“Well written and an interesting perspective.” Clan Rossi --- “Your article is too good about Japanese business pushing nuclear power.” Consulting Group --- “Thank you for the article. It was quite useful for me to wrap up things quickly and effectively.” Taylor Johnson, Credit Union Lobby Management --- “Great information! I love your blog! You always post interesting things!” Jonathan N.

Monday, September 26, 2011

A Trader Dreams of Economic Collapse

Call it over-confident bravado or perhaps a lapse into utter transparency; trader Alessio Rastani’s comments on BBC give the rest of us a glimpse of the power behind the world’s thrones and how prone “the system” is to collapsing without a sufficient force geared to the viability of the system itself. In other words, it is amazing that the financial/governmental systems go on without more attention to them as systems rather than to micro self-interests. One might ask whether powerful self-interests are sufficient to keep the system from hitting the rocks. Apparently the answer is yes, though this is astonishing nonetheless. It is like a car somehow making its way down the street with one person in the car looking at pedal, another at the steering wheel, and still another at the speedometer. It is amazing if the car does not crash, yet somehow it managing to stay on the road.

As for a dash of reality, Rastani said on September 26, 2011 on BBC TV that Goldman Sachs rules the world and the Euro zone is poised to crash. "This is not a time right now for wishful thinking that governments are going to sort things out," Rastani said. "The governments don't rule the world, Goldman Sachs rules the world." Beyond the disciplining of egos within the bank, Goldman’s reach is multiplied by forays made by its alumni into governments and other banks. For example, when Merrill Lynch executives were finally facing the prospect of needing to sell to Bank of America in September 2008, John Thain relied on his fellow Goldman alums who he had lured to Merrill—sidelining Merrill’s own. In the U.S. Government, both Henry Paulson and his assistant at Treasury who ran TARP were Golden. It can therefore be surmised that the Eurozone was poised to crash because Goldman’s execs had determined that they could profit from it. The state-heavy E.U.’s government only appeared to be capable of protecting the viability of the euro financial system.

I suspect that Rastani was overplaying his hand. The financial interest of the rich states of the E.U. (and their respective banks) cannot not be written off in favor of a Golden hegemony unless Goldman Sachs controls the European banks. To be sure, at the time of Rastani's interview, there were players poised to benefit financially from the collapse of the Eurozone. Even so, powerful vested financial interests not limited to Europe surely had a financial interest in the continued viability of the Eurozone. Of more value to us than Rastani's crystal ball is his mentality and values, which were on full display during his interview. We have a rare snapshot of what sort of people rule the world in terms of real power. 

The crash will be good news for traders, Rastani told stunned BBC anchors. "For most traders we don't really care about having a fixed economy, having a fixed situation, our job is to make money from it," he said. "Personally, I've been dreaming of this moment for three years. I go to bed every night and I dream of another recession." Rastani said traders aren't the only ones who can benefit from the crisis. "When the market crashes . . . if you know what to do, if you have the right plan set up, you can make a lot of money from this." Whether or not such opportunities rule the day, Rastani’s mentality itself is startling (or should be). In other words, we should also be stunned.

 Rastani's dreaming of a recession (like Bing dreamt of a white Christmas?) even as he was predicting that the “savings of millions of people are going to vanish” in less than a year might strike us as insensitive, even sadistic—and at the very least, rather selfish. Would he cheer the death of an uninsured man who could not afford medical treatment if money could be saved by a hospital in Rastani’s portfolio?  If so, could we give any credence to his “deathbed conversion” should he fall on bad times? Beyond the obvious moral questions, does the child deserve his amassed power, wealth and position? Moreover, can we continue in good conscience to respect him now? The respect that we give to offices or positions may be exaggerated, and thus due an "adjustment." Just because a Wall street player has power on account of his or her position (and wealth) does not mean that he or she is due respect accordingly.

In fact, if traders such as Rastani have a financial interest in the collapse of an economic system, it could be asked whether they have enough power to make that catastrophe happen. If Wall Street bankers—the real power-brokers—are focused on such financial payoffs, is anyone of sufficient power looking out for the system itself? Again, Rastani may have been overplaying his hand.

In 2008, the U.S. Government enacted TARP to stave off financial collapse. Of course, even Goldman was vulnerable, so it was in its own financial interest that Treasury contain the contagion. The experience demonstrated that the American federal government is capable of safeguarding the financial system, but what if Goldman were to face no downside from a collapse and would in fact benefit from it? Could Goldman alums in strategically-placed government offices sabotage the government’s own efforts to protect the system? As Sen. Dick Durbin said in 2010, the banking lobby owns Congress. The U.S. Government acting against the interests of Wall Street might be akin to that government putting some air between itself and Israel. Elected representatives and their appointees know enough not to screw the sacred cows.

So the trader has a point, though beyond the content of his predictions, the transparency of his mentality and the mentality itself warrant reflection by the rest of us. I suspect that we have a naïve view of the type of people pulling the strings. Were we to get to know those people (even the CEOs), an obvious question might be whether they deserve the power, position and wealth that they have gained. In a plutocracy, there is unfortunately little that we can do about it, as they hold the strings. In a republic, on the other hand, the financial and business sectors are subordinate to the public good, and the representatives of that good can reform the selection and promotion rules in those sectors. In saying that the rest of us will have no other choice but suffer because it is in his financial interest, Rastani was essentially informing us that our so-called democratic republics are actually plutocracies. Our systems depend, in other words, on the particular financial incentives of the Golden traders. This is even worse than the prospect of a recession.

It means nothing that you or I might conclude that the system itself is broken, as we do not pull the strings; we merely pull the levers on election-day, lulled by the illusion that popular sovereignty lies with us. Even if Rastani’s interview wakes some of us up, little difference can be expected short of a major shift in power—but how can the less powerful overcome the kings of the hill to gain the hill itself? That would be like water flowing upstream as if gravity no longer held. Yet somehow, for people such as Rastani to be so respected and powerful in spite of the kind of persons they are seems to go against gravity itself. Like ignorance that is arrogant, one must wonder how the thing manages to stand at all. Perhaps all that is necessary is a gust of realization by us that the emperors are indeed trading in the nude, and are thus unworthy as de facto rulers. But can we act on the basis of a new awareness?