Shooter7
Aluminum
- Joined
- Mar 6, 2009
- Location
- Northern CA, USA
I find the reaction, amongst successful and semi-successful individuals within the REAL sector of the economy, to the OWS movement to be particularly baffling. By the real economy, I am talking about what we do, along with construction, ag, mining, tangible services, etc. You know...the type of economic activity that MADE America.
Of course, the leaders of small to medium sized manufacturing (as well as construction and ag) focused businesses tend to be conservative, so some a negative reaction the image portrayed by OWS is to be expected. But the knee jerk reaction to OWS goes far beyond that. It has been to tune out their message entirely, and dismiss them as spoiled, envious socialist loser hippies who are lazy. The next step is to make conclusions about what the OWS message is, without even listening to what is being said.
I hear things like this all the time...
And yet, over and over again, the #1 'lead-off issue' of OWS is the capture of our political leaders, policy makers, and regulatory agencies by the corporate elite, and the financial sector specifically. And this is an excellent point.
I can cite two examples within the last month that provide strong evidence that this is a real problem that must be addressed for the long term economic health of the US:
1. CitiGroup front ran a group of their own clients (of course on Wall Street...every 'client' is a potential sucker asking to get screwed) on a CDO deal where CITI was the counter-party/seller (not known to the buyer/clients) looking to unload this crap before it went to zero. So they sold something like $1.2B in CDOs to their customers, never disclosing that they were on the opposite side of the trade, and never disclosing the true quality of the financial instruments they were selling. CITI made $285M, and the buyers eventually lost $700 million. After years of negotiations, the SEC struck a deal with CITI. $95M in penalties, no admission of wrongdoing, and no criminal prosecution. THAT is regulatory capture. The SEC investigators/prosecutors (lawyers) don't want to be too hard on CITI...because they are all gunning to get a job with the high end law firms that represent CITI...hence the sweetheart deal. Where is the outrage? Even worse is the fact that CITI has done this 1/2 dozen times...and the SEC keeps letting them off the hook! What does letting CITI commit fraud have to do with conservative values like hard work and the rule of law? Since when is the core value of America deception and theft. Thank god US District Court Judge Jed Rakoff put a stop to this...gave the SEC the finger...and threw out the settlement. In my view, CITI should be penalized in an amount that put them in the position the would have been in if they had properly disclosed what they were selling. In other words...they should be penalized $700M...which happens to be what the institutions they defrauded lost.
2. MF Global. 2 weeks ago, farmers and ranchers across the nation got a shock when they tried to execute commodities transactions (selling forward futures to lock in prices, or hedging risk) only to find that their accounts were frozen. Why? Because MF Global, the parent company of their brokers, STOLE their inactive funds to try double down on losing bets they had made on their own proprietary leveraged trading position in EuroZone debt/bonds. And yet, the only legal action with respect to MF Global THEFT has been to question the ratings agencies, which rated MF Global positively right up till the end. I guess the US Gov is still pissed about the SnP downgrade. Oh...and who was the head MF Global thief? Ex Goldman, ex Us Sentate, ex New Jersey Governor John Corzine. When you are in the club...you get free pass on a $1.2$ theft (the current estimate of how much MF Global stole from their clients...) Again...no action from the SEC...no action from the CFTC...no action from the Department of Justice. Nothing....
Where is the outrage? Why do people who actually make and create things in their business lives not recognize the vast difference between what these criminals in the financial sector do, and what they do?
I have been wondering what explains the lack of resonance of the OWS message amongst people who are engaged in actually adding economic value. About the only thing I can come up with, is the fact that people like to think of themselves is a positive light. They light to think themselves super successful. They see OWS protesting a certain segment of society which is no doubt VERY successful, so people, in a subtle way, are prone to think of themselves as part of that very same segment of the societal-economic heirarcy. The knee jerk dismissal of OWS follows immediately.
Or perhaps we have just become so morally bankrupt, and so enamored of the ultra-rich, that we are willing to condone whatever actions they took to gain their wealth....
The scary part, is it could not be further from the truth. About 1/4 of the activity in the financial sector IS necessary, and that is related to capital formation, finance, credit, etc, in support of aforementioned real economic value added activity. But the bulk of it is zero sum gain activity that has been enabled by the most massive credit expansion the world has ever seen.
Now that the credit cycle has turned, the only way the financial sector can maintain the 75% of its activity that adds no economic value, is to essentially consume the real economy...which is essentially what they are doing. Actually...they have been doing it for 20 years..but the pace is increasing. There have been endless threads on this site about this. Goodwill is monetized, and the value added portions of production are shifted to overseas economies. In the short term, the results are positive to the bottom line, and the long term results are only starting to be felt. But there is another dynamic at work, and that it the capture of paper wealth.
One way in which this happens, is as follows. There are currently 21 primary dealers that can borrow FED direct:
Bank of Nova Scotia, New York Agency
BMO Capital Markets Corp.
BNP Paribas Securities Corp.
