Roubini says double-dip too!

On the other hand, Paul Krugman isn't talking about double-dips, but a decade long depression.

I've got an expanded blog article titled "Recession Watch: one dip, two dips, ... we all fall down", which includes current macroeconomic data on America's descent into recession and opinions on what this all means by Krugman, Roubini, Joe Stiglitz, and Ken Rogoff.

None of this should be a surprise to those paying attention, but I suspect most people -as usual- aren't.

Quote of the day: Krugman on the coming storm

The austerians have brought us to the brink of a vast disaster. A recession in Europe looks more likely than not; and the question for the United States is not whether a lost decade is possible, but whether there is any plausible way to avoid one.

- Paul Krugman, "Defeatism"

Europe's inverted socialism

And most Northern Europeans also seem to believe that the bailouts have gone to lazy Southern Europeans. In fact, their purpose has been to shore up the fragile Northern European financial systems. German banks are among the weakest in Europe; some of them (especially the state-owned landesbanks) are effectively bankrupt. If they were forced to mark down their Southern European debt, they might well collapse in a heap, and the European financial system could grind to a halt. Just as in the United States, the real impact of the European bailout has been to shore up the continent’s banks – not to help the continent’s debtors. The recent downgrading of two of France’s most important banks, due to their holdings of Greek debt, reminds us of how exposed Northern Europe’s financial systems remain. And rumors of a recent IMF report that European banks are over $270 billion short of the capital they need to confront their current problems served to drive the point home.

- Jeffry Frieden, "Europe's Lehman moment"

Europe's financial problems have escalated to the point where a world-wide contagion has become again possible.  Economists and international leaders are sounding alarms that have rarely been spoken in unison, since the inception of the 2008 financial crisis.  Christine Lagarde, the managing director of the International Monetary Fund, said "We have entered into a dangerous phase of the crisis." Her words come at a point where the Greek debt crisis appears to be reaching its climax.  Moody's Investors Service downgraded two of France's top banks, Societe Generale and Credit Agricole, stating that it had concerns about the two banks funding and liquidity profiles, due to their exposure to Greek debt.  A recent analysis indicates that 43 large European banks hold debt in the PIIGS equivalent to 65% of the book value of those institutions. Gretchen Morgenson of the NY Times explains the current situation:

Some of these [European] banks are growing desperate for dollars. Fearing the worst, investors are pulling back, refusing to roll over the banks’ commercial paper, those short-term i.o.u.’s that are the lifeblood of commerce. Others are refusing to renew certificates of deposit. European banks need this money, in dollars, to extend loans to American companies and to pay their own debts.  

As a result several central banks have mounted a coordinated effort to inject US dollars into the financial system to stimulate market confidence.  The Guardian newspaper elaborates:

The Bank of England joined the US Federal Reserve, the European Central Bank, the Swiss National Bank and the Bank of Japan on Thursday to announce that they would flood money markets with dollars over the coming months.

Gus Faucher, director of macroeconomics at Moody's Analytics, states "The big question is: is this enough in the short term to get us to a longer term solution? There is a potential for a really huge financial crisis in Europe. Things are bad now, but they could get a lot worse."

Many observers are looking at the current European situation and seeing similarities between Lehman Brothers demise and the 2008 crisis.

Adding to the peril is that these banks are funded primarily by short-term investors, like buyers of commercial paper, rather than by depositors, as is more often the case with American banks. This was the same problem faced by Bear Stearns and Lehman Brothers, which collapsed after short-term lenders fled in panic.

Economist Barry Eichengreen says that, "The euro’s survival and, indeed, that of the European Union hang in the balance."  He says long term proposals on restructuring Europe's sovereign debts are not of immediate concern, rather the continent needs to act decisively in stabilizing its banks.  The European Financial Stabilty Facility (EFSF) and even the IMF should be used to re-capitalize Europe's weak banks.  The second move should be to give Greece sufficient room to maneuver by asking its creditors to relax its fiscal targets.  Third, governments need to end this futile dalliance with austerity and proceed with stimulus projects that would create real growth.  He states, "Without growth, tax revenues will remain stagnant, and the capacity to service debts will continue to erode. Social stability, similarly, depends on it."

