Societe Generale on trial in French-Israel scam

PARIS (AFP) — Embattled French bank Societe Generale faces fresh troubles Monday when a trial opens in Paris involving a vast money laundering scam between France and Israel.

Four banks, including Societe Generale, and 138 people, including the bank's chairman Daniel Bouton, are on trial over the multi-million dollar scam that allegedly began in the late 1990s.

The other banks include Societe Marseillaise de Credit, Barclays France and the National Bank of Pakistan.

Societe Generale revealed late last month it had lost a staggering 4.8 billion euros (7.1 billion dollars) in the biggest rogue trading scandal in history.

Takeover talk is now swirling around France's third largest bank, with two French banks eyeing a possible bid on Societe Generale.

Allegations of a money laundering network stretching between France and Israel initially surfaced during an investigation into a separate fraud involving companies in the Sentier garment-making district of Paris.

Cheques trafficked from France were allegedly cleared in money exchange offices or banks in Israel, where a third party can clear a cheque by paying a cash sum, making it difficult to trace the origin of the funds. The sums were then repatriated to French banks.

Among those charged in the France-Israel scam include six rabbis, a former French prosecutor and 57-year-old Bouton, along with other banking managers.

In the case of Societe Generale, investigators cite one example in which the bank received seven million euros (10.4 million dollars) in stolen cheques from the Israel Discount Bank between 1997 to 2001, "knowing these influxes had a criminal origin."

All four banks are charged with contributing to money laundering and profiting from the deals. All deny the charges.

"Societe Generale and its representatives did not -- either knowingly or unknowingly -- participate in this system and in no way committed the crime of money laundering they are charged with," the bank's lawyer Francois Martineau said.

Bouton is accused of turning a blind eye to the cheque system, though his lawyers insist he knew nothing about it.

Investigators have gathered 600 tonnes of paperwork and evidence for the trial which is expected to last until July.

Eighty five people have already been found guilty over the case in 2004. Some of those defendants are back on trial facing new charges.

MEDIA LENS: Correcting for the distorted vision of the corporate media

February 5, 2008

MEDIA ALERT: 'CREATIVE DESTRUCTION' - THE MADNESS OF THE GLOBAL ECONOMY

Watching the corporate media report the 'financial crisis' is instructive. From the perspective of power, it is important that a steadying hand is applied to the tiller of news and commentary on the crisis, and the global economy itself.

And so columnist Martin Wolf took a 'measured' view in the Financial Times. There have been 100 "significant" banking crises in the past thirty years, he noted, making them almost routine. Authorities have had to intervene to "rescue" the US financial system from four crises over that period: the developing country debt and also the "savings and loan" crises of the 1980s; the commercial property crisis of the early 1990s; and now the subprime and credit crisis of 2007-08. As Wolf observed correctly of the banking sector: "No industry has a comparable talent for privatising gains and socialising losses."

Wolf's big "fear", though, is that the crumbling financial system will destroy "the political legitimacy of the market economy itself." Why this "political legitimacy" should not be challenged is left hanging in the air.

And what Wolf terms the "market economy" is an extreme variant of capitalism known as 'neoliberalism' which is massively subsidised and protected by powerful states. Again, all this is left unsaid. Wolf turns instead to bankers' pay which, he asserts, lies at the root of the problem:

"By paying huge bonuses on the basis of short-term performance [...] banks create gigantic incentives to disguise risk-taking as value-creation." Official intervention to regulate bankers' remuneration is a "horrible" solution. But the alternative, an endless series of financial crises, is "even worse." (Wolf, 'Why regulators should intervene in bankers' pay', Financial Times, January 16, 2008)

Wolf's "solution", however, is hugely impractical. Defining a link between bankers' performance and remuneration would be immensely difficult, involve unlikely international regulation of global markets and require complex mechanisms to police. As this simply is not going to happen in the current political climate, given the certain massive resistance of financial interests, we can expect similar and maybe worse crises in the future.

