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Our March Toward Economic Socialism

53 | By Shah Gilani

Have you noticed that the world is on a creeping – some (that would be me) would say cascading – slide into socialism?

It started with one giant step in the direction of economic socialism.

Economic socialism is specifically the shared risk the public has been yoked into pulling on behalf of banks.

The unmistakable and indelible footprints of socialism’s latest forward march have been made by collectivist central bankers, pushed ineluctably forward (at least that’s the direction for them) by their constituents, the bankers of the world.

The bankers’ jackboots are filled with stinking feet itching from the fungus of greed. And sadly, the sole of those boots bears the unmistakable “Made in America” stamp.

What’s flooded into all those succeeding footprints is the stagnant future we all face. The march towards global hegemony of bankers’ birthrights makes that evident.

It’s not ironic that bankers espouse capitalist, free-market doctrines, but under cover of their ostensible handlers – their central bankers – prosper and propagate behind a Marshall Plan whose manifesto is socialized risk; it’s sickening.

The moral hazard of socialized risk, of economic socialism, is unfettered.

The United States let the biggest banks in America get bigger. We let them bridle us, saddle us, and ride us into the ground. And they are all bigger now.

How can there be any free market discipline if there is no free market? How can moral hazard be corralled if there are no fences around the risks banks are allowed to take, given their size and power?

We’re facing QE4ever (that’s quantitative easing) on account of the banks being subject to lawsuits and an attack on their capital.

Oh, you didn’t get that?

Here’s the real reason we have stimulus to the nth degree here in America…

The stimulus is not for us. It’s for “them” – the bankers.

Of course, it’s being done under the guise of the dual mandate, gifted to the Federal Reserve by our Congress a few decades ago. You know, the dual mandate that says, besides price stability, the Fed is tasked with manifesting full employment, too.

Forget that that’s an abdication of fiscal policy, an abdication by our Congress and American leadership (what’s that?). Just realize that it was a gift to the Central Bank to cover the butts (print money) of their banker constituents when they (the greedy bankers) get themselves into trouble with their moneyraking schemes.

Banks are facing billions in lawsuits. They’ve already paid out billions.

Bank of America just settled a class-action suit for $2.4 billion. What was the suit about? BOA executives misled shareholders at the time of the financial crisis. Forget the specifics; was there a single bank in America that didn’t mislead the public and their shareholders at the time of the financial crisis? Not a one.

And the Fed? Did they mislead the public? Of course they did. But they can’t be sued.

So, the Fed is making sure the banks have the money they need, the liquidity they need, to deal with ongoing litigation, litigation that won’t end any time soon.

And about those capital ratios…

Basel III was supposed to increase the equity capital ratios banks have to maintain. What happened? The benchmarks have all been raised, but they are far lower than all the academics and prudent regulators wanted.

The main equity capital ratio was supposed to be between 7% and 11%, with the consensus being 10%. We got 7%. How? The U.S. Treasury Secretary and the head of the Office of the Comptroller of the Currency undermined the Basel Committee’s intentions and teamed up with the French and Germans to lower the ratio.

How do I know? It’s in “Bull by the Horns,” the new book by Sheila Bair, the former chairman of the FDIC. (Read it.)

Here’s one excerpt: Bair wrote in a memo after an Aug. 6, 2010, meeting with Geithner, “Why do we keep making banking policy to accommodate weak institutions? Keep hoping our relationship will improve, but this was a new low.”

Socialized risk is killing the free market “clearing” mechanisms that would have made our pain coming out of the financial crisis really bad. But they’d also put us much farther along in the healing process than we are now.

Instead, today, we’re deep in the march towards socialism, with the central bankers of America and the world leading the charge.

And if this isn’t cut out like a cancer ought to be, our economic future will be subject to a constant nagging fungus – the fungus of failed capitalism.

Shah

53 Responses to Our March Toward Economic Socialism

  1. Rellif says:

    Banks. Banksters. Here is another conspiracy that goes back awhile. Remember when we moved the “accountability” age from 21 to 18? Remember the logic issued explain the change? Well, now look at the reality. Which banks figured out that there was an education debt option that they had been missing? What was the student debt at that time and then compare it today. Just another “shared risk”.

