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Paul B. Farrell
March 8, 2011, 12:01 a.m. EST
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Four time bombs that will blow up Wall Street
First Take "º
No need to wield the Strategic Petroleum Reserve
By Paul B. Farrell, MarketWatch
SAN LUIS OBISPO, Calif. (MarketWatch) "” We have hard evidence Washington and Wall Street knew the 2008 crash was coming years in advance. Yes, they could have prevented it. But didn't. And, yes, the cover-up cost Americans trillions.
Was their Reaganomics ideology so rigid, so blinding, they couldn't (and still cannot) admit they were wrong? Forcing them to lie to America? Cover up the lies? The evidence is clear.
Independent investment advisers are putting more money into large-cap U.S. stocks and turning away from bonds, says Bernie Clark, head of Schwab Advisor Services. Jonathan Burton reports.
Today, a harsh lesson from history, facts and a warning. Listen closely America. It's already happening again. The collective Reaganomics Brain has gone from crash to cover-up to comeback kid to capitalism-for-the-super-rich in three short years. Now with absolute power over America.
But the worst is yet to come. The forces behind the 2008 crash are stronger today. Like the villain in a horror-flick sequel, the dark side is now hungrier. Phase 2 is already in full swing as the Reaganomics Brain aggressively races to complete unfinished business "” the 2008 meltdown "” which will implode Wall Street banks and the Fed, ending the reign of the dollar as the world's reserve currency
Recently we reported some bearish predictions for 2011 by two respected market leaders: Ned Davis warns of a "midyear peak" before a new cyclical bear. Jeremy Grantham warns investors to get out before Christmas. Market Crash 2011: It will hit by Christmas.
Bad news for investors angry at the past, worried about the future. Remember, the Dow's barely above its best 2000 level of 11,722. Adjusted for inflation, the market has flatlined the past decade.
America's boomers don't have to be rocket scientists to see the workings of the Reaganomics Brain here, how it's destroying capitalism, democracy and their retirements. Here's hard evidence of lies and cover-ups in past and future catastrophes:
In a Bloomberg Market's magazine column last year, "Greenspan Cover-up," Roger Lowenstein, author of "The End of Wall Street," wrote that in a newly released transcript of a March 2004 meeting Greenspan "argues against disclosing too much to the public lest the Fed "?lose control of a process that only we fully understand'." Yes, a cover-up.
Lowenstein was classy, but went ballistic: "This statement ranks as a sign of monumental arrogance. It was Greenspan himself who didn't understand, much less "?fully understand,' that the Fed's lax mortgage regulation and easy monetary policies were setting America up for a disastrous fall."
Then the indictment: "Had the Fed publicized such concerns, it might have led to a crackdown and forestalled millions of bad mortgages that would be written over the following 2 1/2 years. Instead, the Fed released minutes with sanitized phrases that had been stripped of alarming language." Lying by omission, then a cover-up.
Now ask yourself: Was Greenspan so blinded from being inside the myopic echo chamber of the collective Reaganomics Brain for so many years that he, like all other insiders, is forced to lie, then cover up the lies?
As a postscript to the meltdown, Bloomberg later reported that back in August 2006, a month after Henry Paulson left Goldman Sachs as CEO with a net worth of over $500 million to become the new Treasury secretary, he spoke to the White House staff at Camp David: "Paulson held up over-the-counter derivatives as an example of financial innovation that could, under certain circumstances, blow up in Wall Street's face and affect the whole economy."
Reminds us of Warren Buffett's famous reference to derivatives a "financial weapons of mass destruction."
Paul Farrell writes the column on behavioral economics. He's the author of nine books on personal finance, economics and psychology, including "The Millionaire Code," "The Winning Portfolio," "The Lazy Person's Guide to Investing." Farrell was an investment banker with Morgan Stanley; executive vice president of the Financial News Network; executive vice president of Mercury Entertainment Corp; and associate editor of the Los Angeles Herald Examiner. He has a Juris Doctor and a Doctorate in Psychology.
Aiming an emergency crude stockpile at frenzied oil traders without touching a single barrel.
3:27 p.m. March 7, 2011
"The 2008 crash isn't over, only covered up http://on.mktw.net/i36i1A" 12:16 a.m. EST, March 8, 2011 from MKTWFarrell
"Four time bombs that will blow up Wall Street http://on.mktw.net/fCQPKa" 12:39 a.m. EST, March 1, 2011 from MKTWFarrell
"Market Crash 2011: It will hit by Christmas http://on.mktw.net/h1z7Kz" 12:20 a.m. EST, Feb. 22, 2011 from MKTWFarrell
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