Over at the Times, another useful gauge of establishment thinking, the title of Anatole Kaletsky's column summed up the required pacifying message: 'Relax. Our economy isn't manic depressive.' Happily, according to Kaletsky's "hunch", it will all turn out fine: "a combination of monetary and fiscal easing, along with some regulatory changes [...] will lessen the credit crisis and prevent a world recession." (Kaletsky, The Times, January 24, 2008). The message was buoyant, but it was also superficial.

The Independent's economics commentator, Hamish McRae, pinned blame for the crisis simply on "mistakes":

"Bankers, like the rest of us, make mistakes, but the scale of the mistakes, particularly in US banks, has been enormous. We won't fully understand for some time quite how they could persuade themselves that bundles of housing loans to clearly uncreditworthy borrowers should be ranked as almost as good as government securities."

The "legitimate question" now, asserts McRae, is "whether the continuing banking weakness has become so serious as to transfer what is still a financial market problem into a more general economic problem." His reassuring conclusion:

"Banking troubles will be a drag on the world economy, slowing it down. But they won't stop it in its tracks." (McRae, 'The markets are bad, but don't panic just yet', Independent, January 23, 2008)

This would be comforting news for the 'masters of the universe' who were meeting in Davos, many of them in sombre mood: 27 heads of state; 113 cabinet ministers; hundreds of chief executives, bankers, fund managers, economists and journalists: about 2,500 participants in all. Sean O'Grady, the Independent's economics editor, was enthralled by the "concentrated, eclectic mix of the top slice of humanity" that "is part of the 'magic' of this mountain redoubt"; all twinkling under a "sprinkling of stardust" brought upon proceedings by the likes of Bono.

The stardust was clearly affecting O'Grady's vision as he proposed we should rely on western political and corporate leaders to "balance the needs and aspirations of the old economies of the West, the emerging economies of the east and the still poor billions in the south." (O'Grady, 'Davos. Wealth, power and a sprinkling of stardust', The Independent, January 22, 2008)

In the Guardian's comment pages there was at least a glimmer of dissent from columnist Jonathan Freedland. "Turbo-capitalism is not just unfair," he wrote, "it is dishonest and dangerous." He pleaded: "surely this is the moment when Labour and the centre-left can dare to question the neoliberal dogma that has prevailed since the days of Thatcher."

Freedland's dissection was limited, though, cautiously proposing that "you could argue" that "capitalism is always [...] parasitical on the state." What he sought was a kinder, gentler form of capitalism instead of the "turbo-capitalism" which is happy to rely "on us, the public, and our instrument, the state, when it gets in trouble." Thin on details, he concluded weakly: "Now we should demand a say the rest of the time, too." (Freedland, 'The free-marketeers abhor the crutch of the state - until they start limping', Guardian, January 23, 2008)

The above sample indicates the narrow spectrum of corporate media opinion on the 'financial crisis.' Viewpoints are heavily biased towards the status quo, with only occasional fig leaves of mild dissent. This is a misleading picture, avoiding scrutiny of an economic system that is both fundamentally flawed and stacked against the majority of humanity.

Financial and political elites are at pains to convince the public they +can+ get things 'back on track' by tweaking interest rates, 'stimulating' the economy and only infrequently having to intervene to make a heroic "rescue". Thus, although the occasional financial crisis cannot be prevented - just as a flu virus might afflict a healthy body - the economy itself is presumed to be "inherently strong." (President George W. Bush, quoted, Democracy Now!, January 23, 2008; http://www.democracynow.org/2008/1/23/recession).

This is a vital illusion; the required view of wealthy investors and corporations. After all, a basic requirement for powerful authority to prevail is the mythical projection of a benign force in control of events. Western leaders and their faithful retinue in the media are deceptively reassuring about the global economic situation - because profits and power demand it. Otherwise they run the serious risk of a huge slump in public confidence in the current economic system and even in what passes for 'democratic' politics. Corporate reporting of the 'financial crisis', then, is yet another example of how reality is distorted in service to power and profit.

