SERIOUSLY, ERIN BURNETT?

Erin Burnett is in the first week of her big transition from CNBC to CNN with her new show Erin Burnett Out Front.    And what better place for the former Wall Street anchor to start than with the Occupy Wall Street protests?   Unfortunately, Burnett used the opportunity to spread more myths in the mainstream media and totally ignore the real point of the protests.

In a segment called “Seriously?!”  Burnett goes down to Wall Street and talks to Dan, an “unemployed software designer” about the purpose of the protests.  She says:

“So, do you know that taxpayers made money on the Wall Street bailout?  They did.  They made money on the Wall Street part of the bailout….Does that make you feel any differently?”

Dan kind of (not really) says yes and then they cut back to studio and Burnett says, “Seriously?  That’s all it would take to end the unrest?”  Then she verifies her claim and tells her unwitting viewers that the bank bailout “made” $10B for taxpayers.  She proclaims victory by saying they “solved” it.  And that’s it.  2 minutes and 34 seconds and she did it.  Case closed, right?  Not even close.

So what should Dan the “unemployed software designer” have said to Ms. Burnett?  He should have said this:

“Excuse me, but I believe you have a completely insufficient understanding of the way that our fiat monetary system works.  When the U.S. Treasury “makes” money it is actually reducing the outstanding net financial assets of the private sector.  There is no such thing as “making money on the Wall Street bailouts” because, as the issuer of our currency, the U.S. Federal Government is not a profit making entity and cannot be compared to a household, business or bank.   There is simply no such thing as the U.S. government having “more” money when it brings in tax revenues.  As the supplier of the U.S. dollar, the Federal Government must issue money before it is available to us.  And when they “make” money via increased taxes they are quite literally removing net financial assets from the private sector.

So no, none of us are “making money” on the bailout except for the people who caused their banks to collapse.  That is of course, unless the banks or Uncle Sam are paying you some form of special bank bailout dividend?  Did that happen?  No.  So none of us are “richer” directly because of the bank bailout.

More importantly though, what the banks did to us was break the moral code that is always attached to money.  Money is always debt and when an institution or individual fails to adhere to the moral code attached to our debts, they are directly infringing on their moral obligations that they are legally bound to.  And when a government bails out banks, individuals or businesses, they are saying that this infringement is okay and are in fact encouraging it.  This is why we don’t allow counterfeiting, fraud, scams, etc.  These are all forms of infringement on the moral code that inextricably links us all together via trade and commerce.  Without the soundness and strict adherence to this moral code, there is no such thing as a healthy functioning U.S. economy.  And the banks infringed on this moral code to the tune of trillions of dollars.  And we let them get away with it.  Now you’re justifying it with a false understanding of how a fiat monetary system works.  Shame on you.

So, no, there is nothing you can say or do that would make me feel better about the Wall Street bank bailouts.  SERIOUSLY!”

It’s that simple.  People feel slighted.  And rightfully so.  Now, in fairness, most people in this country are not aware of the underlying mechanics of our monetary system.  And most people have a poor understanding of what money really is.  But one thing is very clear from the Wall Street protests.  Main Street got the short end of the stick.  And we all know it.   Whether it’s the fact that none of us are actually “making money” on the bailouts or the idea that we have all been subjected to approval of an egregious violation of the moral code that links us all through our money.

Although it may not be obvious, the anger that resonates from these facts is what is fueling the movement.  It is the heart of the Occupy Wall Street protest.  Misleading media coverage like Ms. Burnett’s is just another glaring reason why the mainstream media is dying a quick death in this country.  They continually fail to represent our reality and connect with the American public.

 

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • ES

    Good post. Yes, most average people feel it in their gut that they got the short end of stick. Actually, have been getting it for some time.)) But since they don’t know the mechnics they can’t pinpoint what exactly it is that is wrong. This is one of the reasons that drive the inflation and debt ceiling mania. People know that there has to ba a catch to bailouts somewhere. Tehre is a catch, the catch is unproductive misallocation and waste of the country resources.
    So, it took us three years to finally get the situation so well known in Europe. Mass unemployment causes discontent and riots. They solve it through various social programs . What is the US going to do?

  • Paul Mineiro

    I was wondering how long we could run elevated unemployment rates without civil unrest. I was starting to think that World of Warcraft had caused a structural change in society …

  • SS

    Awesome essay. I love it when you get a little pissed off. It’s like watching an Al Pacino movie – He’s at his best when he’s angry. :-)

  • dfmills

    Sadly, if “Dan” had said that to EB there is no way in hell they would have aired it. Most of the MSM anchors are just empty-headed haircuts. Otherwise, great comment as always; PragCap has vastly improved my understanding of MMT. Keep up the good work.

  • Mike

    People are forgetting about the Fed’s bailout of Wall Street. We don’t know if the Fed is going to make money on all the junk it bought.

    Also the hundreds of billion already spent on bailing on Fannie and Freddie should also count as a bailout of the Wall Street securitization machine.

    Of course, Wall Street isn’t grateful, but the media and taxpayers shouldn’t let Wall Street forget about this.

    http://blogs.reuters.com/columns/2011/06/13/fed-gets-a-taste-of-painful-exit-strategies/
    The largest single item on the Fed’s balance sheet is the $1.1 trillion in mortgage-backed securities it has acquired since the meltdown began. These are bonds issued by Fannie Mae and Freddie Mac and guaranteed by the U.S. government.

