Why Demand Glass-Steagall Now ~ The Risk Averse Alert

Tuesday, April 19, 2011

Why Demand Glass-Steagall Now

Here at the crossroad of imminent 1923 Weimar Germany hyperinflationary breakdown of the physical and financial economy and urgent need to restore the 1933 Glass-Steagall reform of the banking system, but one thing now (as then) will bring a turn in the right direction: overcoming "the political difficulty of deflating."

We stand at a moment when financial wealth accumulated over several generations is on a fast track to being obliterated. This is on account of unwillingness among the political class to distinguish productive debt well-positioned to increase the wealth of nations from mere speculative claims. This latter category is dominated (hands down, no contest) by so-called "derivative" securities whose ultra-thin backing now reaches deeply into the U.S. Treasury. Severing this connection is the proper objective restoration of the 1933 Banking Act (a.k.a. Glass-Steagall) would achieve.

Cut through the sophistry rationalizing most speculative claims (these generally center on "liquidity enhancement") and a cancer is exposed. The cure is Glass-Steagall. Reconnect finance to its most stable foundation, where increasing mastery over physical processes facilitating commerce in productivity-enhancing goods and services is most effectively assured, and a shred of hope for anyone with financial wealth tied up in speculative claims will be gained. Without this, wages and savings will continue being robbed, accumulated financial wealth will evaporate, and physical assets will further consolidate into fewer hands. This same outcome became the German experience in the early 20th century. There is no reason to believe it will not be our experience, too. We are moving down the same misguided path where the mere provision of money increasingly must substitute for sound finance (this because the notion of sound finance bounded by physical constraints on its productive investment has been obscured for many decades in the church of Adam Smith's leveraged Ponzi scheme).

One way or another, "the political difficulty of deflating" will be overcome. The only thing in doubt is whether this will occur as a result to tens of millions more being financially wiped out in an orgy of hyperinflation like that which occurred in Weimar Germany from 1922-1923 (effectively "deflating" the wealth of the German nation), or whether the prospect of such unimaginable, mass demoralization will be avoided by a political consensus to restore Glass-Steagall, and stat.

Not to diminish one's desire to overcome exigencies that largely lie outside one's control, for this is why some intelligible discernment of the stock market's state is of interest, that one's ability to thrive might be secured no matter what curve ball life throws. Nevertheless, what good will one's thriving bring when abounding all around are many millions made destitute through no fault of their own? Have no doubt. This, today, is the "best case" future one faces if Bernanke is allowed to continue a hyperinflationary policy whose precedent in Weimar Germany qualifies such policy as nothing but an insane act of treason against the founding principles that, institutions of the U.S. government are charged to uphold. One's thriving amidst a sea of destitution likely will prove little consolation, in fact.

So, that is why immediate restoration of Glass-Steagall is critical, and why to my American readers the following is directed...

On April 12, 2011 H.R. 1489Return to Prudent Banking Act of 2011 — was introduced by Rep. Marcy Kaptur (D-OH9) in the U.S. House of Representatives. The bill has but two cosponsors: Rep. Walter Jones (R-NC3) and Rep. James Moran (D-VA8). Dozens more cosponsors might better assure H.R. 1489 moves forward to a vote on the floor of the House of Representatives.

First order of business, then, is writing your representative and imploring them to become a cosponsor. (Simply enter your zip code in the field located at the top of the web page, click "Go" and a link to the web page of your representative in the House will be returned.)

You might direct your representative's attention to the Societe Generale report whose link appeared at the top of this post:
Popular Delusions: Some useful things I've learned about Germany's hyperinflation

Also, an excellent review of the physical processes leading to the hyperinflationary blowout of Weimar Germany is presented in the following video production. One cannot help but see today's parallel in a United States whose physical economy has been driven into the ground, that Adam Smith's leveraged Ponzi scheme — the abomination that, the Fed and U.S. Treasury are mightily straining to keep alive — might flourish in its stead:
Fed Copies Weimar Hyperinflation

Representatives in Congress should be under no illusion that, somehow, this time is different. Your voice given to confirming this outlook can only raise their awareness that, many fortunes stand to be told (as well their own) depending on how quickly H.R. 1489 is moved to a vote on the floor of the U.S. House of Representatives.

Fast Money
* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!