Despite the repetition of a compulsive/obsessive pattern, Congress repeatedly fails to address banking regulations. It's time to stop blaming consummers and educate congress! by Ted Williams
(libertarian)
Thursday, January 24, 2008
Congress & The Cocaine Monkey
Remember the cocaine monkey? The cocaine monkey was used in a marketing campaign, by a drug treatment center, in the 1980's. The job of the monkey was to convey the horrors of cocaine addiction. Low frequency music hummed, while a wired monkey stared at the camera. The voice-over darkly describes how the monkey surrendered everything from sex to food in favor of cocaine. The point was obvious. Given the proper stimuli, primates can quickly descend from high-functioning mammals into slobbering, irksome Coke Ho's (TM).
The truly alarming aspect of this commercial was the implied ease of enslavement.
To control a primate, simply supply an unlimited, extremely addictive product that stimulates the compulsive/obsessive center of the brain, while concurrently frying the decision-making cortex.
Now, before you suddenly flashback to your college days and begin contrasting your partying endurance with your current adult-like abstinence, consider the following: Could the above statement apply to anything other than drug abuse? I would suggest it does, and that something is unmitigated, institutional greed.
Hold on! Am I suggesting unchecked greed makes irrational cocaine monkeys out of honest people? Well, yes...and no. A reasonable amount of greed arguably propels the economy forward, and that's a good thing. But what happens when greed runs unchecked? When (or how) does greed become bad, or destructive?
I think it accurate to say greed becomes destructive when it escalates into an uncontrollable, embedded behavioral component. Your psychologist would call this problem a compulsive/obsessive disorder, and it can be very bad. Just ask the cocaine monkey.
Does compulsive/obsessive institutional greed actually occur, and does it affect our economy?
For the past 30 years, America has watched in disbelief as bubble after bursting bubble has been interspaced by financial crisis after financial crisis. With each bursting bubble or financial institutional meltdown, a distinct reoccurring pattern emerges.
Expansion: Financial institutions create "exciting" high yield products (real-estate, CDO's, energy schemes...) based on artificially inflated risk-based assets.
Exposure: The products become desirable mainstream financial items, but inevitably are exposed as untenable, and quickly (often entirely) devalue.
Evaluation: Due to systemic participation, the damage is often enormous, as every financial institution feigns utter horror over their inexplicable stupidity. The damage usually plays out in slow motion.
Evolution: Reparation inevitably requires an extensive solution, requiring the Fed's intervention combined with Legislative intervenion and oversight. (Note the title, evolution. The disease isn't cured, only a minor symptom is treated and absorbed. The real disease is ignored and allowed to evolve, insuring a future re-occurrence)
Let's call this pattern the Trouble-Bubble Phenomenon, or TBP. It is a repetitive financial cycle of inception, damage, assessment, and pseudo-repair. TBP is a type of socio-economic compulsive/obsessive disorder. It doesn't bode well for our economy, or our future.
How so? Because with each cycle, the disease will magnify in intensity, and ultimately result in the death of our economy, just like the cocaine "problem" eventually killed the monkey. Observe these TBP patterns.
In the late 1980's, the cocaine monkey watched as the Savings and Loan industry acted in collusion to inflate the prices of worthless land holdings. Participants then borrowed against the artificially inflated prices. The practice became systemic, participants became artificially wealthy, the system crashed, Congress and the Fed intervened, laws were passed, and the problem was absorbed.
Then came The WorldCom and Enron scandals. While not financial institutions, the combined shares of these companies insured retirement benefits for thousands (nay, hundreds of thousands) of people. Their success became systemic, investors became artificially wealthy, the stocks crashed, Congress and the Fed intervened, laws were passed, and the problem was absorbed.
Today, the current sub-prime meltdown is the result of financial organizations that played a game of "there is no risk in loaning money". These organizations originated secured loans, and then sold off the loans (at handsome profits) to institutions, that purchased the loans (or risks) and resold them as investment products (CDO's etc). The practice became systemic, the participants became artificially wealthy, the system crashed, Congress and the Fed will intervene, laws will be passed, the problem will be absorbed. Well, not quite.
It is important to understand there is nothing sub-prime about our current situation. The good life we've enjoyed in America for the past 50 years is currently boarding the Orient Deficit Express and/or the Reckless Spending Steamer. Both are destined to crash and burn. Our soon to arrive nightmare is going to rearrange American life in a hellish blender of debt and deflated currency.
Sadly, I believe it is too late to repair the current situation. America is going to have to ride out the coming bubble-induced depression (not a recession, but a full blown 1929-style global depression). The question we (or at least our children) must ask, is how exactly do we end the destructive cycle of TBP?
