What If the Banksters KNEW That They Were Creating a Bubble Economy That Would End in Recession?

[McCamy Taylor]

This is a follow up to my journal “How America’s Leaders Learned the Wrong Lesson from the Japanese Bubble” if which I describe how American economists predicted that Bush era fiscal policies would lead to a Japanese style recession.

http://journals.democraticunderground.com/McCamy%20Taylor/578

Lately, I keep asking myself:

1.“Were the Banksters incompetent (in which case why did we bail them out? Why not get rid of them and replace them with smart people)?”

2. “ Were the Banksters greedy (in which case, why aren’t they in jail)?”

3. “Or were the Banksters part of an orchestrated plan to roll our country back to the days before FDR---i.e. the Great Depression, when the rich got richer and the working class got screwed?”

It’s that last one that worries me, because there really is a right wing conspiracy in this country, just as Hillary said. And its stated goal is to take us back to the way we were before FDR. Google “New Federalists” if you do not believe me.

While ignorance of the law is no excuse, business leaders love to claim ignorance of economic laws as their excuse for royally fucking up our economy. But honestly, could anyone with an MBA from Harvard really be that stupid? If you saturate the market with money while restricting the supply of goods, the prices of everything with rise through the roof. If you suddenly cut off that money supply---as the Banksters did in our country, right after their massive bailout---the prices of the stuff you are still paying for will bottom out, and you will find yourself up to your eyeballs in debt. And the Banksters who now have all your money will see their buying power go through the roof.

I witnessed this first hand in the simulated economy of one of the MMORPG (massively multiplayer role playing games), Final Fantasy XI. Currency in that game is called “gils”. Several years ago, gil sellers appeared, folks who would sell a few million gils to players for a little bit of real life cash. The gil sellers were poorly paid people in other countries like Vietnam, who would play for hours at a time, cornering the market in rare items (the equivalent of limited natural resources in the real world), which they would then turn around and sell at inflated prices. Supply was kept low---they would destroy most of what they obtained. With demand high and “free” money so plentiful, inflation became a major issue in the game. Items that once sold for 50,000 gil would now sell for 5,000,000. That in turn fueled players’ demands for more “free” (or at least cheap) gils, which they purchased from the gil sellers. It was a never ending cycle---

Until Square Enix, the producers of the game, suddenly decided to throw the moneylenders out of the Temple. Gil sellers were banned. All that “free” money vanished. The supply of natural resources returned to normal. And suddenly, people found that the 7,000,000 gil armor (the game equivalent of your house) that they had worked so hard to buy was only worth 70,000. Those who had invested their gil in stuff were now bankrupt. Those who had sold stuff during the bubble economy were now richer than ever, because their gils would buy a whole lot more stuff.

That’s what happened in Japan. And that’s what happened two decades later in the U.S. And I can not rid myself of the suspicion that the same folks were involved. What better way to get rich than to inflate the prices of your “stuff”----your oil, your real estate, your stock----sell it to a bunch of suckers who buy it at super high prices using borrowed money, and then sit back and enjoy your newfound wealth when the bubble bursts and all your millions or billions suddenly have ten times the buying power that they did before. That is the “greed” model.

And then there is the “corporate fascist coup” model, in which folks who are already as rich as sin decide that they want more than billions. They want the rest of us to kneel down before them and kiss their boots. And the easiest way to make the working class your dog is to make it poor, unemployed and desperate. You do that by taking away their real wealth (their homes), taking away their jobs (by denying credit to small businesses) and taking away their hope (by buying up the next election).

Some one tell me that I am wrong.

[mrcheerful]

1. What do you mean if? They were betting on it.

[kentuck]

2. What if they didn't know??

They knew they were playing with fire.

[JuniperLea]

3. Clearly the bubble was part of the plan...

They counted on those actions so they could rob us of more money.

[Warren Stupidity]

Read The Big Short and Griftopia

of course they knew. They aren't stupid.

[Demoiselle]

6. Or....just research the term "short sale."

it's a fine old Wall Street term. I'd like to think that financial types used to think it was a slightly scruffy no-class way to do business.
Not anymore, of course.

