Zerohedge points out what seems to be obvious to all but those whose professional interests lie in not being able to find their nose on their faces:

“Let’s get something straight right off the bat. We all know there is a certain level of fraud sleight of hand in the financial industry. I have called many banks insolvent in the past. Some have pooh-poohed these proclamations, while others have looked in wonder, saying “How the hell did he know that?” Continue reading →

Jayant Bandhari in Liberty Unbound:

“Starting in May 2005, Canada’s National Post, a generally anti-statist newspaper, ran a series of stories on the enormous successes of India’s opening economy. On the first day of the series, most of the front page was occupied by a picture of an Indian rocket taking off. The story said that the Indian government was seriously contemplating a mission to the moon. Continue reading →

Aha! Searching for more confirmation of my theory that there’s an ongoing effort to white-wash the role played by hedge-funds/speculators in destabilizing the economy, I came across this intriguing passage at wiki, about the upcoming Oliver Stone movie, Wall Street: Money Never Sleeps, a reprise of his 1987 movie Wall Street:

“The New York Times reported that, as part of research for the film, Douglas and Stone had a dinner meeting with Samuel D. Waksal, the founder of the biopharmaceutical company ImClone Systems, who spent five years in federal prison for securities fraud.^[42] They also stated that LaBeouf, along with Stone, discussed the financial collapse with multiple hedge fund managers.^[42] Stone stated that, earlier in the summer he had taken LaBeouf to a cocktail party, organized by Nouriel Roubini, a New York University economics professor and chairman of a consulting firm who earned acclaim for predicting the financial crisis early. At the party Stone and LaBeouf discussed the financial collapse with Roubini and also
discussed hedge fund managers, who are clients of Roubini’s firm. Roubini stated that: “In this financial crisis it was the traditional banks and the investment banks that had a larger role in doing stupid and silly things than the hedge funds.”^[42] Stone also stated that he had conversations with Jim Chanos, a “prominent” hedge fund manager who had urged him to focus less on hedge funds and more on the banking system, Chanos stated: “There was a much more important story, a bigger story, in what happened with the system.”^[4]”

Wouldn’t you know it…

Of course, here at the MBP we don’t have a problem with the thesis that the investment banks behaved stupidly…and badly. We just have a problem with the accompanying non-sequitor – that the hedge-funds behaved any smarter or better.

A few made out like..er…bandits, true. But, it’s our theory, and we’re sticking to it,  that many of the ones who did – especially the ones who’re getting a boost in the media – were part of the “inner circle” of government-connected banks that essentially ran this whole racket.

Chanos seems to have been part of that clique.

And Paulson too.

It’s not government versus banks. That’s the silly black-and-white debate created for mass consumption.

It’s more like some parts of the government +some banks + some speculators versus everyone else.

With the SEC (government), “captured” by some hedge-funds and banks, any regulatory change (whether it’s more reg. or less reg.) ends up serving the same set of masters. It’s heads-I -win- tails- you- lose for them….

Unless we can start seeing this for what it is and bypass ideological rigidity, we will never be able to prevent the system being gamed.

Or, to put it in terms of those formulae beloved of financial “masterminds” who think we rubes can’t see through this baloney:

It’s not G v. B.

It’s

(s)G+(s)B +(s)S  v. EE, where ‘s’ is always a positive integer.

(Chuckle). I think I have a future as a “quant.”

Of course, all this is only the short-term fix. The long-term fix is the Federal Reserve.

But while we’re working on the illness, there’s no reason we can’t treat some of the symptoms correctly, as well.

Larry Reed:

“Equal people are not free, the second half of my first principle, really gets down to brass tacks. Show me a people anywhere on the planet who are indeed equal economically, and I’ll show you a very unfree people. Why?

The only way in which you could have even the remotest chance of equalizing income and wealth across society is to put a gun to everyone’s head. You would literally have to employ force to make people equal. You would have to give orders, backed up by the guillotine, the hangman’s noose, the bullet or the electric chair. Orders that would go like this: Don’t excel. Don’t work harder or smarter than the next guy. Don’t save more wisely than anyone else. Don’t be there first with a new product. Don’t provide a good or service that people might want more than anything your competitor is offering.

Believe me, you wouldn’t want a society where these were the orders. Cambodia under the communist Khmer Rouge in the late 1970s came close to it, and the result was that upwards of 2 million out of 8 million people died in less than four years. Except for the elite at the top who wielded power, the people of that sad land who survived that period lived at something not much above the Stone Age.”

My Comment:

The Reed quote shouldn’t be misconstrued.

Reed isn’t advocating violence against the government...he is making the commonplace observation that, ultimately, government authority is backed up by force…and he then gives examples of that force…from the guillotine (revolutionary government of France)..to the bullet (modern standing army, police officers etc.).

Now, is every one who resists paying tax, for example, going to be eliminated? Obviously not. Much more likely, they’re in for a long, tedious court battle, endless letters, petitions and hearings…culminating in a fine/penalty, confiscation of their property, possibly a jail sentence.