    The Fed, for example, has $90 billion tied up in investments related to stricken insurance company AIG—loans to the company, preferred stock in two AIG subsidiaries, and Maiden Lane II and Maiden Lane III, the vehicles created to remove toxic assets from AIG’s balance sheet. But as I documented in a recent column, that’s all on a glide path to going away. The closing of the sales of Alico and AIA will return $50 billion to the Fed, and the Maiden Lane vehicles are generating sufficient income to pay down the debt extended to them—and then some.

  • Mike

    Oh, the link should be the article at Slate:
    http://www.slate.com/articles/business/moneybox/2010/05/the_23_trillion_garage_sale.html
    The $2.3 Trillion Garage Sale
    Can the Fed unload all the assets it acquired during the meltdown without crashing Wall Street again?
    By Daniel Gross|Posted Tuesday, May 4, 2010, at 4:43 PM ET

  • Anonymous

    I watched in amazement while Burnett made comments on how it was o’k for China to put poisonous chemicals into toys and sell them to Americans who then gave them to their children because Americans demanded cheaper products.

    She’s an imbecile.

  • Ted

    Same here. About a month ago I mentioned to a co-worker that I wouldn’t be shocked to start seeing people protesting in the streets, like the 1932 Bonus Army. He looked at me like I had three heads. You can already see the beginnings of global trade wars and reactionary governments taking shape. Perhaps we should call this current environment “I love the 30′s.”

  • jon law

    WORDY

  • Mike

    http://articles.latimes.com/2010/oct/22/business/la-fi-fannie-freddie-bailouts-20101022
    Fannie Mae, Freddie Mac bailouts could hit $363 billion, report says
    The government’s estimate, projected through 2013, represents a worst-case scenario that assumes a double-dip recession. The mortgage giants have received about $148 billion in taxpayer funds.
    October 22, 2010|By Jim Puzzanghera, Los Angeles Times

    http://www.imackgroup.com/mathematics/670739-us-regulator-sues-17-banks-for-fraud-in-subprime-mortgage-deals-more-details/
    U.S. Regulator Sues 17 Banks For Mortgage Fraud (more details)
    September 3, 2011

    The FHFA alleges that banks repeatedly made false claims to the mortgage giants Fannie Mae and Freddie Mac about the very nature of the loans banks were selling. In many cases, the FHFA claims, banks sold the shoddy loans even after a third-party analysis company informed the banks that billions of dollars’ worth of mortgages did not meet the specifications that the banks made in legal filings and in statements to Fannie and Freddie, which are still owned by U.S. taxpayers.

    “Make no mistake: fraud is a business model,” said Janet Tavakoli, president of the Chicago-based consulting firm Tavakoli Structured Finance.

    “Unfortunately, Fannie Mae and Freddie Mac were often tagged with a lot of these loans,” she continued. “Whether they were willing victims in some cases is almost irrelevant at this point, because now it is a matter of public interest, since taxpayers had to bail out Fannie and Freddie. The whole ballgame has changed.”

  • VRB II

    Is it the fault of the child who begs his parents to allow him and his friends to consume alcohol under aged in the confines of their home. A child consumes to much and ends up in the hospital…or worse.

    Isn’t it the Childs fault? No…u say. It’s the parents.

    OK no argument here.

    THEN TAKE HALF of the campers and park your ass outside of your states capital.

    GOP and DEMS. Yes…WALL st. Is to blame..no doubt. But equal share goes to those who provided a safe place for them to become drunk.

  • Wulfram

    We made $10 billion from the bailouts. Really?

    Does that include the $350 billion we’re on the hook for Fannie and Freddie, or the trillions lost in interest income from ZIRP, or the millions of jobs lost by people who had nothing to do with Wall Street during the recession.

    (It doesn’t)

  • DanH

    I am surprised more people don’t make the basic connection between their depleted bank accounts and the bailout when someone claims we made money on the bailouts. Of course, the Erin Burnett’s of the world will say that the economy would have been worse off without the bailout. But the logical and accurate response is – well, if we’d properly regulated these banks in the first place we’d never have been put in this position in the first place.

  • Wulfram

    Oh, lets also not mention the backdoor bailout from QE1 and QE2 swapping MBS paper for cash.

  • beowulf

    Burnett began her career as a financial analyst for Goldman Sachs[8] in their investment banking division, where she worked on mergers and acquisitions and corporate finance.
    http://en.wikipedia.org/wiki/Erin_Burnett

  • SS

    That doesn’t surprise me. What does surprise me though is how someone like Cullen can also have a big bank background and come to completely opposite conclusions from someone like Burnett.

    We should all be a little bit more pissed off about this.

  • Mountaineer

    Erin Burnett “is set to tie the knot with Citigroup executive David Rubulotta.”

    http://tinyurl.com/5rhucwc

  • Cowpoke

    “They continually fail to represent our reality and connect with the American public.”

    Yep, which is why I am an advocate for allowing great companies like Walmart have a shot at managing the purse. We have let Wall street have it for far to long and all we have gotten is 6000 dollar a month penthouses.

    What has Walmart given us?

    A clear Picture as to the true market value of personal necessities like food clothing car care, eye care etc and of these they have CONSTANTLY drove prices down to help low to middle America.

    And when the look to further make a profit by improving Low to Middle Americas access to US GOVT Capital all they get is Attacks.

    Makes One Think Hmmm. None of the Toilet paper, deodorant, clothing, electronic mfg have bucked Walmart as hard as the BANKSTERS.. What’s The REASON?

