However, in a bi-partisan fashion, apathy has finally moved into empathy and even sympathy, but it is early in this movement and there is a fog over even the name of the movement. The 99% will "occupy" each and every city and protest the other 1% who are the targets of blame for the crumbling state of these United States. The fog also shrouds other things like what direction this all should take. The fervor is piqued. The Man is the enemy. There is so much pent up frustration that it is just exploding like a poorly tossed hand-grenade. There are some that are even calling for the end of capitalism.
What is capitalism?
Dictionary.com:
an economic system in which the investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, especially as contrasted to cooperatively or state-owned means of wealth.
Whew.
How about a more concise statement from Wikipedia:
Capitalism is an economic system in which the means of production are privately owned and operated for profit, usually in competitive markets.
I'm not trying to be pretentious with the definition of capitalism, but it is important to look at a few key aspects of the system. The one I want to focus on (and what many others should be focusing on) is the last part from the Wikipedia definition: "usually in competitive markets."
We have to look at capitalism like an old piece of machinery, which it really is: The machinery of finance and economy. The working parts have to be free to move as required by those it serves. Yet these parts have to be regulated by engineering to work in tandem with all of the other parts of the system. This is the Free Market and I think the use of the term has been skewed much like the term "occupy", so lets use another word to remove the old paradigm from the lexicon: Liberated Markets. We'll still use the term, coined by Adam Smith; "the invisible hand" to personify the spirit of the people in the market.
A market is any place we trade goods or services. If I'm hungry I can satisfy that hunger by going to a grocery market and trade my cash, which I've gotten for my services in the labor market, for a frozen dinner. If I want to retire I can satisfy the needs of retirement by going to a financial market and investing my cash for its future value. Like the many choices at the grocery market, there are many choices in the financial markets. I chose a frozen dinner because it was quick and easy, but it is "high-risk" because it may not be healthy. There are low and high risks in financial markets too. Some of the more high-risk instruments in finance are the Credit Default Swaps and Derivatives.
In any loan there is a risk for default and as we saw in the housing crash there were a higher-than-normal number of defaults. Finance institutions hedge against default by taking out a form of insurance called a Credit Default Swap (CDS). This derivative is a basket of high- and low-risk loans. They are packaged in such a way that their overall risk is minimal and are traded in the financial markets. People think that when they take out a loan that their bank will hold on to that loan, but it is often traded on the market for investments. Yes, institutions are investing in your investments. They get swapped and repackaged by many entities as they hedge against your potential default. If we were to look at the buzz about a U.S. default on debt, we can look at the price of currency and Treasury Bonds. The rate of T-bond will go up when issuers are at risk of default. These "Junk Bonds" will hedge the currency in the event of default. That is a generalization as there are many factors that swing the pendulum of finance hither and fro. So derivatives are passed around hither and fro as well. These insurance policies against default, or securities, have grown to massive proportions.
There is no exact number or value to be found on the derivatives market because it is too big to calculate. Each time a derivative is repackaged and resold the old value still exists unless the debtor actually defaults (much like a Put Option in perpetuity). For every good citizen making his or her payments on their loan, there is a massive amount of asset value on many different accounting books. Is this the "invisible hand" of the "free market"? No. This is the rambunctious free-wheeling market.
The paradigm is that a true free market will have fewer and fewer regulations oppressing it. This, however, couldn't be further from the truth. The fact of it all is that a free market has to have a set of rules and guidelines in order to maintain order, much like the Constitution of these Free and Independent People of the United States. Hence, the markets need to be Liberated from institutions that are funneling money one way, by investing in your investments (drinking your lemonade). Etymology and definition are need here:
liberare "set free" to free an occupied territory from the enemy.
Liberated; to free from social or economic constraints or discrimination, especially arising from traditional role expectations or bias.
"Or bias". Where can we find an example of bias in our economic situation? Do I even need to ask? Too Big To Fail.
