Commentary on the Goldman Scandal

We had a couple of questions regarding whether or not the Goldman fraud story implies that the US administration is now going to crack down on the dirty dealings of the banking industry.

Typically, we avoid these types of discussions here and try to stick to just the technicals with a fundamental outlook.  However, it may be time to cut to the chase on the politics of the situation more frequently.

In a word, "No."  Wall Street owns Washington.  The City owns London.  When times are good, greedy politicians support greedy banks with inside dirty dealings.  That's the normal course of events when money is something that the private banks create from nowhere and the government forces people to use it.  The normal state of being is corruption, whether you see it or not.

On the other hand, when the ship starts listing and gets ready to sink, the various colluding factions splinter and each tries to save itself.  In this case, don't expect bad Goldmans news, or some ridiculous notion that the SEC is going to crack down on banks, or any other such political rhetoric to make any real difference.  Politicians are in the business of paying themselves--just like everyone else.  They will ultimately not kill the goose that lays the golden egg for them.  However, they know they need to make an example of things to boost their election efforts this autumn, so someone is going to have to be a sacrificial lamb.  That's it.  There's nothing more to it.  In good times, there will be no attacks on the Bernie Madoffs of the world.  In bad times, a few have to take it on the chin so that the larger group can continue to fleece the public.

This game continues around the world until the stock of a major country, ie, it's currency, gives.  Then the game is up.  Then you can count on the blame for problems falling on foreign enemies as a way to distract the public from the real criminals (their own government officials).  That's what wars are for--to provide politicians 'an out' for their behavior when their actions finally catch up to them.

So, if you're of the crowd that justice by the benevolent hand of your government is coming soon, then you had best just go line up behind the barn.  After all, you are a sheep to be shorn by your government and those that control your money.  That is your purpose in life.  Now you know, and you can stop searching for meaning in it all.

The markets are overbought short term.  The public is holding cash in banking accounts paying virtually nothing and has flocked into government bonds fearing "deflation" and has run away from stocks out of terror.  Only institutions and large investors are in the markets.  That's how you know it's not ready to fall apart yet.  The sheep have not entered the fray to be fleeced.  That time will come, and your beloved politicians and bankers will know when to sell overpriced paper to the sheep.

Wake up.