When Economics, finance, and history form a convergence, then it is time to look at the "trend". This blog is designed to see how the little pieces fit together to form the big picture. . The blog will also address some social and political aspects of the United States and beyond. College football season will offer weekly complimentary selections v.s. the Las Vegas Line.
Sunday, August 29, 2010
Post from American Patriot... Market Moves
From the American Patriot...
At the very core of all of our economic problems is the banking system in the US which has unquestionable acted stupidly, greedily, and abused the trust of the American people.
Had it not been for the securitization (bundling of mortgage portfolios and then splitting them into tranches and offering them as bonds) there wouldn't have been funding for the housing boom and risk would have been retained largely at the banks in which case the banks would have remained conservative in only issuing sound mortgages with 20% or so down payments which itself would have precluded the whole housing mortgage debacle.
We are in a major deflationary spiral and there is nothing whatsoever that the Federal Reserve can do about it. Prices of goods and services must come down relative to people's incomes as that is the core problem with the entire economy where prices have gone up vastly beyond the capability of people's wages to pay for them which is why the economy is slowing.
No amount of additional easing by offering credit will change that as most people quite wisely are not interested in more credit (which means taking on more debt).
There is a great debate now being waged in this country as to what extent the banks should have control over our economy. Once upon a time, a mere 100 years or so ago, the banks were less than 10% of the economy and they were the facilitators of financial commerce. Today, banking and financial services has taken a huge role in our economy and it now accounts for around 34% of our economy. It is clear that banking - particularly money-center centralized banking - has become far too powerful and far too intrusive and far too controlling in the US economy and that needs to change.
The Federal Reserve is indeed part of that problem and its role for the future needs to be carefully considered. It is a creature of Congress and in its very Act of creation by Congress the right to AMEND OR ABOLISH the Federal Reserve was retained by Congress (the people of the United States) exactly as follows:
"Federal Reserve Act"
"Section 31. Reservation of Right to Amend
1. Reservation of Right to Amend
The right to amend, alter, or repeal this Act is hereby expressly reserved."
What restrained many questionable, dubious, and otherwise out-of-control banking practices for over 60 years from 1934 up until 1999 was the GLASS STEAGALL ACT which was a simple, strong, and straightforward 13 page (nearly unimaginable in today's era of 2,400+ page bills) document that clearly separated 1) commercial retail banking, 2) investment banking and brokerage services, and 3) insurance and other financial services.
The Glass Steagall Act was a result of the investigation by the Pecora Commission in 1933-34 in Congress which determined the key causes of the Great Depression and the banking collapses of the early 1930s. I have long advocated that the Glass Steagall Act needs to be implemented today in its entirety without any changes and that what repealed it, the Gramm Leach Bliley "Financial Services Modernization Act of 1999" needs to be fully repealed in its entirety.
Had we as a country kept the Glass Steagall Act in force, we would not be seeing hardly any of the financial messes and problems we are facing today, and we need to look to it as the real solution to get our banking and financial services house back in order and restore our economy.
I am looking at calls on ADM, AKS, and maybe even shares of SPY. I look for a move up this week and through the end of September...