By John F. Di Leo -
Bitten by the acting bug in my youth, I joined a small children’s theater company run by a pair of magicians. We didn’t travel far, just around Chicagoland, but it kept my 8th grade weekends busy, riding around Cook County in a bus from show to show.
The magicians never shared any secrets with me, of course – proper magicians don’t give up the secrets to anyone except their assistants and their insurance agents – but one day en route to a gig, the director confided to me that the most important thing isn’t how you do the trick, it’s how good you are at the simultaneous distraction.
The one hand waves, or points a wand, or flashes a cape, or signals to the lovely assistant over there… while the other hand flips the false bottom, or slides open the false door, as the trick is completed.
So it can be in politics, and so it can be in economics.
A Pound of Flesh
In the middle ages, long before the social science of capitalism was understood, some misguided church teachings forbade the concept of interest-based savings and loan businesses. The Christian church then believed, and the muslims even today do as well, that earning a profit from money-lending was immoral.
Hundreds of years before the publication of “The Wealth of Nations,” this may have been forgivable. Hundreds of years after, it is most certainly not.
Bankers make it possible to own homes, to start businesses, to hire, and plan, and grow. Banks are a business just like any other – they exist to provide a product the public wants at a fair price – but they are more important than most.
How many of us could afford a house without a loan? How many could afford a college education, a car, a business start-up, entirely from savings? The banking community isn’t more or less moral, more or less proper than any other sector, but they are more important to the rest of us than most. Without banks, your job and mine likely would not exist, no matter how far removed we may think our sector is from that one.
The bank isn’t the most important piece of the puzzle, of course. We still need a job, to make the payments on the loan, but the bank is there, as an important tool in the toolbox of an active economy. Just as it shouldn’t be dismissed as an unnecessary tool, it also shouldn’t be viewed as the only tool, or even the main tool. Banks hold and loan the funding for a free market; without that market of other goods and services, however, the banks have nothing to contribute. The size of that free market is what counts, above and beyond the size of the bank.
The Jeffersonian Tradition
Just as all bigots are inclined to distrust or dislike that which they do not understand, American Democrats have a long tradition of misunderstanding, disliking, and abusing banks. Back in the complicated days of 18th Century British rule, Southern plantation owners had to send their produce to English factors (middlemen) who would pay the import taxes on them, sell the goods on the southerners’ behalf, and fill their orders for china, glassware, books, equipment, clothing… whatever the Virginians, Georgians, and Carolinians could not procure at home.
After taxes, damage, spoilage, breakage, and the factors’ fees were taken into account, the often acquisitive Virginians, who tended to have an inflated estimation of the value of their own produce and a lesser appreciation of the value of others’, tended to land themselves in constant debt. The experience led some of the men of the plantations to distrust and dislike the merchants and bankers of the cities, a distrust that came to a head during President George Washington’s first term.
Alexander Hamilton proposed a national bank, a power not specifically mentioned in the Constitution, and the battle was on. From the Jefferson-Hamilton fights of the 1790s, to the Jackson-Biddle fights of the 1830s, and on to our own time today, the Democrats have portrayed banks and bankers as wicked elitists, bent on controlling, even subjugating, the American public. Oddly, one strain of libertarians (many followers of Rep. Ron Paul) have joined them in this irrational and misplaced fury.
The envy of the left, with their suspicion of Wall Street, and their bigotry against Jews and WASPs and the better-educated, has most recently manifested itself as the Occupy movement. Young communists, environmentalists, and the soap-averse have spent a year directing their ire at the world of finance, as they strive to spread their class envy among the population at large.
Just as Jefferson and Jackson, envious of the more leisurely lives of deskbound city folk, demonized bankers as the villains of their day, the Obama administration and the Occupy protesters they control have tried to convince the public that all our ills today remain the fault of this same wicked permanent criminal class.
They should have expected it.
To be fair, we should remember that bankers have been asking for it.
No, not two hundred years ago, but lately, banks have presented themselves as the potential saviors for all the troubled, from individuals to communities to whole nations.
The investment bankers of New York began to contribute to politicians, Democrats in particular… they installed a revolving door between Goldman Sachs in New York and the Old Executive Office Building in Washington… they started being photographed together, as if the Framers had actually intended for yesterday’s Treasury Secretary to become tomorrow’s million-dollar bank executive with a thousand percent annual bonus, stock options, and retirement parachute… or vice versa.
Banks have gone on TV and radio saying “We’ll help you get that mortgage” and “We’ll help you go to college” and “We’ll help you get that car”… whether you could afford the payments or not, whether you belonged in college or not, whether you needed a car or not. They advertised.