Economist Paul Krugman at the beginning of this week had some serious words for European governments.  He states, "We’re not talking about a crisis that will unfold over a year or two; this thing could come apart in a matter of days. And if it does, the whole world will suffer"  Likewise, he is telling Europe to use the ECB to continue buying up Spanish and Italian debt to contain the risk of default. The moral argument for inaction or worst punishing Europe's peripheral nations and the Mediterranean nations of Spain and Italy, will drive the continent -if not the world- into another economic abyss.

The reality is Greece's debt problems have been growing and not diminishing over the past two years.  The country is not in any position today or in any foreseeable future to repay the totality of its debt.  Under the current regime imposed on the country, Simon Johnson a former IMF chief economist concludes that "The tax revenue needed to service [the Greek] debt would burden businesses and households for decades – enterprising and productive people will move their fortunes and their futures elsewhere in the euro area or to the United States." Throwing billions of dollars at the nation, only to prop up banks in the northern economies of Europe and hoping that the situation will be resolved at a later date, has now been shown to be an unfeasible and irresponsible position.  Europe needs to first stabilize its banking sector immediately and then proceed in an orderly default of Greece's debt. An unorderly default will plunge the entire Eurozone into chaos.  Spain and Italy will face unprecedented pressure, whereas the remaining nations of Portugal, Ireland, and Greece may well face economic collapse.

Recession Watch: one dip, two dips,... we all fall down

The trend lines are undeniable; the US economy is heading into another recession.  Debate between economic analysts entail whether what is occurring is an entirely new recession, a double-dip recession, or the continuation of even larger economic contraction that began initially with the 2008 financial crisis (which some would argue is an extension of the 2001 recession) and has properties that are unlike previous recessions.  Each of these arguments have some validity in explaining the current situation, but all conclude that this new decline, while not likely to be as severe as the 2008 crisis, will last longer in duration and given the current political weaknesses of the major industrial nations, be more difficult to mitigate.

Leaving aside the debt crisis and economic malaise that is occurring in Europe for the moment or the possible hard landing that has been predicted about China and the entailing risks these situations pose to the global economy, America's economic position is clearly weak.

First, the jobs position is dismal.  Last month, zero jobs were added and only a fraction of the jobs necessary to compensate for population growth alone have been achieved in the previous four months.  The NY Times summarizes:

Over the last 50 years, every time that job growth has been as meager as it has been over the last four months, the economy has been headed toward recession, in a recession or in the immediate aftermath of one.

The collapse of job creation is not about businesses fearing regulatory uncertainty, creeping hyper-inflation, or the need for further tax-cuts to stimulate big businesses already bloated corporate coffers, but rather it is due to insufficient aggregate demand.  People without jobs, people forced to take inferior paying jobs, people concerned that they may lose their jobs, people forced to subsidize their spouse, adult children, parents, and/or relatives, and people loaded with debt, aren't engaged in making major purchases, because they can't afford to.  Consider the following:

But the latest indicators suggest that even if the economy does not continue to worsen, it appears to be too weak to add enough jobs each month — roughly 125,000 — even to keep pace with population growth. Anything less, and the share of the population that is employed will continue to fall.

The stimulus program offered by Mr. Obama was insufficient to meet the full demands of the  financial crash of 2008.  This blog has been saying for the past three years (here, here, and here) that the weak recovery was an illusion.  Joseph Stiglitz said back in 2009 that, "We need a larger and better designed stimulus."  Paul Krugman has been waging a public policy crusade to convince the public that a second more robust stimulus is needed.  President Obama, instead of listening to these and similar minded economists, decided to split the difference and offer everyone a little of what they wanted: a little bit of tax cuts and some stimulus over a couple years.  The problem was that while averting a more severe recession, it failed to create enough power to re-inflate the economy to pre-recessionary levels.  Now that the stimulus dollars have been used, the economy is drifting back into negative territory and with a recalcitrant Republican dominated House of Representatives, there is virtually no chance that anything of substance being passed.

Other indicators such as GDP, consumer confidence, consumer consumption, factory employment diffusion index, and housing are all trending downwards.  Volatility in the market place, with abundant talk of debt crises across the western hemisphere, has investors and business worried.  Last month Asian banks cut credit lines to French banks.  Central banks across Europe, Japan, and America have made the unexpected move to offer dollars to European banks to ensure liquidity.

What had been in 2008 a financial crisis has migrated into a sovereign debt crisis.  Nouriel Roubini expands:

We are running out of policy bullets. The policymakers don't have monetary bullets; they don't have fiscal bullets; they cannot even backstop their own financial system. That's why it's more scary than a year ago, two years ago, or three years ago -- when we had all these policy bullets. Now we are running out of them.

***

Ken Rogoff, Harvard professor and former chief economist at the IMF, has said, "the real problem is that the global economy is badly overleveraged, and there is no quick escape without a scheme to transfer wealth from creditors to debtors, either through defaults, financial repression, or inflation."  As a result, Rogoff points out that many policy makers have badly misunderstood the overall problems associated with this second great contraction, as he puts it.  He offers the suggestion that, "If governments that retain strong credit ratings are to spend scarce resources effectively, the most effective approach is to catalyze debt workouts and reductions."

Solutions to both individual and national debt problems should be addressed as follows:

For example, governments could facilitate the write-down of mortgages in exchange for a share of any future home-price appreciation. An analogous approach can be done for countries.  For example, rich countries’ voters in Europe could perhaps be persuaded to engage in a much larger bailout for Greece (one that is actually big enough to work), in exchange for higher payments in ten to fifteen years if Greek growth outperforms.

Another approach offered by Rogoff to reduce the painful deleveraging process and years of unnecessary slow growth, would be for central banks to pursue a policy of moderate inflation of 4-6% for several years.

At this stage, none of the policies suggested by Stiglitz, Krugman, Roubini, or Rogoff appear on the table in either Washington DC or the capitals of Europe.  Instead of sustained and ambitious solutions, we are left with blathering idiots telling us of austerity programs that will magically generate confidence, while keeping away the terrible bond vigilantes.  The incompetence and stupidity of our leaders is nearly blinding.

Krugman on the toxicity of American Politics

Paul Krugman talks about the toxic atmosphere created by the right-wing and their corporate supporters in the media, that has lead America to this current and deadly state of affairs.  In the article he exposes the primary source for the vitriol.

The point is that there’s room in a democracy for people who ridicule and denounce those who disagree with them; there isn’t any place for eliminationist rhetoric, for suggestions that those on the other side of a debate must be removed from that debate by whatever means necessary.

And it’s the saturation of our political discourse — and especially our airwaves — with eliminationist rhetoric that lies behind the rising tide of violence.

Where’s that toxic rhetoric coming from? Let’s not make a false pretense of balance: it’s coming, overwhelmingly, from the right. It’s hard to imagine a Democratic member of Congress urging constituents to be “armed and dangerous” without being ostracized; but Representative Michele Bachmann, who did just that, is a rising star in the G.O.P.

He realizes that Fox News and Rush Limbaugh provide people who watch and listen to them exactly what they want; an endless stream of drama, in which they play the victim in their own pretentious and morally debased theater of the absurd.  However, that does not imply that just because the obscene can be monetized, that it should be given public disclosure.

But even if hate is what many want to hear, that doesn’t excuse those who pander to that desire. They should be shunned by all decent people.

This tragedy, isn't about limiting free speech.  This is about dangerously ignorant people, pursuing an ideology that demands the liquidation and elimination of all opponents and persons, who do not faithfully adhere their warped and deranged version of reality.  Krugman summarizes the critical conceit in this whole sordid affair.

It’s important to be clear here about the nature of our sickness. It’s not a general lack of “civility,” the favorite term of pundits who want to wish away fundamental policy disagreements. Politeness may be a virtue, but there’s a big difference between bad manners and calls, explicit or implicit, for violence; insults aren’t the same as incitement.

If there are those who do not believe the above, then they should ask what countries and explicitly, what Western democracies, allow their media and politicians to engage in such lawless behavior? The answer is that no Western European nations nor countries like Australia, Canada, or New Zealand, would tolerate the type of incitements to public violence as what routinely occurs in America.  On the other hand, third world countries with limited experience in democracy, failed nations engaging in sectarian conflict and ethnic cleansing, and countries like Venezuela and Iran, which are subsumed in managing their population through class and ideological warfare, are the ones in which America's political landscape most resembles.

Krugman on the Limits of American Exceptionalism

Paul Krugman compares America's current mortgage morass, associated with the unfolding home ownership and foreclosure fiasco, to that which was encountered during the Asian financial crisis.

After the Asian financial crisis of 1997-1998, it was often said that a key barrier to recovery was the uncertain state of property rights: so much debt had been run up during the boom, and there had been so many defaults in the bust, that it was no longer clear who owned anything. Plus, these countries lacked clear legal procedures, and in general suffered from insufficient rule of law. All this was said, of course, in a tone of superiority: we Americans had solved such problems.

He also states, America's mortgage crisis dwarfs anything that occurred in Thailand and Indonesia by orders of magnitude. 

The crony-capitalists and casino-players on Wall St. have made a mockery of America's international reputation as a safe and secure center of investment.  Gimmickry, sleight of hand agreements, unequivocal fraud, and legislative and regulatory arbitrage were all employed by the MBA ass-clowns in the banking and mortgage industry to secure profits for themselves without taking into account the long-term risk to either their businesses or the nation.  The end result will be a decade of lost growth for America and given that somewhere within that same period another potentially catastrophic economic collapse may occur, based on historic trends and the belief by many economists that an even larger shock lies in wait given the failure of most governments to adequately address the root causes of the great recession, capitalism as we know it today may collapse.

The Dismal Science Redefined

Current economic theory is less a science than an ideology peculiar to a certain period of history, which may well be nearing an end...

[Economists are] the jilted lovers of the science world – the more rigidly they approach their subject, the more it mocks them with spurious and headstrong behaviour.

Since this blog started, I've been constantly commenting on the dearth of empirical evidence that lies behind many of the attributed economic theories of our time and the persistent irrationality, if not complete fraud, of proponents of modern economics.  Many noted persons who are economists, like Paul Krugman and J. Brad DeLong, have likewise stated how the field has become a self-serving entity, that is in many cases polluted beyond the point of usefulness.  The above quotes, culled from a Globe and Mail newspaper opinion piece by Brian Milner titled "Economists and their fairy tale world of prognostication," is another indictment of the dismal science's ability to actually be a science.  The central basis of any science is its ability to factually explain natural phenomenon, testability of theories, reproducibility of experiments, and its ability to predict future events.  Economics, or at least that set of dogma pedalled in the MSM, doesn't pass any of the above criteria. 

If economists want their profession be taken seriously, then they should start actually calling out those on their side who have perennially gotten it wrong and banish them.

The entire fable of sustainable capitalism is disintegrating all around us like the dreamscape in the movie Inception.  The communists of China, through their mercantile and corrupt practices, are acquiring natural resources across the globe and buying friends everywhere.  The new globalization that peaked in the last decade is slowly devolving.  The financial system that imploded in 2008, has only been patched together with band-aid remedies and awaits further paralysis in the near future.  China, Europe, and America are all betting against the odds, that growth will magically return and the masses will defer sharpening their pitchforks until another day.

Paul Krugman on our Current Depression

a significant proportion of the economics profession has spent the last three decades systematically destroying the hard-won knowledge of macroeconomics. It’s truly a new Dark Age, in which famous professors are reinventing errors refuted 70 years ago, and calling them insights.

- Paul Krugman

In the fall of 2007, I read Prof. Paul Krugman's NY Times column with great interest, because in it lay the seeds towards understanding our current calamity.  In it he inveighed against the recklessness of the Bush junta's tax policy and their pro-corporate policies that had boosted big business' bottom-line, but failed to produce any meaningful or sustained growth for ordinary citizens.  The dismal jobs report that emerged earlier that month, in which Krugman referenced, was a precursor to the worst economic turn-down since the Great Depression of 1929.

