A sign of things to come (2) ... ?

As Christmas draws closer and the New Year fast approaches are we starting to see the writing on the wall ... and sign of things to come ...? 

Sterling devalued 25% (e.g. even against collapsing currencies like the dollar!), inflation running way above target (e.g. with petrol now heading towards £6/gallon!), interest rates set to go up, unemployment starting to increase again (before the real cuts start to bite), VAT set to rise to 20%, and the top civil servant (Sir Gus O'Donnell, Cabinet Secretary) quietly drawing up a "Plan B" for if/when the UK falls into recession again next year ...

Yet bankers (whose self interest/greed created this crisis) are celebrating and pocketing their Christmas 'bonuses', as a result of debt slavery (e.g. Fractional Reserve Banking) and corrupt profiteering/gambling using your money (where they take all the profit and you/taxpayers take all the losses) ... nb they are not focused on helping/investing in businesses, but continuing to speculate on the stock exchange, commodities, currencies and bonds instead ... forcing countries to the brink financially (e.g. Ireland) and pushing up food prices around the world so millions of people can no longer afford to eat (nb the same bankers also want to be able to speculate/trade in fresh water in the future too)!

Whilst the European Union is trying (and failing) to fiddle around with bankers pay (restricting bonuses will only elevate their basic pay), it has done nothing to stop Fractional Reserve Banking or Casino banks (investment banks) from speculating gambling using your/taxpayers money (commercial banks) ... much of this crisis was brought on by repealing the Glass-Steagall act (which was brought in after the last Great Depression) and nothing is being done to reverse this!

The banks have stolen the future from future generations, through high levels of tax needed to service (and eventually pay off) all the bailouts/debt, through the removal of EMA and the tripling of tuition fees, doubling of youth unemployment and further debt slavery as young people try to pay for a roof over their head (nb the bankers are aided and abetted here by a few very wealthy landowners who profit heavily from restricting the use of land ... instead of being taxed for the land they own)! 

If we really want to get out of this mess, we need to i) stop the corrupt practices of banks, ii) invest in education, innovation, enterprise and business, and iii) introduce a Land Value Tax, to replace the current Property Tax and to reduce the tax on jobs (income tax/national insurance) ... 

As the toxic mixture of ignorance and apathy continues to reduce ... Poweromics will be increasing exposed and challenged.

Reforming banks - A fight to the death?

Whilst some (e.g. Gordon Brown) focus on spin, others focus on substance (e.g. Barack Obama).  Whilst some try to paper over the cracks (e.g. UK), others try to focus on solving the problem (e.g. USA).  This has become ever clearer over recent days and weeks .... in relation to dealing with banks ...  

Gordon Brown decided to introduce a one-off 'bonus tax' for bankers, which involved far more spin than substance.  Barack Obama on the other hand plans to introduce a bank levy and made it clear 'Wall Street' must pay back all the $117bn (£72bn) that US taxpayers are expected to lose from bailing out the banks during the financial crisis. "My commitment is to recover every single dime the American people are owed ... We want our money back and we're going to get it", the President said.


However over the last two days he has gone much further.  President Barack Obama has proposed significant new curbs on the activities of banks to try to prevent future financial crises.  The plans include limits to the size of banks and restrictions on riskier trading. "Never again will the American taxpayer be held hostage by banks that are too big to fail," Mr Obama said.   He added he was ready for a "fight" with any banks prepared to lobby against tougher regulations.


"While the financial system is far stronger today than it was one year ago, it is still operating under the exact same rules that led to its near collapse," Mr Obama said.  His proposals also include a ban on retail banks from using their own money in investments - known as proprietary trading. Instead, banks would be limited to investing their customers' funds.


I, and many others in the blogosphere, have regularly pointed out the fallacy of allowing retail banking and risky investment banking being joined together and remaining together, but the UK Government has singly failed to address this issue, and the BBC failed in it's duty to press home this issue either.  


Mr Obama's proposals appear to be a return to the principles underlying the Glass-Steagall Act. That law - from the 1930s in the aftermath of the Great Depression - separated commercial and investment banking and was eventually abolished in 1999 under President Bill Clinton.


"I am proposing simple, common sense reforms" Mr Obama said, and vowed "If these folks want a fight, it's a fight I'm ready to have".

Taxing Times - Taxing Gambling ... Separating Gambling

Robert Peston appears to be one of the few BBC journalists prepared to probe what's going on and to question further what current leaders are doing. His recent blog eluded to the fact that the Government are considering ways to 'tax' Banks more ... partly to pay for the fact the taxpayer has had to bail them out ... but for me this does not go far enough ...

Following on from my previous post I decided to add the comment below to his blog too (Post 53):

"Tax gambling (i.e. investment banking) a lot more - absolutely ... for any Government and society, with any values/morals at all, taxing gambling heavily is a 'no brainer'.

What still makes this story more spin than substance however is that the Government is STILL avoiding the key issue ...

