Tuesday, January 06, 2015

Don't Blame JPMorgan or Citigroup, It's the Credibility Trap

Zero Hedge had a pretty interesting essay out this week. They go over numbers, holdings, political moves and connect the dots. The main point is that Citigroup has loaded up on derivatives just this year, accelerating into the third quarter. The recent legislation that passed in the Omnibus has a little provision in there that makes the big banks good on bad derivative bets with a bail-in from you the taxpayer due to FDIC. The running joke in the Omnibus debate and vote was that Mr. Jamie Dimon, CEO of JPMorganChase (JPM), was making calls to make sure Congress did his bidding. While JPM would benefit from this same protection, it once again is Citigroup that is the problem child looking out for the government protection as a hedge on their own bets. Nothing will happen until a crisis and then Citigroup will receive government help if our government can do it, and the credibility trap will go on.

The credibility trap is an idea from Jesse's Cafe Americain. The problem of nothing possibly changing is widespread in our current political climate. If Obama has served any purpose, it is to hammer home to the fools, "haha, nothing changes, even the minority progressive reformers are our puppets". The trap is defined in shorter form here in this statement.

A credibility trap is a condition wherein the financial, political and informational functions of a society have been compromised by corruption and fraud, so that the leadership cannot effectively reform, or even honestly address, the problems of that system without impairing and implicating, at least incidentally, a broad swath of the power structure, including themselves.
You are corrupt enough to be let into the club, and by being dirty, will not expose any corruption. This is why the courts are not prosecuting, and regulatory capture makes our government agencies toothless. Fiat profits and paper wealth still has to find a home, so the credibility trap is lined with honey. As Jesse notes, it is often ended through an external force. War can do this, and so can sudden drops in living standards. The lies get swept away, and the rotten truth is left for all to see. New order forms.

This entire game is set up because of the conditions for the trap being set over 30 years ago. The US economy needed to either take its lumps, buckle down cost-wise and get more competitive, or it could try the FIRE economy route. We went with FIRE. Roughly at the same time, corporations realized they needed to spend money to grease wheels and elect politicians to fight back against government reach, especially the EPA. Money helped ideological allies against government interference on the Right. This scared the Old Left's mandarins like Bob Strauss, the Republican turned Democrats they had picked up in the late '60s and '70s, businesses friendly with the Left and some white politicians fearful of being junked by the New Left. The DLC helped the Dems take back the White House, and Robert Rubin showed the fear of losing an election could swing policy to Wall Streets way. Eventually the rest of the business world saw the Left could play ball.

Yet that is not the whole story. How does it get to that point? We have a voting system that assigns power to different interest groups. We also created with the 1932 election the idea that if there is something wrong with the economy, the government is obligated to help. Hoover himself bought into it, and was doing FDR's same pump priming during his one failed term. A growing economy became the obsession and yardstick for how presidents were measured. Banks just dominate now because of the FIRE economy's ascendancy, the tax game and winner take all markets skew to concentration on top of concentration of wealth, and FIRE being bipartisan versus the productive economy, which skews to the right in donations.

Yes, we need to break up JPM and Citigroup. Yes, we need a new political system. We also need a new economy. We also need a new way to measure our societal health. Life is not just maximizing shareholder wealth for a rigged stock market nor expanding GDP through debt issuance. It's all we have though as nearly all other social measures decline. Few even discuss other ways, but the SJWs do. An alternative measure and society to aspire to is definitely not the social justice warrior's dream world. The credibility trap will exist until exhaustion, destruction or a new system is dreamed up that gives enough people incentive to change. Forget the media dominated conversation on gender or race, this is the conversation we need to be having.


nikcrit said...


This could be considered discouraging, in that it breaks down in detail some already-known discomforting news.
Or you might say it's encouraging, in that it manages to call for Euro-population replacement in a way that's not mindful or worried about being considered racist..


nikcrit said...

Here's what I felt was the nut graph of the essay I linked to in my last comment:

" So what is the prescription for Europe’s ills — and the lesson for America’s future?

It is true that good monetary and fiscal policies are important. But the deeper problems in Europe will not be solved by the European Central Bank. No matter what the money supply and public spending levels, a country or continent will be in decline if it rejects the culture of family, turns its back on work, and closes itself to strivers from the outside."

Sounds reasonable to me.

peterike said...

"No matter what the money supply and public spending levels"

No matter what? Absurd. Spending levels are very much a problem, but because of too much, not too little.

"a country or continent will be in decline if it rejects the culture of family"


"turns its back on work"


"and closes itself to strivers from the outside."

Ridiculous. There are millions and millions of native whites in every historically white nation. This is more than enough to succeed marvelously without all those "brainy" (and corrupt and corrupting) Asians or other "strivers." Once freed from the tyranny of multi-culturalism and PC, whites will prosper, like they always had before.

The only thing "wrong" with white nations is they've been poisoned mentally and spiritually. Stop feeding them poison and they will be just fine, thank you. As a side note, the same forces that are pushing the "strivers" on us are the ones that are pushing the destruction of the family and the no-work-required ethos. It's all of a piece.

nikcrit said...

"and closes itself to strivers from the outside."


I misread that part; I initially interpreted that to mean a given euro nation or culture had to make room and provide opportunities for its workikng class, rather than just minionizing it.

I was going to post a correction but decided to skip it; given the rest of his points, it was slighty odd for him to go off on a pro-immigration tangent, but it was fairly obvious.

i'm getting lazy, sloppy; need a break.