Protesters in the Occupy-Wall-Street movement are angry. They should be, as we all should be. We are in the current mess because there has been a great deal of theft and fraud committed against the people of this country. Rich corporate executives have had a feast on the hard work of the middle class. The people elected in good faith have let us down. They have enabled mega-corporations to use the economic, legal, and political systems to plunder the nation. Most people sense that something is terribly wrong.
About what, however, should we be mad? On whom should we vent our frustrations? Executives from the big, international banks certainly deserve all the scorn which has been heaped upon them. They have used the system to scam the rest of us. They, however, are only one side of the coin. They never could have done it without their enablers, the politicians who steal from main street to bail out wall street, who give the banking system carte blanche to inflate away the purchasing power of our money and the gains from our increasing productivity.
The situation is complex, but only because it has been made so by massive government intervention in the economy. The economic effects of individual interventions are quite understandable and have been known for centuries. Subsidizing bad behavior and shielding it from consequences will beget more bad behavior. Keeping interest rates artificially low sends the wrong signals to entrepreneurs, investors, and home-buyers, causing them to invest in ventures that cannot be sustainable in the long-run. Inflating the money supply will cause economic bubbles, which are nothing more than asset price inflations, a phenomenon affecting real estate and financial markets rather than consumer prices during the various inflation-fueled bubbles, with their subsequent, inevitable crashes. Enforcing price ceilings below market prices will cause shortages, while price floors above market prices will cause gluts. Making it difficult to start or operate a business, by paperwork, fees, and regulations, results in fewer people starting businesses. Increasing the cost of hiring employees results in less hiring and more layoffs. The list goes on.
The economy is in the present crisis because all of the above and more have been piled upon a citizenry unwilling to hold elected officials accountable. Politicians are regulating the banking industry by helping them to transfer their risks, in the tens of trillions of dollars, onto the shoulders of the American people. Yes, people should be angry with corrupt crony-capitalists in the international banks and other too-big-to-fail corporations, but they should be even more angry with the sham of regulation which legally transfers wealth from citizens to the financial elite.
Bank of America holding company is apparently transferring trillions of dollars of toxic assets from its Merrill Lynch subsidiary to its commercial banking subsidiary, the one covered by the nearly-bankrupt Federal Deposit Insurance Corporation (FDIC), a program of the federal government. The move was encouraged by Federal Reserve Bank officials.
A Federal Reserve Board Governor is backing another big buyout of toxic assets in the form of mortgage-backed-securities to prop up real estate prices and "support the economy." These assets are comprised of mortgages that are under water, loans on which the balances owed are greater than the market value of the property, and are thus not marketable. The banks refuse to write off the losses because it would hurt their profits, so the Fed will buy the worthless securities. Banks remain profitable while the people get fleeced again. When the Fed buys toxic assets, it does so with money made out of thin air, mere accounting entries. That money flows through the banks first, and by the time it filters down to the people on the street, the poor, the elderly, the families, all money is devalued, it buys less stuff. A portion of their assets, their productivity, their savings, is transferred to the bankers, who subsequently have a bigger slice of the pie. You get a smaller slice. If the idea of stimulus is to get more money into the hands of consumers so they can spend and raise demand for products, wrong-headed though it is, the government could most easily and effectively do that simply by stopping the confiscation through taxation and inflation. Just leave the money in the hands of the people.
The corruption of our politicians and bureaucrats continues to multiply unabated. One positive thing that hopefully will result from this debacle is that Americans will no longer trust their politicians to do the right thing.
Dan McLaughlin is a columnist for The Post-Journal. Contact him at danmcl999@roadrunner.com.