  • Different Trixie Warchest

    This is the sort of obvious agenda that invokes a visceral response from me, to the extent I can’t even see straight. Burnett already had a conclusion she wanted to draw and simply backed into it. Because how difficult is it to find the tea party rallier holding the sign “Keep your government hands off my Medicare”? Or the middle-class GOP voter who takes advantage of subsidized public transportation on a daily basis, works a 40-hour work week due to unions, sends their kids to public schools, drinks safe water and breathes cleaner air, is comforted knowing their parents won’t end up on the streets due to Social Security payments, and receives unemployment benefits when they fall on difficult financial times so they won’t lose their house due to random bad luck entirely out of their control. Yet when anyone else receives unemployment “entitlements”, it is clearly socialism. And since THEY have successfully lived their lives completely independent of government intervention and single handedly provided for themselves, why can’t everyone else?

    (Vomits).

    Alas, Burnett’s bullshat sells. But the reality is that #OccupyWallStreet represents MANY different views. Bottom line: People know something is wrong, they just don’t know what. They see corporations doing better than ever, astronomical Wall Street exec compensation and bonuses, yet they can’t figure out why they can’t find a job, including why no one is doing anything about it. I’ve talked to them, and unlike Burnett, I walked away with better information to use as opposed to mocking a single person. Simply because you can. Her approach is beyond irresponsible reporting, and it’s embarrassing. Not to mention reprehensible.

    Burnett needs to interview me. I don’t give a rat’s @ss about the bank bailout. What I DO care about is the strategy to take advantage of a crisis, repackage it, and push through an agenda that otherwise wouldn’t stand on its own. All spending needs to be “offset”, but can’t include revenues. Grover Norquist, I am gunning for you as well as the Koch brothers. Because you don’t get to have this conversation while ignoring half the equation. And if I have anything to say about it, the wealthy and big business will get taxed into the next century. Then we’ll see how quickly Boehner and Cantor change the subject with one big “NEVER MIND”. Only then can we hopefully move to the discussion which provides REAL solutions to help REAL people.

    Or. OR? She can interview THIS guy, an exchange which never saw the light of day on air:

    http://www.youtube.com/watch?v=6yrT-0Xbrn4&feature=player_embedded

    There is only one message I have for Burnett: Eat me.

  • apj

    $10bn? Wrong metric, surely.

    Wouldn’t 2 rather obvious comparisons be the trillion $ gap between real and potential GDP, and the scale of unemployment?

  • BT

    If the US government had chosen to bail out main street with a large and sustained deficit spending stimulus they would also have ‘made money’ in the Erin Burnett sense that tax revenues would be increased over their currently depressed level.

    But the decision was taken to bail out Wall St and other US corporations and not to do anything about mass unemployment or stagnant economic growth.

    Why favour Wall St over Main St? Because politicians and the media listen to economists from Wall St (Krugman’s Very Serious People) who don’t understand MMT and whose priority is protecting their employer, not the public.

  • http://ralphanomics.blogspot.com/ Ralph Musgrave

    This study puts the cost of bank subsidies over the last five years at $2.2trillion:

    http://www.project-syndicate.org/commentary/taleb1/English

  • alex

    In all likelihood, the only thing Erin Burnett achieved with this article (which needless to say, was terrible journalism) is increased public anger. He entire commentary had a “Wall Street is laughing at you” tone, which is only going to further outrage the average American.

    Not only that, but as you point out, her entire economic understanding is awful. It seems nowadays that if you want to make it to the top of the economics/finance profession, the less you know, the better!

  • Kobayachi

    Classic media propaganda!

    It’s the same technic the democrats use to make fun of the Tea party movement. Although they all feel something has gone terribly wrong with their country, most of the followers are unable to clearly point out what exactly they don’t like. So they mumble stuff like “the Constitution says this and that”. Off course pundits will never interview the guys who are able to put a narrative on what went wrong. They prefer to interview a simple follower so they can make fun of him. But that doesn’t mean all Tea Partyers are retarded or mislead.

    Same thing with the occupy Wall Street movement. All those people “feel” something is corrupt in Wall Street. It’s not one particular thing that makes them feel that way, it’s the numerous laws with special Wall Street loopholes that compounded over the years that simply reached a tipping point.

    My personal view on this is that Americans are experiencing a “cognitive dissonance”. Most of them where raised with values that made this country the greatest country on earth and they still have that image in their heads. But reality shows them that those values are no longer in place or enforced by government. Values like equal opportunity, civil rights, union rights etc… that have been slowly removed over time. How many can still Attempt College without getting in debt for the rest of their lives apart from the upper 10%? Is that an equal opportunity society?

    Those people on Wall Street need a spokesman who knows how the system works and isn’t afraid to speak up. And that’s the difficult part, because for those who are in the know, it is easy to profit from it and you have no incentive to fix the damn thing.

  • Greg

    Hey Cullen, great article

    I would love to see you take your explanatory talents to one of the OWS sites ( I hear Joseph Stiglitz addressed one of the crowds somewhere). It would be a great forum to get out the message. Take up donations at this site to get your plane fare and whatever else you need. We’ll get your back. Go ‘splain to the folks how things really are. If you’re lucky you might get one of the media guys out there to interview you.

  • TheLesser

    They’ll probably just never sell them. Continuing to hold that on their books does not hamper their ability to constrict liquidity by directly manipulating rates.

  • But What Do I Know?

    Good thing nobody watches CNBC :>)

    Seriously though, that’s a great takedown and a wonderful rebuttal. The people who will listen to someone like EB are those whose minds are made up already and are just want to hear “confirming” evidence. Those of us willing to think and listen to understand (not necessarily agree) appreciate a site like yours.

