Wednesday, June 15, 2011
We Suffered a Fukushima-Style Melt-Through In the Global Financial System in 2008 ... But Nothing Has Been Done to Fix It
As I noted in April, the Japanese nuclear disaster and financial crisis were caused by the exact same thing: removing all of the safeguards in order to save money.
As British MP Nigel Farage points out today, European regulators removed all of the safeguards on financial firms just like Washington did, and let the big banks run amok:
Similarly, Stacy Herbert compares the financial crisis with Japan's nuclear accident by noting that the "containment vessels" separating depository banking from speculative gambling, regulators from the banks they regulated, and derivatives from real assets were removed, thus leading to a "melt-through" of the financial system in 2008.
Herbert says that - just as the Japanese nuclear accident was much more serious than officials let on for months, with a "melt-through" instead of even a "melt-down" - the financial system melted through in 2008, leading to a radioactive economy:
Of course everyone with two brain cells to rub together knows that the government never fixed the underlying economic problems, and - because nothing has changed - things will go wrong.
Instead of acknowledging the immense holes of fraud and inequality at the bottom of our financial plumbing, governments tried to hide them by pouring in massive amounts of "liquidity" into the system, just like the Japanese tried to cover up the severity of the melt-through by pouring water into the destroyed reactor buildings, which just dumped massive amounts of radiation into the ocean.
As I wrote last year (using the water analogy):
(Unfortunately, the fire truck in the photos above represents our nations' and peoples' money and resources, which the central banks have thrown into the breach to try to save the big insolvent banks. But saving the giant banks will actually hurt the economy rather than helping ... see this and this.)
The government is deploying all of its equipment to rescue the economy.
But rather than fixing the economy, the equipment is just getting swallowed up.
Ben Bernanke's answer to all of the water running out of the bathtub (high unemployment, falling home prices, slow growth, etc.) is to pour more and more water (easy money) into the tub (quantitative easing, zero percent interest rates, etc.)
Similarly, Geithner and Obama and Congress can throw all of the money at the giant banks through direct and hidden bailouts that they like, but - until the hole is plugged - nothing they do will work.The water will just keep running away.
What's the hole that is swallowing up the economy? The failure to follow the rule of law.
The rule of law is the basis for our social contract. Indeed, it is the basis for our submission to the power of the state.
We are supposed to be a nation of laws, not of men. That's what humanity has fought for ever since we forced the king to sign the Magna Carta.Indeed, lawlessness - the failure to enforce the rule of law - is dragging the world economy down into the abyss.
Fraud caused the Great Depression and it has caused the current financial crisis. But fraud is not being prosecuted on either side of the Atlantic.
The huge gap between rich and poor also helped cause the Great Depression and the current financial crisis, but governments worldwide are still helping the rich get richer and sticking it to the "little guy" globally.
The lack of financial containment measures caused us to "melt through" into a depression in 2008. And everything that has been done since is just Kabuki theater to allow the big boys to "evacuate" their money while trying to hide the true facts from the rest of us in the danger zone.
But - just as with Fukushima - the truth will eventually leak out.