Money & Trust: Trust & Money

Who would not use an edge if they had one? Every athlete works hard to create an edge so they can defeat their opponent. But, should an industry like the financial service industry, create or maintain an edge to the detriment of the rest of the population?

Yesterday, I cited an article in VANITY FAIR that I thought gave the reader an inside look at a man that worked his life in the financial service industry and rose to the top of his corporation as its CEO. Then reluctantly made the switch to become the Treasury Secretary of the United States at the end of George W. Bush's presidency. I think Hank Paulson was trying to put out the fire, but the fire was out of control. The financial system is to a large measure based on trust. I spoke of this trust yesterday, and I want to repeat that trust is the most important element in the financial industry. When trust is broken, it is like the chain on a bike breaking and there is no connection between the pedal and the back wheel.

Congress, unfortunately, is not up to the task of regulating the financial service industry. If they knew which end was up, they would not need to take money from the lobbyists from the financial service industry. They would now understand how close we all are to the edge of the cliff. Once the trust is gone, it will take years to repair the damage. The slow start back from the present recession is no more than a lack of trust within the system as a whole. Everyone is watching to see who will be the next one to get burned in a big way.

One of the first things I learned when I sold municipal bonds was that ratings are based on a state, county, city, authority or school district's ability and willingness to pay their debt in a timely manner. It sound quite simple. Retire the debt as it matures and pay the coupons as they are presented for payment. But, when debt instruments come under question, the system slows to a halt. There is no reason why better regulation would hurt the financial service industry. The movement of credit from lender to borrower is what it is all about. I wish I had the ability to explain this simple point to the Congress of the United States.

Stay tuned.

"There's A Great Lack of Financial Literacy"

"There's a great lack of financial literacy and understanding in this nation, even among college-educated people." Henry Paulson, former Treasury Secretary.

Source: VANITY FAIR, October 2009, Henry Paulson's Longest Night p.212.

I recommend this article to anyone interested in reading about the financial crisis that hit the United States in 2007-2008. What is the point of the quote above from the article about the former Treasury Secretary?

This to me is the danger that this country faces. Not a terrorist attack or an invasion from a foreign army, but the extreme greed of a few people with the money and the political power to corrupt the financial system of this nation. There is an internal bomb ticking in the financial service industry and not enough people realize this or understand it. The politicians in Washington do not have the knowledge to deal with the problems as they are unfolding, nor to stop the financial industry from bringing down this nation.

A system based on trust requires that trust be present for it to work. When trust disappears because trust has been abused repeatedly, the system will ultimately fail. The system came close to failure just a short time ago, but repeated attempts to corrupt the system will eventual result in the system, based on trust, closing down for the entire nation.

The Congress and President Obama do not realize the seriousness of the financial industries' contempt for the American people. If a few hundred people can pay to corrupt the Federal Government and keep reforms and regulations from being meaningful, then millions of people, at home and abroad, will suffer. As James Baldwin once said, "the fire next time."

Stay tuned.

We Are Talking About Real Money

I saw Greenspan on TV Sunday, but I did not listen very closely to what he was saying. The guy is so overrated that it makes me sick to see the talking heads still interview him. He sat on one of the most important seats of economic power in this country and was blind to the happenings as they were taking place. As someone who came out of Wall Street, he should have known that regulations and its enforcement was a necessary piece of the equation, but instead he did nothing to protect the millions of families that had invested in our capital markets.

I take a very narrow view of the duties of a central bank such as our Federal Reserve Bank, but given the realities of our situation, a good Fed Chairman would have worked the system to protect the many and not the few running the investment banks and the greedy of Wall Street. In my opinion, Greenspan failed to do this.