Boom And Bust

Despite the huge scale of yet another financial crisis, and the threat of an impending severe global economic recession, the major political parties and elite media refuse to address the possibility of fundamental weaknesses and inequality at the very heart of modern 'capitalism.' In reality, the current system, driven by private profit far beyond environmental sanity, is incapable of meeting the needs and aspirations of humanity.

The inherently unstable and destructive behaviour of capitalism derives from its inevitable cycles of "boom and bust." We can see this in both theory and practice. Corporations operate for the primary benefit of their shareholders, as demanded by company law. The priority of shareholders is to maximise profits. The capital that they invest must increase in value to justify the risk undertaken. Demand for products and services thus needs to expand. The profits gained, or part thereof, can then be reinvested to generate further profit.

But the process is unsustainable because markets become saturated as consumers reach the limit of their demand capacity. Intense competition impels producers to drive down costs, especially labour, to make a profit. As profits become squeezed, and dividend-hungry shareholders threaten to take their investment elsewhere, producers become desperate to push up total sales. They pump out ever greater volumes of commodities and spend billions on advertising to boost demand. Inevitably, the flood of commodities surpasses the capacity of the market to absorb products. Sales collapse, unemployment rises and a full-blown recession ensues: this is the 'bust' part of the cycle. Surplus productive capacity then has to be destroyed before a new 'boom' can begin.

That is the theory, and it is borne out by historical experience. Since the industrial revolution, around 200 years ago in the West, boom-and-bust cycles have recurred with varying intensity. The most destructive bust occurred in the 1930s Great Depression, leading to World War Two and the deaths of over 60 million people.

Historically, as Karl Marx recognised, capitalism can also be seen as the driver of technological revolutions and in boosting human powers of production. And, at least in the West, it has been associated with past increases in the living conditions of a sizeable fraction of the population. So perhaps we should accept that capitalism, with all its flaws, +is+ the best we can do. Perhaps we should believe the official argument that governments have largely learnt to cope with boom-and-bust cycles through judicious planning.

For example, a huge crisis +was+ averted in the 1970s. However, this was only possible because, as British economist Harry Shutt explains: "the authorities were determined (as never before) to use the forces of the state - through fiscal and monetary manipulation (including massive but unsustainable government borrowing) - to try and keep the show on the road." (Shutt, email, January 28, 2008)

But these were only short-term 'fixes' at best. Gerry Gold and Paul Feldman sum up:

"Attempts to resolve the simultaneous stagnation and inflation of the 1970s through high interest rates produced a recession in the US in the early 1980s. Parallel deflationary policies imposed by the UK's Thatcher government from 1979 led quickly to a recession and a fullblown slump by 1985. Attempts to overcome this only led to a further recession in 1991-2." (Gold and Feldman, 'A House of Cards: From fantasy finance to global crash', Lupus Books, London, 2007, p. 28)

Moreover, Shutt exposes the "coping strategies" promoted over the past twenty years by government authorities in cahoots with Wall Street and the City. These have "all involved pumping up credit bubbles around various fantasies - 'emerging' markets, dot.com, housing - which had about as much substance as the original South Sea [Bubble] and could only be sustained even for a few years by a similar level of fraud and misinformation." (Shutt, email, January 28, 2008)

In 1997, a major financial crisis erupted, starting in East Asia. Currencies collapsed, businesses went bankrupt and millions of people lost their jobs. Many Asian enterprises were subsequently snapped up at rock-bottom prices by corporations and investors in the West. Soon after, in 2000, the speculative bubble of investment in internet-related companies burst spectacularly. This 'dot-com' bust saw a lengthy recession ensue in the developed world.

