20171030

Wall Street v. Wall Street

Here we are again, on the eve of massive asset bubbles purges. And as always (see for instance "Mondialisation : du "free market" au "fair market" - 20070726, "This is not a financial crisis" - 20080711*):
  • This is not a financial crisis, but a crisis of finance
  • This is not an economic crisis, but a crisis of economics
  • This is not a political crisis, but a crisis of politics. 
Which means, as always, that:
  • we will not solve anything by rejecting finance, economy, and politics - that's exactly what brought us the rise of extremism and populism, Brexit, or of course Trump.
  • we must to the contrary embrace finance, economy, and politics - at their core, starting from  their definitions, exposing smokescreens and impostures, demanding transparency and accountability.
So what happened after Lehman? Further desertion by people with basic notions of economics, or at least traces of common sense (I won't even mention 'moral compasses'). If it weren't for the A.I. algorythms and high-frequency trading that amplify and perpetuate the illusion, the most blatant bubbles would have probably alreaday burst years ago.
DJI chart (2nd biggest component after Boeing, Goldman Sachs weighs 11.6 times more than GE)

Nasdaq - better real/virtual ratio than before the dotcom crisis, but Apple (14.6% of the index, 4.9% of the DJI) and co will eventually meet reality.

Politicians? They totally surrendered. Back in 2009, they still had the power to change things by injecting tens of billions of dollars, and by passing a few legal safeguards - but now governments are weaker than ever, and they let their agenda be set by the very firms they bailed out without actually purging the system. 

Exhibit A: Goldman Sachs, who were instrumental in frauds leading to major crises (e.g. betting against toxic assets they helped create, or forging figures with the Greek government), are now stronger than ever, and still runnig the show (Steven Mnuchin, Gary Cohn, Mario Draghi, Robert Zoellick, Jose Manuel Barroso...). They aim at becoming the alpha and omega, or rather the Alphabet of finance since, like google, they're investing massively in A.I. to comfort their leadership.

Beyond this caricature, our financial systems rejected finance as an enabler for the economy. Not just Wall Street against Main Street, but ultimately Wall Street against Wall Street*. Emboldened by impunity (except maybe in Iceland, that lone country where The People put corrupt politicians and banksters in jail), these guys prolonged the bailouts with a wonderful invention, Quantitative Easings: after emptying governmental chests, they simply decided to print money for themselves - officially to fuel the economy, but actually to improve already indecent balance sheets, and to widen wealth (and reality) gaps in abyssal proportions. They brought back derivatives, fantasy league ratings, or gambling, and they're gutting Dodd-Frank like they gutted Glass-Stiegel.

What happened after Lehman was Lehman on steroids.

What happens next is for history books. 

And if by 'miracle' these guys manage to prevent the fall until after the Mid-term elections, all bets are off.

blogules 2017
Since 2003, nonsensical posts about noncritical issues in nonenglish (get your blogules transfusion in French)
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* also 'the ultimate stage of free market is the negation of the market' ("Le stade ultime du libéralisme, c'est la négation du marché (le déni d'économie continue") - 20110302) 

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