(np) last one...

[Michael Bailey]

but I think his points are well-taken.  there's something Pynchonesque
about it (I'm thinking of how banking regulations might be to our
current economy, as potassium permanganate to the cocaine market in
postwar Berlin in GR - without it there is just no honesty, people end
up selling baking soda just to see the buyer's face when they snort
it...)



The result is a view of prices between individual buyers and sellers
as heuristic stand-ins for relations between consumers and producers
in a more realistically complex economic system. Credit is treated as
if “savers” defer consumption so that consumers can “enjoy” more in
the present.

There is no acknowledgement of the fact that banks create
interest-bearing loans freely, or of a wealthy rentier class (and
financial firms, hedge funds and kindred money managers) whose aim is
simply to make more money faster than anyone else, not to consume
more.

Austrian theory attributed payment of interest by individuals to “time
preference” – an “impatience” to consume in the present rather than in
the future. Yet most consumer borrowing is to obtain essentials:
mortgage loans for housing, student loans to get education to qualify
for a decently paying job, auto loans to get to work, and credit-cards
to buy such basic necessities as food, transportation and clothing.
Interpreting this consumer demand in terms of impatience shifts the
blame for consumer debt off the economic system as a coercive trap.

Republicans have blamed the real estate bubble’s collapse since 2008
on poor blacks and other minority borrowers cheating the banks by
overstating their income and borrowing irresponsibly.

Yet the FBI (Federal Bureau of Investigation) and Fitch Ratings Agency
have found financial fraud in 70 percent of subprime mortgage loans,
involving a vast network of crooked mortgage brokers, real estate
appraisers and lawyers. The leading culprits (Countrywide Financial,
Washington Mutual and Citibank) set up the system, and ratings
agencies helped Wall Street investment banks (Lehman Brothers, Bear
Stearns, etc.) perpetrate a vastly controlled fraud by giving AAA
top-grade ratings to junk mortgages that quickly plunged some $750
billion into negative equity in the financial meltdown of 2008 – 09.

This led to a $13 trillion bailout of bad credit default swaps (CDS),
derivatives trades and other casino-capitalist gambles – a power grab
of debt-money by Wall Street lobbyists and insiders in Washington and
New York[2].

Austrian theory attributes interest on business loans to “roundabout”
production that requires a longer time period for capital investment
as industry becomes more capital-intensive. This view depicts banks as
working with industrial customers to fund long-term investment. The
reality is that the banker’s time frame is short-term, and most loans
are for speculation.

Every day the equivalent of an entire year’s GDP passes through the
New York Clearing House and Chicago Mercantile Exchange in payment for
trades in stocks and bonds, mortgages and packaged bank loans, forward
purchase and repurchase contracts. Most of these trades take about as
long as a roulette wheel takes to spin. They are driven neither by
psychology nor by industrial technology, but are gambles based on
computer-driven programs, or leveraged buyouts of existing assets.

For the economy at large the result is a financial squeeze that lacks
a long-term vision.