Things have changed a lot since the financial industry crash of 2008. During that time, I was in college and studying economics. In college, words like “inflation” were rarely if ever used in courses. Instead, we heard terms like “monetary policy” and “quantitative easing”. There was one professor that dared to teach us about the “petro-dollar status” but that was too out-of-context for our young minds to really comprehend. As economics majors, like most finance majors, we wanted to deal with green paper, not grimy oil and messy politics.
At the age of 22 years old, the focus was more geared to learning numbers that would squeeze out a few dollars in the financial industry. Rarely did we really focus on the underlying meaning of such numbers. Risk, trust, ownership, control, adding value, resources – these were all abstract concepts that our class, or perhaps even our entire generation, missed the importance of.
Bailouts and the Not-So-Free-Market.
While politicians on both the left and right were busy justifying the bail-outs to the banks and auto industry, I was busy studying how great the theory of the free-market system was. Professors didn’t often discuss the current world news in class. It was sometimes a politically taboo topic. We generally focused on economic theory – macroeconomics, surplus, how hedge funds operate, financial analysis, etc. Understanding all of these pieces was somehow meant to get me a job at an investment bank or hedge fund, and lead to a $120k/year salary.
This was America after all, if I finished my degree, worked hard, and they liked me, I would get a desk on some trading floor bringing in the big bucks. Not only that, but understanding economics and finance (to us) meant that we knew how the world work.
As time went on, the Bail-outs became big news. Politicians were really fantastic at persuading Americans that the bail-outs were necessary to save the American system. We needed the bailouts to protect the free American way of life – but therein lies the rub. In free-markets there is no such thing as bail-outs. When a company or bank is failing, it just dies. There are no hand-outs. There are no safety nets. So it was interesting, we were being taught that the United States was a free market system, but the political economy was doing some very non free-market things.
You see, the great thing about the free market is it allows hard-workers to rise up. When the slackers and corrupt business people fail, they are replaced by the superior firm, product, worker, etc. The bail-outs contradicted this in every way possible.
After the bail-outs were squeezed through congress and the gravy was paid out – Americans were told things would change. The recession would end shortly and we’d all be up to our eyes in money and employment possibilities. But as we know now, in 2014, we’re still all waiting for that to happen. What actually happened is this:
The outdated financial industry and the auto-industry were slowly failing – so they took more risk. They leveraged up their positions by taking on more and more debt. Eventually the risk caught up with them and they lost a shitload of money. After that – they whined – a lot. They pulled their political strings and got their bail-out money from the Tax-payers through the federal reserve printing money (read: inflation). But instead of re-investing to make their companies stronger, they took massive bonuses and fired a lot of their staff. Then they sat low and expected everyone else to pick up the slack in the economy. They weren’t going to hire new staff, they had no plans of “stimulating” the economy. They just wanted their corrupt green money and to lay low in case the world imploded.
Read Douglass Rushkoff’s explanation of the bailouts in his powerful article called LET IT DIE.
The Federal Reserve.
Before the 2008 financial crash and the following recession, few Americans understood the role of the Federal Reserve, the USA’s Central Bank. Even if they knew what it was, they surely didn’t understand how it worked, or what it’s relationship is with the treasury.
As the economy tanked after 2008, families lost their homes, employees got fired, credit card rates were raised for no reason, and the dinner table started looking a lot less filling. Americans got burned. Since then, a lot of people have woken up, thank god. Finally, people are cutting back on debt, living more within their means, and making better decisions. Americans swore to never get screwed again. This fact alone has reflected the dismal performance of the real economy.
While Wall Street has been pumped full of funny money from the Federal Reserve, Main Street has smartened up. The Federal Reserves role before 2008 was primarily to manage inflation and set rates using bonds. Now – they’re focused more on monetizing the system, depressing the price of gold, making financial (paper) assets look good, and dodging economic bullets for the US government. Mostly everyone I know avoids debt like the plague and can explain who the Chairman of the fed is (Janet Yellen btw).