... We must NOT allow investment bankers to gamble with taxpayers and hard-working people's savings! ie. investment banking needs to be separated from retail/commercial banking (as well as being taxed more) so they can be allowed to fail when their gambles go wrong ...

http://poweromics.blogspot.com/2009/09/challenging-greed-and-creating-leaner.html

... We need a new Glass-Steagall type act introduced again, similar to the one brought in after the last great depression ... which the current set of clowns (with 'no brains' and/or 'no morals') in their 'wisdom' took it upon themselves to remove!

Keep up the pressure and can you challenge them on this please too Robert".

Building up a bigger crash

Whilst the Bank of England continues to print money to service Government debt, Banks are busy stoking up the next crash via another pyramid scheme (rewarding themselves huge bonuses in the process too) ... for instance, take a look this US article (as it also applies/relates to the UK too), as well some of the key additional points I've summarised below:

“Interest rates are close to zero; in effect the Federal Reserve is subsidizing the risk-taking and bond trading that has allowed Goldman Sachs to produce billions in profits and that infamous $16 billion bonus pool (analysts say it could grow as high as $20 billion). The Treasury has lent banks money, guaranteed Wall Street’s debt and declared every firm to be a commercial bank … They are all ‘too big to fail’ and so free to trade as they please—on the taxpayer dime.”

The Wall Street Journal reported Monday that Morgan Stanley has concluded that the amount of cash circulating in the global economy is at its highest level by far since the firm began tracking it 30 years ago. This vast wave of hot money can find no profitable outlet in production, so it is being pumped into stock markets and speculation on commodity prices and currencies. The result of a colossal global asset bubble that must sooner or later burst."

If the money taxpayers had provided to banks was steered into traditional banking only, and commercial banking separated from speculative trading (e.g. by Government's re-instating a Glass-Steagall type act), this type of behaviour would not be possible. Bankers would not be able to use government cash to underwrite short-term speculation to fuel their massive bonuses again, and they wouldn't be able to call upon taxpayers to fund their failure again either (i.e. once their current pyramid scheme collapses).

Commercial banks focus on lending to real 'wealth creators', to enterprises/institutions adding real value for others as well as to the well-being of the economy. Creating real wealth takes time, energy and resources, and is not a short term decision/investment/gamble. On the other hand, 'wealth manipulation', adds no real value, except to the bankers, traders and the already wealthy (who benefit further from this manipulation of wealth - particularly when it's taxpayers money being used to pay for all the failure). 'Wealth manipulation' takes very little effort in terms of time, energy and resources (e.g. beyond the passing on of 'pieces of paper') so banks see it a much easier (and 'profitable' way) of 'making money' from money (i.e. the velocity, and profit, from money is much greater), particularly when all the risk (i.e. failure) is taken on by someone else (the taxpayer).

... and it doesn't take a rocket scientist to work this out, so why have UK/US Government's chose not to heed such advice, and done absolutely nothing about splitting the banks up in this way? ... why have mainstream economists identified the fundamental flaws in the economic model? ... and why have the media been 'absent' in investigating this properly ... well it doesn't take a rocket scientist to work all these out either ...

and fail again it will ... but wow - decades more misery to sell news* ... and as the crisis deepens ... an attempt to create more wars to deflect people's attention away from the immoral/guilty ... so they can continue to quietly profit from the system ... and so the newspapers can sell more news ...

For this to change, Ignoromics needs to reduce quickly ... and Poweromics needs to be challenged too ... if apathy prevails for much longer, the outcome is pretty clear ... 'war'

* NB Good news/success doesn't sell (only bad news and celebrity does).

Why the Prime Minister hasn't learnt a thing

Gordon Brown said today he is "appalled" that some financial firms are continuing, and even extending, their bonus culture ... so why did he present an open-cheque book to them, bail them out with £100's billions of taxpayers money, and put nothing in place to stop this from happening again? ... for instance why has he not pushed for the introduction of a new Glass-Steagall type act to separate commercial banking (supporting wealth creation) from investment banking (supporting wealth manipulation) again, given the removal of this was a key factor in the financial crisis in the first place?

Mr Brown also refused to blame Britons for their level of rising personal debt during his time as chancellor and prime minister, saying the vast majority of debt had been the result of the "legitimate aim" of people trying to buy a home ... a "legitimate aim" to have a roof over ones head - yes ... but to have to take on huge personal debts to do this - no! ... and this would not have happened if the Government had ensured a steady & sufficient supply of housing (ideally driven by a Land Value Tax too), rather than 'promoting' self interest/greed and house price inflation/speculation.

The problem is the Government do not know how to create real wealth ... they only know how to manipulate wealth, and letting landowners profit from land whilst bankers profit from loans ... and what's even more worrying is that the Prime Minister's comments today show he hasn't learnt anything from this crisis! ... so how could we ever believe he is the right man to fix it?

Challenging 'Greed' and creating a 'Leaner City'

Extracts from a City diary, from an insider who has worked in the City of London for over a decade ...

"... You get to the top by making more money than your peers. Competitive crafty, greedy people give their employers what they want and rise up the ranks. Greed is inevitable ...

... We're told by our chancellor that the solution to our crisis is more effective regulation of our banks, but regulation will never stop greed. Chancellor Darling also cites the notion that "spreading your risk is a good thing." This is a classic academic over-simplification and fails to account for human behaviour ...

