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The U.S. government is still closed for business. And investors are confused.
But our fearless leaders aren’t confused. They’re sticking with the playbook that’s worked for them for … well, forever, really.
Was it a surprise that President Obama met with chief executives from major financial institutions yesterday?
The revolving door between government and corporations turns most frequently and fastest when financial institutions are involved because they effectively control our modern-day hyper-financialized economy. It’s possible they were told to throw the White House a bone on this shutdown standoff. But more than likely, the CEOs were probably offered plenty of kickbacks and reassurances for their cooperation.
Lloyd Blankfein, CEO of Goldman Sachs, was present for the rendezvous. He said: “You can litigate these policy issues. You can re-litigate these policy issues in a political forum, but they shouldn’t use the threat of causing the U.S. to fail on its … obligations to repay on its debt as a cudgel.”
The threat of causing the U.S. to fail. Seriously? A canard, pure and simple.
Fed Chairman Ben Bernanke gave a nod to what’s really in play during his most recent post-policymaker press conference two weeks ago. He specifically noted the decision not to taper the stimulus program was made because there were tighter financial conditions that must be monitored. Let me translate: “We may eventually taper, but our exceptional monetary policy is here to stay.”
Bingo. It is the financial conditions. That’s all that matters to these elites. The economy doesn’t matter. They may pretend the economy matters to them, but it’s merely a sideshow used to keep the plebes content. From Brian Moynihan, CEO of Bank of America: “There’s no debate that the seriousness of the U.S. not paying its debts … is the most serious thing we have, and we witnessed that in August 2011, and you saw the ramifications: a slowdown in the economy.”
Did we see the ramifications manifest in the form of an economic slowdown?
No. We saw the ramifications of a first-ever U.S. downgrade manifest in the markets for an entire month. But, boy, I bet that was a long month for financial institutions. After all, they had to explain why there was “nothing to worry about” and that investors should not fear a collapse in our highly levered system.
Few will admit the real cause of a widening socio-economic gap between the rich and everyone else. It is that the system is geared toward benefitting those with capital at the expense of those without it — at the expense of the laborers. If this system really were to unwind, the financial institutions’ gravy train could stop, relatively speaking. Blankfein and Moynihan won’t stand for a threat that causes their gravy train to fail.
I’ll scratch yours, if you scratch mine.
Best,
JR