  2. Noel Falconer MEcon says:

    A much-underrated US President, Ulysses S Grant, observed that the best way to rectify a bad law was to enforce it rigorously.

    Soft options have failed. The best way to cure the American and world economies is to let them, encourage them, to explode. Yes, the consequences will be appalling – but they’re coming anyhow, and the later, the worse.

    Happily, if in ignorance, we are following this strategy.

  3. Ray Southwell says:

    Best explanation yet. We keep hoping a president will make a difference. Only the people can cause change. Obama and Romney the two wings of the same vulture.

  4. Spartacusstoo says:

    Well written, however, do we need to stuff words, which seesms to be the journalistic tendendcy these days.

    I realize you guys get paid by the word, you’d have to to justify the exentsive use of enormous adjectives for fill and to look smart.

    Banking as we should all know, if we read our history books, has been a bane down through the ages. He who controls the money controls the world, and all that.

    And congress is complicit as the banks are the source of most campaign funds as I am told. Beyond that we have to know that banking is the primary cornerstone of modern civilization. Simply put, the banks make money as a function of monetary velocity but that is insufficient. Banks now make money off of deriviatives as well, but then that is not enough….only when capital ratios go to zero do we have infinite capitalization capability and with that the banks make money by having zero risk positions.

    We are now at the banking “Rubicon” and our only recourse is to “run for the hills” or just submit to being robbed. The Bernanculus says he will be kindly in the process…not to worry…be happy.

  5. Ron Tuggle says:

    You can hammer the banks but why not deal with some facts first then fix the banking problems.
    Some facts
    1. some 350 billion dollars of the 750+ billion appropriated to tarp was given to banks.
    2. Basically that money was repaid plus interest except a few small
    banks.
    My question is where did all the money (750B tarp plus 800B stimulus ) go. Nobody seems to want to question the administration on the distribution of 1.5 trillion dollars. We know Bush gave 15B to keep GM alive till Obama took over. BO decided to save the unions and screw everybody else with a phoney bankrupt procedure. Between GM, Chrysler and green energy and green cars he has wasted several more billion.
    The big question is what about the other 1.48 trillion dollars.

    r Tuggle

    • R Tuggle says:

      Everybody wants to know, how do we fix the problem???
      Whats the problem? following is a list of assets we have.
      1. Manufacturing Technology
      2. Agriculture enough to feed our population and more
      3. Energy including oil, gas, coal (forget the green stuff for at least 20 years). If only we had leadership we could produce all the energy requirement we need, Not cheap energy but energy we would have control of.
      4. Population with 300 million plus we have a large consuming population.

      With the above assets we have a military power unequaled by any other country, why are we foolishly following the european model and letting other governments dictate our social policies.

      First we need a major tax cut both individual and corporate. I know the media and the BO administration blame the crisis on the Bush tax cuts of 2003. But has anybody looked at the facts.
      Under Bill Clinton total revenue for his eight years was 12.3 trillion. Under George Bush’s eight years the total revenue was 17.1 trillion. If you don’t believe me go to
      http://www.whitehouse.gov/omb/budget/historicals
      Tax cuts increase revenue but they don’t stop spending.
      By the way the deficit under Bush control was down to 160 billion in 2007. The highest under Bush control was 417 billion in 2004. The deficit for 2008 under democratic control jumped to 458 billion and has balloned ever since under BO.
      2009 1.4 trillion
      2010 1.2 trillion
      2011 1.2 trillion

      • Ed the Grocer says:

        There is a difference between deficit and debt. The food is toxic. Vast areas of agriculture land has been poisoned and a large portion of the populace is ill and dumb. Check the numbers on manufacturing, its all downhill. Yup, that’s what you have.

  6. Armando Monteiro says:

    It is sad to read the description of the preparations for the coming funeral of the U.S.A financial empire although everyone in charge is very pious lying to the american people. The Ecologist-Humanist group more than two decades ago warned the nations of the world that due to the population explosion 250% in the last 100 years we needed the resourcas of two Earths to maintain minimum living conditions for the humanity in the future and the cost of everyhing will escalate wildly causing
    new wars supported by the first world richer nations.
    “ALEA JACTA EST or as they say in the casinos when they throw the ball rolling,”Luck has been decided”and we all become spectators of a coming tragedy.The cancer in the human world is not the partition of the resources of the Earth by the more powerfull nations,they can cal the help of carios GODS but if the councill of the United Nations or the leaders or he carious cartels do not wake up and encourage a world program of family planning to reduce the population of the Earth to more manageable levels we will have to ask the gods to send a virus plague to same Life in our planet.