Barclays Capital Inc.
Cantor Fitzgerald & Co.
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Daiwa Capital Markets America Inc.
Deutsche Bank Securities Inc.
Goldman, Sachs & Co.
HSBC Securities (USA) Inc.
Jefferies & Company, Inc.
J.P. Morgan Securities LLC
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Mizuho Securities USA Inc.
Morgan Stanley & Co. LLC
Nomura Securities International, Inc.
RBC Capital Markets, LLC
RBS Securities Inc.
SG Americas Securities, LLC
UBS Securities LLC.
Currently, they can borrow fro the FED at close to 0 percent. In addition, these same parties, or associated parties within the financial sector elite, are privy to advance notice of FED future policy. For instance, the FED floated the idea of "Operation Twist" to select private parties months before they floated the idea publicly. Now think about this. You can borrow money from the FED at 0-.25%. You have advance notice of major economic policy events well ahead of the public. Finally...short term financial trading is a zero sum game. The net result of this is outright THEFT. A primary dealer secures financing at very low to zero rates, trades on inside info. When it is all said and done..they give back the borrowings that they used to make a trade...but they keep the profits. Think about their counterpart. They did not have the same info. If they did...they would not have made the trade! THEY were essentially robbed. That party might have been your pension or retirement fund. This is what is going on in this nation. This is how inequality is skyrocketing it has nothing to do with hard work, smarts etc. It is like playing Texas Hold Em against a player that gets as many free chips on the house as he wants...AND he knows what the flop, turn and river cards are before they are turned over...
Those of us in the real economy have to realize that the financial sector is now actively engaged in monetizing what is left of the productive sectors of the economy to sustain its position, and paper wealth. While the owners of small to medium size mfg and construction companies may want to think of ourselves as being in the 1%...THEY ARE AT THE OPPOSITE SIDE OF THE SPECTRUM FROM THE WALL STREET BANKERS! The bankers and financial elite are consumers/parasites and we are creators. It is NOT rich vs. poor. It is the real economy vs the financial economy.
The OWS has not quite figured this out yet...and they need to. They may now know exactly what the stench is...but they are pretty much on the money with regards to identifying its source.... Most successful people in the REAL economy are absolutely clueless about the dynamic of what is going on. They need to wake up and realize that their gut instinct to defend this other successful group is nothing more than suicide. They are not like us...and they are going to literally eat us alive while we defend them. The US is currently hacking off its own limbs, and eating them.
We need to stop dismissing the message based on our preconceptions and prejudices about the messengers...
Of course, the leaders of small to medium sized manufacturing (as well as construction and ag) focused businesses tend to be conservative, so some a negative reaction the image portrayed by OWS is to be expected. But the knee jerk reaction to OWS goes far beyond that. It has been to tune out their message entirely, and dismiss them as spoiled, envious socialist loser hippies who are lazy. The next step is to make conclusions about what the OWS message is, without even listening to what is being said.
I hear things like this all the time...
"These OWS have been indoctrinated to the point that they are like robot drones, Government good... liberty bad....Democrat good....Republican bad....High Taxes good......financial freedom bad....Regulation good.....independence bad.....Socialist good.......TEA Party bad….What do they teach them in college again?"
And yet, over and over again, the #1 'lead-off issue' of OWS is the capture of our political leaders, policy makers, and regulatory agencies by the corporate elite, and the financial sector specifically. And this is an excellent point.
I can cite two examples within the last month that provide strong evidence that this is a real problem that must be addressed for the long term economic health of the US:
1. CitiGroup front ran a group of their own clients (of course on Wall Street...every 'client' is a potential sucker asking to get screwed) on a CDO deal where CITI was the counter-party/seller (not known to the buyer/clients) looking to unload this crap before it went to zero. So they sold something like $1.2B in CDOs to their customers, never disclosing that they were on the opposite side of the trade, and never disclosing the true quality of the financial instruments they were selling. CITI made $285M, and the buyers eventually lost $700 million. After years of negotiations, the SEC struck a deal with CITI. $95M in penalties, no admission of wrongdoing, and no criminal prosecution. THAT is regulatory capture. The SEC investigators/prosecutors (lawyers) don't want to be too hard on CITI...because they are all gunning to get a job with the high end law firms that represent CITI...hence the sweetheart deal. Where is the outrage? Even worse is the fact that CITI has done this 1/2 dozen times...and the SEC keeps letting them off the hook! What does letting CITI commit fraud have to do with conservative values like hard work and the rule of law? Since when is the core value of America deception and theft. Thank god US District Court Judge Jed Rakoff put a stop to this...gave the SEC the finger...and threw out the settlement. In my view, CITI should be penalized in an amount that put them in the position the would have been in if they had properly disclosed what they were selling. In other words...they should be penalized $700M...which happens to be what the institutions they defrauded lost.
