Gordon Gekko tried to tell you

24 Feb Gordon Gekko tried to tell you

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Say what you will about the 80s or Hollywood movies.

Gordon Gekko tried to tell y’all. In fact, he tried to tell y’all in 1987 and again in 2010.

Ignore it at your own peril.

BUD
Tell me, Gordon–when does it all end? How many yachts can you waterski behind? How much is enough?

GEKKO
Buddy, it’s not a question of enough. It’s a zero sum game, sport. Somebody wins and somebody loses. Money itself isn’t lost or made, it’s simply transferred from one perception to another. Like magic. That painting cost $60,000 10 years ago. I could sell it today for $600,000. The illusion has become real. And the more real it becomes, the more desperately they want it. Capitalism at its finest.

BUD
How much is enough Gordon?

GEKKO
The richest one percent of this country owns half the country’s wealth: 5 trillion dollars. One third of that comes from hard work, two thirds of it comes from inheritance, interest on interest accumulation to widows and idiot sons and what I do — stock and real estate speculation. It’s bullshit. Ninety percent of the American people have little or no net worth. I create nothing; I own. We make the rules, Buddy, the news, war, peace, famine, upheaval; the cost of a paper clip. We pull the rabbit out of the hat while everybody else sits around their whole life wondering how we did it… you’re not naïve enough to think we’re living in a democracy are you, Buddy?

–https://imsdb.com/scripts/Wall-Street.html

Do you think anything has changed since ’87? Or are you still in the delusion that we live in a democracy?

If that wasn’t clear enough, his speech in the sequel remains one of my favorite distillations of the nightmare we saw in ’07 and ’08:

Someone reminded me the other evening that I once said, greed is good.

Now it seems it’s legal!

But folks, you know it’s greed that makes my bartender buy three houses he cannot afford with no money down. And it is greed that makes your parents refinance their 200,000 dollar house for 250K, and then they take that extra 50K and they go down to the shopping mall and they buy a plasma TV, cell phones, computers and an SUV. And hey, why not a second home while we are at it. Because, gee whiz, I mean we all know the prices of houses in America always go up. Right?

And it’s greed that makes the government of this country cut the interest rates to 1% after 9/11 so we can all go shopping again.

They got all these fancy names for trillions of dollars of credit, CMOs, CDOs, SIVs, ABSes. You know I honestly think there’s maybe only 75 people in the world who know what they are.

But I’ll tell you what they are, they are WMDs. Weapons of mass destruction.

When I was away, it seemed that greed, got greedier. With a little bit of envy mixed in. Hedge fund managers just walking home with 50 to 100 million bucks a year.

So Mr. Banker, he looks around and he says, “My life looks pretty boring!” So he starts leveraging his interest up to 40%, 50% to 100%. With your money, not his. Yours. Because he could. You are supposed to be borrowing, not them!

And the beauty of the deal: no one is responsible. Because everyone is drinking the same Kool-Aid.

Last year, ladies and gentlemen, 40% of all corporate profits came from financial services. Not production, not anything remotely to do with the needs of the American public.

The truth is we are all part of it now. Banks, consumers, we’re moving the money around in circles. We take a buck, we shoot it full of steroids and we call it leverage. I call it steroid banking.

Now I have been considered a pretty smart guy when it comes to finance, and maybe I was in prison too long, but sometimes it is the only place to stay sane, and look out from the bars and say, hey is everybody out there nuts?

It is clear as a bell to those who pay attention. The mother of all evil is speculation. Leverage debt. The bottom line: it’s borrowing to the hilt. And I hate to tell you this, but it is a bankrupt business model.

It won’t work. It is systemic, malignant and it’s global. Like cancer. It’s a disease. And we got to fight back. How we going to do that? How we are going to leverage that disease back in our favor?

–https://speakingfrog.com/?p=589#:~:text=Gordon%20Gekko%3ASomeone%20reminded%20me,afford%20with%20no%20money%20down.

Does any of that sound like history has repeated? Does it also sound like we’re experiencing the fallout of what he’s describing?

• “Money itself isn’t lost or made, it’s simply transferred from one perception to another. Like magic.”

“The richest one percent of this country owns half the country’s wealth: 5 trillion dollars. One third of that comes from hard work, two thirds of it comes from inheritance, interest on interest accumulation to widows and idiot sons and what I do — stock and real estate speculation.”

