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Money Morning subscriber Ted Kubichek wrote and asked if one of our experts could comment on the underlying cause of the financial crisis whose fallout will affect the U.S. economy for years. Here's an edited version of that question, as well as the reply by Money Morning's Shah Gilani, an internationally recognized expert on the global credit crisis.
Question: I would appreciate if Money Morning could respond to my statement or theory of why we are in this crisis. I believe they [government insiders] are afraid of the backlash from making a comment of the true reason we are in this crisis. As it would be political suicide to do so for anyone in that position.
"Greed," and its overwhelming baggage of "arrogance and corruption," has far surpassed what the economy can absorb while still being able to prosper. Not just monetarily, but ethically as well. Business decisions that have been made/bought with the mindset of self and partnered greed, not for the prosperity of a nation.
I would love to hear someone's reaction to this. Am I off my rocker? Or is what I'm saying some sort of forbidden truth? The greed is so intertwined with so much of our economy and society that comprehending it boggles the mind - at least for me.
Answer: Mr. Kubichek, as you pointed out, the answer to your question as to why we are in this crisis is very straightforward: It is a matter of "greed."
As to why not enough voices are echoing your sentiment, that, too, is a matter of greed.
An inordinate number of our legislators are in the deep pockets of the purveyors of greed, because they, too, are greedy. Unfortunately, most politicians go into the "business" of politics because the ability to wield political persuasion results in the ability to clear pathways for constituents. When a minority of constituents controls a majority of economic power, the tail wags the dog. Washington is a giant revolving door. Do good by your moneyed constituents and there will be a place at the dinner table when your inside job is done.
What would be an incredible undertaking - although it might wake up the poor, uninformed masses - is an extensive expose on every politician/legislator who in the last 20 years has had any power to steer any decision, regulation or vote (we could go back 50-100 years ... it doesn't matter). This undertaking would have to follow their rhetoric and voting in light of who corresponded with them, who paid them anything (campaign money, "charitable" donations, etc.), whoentertained them, and where they and their family, staff, and cronies ended up later in the cycle of "you scratch my back, I'll scratch yours."
What this country needs is more people like you! We should all be yelling from every window, "I'm sick and tired and I'm not going to take it any more!"
Thank you for being part of the solution, simply by addressing it. Every revolution starts with a single man. You're as good as they come ... raise your voice and start your own revolution. I'm doing my part.
[Editor's Note: Money Morning Contributing Editor detailed the causes of the U.S. financial crisis in a special report this week. To check out that report, please click here.]
News and Related Story Links:
- Money Morning Special Report:
Wall Street's Stranglehold on the Economy Is Choking Americans .
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.
I only have a point of contention that seems like semantics, but sometimes, the devil IS in the details. In this case, the word should be "desire". More specifically, the problem is human emotional manipulation. We live in a world where corporations are given tax deductions for buying advertising which tells us to destroy our own future. (Sugary drinks, unnecessary spending, debt-based living, cheap food with little nutrition, automobiles and their associated death rates, etc.).
Humans believe they are intelligent and in control of their actions. We are not. We do stuff. We have reasons for doing stuff. In that order. This 'financial' crisis is really a crisis of existence for human beings that belies the inability to act in our own best interests. We 'know' we should save instead of go into debt, yet we don't. We 'know' we should do something about our government's fascism, yet we don't. Our perceptions are as easily manipulated as those of a child believing in the tooth fairy.
The solution is to put the real costs of everything we buy on the price tag. In other words, the costs of wars for oil, bailouts for banks, and health care for everyone should be included in a sales tax on every product purchased at retail.
The failure mode of such a system is that people would have to stay home, make things themselves, and trade with their neighbors without cash.
The success mode is that the more we buy, the more money government has for maintaining the logistics required to support those purchases.
A consumption tax is a lot less regressive than a dead planet.
Yes, greed is at the heart of it. The concern that all of the above leaves me with is that there is still a prevailing mindset in the US that it's the Government's fault, the Fed's fault, big business' fault, it's everyone else's fault (greed) but mine.
