LaRouche: Trump Being Trapped By London and Wall Street

[Donnadogsoth]

Trump Being Trapped By London and Wall Street—He Must Be Protected

 

"As Donald Trump begins his first week in office as President of the United States, the Western world is in a dangerous state of tumult and indecision, but one of extraordinary potential. The direction the Trump presidency will take is uncertain. While Trump campaigned against the role of Wall Street over Obama and Hillary, and explicitly called for restoring Glass Steagall to end the power of Wall Street over government, his choice for Secretary of the Treasury, Steven Mnuchin, claimed in his Congressional confirmation hearing that neither he nor Trump want to restore Glass Steagall, since, he said, it would disrupt "liquidity and the capital markets." This is particularly absurd, since it comes as the entire western financial system is facing a catastrophic collapse of the $2 quadrillion (that is, 2 and 15 zeros) derivative bubble — gambling debts sucking the blood out of the real economy.

 

" "Trump is in trouble," Lyndon LaRouche asserted today, pointing to his exposure to huge debts and creditors who are trying to hold him to account on behalf of the City of London and Wall Street. "We need to clean out the dirty operators — we need a clean operation in the U.S., that will protect Trump and protect the country." LaRouche has called on the Congress to reject Mnuchin's appointment to Treasury, and to immediately restore Glass Steagall as the necessary first step to restoring the nation's real economy.        

 

"The Wall Street power over leading elements of both political parties is now exposed, as the right wing Republican's and their fellow Obama Democrats have joined forces to instigate the removal of Trump from office by any means necessary. Members of Congress and elements in the intelligence community are "investigating" connections between Trump and his cabinet appointees with the Russian government, playing on the absolute hysteria against Russia and Vladimir Putin by the Obama circle (who, as Putin said last week, "keep saying goodbye but don't leave")." 

[Dylan Lawrence Moore]

Mnuchin Backs Fed Independence and Signals Reform Isn’t Priority

“The Federal Reserve is organized with sufficient independence to conduct monetary policy and open market operations,” Mnuchin responded to Senator Bill Nelson, a Florida Democrat. “I endorse the increased transparency we have seen from the Federal Reserve Board over recent years.”

 

Mnuchin’s comments point to the fact that the Fed doesn’t have constitutional independence. That’s protected more by organization of the system, as Mnuchin highlighted, where the heads of 12 regional Federal Reserve banks are appointed by private citizens. That’s a check against the influence of the White House appointees on the Fed Board.

 

 

Can anyone help me parse this bizarre statement? A check against the influence of the White House Appointees? Like what? The president being a check against the legislative powers of Congress? How can that possibly be considered a legitimate "check" in the realm of government?

 

I know the LaRouche guys have been jumping up and down about Glass-Steagall for years. As far as I'm able to tell, getting GS back into place is a good idea. Normally more regulations isn't good, however it needs to be kept in mind that GS is regulations on a government entity, not a private one (despite these private guys being appointed by... who?). Any regulation on the Fed is like the US Constitution--something that says what it CAN'T do with its power.

 

Nima and I were discussing this yesterday, because I wanted his view on GS from a Modern Money Theory standpoint.

 

He had something interesting to say and then sent me a link about it later. (Link is here.) In it Randall talks about Minsky's views on Glass Steagall and what a health banking system in a fiat money economy should look like.

 

 

"While many point to the demise of Glass Steagall separation of banking by function, the problem really was the demise of underwriting."

 

" the problem and solution is not really related to functional separation, but rather to the erosion of underwriting standards that is inevitable over a run of good times when a trader mentality triumphs. If a bank believes it can offload 12 questionable assets before values are questioned, its incentive to do proper underwriting is reduced. And if asset prices are generally rising on trend, the bank will try to share in the gains by taking positions in the assets. This is why the current calls by some for a return to Glass Steagall separation or to force banks to “put skin in the game” by holding some fraction of the toxic waste they produce are both wrong-headed"

 

 

I really appreciated the movie The Big Short for going into this process of demised underwriting. I'm not savvy enough to know exactly how accurate the movie was, economically speaking, but understanding the concept how companies can create crap securities, sell them, then bet against them helped my understanding a lot.

 

Basically, GS is a brake-system that helps prevent the downward-spiral of underwriting toxic assets, because banks can't just make bets with someone else's money.

 

Further, and this is what the LaRouche guys are so upset about, and something I really wanted an MMT approach on, is that all the toxic assets that were created in the 2008 crash became government liabilities through the banking bailout. The estimates of these liabilities are in the $700 trillion area, which, from a traditional mindset, the taxpayer has to cover. From an MMT approach, this is simply money that can be made out of nothing. However, $700 tril is... a lot.

 

As of now, Glass-Steagall seems like a good thing to me.

 

 

 

 

 

[DaveR]

As Steve Keen noted, systemic debt had already surpassed in real terms the 1920s/30s high in 1998 when GS was abolished. 

 

Admittedly much of GS was apparently gutted in the preceding 50 years or so, so one has to ask 'what version of glass steagall'

 

Personally, I think "bring back GS" is just a snappy soundbite politicians can point to. The real problem is debt as money. For it to work you have to have a pure capitalist system where all debts that go bad are written off instantly rather than socialized/guaranteed. In a democracy, with special interests, thats probably impossible. Also central banks interpreting 'stable prices' as 2% debasement every year is problematic. Stable prices are intuitively sensible. Its why virtually all central banks ostensibly start off with that as their mandate. It confers no bias to either debtors or creditors, and allows interest rates to act as a transparent measure of risk, their original and true purpose, rather than as a hedge against inflation, which governments seem to think it should be.