Monday, May 17, 2010



A number of financial big shots have insisted that preventing individual banks to become Too Big To Fail would be enough of a reform. But this is completely insufficient, because what has become too big to fail is the entire financial industry. And the financial industry used that power in 2008, as I pointed out at the time. The top financiers said: give us money, to us personally, or we will close the ATMs, and cut off all the money economy. They were given the money personally, instead of yanking out the banks from them, and nationalizing them, with that same money. As it is, even now the entire financial system is on life support from the public, as the plutocrats keep on splurging on the money flow that, unbelievably, they are still given the opportunity to control (control beats jail, any time).

In theory, finance is supposed to be like an oil, allowing the friction-less transmission of savings to valuable investments. Right now it has become instead a metastatic oil spill engulfing civilization. This is entirely due to the fact that politicians have been bought by that financial cancer they helped create stealthily. The system keeps on growing, because the public does not understand how the labor, saving and taxes of common people is used to make an oligarchy very rich. It is not so much that it is too technical, and people do not have enough mathematics, nor moral fiber left to appreciate how revolting that exploitation has become. No, more simply, a careful propaganda machine disguises the tricks used by the financial oligarchy.

Just thirty hedge funds control, together, more than one trillion dollars (that is 2/3 of the normal USA federal budget) . Now, of course, the largest banks are behaving like hedge funds. This is actually by behaving as hedge funds that the bank holding companies collapsed in 2008: 300 billion dollars of mortgage defaults were transformed into 24,000 billion dollars of potential losses, in the USA alone, as the hedge funds like bets of bank holding companies backfired. The financial crash was purely a hedge fund phenomenon. Had the Banking Act of 1933 still been in force, this could never have happened. (But the plutocratic boy, Summers, had demolished the Act under puppet-in-chief Bill Clinton)

So here, when I say 30 hedge funds control as much as two third of the federal budget, by "hedge funds" I meant pure hedge funds, the ones reserved to the hyper wealthy (by the way, to open an account at the so called "bank" Goldman Sachs, you will need ten million dollars, although every US taxpayer gave vast amounts of money to Goldman Sachs, by paying taxes, they can’t enter that temple of wealth). Oh, by the way, there are not just 30 hedge funds: there are about 10,000 of them in the USA, and as many in Europe.

Hedge funds use strategies such as "butterfly" trading. They consist in taking huge leveraged and opposite positions. One side will always lose, but the other will win so big, that it does not matter. All what is needed is markets that move big (so that there is a big loss, or a big win). So the question of the monstrosity of finance becomes: can an "industry" that control around 15 times WORLD GDP move markets?

There are other lightly regulated pools of capital, and tax heavens are part of the shadow financial empire which tries to control the planet. The tax system of the USA is entangled with US corporations and tax heavens, so this plutocratic system functions as an integrated whole: the USA political structure has been captured by plutocracy.

In 1998, one hedge fund, Long Term Capital Management failed, and the US Federal Reserve intervened on the most gigantic scale to save a number of investors who were friends. It’s all about friendship among the rich and famous. The Fed, the supposedly independent central bank of the USA, is part of that system, and fears to be exposed to the light of the day, as all good vampires do (that is why it does not want to be audited by the US Congress, lest all the gifts to friends would be exposed to the light of the day).

Quantitative and high frequency trading increases the complexity, opaqueness, and self fulfilling prophetization of financial markets, allowing plutocrats to become ever bigger relative to the political and economic systems. Market shut-downs such as the one of May 6 (market down 10% in a few minutes for no reason whatsoever, except huge sell orders from giant plutocratic organizations: Citi, etc.) will increasingly happen. US Senators were just engaging in a vote to curb the banking industry at the time. When asked for explanations, we were told that a trader confused the letter m, and the letter b. So he sold billions, in a fraction of a second, when he should have sold millions. It reminds me of fairy tales for children. Panicked, the senators did as they were told, implicitly, and voted down a pesky law, that would have bothered the banks.

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