classical economics
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and policy design
The Anti-Capitalist
THE ANTI-CAPITALIST
By Wayne Jett
© May 21, 2009
By Wayne Jett
© May 21, 2009
Say
“capitalism” and most minds connect “New York” or “Wall Street.” Much
commerce centers in New York and on Wall Street, but not all that
occurs on Wall Street is capitalism. In fact, mercantilists of the U.
S. financial sector inject poison into the capitalist system daily.
This will confuse casual economic observers who mistakenly equate financial mercantilism – leveraging massive private capital with influence over government policy to produce illicit gains – with true capitalism. Mercantilism, creator and author of the Dark Ages and the Great Depression, is the evil cabal which inspires hate of “imperialism” globally because its members do, indeed, prey upon the Middle Class and the poor.
Capitalism, by contrast, is the system by which individuals convert their talents and labors into capital and deploy it. This is entirely just and, in essence, socially beneficial exercise of personal liberty. Capitalists seek only a limited role from government: enforce law to prevent fraud and force in commercial relations. The nuts and bolts of capitalism are what most people think of as Main Street.
Upon this humble platform – liberty and justice – capitalism built history’s most accomplished civilization and largest Middle Class. Do not mistake Middle Class with moderate income. Middle Class includes all within the great “third class” which grew through capitalism between the ruling elite mercantilist class and the “second class” of serfs and peasants. The Middle Class certainly includes every successful capitalist whose creed acknowledges justice in fair reward for production and performance.
This will confuse casual economic observers who mistakenly equate financial mercantilism – leveraging massive private capital with influence over government policy to produce illicit gains – with true capitalism. Mercantilism, creator and author of the Dark Ages and the Great Depression, is the evil cabal which inspires hate of “imperialism” globally because its members do, indeed, prey upon the Middle Class and the poor.
Capitalism, by contrast, is the system by which individuals convert their talents and labors into capital and deploy it. This is entirely just and, in essence, socially beneficial exercise of personal liberty. Capitalists seek only a limited role from government: enforce law to prevent fraud and force in commercial relations. The nuts and bolts of capitalism are what most people think of as Main Street.
Upon this humble platform – liberty and justice – capitalism built history’s most accomplished civilization and largest Middle Class. Do not mistake Middle Class with moderate income. Middle Class includes all within the great “third class” which grew through capitalism between the ruling elite mercantilist class and the “second class” of serfs and peasants. The Middle Class certainly includes every successful capitalist whose creed acknowledges justice in fair reward for production and performance.
Mercantilist Exploitation 2000-2002
Since 1999, merely the past
decade, U. S. mercantilists financially raped and pillaged the Middle
Class – twice – in proportions matched only during the Great
Depression. During 2000-2002, U. S. financial markets crashed. The
S&P500 dropped 45% from about 1470 in October, 1999, to 815 in
July, 2002. The volatile collapse was triggered by the Federal
Reserve’s secretly deliberate deflation of dollar value from gold above
$400/oz in 1996 to $252/oz in 1999. Higher dollar value mandated lower
prices for products, which destroyed profits.
Financial mercantilists, Fed insiders by definition, exploited the currency manipulation by selling short and selling naked short in voluminous avalanches. Terrorist attacks of September 11, 2001, added panic and further enabled financial predators. Still the Fed did not return the dollar’s value to equilibrium until 2003. With fairly valued currency and cuts in income tax marginal rates, economic growth reignited.
Financial mercantilists, Fed insiders by definition, exploited the currency manipulation by selling short and selling naked short in voluminous avalanches. Terrorist attacks of September 11, 2001, added panic and further enabled financial predators. Still the Fed did not return the dollar’s value to equilibrium until 2003. With fairly valued currency and cuts in income tax marginal rates, economic growth reignited.
Mercantilist Exploitation 2007-?
But by then, Wall Street’s
mercantilists already had designs for their next assault on Middle
Class capital. In 2000, Goldman Sachs and Morgan Stanley gained new
federal law permitting crude oil futures trading in “dark markets”
hidden from federal regulators, and promptly formed Intercontinental
Exchange (ICE) to exploit it. Trebled prices for crude oil in 2006-2008
despite high and rising inventories produced global economic collapse
in mid-2008. This provided a comprehensive cover story for fraudulent
manipulation of stock share prices in financial markets begun in 2007.
In March, 2007, the ABX index of sub-prime mortgage-backed-securities appeared with a transparent design easily manipulated into sharp decline. In November, 2007, the Financial Accounting Standards Board based in Connecticut (also home of short-selling hedge funds) made its Rule 157 effective. Rule 157 required financial institutions to change the value of financial assets (including MBS) on their books to current “market” value, and to run reductions through the income statement as operating loss. Sarbanes-Oxley threatened auditors and corporate executives with criminal penalties for accounting error, so auditors used ABX as grounds for marking down values far below cash flow analysis as MBS stopped trading.
