Charles Hugh Smith
Of Two Minds
November 12, 2010
The status quo would collapse were systemic fraud and complicity banished. Rather than the acts of evil conspirators, they have become the foundation of the U.S. economy and financial system.Though fraud and complicity are presented in the mainstream media as isolated conspiracies outside the status quo, the truth is that the status quo is now entirely dependent on fraud and complicity for its very survival. Every level of the status quo would immediately implode were fraud and complicity suddenly withdrawn from the system.
How is this true? let me count the ways.
1. The mortgage market. As I reported recently in this Daily Finance story, the private market for mortgage-backed securities is dead. Now that we all understand the entire mortgage is not just riddled with fraud and misrepresentation of risk, but it is entirely dependent on fraud and misrepresentation of risk to function, no one is willing to touch any of this debt--except if it is guaranteed by the Federal government (and thus by its taxpayers).
Now that the systemic fraud and misrepresentation of risk have been exposed, the $10 trillion mortgage market has ceased to function except as a dumping ground where private players can dump 100% of their losses on the taxpayers (profits were privatized, losses are socialized).
2. Foreclosures and our Banana Republic system of "law". There are two sets of laws (and two sets of books) in status quo America: one set of laws for "too big to fail" banks and Wall Street, and one for the rest of us peons.
Courts Helping Banks Screw Over Homeowners.
3. Housing and commercial real estate (CRE). Does anyone seriously think housing is recovering from organic demand? Does anyone seriously think housing wouldn't fall off a cliff if the Central State withdrew its collusive propping-up of the real estate market?
As I reported in These Numbers Paint a Bleak Picture for Housing, there is essentially no evidence that housing is recovering due to "organic" (that is, non-State-manipulated) supply and demand.
Rather, Home Prices Fall in Nearly Half of U.S. Metro Areas and the percentage of underwater homeowners rises.
4. Wall Street. Perhaps no finer example of a system totally dependent on fraud and misrepresentation of risk exists than Wall Street. To pluck but a few from dozens of recent examples:
J.P. Morgan, BofA Report Perfect Trading Quarters.
Proprietary Trading Goes Under Cover: Michael Lewis.
Continued. . .
November 12, 2010
Fraud and Complicity Are Now the Lifeblood of the Status Quo (Banality of Financial Evil, Part 2)
Fraud and Complicity Are Now the Lifeblood of the Status Quo (Banality of Financial Evil, Part 2)