  7. Dave Seely says:

    Exactly, this is why we must get our current administration out of our lives. Believe me when I say that Mitt Romney will do everything in his power to prevent Socialism!!!!!

    • Steve says:

      I’m voting for Romney despite his detachment, his weak persona, his losing game the past eight years, his economic plan being no plan, and believing he will lose in the face that independents believe Obama will screw them less. Yup, I’m voting for him, puking as I pull the lever. That is how disgusted I’m with Anti-America Obama and his ilk.

      America’s acceptance for the kind of leaders (Clinton, Bush 43, Gore/Kerry, Kerry/Edwards, McCain/Palin, Obama and Romey) offered by this system must come to an end. Four more years of two party rule-by-corporate lobby-and-debt will utterly crush our country.

      The American Revolution was funded by those with everything to lose and fought by those with nothing to lose.

  8. Al Takemoto says:

    I thought I understood your essay until I read your last sentence . It appeared you’re criticizing the socialized risk banking system we’re moving to is hurting the free market, yet you’re calling capitalism a fungus?
    Isn’t the system we have evolved into because of the Fed Reserve Bank that what you describe as a socialized risk system with all of the big banks. Aren’t the smaller banks normally a free market capitalism company, being bent into this socialistic risk structure (SRS), and capitalism is not the fungus, but in reality the SRS is destroying the capitalism system?

  9. H. Craig Bradley says:

    WHY AMERICA CAN NOT RENEW ITSELF TODAY

    Much of America has indeed succumbed! I see no evidence of a resurgent movement to turn anything around either. America has actually surrendered because we no longer have the collective common sense or intelligence necessary to recognize the threat(s) and then attempt to resolve to retify them.

    Our politians don’t care. In fact, even our most “educated citizens” (college professors, professionals, etc.) display financial ignorance. At the local grocery store, I see a motley assortment of different ethnic groups, most of which are secular and politically agnostic (don’t vote).

    Thus, we have all become slaves of the U.S. BANKERS. They now have the power to do ANYTHING to us them choose to and have the Government back them up. So, forget about “free markets”, since we are not free to do as we wish anymore without conflicting with some kind of law, regulation, or criticism.

  10. ASHLEY GOODMAN says:

    iT IS WORSE. THE RISK IS SOCIALIZED AND THE PROFITS PRIVATIZED. BUT WAIT, WE HAVE AN EXPLODING POPULATION AND DIMINISING TAX BASE. 47% OF THE POP DON’T PAY TAXES.AND IT WILL GROW EVEN WORSE AS OUR DEPRESSION BECOME PERMANENT.. OUR TRANSFER PAYMENTS TO THE CITIZENRY IS 67% OF EVERY DOLLAR AND GROWING AND WE ARE IN THIS INDUSTRIALIZED WORLD ABLE TO MANUFACTURE EVERYTHIING WITH ROBOTS AND 3D PRINTERS. THEN, HOW MANY REFIGERATORS DO WE NEED AND AUTOMOBILES IF WE HAVE ROBOTS MAKE THEM, DRIVE THEM AND ROBOTIC SYSTEMS TO GUIDE THEM. IF HISTORY TEACHES US ANYTHING IT IS THAT MAN LOVES POWER AND WAR. WE ARE LOOKING INTO THE ABYSS OF A FUTURE FROUGHT WITH WARS AND ATOMIC ARMAGEDDONS
    WHILE WE POLLUTE AND EXHAUST THE RESOURCES OF THE PLANET, OUR ONLY HOME IN THIS UNIVERSE.MEANWHILE THE RICH GET RICHER, THE POOR POOER AND THE MIDDLE CLASS IS EFFECTIVELY DESTROYED. WE ARE MARCHING INELUCTABLY TO OUR MUTUALLY ASSURRED DESTRUCTION. MAYBE WE CANNOT SOLVE OUR ECONOMIC CRISIS BECAUSE WE DON’T HAVE THE KIND OF CAPITALISM WE PROFESS. MAYBE WE HAVE TO START OVER WITH SOMETHING NEW. WE HAVE INFLATED OUR CURRENCY AT 2% A YEAR FOR THE PAST 100 YEARS THEN WHAT IS OUR CURRENCY WORTH, ZERO BY MY CALCULATIONS. QE 2,3,4, CANNOT DESTROY THAT WHICH HAS ALREADY BEEN DESTROYED. THERE IS NO PONY HIDING IN THIS BUNCH OF MANURE. WE ARE ON A SHIP OF FOOLS.