  • John Law

    Let me preface this comment by saying even though I understand MMT, I’m note sure why its being named a “theory.” MMT is just a description of the “transaction clearing process” in particular, that between the government and private sector. With that said, why do MMT’ers explain MMT using such obscure language and i.e. net financial assets, etc? If MMT’ers explained MMT by defining it as the “transaction clearing process” people would catch-on alot quicker. Money is a debt for the issuer (buyer of real goods and services) and an asset for the seller of goods and services (if they accept money as FINAL payment – only relevant in private sector).
    The government-private sector transaction process goes like this: Government issues money (debt) to tender to the private sector to obtain the real goods and services it needs in order to pay real government goods and services back to the private economy. If the private sector accepts the tendered money for its real goods, it becomes a creditor to the U.S. government. The only way for the transaction to clear is if the U.S. government pays the private sector back in real goods and services and collects (taxes, fees, etc) the corresponding amount of its money (debt) back from the private sector.
    Accounts always need to be settled, so for every credit in a debtors account payable there is an offsetting debit in the creditors account receivable. Once the debtor debits his expense account to pay the creditor, the creditor credits the debtors account payable to neutralize the debit balance. Modern Monetary Transactions (MMT) in two paragraphs.

  • LRM

    I am at a loss with regard to where to obtain honest information. Does the statement that EB makes regarding the government having the assets it purchased from banks appreciate to the tune of 10B remain true. Is this a fact? When someone challenges us to defend Cullen’s statement regarding the banks infringement on the moral code to the tune of trillions of dollars, who is the best source for the “numbers” . I was not adequately able to defend myself when I was told that banks paid back all their “bailouts” . I have tried to read some of Black’s stuff on control fraud but am not getting it. Also Chris Whalen has written/writes about some similar fraud control.

    With regard to EB, I lost just about all respect for CNBC and EB shortly after the Japan tsaunami when the market was going into a dive and she read a report that the reactors were contained when there was no logical reason to believe this. I have watched little CNBC after this as it finally dawned on me that they were purposely manipulating the markets. I really do not know how these supposedly inteligent people can be forced to read outright lies and then look their family in the eye when they come home at night.

    I wanted to give EB the second chance and hope her leaving CNBC was because she was not happy about reading lies, but apparently from this video she wants to be a puppet to the bank “infringment of the moral code”

  • http://www.pragcap.com Cullen Roche

    Theory is all in the application….

  • Remus

    First they ignore you, then they laugh at you, then they fight you, then you win.
    - Mahatma Gandhi

    It is interesting to watch this thing evolve… the MSM just reached step 2 of the above statement with this CNN “story”.

    take care and thanks for this blog.

  • perpetual neophyte

    Cullen (or anyone else) –

    Can you help clarify this comment and help me make the distinction as it relates to “making money on the bailout?” “There is simply no such thing as the U.S. government having “more” money when it brings in tax revenues.”
    -
    I think I understand the statement on its face but it is not “clicking” for me as it relates to the perceived “profit/los” on the various bailout mechanisms. That is, if Fedsury hypothetically spent $1 trillion and recieved back $1.1 trillion dollars in total return through dividends, sale of stock, bond maturation/appreciation, etc… How is that not making a profit?

  • Coolidge Low

    Great video, thanks for post. Agreed!

  • http://www.pragcap.com Cullen Roche

    It’s best to not think of the govt as having or not having $. Like a point keeper at a football game. When the screen goes off at the end of the game the man in the tower doesnt “get” his points back. They came from a bottomless hole to begin with…..

  • Coolidge Low

    Occupy Wall Street protests are spreading to other cities. Find one and show up. Show support. Participate. Maybe then, we can get the ear of our politicians and create the changes needed.

    I have invited one of my favorite local state representatives to attend with me.

    Cullen’s site will get to one more reader………. this weekend.

  • http://www.pragcap.com Cullen Roche

    I think you overestimate my sphere of influence. Honestly, I wish I could stand up in a crowd of people and catch their attention and expect them to listen. But I think you overestimate how many people know who I am or what I profess to know…..

  • Pod

    This is all correct, and also misses the point.
    TPC is saying that dollar profits to the federal government are a meaningless construct since the federal government is the issuer of the currency in the first place. Like saying the scorekeeper at the football game can’t “win” on points since he controls the points. True enough.
    That said, it is a fact that in the bailout process the banking sector paid-back to the federal government more dollars than it received. As such the banks did not receive any increase in net financial assets as a “gift” from the federal government, i.e. taxpayer.
    So while it is true that the federal government did not “profit” from the bailouts since it can not, by definition, “profit”, the more relevant truth is that the banks did not “profit” either. Did they “benefit”? Yes, of course, as did we all by preventing our economy from collapsing into a deep-freeze depression had the banking system failed.
    As a corrollary, it is most assuredly populist clap-trap to suggest that bailout funds were used to pay “banker bonuses”.

  • Silalus

    It’s about intellectual honesty.

    The high priests of the coke and pepsi parties, the apologists of the financial sector, the “end is nigh!” screamers selling gold, silver, and fear… They all have both career and emotional investment in thinking things through backwards: starting with a position and searching for evidence to support it.

    Unfortunately our culture (especially here in the US) tends to exalt and reward the “courageous” that “stick to their guns” instead of recognizing the real bravery it takes to cherish learning something new that might cause you to see things in a different way. Hell, our entire legal system is based on that ideal and our two-party system has fully devolved into it as well. If Mr. Roche overcame the temptation to follow that path during his banking background, then I definitely respect that philosophically, on top of the practical reasons I appreciate the information and commentary he shares.

  • John Zelnicker

    LRM — I can’t give you a good source for the numbers. But, for a lot of the banks the bailout was in the form of preferred stock that paid a dividend. If you look at just one certain program (TARP, I think) the government did get back more than it put in if you consider dividends and proceeds from the sale of some of the stock. I believe the government made a “profit” on both General Motors and Chrysler stock when sold. This, however, does not include the unpublicized financial assistance to the TBTF banks and others that adds up to the multiple trillions that was actually put into the banking system to support it.

