Busted: Bankers and The Global Economy

July 7, 2009

Pope: Economy Needs Ethics

Without internal forms of solidarity and mutual trust, the market cannot completely fulfill its proper economic function. And today it is this trust which has ceased to exist, and the loss of trust is a grave loss.” According to the Vatican, the economy needs ethics in order to function correctly, just as the implementation of ethical financing and systems of micro-credit and micro-finance indicate. In development programs, the principle of the centrality of the human person must be preserved, while international organizations might question the actual effectiveness of their bureaucratic and administrative structure. This is one of the central messages of Benedict XVIs new encyclical Caritas in Veritate that was published July 7th and signed by the Pope. If you have been following this blog, you know what is up right now. I don’t need to say another word. ~ E. Manning

September 22, 2008

Robbery from American Taxpayers

bailout or pork barrel?

bailout or pork barrel?

“It is a big package because it’s a big problem,” Bush told reporters at a news conference. “The risk of doing nothing far outweighs the risk of the package.” Yet, most Americans seems to be irritated, if not entirely incensed about the prospect of bailing out wealthy bankers and insurance companies along with buying up worthless securitized bonds built by greed and corruption. Do Americans seem to care, even though authorities say that the alternative is total economic devastation? Americans do care, but realize that what the Bush Administration intends to do is not without substantial risk. Even more important are the real moral principles involved in the bailout. Moral and ethical concerns is exactly what the Bush Administration, Republicans and the Congress have been bereft of during the last two terms of office. An undercurrent of seething rage foments in the underground of American souls.

Americans have focused most of their indignation on having to foot the bill for irresponsible lenders and borrowers. The fact that little benefit to the economy or decent jobs for the American people will result from the trillion dollar bailout doesn’t make the bitter pill easier to swallow. However, the fact that Main Street America will suffer has some Americans rethinking their position.

the legacy of Bush

the legacy of Bush

What Americans fail to realize is the economic devastation that will plague America regardless of a bailout. The U.S. economy is in a king-sized pickle with a stalled economy and poor prospects. Politicians and economists alike seem to have temporarily forgotten that bailout or not, stagflation is on the way, a difficult prospect that the panicked authorities have suddenly ignored in the interest of saving their immediate power. The trillion dollar economic bailout is not a miracle, just a different road down the same mountain of decline.

A few have suggested that the bailout is not a bailout. The government is not handing out cash and have advertised that they might actually stand to make a great deal of money out of this. The bottom line is that when the bad securitized bonds gain value, that value will trickle down to the American taxpayer. The big problem is that most Americans no longer believe in the lie of “trickle-down economics,” a political theory that seems to have been fully subverted by bad business practices, corrupt politics and even more incompetent regulators while Americans follow the rules. Furthermore, money doesn’t trickle down from government except through the welfare system. This make the prospect of “trickle down” even more unlikely and unpalatable. The taxpayer does not expect to see the money, but knows that the government will continue to spend with wild abandon. The national rage is palpable as American taxpayers are made to bail out the world. ~ E. Manning

May 18, 2008

Paradox of Market Turmoil

World financial market turmoil has revealed two paradoxes. The first is that after several years of high profits the global banking sector was thought to be well capitalized, even bullet-proof. Actual capital buffers and provisioning in banking were much less robust than they had seemed. Everyone forgot to measure risk and looked at the profit. Little, if nothing has changed.

The second paradox is that elements of a massive liquidity freeze occurred in certain financial market segments (for example, the United States) within a context of overall excess dollar liquidity worldwide. In other words, because of bad bank securities and the risk of accepting them or trading value-for-value, bankers on a global scale began to refuse to trade with fellow bankers to protect themselves.

World bankers are looking at these arenas for salvation: risk management in financial institut- ions; the originate-to-distribute business model of the large banks; and the coordination of financial regulation and supervision across financial institutions, markets and national borders.

World bankers say that improvement in financial literacy can be made by realigning the incentives among the originators and other participants in the securitization chain through attention to detail. (more…)

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