Historical evidence shows, then, that governments have been largely powerless to combat capitalism's inevitable and damaging 'business cycles'. However, this should not be confused with the resiliency of capitalism; the system has demonstrated a repeated capacity to reform itself sufficiently to allow renewed growth and to survive further rounds of business cycles. So it would be wrong to assume that the whole capitalist system, unstable and unfair as it always will be, is on the verge of total collapse.

Official Fraud And Propaganda

An alarming symptom of what is wrong with current economics is the increasingly desperate and cynical measures taken by powerful states, corporations and investors to maintain faltering public confidence in global capitalism. Just as Enron, Worldcom and a host of other large corporations have committed accounting fraud, so governments have falsified figures on inflation, output and unemployment to present a false picture of a healthy economy. (See Shutt, 'The Decline of Capitalism', Zed Books, London, 2005, pp. 104-5)

For example, the US government has deliberately exaggerated GDP growth rates in order to disguise the economy's poor performance since the mid-1970s; in the developed world, growth rates have actually declined over the past three decades. As David Harvey reports, aggregate global growth rates stood at around 3.5 per cent in the 1960s. Even during the difficult 1970s, marked by energy shortages and industrial unrest, it fell only to 2.4 per cent. But the subsequent growth rates have languished at 1.4 per cent and 1.1 per cent in the 1980s and 1990s, respectively, and has struggled to reach even 1 per cent since 2000. (Harvey, 'A Brief History of Neoliberalism', Oxford University Press, 2005, p. 154)

In terms of public perception, however, the authorities have largely succeeded. They have maintained the fiction that they +can+ manage the economy effectively and that global capitalism is the only game in town. How has this been possible? Shutt points to a "media campaign of uncritical propaganda and pro-market hype." This "sustained act of mass deception (in which the establishment has seemingly come to believe in its own propaganda) has had disastrous consequences." (Shutt, op. cit., pp. 36-37)

Those consequences include crushing levels of poverty and inequality; wars motivated by the desire for strategic control, hydrocarbon resources and economic markets; climate instability; and the most rapid loss of species in the planet's history.

The Neoliberal Nightmare

To complement the above picture, and in contrast to corporate media coverage, we must also critically describe the political-economic process summed up by that innocuous-sounding word, 'neoliberalisation'. This serious attack on democracy, the latest stage in advanced capitalism, took root in the Reagan-Thatcher era of the 1980s, and has accelerated ever since. Proponents of neoliberalism tell us that human well-being flourishes best within an institutional framework characterised by strong private property rights, 'free' markets and 'free' trade. But what has it meant in practice?

First, recall that after the trauma of the Depression and WW2 in the 1930s and 1940s, Western governments used Keynesian fiscal and monetary policies (named after the British economist John Maynard Keynes) to try to dampen business cycles and to ensure reasonably full employment. There was significant state-led planning, and even state ownership, of key industrial sectors such as coal, steel and cars. Governments also made huge investments in health care, education and infrastructure. As David Harvey explains, this system of "embedded liberalism" involved "market processes and entrepreneurial and corporate activities [that] were surrounded by a web of social and political constraints and a regulatory environment."(Harvey, op. cit., pp. 10-11)

During the 1950s and 1960s, embedded liberalism delivered high rates of economic growth in the West. But in the 1970s, given the inevitability of boom-and-bust, a serious crisis of capital accumulation arose. Inflation and unemployment soared, and labour unrest threatened business interests. The free-market and monetarist financial centres, notably the City of London, had never been enamoured of the postwar welfare state and were increasingly antagonistic towards state Keynesian policies. As Harvey notes, "the nationalized industries were draining resources from the Treasury." (op. cit., p. 57). With the oil shocks and economic stagnation of the 1970s, powerful business and political forces mobilised to set a course for the next stage of capitalism: to regain the elite class power that had been dissipated, to some extent, by postwar policies of wealth redistribution and social welfare. Neoliberalisation was born.

