When I consider events like the CFA conference being “postponed” I naturally get a sinking feeling, which I can tell is shared by many who read this bog.
I don’t blame you.
When one considers the track record of our elected officials – our government – and the regulators that work for them, one has to start wondering what country we are now living in.
I’ve said before that the contract between a citizen/taxpayer is a delicate one, wherein there is an equitable exchange of value – roughly 60% of one’s income (state, federal, sales, property, gas, etc.) is taxed – in trade for certain protections and deliverables: The government will provide certain goods and services, in a reasonably competent and effective manner.
These include:
A) Protecting the taxpayer from foreign invaders/harm.
B) Protecting the taxpayer from domestic harm.
C) Applying the rule of law evenly and fairly, with no favoritism.
D) Educating the population.
E) Safeguarding the taxpayer’s property rights.
F) Safeguarding the taxpayer’s voting rights.
G) Ensuring a reasonable level of safety from products.
H) Ensuring a reasonable infrastructure of safe roads, sewer, water, power.
I) Safeguarding the taxpayer’s rights, as laid out in the Bill of Rights and the Constitution.
There are more, but those cover the basics.
When one considers what the Naked Short Selling crisis has exposed about how our government operates, one has to question the sensibleness of the continued performance by the taxpayer under that contract – I would maintain that the government, Democrat and Republican alike, have “failed to deliver” most of what they are being paid to do – thus, one questions the wisdom in continuing to pay them.
Let’s consider each item.
A) How are we doing there? Well, we are the only superpower in the world now, however we are arguably more hated internationally than at any point in our history. We have entire regions of the planet where the populations would give their lives to harm us.
We are occupying a middle eastern country with no success or end to the conflict in sight, we are saber rattling with another, our adventure in Afghanistan has turned into a headline play (the country is rapidly devolving back into a fundamentalist-controlled terrorist breeding ground, now that the TV cameras have been turned off – because we didn’t have a plan to create infrastructure, there isn’t anything to replace the Taliban, thus a vacuum exists and they are re-assuming their stranglehold – and that didn’t go well the last time) which will likely bring us more anguish in the future, and Americans are targets of hatred and anger from many segments of the globe – Central America still remembers our supporting murdering terrorist organizations there (for many years), Muslim countries hate us for what is perceived as aggression and a double standard and colonialism, South America (Venezuela comes to mind) recalls our CIA’s behavior in Chile and elsewhere, and views our interest in oil producing nations with suspicion and resentment, Russia is a kleptocracy ruled by criminals using force (you want a nightmare, read up on the rotting nuclear sub fleet and the inevitable chain reaction when hundreds of nuclear reactors melt down from lack of maintenance, and the first seawater hits them) who view the US as a hunting ground – I could go on, but suffice it to say that we are not viewed by most as the saviors we were after World War II.
And any sympathy currency we generated over 9/11 has been expended by what many perceive as a wreckless and arrogant international policy. Thus, we, and our citizens traveling abroad, are in more danger than ever before, and 9/11 should offer an example of how difficult it is to stop those driven by hatred to harm, if they really are committed - even on American soil. And the fact that the master mind of that event still remains at large, despite the largest and most sustained manhunt in history, spanning 5 years now and yielding no result, makes us appear to be vulnerable and easy prey – a bloated paper tiger incapable of doing much to stop the righteous from their task. I maintain Item A is a draw to a negative in performance. No offense intended to those that disagree with my take on our standing in the court of world opinion.
B) Harm at home? How about looking at the crime rates for most American cities, and comparing them to other first world countries – Europe, Australia, Japan, Canada. Or consider our ability to deal with disasters that occur – FEMA being a nice example. For all the rhetoric, we live in a violent culture with a massive drug problem, a higher murder rate than virtually any other civilized place, and billions spent on “wars” on things that don’t respond to battle – our war on drugs has burned many billions and accomplished nothing, our war on crime is a meaningless sound bite, our war on poverty is silly as it is specious – but “wars” sound like action is being taken, thus they continue in spite of provable lack of success. I would maintain that B is a draw to a negative.
C) C is a pure failure. One can look to the track record of Wall Street’s co-opting of the system for proof positive. If you are an inner-city thug who steals a car, or sells a crack rock, you will go to jail. You will likely do time in an ugly, unpleasant place, filled with other dangerous miscreants, who will teach you to be an even more ugly and dangerous citizen. If you steal hundreds of millions from grandmothers on Wall Street, you might have to pay a small fine. This is pure favoritism. Or if you are a heavy hitter like Marc Rich, you can commit treason and buy a presidential pardon. If you are one of the rank and file, you will be flagged if you withdraw $3K in cash, or buy anything substantial using cash, or want to leave the country and renounce your citizenship – the US considers 50% of your total estate (over $500K) to be theirs to confiscate in that instance, even though you already paid taxes on it – they figure they would get it when you died, thus they are entitled to it. If you are wealthy, however, you can have millions go wherever you like in anonymous structures called hedge funds, with no constraints of any sort imposed – this creates a de facto second-tier banking system for the very wealthy, where the rules are circumvented. Thus, no even application of the rule of law, even as it applies to national security. I could go on. I won’t. We don’t apply the rule of law evenly. Period. So this is a complete farce and failure.
