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By now,
everyone in that fraction of the world that pays attention to something other
than American Idol and their platter of TGI Friday's loaded potato
skins knows that Goldman Sachs has been caught at another racket in the
stock market: front-running trades. What a clever gambit, done with the help
of the markets themselves - the Nasdaq in
particular - in which information on trades is held back a fraction of a
second from public view, while the data is shoveled to the computers of
privileged subscribers who can execute zillions of programmed micro-trades
before the rest of the herd makes a move. This
allows them to vacuum up hundreds of millions of dollars by doing absolutely
nothing of value. The old-fashioned method used by brokers was called
"churning," in which stocks were bought and sold incessantly (by
phone) from the portfolios of inattentive clients merely to generate
commissions. In any sensible society - i.e. a society with an instinct
for self-preservation - it would be against the law and the people doing it
would be sent to prison.
I'm not a lawyer, but
I've got to think that the actions at the Nasdaq
end - shoveling the data to the privileged subscribers a fraction of a second
early - is patently illegal in the first place, since the whole purpose of an
exchange is to create a fair trading space. Where both parties are concerned,
it should amount to a plain vanilla criminal conspiracy to commit stock
trading fraud. Maybe the larger question is: since when did we become a
society lacking the instinct for self-preservation - that is, a society bent
on suicide? Or maybe the question is better put to Goldman Sachs's CEO
Lloyd Blankfein.
Since this racket was
made public, there has been chatter all over the Web about how angry the
American public is about Wall Street in general, and
increasingly about Goldman Sachs in particular. Nobody has summed it up
better than Rolling Stone's Matt Taibbi, calling
the company "...a great vampire squid wrapped around the face of
humanity, relentlessly jamming its blood funnel into anything that smells
like money." And Taibbi's fierce article
about Goldman Sachs came out weeks before this latest outrage. As we turn the
corner toward autumn, President Obama looks increasingly like a dupe, a tool,
or a co-conspirator of Goldman Sachs. If he doesn't instruct the
Justice Department to commence investigations of the company, and if he
doesn't dissociate himself from their alumni hanging around the White House,
the Treasury Department, and elsewhere in the government, he's going to
become the object of an awful public wrath. Obama has no other choice
at this point except to clean house - to fire Larry Summers, Robert Rubin,
Tim Geithner, and all other former Goldman Sachs
employees in positions of power and influence around him.
Actually, it's not
necessary for the whole general public to be fed up with this
situation. According to the Pareto 80-20 rule, it only takes one-fifth
of the public to set social actions in motion, and only one-fifth of that
one-fifth to do the heavy lifting. I think we've reached that
point. The sentiment is now overwhelmingly tipped against Goldman Sachs
(and Wall Street generally) and the only questions are whether the President
of the US ends up lumped in with them, and whether we'll see orderly
prosecutions or disorderly persecutions. At this point, it even begins
to look as though Mr. Obama is taking cover behind the health care reform
debate to avoid answering for his government's association with Goldman
Sachs.
The trouble is, if
the thoughtful and trustworthy members of the "Pareto 20 percent" don't
stir themselves into action over Goldman's behavior, then sooner or later the
thoughtless and reckless will take over. Bill Moyers hosted a
fascinating report on his most recent podcast about the savagery of
right-wing broadcasting and how it had led, in one instance, to the murder of
a doctor who performed abortions. What bothers me is that, sooner or later,
the conduct of Goldman Sachs will lead the growing ranks of the unemployed,
foreclosed, disentitled, and hopeless into the hands of a savage right wing
seeking mindless vengeance, for instance, against "the Jews," (as
represented by Goldman Sachs), or brown-skinned people (as embodied by a
vilified president).
Readers of this blog
know I'm allergic to conspiracy theories. But surveying the scene out there,
it is hard to not conclude that Goldman Sachs has become the
"front-runner" of a criminal syndicate defrauding US
taxpayers. This isn't the first time in American history that business
veered into extremely antisocial behavior on the grand scale. The last
quarter of the 19th century was just as bad, with frauds, swindles,
sociopathic trusts, and predatory corporations preying on people trying
desperately to make an honest living. Then, one summer day in 1901, a
factory drone named Leon Czolgosz stepped up to
President William McKinley in a reception line at the Buffalo World's Fair
and plugged him twice in the abdomen. (Czolgosz
liked to think of himself as an "anarchist," a then-fashionable
ideology among the simmering powerless.) Eight days later, McKinley expired
and Teddy Roosevelt became president - to the extreme chagrin of the
Republican business establishment - "... now that damned cowboy is in
the White House!" cried Republican national leader Mark Hanna of Ohio.
He was correct to be
nervous. TR turned the corporate world upside down with reform, from
dismantling monopolies to establishing the cabinet departments of Commerce
and Labor, to bringing the new food industry under regulation.
This naturally leads me to wonder if or when Barack Obama will have his TR
Moment, when he stands up to the large malign forces operating arrantly in
the daily life of this nation. I get volumes of email complaining about
Mr. Obama. The writers behind them seem, on the whole, crankish, cynical to an extreme,
and not very trustworthy observers of the scene. But I begin to sympathize
with them.
In the meantime, the
US economy gives the illusion of recovery - but to what? Back to a
"consumer" credit card shopping orgy? Another house-buying
fiesta? I don't think so. Households are drowning in debt.
They're using their credit cards, if they still can, to buy staple
foods. Those are the lucky ones who still have lines of credit
left. Soon, many of these families won't even amount to households
because they won't have a house. There is absolutely no way we are
going back to that particular bubble economy. The only bubble left is
the government debt bubble, now leading to such extravagant excess that it
can only end up wrecking the government, and perhaps American society with
it. In the meantime, how much remaining wealth is
Goldman Sachs and its cohorts vacuuming off the floor?
Also meanwhile, oil
is heading back to the $70 range (with the dollar shedding basis
points). That's the oil price range where the economy begins to get
wrecked all over again - that is, whatever remains of the economy.
That's the price range where airlines go back to the intensive care unit and
citizens have to max out their credit cards to buy gasoline. We're
moving toward a very hard landing and very soon.
James Howard Kunstler
www.kunstler.com/
Also
by James Howard Kunstler
James Kunstler
has worked as a reporter and feature writer for a number of newspapers, and
finally as a staff writer for Rolling Stone Magazine. In 1975, he dropped out
to write books on a full-time basis.
His latest nonfiction
book, "The Long Emergency," describes the changes that American
society faces in the 21st century. Discerning an imminent future of
protracted socioeconomic crisis, Kunstler foresees
the progressive dilapidation of subdivisions and strip malls, the
depopulation of the American Southwest, and, amid a world at war over oil,
military invasions of the West Coast; when the convulsion subsides, Americans
will live in smaller places and eat locally grown food.
You can purchase your own
copy here : The Long
Emergency . You can get more from
James Howard Kunstler - including his artwork,
information about his other novels, and his blog - at his Web site : http://www.kunstler.com/
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