A wave of deregulation of financial markets swept the world, and transnational mobility of capital rapidly rose. Corporate pressure intensified on governments to create a 'good business climate' and to adopt neoliberal 'reforms' that routinely squeezed state spending. Wall Street-IMF-Treasury policy measures came to dominate US economic policy and many developing countries were driven down the neoliberal road, creating social havoc and environmental disasters. Neoliberalism became the new economic orthodoxy, exerting a powerful ideological influence in the media and academia.

The whole process has been a form of 'creative destruction', weakening or even breaking down existing institutions and state powers, social welfare, health care, education systems and culture - even modes of human interaction, behaviour and thought.

In some countries, certainly, there have been 'successes' during the initial stages of neoliberalisation in lifting people out of poverty and in raising living standards for many - just as past capitalism generally did in the West. However, this has certainly not been the motivating intent of corporations and investors, despite much pious rhetoric about 'solving poverty'. Any localised 'success' has typically been achieved at the expense of people elsewhere, in regions where neoliberal 'development' has not been as advanced. China's achievements, for example, have been gained to the serious detriment of neighbouring economies.

A persistent and deep-rooted characteristic of neoliberalisation has been its strong tendency to worsen social inequality, as we will see later. Social progress achieved during neoliberalisation of previously poor countries has not been sustained. Typically, state intervention has been required to maintain any semblance of a social welfare safety net - or the net has simply been left to fray in the chill winds of economic 'progress'.

At the other end of the social spectrum, neoliberalisation has generated spectacular concentrations of wealth and power that have not been seen since the 1920s. In China and Russia, new and powerful economic elites have been created. Harvey sums up:

"The flows of tribute into the world's major financial centres have been astonishing. What, however, is even more astonishing is the habit of treating all of this as a mere and in some instances even unfortunate byproduct of neoliberalization. The very idea that this might be - just might be - the fundamental core of what neoliberalization has been about all along appears unthinkable. It has been part of the genius of neoliberal theory to provide a benevolent mask full of wonderful-sounding words like freedom, liberty, choice, and rights, to hide the grim realities of the restoration or reconstitution of naked class power [...]." (Harvey, op. cit., pp. 118-119)

The above is but a hint of the stark reality underpinning the 'flourishing' of the global economic system; a reality that is shamefully missing from broadcast headlines and newspaper front pages. The current system of economics, particularly the latest stage of "turbo-capitalism", known inoffensively as "neoliberalism", is built upon painful boom-and-bust cycles fuelled by corporate greed and maintained by cynical deception of the public. The costs to the planet - in terms of human suffering and environmental collapse - are staggering.

In Part Two, to follow shortly, we tackle the establishment myth that India and China are the latest 'success' stories of global capitalism.

Please do NOT reply to the email address from which this media alert originated. Please instead email us:
Email: editor@medialens.org

This media alert will shortly be archived here:
http://www.medialens.org/alerts/08/080205_creative_destruction_the.php

The Media Lens book 'Guardians of Power: The Myth Of The Liberal Media' by David Edwards and David Cromwell (Pluto Books, London) was published in 2006. John Pilger described it as: "The most important book about journalism I can remember." For further details, including reviews, interviews and extracts, please click here:
http://www.medialens.org/bookshop/guardians_of_power.php

New Study Claims Mistruths Shaped Rush To War: Is The Same Type of Misinformation Influencing Economic Coverage?

By Danny Schechter
http://www.zmag.org/sustainers/content/2008-02/03schechter.cfm

Znet Commentary; February 03, 2008

It took almost five years for major studies to come out to confirm what most of us knew a long time ago about Iraq. The conclusion: the lies "were part of an orchestrated campaign that effectively galvanized public opinion and, in the process, led the nation to war under decidedly false pretenses."

So now it's "official" with two top journalist organizations documenting that the war in Iraq was facilitated and sold with a whopping 935 misleading assertions. May we ask: Why is it that truth takes so long come out in a land which proudly claims to have the freest media in the world?

