June 2016
Since I have no financial or banking credential, but an occasional dosage of common sense, I do listen to those who are better informed yet not so heavily invested in the system that they staunchly defend it despite the signs that it is collapsing.
Belgian banker Bernard Lietaer is one man who seems to have integrated the principles of consciousness into a savviness of the economic system. Shortly after the 2008 recession he warned us, “Time is of the essence, if we want to avoid the social and economic ravages unleashed by the unraveling of today’s complex business supply chains. As the rot spreads from the banking system to non-financial businesses, a lot of the damage will be done quickly.” In a private conversation with me, Lietaer predicted that the 2008 recession was followed by the equivalent of an eye of a hurricane passing over us – allowing us to think the worst was over – when the next wave would be even more devastating.
Another colleague I have come to respect is Michael Lewis, author of The Big Short, Flash Boys and other books. Lewis did a tour on Wall Street – working at Salomon Brothers, much of which he shared in his first bestseller, Liar’s Poker. In his column for the May 9-May 15 issue of Bloomberg’s Businessweek*, Lewis writes about a new book by Mervyn King, former Governor of the Bank of England, in which, among other things, the author calls for the separation of the “boring bits of banking” (commercial banking) from “the exciting ones” (trading and investment banking).
What amazes me – an admitted layman – is that this separation was once in place here in the U.S. The Glass-Seagall Act was passed in 1933 after the 1929 crash, making it illegal to blend these two activities, one conservative by nature and the other speculative. In its infinite wisdom, Congress chose to repeal Glass-Seagall in 1999 after the number of banking lobbyists more than doubled in Washington widely peddling their influence. Less than nine years later we had the crash of 2008, largely due to this oil-and-water comingling (and confusing) of complex products with simple savings and lending activity.
While I have ordered King’s book – The End of Alchemy – based on Lewis’ review, I have not yet read it. But I find it even more amazing that with all the legislation that has passed since 2008 the repeal of Glass Steagall still remains in effect. Nothing has replaced it to make sure banks didn’t go back to doing exactly what they had been doing since it was repealed! And they are still doing all those things that caused the 2008 crash! Continuing the same behavior leads me to think Lietaer’s prediction of the second wave is quite likely.
Lewis closes his Businessweek article with this: “It’s interesting in the aftermath of the [2008] crisis how much energy has been expended seeming to fix the problem without attacking it head on. Much as they moan and groan about reduced circumstances, our biggest bankers are still playing a game of heads-I-win, tails-you-lose with the rest of society.”
If anyone doubts that the system is rigged, that the free market isn’t free anymore, they should do a deep dive into the inter-relational workings of lobbyists, bankers and politicians. Here are a few of my past ramblings that may help:
“Lesson from Early Capitalism” (2010) http://renesch.com/2010/lessons-from-early-capitalism/
“A Lesson from the Meltdown” (2009) http://globaldialoguecenter.blogs.com/johnrenesch/2009/09/index.html
“What Ever Happened to Free Markets?” (2008) http://renesch.com/2008/hyper-capitalism-what-ever-happened-to-free-markets/
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* http://www.bloomberg.com/view/articles/2016-05-05/the-book-that-will-save-banking-from-itself