My reasoning for a negative view on the prospects of a sustained recovery

[AllentownJake]

Two words, Human Nature.

The sector that created the crisis, the financial sector, has had no meaningful reforms passed, and they have purchased everyone in a position of Government that might be able to move them from a parasitic organism to a symbiotic organism in the economy. That and the ones who weren't bought, have been scared to death about their overall "importance."

Add to that in the instances they clearly broke what was left of existing laws, we looked forward. I love that looking forward thing. You clearly broke the law and pretty much put the entire nation into suffering, but we feel it would be bad for you to live with the consequences of such actions, hell we are even going to leave you in the same position to do it again, oh and you profited from doing it so I'm sure you learned your lesson not to do it again.

2009 was a record year for these people, and as someone who is a graduate of a management training program for one of the Fortune 500 firms in the industry, I know these people rather well, I was one of them.

The reason 2009 was a record year for these people, is they were handed a bunch of free money by the government. They really didn't have to work that hard to be profitable. Hell hand me a bunch of free money and let me hide my past losses from the previous year with accounting rule changes and it would take a great deal of incompetence on my part not to be profitable (Citigroup cough, cough). They were given great bonuses and while others were being massacred in the employment downturn, they were thriving fed on free money.

I know these people. Generally speaking, the ones that reach the top are sharks. Their appetites are never satisfied and they will go to great lengths to get their next meal, which must be bigger than their last meal. They aren't the sharing type, unless they think sharing will benefit them in some way. Pretty much take the worst aspects of humanity and concentrate it in one industry and you got Financial Services. Imagine a room full of spoiled 3 year old children that has never been disciplined and you have the Financial Service industry. The mere talk of discipline or rules makes them go into a temper tantrum and like any 3 year old, when they are told no more cookies and the cookie jar is left in the middle of the room, unprotected, they are going to get those fucking cookies.

They are going to have a difficult time topping 2009, I mean topping being handed over a trillion dollars by the US Treasury department and the Federal Reserve isn't going to be easy. Just like making money in the stagnant economy we had from 2001-2007 wasn't really easy, ethically speaking.

The government has lost the ability to keep feeding them, without dire political consequences and economic crisis on their own.

So, fully knowing these people, having been amongst them for five years, and fully knowing how they react when times get tough, it is pretty easy to predict what they will do. What they did last time. Commit fraud, do ridiculously unethical things, go on a rampage destroying everything in their path. They want their fucking cookies.

My prediction, they crash the economy again, trying to get their fucking cookies because no one was spanked (hell they were barely scolded) for eating all the cookies the last time and the parents don't have the common sense to put the cookies on a shelf or watch the 3 year old.

[cilla4progress]

1. Sounds like U.S. government needs ...

SUPERNANNY!!!

[AllentownJake]

2. Campaign Finance Reform and Election Reform

We've returned to 19th century politics where the ability to buy votes through media ad buys has become easier than actually being an effective government, as such, the GOP and DNC economically speaking appear remarkably similar.

The good news is the Supreme Court has just sped up systemic collapse, as opposed to the slow burn we've had over the past 30 years.

McCain Feingold was always somewhat of a joke. The congress critters stripped the reform out of it before it got a floor vote. However it gave the illusion of reform which is more danger than no reform.

At least now, the problem is right out there in the open uninhibited.

[cilla4progress]

3. Good points, AJ.

I'm finally finishing Howard Zinn's masterpiece, and it's amazing that we're stuck in the same cycles as the crash of '93 (that would be 1893), etc. Same dynamics: bankers fleecing, corporate theft, collusion, graft, corruption, anti-union.

[AllentownJake]

4. It's like Battlestar Gallactica

This has happened before it will happen again.

Middle Class is impoverished, rich get less money, middle class organizes for reforms, middle class prospers the rich prosper, people who organized for reform die, children get greedy rich want middle class assets, reforms go away, middle class impoverished....

[varelse]

5. It's good to see you posting here again

If our pseudo-democracy now lacks the ability to feed these sharks, aren't they likely to try to tear it down completely and set up a government more to their liking?

[AllentownJake]

6. They'll start eating each other

Which is what ignited the collapse of 2008. They ran out of fish to eat.

What people don't understand about the Sharks, is that they are rather content to leave each other relatively alone as long as there are plenty of fish out there to eat. It is impossible for them to conspire for long, because once they've eaten the fish, they always will eat each other.

Sharks in nature are cannibals as are the financial service peeps.

They have set their site on governments (Greece, Dubai, Spain, Portugal, Italy etc) which is part of the process of eating their own. I expect them to start taking each other down sooner rather than later. Remember there is a revolving door in government and finance, the PIIGs are no different than the US in them regards.

