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Some original and innovative thinkers have independently made some strikingly similiar arguments and analyses (at a macro level) of today's economic enviroment (anglo-saxon model used by U.S. and U.K.) and what end game this model tends toward.
Many of their theses and analysis are familiar to long-term readers of E.J. and iTulip. Great minds think alike!
Each uses their own words and background to shape their models and thoughts, but in the end, they all agree that the ultimate costs of a debt-based, FIRE Economy are borne by the Production and Consumer sectors.
Dr. Michael Hudson - no need for detail here. His views are well known to iTulip readers.
LondonBanker - used to post his comments at RGE Monitor (seems to be regarded well by Dr. Roubini). Now has his own blog. His latest post of July 31 is well worth reading.
"I have been both a central banker and a market regulator. I now find myself questioning whether my early career, largely devoted to liberalising and deregulating banking and financial markets, was misguided. In short, I wonder whether I contributed - along with a countless others in regulation, banking, academia and politics - to a great misallocation of capital, distortion of markets and the impairment of the real economy."
He then provides his analysis of "how we got to today", using work of Dr. Irving Fischer as a framework. "Like me, Professor Fisher lived to question his earlier convictions and pursuits, learning by dear experience the lessons of financial instability."
Like Fisher, he sees over-indebtedness and asset bubbles among the chief causes for subsequent busts, going into some detail. Then he summarizes:
"Had Fisher observed the Greenspan/Bernanke Fed in action, he might have updated his theory with a revision. At some point, capital betrayed into unproductive works has to either be repaid or written off. If either is inhibited by reflation or regulatory forbearance, then a cost is imposed on productive works, whether through inflation, higher interest, diversion of consumption, or taxation to socialise losses. Over time that cost ultimately hollows out the real productive economy leaving only bubble assets standing. Without a productive foundation, as reflation and forbearance reach their limits, those bubble assets must deflate."
http://londonbanker.blogspot.com/
Catherine Austin Fitts has expounded her theory of the Tapeworm Economy for several years. Her definition of the Tapeworm Economy is an economy that chiefly benefits a small elite of insiders and the well-connected (Wall Street and high-level government officials/contracters) and drains the rest of the economy (Production and People).
Her backgound is as a Dillon Reed investment banker and partner in the 1980's, then as Assistant Secretary of Housing/FHA Commissioner at the U.S. Department of Housing and Urban Development (HUD) uner Bush 1, starting in 1989. In mid 1990's, she started her own firm and obtained a contract to manage foreclosed properties at HUD.
She wrote an article dated February 5, 2008, related to current housing crisis and Tapeworm Economy.
http://solari.com/blog/?p=501
" The last time the U.S. media exposed mortgage fraud of this magnitude was in 1989. In April of that year, I was appointed Assistant Secretary of Housing/FHA Commissioner at the U.S. Department of Housing and Urban Development (HUD) only to find that the FHA single family mortgage insurance fund, required by law to be financially sustainable, was losing $11 MM a day ... The mortgage fraud at HUD, one of the largest issuers of mortgage securities in the world, was so bad that Secretary of Treasury Nicholas Brady privately tried to dissuade me from joining the agency, saying “You can’t go to HUD — HUD is a sewer.”
...The HUD losses were a drop in the bucket compared to the losses on the savings and loan institutions, ultimately costing U.S. taxpayers an estimated $500 billion by the time the clean-up was through in the mid 90’s...
Policymakers encouraged those of us leading the last clean-up to fashion reforms ..."
Austin Fitts then pushed for and got a law in early 1990's requiring annual audited finanacial statements by government agencies that has only minimally been enforced.
She also started a firm that developed a database and focus "... to ensure transparency of federal mortgage credit and spending by county and zip code. The most effective internal control is knowledgeable citizens, watching the use of government resources on their home turf...".
She made enemies at HUD, insiders at the agencies and their Wall Street and RE investor "friends", who had been making significant money off HUD foreclosures, prior to her re-vamping the foreclosure bidding process. She lost her government contract in latter part of '90's.
She sees the housing fraud and bubbling as part of a bi-partison 20+ years deliberate tapeworm drain (from yesterday's S&L's to today's sub-primes and Alt-A's). Purpose is to maker insiders rich and pass along the costs to the rest of America.