A central bank in a system of fiat money must be concerned with the integrity of the currency first. The United States, because of her military strength and political stability, along with her economic strength, is regarded around the world as a currency to hold. That does not mean other countries sit with U.S. dollars in their vault, but that they are very comfortable to hold U.S. dollar denominated assets such as U.S. Treasury notes. But, even the United States has a top side as to how much paper foreign governments are willing to hold. By borrowing constantly, and the central bank keeping interest rates low, will eventually put pressure on our ability to borrow at home and around the world. The deficits that were created during the Bush administration from 2001 to 2009 will present a problem as the Obama administration tries to get our economy back to full employment. Can we continue to waste giving billions of dollars away to foreign governments that do not get the job done or are so corrupt that it is the same as pouring the money down a rat hole? You know a billion here and a billion there and pretty soon we are talking about real money.

Stay tuned.

Sunday Is For Sunflowers & The Bengals

I will miss the Bengal's game this afternoon as I am working at the Contemporary Arts Center (CAC) downtown all day. The thought of the Bengals going 3-1 for the season will be great for the economy of the city when they return to Paul Brown Stadium. We need to fill the place and bring people into the downtown. This afternoon the Bengals are in Cleveland and the Browns, no matter how poorly their season is going, find a way to upset the men in Orange and Black. Go Bengals!!!

A few years ago while I was working as a gallery attendant at an Opening of an exhibit at the CAC, a man started taking pictures on the fourth floor gallery of one of the exhibits. I approached the man and politely told him that he could not photograph the exhibit. He informed me that he was the artist of the exhibit he was taking pictures. He looked at me as if I should have recognized him as a great artist, but unfortunately I did not. What was the work of art that he was taking a picture? The work of art was three mirrors of different sizes placed in such a way that they could seen, all three, from one perspective. After I told him he could not photograph the exhibit, I realized that I was telling him not to photograph three mirrors. Photographing mirrors is not exactly what I think of when the directive is not to photograph the art. But, then again this is contemporary art, and what do I know about contemporary art when they do it with mirrors?

Saturday Is For Art

I have not posted this piece in a while, so, I thought I would throw it up once again. For me creating art does not have to be an expensive proposition. I enjoy working with items that are on their way to the trash and turning them into something nice to look at. I guess that is the way I am wired. I could break off into a philosophical discussion about how a liberal mind works in this artist's old head, but I will save everyone some time and not go into it. People that enjoy making things can find a way of turning almost anything into a work of art. This piece measures 36"x27"x6" and is made of styrofoam, cardboard, cereal boxes, paper mache, glue, gesso and acrylic paint. While I put many hours into this little project, I enjoyed working out the many little details of construction as I was putting it all together. The only plan of instructions was photographs that I took of my inspiration and the rest was in my head. The title of this piece is: Mother & Child: American Icon No. 2.

I hope you all have a nice weekend, and may your team(s) win.

Stay tuned.

MOTHER & CHILD: LEVEL PLAYING FIELD OUT THE WINDOW

Today, I am not going to write about the economy or any of the topics that relate to it, like health care. Today I will post a great piece of art that says it all in one picture. So, for my 67th birthday, I present one more time, MOTHER & CHILD: LEVEL PLAYING FIELD OUT THE WINDOW. I picked the painting up yesterday as the art show that it was in closed Wednesday. Enjoy and have a nice weekend.

Stay tuned.

Read The Article In THE NEW YORKER

Today, I am posting a link to an article in THE NEW YORKER that I think you will enjoy. You must paste it in your browser otherwise it does not work, and you will get the wrong page. Sorry that it is that way, but it was sent to me that way with those instructions.

http://www.newyorker.com/talk/financial/2009/09/28/090928ta_talk_surowie
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The word is getting around about the financial crisis and what caused it. As I have written many many times, this financial crisis and bond market meltdown was man made. It certainly could have been avoided and had the laws that were written after the Great Depression left standing as they relate to investment securities and the Investment Act of 1940, the damage would never have been this great. The issue of the credit rating agencies is going to be key because of the position the credit ratings on debt obligations hold in the system of borrowing and lending. Major changes must be made, or, we are all headed down the same road again.

Stay tuned.