[varelse]

7. Is it sad that I'm actually very relieved to see your answer?

So selfish of me :(

Isn't Dubai already pretty much toast at this point?

[AllentownJake]

11. I think they were bailed out by the U.A.E.

Which I'm sure got something for doing so.

Greece will be interesting. The Eurozone has to find a way to prevent Greece from collapsing without igniting worse behavior in Spain, Portugal, Italy, and Ireland.

It is the biggest test of a United Europe currency since it was developed.

Their best bet is to come down hard on them and take the hit. A bailout in my opinion would look for Spain, Portugal, Italy, and Ireland to totally abandon any attempts to contain their own crisis.

Of course, failing to bail them out, might lead to higher interest rates in those countries causing them to collapse.

They are honestly looking at the situation the US Government was looking at in 2008 with the Too Big to Fails. The problem goes back to, when times were good and growth was booming the Eurozone was less stringent on enforcing their rules on debt to member nations.

The US will be experiencing similar problems soon in 7 states.

[varelse]

12. What happens to Europe's much-vaunted social services and single-payer health care then?

Isn't it under threat because of this crisis?

[AllentownJake]

14. Not really that sure

cutting those things, will result in riots. I wouldn't want to do that in France if I was in government. They have a history of reaction to such things as does Germany, and Italy, and oh hell the entire continent.

[varelse]

23. That's actually good, because it could serve as a deterrent (nt)

[AllentownJake]

25. I don't think anyone wants another Napolean, Hitler or Mussolini

Europe's temper tantrums during economic crisis are pretty fucking destructive.

[jotsy]

8. Yes, we are introduced to the benefits of selfishness at a young age.

Perhaps I'm silly, but I like to think that by the time we're grown up its among those things we grow out of; that sooner or later some experience or pivotal moment, whether it be consequence or a dawning, guides us and our ethical barometers based on what's equitable or fair, as part and parcel to a collectives well being.

But to deem it as human nature is a place it would disappoint me to have to go. When the ruthless are so rewarded, well then I have to contend that its conditioning that has us believing the only way to stand tall is to step on everybody else.

As for the recovery Mr. Jake, I don't see it coming anytime soon either, but I'm not sure if we wait to bottom out, that no matter how hard we kick to get back up to a breathable air, we will have suffocated by the time we reach the surface. There must be a way for this public to un-tether itself from what causes it to sink.

That's a kick, tyvm.

[buzzard]

9. I came across this article and I see another big default by banks if the bets are wrong once again.

I am not an economist so maybe my understanding of this is wrong but it seems to me that these derivatives are something that should be regulated and not allowed to be held by regular banks, it reminds me of the old bucket shops.

http://www.safehaven.com/article-15712.htm

"Ben Bernanke, the nation's leading bank regulator, did not understand that banks could not honor trillions of dollars of claims once the defaults occurred. It was the CDS market that left Bear, Stearns; Lehman Brothers; Goldman, Sachs; and AIG either insolvent or close to it.

Today, galloping derivative growth has moved to interest-rate protection. The fear is of a government bond bubble. Ten-year Treasury bonds yield 3.7% during the greatest money-printing experiment in the nation's history. Investment managers are protecting themselves against a higher 10-year Treasury yield. (With interest-rate derivative contracts, banks will have to pay the purchasers if rates rise to a specified level.)

During the first six months of 2009, the volume of contracts offering protection against rising yields of Treasury bonds with maturities of 5 years or longer rose from $109 trillion to $150 trillion. When rates rise, banks may once again default on their commitments."

[AllentownJake]

13. A derivative is an insurance product

Look to the 19th century life and property insurance issues to what happens when you don't regulate an insurance product. With a major bigger catastrophic exception.

Essentially you create a Ponzi scheme. Banks take on more risk, because they are "insured" initially the event they are insuring themselves against is highly unlikely to happen. The insurer looks at the probability of the event and realizes it can pretty much pocket the premiums.

On the higher likelihood events (a small uptick on interest rates) the "insurer" can cover their bets.

On the lower likelihood events (Sovereign debt default, collapse of the mortgage industry, etc) the insurer has no chance in hell of covering the events.

Unlike property and casualty insurance or life insurance the very act of offering the insurance increases the likelihood of the event.

If you think your risk is "insured" you are more likely to be cavalier about taking it and you can justify to your creditors your taking it.

Essentially, the derivatives encourage people to smoke in bed on a flammable mattress because they think their house is insured.

If the products were better regulated they would be priced appropriately and reserves would be required.

