海角大神

You can鈥檛 help but feel sorry for the bankers. Yesterday, one of them was so upset and humiliated he tended his resignation 鈥� at a Senate hearing.

One after another the bankers mount the scaffold. Goldman, JP Morgan, Barclays鈥�and now HSBC. One loses money. Another rigs LIBOR rates.

One fiddles an entire nation鈥檚 books. And another helps terrorists, drug dealers and money launderers with their banking needs.

That last charge is the one leveled against HSBC yesterday, causing the bank鈥檚 chief of compliance to quit, on the spot. Here鈥檚 the accusation:

鈥�using a global network of branches and a US affiliate to create a gateway into the American financial system that led to more than $30bn in suspect transactions linked to drugs, terrorism and business for sanctioned companies in Iran, North Korea and Burma.

This spectacle may be entertaining, but in our view, it is fundamentally meaningless.

Here鈥檚 what really happened:

The feds created a funny money, back in the early 鈥�70s. Unlike the gold-backed dollar, this one was almost infinitely flexible. It would allow the financial system to create trillions-worth of new cash and credit, vastly expanding the amount of debt in the system鈥�and greatly increasing the profits of the banking sector.

The financial industry 鈥� the dispenser of the need money 鈥� set to work, creating fancy new ways to move the new money around. Each time it closed a deal, it made a profit. Naturally, it was encouraged to find all manner of clever ways to make deals.

Then, when the credit bubble blew up in 鈥�08-鈥�09 many of these tricks of the trade didn鈥檛 look so clever. They looked sinister. Stupid. Or crooked.

鈥淲hen the tide goes out,鈥� says Warren Buffett, 鈥測ou see who鈥檚 been swimming naked.鈥�

It is not a pretty sight.

Billions of dollars were lent to people who shouldn鈥檛 have been allowed to borrow lunch money. And now, there are losses 鈥� trillions worth.

The real question 鈥� the only question of great significance since the blow-up 鈥� is: who will take the losses? Or, to put it another way: How will the system be cleaned up? Who will decide who wins and who loses?

Mr. Market or Mr. Politician?

Let investors and speculators take the losses鈥�or put them on savers and taxpayers?

Who will lose? The rich? Or the rest?

We鈥檝e given you our answer many times: let Mr. Market sort it out. He鈥檚 completely impartial. He鈥檚 honest. He鈥檚 fast. And he works cheap.

In a flash, back in September-December of 鈥�08, he probably would have wiped up the floor with the bankers. In a real crash, few of the big banks would have remained standing. Investors and lenders who had put their money in them鈥�and who had invested in the things their phony credits supported鈥�would have lost trillions. The rich wouldn鈥檛 be so rich anymore. And we鈥檇 now be in some phase of real recovery with many new financial institutions.

But we鈥檙e not in a position to impose our will on the world. And the politicians are. So, they鈥檝e decided to do it another way. Instead of allowing Mr. Market to do his work they make their own choices鈥�generally trying to direct the losses towards groups of people who don鈥檛 make campaign contributions鈥�and don鈥檛 know what is going on. That is, towards the masses鈥�and the unborn鈥�

The idea has been to kick the can as far down the road as possible鈥�borrowing and printing trillions more dollars to prop up the financial system鈥�while also parading a few bankers through the streets with nooses around their necks. The press insults them. The mob spits upon them. The public spectacle continues鈥�

鈥�and nothing really changes.

Regards,

Bill Bonner,
听蹿辞谤 The Daily Reckoning