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Why Most Things Do Not Matter
by J. R. Nyquist
Weekly Column Published: 06.19.2009

Imagine you are on the Titanic, and the ship is sinking after sideswiping an iceberg. Does it matter if you need a haircut? Should you be worrying about your investments? Under life-and-death circumstances, only life seems to matter. The trivia that clogs our existence is swept away by the sudden realization of what is actually at stake. In this sense, true philosophy is found on the deck of the Titanic. It leads us to discover what really matters; that is to say, why most things actually do not matter.

Using the Titanic as an analogy, we all find ourselves on a ship of state. And for Europeans, Russians and Americans – at the least – a figurative iceberg has torn through the underside of our ship. In other words, something cold and dangerous has damaged us from underneath. Of course, this is something we strenuously deny. We say to ourselves, “The ship of state is not fatally damaged.” We therefore continue our vain activities, imagining that the latest rearrangement of the deck chairs constitutes a move in the right direction. People do not consider their actual position, where they are headed or what vessel they have embarked upon. The passengers and crew of many countries have deluded themselves with rhetoric and ideas that are utterly at variance with reality.

Cold bureaucratic words seem harmless enough, like the ocean rolling endlessly along. But sometimes whole icebergs are hidden in such words. The recent meeting of the BRIC countries is a good example. BRIC stands for Brazil, Russia, India and China. Combining these four countries into a new economic powerhouse was the brainchild of a KGB general. In such waters, cold and forbidding, one finds ice in abundance. “We the leaders of the Federative Republic of Brazil, the Russian Federation, the Republic of India and the People’s Republic of China,” etc. What does it mean? The joint statement says: “The emerging and developing economies must have a greater voice and representation in international financial institutions….” Note the sharp edge of the iceberg itself: “We also believe that there is a strong need for a stable, predictable and more diversified international system.” (Dominated by Russia and China.) “The poorest countries have been hit hardest by the financial crisis. The international community needs to step up efforts to provide liquid financial resources for these countries.” (Read “bailout.”) The BRIC statement also proposes to deal with “climate change based on the principle of common differentiated responsibility….” (Read “the Americans pay” to lower global temperatures.) “We underscore our support for a more democratic and just multi-polar world order … and collective decision-making for all states.” (Read, “We support socialism and an international redistribution of wealth, and taking America down a peg or two.”)

In the name of stabilizing the world, Russian President Medvedev encapsulated the destabilizing principle of BRIC when he said, “The idea of fairness is probably one of the key terms that we should use today.” The reader may ask, in this context, what is fairness? It is a codeword for the redistribution of global power from rich to poor countries. It is “communism” writ large, yet disguised behind innocuous language. To make a revolution that will ultimately kill billions of people through starvation, famine and war, you must emphasize “fairness.” There is no better slogan for promoting global catastrophe. Here is a thinly disguised assault on the U.S. dollar, capitalism and the protecting hand of America.

If the United States was the all-power malignant cancer that so many prefer to denounce, then why hasn’t this malignancy devoted its vast treasury to the construction of a successful pro-American mythology? Why are the people of Brazil and India allowing themselves to be used by Moscow and Beijing? To answer simply: The United States does not defend itself rhetorically, and does not have a coherent strategy – failing to recognize its enemy. The Americans believe in freedom, and they believe that the “truth will prevail in the market place of ideas.” They believe that their benevolent intentions will persuade others to adopt the American way. In a speech given to senior Party cadres in 2005, Chinese Defense Minister Chi Haotian once noted, “In Chinese history … the ruthless have always won and the benevolent have always failed.”

What is true for Chinese history, however, has not been true in American history. Only those who appreciate this fact will understand what the elimination of the United States would signify. No country is perfect, of course; but the intentions of the United States are not those of China or Russia. The strategic misdirection of these two countries will ultimately produce the most devastating war that the human race has yet experienced. BRIC is part of that strategic misdirection. Much of the poison that circulates on the internet, entering our political discourse, belongs to that same mode of information warfare once referred to as “active measures.” Consider, in this context, the words of yet another Chinese general, Li Jijin: “Unconsciously accepting an opponent’s strategic misdirection causes a nation to be defeated or collapse, and not know why.”