Likewise in today's NY Times op-ed he re-iterates -what should be obvious to all who never bought the original green-sprouts argument offered by the high-priests of commerce- is that "we’re looking at a lost decade."  He proclaims that given the misaligned interests of governments across the globe, that we are witnessing the solidification of the Third Great Depression of the modern era.

To quote:

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs will nonetheless be immense.

With the cumulative failures of modern finance and crony capitalism witness to all and the well anticipated onset of resource scarcity, climate change, and ecological collapse posed to overwhelm all nations, I'm quite confident that Malthusian arguments will dominate this last century of humanity.

Welcome to the beginning of the end...

Leading Economists Question US Growth

Despite the seemingly robust growth of 5.7% seen in the last quarter of 2009, a number of noted economists, who originally anticipated the great recession, have stated their concerns and pessimism for the future of the American economy.

In Bloomberg's news-wire, New York University professor Nouriel Roubini calls the released Q4 numbers “very dismal and poor.”  He explains that more than half of the 5.7% expansion "was related to a replenishing of inventories and that consumption depended on monetary and fiscal stimulus."  In his opinion, future growth for the US economy remains tenuous and he believes that although the economy will not trend back into a recession, for many Americans -especially those who remain or become unemployed- it certainly will feel as if the recession persists.  His title as Dr. Doom remains intact.

Princeton university professor Paul Krugman has been warning Americans since the first signs of the recession that a strong stimulus program, paralleled with a comprehensive regulatory reformulation between government and America's financial institutions, was necessary in order to have the country successfully rebound from the recession.  His January 28th NY Times column outlines this theme:

We’re in the aftermath of a severe financial crisis, which has led to mass job destruction. The only thing that’s keeping us from sliding into a second Great Depression is deficit spending. And right now we need more of that deficit spending because millions of American lives are being blighted by high unemployment, and the government should be doing everything it can to bring unemployment down.

He rebukes Mr. Obama and his economic team for their unwillingness to do more and warns "against the perils of complacency and false optimism."

As you read the economic news, it will be important to remember, first of all, that blips -- occasional good numbers, signifying nothing -- are common even when the economy is, in fact, mired in a prolonged slump ... the odds are that any good economic news you hear in the near future will be a blip, not an indication that we're on our way to sustained recovery.

In addition, he sternly chastises the Obama administration for engaging in budgetary gimmickry and sleight of hand policies, such as reining in non-military discretionary fiscal expenditures, while calling for increases to defense, nuclear, and homeland security budgets.  A subject Glenn Greenwald described as the Sanctity of Military Spending.

Joseph Stiglitz, another Nobel Prize winner in economics and professor at Columbia university, is equally unimpressed by the current state of affairs and has been condemning both governments and business alike in their meekness to effectively manage and resolve the underlying problems.  He too calls for a second government backed stimulus in the USA, to reduce chronic unemployment, which when including the under-employed and discouraged workers represents a rate of approximately 19%.  He states that, "I don't think anyone would describe the current situation as a strong recovery."  Furthermore, Stiglitz questions the underlying premise of using GDP as an adequate economic metric:

The big question concerns whether GDP provides a good measure of living standards. In many cases, GDP statistics seem to suggest that the economy is doing far better than most citizens' own perceptions. Moreover, the focus on GDP creates conflicts: political leaders are told to maximise it, but citizens also demand that attention be paid to enhancing security, reducing air, water, and noise pollution, and so forth - all of which might lower GDP growth.

Robert Shiller, professor at Yale University, has written an article in the NY Times that discusses the underlying psychological elements affecting both consumers and investors.  He reminds people that,

business recessions are caused by a curious mix of rational and irrational behavior. Negative feedback cycles, in which pessimism inhibits economic activity, are hard to stop and can stretch the financial system past its breaking point.

The article notes that a majority of Americans do not believe that any recovery will occur for at least another two years.  Unless the population becomes convinced that serious attempts have been made to re-align risks, stabilize the economy, and pursue a long-term plan for future growth and prosperity, there will be  little realized improvements. 