[Arctic Dave]

4. Of course they knew, they just didn't care because they wouldn't be affected

when the chickens came home.

[Octafish]

5. I'll bet the house on Number 3.

Oh. Wait a second! Who runs Bartertown?



Don't know about MRG, but I do know The Best Way to Rob a Bank is to Own One

[Gin]

8. the timing of the blow up was suspicious to me...right at the end

of shrubs reign of terror/theft....they were able to pull off the biggest heist in history and they had a friend in high places to help them and to aid and abet the heist..

no coincidence it blew up on his watch.....crooks and liars.

[patrice]

16. Remember the timing too of those dives in the market. I never lost money in my life until 2000.

They all just could not wait to start re-positioning themselves.

[socialist_n_TN]

7. IT'S THE SYSTEM, my friends. Capitalism is BASED

on booms and busts. During the booms everybody makes a little bit and the big players make a LOT. Then the bust happens and clears out the players and the big guys (who manipulated the boom and bust BOTH so that they weren't hurt BY the bust) swoops in and buys up the remaining assets from the little guys who bankrupted and consolidate the wealth a little more. Lather, rinse, and repeat until you run out of tangible assets.

Captitalism at it's finest.

[CTyankee]

28. If I, a lowly Liberal Studies grad student, had to read Das Kapital, you can be sure

the MBA's from the Wharton School had to read it. Marx laid it all out. He skewered capitalism's "reckless speculation" and gave actual, real life examples (e.g. the Liverpool cotton exchange and the U.S. railways). Such speculation impoverished those who had not enough capital to "get ahead" of their credit curve in such nefarious places as "company stores." This is a far cry from the Classical School's belief that the market was a sphere of individual freedom.

Reading Marx, you realize that the capitalist system is inhumane and destructive and that there is a real need, now just as much as in the 19th century when Marx was writing, for mitigating reform.

[socialist_n_TN]

37. Yep. It's the system, not the players.......

That's also the reason that capitalism can't even save itself. The system won't LET it save itself.

[ljm2002]

9. I vote "Orchestrated Plan"...

...a position I have come to over the last 3 years or so after a lot of thought and of course following the various stories about the global recession here on DU and elsewhere.

It appears to me that the international corporate and banking elite are wresting control from governments worldwide. They have successfully planted the idea here in the US that government is always, always less efficient than the hallowed "private enterprise". Never mind that government got us to the moon, that government invented the Internet, that government has been instrumental in so many medical advances. No sir, private enterprise would have done it all better and faster. (and with more profit to the companies involved)

We are not supposed to think about the fact that medical costs may be as high as they are because of the PROFIT MOTIVE of private enterprise; we are not supposed to notice that their administrative costs far exceed those of government medical programs like Medicare. We are not supposed to bother our little heads with conundrums like, why did Congress vote to DISALLOW our government from bargaining for prescription drug prices? We are not supposed to notice that the very people and organizations who crashed the worldwide financial system are the very same ones who are now putting the screws to us, who are demanding less taxes for them and austerity measures for the rest of us.

And it's the same everywhere, at least in regard to the bailouts for the fat cats vs. austerity measures for the rest of us.

And all so that the rest of us can pay back on bad bets that WE did not make, with funny money that WE have no control over and that THEY conjure up out of thin air when it suits them. And in the meantime, because of some arbitrary pluses and minuses they have installed in their virtual balance sheets in the sky, all of the sudden it's bologna sandwiches for us (well, for the lucky amongst us) and it's caviar and gold-leaf-decorated desserts for them.

Odd how that works. Oh and don't even get me started on the various real estate crises worldwide. Yep, it looks like an orchestrated plan from where I sit.

[JDPriestly]

23. Yes. What makes me so suspicious is that the austerity measures

are being brought in everywhere, in all of the Western countries. It looks as though the oligarchs pulled a heist.

I would have thought that a country or two would survive without drastic cutbacks. It was too abrupt and too universal to look real. There have to be winner and loser countries.

[patrice]

10. They knew it was going to happen. That's why they hired Shrub. He was supposed to earn all

of this political capital from "Mission Accomplished", which political capital was supposed to subsequently make the Privatization of Social Security a shoe in and, then, with our Elders' lives and well being held hostage by the banksters, a derivative crash was supposed to happen, so that the thieving gamblers could then demand any bail-out they wanted, ". . . or else, Grandma & Grandpa get it!!!"