Is this really possible? Decades of information warfare – through active disinformation – has already had an effect. The process touches on topics as unrelated as religion and art, diplomacy and child-rearing. The subtle poison of certain ideas, the mischief of new disciplines, has sometimes arisen through a generalized nihilistic tendency. But also, there is a positive design at work. For nobody has yet explained civilization’s sudden unwillingness or inability to crush pathological growths that have sabotaged our collective sanity. The serious strategist, looking at society’s gradual surrender to one suicidal idea after another, says to himself: “An enemy could not have devised a better engine for our ultimate destruction.”

I am reminded that society does not automatically promote its own health, or its defense against enemies (foreign and domestic). Somebody has to know what is needed and do something. The problem we face today is best described in the words of Cato the Younger, when he characterized the Roman Senate in the midst of a plot to destroy the state as “each waiting for someone else to act.” That seems to be our position, today. We do not see the danger as it approaches, or maybe we don’t want to see the danger. The evil of our time is not easy to cope with. One might say it is “inconvenient.” As General Chi explained to his Party comrades four years ago, “Death is the engine that moves history forward.” This totalitarian admonition is not put forward as a principle of American foreign policy, but as a hint regarding Chinese and Russian intentions.

That others are promoting conditions leading to your demise should be understood; that language itself is a tool in the promotion of life or death, should also be understood. But we understand next to nothing. We are too busy with things that do not matter. Meanwhile, we ignore something of great importance. We ignore something that is a matter of life and death.

Copyright © 2009 Jeffrey R. Nyquist
Global Analysis Archive

Exibições: 30

Comentário de Alexandre César Weber em 24 junho 2009 às 2:13
"Suck on Our Yachts": Goldman Sachs Issues Non-Apology for Destroying the World Economy
By Matt Taibbi, True/Slant
Posted on June 22, 2009, Printed on June 23, 2009

Anyone else out there find himself doubled over laughing after reading Goldman, Sachs chief Lloyd Blankfein's "apology" for his bank's behavior leading up to the financial crisis? Has an act of contrition ever in history been more worthless and insincere? Even Gary Ridgway did a better job of sounding genuinely sorry at his sentencing hearing -- and he was a guy who had sex with dead prostitutes because it was cheaper than paying live ones.

Looking at Blankfein's one-sentence apology, I'm struck in particular by a couple of phrases:

While we regret that we participated in the market euphoria...

Really, Lloyd? You "participated" in the market euphoria? You didn't, I don't know, cause the market euphoria? By almost any measurement, Goldman was a central, leading player in the subprime housing bubble story. Just yesterday I was talking to Guy Cecala at Inside Mortgage Finance, the trade publication that tracks statistics in the mortgage lending industry. He said that at the height of the boom, in 2006, Goldman Sachs underwrote $76.5 billion in mortgage-backed securities, or 7% of the entire market. Of that $76.5 billion, $29.3 billion was subprime, which is bad enough -- but another $29.8 billion was what's called "Alt-A" paper. Alt-A mortgages are characterized, mainly, by crappy documentation and lack of equity: no income verification, no asset verification, little-to-no cash down. So while "only" 38% of the mortgage-backed securities Goldman underwrote were subprime, more than three-fourths of their securities were what is called "non-prime," ie either subprime or Alt-A. "There's a lot of crap in there too," says Cecala.

Let's be clear about what that meant. These crap/sham mortgages, a lot of them adjustable-rate deals with teaser rates that featured sudden rate hikes two or three years after closing, they would never have been possible had not someone devised a method for selling them off to secondary buyers. No local bank is going to keep millions of dollars worth of Alt-A mortgages on its books, because no sensible company lends out money to very risky customers and actually keeps those loans on its balance sheet.

So this system depended almost entirely on banks like Goldman finding ways to securitize these instruments, ie chop the mortgages up into little bits, repackage them as mortgage-backed securities like CDOs and CMOs, and sell them to unsuspecting customers on the secondary market, most of them large institutional buyers like pensions and insurance companies and workers' unions, many of them foreigners. Most of those customers were snookered into buying this stuff because they had no idea what it was: in the case of pensions and unions particularly, a lot of these customers only bought this crap because the peculiar alchemy banks like Goldman used in devising their mortgage-backed securities made radioactive mortgages look like AAA-rated investments. (Or at least they were given these ratings by Moody's and Standard and Poor's, ratings agencies that were financially dependent upon the very banks they were supposed to be rating -- but that's another story).

