Treasury secretary, Geitner seeks to broaden his bureaucratic power to control systemic risk--the interdependent dimension of the financial sector that has been engineered to extort value by consolidating (leveraging) the capital under the guise of spreading the risk.
Interdependence is argued to be a way to spread the risk in order to be able to afford taking the "big" risk to promote economic growth that being "small" does not afford. As it turns out, of course, the argument is nothing but a fraud. The "big" risk is but a systemic risk generally imparted to The People disproportionate to their share of the reward. In other words, it is an unjust enrichment perpetrated by a fraud, and as long as the risk is to be bureaucratically managed to protect "the system" from failure, perpetration of the fraud is not a crime, and the expert, elite perpetrators do not go to jail for fraud.
The interdependence of bank firms, and other financial entities, is argued to be a necessary condition of the sector independant of organizing to be "too big to fail." The financial sector's interdependence is necessary to produce the risk/reward ratio necessary to turn wealth into capital. The "natural" result is being too big to fail. Buying into this argument results in the byzantine bureaucratic measures we see unfolding to control the inherent, the "natural," systemic risk of ensuring the survival of what needs to sytematically fail.
Since private wealth, personal or corporate, is not likely to become capital (money to be invested) until solicited with a favorable low-risk/high return ratio, the bureaucracy is busily organizing to lure private capital toward the public good--economic growth. The lure, the incentive, to not remain illiquid and produce the public good, private-sector wealth is turned into capital with a disproportionate reward-to-risk legitimized by being organized into a public-private partnership that is too big to fail. The disproportionate reward is the empirical value of the problem--the risk--to be resolved. Satisfying the value causes the problem, and like borrowing your way out of debt, the problem can appear to be the only solution.
Supposedly, the leveraged return of inter-bank finance is an innovative means of forming the capital (the liquidity) needed for economic growth with a return that is disproportionate to the risk. The "big" dimension of the capital is argued to be a way to create capital (money to be invested rather than just saved or horded) when it is really a way to consolidate it by being so big it cannot be allowed to fail, or to actually take the systemic risk it causes. The result is a big reward with no risk. The disproportion is empirically expressed as an economic crisis and refered to as management of the systemic risk.
Being too big to fail, so the argument goes, allows the firms to have the capital reserves necessary to survive the crisis, the inefficiency, organizing to be too big to fail causes. The crisis, then, necessitates the need for what causes it (the capital reserve of too big to fail).
The interdependence argument, in addition to being a tautological legitimacy of the most absurd proportion, is especially deceitful and pernicious because it relies on the argument that what ails us is a necessity beyond good and evil despite the invocation of "moral hazard" whenever solutions are most likely to put the public good before the primacy of private profit with the result always being the value judgement that what supports a private sector benefit is good and what provides a public benefit is always likely to be bad. To bring the value judgements into a practical "resolution" without jeopardizing the status-quo organizational tautology, there is a tendency to resolve with a public-private organizational technology designed and implemented with the best and brightest elitist, technocratic expertise.
It is time to quit listening to the "revolving door" experts of the public-private partnership of power and let The People rule. This is how We do it.
Organize this current crisis of the economy and the financial sector into the means to prevent it, not cause it!
A national bank is clearly needed to finance the priority of government: ensuring a free and unconsolidated marketplace that will not tolerate "too big to fail" and the extortionists it rewards and maintains.
The National Bank funds small banks. If a small bank fails, it ceases to exist without systemic risk. It is not consolidated because that causes the problem, the systemic risk, of "too big to fail." The depositors of the failed bank are insured and are free to redeposit among the alternatives. No one bank or syndicate is solicited to buy the bank. The customers (The People), the depositors, fund the success of the other banks instead of, as taxpayers, financing "too big to fail" and the means of their extortion, which not only increases the need and the expense for government with a typically regressive tax burden, but reduces the funding (their savings, the capital, the distribution of dollar votes) that rewards the success of NOT being "too big to fail" and the ability of the sovereign, The People, to rule.
The national banking system adds to the number of existing small banks by busting the large, too-big-to-fail banks into small banks with an equal number of equity shares. The banks lend to each other as a standard business practice, and so become interdependent for the purpose of pluralizing the marketplace, i.e., allowing capital to easily flow into profitable industries and markets, controlling inflation and unemployment without trading them off like we do now into a crisis dimension. Less capital is held in reserve and more is available for economic growth, making the capital optimally available to prevent the systemic risk.
The interdependency of the banks is profitable by being pro-growth which naturally hedges, or spreads, the risk so that failure of one WILL NOT cause the failure of others. Failure of a bank will be by the choice, the democratic legitimacy, of its customers, not the determination of a bureaucratic elite and political gaming. The People rule!
Hedging the risk becomes a function of promoting economic growth, not by just investing new markets, but by investing profitable existing markets as well. Without investing in growth, the bank cannot be profitable...that will most assuredly promote growth! The sheer number of businesses and possible profit opportunities is the incentive to hedge with growth rather than create a leveraged interdependence that will expose the firm to the probability of complete failure that will be allowed to occcur with the depositors, not the bankers, at no risk of loss with the full faith and credit of the national bank...and The People rule!
Where bank interdependence has been argued to spread the risk only to be used to extort The People into accepting terms it would not accept if it were a free market, instead of the tyranny of a consolidated (interconnected) capital, it can be a function of ensuring a free and unconsolidated marketplace as best can be had so that the risk is not the fear of detriment (systemic crisis) but the promise of always promoting a peaceful prosperity.
Instead of destruction of the American dream, we have the means to ensure it.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment