Wall Street: how to finish off this vile beast?
What is the deeper, intimate reason for financial crises? How do cracks appear and why do bubbles implode? It is always for a simple and unique reason, which is that irrational and outlandish bets undertaken by the world of finance are done so with borrowed money! In this regard, the last serious crisis – subprimes – didn’t fail this basic rule of a banking sector that is full to its belly, still and forever preoccupied with maximising profits, but which ends up imploding under the weight of ginormous and overwrought leverage. It is the culture of debt and excessive risk that was put into practice by several generations of bankers who have considered the steady increase of their annual bonuses to be a given, the natural order even. In order to do this – to always earn more and more – it is the whole of this corporate network which has again found itself actively working to somehow endlessly improve their employer-bank’s balance sheet and in turn harvest from it their own delicious, gleaming fruits. This is how Citigroup – who in 2001 had taken a century to get to a balance sheet of a trillion dollars – was able to double this in six years, reaching the size of 2 trillions in 2007, just before the subprimes.
The beast must be fed, and everyone has gotten in on this highly lucrative little game, even the emerging and developing nations who are now harshly feeling the shock of debt, which is private as much as it is public. It is thus the globalized race for profits which has ruled over the world since the beginning of this millennium, but of course on the condition that these benefits are reaped as quickly as possible. In this respect, it goes without saying that investments destined for the real economy – profitable in the medium and indeed long term – are being abandoned for all the instruments that enable short term profits to be churned out. Such a paradigm – combining debt, leverage and the rarefication of productive investments – has therefore brought about the need for revolutionary monetary policies – unprecedented, in any case – whose objective it is to rescue an economy severely lacking in liquid capital.
In fact, the lowering of interest rates has been initiated and intensified due only to one final conclusion, which is that only monetary creation would be likely to pull our economies out from this torpor it has been plunged into, and from investment deficiency and the hyperbolic growth of a parasitic financial system. And this is because all these artifices – which have belonged to the abstract arsenal of the central banks – were considered up until now with a kind of dread, since they were suspected of fueling hyperinflation. Nearly ten years on from the biggest financial crisis since the Great Depression, after several trillion dollars, euros, yen and yuan have been created out of thin air, our central bankers would go a long way to get an inflation rate of just 2% in our Western nations, which are being stifled by stagnation that is characterized – indeed caused – by a morbid absence of inflation.
It is in fact another much more insidious evil that they are now confronted with, the same one that Japan has been desperately and unsuccessfully trying to combat for twenty years: deflation. The cause and effect link between the money supply and prices was effectively broken from the moment that the banks stopped lending to the economy in order to focus on the global casino, which has allowed them to multiply their profits, which have been as virtual as they have been enormous. This is why the preceding months’ and years’ stock market records were abhorrent. And it is also why they now belong to a time long past: we cannot indefinitely and with impunity speculate, play, and get rich from imaginary money. Today, Wall Street is finally joining Main Street in its misfortune.