Curbing The Banks

Sooner or later this has to happen everywhere. It is to the greatest credit of the United States that it is the first to act. Once America sees a problem and accepts it, it acts. This is why it retains the edge on Europe and most likely always will. Contrast with the scampering around in Europe, trying to prop up the Euro, bail out Greece, stop Spain, Portugal and Italy going the same way and, on top of all of that, agree proper regulation of financial institutions run amok, but on whom they depend for endless loans to fill budget black holes.

Of course banks with ordinary High Street (Main St) depositors cannot use resources to become traders in whatever wild financial instruments fly through the market, some so obscure that nobody knows what they actually are. This is the nub. If parcels of worthless securities are bundled up and traded, if weird so called positions are bet against opposite events, if money is taken to insure against loss in these unfathomable transactions, there is at work a process of creating worthless money, little different to setting up a forger’s press and printing counterfeit notes. There is no difference when after passing from hither to thither, they are presented for payment of real hard cash. Both are of no value whatever.

The busted banks rush pleading to the taxpayers, crying that they are too big to fail and that all will come crashing down unless they are given real money now. So the taxpayers of the U.S and U.K and to a lesser extent Europe, came up with real money, which they exchanged for the worthless paper clutched in the tainted hands of the gluttonous financiers.  Now with real money in those ever sticky palms, back they went to their dodgy ways, their fraudulent activities legitimized and made profitable. Well not any more. The game is over. It will not be played again.

The market reaction? Record falls. You’re so right. Even the market knows when the music stops.