David Dayen rages against the Sounds of Silence.
http://prospect.org/article/how-hedge-funds-are-pillaging-puerto-rico
David examines leveraged debt here too:
http://www.nakedcapitalism.com/2015/12/david-dayen-is-this-the-beginning-of-the-crackup-in-high-yield-corporate-debt.html
David goes on to rage against the silence here:
http://www.nakedcapitalism.com/2015/12/debunking-the-big-short-how-michael-lewis-turned-the-real-villains-of-the-crisis-into-heros.html
He and Yves must have fascinating discussions! They should do a Click and Clack talk show. Take complicated things related to mechanics and their social settings and turn them into simple solutions.
Puerto Rico is so far in debt to financial debt holder with political power that it will never climb out of the hole. The financial fungus is strangling the host but it will not be permitted to die because the business model of the fungus hedge funds is certainly to keep the zombie alive and make it a proxy for sucking our more blood provided by the US government tax payer as a life support transfusion. Might as well just hand money directly to the hedge fund like money was handed out to the banks.
We are all zombies to debt holders. All of our money is debt. Created from nothing by the establishment of a debt loan.
Hedge funds are described here by Wikipedia. It is complicated. Complicated by design. Designed to benefit the managers of the Hedge Fund of course in any way possible or made possible by political influence and hiding behind legal complexities including exclusions from laws designed to reduce risk and maximize profits.
Exclusion from oversight and rules to protect the public is a business model. The banner for the political side of that exclusion is carried by the Republican party. The banner says that business can operate better with less government regulatory control. "Market" controls are better. Crooks don't want guards on the public welfare of the common good.
The question "What is Money" is the purpose of this blog to define.
Debt is money. Money is debt. Making money is making money. Play on words here: Making money is Making Money. An absolute truth when money is created from nothing.
An alternate money universe is one in which money is not debt. Is not created by debt in the form of a balance sheet loan for introduction to the monetary system. A system where money has definition as an independent debt free object. A discretely identified conceptual digital object in a defined granular unit of one. That it s the system that I propose.
Hedge funds are complex. Complex by design. They are not banks. Wikipedia says: In comparison with investment banks, hedge fund leverage is relatively low. That is certainly a statement big enough to drive a truck through. Banks have 100% leverage. The old notion that they have some kind of "reserve requirement" has had a stake driven through its heart to kill it but the ignorant public does not know the idea is as dead and worthless as an old square door nail. It ain't the way it works!
Yes, hedge funds may have relatively low leverage meaning that almost nothing of significant real substance or strength moves something of considerable substance and mass. The ideal of course is to get the the leverage position of banks to move anything defined by money or money value with nothing. Good trick. Just like creating something out of nothing. That is the trick that banks do best.
Not knowing any better (due to blissful ignorance) one would think that a Hedge Fund is an entity where extremely rich people invest their real hard earned "real" money. Doin all that screwin is hard work! Real money like their own personal money in a bank account. Here is the news: Hedge Funds work with leveraged money. It is not money taken out of a rich person's bank account. It might be backed up with some of that money and the proceeds of the Hedge Fund certainly flow into that bank account but it is money leveraged on what is in the bank account. The money in account that is placed at risk.
What is the prime directive of the money business? Don't risk anything. There is no absolutely assured reward in doing that.
Like banks, hedge funds employ leveraged money.
Wikipedia has a definition for Leveraged Money. The implication is that the source of leverage, the thing from which leveraged money derives its mechanical advantage is: Borrowed Funds.
What is the implication of the concept "Borrowed Funds". One would think that it is the working capital of money funds from a bank account. That however is not leveraged use of those funds. If they came from a bank account there would be a 1 to 1 ratio of advantage. That is not leverage.
Somehow the base concept of "money" must be inflated to become more than its base. The first inflation is to create it from nothing. To define it as a conceptual presence based on the fact that in reality it is absent in existence as an pre-existing entity with attributes. Debt money lacks a reason for being like the proclamation of Self Evident Truth that is the basis of the existence of certain inalienable things that were pre-existing by definition and are eternal. Eternal until government takes them away. That is the catch 22: We are the government! It is simple yet very complex.
Hedge Funds play with money that is not real money just as much as banks do but have even less controls of what they play with and how they play with it.
Banksters must be envious! On the other hand, Where do Hedge Funders come from?
If Banksters have a license to create money from nothing
Then
Hegdesters have a license to steal.
That is what Hedge Funds are doing to Puerto Rico. But they can't steal from anyone with nothing to steal. Their strategy must be to steal from the cup of a blind person that is filled with money from the Mainland. Hedgsters must assure in the halls of Washington that Mainland money and the monetary value of protective concessions continue to flow into the cup.
A victim is being raped and we are all watching. There are no police to be called to protect the victim. Just like being on the street in the wrong color......the fix is in and written on the wall.
Sounds of Silence.
As Juan Cole says here the US is corrupt. It is those with power to serve their narrow self interest at the expense of the common good that are corrupt.
http://www.juancole.com/2015/12/signs-corrupt-country.html
"4. That politicians can be bribed to reduce regulation of industries
like banking (what is called “regulatory capture”) means that they will
be so bribed. Billions were spent and 3,000 lobbyists employed by bankers to remove cumbersome rules in
the zeroes. Thus, political corruption enabled financial corruption
(in some cases legalizing it!) Without regulations and government
auditing, the finance sector went wild and engaged in corrupt practices
that caused the 2008 crash. Too bad the poor Afghans can’t just
legislate their corruption out of existence by regularizing it, the way
Wall street did."
Perhaps real honest risk with real honest positive non-debt based non-leveraged money that has one dollar backing every speculation of one dollar is the systemic answer to the Problem? Would that stifle growth and investment? Would it stifle the unjust rewards of the present system and redistribute the wealth. What is all that wealth worth to someone that has accumulated it by extreme leverage if they can't invest it in more leveraged schemes? They would have to do some honest investing with honest money. Or spend it on consumption putting it in the hands of real producers of goods and services.
Stab them with our steely knives......
Fundamentally, it is all our money. It is only theirs by virtual of the fact that they can create it in the first place and then leverage it to even greater levels than it is created in the first place. We permitted them to do that and the privilege was abused. It's our game and our ball.
A paradigm shift to positive money from debt based money simply takes it all away from them and their ability to use debt money and its leveraged aberrations as a social decision making tool for allocation of resources that undermining its use for the common public good of "We the People".
Beyond Puerto Rico here is a much bigger global picture of the problem of applying our universal decision making tool called money due to its basic attribute of debt facilitating dysfunction in the allocation of resources. By comparison the universal social decision making tool of religion really is and never was as significant as money no matter how many money changers were cast out of the temple. Nor is religious difference and the fiction facade of political consolidation on a state religion base like Israel or a Caliphate the heart of the problem. It is all about the money.
There is a bad moon rising. It is not about religion, nationalism, sectoral differences. It is about money. A money system that was created by a few that is not serving the many well.
http://www.tomdispatch.com/post/176079/tomgram%3A_peter_van_buren%2C_who_will_fight_the_islamic_state/#more
Time to nail a new plan on the door of the bank.
NY Times here:
http://www.nytimes.com/2015/12/20/us/politics/puerto-rico-money-debt.html
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