Sunday, December 12, 2010

The "Uncertainty" Ruse That's All Over The News [Anthony McCarthy]

I'd just decided to leave this outrageous story about the semi-secret group of bankers who control the derivatives market to Echidne's more able hands when I heard a bunch of DC media drones talking about how it would be dangerous for House Democrats to not rubber stamp the Obama-Republican billionaire tax bonus. They said, in the somber tone they always adopt when they're spouting pious nonsense, that the banker-investor class is skittish about "uncertainty" in the economy. It's a line that has been used over and over again, that the titans of finance who stride like giants across the globe and move governments aside as if they were made of light weight foam, are scardy cats unless placated and soothed continually.

Now, if there's one thing we know about derivatives, credit default swaps, etc, it's that "no one really understands them". Do I really need to provide citations of people saying that "no one really understands derivatives"? It's a pat phrase in the media over the past few years. It's one of the few things about them there seems to be universal agreement on. And credit default swaps and whatever, other, engines of fraud and theft that have recently been invented are similary mysterious to the investors who buy them, the bankers who trade them, the regulators who shirk the regulation of them and, I'm far more confident, the prosecutors, judges and juries who are supposed to clean up the illegal use of them.

The foremost feature of an entity that isn't understood is that you can make no honest assumptions about it, you can not be certain of its nature or its performance. Yet the same tycoons we are warned will spook unless they're given hundreds of billions of dollars, thus ending their all consuming "uncertainty" daily trade in these occult products to the tune of trillions of dollars. Uncertainty is their stock and trade, they are in the business of creating it and selling it in a market controlled by some of the most irresponsible banks and bankers*, whose monumental irresponsibility and the fall out from it has brought us to the current, unofficial depression we're in. Apparently the same institutions that brought the world economy over the edge are trusted enough by these nervous numbskulls to manage the derivatives market.

As has been mentioned here before, no one talks about making these incomprehensible contracts illegal, even though they've already been used to steal hundreds of billions of dollars, both by intention and, allegedly, unintentionally. A contract that isn't understood should mean that it's null and void. How can judges judge on the incomprehensible?

But all of that isn't too much uncertainty for the genuine, indigenous criminal class of the United States, bankers, investment houses and the media and government that is their servant. Maybe it's the certainty of bailouts that provides the hedge against that kind of uncertainty. Only saying "maybe" is false, it's exactly what they know they can depend on.

* Drawn from giants like JPMorgan Chase, Goldman Sachs and Morgan Stanley, the bankers form a powerful committee that helps oversee trading in derivatives, instruments which, like insurance, are used to hedge risk.

Note: In related information, Barack Obama's former head of Management and Budget, Peter Orzag, has become a VP at Citigroup:

An item in this second category has just come up: the decision of Peter Orszag, until recently the director of the Office of Management and Budget under Barack Obama, to join Citibank in a senior position. Exactly how much it will pay is not clear, but informed guesses are several million dollars per year. Citibank, of course, was one of the institutions most notably dependent on federal help to survive in these past two years

Objectively this is both damaging and shocking.

Also note: As I am typing this I find out that David Gregory has on multi-billionaire, dictator of New York City, Michael Burlusc,.... uh, Bloomberg to support the billionaire bonanza compromise.