  11. H. Craig Bradley says:

    THE NEW AMERICAN OLIGARCHES

    We are now unable, collectively, to correct the massive imbalances of money and power that have captured the country. Yes, the U.S. BANKERS have removed all the regulatory stops, with the willing help of our elected politicans and their appointees. In the process, we have all become the slaves of the new AMERIAN oligarches ( the U.S. BANKERS). The liberal immigration of many assorted minorities beholden to the Democratic Party and their token payoffs have made elections an exercise in futility. Republicans simply do not have strong candidates and the people are distracted and ignorant (uninformed), at best. How ignorant?

    Well, just this Sunday morning I was getting some groceries at the nearby Trader Joes in Montrose, CA. Another triple digit heat wave is settling in on us ( the hottest region in the counrty in Sept.). I stopped by the coffee dispensor and was discussing some current events with a retired college professor (well traveled). He mentioned he did not notice any decrease in commerce while recently touring Spain. So, despite the terrible financial reports about Spain, life does go on with most people, as usual. You would not notice it.

    There is a huge disconnect between the financial world and the real world made more striking by the fact that most educated people and common people alike are financially ignorant. They never got it over the last 40 years. In addition, the motley assortment of customers at a suburban T.J.’s (different minority groups) are primarily secular and politically agnostic. Therefore there can be no united consensus among the general public to unite the country and demand real policy change. Elections therefore become only a process to validate the status quo.

    • Steve says:

      Mr. Bradley, your observations align with mine. Today, most Americans are comfortable, hiding from the future, not wanting much to change. When the trillions are called, the debt supported supply chain will snap. In short order masses of people will see their resources consumed without replenishment. That moment will force change; a resource endowed dictator will rise promising, punishing, promising, punishing…… Our elected officials will only sell out again to a different regime.

      Once indebted, the power of the people is determined only by those we have empowered through indebtedness.

  12. RickB says:

    The bankers have to keep up a steady stream of new credit. So what new tricks are up the bankers’ sleeves? Mortgages are done. So are student loans. Sub-prime auto loans next? How can we incur more debt just as Boomers are retiring, saving, and paying down debt? Or are they going to crash the market in order to buy equities at a discount? How broken are credit markets that the Fed must add 16 pct of its current balance sheet per year?

    Great article, Shah

  13. kj shah says:

    Well when people believed all politicos promising something for nothing this rot began.Now all govermnents including USA Govt is under thumb of the Bankers.Untill all big business collapse under its own dead weight we have no chance.Just like USSR collapsed from within because common man there became dumb and alchoholic lazy etc, this economic socialism will also wither away will take some time and may not be very peaceful

  14. douglas says:

    Shah,
    “United we stand, divided we fall.” The only reason communism failed in Russia was because only twenty five percent were true believers. The rest were like all the capitalists in the world, GREEDY. And one reason the US will fail is not because of capitalism (after all every country needs capital………ism), but because of unbrideled socialist policies.

