Lord Acton, Lord Chief Justice of England 1875 said…. “The issue which has swept down the centuries and which will have to be fought sooner or later is - the people vs the banks”. Is the movement “Occupy Wall St” the start of Lord Acton’s prophecy?
Our current financial debacle started when the US Federal Reserve allowed the US dollar to be freed from the gold standard and engage the ‘Fiat system.’ This system was invented and discarded by the Romans but was reinvented in 1971 by the USA.
To partially explain the impact of such a move we only have to go back just a few years - to 2007 when a new phrase entered the lexicon – the “have yachts”. The world has always had the “haves” - the “haves nots,” but thanks to the financial world of derivatives, margin trading and currency speculation; a new grouping called the “have yachts” emerged and with them, a new dimension in largess. Such people were to become fluent in the unrestrained manipulation of the financial system. It has become clear that it was these financial coteries dalliance with credit and not capitalism (or even socialism) that has caused the inevitable economic meltdown of recent times.
It was and still is the failure of the unregulated derivative market that is responsible for the creation of the unheard of wealth by the traders of “financial instruments”. This is where a buyer and seller exchange certain benefits of one parties financial instrument for those of another party’s financial instrument and is called a “swap”. Got that? In essence it is the swapping of information and benefits between parties and each relies on the other party to perform, which on a rising market they usually did. It is this unreal world of the have yachts that caused famed investor Warren Buffet to describe derivatives as – “financial weapons of mass destruction” as derivatives distort the real underlying value of an actual asset. (See Fannie May and Freddie Mac)
The have yachts and their bankers / shareholders wealth should have collapsed due to their exposure to “assets” that didn’t actually exist or were valueless, as, with the derivative market, you own absolutely nothing. In February 2009 the total world derivative market expanded to upwards of $1000 trillion so it’s not difficult to see how an apparent trifling commission percentage resulted in an early and comfortable retirement for the traders. The have yachts have somehow managed to shower the blame on the ordinary investor for involving themselves in something few people understood but were coerced into with the promise of a good return; so in the eyes of the have yachts it is the investors fault for believing them and the governments fault for not effectively regulating them.
The have yachts secured their personal wealth during the time of wine and roses by way of commissions for the traders and share options, and multi million dollar salaries their executives offered themselves and never refused. They believed they fully deserved their money as they were the really really clever people who knew how the investment world worked. Essentially, the have yachts knew everything goes up in value and will never fall. The system of capitalism did provide for checks and balances within the world of high finance but sadly those appointed as commercial watchdogs were happy to remain on the chain and merely sniffed the air for the smell of corrupt and illegal practice. The NZ QC Anthony Molloy in his book “Thirty Pieces of Silver” asked a vast array of as yet unanswered questions of NZs financial and commercial sector in 1998. Why after such a period of time are his challenges apparently ignored? Our political masters still appear to be asleep at the wheel.
Commerce and securities commissions all over the western world were required to exercise their given authority over the have yachts which we now know did not occur. Banks such Lehman Bros and companies such as Enron exemplified the worst excesses of the have yachts but were by no means alone as they ignored the risk factor and bought and sold “securities” all over the world that often had little basis in actual value and even less security. All the while - the financial system wallows in the seemingly bottomless trough of excess.
President Barak Obama held out hope to the masses that the have yachts would have their sails removed or at least trimmed. Even today, it seems like business as usual in that sector despite the clamour from their victims to control those who set out to debauch the financial system. Hence the global - “Occupy Wall St” movement.
The mess started out with politicians. The current rulers now lack the courage to restrain the rampant manipulation of the financial system by those who have established themselves as the have yachts.
We should all pause to “thank” one President Richard Nixon who in 1971 moved the $US away from the gold standard and so unleashed the financial world which has enabled them to exploit untold personal benefits from the creation of unrestrained and destructive credit.