  • http://kiddynamitesworld.com Kid Dynamite

    One of the protest videos I saw was about sound money, electing Ron Paul, return to the gold standard, and protesting gov’t spending… I’m quite sure protesters supporting that view wouldn’t be fans of MMT!

  • http://www.pragcap.com Cullen Roche

    They did not profit? If that is true then why are the bonds of these banks still trading at par? They should have been crushed. And the US govt should have embraced that by cramming down the debts, guaranteeing the deposits of the banking system and maintaining the stability of the system they have put in place without destroying the moral code that helps bind it all together. Instead, they decided to keep the system together by destroying the moral code. And now no one trusts the system. Rightfully so.

  • pebird

    I would have preferred a shorter response to Burnett:

    “You say the taxpayers made money, great. So, where are the jobs?”

  • http://www.pragcap.com Cullen Roche

    Better yet, “you seem to be one of the few people who is quite literally accumulating money through the bailouts. You are marrying a CitiGroup executive after all, aren’t you?”

  • http://www.pragcap.com Cullen Roche

    Yeah, not a good turn in the OWS protests. Some videos have gone viral about “sound money” and “End the Fed”. That’s the totally wrong message to come out of this…..

  • ES

    Yes, they did profit. They got billions on very favorable terms, much below the “free market” rates ( what is this myphical “free market” anyway). I’d like some of those billions myself so that I could make money on the 2% risk-free spread. I’d me a millionaire tomorrow and be able to retire.

  • pebird

    Perfect. I forgot to ask “which taxpayers made the money.”

  • Pod

    they did not profit. They returned more dollars to the federal government than they received. They would “profit” if they received more dollars than they returned.
    That their bonds are trading at par has nothing to do with “profit”, it has to do with credit risk and interest rates. The credit risk in the bank debt today is less than it was (perceived) to be at the peak of the crisis.

  • Dismayed

    Too absurd. The real cost of the bailout is a destroyed world economy and millions of people without work. Of course the monetary part of the bailout means nothing. Only human suffering matters.

  • http://www.pragcap.com Cullen Roche

    So you really believe that an entity that should be bankrupt and is still making profits, did not profit from a govt bailout? That has to be some of the most backward thinking I have ever read.

  • Roger Ingalls

    1+

  • Roger Ingalls

    Agreed, GREAT video, Trixie you are at YOUR best when you’re pissed…a great yin to Cullen’s yang!

    My disappointment in mainstream media is not limited to Fox, but honestly, its hard to see any of them doing better than Jon Stewart.

    Come to think of it, Jon Stewart should get that dude to come on his show…

  • vyw

    Taking this to the micro level.
    When homeowner makes a payment to Fannie Mae…is the Govt taking money out of the system?
    I think it would be consistent with the moral code to insist on repayment – on reasonable terms. The bailout was needed and was used in the auto sector in 2009 and in the past with S&L and with Chrysler way back in the 1980′s.

    That said, Ms, Burnett misses the point…it’s the inequality that has struck a cord with the 99% of Americans. And that is consistent with some MMT examples I heard in Cullen’s video ie. what if the Govt taxed us 100%.

    Well what if the (disposable) income went to the top 1% of the population?

  • Roger Ingalls

    Cullen:

    This is truly off topic, but could you place a little more emphasis and content on employment? A central theme of your is that a proper application of MMT would diagnose the problem towards additional employment. Maybe it would edge more into the political and prescriptive elements than you would prefer, but it is clear that this is a massive problem, that’s not getting fixed.

    The following is from a reliable source, and underscores a lot financial and social problems in America. Of particualr concern to me is the labor participation rate, which more accurately reflects productivity that unemployment figures.

    “Unemployment since the start of the recession has risen disproportionately for men, so much so that the recession has been dubbed by many as a “mancession.”

    Decomposing the headline unemployment rate of 9.1 percent, joblessness stood at 8.5 percent for women compared to 9.6 percent for men in August. This has come at a time when male participation in the labor force has fallen sharply, accelerating the long-term decline since the mid-1950s. And in this recession historically male industries (construction & manufacturing) have been harder hit than other sectors such as education and health services. There are signs that these unemployment numbers are changing as different sectors expand & contract, but it is interesting to watch.

    The Census Bureau notes that differences are also visible when looking at race and ethnicity. “Black joblessness, at 16.7 percent, stands more than 7 percentage points above its prerecession rate and is more than double the unemployment rate for white workers (8.0 percent). Furthermore, unemployment for black teenagers is staggeringly high at 47 percent, making it difficult for this group to gain valuable work experience early in their working years. Unemployment among Hispanics, at 11.3 percent, falls in between the rate for whites and blacks. However, due to a higher participation rate, Hispanics and whites have roughly equal rates of employment relative to their populations at 59 percent. Black employment-to-population is notably lower at 51 percent.”

  • EB

    Erin Burnett is a mindless idiot.

  • Greg

    Which is why someone needs to set them straight.

    I have a feeling there are opportunities for ANYONE who wants to say something TO say something. I think the soil is rich up there right now but its a matter of planting the seed. Maybe one of the “Corrente” guys could do it.

    I just think this is too prime an opportunity to miss.

    Id go myself but Im not sure I could spread the message well enough. Id gladly help Cullen or someone else but It needs to be one of the big boys taking the lead.

    Warren, Randy, Cullen, Marshall are a few that come to mind at first.

  • Kristjan

    “Theory is all in the application….” like Cullen said.

