Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Palladium Surges above $2,400. Is It Sustainable? - 27th Jan 20
THIS ONE THING Will Tell Us When the Bubble Economy Is Bursting… - 27th Jan 20
Stock Market, Gold Black Swan Event Begins - 27th Jan 20
This Will Signal A Massive Gold Stocks Rally - 27th Jan 20
US Presidential Cycle Stock Market Trend Forecast 2020 - 27th Jan 20
Stock Market Correction Review - 26th Jan 20
The Wuhan Wipeout – Could It Happen? - 26th Jan 20
JOHNSON & JOHNSON (JNJ) Big Pharama AI Mega-trend Investing 2020 - 25th Jan 20
Experts See Opportunity in Ratios of Gold to Silver and Platinum - 25th Jan 20
Gold/Silver Ratio, SPX, Yield Curve and a Story to Tell - 25th Jan 20
Germany Starts War on Gold  - 25th Jan 20
Gold Mining Stocks Valuations - 25th Jan 20
Three Upside and One Downside Risk for Gold - 25th Jan 20
A Lesson About Gold – How Bullish Can It Be? - 24th Jan 20
Stock Market January 2018 Repeats in 2020 – Yikes! - 24th Jan 20
Gold Report from the Two Besieged Cities - 24th Jan 20
Stock Market Elliott Waves Trend Forecast 2020 - Video - 24th Jan 20
AMD Multi-cores vs INTEL Turbo Cores - Best Gaming CPUs 2020 - 3900x, 3950x, 9900K, or 9900KS - 24th Jan 20
Choosing the Best Garage Floor Containment Mats - 23rd Jan 20
Understanding the Benefits of Cannabis Tea - 23rd Jan 20
The Next Catalyst for Gold - 23rd Jan 20
5 Cyber-security considerations for 2020 - 23rd Jan 20
Car insurance: what the latest modifications could mean for your premiums - 23rd Jan 20
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

The Third Anniversary Of The Financial and Economic Crash

Politics / Recession 2008 - 2010 Aug 03, 2010 - 02:57 AM GMT

By: Danny_Schechter

Politics

Best Financial Markets Analysis Article“Those Were The Days, My Friend. I Thought They’d Never End.” They Haven’t

We live in the United States of Amnesia and selective memory. As we debate the breaking news, we easily forget the sequence of events that broke the bank and left us broke.


Three years ago, when the idea of an Obama presidency was sill a fantasy in polite company, a non-seismic financial earthquake began to rumble in ways we then could barely anticipate. Buildings didn’t fall as they did in Haiti’s nightmare, only a financial system. And, there are still piles of rubble everywhere here, too.

It was August 2007, and I was blogging about the coming economic collapse even as it appeared that our economy had nowhere to go but up.

What began with a few ‘incidents:--the collapse of New Century Financial, the demise of Bear Stearns, turned into a nonstop month-long drama of economic convulsion as fear turned into panic with calls for intervention. Slowly, like an apple being peeled, the truth got more apparent the closer you got to the core. Suddenly, a crisis that many had warned about or feared was beginning to erupt. In August, it exploded, ruining many a Hedge Fund manager’s vacation in the Hamptons.

Armies of too clever by half money managers had been making a fortune feeding off the housing bubble with practices that are now being characterized as “outright fraud” by none other than President Bush’s chairman of the Federal Reserve. Most of their wheeling and dealing flew under the radar of public scrutiny with the press bolstering the rise of the stock market without examining the precarious “infrastructure” under that

“STREET.”

A week earlier, Credit Suisse predicted a big stock market fall in 6 months because securities were overvalued. The Fed warned of $l00 billion in credit losses. The Guardian reported, “Some analysts said they feared a broader credit crunch if a collapse in confidence in the US mortgage market rippled out to other parts of the debt markets.” A New York Post article suggested that over two TRILLION dollars was at risk. Of course, all of this was offered as speculative.

Now we know, all of these estimates understated the calamity, often by a factor of ten.

I went to a dinner party early in August and met a financial executive who worked at one of Wall Street’s top investment firms. He acknowledged to me that the people shoveling out those sub prime loans KNEW many of the borrowers couldn’t afford to pay back. They knew what misery they’d cause, but that didn’t stop them.

I asked: “So, what happened to due diligence?” one of the “market disciplines” that these bankers are always preaching?

He shrugged, indicating that there was so much to be made that normal safeguards and standards were pushed to the side or forgotten. He says there were many internal investigations underway then. I thought, how can we allow them to investigate themselves?

And then it happened, in August, the dog days of summer,  when, as if in accord with the law of gravity, what had gone up started coming down.

AP reported: “NEW YORK (AP) -- Wall Street suffered one of its worst losses of 2007 Thursday, leading a global stock market plunge as investors succumbed to months of worry about the mortgage and corporate lending markets.”

On August 9th, President Bush met the press to reassure us all was well on the Wall Street front. He was asked about market “volatility” which is how the meltdown was then described.

He prattled on, arguing, “the fundamentals of our economy are strong. I mentioned some of them before. Job creation is strong. Real after-tax wages are on the rise. Inflation is low. Interestingly enough, the global economy is strong, which has enabled us to gain more exports, which helped the second quarter growth numbers to be robust, at 3.4 percent.