So some Dutch teachers' union that a year before was buying ultra-safe U.S. Treasury bonds in 2006 runs into a Goldman salesman who offers them a different, "just as safe" AAA-rated investment that, at the moment anyway, just happens to be earning a much higher return than treasuries. Next thing you know, a bunch of teachers in Holland are betting their retirement nest eggs on a bunch of meth addicted "homeowners" in Texas and Arizona.

This isn't really commerce, but much more like organized crime: it was a gigantic fraud perpetrated on the economy that wouldn't have been possible without accomplices in the ratings agencies and regulators willing to turn a blind eye. Imagine a meat company that bred ten billion rats, fattened them on trash and sewage, ground their bodies into chuck, and then sold it all as grade-A ground beef to McDonald's and Burger King, right under the noses of the USDA: this is exactly the same thing, only with debt instead of food. We're eating it, they're counting the money.

Any way you slice it, Goldman was responsible for putting tens of billions of toxic mortgages on the market, resulting in mass foreclosures, mass depletion of retirement funds, and a monstrously over-leveraged financial system that we will now all be bailing out for the next half-century or so. All of this so that Goldman could make a few billion bucks acting as the middleman in all of these deadly transactions.

Anyway, I was also struck by this phrase:

...we are proud of the way our firm managed the risk for our clients...

First of all, generally speaking, when one apologizes for having done a bad thing (like for instance destroying the world economy), it is good form to wait at least until the end of the sentence to start bragging again.

Second of all, what is particularly obnoxious about this phrase is that Goldman is bragging about the fact that it actually made money while it was pumping the economy full of explosive leverage. While companies like Lehman and Bear were dumb enough to actually eat their own rat meat, Goldman knew what it was doing and was careful to bet against the same stuff it was selling, which makes its behavior many times worse than that of other banks, not better. I get into this more in a Rolling Stone piece coming out next week, but Goldman's continual bragging about its mortgage hedges is one of the more obnoxious phenomena in the recent history of Wall Street, given that it was selling this s*** by the ton during that same period.

Beyond that, Goldman's "risk management" also involved buying massive hedges on its mortgage exposure from...drum roll please... AIG. In fact Goldman was AIGFP's single largest customer; while the bank was busy flooding the world financial system with doomed mortgages, it was also busy piling bets on the back of the insurance behemoth -- $20 billion worth, to be exact. And AIG's death spiral was triggered not so much by its bets going sour, but by companies like Goldman that demanded that AIG put up cash to show its ability to pay. These collateral calls were what killed AIG last September, and Goldman was one of those creditors pulling the trigger: what makes this fact even more obnoxious is that ex-Goldmanite Henry Paulson then stepped in and green-lighted an $80 billion taxpayer bailout. Ultimately another ex-Goldmanite named Ed Liddy was put in charge of AIG, and Goldman ended up getting paid 100 cents on the dollar for its AIG debt.

So basically Goldman helped kill AIG, necessitating a federal bailout, after which time it got paid off handsomely for bets that it certainly would not have been paid off completely for had AIG simply been liquidated. And again, AIG probably does not have a market to sell its CDS insurance to firms like Goldman, if firms like Goldman had not cooked up this insane scheme to underwrite billions upon billions of toxic debt and sell it off to secondary buyers as safe investments. Moreover AIG would not have even had this business of selling CDS insurance had not a bunch of ex-Goldman guys, in particular Bob Rubin, quietly pushed to deregulate the derivatives market back at the end of the Clinton administration.

So when Goldman says it is proud that it "managed the risk" for its clients, what it's really saying is, "We're proud that we kept the extreme crapness of our mortgage securities secret from everyone but our clients, and fobbed off the nightmare leverage they created on dumbass AIG and all the pensioners and teachers and other idiots who bought this stuff. Go f*** yourselves and suck on our yachts."

There's a much larger story about all of this coming out in the magazine next week, but in the meantime... hey, Lloyd, thanks for the apology. It makes us all feel a lot better.

Matt Taibbi is a writer for Rolling Stone.


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