Friday, July 3, 2009
Goldman Sachs: Boll weevil or Bee?
Today is the 126th birthday of Franz Kafka (1883-1924). A writer, he wrote a story about a man who wakes up one morning in his bed and finds that he has become an insect. The story is called The Metamorphosis.
Once more, I am going to try and bring together the several threads that run through my story and bring them together in such a way, that we can see how they build to create the situation we all find ourselves today.
The monetary policies of the Federal Reserve Bank, the tools that the Fed uses to run monetary policy and our system of banking, along with the fiscal policies of the Federal Government, combine to create an inflationary environment where the purchasing power of our dollars evaporates over time. Because of our policies, your dollars and mine, over an extended period of time are worth less, they buy fewer goods and services. This inflation factor, affects not only families, but large institutions as well. Placing money in a savings account at your local bank will not over an extended period of time maintain the purchasing power of your dollars. Pension funds, insurance funds, mutual funds, foundations, endowments and every other large pool of money that must meet certain actuarial assumptions of total rate of return must invest their money. Because of our monetary and fiscal policies as a country, investing is hardly a choice. The large state pension funds have a responsibility to grow their fund to keep pace with inflation so that retired workers will be able to receive a pension that will purchase the necessary goods and services for their survival. It really is that simple. Large pools of money with a responsibility to millions of people have no choice but to invest their funds for the future.
As a result of the Stock Market Crash of 1929 and the subsequent Great Depression that followed, the Federal Government passed laws to protect the American investor. There were the securities laws of the 1930s and the investment acts of the 1940s, and most importantly the Glass Stegall Act that separated commercial banking from investment banking. These rules of the game did not eliminate all the problems that arise in a market, but they prevented a major meltdown and a serious economic crisis.
Wall Street lobbied against these laws and Congress changed the rules and even an era of deregulation took over those that should have been watching the store. As a result, we have the economic turmoil that we now enjoy. This economic crisis, financial crisis and bond market meltdown was man made in Washington by a Congress that sold out the millions of American people right down the drain. For a very small number of people on Wall Street, the investment bankers, the Congress of the United States sold your economic well being to a bunch of economic and financial terrorists. In my world of justice these people would receive a trial and then be hanged for the economic crimes they committed against the American people. In the old days, it was called fraud, today they call it a bubble.
Americans will have to get smarter if they want to protect what they have. Goldman Sachs and there investment bankers view you as a "mark" when they look around the table. They do not view their job as having any responsibility to you the investor. Wake up America, the Boll weevil is at your door!!!