Sunday, March 16, 2008

Notes on the Current Banking Crisis and the Elite MBA Diploma Mills

What are we to make of the current financial crisis and looming insolvencies (& bailouts) of some of the most "respected" investment banking institutions with such cool household names like Bear Stearns and Citibank? How could the three-piece suits not see this coming? Even with the most rudimentary knowledge of technical charting and the behaviour of markets, any fool with an economics or finance degree from any community college should have seen this coming. How sustainable were home price increases exceeding 25 to 30% annually in many areas of the country? The problem with human nature and markets is the belief that what goes up just keeps going up. The "tyranny of the moment." But why were the best and the brightest from the best regarded financial institutions creating incredibly leveraged, toxic financial instruments that were doomed to fail should any unperceived, yet predictably bound to occur, economic downturn? The current problems we are witness to are not solely due to the mortgage mess, but also due to credit swaps and other complex instruments referred to as "derivatives" that even Warren Buffet doesn't understand. These financial instruments had begun to exist more than a decade ago.

I am convinced that the big-boys, maybe at the CEO level and definitely at the central bank level and above, knew where this would all end up. Ultimately, any discerning individual with two brain cells who gives this some thought knows where this all ends up in the long run. Are we near the end of the "long run?" Who really knows, but logically, a debt-based monetary system, whose operation is dependent upon having interest payments service previously issued debt by issuing yet more debt which incurs yet more interest obligation, which is serviced by issuing yet again, more debt ( get the picture), is mathematically unsustainable. It wouldn't surprise me if these banksters, represented by ethereal institutions like the International Monetary Fund, the Bank of International Settlements in Basil, Switzerland and the Bank of England, have been orchestrating a plan to foster transition to a new system and I can bet that this plan has been in the wings for some time now. What could that be? A Federal Reserve bank of the world which might eventually be paired with a cashless system? Surely the public would never go along with such a system...but what if the public were taken beyond the edge of the economic abyss? Might they beg for any solution, no matter the cost, to relieve them from suffering?"

Slowly, evidence is coming to light of the deliberate financial take-downs of the past, starting with the money panics of the late 19th and early 20th centuries, including the Great Depression, which eventually killed state-chartered banking and created political acceptance of central banking in the United States, just as intended. If history doesn't exactly repeat, at least it often seems to rhyme. What to believe other than that the current situation could have only been fostered and encouraged with insane easy money and suspiciously absent regulatory oversight, which included enticing home buyers into committing bank fraud on their "no-doc" mortgage applications? The lack of guidance and enforcement of predatory lending regulations, which are especially required in an environment of easy credit with its concomitant moral hazard, were curiously not in the way of what was obviously all-out predatory lending practices. Basically, the bankers were desperate for more warm bodies to create more debt (money) for the system with promissory note signatures.

Of course, one individual New York Governor was about to take the money-changers to task until his weakness was used to stop that unusually noble endeavour. My, my, my, what a coincidence. Nothing changes in politics now, does it? Even the ignorance of the public regarding the most obvious of machinations. Do you believe that [former] New York Governor, Eliot Spitzer, is the only politico in office now known to have shelled out money on call-girls? transparent.

Predatory Lenders' Partner in Crime
How the Bush Administration Stopped the States From Stepping In to Help Consumers

by Eliot Spitzer Thursday February 14, 2008

Sustaining the System; Not Only a Matter of Greed, but of Trained Ignorance
Consistently, highly intelligent young men and women are indoctrinated in Keynesian Economic Theory by the elite MBA diploma mills like WHARTON, STANFORD and THE LONDON SCHOOL OF ECONOMICS. Many of these young MBA types, who are probably not privy to the "plan," are certainly running around in panic mode right now as this crisis continues to unfold. I believe these graduates, from the most desired post-graduate business schools, are given high starting salaries and key positions based upon their "proper" training from this cream-of-the-crop education pipeline. They are purposefully indoctrinated into the Keynesian economic model and kept deliberately ignorant of the sound monetary systems which have successfully existed for hundreds of years prior. I would not be surprised to learn that the professors, which I suspect are gate-keepers in these institutions, are charged with continuously monitoring and watching for any deviations of any candidate away from the originally selected "yes-men" characteristics and/or knowledge beyond the program text books. Creative thinking and aggressive solutions oriented styles are encouraged and expected, but only within a well defined box of the current economic paradigm. This assists and assures the maintenance of the status quo of the current system so as to avoid any rocking of the boat from the chairs of their consulting firms and investment banking offices and in certain cases, from key leadership positions. You could take an academic superstar who speaks heresy from the likes of the free market advocate, the late Ludwig von Mises of the Austrian School of economic theory, and he would be shunned from such lucrative employ. What's wrong, in my opinion, with our current "Keynesian" monetary situation, a non-free market system which is maintained by government interventionist policies? You can explore for yourself, but what confidence could anyone have in the longevity of a monetary system advocated by a man who, in reply to a question regarding the sustainability of his theories in practice responded with, "In the long run, we'll all be dead."(?)

A couple of years ago, I remember working with a very soon to be grad from one of these hotshot schools. I asked many questions about the program he was going through and commented about an email I had coincidentally sent to what I found out was one of his professors, regarding his flawed criticism of hard money [gold/silver]. I also discussed with this student the economic fundamentals of the US economy and how precious metals were to continue their appreciation to the point of values that would shock the investment world. He had no idea what to make of my predictions for gold and silver and actually could not process the decaying fundamentals of the economy I was trying to relay to him, much less how the economy used to function on sound money. If he had been made knowledgeable of monetary history and in a position of more seniority to inform higher level officers of his employer regarding the irresponsible risks behind the exotic financial instruments precipitating the current crisis, would he have been well received? It was hard for me to believe that in less than a few months, this individual would be working at a major financial firm advising very wealthy clients.

I am convinced that some of the important qualities sought for recruitment or acceptence to "the club" by way of these schools, is BOTH high intelligence coupled with an Orwellian ignorance of economic history and naivete...and these traits CAN co-exist. The professors are also more than likely monitors to judge the "proper" mindset of the future robotic investment bankers and consultants needed for the system to thrive and continue on its current reckless path to oblivion.


"When, through the process of law, the common people lose their homes, they will become more docile and more easily governed through the strong arm of government applied by a central power of wealth under leading financiers. These truths are well known among our principal men who are now engaged in forming imperialism to govern the world. By dividing the voter through the political party system, we can get them to expend their energies in fighting for questions of no importance." The American Bankers Association Digest, 1924