PROBLEM SUMMARY:
People used to know what banks did. Bankers took deposits and lent to speculators in recklessly large amounts for quick in-and-out trading. Financial crashes have become deeper and affect a wider swath of the population as debt pyramiding has soared and credit quality plunged into the toxic category of "liars" loans.
The first step toward today's mutual interdependence between high finance and government was for central banks to act as lenders of last resort to mitigate the liquidity crises that periodically resulted from the banks' privilege of credit creation. In due course governments also provided public deposit insurance, recognizing the need to mobilize and recycle savings into capital investment as the industrial revolution gained momentum. In exchange for this support, they regulated banks as public utilities.
But today's Banks major customers are other financial institutions, insurance and real estate, the FIRE sector, not industrial firms. Debt leveraging by real estate and monopolies, arbitrage speculators, hedge funds and corporate raiders inflates asset prices on credit. The effect of creating "balance sheet wealth" in this way is to load down the "real" production-and-consumption economy with debt and related rentier charges, adding more to the cost of living and doing business than rising productivity reduces production costs. MAKING US LESS COMPETITIVE.
Since 2008, public bailouts have taken bad loans off the banks' balance sheet at enormous taxpayer expense, some $13 trillion in the United States, and proportionally higher in Ireland and other economies now being subjected to austerity to pay for "free market" deregulation. Bankers are holding economies hostage, threatening a monetary crash if they do not get more bailouts and nearly free central bank credit, and more mortgage and other loan guarantees for their casino-like game. The resulting "too big to fail" policy means making governments too weak to fight back.
The process that began with central bank support thus has turned into broad government guarantees against bank insolvency. The largest banks have made so many reckless loans that they have become wards of the state. Yet they have become powerful enough to capture lawmakers to act as their facilitators. The popular media and even academic economic theorists have been mobilized to pose as experts in an attempt to convince the public that financial policy is best left to technocrats, chosen by the banks, as if there is no alternative policy except governments subsidizing a financial free lunch and crown bankers as society's rulers.
excerpted from Michael Hudson
Which is why Romney is such a terrible fucking choice.