In one particular example, I watched a while back a congressional testimony of a middle aged, middle class woman talking to the world about her experience with her house purchase, where her bank account manager had artificially inflated her earnings on the application to get approval and the real estate agent had been "very insistent", and she overpaid for the property (now apparent in hindsight).
You know where this is going, or maybe you watched it as well, her situation went pear-shaped, times got tough, she couldn't service the mortgage, the property value dropped and she ended up defaulting, losing her home and now has a financial mess hanging over her.
Everybody in the room felt sympathy and bemoaned the evil bank manager, real estate agent and global economy. Yet, no one asked why she had knowingly signed a fraudulent application. Or done better due diligence of the house purchase. Or a bit of basic budgeting the plan for the mortgage. It was everone else's fault but hers.
It worries me that this is an underlying theme in American culture. Multiple credit cards, rampant housing market, savings rate at near zero as people spend beyond their limit, excessive consumerism – and… advertising made me do it??
Where is the personal accountability? I think greed is a big part of the problem and the question and response are on track. I just think you may have missed on who the culprits are, or at least left some of the list.
Greed is the root of all evil.
You have it.
I want it. I covet.
Who's greedier? You, you fortunate hoarder? Or me, the coveter?
You're right on-target in your analysis of the bought-and-paid-for political hacks (i.e., MISrepresentatives of voters) in our corrupt criminal godvernment.
They're greedy PIGS. They've sold out Americans.
It's a good idea to go back 100 years to educate severely dumbed-down Americans about all the TREASONS committed against them by criminal godvernment's political swine. Even mindless American Idol worshippers should be interested to know the Truth about never-ratified 16th Amendment that extorts federal-mafia income tax. It gives venomous bite to feral Federal Reserve banksters — slavedrivers of the USA.
Sellouts have been prolific and legion ever since. All in the name of greed.
These PIGS already access all the money their greedy black hearts could crave.
They're greedy for power. Money lust isn't a big enough thrill anymore.
Greed for power set-up the Global Economic Depression. Theft of wealth made it so.
It's about time we all yell; ENOUGH ALREADY, WE WANT YOU ALL OUT OF OFFICE AFTER EACH ELECTION, EXCEPT FOR THE HONEST ONES? IS THERE ONE AT LEAST? NO MORE CAREER POLITICIANS, GIVE TERM LIMITS TO CONGRESS AND SENATE, WE DO OUR PRESIDENTS, SO WHY NOT THEM? THEY ARE TO BLAME FOR OUR DOMESTIC PROBLEMS, AND THE PRESIDENT FOR FOREIGN AFFAIRS. TELL YOUR ELECTED OFFICIALS, CALL THEM, EMAIL THEM AND EXPRESS YOUR DISCONTENT OF THEIR PERFORMANCE, AFTERALL THEY ARE SUPPOSED TO BE OUR SERVANTS NOT THE OTHER WAY AROUND. AMERICANS WAKE UP, AND CLAIM YOUR RIGHTS BEFORE IT IS ALL CONSUMED BY BIG GOVERNMENT. GET TO THE POLLS ELECTION DAY TO CLAIM YOUR POWER….
LYING CHEATING STEALING JEALOUSY ANGER PRIDE MISERLINESS DOUBT. THIS IS THE STATE OF THE NATION. THOSE 8 POISONS ARE ANTIDOTED BY PATIENT EFFORT AWARENESS MORALITY COMPASSION AND GENEROSITY…MEDICINES TAKE TIME AND PRACTISE…MEANWHILE ABIDE CALMLY AND ENJOY YOUR HEALTHY INSIGHTS.
PATRICK GABRIEL, DC MBA BS BA
Well said by everybody…greed is always a culprit as it is an evil that permeates financial matters and destroys humanity and society. This is where we find ourselves today…in the process of self-destruction at an accelerating rate. Few truly know what the causese are for our demise at this juncture; therefore, the solutions may be not be so easy to attain, if they're even attained at all.
In other words…the thieves are in our midst.