Brain Dropping # 14

If you’re as simple minded as I am then the financial machinations of Wall Street and the banksters will make your head spin.  Begin with the arcane jargon formulated to disguise unethical if not illegal behavior and to keep the average taxpayer in the dark.  Among my favorites is ‘quantitative easing.’   The Federal Reserve Bank, backed by you and me the taxpayers, buys from the banks, bonds, U.S. Treasury notes and Mortgage Backed Securities, which are worthless because of the predatory lending practices of the sub-prime mortgage scam in which unscrupulous bankers convinced low income families to take on unaffordable mortgages.  Where does the Fed get the money?  Why they create it out of thin air in the form of giving credit to the mismanaged banks – it is the equivalent of printing money which ‘eases’  dried up ‘liquidity.’   Liquidity simply means money-on-hand.  If you have ten bucks in your pocket your funds are liquid – if you don’t you’re homeless and broke.

As I understand it, the Federal Reserve in making these purchases is buying ‘toxic assets’.  A toxic asset is an asset that becomes illiquid when its secondary market disappears and cannot be sold, as they are guaranteed to lose money.  In other words as worthless as a pile of steaming cow shit.  But wait, the pile of cow shit can be composted and become a valuable nutrient to your garden.

Two more favorites in the Wall Street larcenous lexicon are – ‘Derivatives’ and ‘Credit Default Swaps.’  A ‘Derivative’ is nothing more than a very ordinary Nathan Detroit floating crap game side bet.   The shooter is going for a ten.  You bet on whether he makes it or not.  He hits ‘boxcars’ and you’re golden.  On Wall Street you can place a side bet on whether a stock goes up or down.  These guys that you see on television in their two thousand dollar pin-striped suits, testifying before the House Banking Committee, are nothing more than cheap back-alley crap shooters who let their MBA flunkies get down on their knees to ‘shoot the bones.’   The big difference is, that when these elegant con men lose,  we the taxpayers bail them out so that they can ride their limousines to the next crap game.  In the words of that great old folksong “Stack O Lee” these Wall Street gamblers never “learn to lose!” because the American taxpayer is always there to ante up.

‘Credit Default Swaps’ is another disingenuous name for an insurance policy taken out by an investment group to cover any loss from highly speculative investments.  The insurance company, say AIG, is supposed to keep on hand enough capital reserves to cover all contingencies.
AIG did not keep such reserves on hand, leading to the largest government (taxpayer) bailout  in history when the sub-prime mortgage house-of-cards collapsed.

Al Salzman

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