AIG Bonus Issue Is Just A Red Herring

So how does one run across the backs of alligators without getting eaten? First chum the waters with some red meat and while the critters are munching on the screaming bait you hot-foot across their backs.

Now use "AIG bonus issue" for the screaming red meat and use the snarling congressional panel for the alligators and the hot-footed one will be Goldman Sachs a.k.a. Government Sachs who will escape the glare and jaws of government, public and the news media.

Cui bono? Who profited from the enabling Commodity Futures Modernization Act of 2000? Goldman Sachs et all were the ones who introduced these financial derivatives products from hell that took down brokers, bankers and now threatens the world financial system. The products by law couldn't be regulated or have oversight by any agency including state gaming commissions! They planned well. The bonus babies at AIG are mere fodder at $160 million. AIG alone cost the taxpayers $180 billion for being Goldman Sachs' favorite customer who would say "yes" to any product that Goldman proposed.

But Goldman needed help from the federal government to get the Modernization Act of 2000 into law. For that job they recruited former Senator Phil Gramm of Texas, Senator Richard Lugar of Indiana and others. So government was equally criminally irresponsible for passing this law. That's why the bonus babies at AIG are being scapegoated.

Bonus In The Headlines-Again

In 1932 at the nadir of the depression many WW I vets formed the "bonus marchers" movement . The goal was to get immediate payment from the U.S. government for their military service which ws due in 1945. President Hoover answered "no" . Then Generals Mac Arthur and Patton calvary- charged, bayonetted and tank- prodded the vets back into one of the Hoovervilles across from the nations capitol.

Today the outrage against bonus is for paying a bonus for bad and/or undeserved performance at the financial derivative branches at major banks, brokerage and insurance companies.

One mans bonus is anothers obligation. But one thing is for certain. Don't get in between a politician and his or hers reelection plans.

How About a Slow And Local Nation?

Because it's the fate of the frivolous primate to relive unheeded history, how soon will the U.S. and the world reaquaint itself with the depths of another depression?

After the 1929 Crash and the subsequent 20% unemployment , the 1930 Smoot- Hawley Tariff Act was passed to create and save jobs for unemployed Americans. The Act raised tariffs on 20,000 imported goods. Business was against the legislation and over 1000 economists signed a petition urging President Herbert Hoover not to sign it. But he did and trade between the U.S. and others plunged 50% between 1930 and 1932 because other countries retaliated.

The prospects of a President Barack Obama pushing protectionism legislation through a rabid democratic Congress is certainly not farfetched. There are all kinds of policies that can kill jobs and exacerbate a financial downturn. Tax code and environmental policies attached to trade agreements can have the same effect as tariff increases. Of course a reduction in worldwide business activity would bring some benefits. The environment would have less destructive pressure put upon it. Also we here in America would have less melamine-laced pet and human food imported from the filthy Chinese.

A slow and local nation approach would bring relief from the dollar chase of of other peoples values.

The Next Financial Shoe To Drop

Here's a quick tutorial on the root cause of the 1930's Great Depression since it increasingly looks like we will replay that whole episode in slow-motion. Sure the market crashed but the reason for the depression was the failure of the banks. The banks failed because they speculated in the stock market. E.G. Morgan Bank owned Morgan Stanley brokerage .Those speculations went south and people ran on the banks to withdraw deposits. The rest is history.

After the Crash and bank failures, legislation was passed that included the Bank Act of 1935 a.k.a. Glass Steagall. It prohibited banks from ever owning brokers or insurance companies. In 1999 , Glass Steagall was struck down. Banks then did the obvious and bought insurance companies and stock brokers. Also brokers bought insurance companies and banks.

" What could possibly go wrong?". Well first there was the failure of Bear Stearns which was bought by JP Morgan Chase and today Lehman Brothers went Chapter 11 and Bank Of America bought Merrill Lynch. Morgan Stanley and Goldman Sachs are in the wings looking for deep pocket partners i.e. some bank with fat deposits of unsuspecting civilians.

So we have gone full circle with banks now back in the brokerage business in spades. The next time the brokers fail they will take their respective bank owners with them. What's a civilian to do among these financial terrorists? First avoid any bank with a brokerage or insurance subsidiary. Limit all deposits to FDIC limits. Keep some cash at home and a weapon for protection.

Our society has resorted to money as the cure all and to that end we have printed literally bales of it. But like a house of cards, paper can't take much weight.

What Are We Going To Do About The Wall Street Gangsters?

Starting with Clinton and through the Bush Administration , the Wall Street gangsters got all they wanted. The "For Sale" administrations repealed Depression-era security and banking laws and appointed Wall Street pirate captains to cabinet positions.

But Bear Stearns stock went from $170 to $10. And there are many other brokers and banking stocks on the same trajectory. So criminals with unbridled greed given free roaming access to other peoples money brings self-destruction faster than anyone could have imagined.

No one knows how all this chaos will play out. We all could end up in the streets fighting for our lives and property. If that happens I know who I will be looking for : members of Congress, lawyers and Wall Street operators.