"Who do you blame more for the bad U.S. economy, Washington or Wall Street?" asked a recent USA Today/Gallup poll.
In fact, it's the sordid relationship between the U.S. government and the big financial institutions that plunged the U.S. economy into turmoil in 2008 and has hampered its recovery ever since.
"They are brothers-in-arms against the greater good of the American public. They are conspirators," said Money Morning Capital Waves Strategist Shah Gilani. "Who is to blame, is it Wall Street for giving money to Washington to clear a path for their schemes, or is it Washington pandering to Wall Street for money to wage their campaign battles to put themselves in place to repay their paymasters?"
In the USA Today/Gallup poll, 64% of Americans blamed the federal government more for the bad U.S. economy, with just 30% pointing a finger at big financial institutions.
But the poll also indicated that the American public is extremely unhappy with both groups, with 78% saying that Wall Street bears a great deal or fair amount of the blame for the bad U.S. economy; 87% say that of Washington.
"You see the frustration that there's some serious things wrong with capitalism in America, but you also see the conundrum – how do we change it?" Terry Madonna, a political analyst and polling expert at Franklin and Marshall College told USA Today.
Close to half of Americans – 44% – also see the system as unfair to them, with some groups, such as people without a college degree (49%), feeling more mistreated than others.
Gilani couldn't agree more.
"Calling the "system' unfair is like calling the Grand Canyon a ditch," he said. "It's massively, incomprehensively unfair. It's unfair first and foremost on the macro level. The system favors the few at the expense of the masses. If there is class warfare stress in this country, it's because the nexus of Wall Street Washington manufactured it."
That Washington's efforts to fix the bad U.S. economy – very loose monetary policy on the part of the U.S. Federal Reserve and billions in stimulus spending from U.S. President Barack Obama and the U.S. Congress – have changed little is no doubt part of the reason why people remain disgruntled with government.
"The Fed is part of the problem, not part of the solution," Gilani said. "They did what they had to do to save us from going over the financial chasm, but they also helped us get there."
How to Fix It
Gilani had several suggestions on what should be done to make the system more fair as well as to prevent another financial crisis like we had in 2008:
- Break up all the "too- big-to-fail" banks.
- Regulate derivatives and determine what limitations need to be put on their use, by who, and when.
- Reconvene the Glass Steagall Act. Make regulations simpler but make penalties stiffer — including jail time.
- Change the Federal Reserve. They need only one mandate, manage money supply commensurate with economic growth.
- Institute mandatory term limits for Congress and put an end to their going to work for companies they either regulate, oversee, or have in any way made more profitable, for five years after leaving office.
One more thing regarding Wall Street – an area with which Gilani is familiar as a former hedge fund manager – is that the American public needs to understand what really goes on inside those executive suites.
"There is a club, in a very real sense, of powerful players who have their hands firmly on the pulse of financial innovations," Gilani said. "It's the men at the top of all those organizations that work to turn profit centers on trading desks into economy-moving – and sometimes economy-ruining – schemes."
Occupy Wall Street
Although the USA Today poll results are telling, one needs only watch the news to see that anger and frustration with the bad U.S. economy and Wall Street's outrageous behavior has already spilled into the streets with the Occupy Wall Street protests.
Gilani discussed the movement in a recent column for Money Morning, in which he outlined several points of agreement he had with the protesters, who say they believe the big banks are ruining the economy and unfairly influencing the politicians in Washington.
Now he has additional advice for the Occupy Wall Street movement and anyone thinking of joining it.
"Protesting is a good start. But what they really need to do is create a platform and a political movement, not unlike what the Tea Party did," Gilani said. "There's only one thing that can trump billions of dollars in back-room funding to pay for political power, and that's the raw power of ticked off people — millions of them."
You can read more of Shah Gilani's inside perspectives on the workings of Wall Street – and how you can profit from it, instead of being a victim of it – on his new Website, Wall Street Insights & Indictments. And you can sign up for his free report, "Blast Profits In the Eye of the Storm: 5 Ways To Trade the Coming EU Crisis – And Make A Killing," by clicking here.
News and Related Story Links:
- Money Morning:
These Three Men Represent Everything That's Wrong with Wall Street
- Money Morning:
The Insidious Truth About Federal Reserve Policy
- Money Morning:
The New Abnormal: Permanently Engineered Market Volatility
- Money Morning:
The Bank of America Settlement: The Latest Travesty in the U.S. Banking System
- Web site:
Wall Street Insights and Indictments
Most Americans Uncertain About "Occupy Wall Street" Goals
- USA Today:
Poll: Washington to blame more than Wall Street for economy