If this happened in the recent past could the deception be continuing? If there were 935 lies abut the lead-up to war, how many are there today about our economy and the crisis we are now just beginning to experience?

Keep in mind that old adage: truth passes through three stages. First it is denied. Then the people who raise it are demonized. And finally, when it is irrefutable it is widely accepted usually with the proviso that everyone always knew it all along.

That is what seems to be happening today with a remarkable recent shift in political and media pronouncements about the economy. They have gone from boom to gloom, from inattention to "deep concern," from boosterism to worries not just about a recession-and many experts say we are in one-but something worse. A crash? A financial meltdown? A global downturn? A Japan-like "stagflation?"

Or horrors, may my mouth be still, will anyone express fear of that dreaded "D word," a depression?

As one who has been called an "alarmist" for forecasts warning of a "sudden collapse" in my film In Debt We Trust (In Debt We Trust.com) I know that the media prefers good news to bad, But what are we to make of a New York Times front page story with the headline "worries that the Good Times Were Mostly A Mirage" suggesting that we may have been misled, or misled ourselves, for years.

This is a point that Mike Adams makes with stunning clarity: "As the markets are finally demonstrating today, the "economic good times" spurred by a runaway housing price boom (and powered by astonishingly fraudulent lending practices by dishonest banks) are over. A day of reckoning has arrived, and the unwinding of this false wealth that has been propping up the U.S. economy for so many years is about to be unleashed upon the American people."

Will we soon be reading new studies cataloging all the errors and omissions in government statements, industry hype and business reporting that did not anticipate or glossed over the slow-motion build up of the economic downturn.

For weeks now, the markets have been falling or experiencing volatile shifts, dramatic ups and downs, suggesting deeper worries and anxiety. Now we are told that the mood up on the mountaintop in Davos where the super-elite of the World Economic Forum hold its annual tribal ritual is one of unconcealed dread.

In short, as we learned from all the misleading hype for the war in Iraq, that experts are not so expert. In fact they were mostly completely wrong. We know now that most of our politicians, regardless of party, bought into the mythology and may be incapable of telling the truth even now.

The pattern continues with critical voices on the economy not being heard with any regularity. The business press still relies on the analysts and CEOs who downplayed past problems or were complicit in present ones. Even billionaires like George Soros are covered more in Europe than in the US. He had his latest commentary in London's Financial Times sent to me. It suggests that this crisis, unlike earlier ones is much more severe and signals the end of an era.

And that is serious:

He writes "the current crisis marks the end of an era of credit expansion based on the dollar as the international reserve currency. The periodic crises were part of a larger boom-bust process. The current crisis is the culmination of a super-boom that has lasted for more than 60 years."

He concludes: "The danger is that the resulting political tensions, including US protectionism, may disrupt the global economy and plunge the world into recession or worse."

Note the phrase, "or worse."

Michael Dicks, head of research at Barclays Wealth, told the Independent: "The risk for policymakers is that they become seen as ineffectual, and the Fed had itself already inferred that its past program of interest-rate cuts has not been up to the task. We remain worried that the overly negative reaction of markets will become more and more self-fulfilling, polluting economic fundamentals."

Translation: The stimulus solutions are not a panacea and this crisis is beyond anyone's control because it is driven by unpayable debt, a deficit driven by war spending, structural imbalances and business cycles.

And, unfortunately, as Bill Bowles notes, our media often obscures the reasons for the panic and instead spins the upbeat drumbeat of officialdom by:

"Never call(ing) a recession a recession, just keep on saying that it's 'around the corner, maybe', a ridiculous response given that we are already in a recession as any fool can see.

'The big question is whether we are just seeing a bad month for shares - or whether this is the start of a bear market that could see share prices sliding for years.'

So questions get answered with, you guessed it, more questions."

But maybe "THEY" don't have answers-as we would expect them to-- and perhaps we do in the sense that the public and advocacy groups do not have to accept the flawed media framing of these issues that proved so wrong about the war then, and deceptive about the economy now.

