I am more befuddled than usual today. I have been browsing the web, trying to find out what’s really going on in the world of finance, and what I have found so far makes no sense. Why do I persist in this thankless task? I don’t have any finances to speak of, and things aren’t going to change a whole lot in my lifetime. But somewhere in the dim recesses of what’s left of my brain, the delusion lingers that the global financial system has something to do with the way we ordinary people live.
The folks who understand these things are applauding the President’s decision to reappoint Ben Bernanke as chairman of the Federal Reserve. The move pumped up the stock market, for example. But why? What has Bernanke done to inspire such confidence? As far as I can make out through the veils of secrecy that shroud the machinations of the Fed, he has produced bushels of American paper money and distributed it to the banking elite interest free. And he is fighting attempts, including a lawsuit, to make him disclose where the money has gone.
Meanwhile, banks and credit card companies continue to charge you and me high interest rates and a bewildering array of fees. And as for our investments, forget it. SunTrust offered Sandra and me 0.9 percent interest to roll over a modest CD last week. Needless to say, we declined the offer.
According to the President, Bernanke is some kind of financial guru who is such an expert in the Great Depression that he kept another one from occurring recently. I wish I could believe the President. He seems like such an honest guy (despite his puzzling choice of UBS President Robert Wolf as a golf partner).
But what kind of guru gets his identity stolen? That’s right. Crooks got into Bernanke’s bank account and made off with an undisclosed amount of loot. His wife Anna’s purse was stolen last August at a Capitol Hill Starbucks, and it contained her Social Security card, checkbook, credit cards and IDs. Someone used the information to cash checks on their bank account. It was part of a scam that totaled more than $2.1 million and involved at least 10 financial institutions. Clyde Austin Gray Jr. of Waldorf, Md., a suspected ringleader in the scheme, pleaded guilty on July 22 in Alexandria, Virginia, federal court. Nine other members of his Chicago-based ring have been arrested so far but no one has been sentenced yet.
OK, I know it’s unfair to blame the Bernankes (photo above) for getting their identities stolen, but isn’t it disheartening that nobody, even the top financial guru in the land, is safe from scam artists? You can’t expect that to increase my confidence in the financial future of our world.
Then there are the economists. You can find an economist to support any crackpot notion you might have, and I put my two cents on Paul Krugman, who writes a column for the New York Times and teaches economics at MIT. I find his reasoning easy to accept, perhaps because his conclusions tend to support my own prejudices. For example, he subscribes to the Keynesian belief that money invested by the government in lean times can yield dividends and restore prosperity.
And according to Krugman (photo at left), America’s Gross Domestic Product is growing once more. It’s not really noticeable yet, but he can feel it or something. But here’s what a curmudgeonly blogger named James Howard Kunstler has to say about that:
Do you mean that the Atlanta home builders are going to open up a new suburban frontier down in Twiggs County so that commuters can enjoy driving Chrysler Crossfires a hundred and sixty miles a day to new jobs as flash traders in the Peachtree Plaza? Do you mean that the Home Equity Fairy is going to wade into the sea of foreclosure and save twenty million mortgage holders currently sojourning in the fathomless depths with the angler fish? Do you mean that all the bales of deliquescing, toxic “assets” hidden in the vaults of Citibank, JP Morgan, Bank of America, et al, (not to mention on the books of every pension fund in the USA, and not a few elsewhere) will magically turn into Little Debbie Snack Cakes on Labor Day weekend? Do you mean that American Express and Master Card are about to declare a Jubilee on accounts in default everywhere? Do you mean that General Motors will produce a car that a.) anyone really wants to buy and b.) that the company can sell at a profit? Are you saying we get a do-over, going back to, say, 1981? Did we win some cosmic lottery that hasn’t been announced yet? What’s growing in this country besides unemployment, bankruptcy, repossession, liquidation, gun ownership, and suicidal despair?
Indeed, what would this recovery be based on? In my simple view, to create wealth, you have to create wealth. It’s not enough to create the illusion of wealth, to perpetuate the theatrical production that America’s political and economic system has become. Somewhere, somebody must produce something that others want. And I don’t see that happening. I see more of the same shell game that produces obscene bonuses for CEOs and cascading job losses for the masses. And I don’t see anything that makes me think substantive change is coming any time soon. For example, wars rage on in Afghanistan and Iraq long after anyone can remember what we’re fighting – and dying – for. And these conflicts are diminishing the hope of a sustainable economic recovery. Meanwhile, back home, the same slick con artists seem to be running the financial system, and the mass of the people seem more deluded every day.
I’m afraid that Kunstler may be right when he declares:
The key to the current madness, of course, is this expectation, this wish, really, that all the rackets, games, dodges, scams, and workarounds that American banking, business, and government devised over the past thirty years – to cover up the dismal fact that we produce so little of real value these days – will just magically return to full throttle, like a machine that has spent a few weeks in the repair shop. This is not going to happen, of course. It is permanently and irredeemably broken – this Rube Goldberg contraption of swindles all based on the idea that it’s possible to get something for nothing.
If anyone reading this can set me straight, I would be deeply grateful. As it is, I think I’ll crawl back into bed and pull the covers over my head.