What a “Financial Addict” Looks Like

In a four part series on the naked capitalism blog, Morgan Sandquist, a member of the Occupy Wall Street Alternative Banking Group, presents us with a narrative that parallels the addiction of a drug addict with those actions of the financial industry that has engaged in irrational behavior, not unlike someone who is high on crack cocaine.

 

The financial industry’s quest to create greater riches for themselves and all hangers-on appears to be the only motivating force behind their actions that led to an economic apocalypse in 2008 that not only cost taxpayers in terms of monetary value ($100 billion in bailouts at a bare minimum) but the long-term effects of “unemployment, business failures, reduced government services, particularly at the state and municipal level”, that according to Andrew Haldane of the Bank of England, amounts to astronomical costs “lying anywhere between one and five times annual GDP. Put in money terms, that is an output loss equivalent to between $60 trillion and $200 trillion for the world economy”.

In his first essay on Finance in Denial, Sandquist notes the similar characteristics between all addicts:

Anyone investigating the true health of the banking industry, apparently including regulators, is faced with opacity, complexity, and even outright hostility that stymies all but the most savvy and persistent. Fortunately, people within OWS, including the Occupy the SEC Working Group, are that savvy and persistent. But the reaction of the industry and its partisans to such efforts has included the not-so-subtle suggestion that inquiring into the well-being of the banking industry will somehow cause problems to arise that wouldn’t otherwise exist if we would all just mind our own business.

This seems odd in an ostensibly objective and quantitative context like banking. Shouldn’t the truth be clearly visible in the accounting? Shouldn’t we all–borrowers, investors, depositors, and regulators–want to know exactly what’s going on?

As unexpected as such a visceral and irrational reaction to genuine, well-founded concern is from the supposedly rational realm of finance, that telltale blend of evasion, grandiosity, and superstition will be familiar to anyone who has ever confronted an addict about his or her addiction.   (emphasis mine) SOURCE

 

Having read the first 3 parts published thus far by naked capitalism has been an eye opener as I watch those in the financial industry and their “enablers”,  who I refer to as the “what’s wrong with being rich” crowd.   One of those enablers is currently running for President of the United States.  Mitt Romney, the venture capitalist who is part of the wealthy one-percent in this country, has shown over and over again that his reactions reflect those of the wealthy elite rather than one who shares a common interests with most Americans; the very people he wants to represent as our next president.

 

Beware the "money pushers"

 

The most recent evidence of this irrational behavior from the GOP presidential hopeful was recorded as he spoke to students at Otterbein University in Ohio last week in a campaign move to attract the young voter bloc who voted overwhelming for Obama in 2008.  Watch his body language too as he talks about his penchant for something that is masked as part of the “American Dream”.  His rapid back and forth glances at the audience and jittery movement with his hands is reflective of someone trying to conceal what he really wants his audience to buy into – creating greater debt so people like Romney can get their fix.

 

 

When Romney tells his young audience that “This kind of devisiveness, this attack of success, is very different than what we’ve seen in our country’s history”, he’s not referring to any objective based premise.  This kind of comment is the typical red-herring message sent out by the right that attacks people who legitimately question the failures we witnessed recently of the free market and why those government regulations were removed by elected officials meant to keep abuses in check.   It’s also typical of the addict that tries to redirect the conversation when their addictive behavior is being brought to their attention by concerned individuals.  Sandquist notes this pattern of behavior in the first part of his series.     

Denial denies not just claims and assertions, it also denies access and insight into the reality of addiction. …  It denies the story of addiction and proposes an endless collection of counter-conspiracies.

 

In his next line, Romney clearly replicates the vernacular of a drug pusher who’s eager to get his target to experience the drug high of wealth.  We’ve always encouraged young people: Take a shot, go for it, take a risk, get the education, borrow money if you have to from your parents, start a business.   In Part II – The Addiction, Sandquist shares some historical perspective with us:

… money is created as debt, its use to finance productive activity means that that activity, whatever it is, must then generate interest to be returned to money’s creators in addition to the money lent.

This has given rise to an industry, even a class of people, that derives its livelihood not from any productive activity of its own, but merely from having money. … There is no logical end to what must be monetized–natural resources, ideas, time. Nothing can remain unowned and clear of liens, and that will eventually consume any finite realm.

Romney is part of that “class of people, that derives its livelihood from … merely having money”.  He is thus compelled to create further interests by others to seek financial aid so that his own addiction can be sustained.

The dynamics of usury-money are addiction dynamics, requiring an ever-greater dose (of the commons) to maintain normality, converting more and more of the basis of well-being into money for a fix. If you have an addict friend, it won’t do any good to give her “help” of the usual kind, such as money, a car to replace the one she crashed, or a job to replace the one she lost. All of those resources will just go down the black hole of addiction. So too it is with our politicians’ efforts to prolong the age of growth. – Sacred Economics, by Charles Eisenstein

 

Public sector “Enablers” repealing Glass-Steagall, making it easier for addicts to fall deeper into their obsession

 

With such a perspective, how far removed is Romney from the chemical drug pusher as he stands in front of this college crowd encouraging them to engage in activities that experience has yet to qualify most of them for.  Not that those who have entrepreneural savvy should be discouraged.  But what percentage of all college students truly have the know-how to create a business model that can successfully organize, fund and promote a business venture?  How many of those who can have the devotion and energy to see it through?

Wealth to most of them is the surface image of material possessions, not the labor and love of what your doing and how society benefits as a whole. Caution has been thrown to the wind because as Romney entices his young minions there is no mention of the down side to financial addiction such as more businesses fail then succeed and the increase in bankruptcies that occur from risky endeavors brought about by the addictive high for even more wealth.  Ancillary to such negatives too are jail time and broken families.

The naked capitalism blog has released part three of Sandquist series (see link below) that deals with Intervention.  His recommendation that we go slow in aiding the financial addict to seek rehabilitation is questioned by naked capitalism’s creator Yves Smith.

While I applaud the general thrust of this series, I have to take issue with one notion that this essay takes as a given that finance as currently constituted is “core to our economy” and is cautious about the costs and risks of intervention (even though it argues for that course of action).

The case for decisive action is far stronger. The largest financial services firms have perpetrated the biggest transfer of wealth in history via the bailouts. They have gone unpunished for perpetrating the greatest consumer fraud in history, namely, the predatory lending in the subprime phase, the destruction of the integrity of title, and continuing abuses of court procedures.   SOURCE 

I agree with Smith’s analysis here regarding “decisive action” and think time will not allow us to treat this in a slower manner where only a small number of people will be impacted by continued addiction.  The global economy is a hair’s breath away from another serious economic collapse that could be far worse than what we have ever experienced, including that dreadful day back in October 1929.

Does anyone feel differently?

P.S.  Stay linked with the NC blog to read Part IV of Sandquist’s Finance in Denial.

 

"Can I float you a loan to expand your business Jimmy?"

 

FURTHER READING:

Morgan Sandquist: Finance in Denial – An Intervention

ECONOMIC HEROIN