Econned: How the Finance Industry Shook the Silver out of the American Economy
The result has been a massive transfer of wealth, with its centerpiece the greatest theft from the public purse in history. This campaign has been far too consistent and calculated to brand it with the traditional label, “spin”. This manipulation of public perception can only be called propaganda. Only when we, the public, are able to call the underlying realities by their proper names—extortion, capture, looting, propaganda—can we begin to root them out. -- Yves Smith, Econned
When we dropped political from economy, we made a grave and what might prove fatal error. We made the republic subservient to mega—corporations and allowed the dominance of crackpot pop-economic theories to trample over the millenia-old hard won wisdom of self-government. For example, how many economic theories have been written on the importance of the First Amendment's freedom of the press to the vitality of the American political economy -- not many, if even one?
Yet, a vigorous free press is essential to every aspect of American prosperity. So, as our newspapers folded and consolidated and our broadcast media became handmaidens to corporate power, we witnessed a tremendous decline in journalism, particularly investigative journalism, which had a long and important tradition in this republic's vitality. The mother of investigative journalism, particularly concerning corporate power, is Ida Tarbell, who a century ago wrote, The History of the Standard Oil Company, documenting the manipulations, thefts, grafts, and other criminal activities of John D. Rockefeller and his cohorts in their monopolization of the oil industry.
While we have lost the great tradition of a hearty journalism in our old media, it is rising again across the new medium of the Internet, and it has been utilized in helping shed light on the underlying scandal of the financial crisis. In the tradition of hard hitting, no bullshit investigation, Yves Smith has written Econned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism.
Econned is the story of how our financial system has become a mass ruse, allowing Wall Street and the largest banks to become predatory, treating their clients as lambs to be fleeced and fatted calves to be slaughtered. It is the story of how a very small group of people gained complete control over the American, and much of the global economy, driving it into the ground, then walking away with trillions of more dollars, while the economy remains on life-support.
How did this happen? Econned tells the story, starting with the greatest problem of contemporary economics, an economics stripped of politics, so it might pretend to be a science. Smith goes through the litany chanted by our economic priesthood for the past several decades – efficient market theory, free markets, and mathematically modeling the future – the equivalent of economic hokum that allowed Wall Street and the banks to dismantle New Deal regulations which kept their worst abuses in check for a half-century.
Once establishing the intellectual foundations, Smith explains the great scaffolding of fraud erected on top of it. She documents the roles of Bankers Trust, Salomon Brothers, JP Morgan, Citi and others as they “innovated” their way out of regulation and into their clients' pockets with derivatives, securitization, and other “efficiencies.” All along, right beside them, stood our elected officials and regulators, such as Fed Chiefs Greenspan and Bernanke, Treasury Secretaries Baker, Rubin, Summers, and Paulson, SEC chiefs, congresspeople, and presidents -- all co-conspirators.
In the final third of the book, Smith details the pinnacle of the great con and how it all came crashing down. Then, the government stepped in to help an orderly looting of the public purse worth trillions of dollars and counting, thus insuring a crippled economy for many years to come.
Econned is an excellent read and needs to be read by all. It is the story of a criminal class, who have separated themselves from the majority to seek their own profits. It is the story of how our political economy is broken. In the end, it is a call to the American people, in the great tradition of this republic, to step-up and fix it. Yves Smith is a citizen and patriot, she deserves our gratitude.