“Ten richest men double their fortunes in pandemic while incomes of 99 percent of humanity fall
New billionaire minted every 26 hours, as inequality contributes to the death of one person every four seconds
The world’s ten richest men more than doubled their fortunes from $700 billion to $1.5 trillion —at a rate of $15,000 per second or $1.3 billion a day— during the first two years of a pandemic that has seen the incomes of 99 percent of humanity fall and over 160 million more people forced into poverty.

‘If these ten men were to lose 99.999 percent of their wealth tomorrow, they would still be richer than 99 percent of all the people on this planet,’ said Oxfam International’s Executive Director Gabriela Bucher. ‘They now have six times more wealth than the poorest 3.1 billion people.'” –https://www.oxfam.org/en/press-releases/ten-richest-men-double-their-fortunes-pandemic-while-incomes-99-percent-humanity

• “And it’s greed that makes the government of this country cut the interest rates to 1% after 9/11 so we can all go shopping again.”

“Why Mortgage Rates are at a Record Low and What That Means for Homebuyers

In a nutshell, interest rates on fixed-rate mortgages are closely intertwined with the stock market and the how the economy is faring. When the stock market is shaky — and as of late it’s been on a scary downward spiral — investors shift their money into the U.S. Treasury bond market instead. Treasury bonds are considered a safer investment because they’re issued by the U.S. government.

Ultimately, Treasury yields (or the return an investor nets on a bond) are linked to mortgage rates. When Treasury yields go up, so do interest rates. And when yields go down, such as from bond prices going up from an influx of investment, so do interest rates.

It’s no wonder mortgage rates have plummeted — from 3.71 percent in February to 3.29 percent in March — as the 10-year Treasury yield has also dropped in that timeframe.

With lower mortgage rates, consumers are incentivized to buy houses, which is good news as it could help bolster the economy during this tumultuous time.” –https://www.newhomesource.com/learn/coronavirus-effect-on-mortgage-rates/  emphasis mine. Article published in reference to 2020.

In the documentary “Money, Power, Impunity: The Bankers Who Stole The World | 2008 Bank Crisis & Recession Documentary,” you will see a video clip of W announcing that home ownership was good for Murica. This was a precursor to the housing market collapse we witnessed in 2008.

And they showed W December of 2003 standing in front of a backdrop that says, a home of your own. I think it’s got a little cartoon of a house and it says something like “a home of your own.” And he’s standing there saying, “Our government is supporting home ownership because it’s good for America.” Meanwhile, it’s like really? Why? Why does the government care so much as to whether you rent or you buy? What what business is it of theirs how you choose to live your life? I’m not gonna get political. I am politically agnostic on this podcast. I’m just wondering, like, why do they care so much? Why? Why is it good for America for you to own a home whether or not you can actually afford it and make the payments is a completely separate point — it’s good for America. Why? Then he creepily leans into the camera, and he’s like, “It’s good for our economy.” And I think that’s pretty much the answer, right? And I really do respect that also in this documentary they don’t get partisan. It’s not one of these issues of “Well, it was just these Republicans.” Or, “It was just those Democrats.” I mean, the commentators are pretty clear in saying this was an agenda that was pushed by both parties. So it really doesn’t matter if you’re talking about Clinton and Obama or you’re talking about Bush. Like: this is the American dream. We need to get you in suburbanite tract housing. It’s just good for everybody.

-“Bonus Episode: Mephistopheles in Manhattan” https://www.buzzsprout.com/1125110/11205137

• “Because, gee whiz, I mean we all know the prices of houses in America always go up. Right?”

I heard that many times from unscrupulous realtors and brokers while I was on my real estate quest. So much FOMO. “Do it now or you’ll never get the chance to again!” 😣 Hell, on June 9, 2022, Dave Ramsey published the video, “Why RIGHT NOW Is The Best Time To Buy A House! (Don’t Wait!)”

• “So Mr. Banker, he looks around and he says, ‘My life looks pretty boring!’ So he starts leveraging his interest up to 40%, 50% to 100%. With your money, not his. Yours. Because he could. You are supposed to be borrowing, not them!”

Yeah, and do you know who that unsecured creditor is that Mr. Banker is taking advantage of? You!

“Bail-ins allow banks to convert debt into equity to increase their capital requirements. They shift the risk to unsecured creditors, including depositors whose account balances exceed the FDIC limit of $250,000. You can avoid bail-ins by spreading your assets across different banks and by monitoring changes in financial regulations.” –https://www.investopedia.com/articles/markets-economy/090716/why-bank-bailins-will-be-new-bailouts.asp

“A bank can legally confiscate its clients’ money in the event it needs to stay afloat, and most retail investors are not aware of this, said Lynette Zang, Chief Marketing Analyst at ITM Trading, who stressed that such legislation is already codified in the Dodd-Frank Act.

