soryang's Journal - Archives
Wall Street investment banks can't live without derivatives. Derivatives are something for nothing as most are sold without a valid insurable interest and may be characterized as gambling or naked derivatives.
Wall Steet institutions are in the habit of issuing so many naked derivatives with great leverage that they simply overpower the underlying markets driving the markets in whatever direction the biggest issuer chooses. However, if the market moves the other way because of a so called black swan event, the entire system is threatened becuase there is no way the largest or controlling institution can pay off its bets, which are astronomical in notational value. The key point about derivatives in general is that the largest financial institutions in the aggregate set the legal and financial standards for their issuance, with the collusion of government and the federal reserve.
Derivatives are issued without reserves to back them so they lead to financial catastrophe. As they are called in a financial crisis, all other assets must be sold off to meet the demands of the insured parties. This is why world markets collapse.
Because derivatives are contracts with no intrinsic worth and have no reserve as insurance is required to have, they represent pure profit for the issuer. Alan Greenspan said they represent the "genius of American financial innovation." Because the naked derivative is "something for nothing" they are extremely profitable when everything goes your way. Because the parties that issue them can't pay when the notional value is called for in massive numbers, the Fed, the taxpayer, and the unemployed worker are stuck with the bill.
The derivatives which caused the collapse of 2008 which we are still experiencing were used to insure dubious collaterized debt obligations, principally mortgage backed securities. This combination was undertaken for export to resolve the massive balance of payments deficit caused by the destruction of the American manufacturing sector by "global free trade."
Instead of exporting goods, the corrupt society exports bad paper.
It's a difficult tome, but everyone should read Adam Tooze's Wages of Destruction, which describes in excruciating detail how, in Nazi Germany, the balance of payments deficit combined with militarism leads to a go for broke strategy of world domination. This is where the military industrial financial elites decide that it's now or never based upon a calculation that their relative economic power would never improve without military conquest of resources. They recognized that the balance of payments deficit would not be resolved with their economic rivals on the playing field of international commerce because of their commitment to military rearmament. Their military and industrial elites decided that the military must make a play for total domination of the world because they would otherwised be compelled to roll back their military power to accompany the relative economic decline forced by finite resources, international debt and the insurmontable current account deficit.
They gave up on peaceful economic commerce and decided to force their way on the world.
is what the inheritance tax is meant to prevent. The permanent alienation of wealth from commerce is what characterized feudalism. Dumping that system is what the French and American revolutions were all about. An aristocratic title is not just a label, it is a propertied estate that supports a dynasty of heirs forever, with unearned income. Such was rejected by the founding fathers.
The desire of the current privileged class of wealth to have their heirs permanently avoid the inheritance tax is nothing less than the rejection of the concept of bourgeois democracy and the reinstatement of a fee or toll based society, where the wealthy live off unearned fees, or fiefdoms forever. It is particularly telling that they wish to do so without the obligation of a fair reciprocal obligation to pay taxes to the sovereign while they are alive. In other words, as in the ancien regime, they are completely corrupt.
The notion of dispensing with enterprise and living as feudal lords generation after generation,"and to their heirs forever," is antithetical to a free people. For serfs and slaves and their masters, a society based upon status of birth is okay.
Michael Hudson has a great essay on counterpunch discussing the true nature of Adam Smith's free economy and the pernicious nature of the "rentier" society of unearned inherited income now returning from the dark ages in the US to the detriment of a truly capitalist society. http://www.counterpunch.org/hudson12062010...
When taxed at progressively higher rates, the rich and corporations will invest their money in tangible capital enterprises. They will do this to seek out business tax deductions and business investment tax credits. They will seek out investments in depreciable assets. Payroll is tax deductible, this is why employment rises during periods of higher taxation but decreases or is anemic during periods of tax decreases. When taxes are progressively increased on the rich, their capital business investments nullify the higher marginal rates while increasing tax revenues in the agregate by generating commerce, higher employment and real productivity.
When you don't tax the rich they merely engage in hoarding and speculation because there is no incentive not to do so.
That's gonna do a whole lot to stimulate the economy, right? Not!!!!!!
They are worse they brain dead. They are cynical opportunists. Anything to get corporations out of paying their share of FICA. Hey why stop at a Social Security tax holiday. Why don't they recommend slave labor and caloric rationing? After all wages and feeding workers is a burden on business.
Both Nazi Germany and Stalinist Russia got into these serial extremist ploys to solve the balance of payment deficit caused by their massive overcommitment to building war machines to dominate the earth. We could get 50 billion here and 50 billion there, who cares what happens to the general population. Hang on to your pigs and chickens people, it's coming!
...in recent years by the note originator and his successors but not by the home buyer. Assignments are required by state law to be recorded in the county court house where the property is located. This was not done by the banks. Instead, they avoided transaction costs and local taxes by simply recording the transaction in the multistate electronic registration system, M.E.R.S. This was a entity/device with no legal standing whatever invented by the investment bankers. This is why home buyers had no notice of what was going on with their mortgages. This is why judges in some states are throwing out the mortgage foreclosures where they are challenged by the respondent/owner. Since most mortgage foreclosure defendants/respondents default, mortgage servicers thought they could just fabricate documents or perjure themselves to create a legal trail that didn't exist. Interesting that perjury and fraud on the court are now known as "robo signing."
Because M.E.R.S. has no legal standing, AIG and others conspired to issue Credit default swaps on so called mortgage backed securities as insurance to M.B.S. buyers. They called them CDS's to pretend they weren't insurance. This because insurance legally requires a reserve and is regulated by law. They had no reserve and avoided/violated state insurance regulations by doing this. Mortgage backed securities were not backed by enforceable mortgages and were not secure. The issuers knew this, any law school graduate who taken more than one real estate course could tell them that.
When it became generally known among MBS purchasers that the instruments were essentially fraudulent, the CDS's were called. AIG and others almost instantly went bankrupt. Credit froze internationally when it was realized that US banks were crooked. Credit risk had to be nationalized and the US taxpayer picked up the tab.
In other words, this was a massive conspiracy to defraud. Why no grand juries? Why no indictments? Because these bankers own the political parties.
Mob psychology is what the republican/corporate/fundamentalist marketing machine mobilizes. It is Bernay's group id, Arendt's mass mind, the Southern Baptist/fundamentalist (John Hagee Mossad/CIA)meme, you don't need no godless socialism, just git rite with Jesus. See Kevin Phillip's book, American Theocracy. It is the volk zeitgeist of white racism that Hitler and his military industrial complex mobilized so well and so catastrophically. The corporate right is mobilizing all of the id's destructive forces, resentment, recrimination, fear, jealousy, hatred, insecurity, and the lust for revenge.
There's nothing reasonable about it.
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