Matt Taibbi comes through again with another bombshell of a story about a little-understood provision of the 1999 Financial Services Modernization/Gramm-Leach-Bliley Act:
“A tiny provision in the bill also permitted commercial banks to delve into any activity that is ‘complementary to a financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally.‘”
Notice that the bill is concerned not with the safety or soundness of say, the public at large, or inflation, or any such thing. It’s only concerned with safety and soundness of banks and the “financial system.” Most people use the term “financial system,” interchangeably with the word “economy,” but they are two VERY different things. They are NOT synonyms.
The Financial System is the slave system where we are forced to get “loans” from banks for everything from cars, to houses, to education, to electronics, etc. The economy, on the other hand, is the actual fruit of the labor we perform as individuals, providing goods and services to each other. This bill wasn’t worried about protecting that, oh no–the economy can go straight to hell (and it has), but the Financial System must ALWAYS be safe and sound.
Pricing is what makes the Financial System possible
So what’s the best way to always ensure that people will need loans from the Financial System and not be able to rely on the fruits of their own labor in the real economy? Rig prices upward, always upward. And this raising of prices must always be done without providing any extra benefits or value. For example:
“For instance, in just the past two years, fines in excess of $400 million have been levied against both JPMorgan Chase and Barclays for allegedly manipulating the delivery of electricity in several states, including California. In the case of Barclays, which is contesting the fine, regulators claim prices were manipulated to help the bank win financial bets it had made on those same energy markets.
And last summer, The New York Times described how Goldman Sachs was caught systematically delaying the delivery of metals out of a network of warehouses it owned in order to jack up rents and artificially boost prices.”
Supply and demand is a lie
Forget “supply and demand” as the arbiter of prices–that’s like the economic version of the Tooth Fairy or the Easter Bunny. Taibbi points out that this price-rigging is quite intentional, as noted by Chase’s Blythe Masters:
“Loosely translated, Masters was saying that there was a limited amount of money to be made simply trading commodities in the traditional legal manner. The solution? ‘We need to be active in the underlying physical commodity markets,’ she said, ‘in order to understand and make prices.’
We need to make prices. The head of Chase’s commodities division actually said this, out loud, and it speaks to both the general unlikelihood of God’s existence and the consistently low level of competence of America’s regulators that she was not immediately zapped between the eyebrows with a thunderbolt upon doing so. Instead, the government sat by and watched as a curious phenomenon developed at all of these new bank-owned warehouses, in the aluminum markets in particular.”
And with the banks having “made prices,” we the people are gouged just that much more. So on top of taking millions of homes, driving borrowers to suicide and bankruptcy, engineering the greatest transfer of wealth from the bottom to the top in human history (see :10 in the video at the beginning of this post), every aluminum can has a higher price–adding seemingly petty insult to grievous injury, as Taibbi points out:
“Every time you bought a can of soda in 2011 and 2012, you paid a little tax thanks to firms like Goldman. Mehta, whose fund has a financial stake in the issue, insists there’s an irony here that should infuriate everyone. ‘Banks used taxpayer-backed subsidies,’ he says, ‘to drive up prices for the very same taxpayers that bailed them out in the first place.'”
Obviously the price of aluminum cans is the least of our worries…