Legislation after the Great Depression created "constraints" in trading on markets to stifle another panic like the one that created the Great Depression. This action did not involve bias. This action went against what the Federal Reserve and the bankers of Wall Street wished. The banks used to loan money at huge discounts to build up interest through the vast number of loans rather than high rates on a small number of loans. Cash seemed free to the debtor and interest through fractional reserve banking was the bankers' dream. The prosperity from this was only a facade though, and when the realization of a devaluing dollar and inflation kicked in, people panicked, leading to the Great Depression. The solution to that problem was regulation for the betterment of the markets and came in the form of the Glass-Steagall Act. This act separated commercial and investment banks and formed the Federal Deposit Insurance Corporation. The newly formed Federal Reserve Central Bank (1913) was none too happy with slicing up the banking market because this meant less control over the money supply, which is the Mission of the Federal Reserve (Fed). Loans are, in essence, future reserves of cash and fractional reserve banking methods expanded that future money supply with every new loan. The Fed expands the money supply by purchasing Treasury Bonds (T-bills) on open markets, so when the banks were expanding the money supply for them with massive amounts of loans, they didn't need to buy U.S. debt (T-bills) and the U.S. was a creditor nation. Many factors changed all of that. The U.S. moved away from gold-backed currency, expanded the money supply through purchasing of T-bills and quickly became a debtor nation as the result of WWII, The Korean War, Vietnam, Nicaragua, Honduras, Iraq, and the Global War on Terrorism (war is good for the economy, right?). Glass-Steagall did its part to control the markets in the best interest of the people during these unsure times, with the exception of the Global War on Terrorism.
Now, we are up to the present-day U.S. as a debtor nation, but we need to reverse to 1999 when the regulations of the Glass-Steagall Act were gutted and the CDS and other derivatives were unleashed on the world due to the overinflated Tech Market. The Clinton administration saw the restrictions of Glass-Steagall as a restraint on new fundamentals and that the Act was an anachronism which needed to be removed from the finance markets...setting them "free". The first sonic wave to resound from this action was the Tech-bubble bursting in 2001. This was exacerbated by terrorist attacks on the World Trade Center in the same year. The new free-wheeling market, under the Bush administration, took it in stride and created the next bubble in the housing market, which collapsed in 2007-2008. The Fed started printing fiat (not asset-backed) currency at an alarming rate and purchased short-term T-bills with it in hopes of expanding the money supply to cover all of the derivatives that had saturated the markets since the end of Glass-Steagall. On top of that, the U.S. bailed out banks to the tune of trillions of taxpayer-dollars. The Fed is still pumping billions into the money supply and the derivatives void, doing what the banks did prior to the 1929 crash that precipitated the Great Depression.
Occupy Wall Street is a start, but it needs to find focus. The idea to end capitalism (Leninism, 1917) is as old as the Fed (1913), yet no one seems to be looking at the Fed and its abuses with our supply of money. To Liberate the markets is to liberate them from the control of the Fed and this ever-expanding supply of fiat currency to cover an endless void of derivatives created by an unchecked banking cartel known as Wall Street. Who is the dog on the leash and who is the master? The "Creature from Jekyll Island" also known as the Federal Reserve Bank is very much the master of the economy. The history of this privately owned central bank is complex, to say the least. But, it is so very important to know what their mission is and how it directly affects the economy right now.
The Federal Reserve's Mission Statement from The Board of Governors of the Federal Reserve System:
The Federal Reserve System is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary system. Over the years, its role in banking and the economy has expanded.
Today, the Federal Reserve's duties fall into four general areas:
*conducting the nations's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.
*supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers.
*maintaining the stability of the financial system and containing systemic risk that may arise in financial markets.
*providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payment system.
1) Prices are unstable. Just visit a grocery store from month to month.
2) Banking is not safe and it is unsound. Just try to get a loan for a small business or a home.
3)Foreign institutions are crumbling faster than ours. Just look at Greece, Italy, Portugal, Germany and France.
4)High unemployment is plaguing the nation.
All of which, according to the Fed's mission statement, are in the purview of the Federal Reserve System.
From the looks of the Fed's mission, they have miserably FAILED in every category of their being and maybe, just maybe, the People will truly start an Occupation....on the Federal Reserve to Liberate our markets and restore the machinery of capitalism so that it will work for the 99% and not just the 1%.
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