    Abba Lerner: “Fundamentally the new theory, like almost every important discovery, is extremely simple. Indeed It is this simplicity which makes the public suspect It as too slick. Even learned professors who find It hard to abandoned ingrained habits of thought have complained that It is “merely logical” when they could find no flaw in It.”

    It is extremely difficult to explain extremely simple things to people who believe It is extremely complicated.
    I don’t think the Wall Street occupiers are any different in this sense.

  • deirdre mclean

    the General Assemble of Occupy Wall st. has released their demands to the media over a week ago. If your so clueless that you can’t find it then maybe your the one isn’t a very serious journalist. lol

  • Colin, S.Toe

    Cullen.

    I probably lean closer to Trixie, but at this time, I think courage and honesty in dealing with reality, which you continue to demonstrate, will prove more of a unifier than any a priori political biases.

    I would be glad to get your take on what has occurred in my home state of NC, as documented by Jane Meyer.

    I will only add a side note to her story: Art Pope bankrolled it from an inherited fortune based on ‘dime stores’ that for years had a near monopoly in small, poor and minority towns on the kinds of goods now available at higher quality and lower prices at Walmart. For years, Roses was notorious for poor service and management; when the Walmart opened in the neighboring county, the two stores in these counties, already in serious decline, folded. (I gladly drove the extra 15 minutes to Walmart, knowing they would have the oil filter for my Corolla in stock. Now, Fred’s offers a similar trade-off between convenience and price/quality, but well managed, and a locally owned franchise.)

    The story demonstrates that there is more truth to the Brandeis quote that ‘you can have democracy, or you can have concentration of wealth, but you can’t have both’ than just left-wing ideology or resentment. That increasing concentration since the 80′s does not primarily reflect the ‘productivity’ or ‘job creativity’ of the few who’ve gained but more than anything the ignorance of the public (kept there in some measure, by design, albeit perhaps largely ‘unconscious’).

    I support the efforts of MMT to dispel that ignorance. However, the ultimate responsibility lies not with those who have ‘gamed the system’, but with the larger public, that bought into a shallow, unsustainable, and largely illusory prosperity, and now need to find a version not based on exploitation (of either the human or natural world), with room for the basic concerns of fairness and community.

  • Bryan

    Cullen, could you elaborate what you mean by “moral code attached to our debts[money]“?

  • quark

    Erin Burnett is another IMBECILE with a time slot on tv. Listen to her comments Americans consumers that they should stop complaining about the toxic materials the Chinese use in the toys and the food they sell us because the prices at Walmart and rates on mortgages will increase.

    Honestly, it is difficult to see how we managed to walk upright with these knuckledragger types constantly showing up to mankinds grand ball.

    http://www.youtube.com/watch?v=6eO5FhoChCo

    Erin Burnett should be one of the unemployed…it goes to show you no matter how many times you demonstrate your an imbecile if you screw a banker you have job security…come to think of it it’s just another demonstration of how the American taxpayer by saving the a banker is like pissing down our own leg.

  • Paul

    Great post! Really simple and beautiful in reminding everyone why, in fact, the mainstream media is losing. They’re not telling the truth.

  • Colin, S.Toe

    I don’t think I am attacking anyone; certainly not the ’1%’ or competent management, and not even those who perpetrate the myths providing cover for the activities of Scaifes, Kochs, Popes, and the like.

    My main concern is with those on either side of any divides of wealth, education or political allegiance who have failed to recognize that the functioning of the system requires the public interest to be constantly represented, in the form of an engaged and informed citizenry. Any needed political and economic balances will follow.

  • http://macronomy.blogspot.com Martin

    “The credit risk in the bank debt today is less than it was (perceived) to be at the peak of the crisis.”

    Guess the CDS market is telling us something different and so is the cash market…

    As John McEnroe, would say, you can’t be serious…

    I wonder where Morgan Stanley and Goldman Sachs would be without their banking access which enabled them to access the Fed discount window in 2008. Maybe you could give me an explaination.
    And maybe you can explain me in the coming weeks the magic of FAS 159 which will help the banks in smoothing their earnings thanks to marking down their own debt in a perfectly legal way.

  • Dennis

    Now I’m really worried about the proposed bailout of the EU banks by the EU taxpayers. Would it be better to create a central EU issuer of EU currency and have that entity spend money into the economy, especially that of the debtor nations? This may dilute the Euro a bit, but that seems to be what they need. Would the Austrian econ geniuses agree with this? Is MMT a pipe dream since it’s not being used in the world?

  • joe

    Yeah, I think you’re right about TARP, I think the teensy-tiny-wart-on-the-ass-of-the-real-bailout TARP got paid back, and that’s what the media is usually referring to as ‘the bailout.’ But they conveniently ignore the 15T to 29T (I’ve seen various numbers, Wray says 29T) of ‘loans’ given by the Fed to practically every big player.

  • Czeslaw

    I’m sorry, but it’s just sort of amusing, in an ironical way:

    <>

  • http://kiddynamitesworld.com Kid Dynamite

    the bondholders profited – Cullen. And you can figure out why if you understand what Too Big To Fail means…. (note: this is the travesty that the OWS goofballs will never understand… that it’s the BONDHOLDERS who were bailed out. of course, they’ll also never understand that they are all better off for it. and that’s coming from a guy (me) who is SUPER Anti-bank-bailouts)

  • Michael Covel

    Goldman Sachs and Morgan Stanley, to name a few, should not exist and should have been killed off, but they were saved by the very politicians elected by the very voters now unhappy and disenfranchised. Everyone trusted the system while their stock accounts and house values were increasing? Changed their minds now that their pact with El Diablo has not worked out? I do worry that the man in the mirror is not getting enough blame.