The past ten years have been a disaster for the American middle class and average person.  The time for tepid half-measures and voodoo-economics has long expired.  Mr. Obama was elected to take on the institutional forces that have corrupted government and driven the entire economy to near collapse.  As all four of these economic professors indicate, serious and sustained actions are required to convince everyone that America has a plan for success that will work in everyone's interest.

Niall Ferguson: I've seen the future and it stinks!

Niall Ferguson gives an interview with business journalist Consuelo Mack of the PBS program 'WealthTrack'.  In it Ferguson does his standard song and dance about the origins of the strife between the USA and China or what he ofter refers to as Chi-merica.   He sternly admonishes those who feel that the current recession/depression is over and the classic 'V' shape recovery is occurring.   Paul Krugman, who has been having a public feud with Ferguson, addresses both topics in his NY Times column (respectively here and here).  In both cases, Ferguson and Krugman are basically on the same page in offering both concerns and veiled predictions of weak American economic performance in 2010.

The take home message in my opinion, which comes near the end of the interview, is Ferguson's comparison of the current 'depression' with of the depression of 1873.  This particular event, which is almost never referenced in the press, involved depressions emerging in both America and Europe.  In America, construction work lagged, wages were cut, real estate values fell and corporate profits vanished.  A total of 89 railroad companies went bankrupt, 18,000 businesses failed between 1873 and 1875, and unemployment reached 14% by 1876.  Whereas in Europe, the Vienna stock exchange crashed, Viennese banks failed, speculative bubbles collapsed, and industries crashed.  Deflation ensued for the next twenty years and an economic shift from Europe to America occurred.

In Ferguson's analysis, China plays the part which America played in the 1873 crash, in terms of the shift of industrial strength.  He also believes that like the populist backlash that emerged in the first Gilded age, current day populist rage across the Western world arising from severe unemployment, decreasing social amenities, and the realization of the corrupt financial/governmental systems, could pose substantial risk for standing governments.

The second message, despite his early preening in the interview about the rise of the emerging markets and especially China, is in his own words,  "I've been to Chongqing. I've seen the future and it stinks!"  He concludes that China's communist party is incapable of fundamental reform or eliminating the rampant corruption that underlies the fabric of its merchantalist society.  I have written a fair degree on China's corrupt business practices (here, here, and here for example) and believe likewise, that this facet of their culture will be one of the principle agents why the so-called Chinese miracle will not overtake the West.

52 Weeks After the Meltdown

By law of periodical repetition, everything which has happened once must happen again and again -- and not capriciously, but at regular periods, and each thing in its own period, not another's and each obeying its own law.

- Mark Twain

We have become our own Greek tragedy, blinded by hubris and unwilling to understand that we are but permutations in time; whether it is in our genes or our empires. As a civilization we should realize, if history is to teach us anything, that this is the moment of our great undoing, for it has happened before, and we know it will happen again. Below is a summation of recent articles issued this past month discussing the fall of Lehman Brothers and the pertinacious crisis of capitalism.

The Economist
"Unnatural Selection: Wall Street and the City of London survived thanks to state support. Now they need to be weaned off it"
"The Promised Bland: One year after Lehman Brothers collapsed"
"What If?" an examination of what could have occurred if Lehman's didn't go bankrupt.

The NY Times
Has an entire section dedicated to the financial crisis. Some of the better reads are:
Alex Berenson "A year later, little change in Wall St."
Robert Frank "Flaw in free markets: Humans"
Paul Krugman "How Did Economists Get It So Wrong?"

The Financial Times
FT also has an extensive coverage section that details the crisis at different levels.
Niall Ferguson does his best imitation of an contrarian in,"Why a Lehman's Deal would not have saved us"
Martin Wolf "Do not learn wrong lessons from Lehman’s fall"

The Globe and Mail
A timeline of the events is described in "Lehman Brothers: one year later"
Sinclair Stewart "The day everything - and nothing - changed." The story remains the same, as it is a story of men empty of decency, moral strength, and even humanity.

Business Week
BW also has a reasonable section discussing the financial crisis one year later. Unfortunately those who need to learn most, will not be interested.