To answer this we must accept some facts and assess some blame. We have to admit that for a capitalist society to advance, some greed is necessary. Banks and investment institutions are essential for financially advancing a free society in a competitive world. We have to admit that we, the people, tend to be lured by the prospect of quick and/or easy wealth, and it is in large part our own greed that is reflected in the greed of our larger institutions. The fact that people and financial institutions will act greedily is entirely predictable!
I'll go further by stating being reasonably greedy is what banks and people are supposed to be doing, at least in a free capitalist society. We therefore can't readily blame banks or people for this mess. We're predictably behaving normally.
We also have to accept that the business cycle is just that, cyclical, and that ups and downs will occur. We should never attempt to forestall a predictable cyclical decline; especially knowing the action will cause an eventual harsher collapse.
So given these facts, how do we now account for the actions of the Federal Reserve, who lowered interest rates, and therefore encouraged banks to engage in wild real estate lending, regardless of the borrowers qualifications? How do we account for the fact that while the Fed doesn't necessarily generate bubbles, it clearly enables them by creating liquidity and lowering rates over time? How do we account for the fact that the Fed lowered interest rates to create the mammoth housing bubble during what should have been a mild (and cyclical) period of recession? How do we account for the idea that the Fed willfully encouraged the practice of dangerous (and stupid) distributed risk products, while simultaneously providing the capital for the risks in the first instance? Does this seem abnormally greedy to you?
Of course it does, because the Federal Reserve is a Financial Institution. They are no more immune to the ravages of compulsive/obsessive greed than is the recently defunct mortgage banker down the street. The Federal Reserve is also no more accountable to the citizenry (or government) of this country than is Hugo Chavez. So, does this mean we should blame the Fed for our problems? Could it be that the unregulated, unconstitutional, outsourced central banking cartel is the entity exclusively causing these problems?
No! Again, greed is always predictable in unregulated financial institutions! So whom do we blame? There's really only one suspect left.
Congress. That's right. Congress.
Who should have been educated in financial and economic knowledge to provide effective and proactive legislation upon assuming office? Congress.
Who should have been ethically prepared to stand above the influence of seductive wealth? Congress.
Who was truly and sincerely sworn to defend and uphold the constitution of the United States of America? Congress.
Whose duty is it to honestly, and sometimes courageously, act as the voice of the people, which they have been chosen to represent? Congress.
Who is the only body that can pass binding legislation affecting the financial methods and practices in this country? Congress.
Save for Ron Paul, who has suffered endless ridicule while warning of this very financial meltdown, not one member of Congress has a right to claim moral decency, much less lay claim to a title as a legitimate representative of this great nation.
To congress, I can only respectfully say, "You Bastards"!
Perhaps you've decided to ignore your duty to the Constitution and your constituency. I challenge you. I challenge you to summon your courage, and throw the cocaine monkey of compulsive/obsessive pattern based greed, party leadership, and cloying special interests off our back, and for once in your careers, stand up and do what is clearly right.
Pass meaningful financial reform to regulate irresponsible banking, stop blaming the consummers, and work to end the endless TBP generating, unconstitutional Federal Reserve/Central Banking cartel. This also includes abolishing the IRS and our nonsensible tax codes.
While you're at it, you could also:
Restore the rights contained in and guaranteed by our Constitution.
Restore America's decency and end torture and rendition programs.
Abandon preemptive strike and all other unconstitutional fear-based laws or policies (HR1959, warrantless wiretaps, etc)
Secure our borders and stop policing the world.
Fix the health care system.
End media monopolies formed after deregulation, and restore the integrity of the press, our fourth branch of government.
If we fail to enjoy a healthy asset-backed currency, which is utilized by a healthy citizenry, that is informed by a genuinely free press, which promotes a morally sound government, that proceeds from a cherished constitution, which is maintained from within sovereign borders, and perpetuated by a principled and courageous legislature, we are no longer a democracy or a republic. We are a target. A target for the first clever hunter who stumbles upon us.
We will become the cocaine monkey, staring out from the screen of our eternal prison, forever captives of our own compulsive/obsessive illness, full of nothing but impotent fear and loathsome weakness. Lock the door. Fade to black.
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Long live fiefdom! Because friends, that is our status now. It is where we are. The founding fathers had some pretty good ideas, but there was a major failure. The consitution failed to define 'high crimes and misdemeanors' sufficiently, and, indeed, failed to address the issue of accountability of those we (the people) elect (hire) to pull us all together and give democracy a chance.
Sadly, it is too late now. In truth, it never had a chance. The historical landscape is littered with attempts to empower the human condition through some form of governance.
We are not there yet. I am old and tired - and resigned. I weep for my heirs, though, because they are unaware of the fact that they are victimized every day, and will continue to be as greedy minds continue to refine their mantra - there are other 'bubbles' out there just waiting to be discovered and applied.
In a form of poetic justice, the greedy ones have yet to realize they have sown the seeds of their own dustruction, as well. Small consolation, but it may be all we have.
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