Originally posted at Writeindependent.org on September 9, 2011
derivatives – economy – Glass Steagall – crash of 2008 – Financial Modernization Act of 1999 – Gramm Leach Bliley Act – Warren Buffett – Charlie Munger – banks – securities
The purpose of this website is to elevate the mood of the citizens of the United States. The cause of many of our problems is being in a valley so low that we cannot see above the crest that would show us a way out. Solutions for our problems lie in creativity, ingenuity, and technology and a shared sense of purpose. If ever we needed a more inspired sense of community, it is now.
That is a good thing, because all the researchers and great thinkers who study happiness tell us that a sense of community is one of the key elements that lead to a more productive and satisfying way of life. Instead of sitting alone in a room, people need to be out in their communities making a difference by social, face-to-face, caring interactions. This website is the answer to ennui, inaction and a feeling of helplessness.
Before a human being can feel good, she needs to have her basic needs met: food and shelter and a means of making a living. With unemployment so high (and the numbers are skewed because everyone knows, when youre unemployed so long that you lose your benefits, they stop counting you) the pressure to take care of the situation is nearly unbearable.
But first I will explain why we are in this situation the best way I know how. This is the short version, because it has taken several decades to get where we are today.
Back in the year 2000, when George Bush Jr. was about to take over the presidency, a bill was on the floor of Congress which would essentially dismantle the last vestiges of what was the Glass Steagall act. The passage of this bill set up the conditions where derivatives, credit default swaps and sub-prime mortgages were deregulated and obfuscated. A strange thing happens between presidencies: its holiday season (Thanksgiving, Christmas, New Years) and our congressmen usually fall into lame duck sessions where people dont feel much like paying attention and working hard. But I dont believe congress stopped thinking in order to pass this bill. Quite the contrary. I think they probably knew that the rest of the country was asleep while they stealthily passed a law to repeal the very act that had protected our country from the boom and bust practices that had put us deeply into the Depression in 1929.
In a very acute way, I feel that our congressmen and women sold out our futures because they wanted to help create get-rich-quick schemes now.
The rest is history, as they say. Make no mistake about it: I am blaming the people who voted in that congress, Democrat and Republican alike, for creating not just one, but a series of conditions under which our present economy came to be. For more information, go to this article, because it is the best description (all in one place) that I have found for what went on prior to 2008 to cause the crash.
Now, we still havent put into place the same safeguards that we used to enjoy that prevented banks from, essentially, gambling with our money. The derivatives market is still corrupted, and it needs to be fixed. Heres Charlie Mungers opinion on the subject: http://www.youtube.com/watch?v=2M3a2j-jHIs. Charlies protégé, Warren Buffett weighs in on this paper, calling derivatives Weapons of Mass Destruction: Warren Buffet on Derivatives.pdf
So the first order of the day should be to replace those safeguards that prevent an inflated boom cycle after which there is always a massive bustand in this case, recovery is taking a long time, and indeed it may be felt for generations to come.
The second thing to understand about the crash of 2008 is that the banks made good on their credit default swaps, which is to say, they borrowed that hefty sum from our governmenttrillions of dollarsto be able to give a hefty sum to a very few paper pushers who masterminded these scams. In a free, capitalistic society such as ours, those people should be rewarded for being so smart that they figured out a way to work the system legally (albeit immorally and unethically). And now, these people are living the high life. Or are they?
Deep down inside, these wealthy few not only understand what they did, but they dont feel worthy of what they have. They know that by pulling massive sums of money out of circulation, they have unwittingly caused massive unemployment, they have caused strain on our government systems, all the way down to the education of our children. Thats not being a good neighbor.
And what happens when you arent a good neighbor? It weighs heavily on your conscience, or at the very least, if you arent a sociopath or a psychopath, it causes fear and anxiety. These people know they got away with something, and they know they are sitting on the solutions, and they know that if they dont put the money back into circulation, this country will continue to spiral down.
Yes you can create a buffer zone using your wealth. Fly in private jets, go to islands that only the wealthy visit, and generally try to ignore the unwashed masses. That only goes so far. Somehow, some way these people (unless, again, they are sociopaths) will figure it out that they cant ignore the problems of the masses who are their countrymen, their neighbors.
There is a law in economics that is rarely discussed, but it is one of the most important laws because it affects our ability as a species to live: money needs to flow. We talk about cash flow, and taxation, but we rarely talk in terms of movement. Money absolutely needs to move in order for the whole system to work. It needs to change hands, so to speak. I am not just blaming the few who have made out in the 2008 crash. I am also pointing my finger at any country, company, or entity that holds onto money and allows it to putrefy when there are so many people in need all over this world. Its a matter of conscience.
We need to create systems where the little guy in this country can borrow, at a reasonable rate, from capitalistic institutions that are designed to move money again. It is a win/win. The investors are anonymous, and they have a place to stimulate our economy, while creating jobs. In some countries, these are called micro loans. Originally used to help third world countries, we need more micro loan programs here at home.