SECTION TWO, PART THREE

Children of a Lesser God, Crime and Punishment: One of the premiere features of Dostoyevsky's character, Rashkolnikov, was that his gnawing sense of guilt could only be purged by receiving some "proper" punishment, almost in keeping with some social obligation. With almost the fifth anniversary of September/October 2008 upon us, it would be worthwhile to see if punishment has been correctly metered to some of the financial disaster perpetrators, or at least that there would be elements of demonstrable remorse floating around. With four elements of news this week, it seems social obligation has been slaughtered like the old woman, rather than embraced as an appropriate reconciliation. Those four elements are a legal suit against Barclays, legal case against Tourre, Bernanke's testimony to the House, and Wall Street profit announcements. Firstly, Barclays. They are under an action in the US for market manipulation of energy prices in the 2006 to 2008 period, with the remedy sought being a fine, and repayment of "unjust profits". I have no beef about the action, but I find that there seems to be an unequal expectation within this framework that market manipulation seems to be variably defined within the US. They still do not see high frequency trading and dark pools as fundamental to market manipulation, and broadly exercised by all the systemically important banks in the US. If only the punishment of disgorgement of unjust profits has been routinely sought, and enforced. Which brings us to the SEC case against Fabrice Tourre. It should be remembered that the Fab worked for Goldman Sachs, and was seen as instrumental in the Paulson fiasco which constructed products which were deliberately sold to investors, without them being told that the investments were meant to fail. The investors lost over $1 billion, but Goldmans settled for half. Nothing new here, Goldmans have a history of profiting by huge sums, but settling with regulators for part of the "gouge". They don't admit liability, and the regulator does not remove their license......I am not sure where the true corruption is here, but I am sure Barclays could learn a few tricks here from Goldmans. The offensive part to all this, is that we are now five years down the track, and we are getting close to Statute of Limitation restrictions to laying claims against the crooks. Is that a deliberate strategy by the regulators...so that they do not have to adduce evidence in legal actions that they were either negligent, or just too dumb, to properly supervise the financial markets. An "unjust profits" action against Goldmans would be a truly astronomic amount, particularly if it could be back-dated. I would love to see Lloydy in sack-cloth, as much as his operation has imposed on a significant number of clients. Which brings us to the primary regulator, the Fed. Bernanke's testimony was truly embarrassing...the regulator of banks, owned by banks, printing money without knowing how to reverse that policy, imposing the ultimate pain for this (as government debt) on the taxpayers...and his policy: we will keep doing this. Wrong statements, wrong policy targets, and completely adversarial to their sole goal of the preservation of the value of the currency. He talks about mandates, but does not have one...and his research says "you need to keep away from the zero bound". Since when is the sole role of the central bank to create a carry margin for the banks, and then not regulate those banks behaviour. How else can you explain the criticisms by Bernanke himself that some of the last two month sell off in credit markets is caused by leveraged positions. Isn't that what put us here? Which has never been controlled? Does the population not know how appalling they are being treated. My one comfort is that because the US refuses to rein in gun control, that maybe, rather than shoot kids, someone will train their sights on some really uncontrollable bad people who seem to think that they do not have to answer for their theft. And it would all be correct because, under the social contract, there has to be a reciprocal obligation to honour the legal systems, and the burdens that is contained therein...this is the rule of law, but some do not think it applies to them. Which brings us to Wall Street bank announcements. Some of the "surprise" arises from investment profits. With proprietary trading being banished, where do the investment profits come from....oh! Of course, security value assessment. Any Tier 3 stuff here? Profits on long bond securities? Leveraged positions? This is absolutely amazing stuff. When will the world wake up and see that the asset inflation of the last few years is false, with no theoretic foundation. All false! Without being conspiratorial, does anyone think that either recategorising, or lying about economic statistics would be perfectly consistent with the myth of economic improvement, if asset price movement is the sole objective of economic policies. As commented previously, social cohesion is vital, given the track record of previous historical examples of the printing of money. It was the desire for social cohesion which suggested to the Chinese authorities that they encourage such huge financial expansion in 2007/2008, and from this false floor level, countries like Australia were ble to benefit from a massive injection of mineral demand, which through flexible exchange rates, has destroyed -Australian manufacturing. The transmission mechanisms are multiple, and manifest, and still not fully understood or calibrated. BUT, the social contract has, and continues to be, poorly met, because the just and the arbitrary has not been reconciled. Maybe a Truth and Reconciliation Tribunal is required. And it needs to be global. Go on Barclays....you should not feel hidebound by the false legal system that the US projects.