We don't need more after the fact studies but, instead, robust action that will be stimulus for more economic equity, not subsidies for the institutions that caused the crisis in the first place.

News Dissector Danny Schechter wrote SQUEEZED, an e-book chronicling the crisis and calling for better media coverage. Download from Coldtype.net/debt.html. Comments to dissector@mediachannel.org

Drooling mad
By The Mogambo Guru

For a good reason why we are in such Big Freaking Trouble (BFT), I note that the Wall Street Journal, a big force in the financial world, is bizarrely out of touch with how things really work. And the reason I say this is not because I am jealous and petty about their preeminence in the financial world, although I am, but about the Journal's editorial piece, "We're All Keynesians Now", in last Friday's paper.

They were talking about the government's new plan to literally give money to people to spend as an economic stimulus, and the editorial writer ludicrously says, "But the $250 or $500 one-time rebate check they may now receive has to come from
somewhere. The feds will pay for it either by taxing or borrowing from someone else, and those people will have that much less to spend or invest themselves. We are thus supposed to believe it is 'stimulating' to take money from one pocket and hand it to another." Hahaha! Wrong-o dude!

Oh, I admit that there was a time when the money supply was constant, and the only money that could be had by a government was by taxing it or borrowing it from people who saved some money, giving rise to such quaint notions as the federal government borrowing so much that it would be "crowding out" private borrowers. But those days have been long, long gone for over 20 years. You'd think the Wall Street Journal would have noticed!

The way it really, REALLY works is that the Federal Reserve creates more credit by pushing the Magic Money Button in Bernanke's office, which makes credit appear magically in the banks, which the banks can now lend out, which makes it easy for someone to borrow the money and buy the bonds that the government is selling!

Note that not only does the government get a lot of new money to spend, but nobody has "less to spend or invest themselves"! Everybody has the same, or more, money! Hahaha!

So you can imagine my surprise to later read in this same editorial that, "three of the four main economic issues cited by Americans are price-related". The four "economic issues" are; health care costs, inflation/rising prices overall, the price of gasoline, and high taxes.

For oodles and oodles of extra credit on your homework assignment tonight (and believe me when I tell you that most of you can use all of the extra credits that you can get between now and the end of the semester), find one "economic issue" that is NOT "price-related".

But this kind of weirdness is all over the place, as I learned when I watched some of Bernanke's testimony the other day. The question was about how much this subprime mortgage bust is going to cost. Bernanke replied that there is about $1 trillion in subprime mortgages, and that 20% are in arrears. So, he says, assuming that ALL of the loans in arrears go bad, then (and you gotta love this for quick thinking on his feet!) if that is the end of it, and THEN if prices rebound by 50% of the losses, then the total loss will be only $100 billion! Hahaha! I can't believe he pulled that crap right in front of my eyes! Hahaha! Too much! We truly ARE a nation of nitwits when he can do that to us, and our elected dimwits, and get away with it like that!

Fortunately, I was heavily sedated and in a straightjacket at the time, tied to a chair as the minimum precautions for watching Federal Reserve chairmen appear in public, especially in front of one clueless bunch of congressional yahoos or another.

Although the medications and restraining straps prevented me from moving or making a sound, I thought I could still spit at the TV in a mute display of disgusting-yet-gripping anger and outrage as a performance-art piece, maybe winning an award of some kind, maybe one with a cash prize. I was wrong. I could, instead, only drool and stare with dead, lifeless eyes.

And so my juicy wad of spit did not make it all the way to the TV screen, as per plan, but dripped drowsily down my chin into my lap, so it looked like I peed in my pants.

Then I realized it was a "mute display of disgusting anger and outrage" after all, maybe not as gripping, but I smiled in satisfaction. At least I think I smiled. It was better than nothing, anyway.

Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it.

Copyright 2008, The Daily Reckoning.