All you need to know

Conclusion

The financial sector taking over

Development
The US has come a long way. From personal freedom and personal responsibility to personal freedom and no responsibility. From the productive sector to the financial sector. From steel and cars to subprime loans. From Carnegie and Ford to Blankfein and Dimon.

Taking over the economy
The financial sector has been very successful. From 1950 to 2006, their share of the GDP grew from 2.8% to 8.3%. In just 20 years, the banks managed to increase their share of industry assets from 26% to 61%. link

Taking over the government
This sort of success is not something you achieve on your own. You need accommodating advisers, like attorneys, appraisers, accountants and auditors. You need accommodating credit rating agencies. And above all, you need an accommodating government.
The government appoints bankfriendly persons to important positions, while politicians and governmental servants leaving politics get well paid assignments with the banks. The laws are changed. It is easier to contribute to politicians and to political parties and the bankers are feeding both parties with generous contributions. Not that all politicians are taking the contributions that is not necessary. As long as the banks have the support of half of each party, they can be sure of support no matter what party is in power. link
In spite of all help from the government, the banks can't keep afloat. So what happens? More help. They were saved from bankruptcy with direct contributions from the taxpayers. Well, at least the Troubled Asset Relief Program was to be paid back and it was, even with some profit for the government. Maybe saving the banks was necessary to avoid an even bigger crisis. At least temporarily. Saving looting bankers is incentivizing further looting, with the present banking policy you can be sure they will soon cause a new crisis. link
Still, although the bankers are responsible for the subprime crisis, it all started with progressives. Loans to low income earners are fully viable if the loan taker is carefully vetted. The crisis came when progressives demanded less vetting and the bankers complied by completely abandoning vetting. link

Taking over the law
After the Savings and Loan crisis of the 1980s and the 1990s, there was a big outcry. Regulators were active and many of the top men behind the crisis got prison sentences. The subprime crises, much bigger, only gave token prison sentences to a few low tier bank officials. Some regulators tried to make some serious investigations. Mostly they were thwarted by other regulators. link link
The bankers drove homeowners from their homes, with counterfeit documents, with unwarranted fees, with any trick they could think of. They were sentenced to pay some fines and damages, most of which was paid by others or not paid at all. There were some ineffective admonitions not to do it again but not much more. link link
Normally, not knowing about the law is no excuse. For the bankers it is, and a very good one. They have their "I'm the CEO and I know nothing" excuse. They can blame their advisers, advisers made virtually invulnerable with new laws. link link

The need for money
Before 2002, on average US corporations ran an annual financial deficit of 1.2 percent of GDP. They borrowed. For 2002 to 2005, things changed. On average, the corporations ran a financial surplus of 1.7 percent. Of course, this does not mean that there is no need for business investments. It only means that business investments are less attractive than some alternatives. They are less attractive than investments in executive bonuses, shareholder dividends, financial speculations and things like that. link
Maybe rich people are necessary for a healthy productive sector. This does not mean that rich people should have all money. It does not even necessarily mean that rich people should have most of the money. Now they have more profitable investments than production. Investments like lobbying, buying back own stock, commodities, "innovations".

Knowledge

The wisdom of Wall Street
When the subprime bubble rose, it proved that the bankers were brilliant and worth their money. When the bubble burst, it wasn't their fault. It was just bad luck. Nobody could have foreseen it. And the bankers still claim they are brilliant and worth their money. link
Many people still believe in the wisdom of the financial sector. It is difficult to understand why. Lloyd Blankfein, CEO of Goldman Sachs, said he does not know the importance of ratings. Jamie Dimon, CEO of JPMorgan, said that he missed that home prices don't go up forever. Hardly something you expect from people in the know. link
The bankers claim that good performance is depending on good remuneration. Not only has the subprime crisis belied this. An analysis of the 100 largest technology companies finds that those with the highest-paid CEOs had the worst returns. link
Economists fail when try to predict economic development. No matter if they just talk from conviction or if they try to construct theoretical models, no other field has such a disastrous series of predictive failures in modern times. link

Innovations: new fees and hiding bad assets
We have the banker's incompetence, demonstrated by their lousy performance and self-acclaimed by people like Blankfein and Dimon. Is there nothing they are good at? They are innovative. They are good at finding new ways to extract fees, they are good at finding new ways to hide bad assets. link

The government or somebody else

What the hell do I get
"What the hell do I get for the money?" This question was asked by a Swedish entrepreneur when questioned about his taxes. For an American making millions or billions, the answer is simple: everything. If it was not for the society to which he and others are paying taxes, he would not be able to make those millions or billions. If he wants to rob the society by just taking and not contributing, he shouldn't start whining if the society wants to rob him. link
For a working society, you need a working government. Unfortunately, governments are seldom perfect. They make mistakes. They pander to special interests. In a democracy they pander to groups with votes. They pander to those with money and, not least, they pander to their own interest.

The government or somebody else
If you don't want the government to tell you what to do, you have alternatives. If you have enough money, you can join Wall Street and tell the government what to do. If you don't have that kind of money, you can join a street or biker gang. One thing is for sure: if the government won't tell what to do, someone else will.

© Anders Floderus