Valerie Plame and the Downing Street Minutes threw a monkey wrench into those works, so they went ahead and had their crash anyway and wanted their buddy John McCain to be in charge of saving their asses from their FOREIGN creditors, but some other faction(s?) in their midst got Barack Obama hired instead.

[patrice]

12. P.S. Make that "... thieving MURDEROUS gamblers ..." !!!!!!!!!!!!!!

[patrice]

14. Just review the stuff Shrub said to Micky Herskowitz, his biographer, especially the part

about how he (Shurb) was going to get everything passed that he wants.

[patrice]

11. P.S. It's their way of re-financing shit they can't pay for. nt

[Canuckistanian]

13. Brooksley Born warned them for years that it was coming

She "asked questions" about regulating the out-of-control derivatives market. She got attacked by Wall Street.

http://www.pbs.org/wgbh/pages/frontline/warning/interviews/born.html

[RandomThoughts]

15. I understand your using that model.

There is some variations in the MMO. Since the gold farmers really are using the game mechanic to get gold.

That imbalance is actually caused by not having a money sink taking out as much money as added in by drops.

A smart game design should track new money dropped, and money sink money spent.

Money sinks equate to some rent or price for something that takes money back out of the game.



Although I don't disagree with your comment that the motivation in the sectors you mention have problems, and they need oversight.

And the manipulation, and changes in values you mentioned could be controlled by financial manipulations in sectors.

[xchrom]

17. Hmmm- I can't see why you haven't said anything.

All you need to answer your question is a back ground in Austrian
Neo-liberal economic business &political philosophies.

That's all that's being taught. Those folks are all that's being hired - especially in the
Government/corporate/lobbyist revolving door.

Friedman, Greenspan, & the rest have won for now - who's gonna say different?
Who's gonna teach different that counts?

Your silence is damning.

[dkofos]

18. DUH

[L. Coyote]

19. The end result was inherent in the policy shifting capital to a few, Bush killed the global economy

Really that simple. The bubbles, real estate, commodities, then oil, resulted from excess capital in the hand of the rich without strings on the tax cuts to create jobs and directed investment.

I don't conflate crooked bankers with the end results of the Bush tax cuts. I do blame Bush for both problems though.

[Gman]

20. Of course they did. Everybody tries to time the bust of the bubble

and then time the recovery for buying back in at the lowest.

The next bust: Gold and silver.

[crickets]

21. Of course they did. -nt

[applegrove]

22. The world is opening up and the banksters almost took the American banking system to its end. That

would have meant that Canadian banks(yes canada has big banks who make billions a year) and other foreign banks would have been the winners in this generation of world domination (and now is the generation where the riches of the world will be finally exploited everywhere so if american banks all failed America would be out of the loop forever). The banksters must have thought they would be bailed out...the US government could not let them go under. They weren't too big to fail so much as too big and american to fail. So the banksters continued on with the riskiest transactions that would garner them the biggest bonuses and forgot about the rest of America. And then they sat in front of congress and refused to apologize for that. IMHO.

[truedelphi]

24. The press in Australia had a conniption fit by Jan 2009

When they realized that Tim Geithner, the man who had destroyed Japan, was going to be Obama's sidekick and made Treasury Secretary. Back in the nineties when the World Bank sent lil Timmy over to Japan, the dude had only two models to choose from, and he manged to chose the model that cause a serious L shape to the recovery in Japan.

But I digress.

What I really want to mention is how I saw on one of the more recent Max Keiser videos posted here, the Talking Heads that were on the TV show with Keiser started screaming at him that "It is a lie that the stock market has any relationship to casino gambling. The casino gambling model of Wall Street has been debunked."

Which probably means that it hasn't been debunked and it ain't a lie, not one lil bit.

And that the Talking Heads realize they better start screaming this at the top of their lungs because if the vast majority of people realize that the biggest Ponzi scheme in the world is the Stock Market, it might be that people will demand that there be no more Bailouts.

