[R-G] [BillTottenWeblog] Evil Syndicated

[Bill Totten]

Clusterfuck Nation 

by James Howard Kunstler

Comment on current events by the author of
The Long Emergency (2005)
 
www.kunstler.com (July 27 2009)


By now, everyone in that fraction of the world that pays attention to
something other than American Idol and their platter of TGI Friday's
loaded potato skins knows that Goldman Sachs has been caught at another
racket in the stock market: front-running trades. What a clever gambit,
done with the help of the markets themselves - the Nasdaq in particular -
in which information on trades is held back a fraction of a second from
public view, while the data is shoveled to the computers of privileged
subscribers who can execute zillions of programmed micro-trades before the
rest of the herd makes a move. This allows them to vacuum up hundreds of
millions of dollars by doing absolutely nothing of value.  The
old-fashioned method used by brokers was called "churning", in which
stocks were bought and sold incessantly (by phone) from the portfolios of
inattentive clients merely to generate commissions.  In any sensible
society - that is, a society with an instinct for self-preservation - it
would be against the law and the people doing it would be sent to prison.

I'm not a lawyer, but I've got to think that the actions at the Nasdaq end
- shoveling the data to the privileged subscribers a fraction of a second
early - is patently illegal in the first place, since the whole purpose of
an exchange is to create a fair trading space. Where both parties are
concerned, it should amount to a plain vanilla criminal conspiracy to
commit stock trading fraud. Maybe the larger question is: since when did
we become a society lacking the instinct for self-preservation - that is,
a society bent on suicide?  Or maybe the question is better put to Goldman
Sachs's CEO Lloyd Blankfein.

Since this racket was made public, there has been chatter all over the Web
about how angry the American public is about Wall Street in general, and
increasingly about Goldman Sachs in particular.  Nobody has summed it up
better than Rolling Stone's Matt Taibbi, calling the company "... a great
vampire squid wrapped around the face of humanity, relentlessly jamming
its blood funnel into anything that smells like money". And Taibbi's
fierce article about Goldman Sachs came out weeks before this latest
outrage. As we turn the corner toward autumn, President Obama looks
increasingly like a dupe, a tool, or a co-conspirator of Goldman Sachs.
If he doesn't instruct the Justice Department to commence investigations
of the company, and if he doesn't dissociate himself from their alumni
hanging around the White House, the Treasury Department, and elsewhere in
the government, he's going to become the object of an awful public wrath.
Obama has no other choice at this point except to clean house - to fire
Larry Summers, Robert Rubin, Tim Geithner, and all other former Goldman
Sachs employees in positions of power and influence around him.

Actually, it's not necessary for the whole general public to be fed up
with this situation.  According to the Pareto eighty-twenty rule, it only
takes one-fifth of the public to set social actions in motion, and only
one-fifth of that one-fifth to do the heavy lifting.  I think we've
reached that point.  The sentiment is now overwhelmingly tipped against
Goldman Sachs (and Wall Street generally) and the only questions are
whether the President of the US ends up lumped in with them, and whether
we'll see orderly prosecutions or disorderly persecutions.  At this point,
it even begins to look as though Mr Obama is taking cover behind the
health care reform debate to avoid answering for his government's
association with Goldman Sachs.

The trouble is, if the thoughtful and trustworthy members of the "Pareto
twenty percent" don't stir themselves into action over Goldman's behavior,
then sooner or later the thoughtless and reckless will take over.  Bill
Moyers hosted a fascinating report on his most recent podcast about the
savagery of right-wing broadcasting and how it had led, in one instance,
to the murder of a doctor who performed abortions. What bothers me is
that, sooner or later, the conduct of Goldman Sachs will lead the growing
ranks of the unemployed, foreclosed, disentitled, and hopeless into the
hands of a savage right wing seeking mindless vengeance, for instance,
against "the Jews", (as represented by Goldman Sachs), or brown-skinned
people (as embodied by a vilified president).

Readers of this blog know I'm allergic to conspiracy theories. But
surveying the scene out there, it is hard to not conclude that Goldman
Sachs has become the "front-runner" of a criminal syndicate defrauding US
taxpayers.  This isn't the first time in American history that business
veered into extremely antisocial behavior on the grand scale.  The last
quarter of the 19th century was just as bad, with frauds, swindles,
sociopathic trusts, and predatory corporations preying on people trying
desperately to make an honest living.  Then, one summer day in 1901, a
factory drone named Leon Czolgosz stepped up to President William McKinley
in a reception line at the Buffalo World's Fair and plugged him twice in
the abdomen. (Czolgosz liked to think of himself as an "anarchist", a
then-fashionable ideology among the simmering powerless.) Eight days
later, McKinley expired and Teddy Roosevelt became president - to the
extreme chagrin of the Republican business establishment - "... now that
damned cowboy is in the White House!" cried Republican national leader
Mark Hanna of Ohio.

He was correct to be nervous.  TR turned the corporate world upside down
with reform, from dismantling monopolies to establishing the cabinet
departments of Commerce and Labor, to bringing the new food industry under
regulation.  This naturally leads me to wonder if or when Barack Obama
will have his TR Moment, when he stands up to the large malign forces
operating arrantly in the daily life of this nation.  I get volumes of
email complaining about Mr Obama.  The writers behind them seem, on the
whole, crankish, cynical to an extreme, and not very trustworthy observers
of the scene. But I begin to sympathize with them.

In the meantime, the US economy gives the illusion of recovery - but to
what?  Back to a "consumer" credit card shopping orgy?  Another
house-buying fiesta? I don't think so.  Households are drowning in debt.
They're using their credit cards, if they still can, to buy staple foods.
Those are the lucky ones who still have lines of credit left.  Soon, many
of these families won't even amount to households because they won't have
a house.  There is absolutely no way we are going back to that particular
bubble economy.  The only bubble left is the government debt bubble, now
leading to such extravagant excess that it can only end up wrecking the
government, and perhaps American society with it.  In the meantime, how
much remaining wealth is Goldman Sachs and its cohorts vacuuming off the
floor?

Also meanwhile, oil is heading back to the $70 range (with the dollar
shedding basis points).  That's the oil price range where the economy
begins to get wrecked all over again - that is, whatever remains of the
economy.  That's the price range where airlines go back to the intensive
care unit and citizens have to max out their credit cards to buy
gasoline.  We're moving toward a very hard landing and very soon.

_____

My new novel of the post-oil future, World Made By Hand, is available at
all booksellers.

http://kunstler.com/blog/2009/07/evil-syndicated.html


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