  15. FrasIsunset says:

    What are the banks going to do with all the money when you will need a wheelbarrow load of notes to buy an ice-cream electronics banking to the rescue. You will not have to worry what how much basic food items have gone up all you have to worry about is if you have enough money to pay for them. Will the banks do something about the massive inflation which they will cause. No they will not. They are so dumb they think more is better without a clue about the depreciation of the money. Trust banks you would be better off waiting for Santa Claus. Frank patey

  16. RUSS SMITH says:

    Hi!, Patrons Of Shah’s Insights & Indictments Et Al:

    Here’ my dilema: Remember when the guy lost track of what happened to 1.5 trillion $’s? Well, he took my money too and I was sent some forms to fill out for filing my claim but you know all too well as I do that that moey is long gone isn’t it? So here’s the dilema: we sen our money into a brokerage account which they take away from us using such code names as “INTERMEDIATION” which becomes a legal entrapment take our money without reprisals. We plan to use our money say to purchase investable funds that help us keep up with the cost of living including the loss of buying power of our $’s through their inflating but, if we keep the money either in their bank or under our mattress ether their inflating eats it from being in their low intereste rate banks or we put it under our mattress for inflation to eat away at its’ buying power. You tell me how we’re suppose to make any headway under these conditions huh? They can through legally maneuveing their words confiscate everything that we’ve ever worked for and none of our neighbors, friends, relatives or fellow citizens at large will even sympathize with our losses. Their seizing OUR collective Middle Class Wealth is a dead cinch for them and we dare not say a word to get our losses back through any kind of restitution. We, the gutless wonders of these United States, will get exactly what they weant to give us primarily with our collective mouths kept shut. What’s next in line for their total confiscatory ways: work absolute and totally forever for free too?

    RUSS SMITH, CALIFORNIA (One Of OUR Broke States)
    resmith@wcisp.com

  17. Ed the Grocer says:

    Once upon a time there were things called ‘vendor mortgages’. And ‘second and third mortgages’. And! ‘full term mortgages’. Now the business or personal finance model does not allow for that kind of risk. ( you will sell someone your house but you don’t trust him to make the payments.) Now, every five years you must go through some sort of gamut to renew what you have been successful at all along. Sometimes every year. In my case I had three times the business mortgage renewal required in that same bank when they refused to renew. Bless their hard little hearts. No problem and no longer are they on my Christmas list.

  18. John Fowler says:

    This is fact, look it up. Texas Gop Blocks Obama’s effort to slip Egypt $450 Million. This is typical of Obama’s illegal overreach.
    This was done by a patriot Congresswoman, from Texas.

  19. Charles says:

    Shah, this is why I love your writing. All of my conservative publications rant about how the country is moving more and more toward socialism, but not once have I read anywhere the idea that the bailouts and the QE by the central banks are forms of socialism. Not once. And I would be willing to bet that they will never say that. In those publications, the term “socialism” is reserved for things like Social Security and Medicare. Maybe I should have figured it out, but sometimes it takes someone like you to whack me upside the head in order to straighten out my thinking. But I am learning. Please keep on sharing your wisdom.

  20. Dave the debt slave says:

    At what point does it become obvious to everyone that events are proceeding exactly as planned? It’s a Banksters’ Banquet!

  21. Thillberry says:

    Think about this one. The central banks at Bessel decided to “monetize” gold. The Fed now lets banks use all the value of gold as reserves. So they will sell there mortgage backed securities “toxic securities” and buy gold for there reserves. QE forever will buy those toxic mortgage backed securities and leave the American Tax payer on the hook for the bad loan.
    Thanks allot central bankers.

  22. Sailor Jo says:

    You are so right with the socialising of the debt and the losses. But it is not the classic socialism that pampers the little guys.
    With my school taxes I support people who have better income and better assets. That is the typical US socialism, from the bottom to the top. Now the rich cry foul because the poor do not pay taxes. How can anyone pay taxes from minimum wage who is not living in a tent? Even then it is hard to get food for mere survival.

    • Ray Southwell says:

      J Smith,Expand the middle class. Continue the monetary policy of expanding money. Have government’s fiscal policy of spending the money on infrastructure projects. Sewer, Roads Water, Bridges. It will put people to work and take fiat currency and create something of value, an asset. Currently created money is used to create more money, nothing of true value. Money is only a tool to help create things of value.
      Economics professor Richard Werner has explained it in his most recent book. “New Paradigm in Macroeconomics.”

    • Ed the Grocer says:

      I think that we have fallen in love with the financial numbers when we should use a different meter ( yard stick ). We should consider if…we are healthy, is my family safe, is the food, water, and air clean, do we owe money, are we polluting our surroundings, are we killing our neighbors, is our business fair, is our situation sustainable, do people respect us and visa versa and so on…It sounds simplistic until you try it. If you try it you will see wealth, safety, happiness, long life and much more.