D) We have one of the most expensive systems in the world, and our children are among the worst educated of any developed country. Most of the money doesn’t make it into the classroom, but rather is soaked up by a bureaucracy uninvolved with actually teaching Johnny to read or write. Thus, Johnny generally can’t, or won’t. This has led to a largely illiterate middle class, wholly unfamiliar with history, or most issues (aside from what they see on TV or in poorly written, obviously biased puff papers), and completely uninterested in any perspective other than that fed to them by their media machine. Patriotism is a surrogate for thinking, and thinking is frowned upon – the education system is big on lowest common denominator memorization by rote, but doesn’t teach how to reason. So we have an entire subculture of under-educated consumers whose expectation of a life better than their parents’ quality thereof is doomed to failure – you can’t finance a future with credit forever, and if you can barely stumble through a literate paragraph, your prospects are dim. D is a failure.
E) E is a failure. The grandfathering of FTDs is a straightforward pardoning of theft of property rights. Money was paid for property, which wasn’t delivered. Simple. Wall Street and the regulators like to dress it up, or rationalize that this fraud and theft is necessary for the system to function, but the truth is that it is nothing more than saying that the system can make more money if a certain amount of theft and fraud are permitted – and the system’s interests are superior to yours and mine. See the failure of C for more on this. I repeat, E is a failure.
F) The right to vote is considered sacred – we have gone to war using that as a pretense. And yet the sanctity of voting rights is ignored by Wall Street, and the government does nothing to protect its population from this violation. We are big on talk, but once the money changes hands, Washington is willing to allow Wall Street to violate this principle every day. You can buy your justice by the pound, apparently, and the thieves have very deep pockets. F is a failure.
G) We have the EPA, the FDA, the FTC, etc. etc. etc. They are all designed to protect us from predatory and unscrupulous companies or providers who would prey on us, by taking dangerous shortcuts that threaten our safety – in food handling, or drug efficacy and safety, or environmental issues, or in commerce-related endeavors. Some are quite good – food safety, for instance – some are all but useless due to loopholes – environmental issues, for instance (try breathing the air in LA sometime, and then contrast the quality to unregulated hellholes like Mexico City – where it is no worse, and on many days better), and some are worse than useless – the SEC comes to mind. So this is a qualified failure – our food is safe to eat, but our financial markets are no more safe than a Brazilian barrio.
H) For the most part, H is a success. Roads suck in places like California, but then again, you can drink the water, the power is stable and ubiquitous, and our sewage systems work well. H is a success.
I) I is debatable. I won’t go into it too much, but the right to go about one’s business with freedom, presuming you aren’t hurting anyone, is pretty limited in the US. We are heavily regulated in many ways, cash has been criminalized, social security numbers are used as a national ID system (in violation of all the assurances issued when that fear was raised in the 30’s, and in violation of law, actually), your ability to come and go across the borders is becoming increasingly soviet in model…much of this is due to larger populations, terrorist threats, and the realities of modern life. Those are the reasons, anyway. I believe that we as a nation have traded many of our freedoms in exchange for false assurances of a security impossible to provide, however that is also merely my opinion. I won’t say that I is a failure, but I am reluctant to declare it a success.
So that is my assessment. Some might call it accurate, some may say overly pessimistic. I would say it is pretty real-world.
We have a federal apparatus that uses a double standard, and is Eisenhower’s worst nightmare come true – the military/industrial/financial complex running a country to suit the desires of those all-powerful special interests. Want to buy a congressman’s vote? Not that pricey, we found out in the Abramoff case. Want to make billions rebuilding countries or “helping” them get their oil out of the ground? Not to worry – it can be done. Want to rob the population of a good percentage of their retirement savings over time? Not a problem – the markets are here for you to do so, with two sets of rules: one for the rubes, and one for the predators.
Sorry for the rant, but I call them as I see them, and frankly our nation is failing us in most of the critical ways I can think of. And we are paying the highest imaginable load for this non-performance. Small wonder that we are inundated with the message that this is the best place in the world to live, that we are better than everyone else, etc.
If we didn’t believe that, why would anyone in their right mind pay that much for such abject failure to deliver on the essentials?
Please don’t give me a harangue about this being one party or the other’s fault, or one racial group or the other’s, or one religion or the other’s. This is a pure class struggle at it’s essence – a redistribution of wealth to the super-powerful and wealthy, who live in different neighborhoods, play by different rules, live by different laws, and view us as sheep to be shorn – or perhaps the Matrix model is more accurate, where our resources are “harvested” to power this machine – which is delivering sub-par or worse performance to those paying for it’s goods and services.
Perhaps the most frightening part about all of this is the single most evil way that the fail to deliver problem could get cleared up - a massive takedown of the market, a la 1929. Recall that the larger houses were out of the market back then, and that it was the "dumb money" that got slaughtered - the Joe Kennedys of the world had been out for a while, and fortunes were made to the downside by those prepared to milk the run down for all it was worth. Everyone thinks that it is different this time, however any serious student of history understands that it repeats itself constantly. Would a Wall Street, backed into a corner, pull the rug out from under the economy, with the willing assistance of the elected officials they have bought and paid for, in order to clear up their centi-billion dollar problem? I shudder at the thought, but don't dismiss it as impossible.
Wall Street plays to win, and cornered rats fight hardest.
Pessimistic? Perhaps. But how can anyone that has seen the last year’s worth of behavior by the system, the regulators, and the media, arrive at any different conclusions?
I watch as Patrick Byrne demonstrates huge disparities at the DTC versus the brokers, and nobody comments on it. He can't get shares for months, and not a peep out of anyone. There is hard, incontrovertible evidence of a massive, sustained takedown of the company using FTDs, and the SEC is pretending that nothing is going on. The financial press are backing Wall Street - their meal ticket.
There is no justice being served, and the ongoing naked short selling crisis makes a mockery of the notion that we are living under the rule of law. That conceit evaporates when all facts are considered objectively.
And that is both deeply disturbing, and sad.