Lies, Lies, Lies: The New Foundation of the Financial System

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Lies, lies,
lies…

The days are
dwindling down fast now. There are only a precious few left in 2010.
The Dow rose 40 points on Friday. Gold fell off $7.

But let’s
forget the market action for a little while…most of it is noise
anyway.

It is time
to relax a little. Time to think.

“Everybody
is so busy now,” said a colleague in Australia. “No one
has time to think. Instead, we’re busy answering our email
or checking our Blackberries. It’s amazing. You get in an elevator
and everyone pulls out a phone. No one talks anymore. Or looks at
anyone. Or has a thought.

“I don’t
even think we writers bother to think anymore. We’re too busy.
We have to produce too much material. We don’t really have
anything to say…but we say a lot.”

Of course,
that’s been true at The Daily Reckoning for years. We
were always ahead of the trend. We write every day, whether we have
something to say or not.

Do we have
something to say today? To tell you the truth, we don’t know
yet. But let’s begin by thinking about this…a quote from
The Daily Bell we passed along on Friday:

“The problem
with where America is now is that the country has been built on
one lie after another for the past decade and the lies show no signs
of slowing down.”

And then, there’s
this from Charles Hugh Smith via Marc Faber:

“…the
status quo would collapse were systemic fraud and complicity banished.
Rather than the acts of evil conspirators, they have become the
foundation of the US economy and financial system…”

You will recall
how Goldman Sachs wowed the whole world with its dazzling trading.
Day in, day out…the traders at Goldman made money. The firm
turned in “perfect” trading quarters, with not a single
day showing a loss.

Surely, one
of the junior traders would have miscalculated at least once? Or
a seasoned old pro, after a well-irrigated lunch, take his fat finger
and hit the wrong button? Nope. Not once did Goldman’s trading
machine err. It was uncanny. Almost unnatural.

Who was on
the other side of those trades, we wondered? Trading is a zero sum
game. One side wins. The other loses. So some poor schmuck must
have taken a loss for every gain earned by Goldman’s geniuses.
Imagine him taking his lumps day after day…and still coming
back for more. How could anyone stand so many losses? What kind
of fighter could take that kind of beating and still be on his feet?
And yet, there were no major new bankruptcies announced during that
period. How was it possible? Who was losing all that money?

We don’t
know. But we know who the schmuck was …the poor sap was us!
Had it not been for Senator Bernie Sanders from the Green Mountain
State, who was curious enough to insist, we would never have known
what had happened to the Fed’s $1.3 trillion in bailout cash.
Now we know. Goldman helped itself 212 times – roughly every
business day – during the 12-month period beginning in March
’09, all the while telling the world that it needed no bailout.

Lies, lies,
lies…

The first lie
was the biggest whopper of all – that you could get rich by
spending money rather than saving it.

The second
was that the stock market would make you rich. All you had to do
was to buy a well-balanced portfolio and hold for the long run.

When that one
ran into a wall, along came the lie that you couldn’t lose
money in real estate.

There was also
the lie that the free market would make people rich…and if
it didn’t, the authorities would force it to do so!

Then there
was the lie that an economy saturated in debt could be stimulated
to heights of prosperity by splashing on more debt.

And then there
was the lie that you didn’t need real money in the system;
the authorities could manage a flexible, paper money system so as
to help maintain full employment.

And then, after
half a century of adding cash and credit, when the Wall Street speculators
cried and moaned, we were told that they were “too big to fail.”
They needed to be saved.

Then came the
lie that monetary and fiscal stimulus would lead to “recovery.”

When recovery
didn’t come, we were told that QEI would do the trick –
so they pumped hundreds of billions of dollars into Wall Street’s
failed institutions. When it didn’t work, we got QEII.

And now, the
federal government is headed to bankruptcy. We are told not to worry.
No need to change course. Tax. Spend. Overspend. Stimulate.

The same goofballs,
liars and incompetents who have brought us this far say they’ll
take care of us.

Which is what
we’re worried about.

December
14,
2010

Bill
Bonner [send
him mail
] is the author, with Addison Wiggin, of Financial
Reckoning Day: Surviving the Soft Depression of The 21st
Century
and
The New Empire of Debt: The Rise Of An Epic Financial Crisis

and the co-author with Lila Rajiva of Mobs,
Messiahs and Markets
(Wiley, 2007).

The
Best of Bill Bonner

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