Longer 2003 article going much deeper in her theory of Tapeworm Economy:
http://solari.com/archive/the-american-tapeworm/
Many of their theses and analysis are familiar to long-term readers of E.J. and iTulip. Great minds think alike!
Each uses their own words and background to shape their models and thoughts, but in the end, they all agree that the ultimate costs of a debt-based, FIRE Economy are borne by the Production and Consumer sectors.
Dr. Michael Hudson - no need for detail here. His views are well known to iTulip readers.
LondonBanker - used to post his comments at RGE Monitor (seems to be regarded well by Dr. Roubini). Now has his own blog. His latest post of July 31 is well worth reading.
"I have been both a central banker and a market regulator. I now find myself questioning whether my early career, largely devoted to liberalising and deregulating banking and financial markets, was misguided. In short, I wonder whether I contributed - along with a countless others in regulation, banking, academia and politics - to a great misallocation of capital, distortion of markets and the impairment of the real economy."
He then provides his analysis of "how we got to today", using work of Dr. Irving Fischer as a framework. "Like me, Professor Fisher lived to question his earlier convictions and pursuits, learning by dear experience the lessons of financial instability."
Like Fisher, he sees over-indebtedness and asset bubbles among the chief causes for subsequent busts, going into some detail. Then he summarizes:
"Had Fisher observed the Greenspan/Bernanke Fed in action, he might have updated his theory with a revision. At some point, capital betrayed into unproductive works has to either be repaid or written off. If either is inhibited by reflation or regulatory forbearance, then a cost is imposed on productive works, whether through inflation, higher interest, diversion of consumption, or taxation to socialise losses. Over time that cost ultimately hollows out the real productive economy leaving only bubble assets standing. Without a productive foundation, as reflation and forbearance reach their limits, those bubble assets must deflate."
http://londonbanker.blogspot.com/
Catherine Austin Fitts has expounded her theory of the Tapeworm Economy for several years. Her definition of the Tapeworm Economy is an economy that chiefly benefits a small elite of insiders and the well-connected (Wall Street and high-level government officials/contracters) and drains the rest of the economy (Production and People).
Her backgound is as a Dillon Reed investment banker and partner in the 1980's, then as Assistant Secretary of Housing/FHA Commissioner at the U.S. Department of Housing and Urban Development (HUD) uner Bush 1, starting in 1989. In mid 1990's, she started her own firm and obtained a contract to manage foreclosed properties at HUD.
She wrote an article dated February 5, 2008, related to current housing crisis and Tapeworm Economy.
http://solari.com/blog/?p=501
" The last time the U.S. media exposed mortgage fraud of this magnitude was in 1989. In April of that year, I was appointed Assistant Secretary of Housing/FHA Commissioner at the U.S. Department of Housing and Urban Development (HUD) only to find that the FHA single family mortgage insurance fund, required by law to be financially sustainable, was losing $11 MM a day ... The mortgage fraud at HUD, one of the largest issuers of mortgage securities in the world, was so bad that Secretary of Treasury Nicholas Brady privately tried to dissuade me from joining the agency, saying “You can’t go to HUD — HUD is a sewer.”
...The HUD losses were a drop in the bucket compared to the losses on the savings and loan institutions, ultimately costing U.S. taxpayers an estimated $500 billion by the time the clean-up was through in the mid 90’s...
Policymakers encouraged those of us leading the last clean-up to fashion reforms ..."
Austin Fitts then pushed for and got a law in early 1990's requiring annual audited finanacial statements by government agencies that has only minimally been enforced.
She also started a firm that developed a database and focus "... to ensure transparency of federal mortgage credit and spending by county and zip code. The most effective internal control is knowledgeable citizens, watching the use of government resources on their home turf...".
She made enemies at HUD, insiders at the agencies and their Wall Street and RE investor "friends", who had been making significant money off HUD foreclosures, prior to her re-vamping the foreclosure bidding process. She lost her government contract in latter part of '90's.
She sees the housing fraud and bubbling as part of a bi-partison 20+ years deliberate tapeworm drain (from yesterday's S&L's to today's sub-primes and Alt-A's). Purpose is to maker insiders rich and pass along the costs to the rest of America.
Longer 2003 article going much deeper in her theory of Tapeworm Economy:
http://solari.com/archive/the-american-tapeworm/
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