  • suckmybishop

    Dear Cullen,
    repeat after me: a banking crisis is a household crisis!
    produce for me a scenario in which all the major banks topple, but households make out fully with their deposits, and without other major collateral damage in day-to-day corporate borrowing and incidental household borrowing.

    if you can produce such a scenario, i’ll be very much interested in hearing it.

    TARP was obviously a lesser evil

  • Different Trixie Warchest

    Since when did you go all Zen on us?

    When I am tired, I will go to sleep.

  • Ben

    Moral hazard be damned, as long as Uncle Sam makes money!

  • Wantingtoretire

    Trixie for President…………..

  • Different Trixie Warchest

    Haha, WTR, you are killing me tonight.

    But damn straight!

    BTW, that was a TOTAL rant. :)

    TRIXIE 2012!

  • Kevin

    Your most insightful article yet, Cullen. Great work.

  • William Bedloe

    The way I see it, Main Street anger has taken on many faces in this crisis. The Tea Party started it, and now we have OWS. Of course, the media and politico types have already staked their claim on each side and in many cases co-opted the messages. The Tea Party and OWS messages should in reality be the same – the little guy is getting stomped, and we aren’t taking it anymore. Instead, we have mass media destroying the tea party, with supposedly mature journalists openly mocking them with unseemly monikers. Now, the OWS frenzy has been co-opted by left leaning progressive types (unions, politicians, the media). From what I can glean, some of the anger of the OWS folks should be directed at Democrats as well, considering their role in the bailouts of Wall Street! I don’t see that now – I see that at ground level, their message is disjointed and emotional…at least until the progressives move in to hone it for maximum political gain. Obama – to his discredit – shamefully plays off of this, because it takes the American eye off of his failed leadership, to the detriment of all.
    The reason common sense does not prevail anymore is because those with common sense don’t own the bullhorn to get their views aired. The ones who do get their views aired have no idea what they’re doing. What we have is unfocused – but very real – anger in America. It is important to identify the real culprits. Perhaps we can even combine an OWS/Tea Party protest in the future by kicking out the ones trying to co-opt the movements.

  • beowulf

    Right. So the next step in your master plan should be getting on TV. Even if you don’t become a paid commentator, TV appearances are how you prime the pump for future book sales and the lecture circuit.

  • http://www.pragcap.com Cullen Roche

    Well, I am on the radio Monday. It’s a start….

  • breed10

    i liked this article. the explanation of the monetary system is very succint in the comment to erin.

  • JWG

    Back all deposit and checking accounts at 100% using the Fed’s keystroke money to do it, so as to help Main Street. Wipe out the stockholders and pay the bondholders after liquidation at whatever price is justified on a mark to market basis after liquidation of assets. Nationalize management of the irresponsible banks prior to selling off the valuable pieces (e.g., the loan book) to banks that were well managed. Clear the housing market. Have the Fed buy enough assets with keystroke money so as to avoid too deep a fire sale discount. Reenact Glass Steagall and separate investment banking, utility banking and insurance once again. Force derivatives onto exchanges and value them (net and gross exposures) daily. Wring out the mystery of counterparty exposures once and for all so bank valuations are no longer a black box. Give unemployed bank employees their 99 weeks of UIC so that they can adjust to other work, just like industrial workers must do.

    In 18 months to two years, we will be through the worst and be growing again. Instead, we subsidize the offenders, allow zombie banks to roam the landscape and continue to paralyze the housing market for an indefinite period of time. We do this because our government is owned by the TBTFs. The Democrats have sold their souls to Wall Street and the flow of campaign money to them from Wall Street proves it. Once the party of the left has sold out, the only hope remaining is that the party of the right has enough old school Main Street Republicans left to block any more bailouts if the system crashes again.

  • Bond Vigilante/Willy2

    AFAIK the Wall Street banks didn’t repay all the bailout money back to the FED/Treasury. So, IMO – Erin Burnett tried to put words in the mouth of this protester. And is twisting the words because she didn’t get the answer she hoped for.

  • Colin, S.Toe

    Ok, but change the last name to ‘Warchester’ (sounds vaguely aristocratic); lose the ‘Different’ (too close to ‘alien’) and the *ed words (too threatening); keep all of the bite.

  • JRigs

    Nice response.

  • Jay

    “monopoly supplier” – debaser is more like it. Also, there are plenty of other fiat currencies in the world.

  • jjames

    i thing someone had crush on erin. erin is simply a reporter not an analyst.

    although i agree, “the government made a profit on the bailouts” is a crock.

    and if the banking system is fixed, why are they still getting free money at 0% interest rates?

    the us government can easily “fix” the market short term. but we’ll see what happens longer term withb thevbanks and other outstanding bailouts.

    did it ever occur to these jokers what is needed it lower prices not interest rates.

  • Broll the American

    It makes me think of this Solyndra “scandal”… Essentially the Fed Government handed the private sector (and many Obama cronies) $500million dollars. They built a fancy factory, paid some employees for a time, bought other resources, materials and equipment and were never able to pay it back. That’s a half-billion dollar win for the private sector, no? If they had been able to stay in business, and paid off the debt, they would just have collected revenues from other sectors of the private sector and sent checks back to the government. The net for the private sector would have been 0 or less if you factor in interest.

  • Trixie Warchester

    I’m sold, it has a certain ring to it. And this way I can start all comments with ‘Dahling’ and end with ‘MWAH’. Win/win.