2. MF Global. 2 weeks ago, farmers and ranchers across the nation got a shock when they tried to execute commodities transactions (selling forward futures to lock in prices, or hedging risk) only to find that their accounts were frozen. Why? Because MF Global, the parent company of their brokers, STOLE their inactive funds to try double down on losing bets they had made on their own proprietary leveraged trading position in EuroZone debt/bonds. And yet, the only legal action with respect to MF Global THEFT has been to question the ratings agencies, which rated MF Global positively right up till the end. I guess the US Gov is still pissed about the SnP downgrade. Oh...and who was the head MF Global thief? Ex Goldman, ex Us Sentate, ex New Jersey Governor John Corzine. When you are in the club...you get free pass on a $1.2$ theft (the current estimate of how much MF Global stole from their clients...) Again...no action from the SEC...no action from the CFTC...no action from the Department of Justice. Nothing....
Where is the outrage? Why do people who actually make and create things in their business lives not recognize the vast difference between what these criminals in the financial sector do, and what they do?
I have been wondering what explains the lack of resonance of the OWS message amongst people who are engaged in actually adding economic value. About the only thing I can come up with, is the fact that people like to think of themselves is a positive light. They light to think themselves super successful. They see OWS protesting a certain segment of society which is no doubt VERY successful, so people, in a subtle way, are prone to think of themselves as part of that very same segment of the societal-economic heirarcy. The knee jerk dismissal of OWS follows immediately.
Or perhaps we have just become so morally bankrupt, and so enamored of the ultra-rich, that we are willing to condone whatever actions they took to gain their wealth....
The scary part, is it could not be further from the truth. About 1/4 of the activity in the financial sector IS necessary, and that is related to capital formation, finance, credit, etc, in support of aforementioned real economic value added activity. But the bulk of it is zero sum gain activity that has been enabled by the most massive credit expansion the world has ever seen.
Now that the credit cycle has turned, the only way the financial sector can maintain the 75% of its activity that adds no economic value, is to essentially consume the real economy...which is essentially what they are doing. Actually...they have been doing it for 20 years..but the pace is increasing. There have been endless threads on this site about this. Goodwill is monetized, and the value added portions of production are shifted to overseas economies. In the short term, the results are positive to the bottom line, and the long term results are only starting to be felt. But there is another dynamic at work, and that it the capture of paper wealth.
One way in which this happens, is as follows. There are currently 21 primary dealers that can borrow FED direct:
Bank of Nova Scotia, New York Agency
BMO Capital Markets Corp.
BNP Paribas Securities Corp.
Barclays Capital Inc.
Cantor Fitzgerald & Co.
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Daiwa Capital Markets America Inc.
Deutsche Bank Securities Inc.
Goldman, Sachs & Co.
HSBC Securities (USA) Inc.
Jefferies & Company, Inc.
J.P. Morgan Securities LLC
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Mizuho Securities USA Inc.
Morgan Stanley & Co. LLC
Nomura Securities International, Inc.
RBC Capital Markets, LLC
RBS Securities Inc.
SG Americas Securities, LLC
UBS Securities LLC.
Currently, they can borrow fro the FED at close to 0 percent. In addition, these same parties, or associated parties within the financial sector elite, are privy to advance notice of FED future policy. For instance, the FED floated the idea of "Operation Twist" to select private parties months before they floated the idea publicly. Now think about this. You can borrow money from the FED at 0-.25%. You have advance notice of major economic policy events well ahead of the public. Finally...short term financial trading is a zero sum game. The net result of this is outright THEFT. A primary dealer secures financing at very low to zero rates, trades on inside info. When it is all said and done..they give back the borrowings that they used to make a trade...but they keep the profits. Think about their counterpart. They did not have the same info. If they did...they would not have made the trade! THEY were essentially robbed. That party might have been your pension or retirement fund. This is what is going on in this nation. This is how inequality is skyrocketing it has nothing to do with hard work, smarts etc. It is like playing Texas Hold Em against a player that gets as many free chips on the house as he wants...AND he knows what the flop, turn and river cards are before they are turned over...
Those of us in the real economy have to realize that the financial sector is now actively engaged in monetizing what is left of the productive sectors of the economy to sustain its position, and paper wealth. While the owners of small to medium size mfg and construction companies may want to think of ourselves as being in the 1%...THEY ARE AT THE OPPOSITE SIDE OF THE SPECTRUM FROM THE WALL STREET BANKERS! The bankers and financial elite are consumers/parasites and we are creators. It is NOT rich vs. poor. It is the real economy vs the financial economy.
The OWS has not quite figured this out yet...and they need to. They may now know exactly what the stench is...but they are pretty much on the money with regards to identifying its source.... Most successful people in the REAL economy are absolutely clueless about the dynamic of what is going on. They need to wake up and realize that their gut instinct to defend this other successful group is nothing more than suicide. They are not like us...and they are going to literally eat us alive while we defend them. The US is currently hacking off its own limbs, and eating them.
We need to stop dismissing the message based on our preconceptions and prejudices about the messengers...