Another factor one has got to look at is the amount of liquidity in the system. In other words, is there enough liquidity to enable markets to be able to correct? And I am told there is enough liquidity in the system to enable markets to correct.”

Note, he repeated what he “was told.” And then he told us.

Few believed it.

While these message points rolled off the “decider’s” teleprompter, a trader was commenting on his meandering press conference on the financial website Ml-Implode in real time:

“He’s being hit with a lot of questions on mortgages, credit crisis, and the economy ... and of course the economy is ‘in for a soft landing’, he’s been assured by the treasury that ‘there is plenty of liquidity,’ yadda-yadda-yadda.

“But he is stumbling over his words more then usual, not making eye contact, not finishing his sentences ... and when he wanders a bit, he quickly goes back on script. It is very odd to watch, to say the least.”

Historian Carolyn Baker was one of the few bloggers I read arguing that such double talk was all too common and that we all must become more engaged with these issues

She also noticed that few in the left-liberal end of the political spectrum had a firm grasp on economic issues “which I suspect comes from a fundamental polarization between activism and financial intelligence.” Baker began stressing “the role of fraud, theft, and malicious intent in the American and global financial train wreck which has been exacerbating.”

We would see that word “train wreck” more in the weeks to come.

This account is from my book PLUNDER: Investigating Our Economic Catastrophe (Cosimo Books). It couldn’t have been more timely but it was largely ignored. It came out a week before Lehman Brothers collapsed at a time when some media outlets were forecasting an upswing.

I went on to investigate the pervasive criminal activities that led to the collapse for a new film and companion book.

Three years later, while this issue has been touched on, it is still largely ignored in most of our media with few bankers and financial manipulators being prosecuted for the shady deals that sank the economy. The consensus among those involved is the collapse was the result of a series of “mistakes.”

And yet, the Wall Street Journal just reported that “Gangsters, drug dealers and money launderers appear to be playing their part in helping shore up the financial stability of the euro zone.” How? By using high denominated notes. Admits the chief economist at Citigroup, these high-value bills are “making the euro the currency of choice for underground and black economies, and for all those who value anonymity in their financial transactions and investments.” How blatant is this? How pervasive?

Few today want to go back to that summer, just three years ago, when the financial spill began with a gusher of anxiety that led to the bailouts that so many hate now but supported then. Fortune Magazine wrote at the time, “Wall Street loves to talk about letting financial markets weed out the weak. But when the Street itself gets in trouble, it sticks out its little tin cup, asking for help. And gets it.”

At the time, a reader wrote prophetically to the Wall Street Journal, criticizing its tendency “to emphasize the positive,” warning:

“Things will get worse before they get better…This is a house of cards that our leaders are trying to segment. It isn’t a sub prime problem, it isn’t a foreclosure problem, it isn’t a mortgage problem, a bond= market problem, a hedge fund problem, or a bank problem…This is a= full systematic collapse of our economy… The problems are masked and hidden throughout every layer of our economy…being too slow to react will only compound this problem as it builds momentum …We have no idea how bad this is really going to get.”

Three years later, we still don’t.  The recovery has not recovered. All is “stalled” to use the phrase du-jour. The growth curve is flat. Long-term joblessness stalks the land and rising as are bankruptcies while foreclosures multiply. College debt is off the charts. Consumer confidence is down while the trade deficit is up. (President Obama is desperately boosting sales of US weapons overseas.)  The housing outlook is miserable. Fed-hed Ben Bernanke is moving from rational explanations to talking about “economic mysteries.”  Sounds mystical. The Financial Times says “drivel” is spreading in the world of finance.

In some ways the financial crisis is like the BP oil spill. Suddenly all the oil has disappeared—thanks to the abuse of dispersants. Wrote a friend, “Same goes for the financial debacle.  Now are being told "everything's fine", as the authorities have thrown trillions at the problem to shore up our insolvent banking system.  But it's still all toxic below the surface, under a thin veneer of normalcy.”

There has still not been a real hard-hitting public investigation of the forces behind this meltdown like the one led by the Pecora Commission during the New Deal. What we have had is more like an academic inquiry than a Watergate-style set of hearings.

The media largely narrows the issues and looks away distracting us with games of celebrity sensation and partisan ping-pong.  The public remains angry, but in Paul Krugman’s word, “unfocused.”

Three years later, in an August like that one, I feel like I am still raving and ranting about the crimes of Wall Street in films, blogs, commentaries and books with few paying attention and even fewer organizing to stop it.  Why is that? Perhaps, it’s time to give up.

I guess many still believe that if we close our eyes, it will all go away. 

Dream on. I wonder if that phrase “the silence of the lambs” was prophetic?

News Dissector Danny Schechters film and book Disinformation. For more information, Http://www.plunderhecrimeofourtime.com.

    News Dissector Danny Schechter has made a film and written a book on the “Crime Of Our Time.” (News Dissector.com/plunder.) Comments to dissector@mediachannel.org

    © 2010 Copyright Danny Schechter - All Rights Reserved

    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules