The Endless Crisis: By and For the Financial System

The Endless Crisis: By and For the Financial System
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Despite their lack of strategy and coordination, the Occupy Wall street protesters have a point; they accuse the financial system to have triggered the economic crisis that led 8 millions of Americans to loose their jobs, houses, families, health insurance, etc. By speculating with fraudulent derivatives and fostering the creation of a housing bubble, the financial establishment sought quick returns at the determent of all the country.

In the fall of 2008, when the financial system was on the verge of collapsing, the government’s TARP money, the tax payers money, was used to bailout a number of large banks who actually didn’t even need these funds to sustain their operations. At that time, the underlying deal was that banks would play the game, cover their operations and continue granting loans to the tax payer and business. Instead, they did exactly the opposite, securing their positions, using the funds as a collateral, distinguishing 2009 as one of the highest paid bonus years in their history while tightening to the extreme loans processes. Did Paulson realize the consequences of having bailout out Wall Street instead or bailing out Main Street? Probably but it was already too late.

Last December, the European Central Bank, lent 489B Euros to the Europeans bank at a low rate of 1% .

Recently, we learned that in addition to the $700B of the 2008 TARP money, the Fed secretly lent $13B to the US banks at a record low rate of 0.01%, according to Bloomberg.
The financial system obviously funds and protects itself but how about nations, businesses and consumers?

The endless crisis that the world is experiencing since 2008 is fueled by all sorts of uncertainties ranging from the recovery of the US economy despite an extreme polarization of its Democratic – Republican parties to the solidity of European financial system. The way Greece mismanaged its finances is a fact but downgrading countries rating and triggering a rise in their debt / bounds yields is probably the best way to deepen the problem. There’s a problem when nations are forced to borrow funds at 6%, 7 or 9% while the financial system is financing itself at rates as low as 1% or 0.01%.

Domestically, how can we expect a recovery while the financial system is not playing the game, taking risks and easing loans? Forget large nations, just look at the micro-economic level. All over the US, banks prefer leading people to foreclosures instead of renegotiating their loans and lowering their rates.

CBS 60 Minutes: Today, 13.1 million people are unemployed and
17 million American children are living in poverty, that’s nearly one in four.

These 3 years of crisis showed clearly that the financial system will do anything to protect its self and do close to nothing to serve the country. Large corporations and their hordes of stakeholders are ready to sacrifice workers for any increase in their dividends. Corporate profits were for instance at an all-time high in 2011. Some claim that productivity has increased and corporations need a smaller workforce. Still, besides the lack of a qualified workforce in certain sectors, the overall unemployment can’t be lowered if a compromise can’t be achieved between revenues and workforce unemployment. How are we supposed to restart the economy while financial institutions keep tightening loans processes for people and businesses and while corporations keep off shoring jobs and reaching by all means their financial targets?

Don’t expect black Friday or Christmas sales to restart the economy alone. To create the 300,000 jobs per month that the country needs to start significantly reducing the unemployment, corporate and financial players needs to accept a compromise. Recent decreasing unemployment numbers are a good sign but they don’t show a strong recovery but rather a seasonal boost thanks to the holidays.

Stock exchanges indexes are the expression of a continuing speculation game that have almost no connection with the country economic reality. When the system reaches such extremes, it’s time to rethink the rules by which financial and corporation are operating. Corporations became stateless and transnational while people are societies are part of nations. The notion of profits has been taken to its extremes, sacrificing local communities, moving jobs overseas and creating unsustainable social dramas all over the nation. What supposed to be a win-win game for consumers and corporations became a loosing game for the former. Obviously, financial and corporate institutions can really be a greater threat to the country than other factors.

NBC: Mass. A.G. Sues 5 Major Banks over Foreclosures

Photo Credits:
Wall Street By Michael Aston / FlickR
Europe Debt Crisis Word Cloud By Vectorportal / FlickR