Gigantic paper losses in quarterly reports of financial firms – first mortgage companies and then banks – provided media cover for torrential naked short selling of financial shares. Countrywide and nearly every smaller mortgage company were destroyed almost overnight, as naked short sales flooded markets with dilutive sales of non-existent shares. In mid-March, 2008, the fifth largest U. S. investment bank Bear Stearns, itself reputed to be a major naked short seller, was destroyed within a week by the practice, executed primarily through market makers in options and credit default swaps.
What do options and CDS have to do with naked short selling? In 2004, the SEC wrote into its Regulation SHO an explicit provision (called the “Madoff exemption”) allowing market makers in options and derivatives to hedge their positions by selling short without delivering shares within a stated time limit. Buying a “put” option or CDS became the cheapest means of assuming a short position in any company, and doing so meant the seller would naked short sell shares “hedging” its exposure on the put or CDS. These manipulative trading practices permitted by the SEC guaranteed two things: collapse of the target company’s share price and ill-gotten gains for the short “investor.”
In March, 2007, the ABX index of sub-prime mortgage-backed-securities appeared with a transparent design easily manipulated into sharp decline. In November, 2007, the Financial Accounting Standards Board based in Connecticut (also home of short-selling hedge funds) made its Rule 157 effective. Rule 157 required financial institutions to change the value of financial assets (including MBS) on their books to current “market” value, and to run reductions through the income statement as operating loss. Sarbanes-Oxley threatened auditors and corporate executives with criminal penalties for accounting error, so auditors used ABX as grounds for marking down values far below cash flow analysis as MBS stopped trading.
Gigantic paper losses in quarterly reports of financial firms – first mortgage companies and then banks – provided media cover for torrential naked short selling of financial shares. Countrywide and nearly every smaller mortgage company were destroyed almost overnight, as naked short sales flooded markets with dilutive sales of non-existent shares. In mid-March, 2008, the fifth largest U. S. investment bank Bear Stearns, itself reputed to be a major naked short seller, was destroyed within a week by the practice, executed primarily through market makers in options and credit default swaps.
What do options and CDS have to do with naked short selling? In 2004, the SEC wrote into its Regulation SHO an explicit provision (called the “Madoff exemption”) allowing market makers in options and derivatives to hedge their positions by selling short without delivering shares within a stated time limit. Buying a “put” option or CDS became the cheapest means of assuming a short position in any company, and doing so meant the seller would naked short sell shares “hedging” its exposure on the put or CDS. These manipulative trading practices permitted by the SEC guaranteed two things: collapse of the target company’s share price and ill-gotten gains for the short “investor.”
Middle Class Under Assault
Taken into trust by American business as the avenue to working
capital, Wall Street financiers morphed into vipers at the breast of
capitalism. In 21st Century America, seasoned corporate executives
remain ignorant that registering their shares for public trading
enables brokers, hedge funds and other institutions to sell imitations
of those shares and to take the buyers’ money as their own. The SEC and
Congress permit this because their functionaries hope to do the same
fraudulent manipulations when their opportunities arrive.
Nothing is as destructive to the success and survival of capitalism as financial mercantilism. Mercantilism masquerades as capitalism itself, even calling itself “laissez-faire free market capitalism” to justify government forbearance of rampant fraud. Such fakery is aided by so many who befriend the ultra-rich and powerful. Much of the world is convinced capitalism, not mercantilism, is the culprit of imperialist exploitation.
Mercantilists thrive under socialism, fascism, communism and every other political ideology in addition to capitalism. In each political system, a government power center exists which bargains with and is swayed by mercantilist appeals. Mercantilism – not socialism, fascism or communism – is the anti-capitalist, and the Middle Class is its natural enemy. ~
Nothing is as destructive to the success and survival of capitalism as financial mercantilism. Mercantilism masquerades as capitalism itself, even calling itself “laissez-faire free market capitalism” to justify government forbearance of rampant fraud. Such fakery is aided by so many who befriend the ultra-rich and powerful. Much of the world is convinced capitalism, not mercantilism, is the culprit of imperialist exploitation.
Mercantilists thrive under socialism, fascism, communism and every other political ideology in addition to capitalism. In each political system, a government power center exists which bargains with and is swayed by mercantilist appeals. Mercantilism – not socialism, fascism or communism – is the anti-capitalist, and the Middle Class is its natural enemy. ~