My question is this – who thought it was a good idea to bail anyone out? Whomever allowed this and supported it should be drawn and quartered. Our economy is on life support today because of this decision.
Scandals are the New Way of American Financial Life
The US Financial industry is weak, meaning money is flowing a lot less abundantly than it used to (pre-2008). This has lead some industry “experts” to cut corners. While the subordinates are still doing the dirty work for the “higher-ups”, both of these guilty parties involved are being exposed for what they really are.
- Gold Rigging
- High Frequency Trading
- LIBOR Scandal
- London Whale
- Foreclosure Scandal of 2010-2014
- Student Loan Bubbles
Interesting how each crisis in America typically leads to another crisis or scandal. Our leaders love to point fingers for accountability and responsibility, but they’re sure willing to cut corners when the system doesn’t work how they want it to. An interesting thing resulted from the 2008 financial crisis – the 2010 forclosure scandal exploded on the scene. When families were struggling to pay their mortgages because of the recession after 2008, banks started illegally foreclosing on families homes to earn money. This has lead to an explosion of litigation and involvement with the Federal Government. And one thing is true – the families that lost their homes never got them back. Sure, maybe they received some settlement money. But does $1000 really compensate one for homelessness, lost community, family distress and unjust legal troubles?
Money Printing Pisses Me Off.
In the USA, I love the concept of possibility. I love the opportunity of bettering oneself. Money printing by the Federal Reserve infringes on my possibilities. When I work hard for my money and someone else can print more for themselves – how the hell does my work matter? Sure, I have my pride – but I will never win. I can’t print money. My money is my employment, and I can’t work faster than they can print money.
Worse, the people that print money are not looking out for the best interest of Main Street. They are largely influenced, if not completely run, by Wall Street. Many Federal Reserve authorities are pulled directly from the executive seats of major banks and hedge funds. Lobbying groups that lobby Washington often have federal reserve ties.
How many Americans does it take to realize this incestuous relationship before things finally change?
Dollar Collapse Is The Only Way.
The people that control our currency are irresponsible, unelected, and self-motivated. They have abused their position and taken advantage of the authority that has been granted to them. They have stripped Main Street of it’s value and delivered it to Wall Street in a nice little handbasket with a fat bonus. In addition to this recent bail-out, the US dollar has lost about 98% of it’s purchasing power. In 1930, a loaf of bread only cost 9 cents. From this in itself, the dollar will surely eventually collapse.
It’s sad though. It’s unnecessary for the dollar to collapse. It really doesn’t solve any problems. Those in power will still be in power when they start printing up the next currency and financial bonuses will still be handed out to undeserving banking executives that originally drove this country into the ground. Worse, this will continuously drive opportunity away from Americans and always give other countries the upper hand. Until the United States gets it’s act together, I will not take out new lines of credit (debt), I will deal in dollars as little as possible, I will support the constitution and not the government that tramples over it, and I will make as many Americans aware of how the cards are stacked against them.
To make matters worse, even other countries are abandoning the dollar. The Petrodollar status is losing ground quickly because Russia and China are offering petroleum oil to other countries and bypassing the dollar. As demand shrinks for the dollar worldwide, all it will take is everyday people on Main Street like you and me to stop using the dollar, by stop accepting the dollar for exchange, and that’ll be the last draw.
Since The Bail-Outs, I’ve Changed
I no longer follow the Left or Right political wings. I used to be moderate left, but now I more moderate libertarian than anything. I believe in the constitution, I don’t believe in big government, I don’t believe in big corporations, and I believe in protecting personal liberties and freedoms of the American people.
With my new belief system, nobody is harmed except someone that wants to take away from someone else. With my beliefs, everyone gets their slice of life and nobody is allowed to infringe on the slice of others life. It’s pretty simple really. My beliefs have no place in the world of big government and big corporations – because these are the exact institutions that aim to take from one person and give to another.
What are your thoughts on these issues? I’d be curious to hear!