But let’s not get sentimental. Should you resist court orders and flee, you can be shot. Should you resist a warrant or arrest physically, it’s almost a certainty you will be shot. This isn’t the violence of the citizen. This is the violence behind Leviathan.

Pointing it out doesn’t make me an advocate of violence. It makes me realistic.

It’s why I don’t advocate physical resistance. It would be very stupid today, against the kind of arsenal the federal government has at its command. Nor do I advocate tax evasion.

Legal tax avoidance I heartily recommend, as does the IRS itself. However, I don’t see why I should regard anyone at the receiving end of state justice to be necessarily guilty of some great moral sin.

There’s legitimate authority (the cop who comes to a victim’s defense) and there’s corrupt authority (tax laws or criminal penalties applied differentially to the powerful and the powerless).They are two different things.

There are crimes that involve injustice to another human being (murder, fraud) and there are legal infractions that are based simply on dissidence from the prevailing views on economic freedom and justice (many so-called tax “crimes”). Those are two different things…

From Sauvik Chakraverti’s Antidote:

“Mint has a little piece that says one-third of all government expenditure is financed by borrowing, and one-fifth of all expenditure goes towards paying interest. They add that out of every 100 rupees spent, 14 rupees goes towards creating assets, while the rest goes towards salaries – that is, towards consumption. Note that “welfare” and poor relief also have nothing to do with production; they are all matters relating to consumption. Also note that, in India, most of the “consumption” is done by the personnel of The State itself – the politicians and the baboons.

Now, capital consumption is the highway to de-civilization. Progress and civilization has always meant increased saving and investment – that is, the accumulation of capital. This capital, when invested in production, raises the wages of labour and results in an abundance of goods and services for all. This is how, throughout history, civilizations have arisen.

What about those who “invest” in government bonds? Their savings do not go into capital creation or production. They merely finance the consumption activities of The State and they are rewarded with interest that comes from us taxpayers. How can this be called “investment”? It is not. It therefore becomes clear that all government borrowing is nothing but capital consumption – the highway to de-civilization.

I am therefore of the opinion that widespread awareness must be created about the pernicious consequences of putting private savings into government bonds. Investors should be made aware of the fact that they are destroying precious capital in a capital-poor country, and that they would be doing their bit for the nation if they made genuine investments either in the stock market, with the banking system or elsewhere within The Market. Further, public opinion must demand that all these perpetual irredeemable loans be repudiated at once. Those who will lose money have only themselves to blame, for they “invested” their money in an insolvent institution. They did not invest in The Market. So theirs were not “capitalist investments” at all. Throughout history, many foolish people (including the Medicis) have lost fortunes by lending to monarchs. Let this important lesson be learnt once again.”

Well, no. I’m not really lost. But I’m in the Andes alright. And my computer cable is lost, although lost isn’t the right word. Swiped is. As in, swiped by some blighter who grabbed it out from me while I was, of all things, trying to check my stuff into the left luggage. May it blow up his laptop and may his descendants be Internet addicts who run up his DSL bill and send him to the poor house…

So that is why I’ve been remiss in my blogging. And will continue to be a while, until this is all sorted out.

Which may not be for a bit, because right now the main puzzle I am trying to work out is how to bus it from the Andes into Colombia in the safest and cheapest way possible. I want to avoid visas, but it seems I cannot. Apparently, from Salta, which is where I am now, you have to take a bus that either gets you to San Pedro de Atacama in Chile, or across the Bolivian border. One route I am looking at is Salta to Arica and from Arica to Lima.

Does this work out fiendishly cheaper than a bargain flight from Buenos Aires? Probably not. But then the Argentines have gone and introduced a visa charge of some kind, effective from January. Something like a hundred dollars or so. It’s a reciprocity fee (that means it’s tit for our government’s tat – and who can blame them) but it means I’m trying to avoid airports, which is where they levy such things.

So far the past several days, it’s been buses and terminals…33 hours of them, and  day long layovers. And on top of that I’ve been a little ill…and developed some kind of rash or allergy that makes my scalp crawl literally. I’ll never use the phrase casually again. And no,  it was not cooties or dandruff, it was my new Argentine shampoo that did it…I have a sensitive skin and new anything on it is always a bit of a risk.

Which is all much more than you should know. 

But on the up side the scenery here is spectacular.

I fed the ducks on the pond on San Martin Avenue right outside the bus terminal, had myself three empanadas with goat cheese – which felt like manna from heaven after two and half days without food..

 The hills are verdant and rise high. And in the summers, the temperatures reach up to 50 degrees celsius, I’m told.

Which is what the temperatures are in my home town in India. There the hills are much lower and have been denuded over centuries. And of course, the town is overpopulated, noisy and polluted. But in a strange way, in its bare bones, it has some similarities…

The food in India is, of course, way, way better.

After 7 months of the rather stodgy South American diet, I am positively ravenous for rasam, curry, pappadams, pilafs…

I shouldn’t have started…..