INSIDE JOB: The Good, The Bad, The Ugly—these liars have no currency

Naysayers point to gold’s price and see a bubble, without understanding that the only acceleration that is taking place is in the rate of decline of paper currency.
—John Hathaway

I saw the film Inside Job last night—about the 2008 economic meltdown/collapse. Charles Ferguson is a highly intelligent interviewer, and it was stunning, sometimes funny, sometimes squirm-inducing, to watch so many confident interviewees get caught in their own lies, arrogance or self-deceptions.

POSITIVES OF THE FLIM

The film is in many ways excellent and a thorough and much needed document and testimonial about what happened from about the year 2000 until the 2008 collapse (with a few references back to 1980) and one fleeting moment back to the Great Depression. The lies and the cheating and the fraud are immense.

ARE THESE ACTIONS NOT CRIMINAL?

And I would like to be more bold than usual. Is it not literally criminal that the group of leaders around the Federal Reserves (the main one and off-shoots (Geitner, NY Fed)) and companies leaders from Goldman Sachs are not at least brought up on charges (and some are, in different places) in the name of certain legal terms like fraud, negligence, malfeasance, theft and so on? I won’t go into the details—they are everywhere—but check out the film.

And worse, they are not only not charged with anything, they are reinstated or kept in power by the either woefully ignorant or woefully corrupted President Obama. I’ll mention a few names of those who oversaw this economic terrorism, from the beginning, during the collapse, made inconceivable bushels of money and remain very rich and/or very rich and in power: Larry Summers, Robert Rubin, Timothy Geitner, Ben Bernanke, Hank Paulson, Alan Greenspan. There are countless more. Feel free to look them up.

Further, when the International Monetary Fund is the voice of reason in the film, one might have reason to be certain the situation is beyond corruption.

Finally, the ‘science’ of economics, and schools of economics from everywhere, Harvard to Columbia, seem to be in pitiful ways a sold out farce, without hope, dangerous to sustainability let alone democracy: gutted, disgraced and still going strong. Indeed, one high up at Harvard didn’t even think economists should disclose conflicts of interest on ‘scientific’ papers.

NEGATIVES OF THE FILM

The truth is, I know so little about economics, no matter how much I read. Combining a pseudo-science and human nature is baffling. Indeed, so-called economics is an aspect of human nature, which has infinite streams.

But keeping things simple, I will say this: for me, the major premise of the film is thought to be obviously correct, but is actually incorrect.

The premise is a common premise from the intelligent/progressive Left, from thinkers as brilliant as this filmmaker, Charles Ferguson, or, say, Naomi Klein. It is this: the Government is corrupt and despicable, and so is the economic system, so let’s get this pathologically immense, trough-sucking Government to regulate (and fix) this hopelessly corrupted system.

Fat chance.

It’s not that I disagree with all regulations. Far from it. Indeed, given the madness of the system today, and the pathological corruption from the top down—the investment banks and shameless CEOs and their political bedfellows all the way into the White House—I would much prefer the Glass-Steagall Act than the criminal free-for-all that came out of the Clinton administration. Deregulation in the obviously utterly corruptible system we have can be, and has been, catastrophic. My beef is that such distinguished so-called Leftists don’t see the schizophrenia of their otherwise often enlightening arguments.

BY ANALOGY

Let me offer an analogy. Should regulations be put on, say, a known pedophile? I would say, almost certainly, yes. Okay. So then, with the regulation imposed, would you let that pedophile look after your children? If the situation was so horrendous you had no choice, the pedophile with regulations may be preferable. And that, it could be argued, may be how sick our current economic system is.

This parasitic economic system is perhaps slightly less dangerous in Canada, possibly because of a few useful ‘regulations’ to keep at bay, temporarily, the disease of the utterly greedy and the utterly desperate (we lacked the same sub-prime force in Canada). But the problem, it seems, is the disease itself (a system and mass of people so easily manipulated, exploited, dipped in debt and disempowered) and what to do about it. But trying to cure the disease with the disease, is the seeing-eye dog problem, in my opinion, of the Leftist argument (with whom I have much empathy).

MONOPOLY MONEY

So not only does the film insufficiently address the crucial history of the creation of the Federal Reserve in 1913, it doesn’t deal with the mortally wounded monetary system of today at all; a monetary system whose value for countless reasons—some too complex for me to understand—is in a free fall. Not pushing the public more towards this truth, and encouraging great thinkers to think about it, is a crucial error, due to the Left Wing position of thinking only more government regulations on a corrupt government is the answer.

I also believe (yet again with great empathy) the libertarian idea of simply deregulating the disease could also prove catastrophic, leading to a sort of death, but perhaps not the one we would like. I think one thing both sides need to consider and find some place of accord on—to minimize catastrophe if there is to be a sane operation—is to fully and mutually identify the disease, which includes understanding seemingly but not necessarily contradictory positions.