[buzzard]

10. Delete duplicate

[hayu_lol]

15. Right on target Allentown. Perhaps what we need right now...

is another Theodore Roosevelt and his policy of speaking softly and carrying a big stick. Our bankers and stockbrokers and their ILK need a good dose of the stick. Perhaps garnish all their ill-gotten gains, bundle their stacks of dollars, and then put the money on pallets to give away as we did in Iraq. Drive trucks to the town squares and just give away bundles of money.

Some of these overpaid dandys need a bit of contemplative time in one of our modern prisons. Shame that it will never happen.

There will be no recovery until we have our jobs back. Those jobs with living wage salaries/hourly rates that will allow families to live again.

[AllentownJake]

16. It is amazing how much better people start to behave

when one or two of them are taken out of the Hamptons and moved into a federal prison.

[laughingliberal]

17. Imagine the reforms we could get if only the Democrats had a majority!

Oh...wait...

BOHICA

[AllentownJake]

19. The funny thing was

watching the Dems in congress getting upset with the silly reforms Barack proposed over the summer, I mean it really was the weakest thing you could do and still claim you did something (I see a pattern).

Here is what the silly democratic congress critters fail to understand about big business. They always hedge their bets, that is what the entire last blow-up was about. They thought they had a win-win and on paper or rather excel they did. People either pay ridiculous interest rates on their mortgages or they default and we are made whole with derivatives.

What they didn't realize is the people writing the insurance policies thought they had a win-win as well (which is rather silly, because they were in fact writing the policies themselves and they knew they couldn't pay them if things went bad, I guess they made the assumption the guy selling them shit was selling them gold and they were selling the shit)

Back to hedging their bets, the minute the GOP appears to have electoral viability, Wall Street will make it rain on them like the number one draft pick does on a stripper after signing his contract.

[Fumesucker]

18. I'm reminded of the description of Wall Street types in the book "Liar's Poker"

http://en.wikipedia.org/wiki/Liar's_Poker

The book's main contribution to literature and history is its unflattering, but accurate, portrayal of Wall Street traders and salesmen, their personalities, their beliefs, and their work practices.

During the training sessions, Lewis was struck by the infantilism of most of his fellow trainees. Examples include, but were not limited to: yelling and insulting financial experts who talked to them, calling phone sex lines and then broadcasting them over the company's intercom, gambling on every perceivable thing (including how long it took certain trainees to fall asleep during lectures), and their incredible lust for money and contempt for any position or job that didn't make that much.

Lewis attributed their behavior to the fact that the trading pit required neither finesse nor advanced financial knowledge, but rather, the ability and desire to exploit others' weaknesses, intimidate other people into listening to you, and generally the ability to spend hours a day screaming orders under high pressure situations. He referred to their worldview as "The Law of the Jungle."

He also noted that, although most arrivals on Wall Street studied economics, this knowledge was never used—in fact, any academic knowledge was frowned on by traders.

Lewis also attributed the Saving and Loans Scandal to the inability of small-time, provincial bank managers to compete with Wall Street. He noted that people on Wall Street are experts at fleecing and taking advantage of ignorant people, which the Savings and Loan banks provided in abundance.

[AllentownJake]

20. That about sums them up accurately.

Left out the cocaine though. Never did it myself, however the addiction to one of the most expensive illegal substances is a huge part of Wall Street and Financial Service culture.

[Fumesucker]

21. Cocaine's a hell of a drug.. -Dave Chappelle

[Overseas]

22. K&R. Well said. //nt

[WestSeattle2]

24. Have you read "Too Big to Fail" by Andrew Ross Sorkin? n/t

[AllentownJake]

26. Yes

and Sorkin is nicer to them, than what they really are.

He's particularly nice to Paulson who everyone should remember, was in charge of the worst offender when this scam was being created.

[WestSeattle2]

27. I'm reading it now and find it fascinating. The level of greed,

fraud and corruption is breathtaking. The fact that these crimes, and I will go so far as to use the term "crimes against humanity", will largely go unpunished, I think speaks to the iron grip these criminals have on our federal government. The magnitude of the laws broken, the millions of innocent lives impacted and literally destroyed, and the perps are right back at the trough with their greedy little hands out demanding "bonuses".

This country, specifically its political and business class, is seriously flawed. When those at the top are so ethically and morally vacuous, I'm beginning to doubt it can be fixed.

[AllentownJake]

28. Pretty much the French/Russian/German Aristocracy prior to the revolution

This play never has a good ending.

[DemReadingDU]

29. Anymore, I just tell people we are living in Ponzi world

and it's gonna implode. Just like Bernie Madoff's victims believed in his financial Ponzi until it imploded, so too will the majority of people believe in the 'recovery' until the world Ponzi implodes. Nothing continues forever.

I'm glad you're posting here again.