... All that happens when risk is "spread" is that it ends up in the weakest hands and overall the system becomes saturated with the same risk. The mantra that diversifying risk is "good" ends up producing the opposite effect: we all fall down together ...

... It's why we must disentangle investment banking from more ordinary, commercial banking. It's the only way to stop another crunch in however many years' time ...

... After the Great Crash of 1929, the Glass-Steagall Act in the USA forbade commercial banks from conducting investment banking business. Since then, financial crises came and went without the disaster we've just witnessed. Separation of the two forms of banking prevented contagion ...

... The investment banks could be as greedy as they liked without recklessly endangering the rest of the population. Glass-Steagall was repealed after nearly seventy years in 1999 and it then took just eight years for the investment bankers to bring our entire global financial system to its knees, hold it to ransom and then get paid to fix it ...

... The politicians' solution? Merge more banks together and embed investment banking even more deeply into our financial blood system. Institutions that are "too big to fail" should, if we apply common sense, be "too big to exist". But instead they have become "too big to resist" ...

... If I am right, the next financial crisis, when it comes, stands to make the last two years look like a "warm up". When these newly engrossed banks fail, what then? For the time being, more of the same is the only prescription the politicians can conceive of. The bailouts that were sold to the public on the grounds they would help the ordinary citizen have failed to do anything other than nationalise previously private debt, leaving the "little guy" to fend for himself and pay up to the hilt for the privilege ...

... Closer to the ground, it's common to believe that these are uniformly hard times for everyone in the City. Not necessarily so. The firms that survived the bust have never known it so good - less competition, fees have gone up, margins have got larger - all courtesy of the reduced competition created by our politicians waving-through mergers as a solution to the crisis ...

... But none of what I see makes me any more hopeful for a better, leaner City. I want a City that properly serves the economy and acts as the lubricant, rather than the engine, of growth. I want commercial banks to make boring, safe loans. I want investment banks to be able to blow up without taking the country down. I want the ordinary citizen to be insulated from financial excess, not left out in the good times and then billed for the bad times. Yet none of this is on the way. Leaving me to simply ask: Why? ..."

Again great insight which very much echoes many of my posts (e.g. take a look at this recent one for instance) ... and I think the answer to last question partly lies in the fact that it's not in the interests of the 'small minority' currently in 'power', who desperately want to 'maintain power' so they can 'profit from power' (i.e. applying Poweromics). However Ignoromics will also have to reduce for this to be properly challenged ... for real change to take place ... and for us to see a "Leaner City" ... one applying "Leanomics" ... and focused on adding value and wealth creation (for communities/society) rather than wealth manipulation (for a small minority).

The 'battle of values' ahead is becoming ever clearer, and as more people take notice (and take responsibility) new 'leaders' will emerge and change things for the better (nb current 'leaders' are unlikely to this - for the reasons outlined in my previous post), and this is not very far away ...

Referred to on Stephanomics recent blog.

Economic fools ...

A Nobel-laureate economist, Joseph E. Stiglitz, has examined the history of the financial crisis in the US, and in this article identifies five key mistakes ... it's worth a read to get a general picture of what went on in America (as it mirrors in many ways what's happened in the UK too), and to understand the roles played by 'leaders' and the impact of de-regulation too (see Mistake 2, described as "Tearing down the walls").  

In November 1999, Congress repealed the Glass-Steagall Act — the culmination of a $300 million lobbying effort by the banking and financial services industries. Glass-Steagall had long separated commercial banks (which lend money) and investment banks (which organize the sale of bonds and equities) which had been enacted in the aftermath of the Great Depression ...

So why are Governments (e.g. and in particular the UK) holding back bringing in a 21st century version of the Glass-Steagall Act now? ... is it the result of i) not wanting to admit to their mistakes, ii) yet another extensive and expensive lobbying activity by the banks, spearheaded & supported by lobby groups such as the CBI (who have proved to be the "Voice of Banks", rather than the "Voice of Business", during the crisis - which is not surprising given the CBI is heavily funded by the banks!) ? ... or iii) the lure of a lucrative job in the city for 'leaders' once they leave office (e.g. like the one Tony Blair landed)  - i.e. the application of more Poweromics? ... or iv) ignoromics, or ... v) a combination of all of them ...

Whichever is the case, they are all accountable for their actions (Poweromics), and their lack of action (Ignoromics), and we must continually expose them, rather than forgive them, for what they do ... if only they had learned from history, instead of ignoring it and irresponsibly 'tearing down the walls' (i.e. deregulation) to re-create history, then we wouldn't be in this mess now ... and yet they still haven't learnt, or admitted to their mistakes, and are just trying to deflect blame away from themselves ... trust, honor, responsibility, respect ... the biggest joke ever, except it's no laughing matter.

NB As an aside, this article (from its title onwards) also shows how even the supposedly most prestigious of economists are way out of date, as 'traditional economics' was effectively dead nearly 20 years ago. Dr. W. Edwards Deming (a 'creative outsider') highlighted the need for a "New Economics" ... and my blogs regularly highlight (and build on) this fact too ... as well as articulate what the 'new economics' will look like (i.e. Leanomics) ...