Are there enough intelligent, compassionate, inspiring doctors in the house?

I’ve said it before: anarcho-leftists and conservo-libertarians (granted, my terms) have a lot more in common than they care to admit. But tribalism amongst these groups remains strong and contracting (members still often believe they belong to the mainstream Left and Right, respectively). Hug a Tea Partier today (and that goes both ways), or at least have a tea party.

Remember even the famed Anarchist Pierre Proudhon—”What is property? Property is theft!”—by the end of his life, wrote in Theory of Property:

“…property is the greatest revolutionary force which exists, with an unequaled capacity for setting itself against authority … [The] principal function of private property within the political system will be to act as a counterweight to the power of the State, and by so doing to insure the liberty of the individual.”

I’ve written about or quoted others on the monetary system, both since and before the 2008 crisis, for example here, here, here, and here.

Two recent comments on the monetary system are worth a quick read. First from John Hathaway (whoever he is), a managing director of Tocqueville Asset Management LP in New York, writing an article called Gold Will Outlive Dollar Once Slaughter Comes, in Bloomberg:

The world’s monetary system is in the process of melting down. We have entered the endgame for the dollar as the dominant reserve currency, but most investors and policy makers are unaware of the implications.

The only questions are how long the denouement of the dollar reserve system will last, and how much more damage will be inflicted by new rounds of quantitative easing or more radical monetary measures to prop up the system.

Whether prolonged or sudden, the transition to a stable monetary system will become possible only when the shortcomings of the status quo become unbearable. Such a transition is, by definition, nonlinear. So central-bank soothsaying based on the extrapolation of historical data and the repetition of conventional wisdom offers no guidance on what lies ahead.

It’s amazing that there is no intelligent discourse among policy leaders on the subject of monetary rot and its implications for the future economic and political landscape. Until there is fundamental monetary reform on an international scale, most economic forecasts aren’t worth the paper on which they are written.

The full article is here.

And then this from the Brazilian Government:

BRASILIA, Oct 28 (Reuters) – Brazil’s Finance Minister Guido Mantega will propose at the Group of 20 nations meeting next month that the International Monetary Fund create an index measuring currency manipulation, local media reported on Thursday.

The idea is to identify who is keeping their currency artificially low to boost exports, Mantega said, lending support to eventual actions against illegal subsidies at the World Trade Organization.

“The IMF would have to come up with a method to measure which currencies reflect the structural situation of their countries, which are floating currencies, and which ones are forcing their hand,” Mantega told O Globo newspaper in an interview.

The next step would be to make a deal to reduce such intervention, and if that didn’t happen the manipulation could eventually be considered a commercial subsidy, Mantega said.

Full article here.

Finally, this from the Globe and Mail—brace yourself—The Scary Actual U.S. Government Debt:

Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 per cent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion—840 per cent of current GDP. “Let’s get real,” Prof. Kotlikoff says. “The U.S. is bankrupt.”

What he goes on to say gets to my point about the sickness of trying to fix the disease with the disease:

Prof. Kotlikoff doesn’t trust government accounting, or government regulation. The official vocabulary (deficit, debt, transfer payment, tax, borrowing), he says, is vulnerable to official manipulation and off-the-books deceit. He calls it “Enron accounting.” He also calls it a lie.

Things are not necessarily going to get economically prettier. I am quite sure, yet with limited knowledge, we must somehow open our eyes to certain realities beyond, as Hathaway says, the status quo.

Keep looking, keep learning, and try to convince yourself that keeping the scoundrels in power, who augmented (often intentionally) this economic disorder, is highly unintelligent, and a sign we’ve stopped thinking.

With hope for greater community, greater freedom, greater compassion,

Pete

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3 Responses to “INSIDE JOB: The Good, The Bad, The Ugly—these liars have no currency”

  1. Jason Goode says:

    Great article.

    I’m left with the same question that I always struggle with when I face the kind of stuff that you’re sharing:
    What do I do? Not in a “how do I make the world better sense”, but rather in a “if the economic system is going to hell in a hand basket how do I protect my family”?

    Perhaps I’m just reading too many dystopian-future novels…

    But seriously. What steps have you taken?

    ~Jason

  2. philip mccormack says:

    Hi Jason
    I don’t think my son (Pete) would talk about how he is protecting his family but there again I have no definite reasons for writing this. Go to Google The Daily Bell and or read Harry Browne “How I became Free in an unfree world. If you want to understand real economics
    http://www.professorfekete.com/moneycredit.asp and it is free. Happy days Philip

  3. philip mccormack says:

    Hi Petesy, Excellent job. The part of the article on schools of economics in the US was a sharp reminder of what the profs will do for money. It is very little different in Canada, grants from central banks lead to abysmal economic papers. Its amazing, but perhaps not, unless you are mainstream the chances of a Nobel prize are close to zero. 10.52 Time for bed. Love Dad

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