Der Spiegel (International edition) has a solid set of articles on the failures and return of American inspired Casino-Capitalism. Those who know about defeat that arises from hubris should be listened to.

Ralph Nader, who predicted this entire fiasco more than a decade ago has a commentary on the return of casino capitalism in, "Rolling the Dice Again" Ignore at your own peril.

Robert Reich, former Sectatary of Labor in the first Clinton Admin. and constant critic of unregulated laissez-faire capitalism counters in his blog, "The Continuing Disaster of Wall Street, One Year Later."

Everybody hates Goldman Sachs

“Our model really never changed, we’ve said very consistently that our business model remained the same” - Goldman Sachs CFO

One fine afternoon last October, George W. Bush, in a scene for the history books, tilted over the large oak table in the White House and said to Hank Paulson, "If money isn't loosened up, this sucker is going to go down." The public was told in no uncertain terms that if the American public didn't agree to saving the reptilian army of bankers that had brought about this disaster, that we would all go down with the Titanic. The deal was made, the money transferred, and like children waiting for Santa, the public expected that the banks would begin lending and the economy would right itself. It didn't happen. Instead Goldman Sachs hoarded the cash in their vaults and then disgorged themselves of their nimiety by giving their staff the largest bonus payouts in the firm's 140-year. The company is believed to have paid 973 bankers $1m or more in 2008, while this year's payouts are on track to be the highest for most of the bank's 28,000 staff.

What we now know is that "sucker" as Dubya put it at the time wasn't the US economy or the American public, but rather Goldman Sachs and the pirates of high-capitalism. Matt Taibbi, of Rolling Stone magazine, states that the public was hoodwinked to make a, "Political decision in the middle of an economic crisis to use the state as a crutch to prop up exactly one sector of the economy, and we chose exactly the wrong people."

Robert Reich, former secretary of labor under Bill Clinton, explains that,

Goldman's high-risk business model hasn't changed one bit from what it was before the implosion of Wall Street. Goldman is still wagering its capital and fueling giant bets with lots of borrowed money. While its rivals have pared back risks, Goldman has increased them. And its renewed success at this old game will only encourage other big banks to go back into it...

[That] Goldman has reverted to its old ways in the market suggests it has every reason to believe it can revert to its old ways in politics, should its market strategies backfire once again -- leaving the rest of us once again to pick up the pieces.

Paul Krugman further elaborates that what has been done is not in the public interest and in fact, has created the groundwork for an even greater economic catastrophe in the near future because,

The huge bonuses Goldman will soon hand out show that financial-industry highfliers are still operating under a system of heads they win, tails other people lose. If you’re a banker, and you generate big short-term profits, you get lavishly rewarded — and you don’t have to give the money back if and when those profits turn out to have been a mirage. You have every reason, then, to steer investors into taking risks they don’t understand.

Max Keiser, broadcaster, former broker, and options trader, has the harshest and absolute best words I've seen or read in regards to Goldman Sachs,

They are literally stealing a hundred million dollars a day. Goldman Sachs is stealing every day on the floor of the exchange. They should be in the Hague. They should be taken on financial terrorism charges. They should all be thrown in jail.

http://www.zerohedge.com/article/max-keiser-goldman-sachs-are-scum

Would Goldman Sachs still be pulling in record profits if the government didn't bailout AIG, which at the time owed Goldman nearly $20 Billion, or given the fact that the FED gave them another $10 Billion through the TARP program and undefined additional millions (billions?) from other government programs, when the company converted itself to a bank holding company? The latter number is impossible to determine, because Ben Bernanke and the Federal Reserve have refused to disclose this information to the public; the very people who made the loan to these bankrupt bankers and greedheads!

What does this say about the American government or for that matter, Hank Paulson who was then secretary of commerce and former CEO of Goldman Sachs? Clearly, the primary objective of both the Democrats and the Republicans wasn't in getting Americans back to work, but instead in saving their wealthy donors/friends in high places. The banking industry and Goldman Sachs have gamed the system and the entire Bush and Obama administrations are part of this orchestrated fraud. Goldman Sachs has made fools of every tax paying American and are laughing all the way to the...