Zang, who has decades of experience in the financial sector and worked as an investment banker at Larson Lehman/American Express, said that these bail-ins could be part of a bigger systemic monetary reset.

She explained how following the 2008 financial crisis, big banks were deemed too big to fail, resulting in government bailouts at the expense of taxpayers.

Financial reforms ushered in with the Dodd-Frank Act in 2010 eliminated bailouts and opened the door for bail-ins.

Speaking with Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News, at the Vancouver Resource Investment Conference, Zang noted that bail-ins allow banks to convert debt into equity to increase their capital requirements.

Zang points out that Dodd-Frank replaces bailouts with “bail-ins,” in which depositors’ funds can be used to rescue a failing bank. The legislation makes depositors into “unsecured creditors,” allowing the bank to reclassify deposits as equity.

The risk is then shifted to unsecured creditors or depositors. This can particularly impact those with deposits of more than $250,000, which is greater than the amount insured by the Federal Deposit Insurance Corporation or FDIC.” –https://www.kitco.com/news/2023-02-08/Your-bank-can-legally-confiscate-your-money-it-is-too-late-to-stop-The-Great-Reset-CBDCs-Lynette-Zang.html

• “Last year, ladies and gentlemen, 40% of all corporate profits came from financial services. Not production, not anything remotely to do with the needs of the American public. The truth is we are all part of it now. Banks, consumers, we’re moving the money around in circles. We take a buck, we shoot it full of steroids and we call it leverage. I call it steroid banking.”

“Consumer spending comprises 70% of GDP.” –https://www.thebalancemoney.com/components-of-gdp-explanation-formula-and-chart-3306015#:~:text=GDP%20is%20the%20sum%20of,output%20of%20its%20underground%20economy.&text=Consumer%20spending%20comprises%2070%25%20of,components%20of%20the%20U.S.%20economy.

We are a nation of consumers, not producers.

• “It is clear as a bell to those who pay attention. The mother of all evil is speculation. Leverage debt. The bottom line: it’s borrowing to the hilt. And I hate to tell you this, but it is a bankrupt business model. It won’t work. It is systemic, malignant and it’s global. Like cancer. It’s a disease. And we got to fight back. How we going to do that? How we are going to leverage that disease back in our favor?”

It is clear to people who pay attention. And as I’ve said many times, I feel like this economic downturn will separate who paid attention from who didn’t. Who listened to hot air and hopium and who didn’t.

“U.S. consumer credit card debt has jumped to nearly $1 trillion, the Federal Reserve Bank of New York said on Thursday.

Credit card balances increased more than $60 billion over the three months ending in December, lifting the total amount of U.S. credit card debt to an all-time high of $986 billion, the report found.

The skyrocketing credit card balance has coincided with an increase in the interest rates paid on such debt, crunching household budgets as high inflation eats away at the savings that many amassed during the pandemic.

The average credit card interest rate offered in the U.S. over the last three months of 2022 stood at 21.6%, according to WalletHub, a jump from about 18% a year prior. An aggressive series of interest rate hikes imposed by the Federal Reserve has caused the jump in credit card rates.” –https://abcnews.go.com/Business/us-credit-card-debt-now-totals-1-trillion/story?id=97286223

“The nonpartisan Congressional Budget Office said in a new report that the U.S. is expected to run out of money to pay its bills sometime between July and September. If Congress doesn’t raise the debt ceiling by then, the country would default on its loans, which the CBO says could trigger an economic crisis.

But leaders in Washington are still in a stand-off about how to confront government spending that’s accumulated $31.4 trillion in debt since the country’s founding. Republicans blame Democratic spending.” –https://local12.com/news/nation-world/cbo-us-will-run-out-of-cash-between-july-and-september-without-debt-ceiling-agreement-economic-crisis-nonpartisan-congressional-budget-office-314-trillion-in-debt-cbos-budget-and-economic-outlook-government-accounts-inflation-money-loan-defaults-cfrb

At the beginning of Gordon’s speech in Wall Street: Money Never Sleeps, he surveys a room of college kids and pronounces, “You’re all pretty much f**ked.” He also refers to them as the NINJA generation: no income, no job, no assets.

Welcome to reality.