The way ahead
Pres. Obama (Archives)
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As Tarp moved away from ppip, the legacy asset auction of tranched bundled toxic assets which Hank Paulson somehow got away with, the trillion dollar stimulus ensured Basil-3 levels of debt to capital ratios, which predicated everything that followed: banker mega-salaries, reliance on big data algorithms thus utilizing rocket scientist mba’s programming in L+, no real derivative reform, but also led to the bull market, resurgent Detroit and renewed optimism.

The problems now are only two: Fed balance sheet (and Treasury yield curve, really the same issue) and the yearly budget deficit (reduced to about $450m per annum, from inherited historic highs). The other 'problems' are temporal or political in nature: strong dollar, low inflation and rising risk of recession. Not that they’re not extremely important and could have potentially dire consequences but they are either always there or simply part of normal, cyclical economic trends.

Why are investors in Europe increasingly paying a tax to keep monies in cash getting negative rates, now even in corporate bonds? I would argue there is one angle that has not been explored: black markets, illegal activity and the sex and drug trades. My guess is that financial institutions have to be as information savvy as NGO’s in a world in which information is power, but that the dots simply haven’t been connected. They can’t put the money in banks because of a paper trail and they are willing to pay a tax because laundering it is so profitable.

But as long as the negative rate environment lasts, corporate or state sanctioned, the balance sheets will stay larger, predicating a world run on debt, where a China is incentivising itself, essentially, to make market reforms to be added to the IMF reserve basket to bail out Greece. It is in China’s long-term interest for Europe not to collapse, but the yuan might now also replace the T-bill in the House of Saud’s Sovereign Trust fund as young Prince Mohammed bin Salman tries to veer it off the petro-dollar onto Google.

Toffler in War and Anti-War implies that the US built in kill switches to the arms sold to the Saudis; if true, it sheds light on their recent deals, through the UAE, with China, but then further complicates the drone targeting data supplied to them in Yemen.

The day of the petro-dollar is waning, GDP will probably fade as the metric of choice in favor of something more applicable to the modern new world order, but the day of block chain has not yet arrived, and may never. The role of debt, derivatives, the very role of money itself is changing in ways it hasn’t since the introduction of copper and the penny at the start of the Enlightenment, directly related to the Ukraine.

Who knows if we’re going to be driving flying Teslas on Mars or trading $1000 Trump dollars (and Pence pence) for a loaf of bread, but one thing is for certain: the trickle-down tactics of Bush with the collapse of the financial system due to shoddy ratings of tranched toxic assets sold as AA when they were in fact Baa1, and the derivatives and fancy financial products like synthetic collateralized debt obligations cooked up in Ponzi-schemes to defraud customers while the very same investment bankers were profiting, should have detailed this country. And they didn’t.

Everything isn’t perfect but we forget just how bad it could have been. Of course, it still could be, if we stop innovating, do not invest in solar, electric vehicles, smart cities, and of course, our future, by helping reduce the burden of student debt for Millennials.

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