  23. jimmy says:

    Well, well…..Where did all those voices go?
    Maybe the implications are a bit too deep to draw the scale of ‘opinion’ that your last ‘courting controversy’ post did.

    ‘Economic socialism is specifically the shared risk the public has been yoked into pulling on behalf of banks.’

    Just how does a public that sanctifies freedom get to be that yokable?

    By the way, is your middle name by any chance ‘Frank’.

    • jimmy says:

      Well i was wrong and there are plenty of voices that must have all been waiting moderation. When i saw no comments i was afraid everyone had jumped ship thinking Shah had shown his true colors and that they were a bit too blue.
      It has certainly become more complicated than being merely partisan. In fact it is hard to trust that one is genuinely informed.
      It is good to be able to listen to this wide spectrum of viewpoints.
      Keep that fine edge going Shah.

  24. Michael McMurtry says:

    Fascinating! And would you now PLEASE inform us as to what, in your educated view, is now the best and wisest way for America to extricate itself from the desperate crisis, at the least possible cost to the taxpayer.

  25. C. Frederiksen says:

    Though not a Socialist, I know enough about it to point out that what you describe has nothing to do with Socialism. Socialism is a government planned economy. What you describe (perhaps correctly) as banks convincing government to “socialize the risk” is not Socialism. Using the term here only gives fuel to some who think of themselves as conservatives to rant about “Socialists”, as evident by a few of the posts here. It doesn’t help anyone to understand what is really going on. If instead of listening to Reagan, we had all chanted, “Too big to fail is too big to exist” we wouldn’t be in this mess.

  26. Ruckrover says:

    wouldn’t “economic fascism” be a better description? Socialism implies at least suport for common people. This system is for the 1% uber-rich bankers.

  27. Kevin Beck says:

    I think the best solution to this problem is something that was proposed by Ron Paul during the Republican primary season. That would be the repeal of Legal Tender and the institution of competing currencies. This would be the first step. The follow-up would be the United States Treasury giving the Federal Reserve 30 days’ notice that the United States is no longer supporting the “value” of Federal Reserve Notes and allowing all bank hostages (I mean, depositors) the instant right to redeem all their cash from the banks on terms demanded by the depositors. In other words: If a depositor wants gold for his deposit, the bank must redeem the deposit in gold.

    The benefit to this is that the banksters would be shown as the criminal class that they are, and that they are not needed in this nation for commerce to occur. And it would also show Benny Bernanke what he can do with his stupid pontificating.

  28. William Morgan says:

    It is just the course of history sadly, and every society seems to let it happen. Central Banks are defined as a necessary evil, but are actually more just evil. The FED will rob this country blind through the destruction of our currency. We have done everything our founding fathers said not to…. formed political parties….. gotten involved in prolonged conflicts overseas, with seemingly no clear results or change insight ( vietnam, iraq, afghanistan )…. and as quoted something close to this by Thomas Jefferson ” Should this young nation chose to adopt a center banking authority, and thus submit its currency to certain deflation and inflation, its children will one day wake up hungry and with out property on the very soil their fathers died for.” By the way, a sad but true reality of why we are still in afghanistan, and why we occupied iraq for so long … wars take alot of money to carry out, must be financed…by the central bankers, we pay it back through inflation. The only way to solve the problem is to disolve the FED and allow our government to print our own currency…as the constitution states. We would in the near future be lifted from a massive burden of debt, and our goverment could no longer simply spend as they wanted by the issue of treasuries to the FED we pay back through inflation. Also, eliminate ALL CURRENT FEDERAL taxes and go to a national retail sales tax. This would eliminate the 47% freerider problem and the 1% and corporate tax dodgers problem. With no income tax or corporate tax it would be astounding how many things offshore would come back to our country, and with a consumption oriented society the national sales tax would surely generate massive government revenue, while being far more constitutional and far less an invasion of privacy. To shore up some of our current debt, sell some of the 630+ million acres our government owns ( not the national parks or monuments though ) and perhaps a few islands owned around the globe. Do these things and this country would be reborn strong again. Sadly it is not the agenda of the elitists or of the socialist, and definitely not of the banks…so it will never happen. God bless America land that….

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