And people might demand that the Federal Reserve be fully audited, and that the nine to thirty trillions of dollars that the Biggest Players were offered by Paulson/Bernanke/Geithner and have paid back with worthless collateral be actually repaid with meaningful stuff like actual inventory or gold or diamonds but not the left over CDS's and other derivatives that the Biggest Players have not been able to slough off yet. (If you wanna see some real scheme-y and slimey sloughing. may OI refer you to how Wells Fargo used some of its more worthless investment paper to get to purchase Wachovia, and then once it took over Wachovia, it used the part of Wachovia that was the most worthless and used that as tax write offs, so that ny the time they dop all this, it cost them very little to purchase Wachovia.)


I think most people who have really studied this know that the people at the top knew full well that what they were doing was going to have serious consequences and that the piper would have to be paid. Luckily for them, they were able to keep Bush on their side even though early October 2008 the President was rather lame duckish.

And better still, they managed to convince Obama that the most important part of the economy is the stock market. (Although those of us on Main Street would love to argue otherwise.) And then they went on to convince him to convince his fellow Democratic Senators to buy into the TARP. Worse still, once Obama got into the WH, he was quite willing to let Bernanke continue the Paulson/Kashkari strategy of loaning out trillions of dollars of money.

And this might have been somewhat a bit less despicable - if there were provisions that the Biggest Financial Players, who have received most of these monies, actually had to create jobs in this country that paid well. But "The Geithner" lied to Congress and said this was the only way to do it - that the Biggest Players wouldn't even take the money unless we gave it to them provision- free.

In short - we are a nation of chumps.

[taught_me_patience]

25. If you made $30MM in one year

would you give a shit what happened next year?

[Hannah Bell]

26. interesting about the parallels in role playing games.

i think the scam is an old one, e.g. "stock-watering"

[Overseas]

27. K&R.

I can't tell you you're wrong.

[KansDem]

29. K!!!

It's no coincidence that Prescott Bush was part of a plot to overthrow FDR. And when that failed, he gave us his maniacal son and grandson.

[leveymg]

30. Yes, they knew. Krugman published a paper on this very subject 13 yrs ago.

Read the Pangloss Value paper:

#
What Happened to Asia? - MIT
Paul Krugman. January 1998. WHAT HAPPENED TO ASIA? It seems safe to say that ..... at the end of period 2 they will be willing to pay the Pangloss value of ...
http://web.mit.edu/krugman/www/DISINTER.html - Cached - Similar
#

[defendandprotect]

31. It was a financial coup -- no different from S&L Thefts & Embezzlements --

and the other financial crap that's been going on --

See: Catherine Austn Fitts on all of that!

November 22, 1963 was right wing coup not only on our president but on our people's

government.

There is only one way the right wing can rise and that is by political violence --

stolen elections, lies in often repeated propaganda.


And usually all of it bought by wealth!!



Catherine Austin Fitts on "The Looting of America" --

http://www.youtube.com/watch?v=T5xpXiTEg0U

[The Backlash Cometh]

32. What if they counted on the Bush-Cheney plan to go through, putting us

in a state of perpetual war and media control? We would be so busy fearing for our children's lives with a draft we would hardly notice the rest of the pilfering.

[leeroysphitz]

33. The largest single upward transfer of American wealth in history was no accident.

Anyone who says otherwise is either a liar or is hopelessly stupid.

[McCamy Taylor]

34. The same transfer happened in the late 1920s----before the Great Depression.

[GeorgeGist]

35. 1 and 2 are correct.

1. 'We' bailed them out because the President and Congress are not smart.
2. They are not in jail because the President is not smart.

[Major Hogwash]

36. They didn't care about the end result, they wanted to reap the cream while the tidal wave was high

They wanted to create a tidal wave in the markets, and then reap the bonus off of the top before the tidal wave turned downward.

They took a lot of money out of the federal coffers while the tidal wave was cresting.
Many of the Democratic Senators saw what they were doing, including Dodd, Kerry, and the guy from Michigan whose name escapes me currently for some damned reason.

They created the "bubble" to get at the temporary increase in wealth, as it was on paper anyway, and then watch it come down.
If it crashed, it crashed.
They didn't care.