  • Sherman McCOY

    Make money or lose money, the FED is keeping short term rates below the inflation level as a subsidy to banks. Seniors should be out en masse protesting that their savings are being confiscated through “financial repression”. It’s a crime

  • theta

    Isn’t “Have the Fed buy enough assets with keystroke money so as to avoid too deep a fire sale discount” contradicting the let-the-market-clear-naturally-in-order-to-avoid-moral-hazard message? How do you define what’s “too deep” of a discount? At the end of the day if too big of a dicsount is set at 20% from the peak for example, then no bank would be bankrupt so there wouldn’t be any need for bailout at all. But you would have the same problem of resources being misallocated to unproductive sectors (FIRE).

  • theta

    From discussions with friends, it seems that some people are angry not at the government for not letting the banks fail, but at the bank executives who took enormous and stupid risks thus destroying the shareholders’ value, and given the public’s exposure to bank shares via 401k etc. the public lost money whereas those executives still got their bonuses. I guess that if the govt had taken your suggested course of action, that anger would have been greater, since equity would have been wiped out causing bigger losses to 401k accounts. You can’t win.

  • jjames

    yes, and the lower interest rates and increased money supply are resulting higher prices for consumers.

    meanwhile, its on to more market volatility, and bubbles, i.e. bonds, gold.

  • JWG

    If the market freezes such that the bid is a penny on the dollar (kind of like the flash crash), the Fed is the bid based on an honest model.

    The solution is right there, and it is not that complicated. We did it after the S&L crisis with the RTC. No one in power wants to go in this direction because they are all co-opted and corrupted by Wall Street money. The blood funnel has gone deep.

  • RobertM

    No system, which continually funnels a growing amount of money into the hands of a few, can be sustained. Once the exponential growth of that inequality turns perverse, as it now has, it will show that concentrated wealth destroys democracies. It’s not that government is spending too much money, it’s that it is going into the wrong hands.

    “The greatest shortcoming of the human race is our inability to understand the exponential function.” Albert Bartlett

  • Colin, S.Toe

    (As in “L’Etat, c’est mwah”? I think she means ‘air kissing’.)

    No, no, no – think upper crust/macho. You are running for president, not trying to wrest the ‘Queen of the Air’ crown from Ms. Palin. Come to think of it, maybe you should change the first name to ‘Hilary’.

  • theta

    The bid on a house will not be a penny on the dollar, it will be let’s say 50 cents (i.e. 50% off the top), should the Fed step in to buy it? And what should it bid? 60 cents? 65? Who can determine what it’s really worth?
    Likewise, the bid on a subordinated or mezzanine tranche of a subprime CDO could be a penny on the dollar. Should the Fed step in and bid 20 cents? I would say that instead you should actually hit that bid because it’s really worth 0 (zero) cents on the dollar.
    So you see that before you have the Fed act as a market maker on any assets, you run the risk of distorting the market and causing moral hazard as inevitably some people will benefit from this intervention.

  • rfr

    When the government puts more money into the private economy without any corresponding growth of the economy, doesn’t that decrease the value of the dollar? So, wouldn’t pulling that money back out *increase* the value of the dollar?

  • Hilary Warchester

    Hilary Warchester? That is so atrociously bad, even I can’t resist. Bless you.

  • Uncounted

    FYI: The Fed Res broke the law, purporting ‘authority’ under Sections of the Federal Reserve that do NOT apply to GSE’s (Freddie & Fannie)rather the only genuine government agency backed by US Govt, GINNIE Mae operated by FHA, nor
    particularly the illegal Maiden Lane 1 & II schemes which is prohibited.
    You might be interested in an article detailing the specifics of this illegal
    Fed & Treasury collusive misconduct – and abuse of power thereof – by Hussman, posted on ‘financialsense.com’ under title: ‘Talking Points for OWS Protesters’
    (post also has a link to Hussman’s website for the full article.)

    Predictably, Congress is complicit as well, enabling, facilitating and condoning the ongoing monetary & fiscal mismanagement of the Fed – instead of doing ITS job of oversight. ALL self serving political parasite’s including regulatory bureaucrats don’t DARE & will NEVER bite the hand they need to feed them OUR money to squander. The entire system is so corrupt, it’s imploding.
    That’s the good news. The bad news is that throughout history, no fiat currency nor the corrupt self serving ‘governments’ exploiting & destroying their economies, currencies & societies, have survived – they all collapse, hurting the ‘masses’ most.

    Thomas Jefferson presciently warned: “IF the people EVER allow a National bank, their children will grow up HOMELESS on the shore’s of the country their father’s fought for and founded.”

    Andrew Jackson was the only US President to pay off the debt, actually balance the budget and ‘killed the National Bank.’ His farewell address also presciently admonished precisely what we had been subjected to in the carefully contrived, conveniently timed, manufactured financial ‘crisis’ that began unraveling in 2007/08 – which hundreds of economic & financial experts had warned about years in advance but who were dismissively ridiculed, trivialized, marginalized and ignored by MSM propaganda mouthpieces protecting their corproate ‘sponsors’ & advertisers and the political establishment of BOTH broken parties and their puppet masters, the Fed led cartel of its member bank owners.

    NONE of the root causes of the problems have been addressed, rather, merely papered over in desparate attempt to keep the scam going a bit longer. There is an excellent interactive chart posted on ‘thefiscaltimes.com’ showing the convoluted 13, THIRTEEN, regulatory ‘agencies’ overseeing the banking scheme.

    This is not only a huge waste of our money on the obscenely bloated & overpaid minions in the labyrinth of bureaucratic bean counters – the real purpose is the protection in numbers, i.e., NO ONE can be held accountable.

    Thanks for your time, hope the suggested links to more info is welcome/useful.