are actual physical things subject to some sort of scarcity.

You already know the answer to this, but what would you rather do, produce beads, dig up gold, harvest grain, or tap a few numbers on your computer keyboard?



That took me 2 seconds to type! Is that power or what!

What is outrageous is that humanity's use of money has evolved to the point of "digital" or let's call it "virtual" money, and mainstream economists actually think its possible to manage this system long term.

History is full of such fictitious money meltdowns.

It's very simple. It's the nature of governments to (over)spend. And given an easily expandable monetary system, nations will abuse it, and eventually, either their trading partners will re-evaluate the relationship, or the relationship breaks down along with the currency.

I think the conclusion is so simple, that it's too hard to grasp for most people.

Many economists successfully criticize the gold standard, and I agree, it has its limits - they bring up many good points. But these same economists never challenge the current system of fiat money. It's gospel to them - like the efficient market theory.

OKL said...

i'm not sure if they treat it like gospel, but rather that they don't see any other alternative that can provide the same benefits and less downsides than fiat currency.

the main strength of which is its ability to shrink and expand the money supply almost at will, providing loans at "suitable" interest rates...

i mean, both high and low interest rates have their own bad effects...

sometimes i too, wonder if all these excessive bond supply really is just a coincidence with the aging demographics in the "developed" world" and all the anger in the US is really just a sign that the country is "maturing" (~250yrs of history)...

i mean, it's easy to get mad with just 250yrs of history because there's not much reference... look at china, greece, europe etc; their people have witnessed so many "founding fathers", "constitutions", "dynasties", "great countries" etc that perhaps, in their blood, they realize that it's not worth anything...

but i digress again...

anyway, i just want to learn and know more about economics; i think the profession has largely ditched its sociological roots in favor for "hard science", which is a real shame at least, if not a downright shirking of responsibilities.

for me, it's about building "intangible wealth"- things you can have in equal or greater amounts by giving them away- love, care, knowledge, wisdom etc.

tangible wealth? well, maybe just enough to get by and then some will be good enough... it's not worth spending too much time on it heheh... i give myself 80yrs; 20yrs spent in youth enjoying, 20yrs to learn, 20yrs to share/do/execute and 20yrs to sleep! LOL

as for those cowries, beads etc; they came to be disused after more and more of them came into the economies... although there was never really an issuer for it, it was just slowly dropped as its quantity increased; won't be surprised if the story rhymes this time too.

the main difference of course is the amount of debt pegged to it; but since everyone is in the same boat, maybe we'll just default together and start afresh lol... yeah, easier said than done...

ahhh... more digressions... cheers