There’s nothing wrong with advertising, but gullible people now say the bankers talked them into it, as if bankers were sitting there with a gun to your head as you bought twice the house or car you needed, or took out a loan to give your kid two overpriced and underuseful degrees so that he could wind up flipping burgers… because there are no jobs for underwater basketweavers, pop art historians, and multicultural perspectivists.
The banks thought that people understood how advertising works. The banks thought that, just as a pizza commercial doesn’t mean you should eat three 4000-calory pizzas a day, and a Caribbean vacation commercial doesn’t mean you should take a $2000 vacation every weekend, surely you must understand that an advertisement for a great rate and a new toaster still doesn’t mean that you should buy a house you can’t afford. Some of the burden for determining what’s good for you ought to be done by… you.
But the bankers didn’t count on these past few hundred years of people thinking of banking as some magical alchemistic society, whose wizards can make money either tumble out of a cornucopia for free or dry up like a field of tumbleweeds, all according to their whim. Too many people still don’t absorb that banks are like any other business, subject to the same laws of nature as manufacturing, retail, and services.
The pedestal on which people have placed the banks is foolish and unjustified, but it was partially built by the banks themselves, so while the prejudice against them is unjustified, it is at least partially their own fault.
Riding in on a Great White Horse
Most unwise of all has been the banking community since Bretton Woods. For over sixty years, international banking behemoths The World Bank and The International Monetary Fund have practically promised to be the omnipotent saviors of civilization – the funding sources that will wipe out poverty, racism, malaria… seemingly everything from homelessness to split ends.
More recently, the Federal Reserve has become ever more aggressive in its offers to fix the problems of the American economy. Not just to ensure a stable dollar, but more than that – the Fed too has offered to ride into town on a gleaming palomino, distributing stimulus money and dirt cheap interest rates, generous payment terms and easy credit, to transform a sad nation in economic crisis into a blissful nation of prosperity and full employment. The Fed offers it weekly; practically every time there’s bad news in the economy, you can be sure that the Fed Chairman will offer to make it all right, with the actions of his proud bank. You can almost see the cape flying behind him in the breeze. Ridiculous though it may be, the Fed seemingly promises to fix the economy with a simple announcement abound interest rates. As if interest rates were the only issue involved, and he could just snap his fingers to make all the trouble go away.
And why is Wall Street on pins and needles these days, in particular? Because Greece is refusing to nicely drink the glass of hemlock that its colleagues in the European Union have prescribed, throwing their plans for economic unity into chaos. The EU thought that a monetary union, based on the management of bankers, would be enough to ensure prosperity until the end of time, but they were dismally mistaken. First Greece, then Ireland, Italy, Portugal, Spain, and others across Europe have each started to tumble, as the EU rules of monetary unity have proven insufficient to stabilize a community of nations so amazingly different. Seemingly every week, the bankers propose some improvement, and the locals declare it hogwash and refuse to play along. If there’s a solution, the central bankers and planners in Brussels certainly don’t know what it is.
An Error of Priorities
The central banks have been trying for decades to prop up western civilization. Every time unemployment spikes, the currency fluctuates, or the trade balance tips in the wrong direction, the central banks step in. They tinker with the money supply; they ease credit or toughen it; they give speeches about “being there to help” Greece, or Mexico, or Portugal, or Italy, whatever the failure of the week may be.
The problem isn’t that the banks aren’t doing it right, or that the banks are mismanaged or misdirected. The problem is that the banks are attempting too much; decades of advertizing themselves as superheroes have perhaps caused them to believe their own propaganda.
When people can’t afford college, it’s not the banks’ fault. Perhaps it’s that the colleges are overpriced. Perhaps it’s that the student doesn’t belong in that school, or that program, or that state. Perhaps it’s that we have too many students going to college in a society that’s not creating anywhere near enough new jobs that require college. Perhaps it’s that our high taxing, high regulating national government has so warped the economy that college isn’t as appropriate for as many people as it ought to be. Yes, college funding is in crisis nationwide; but no, it’s not something to blame on the states.
Similarly, when people can’t afford their house payments, it’s not the banks’ fault. Your interest rate is known, certainly within half a point, when you apply for your mortgage. Housing is in crisis because home values are down, all over the country. People are unemployed, not briefly but for months or years. People aren’t buying homes at the rates they used to, because they’re not getting the promotions and transfers that allow or even necessitate those steps up the ladder. All that’s not the banks’ fault.
Our economy is in crisis – and has been since 2007 – not because banks gave loans that the Community Reinvestment Act forced them to make, or because banks are so greedy they’d rather sell a bad loan for the filing fees then responsibly turn the applicant away. These are problems, but they’re not the causes of the recession.
Our economy is in crisis because it is shedding jobs, simple as that. It is in crisis because our nation has been driving businesses away for fifty years. Our corporate income tax is the highest in the industrialized world. Our unions are empowered by law to destroy companies in order to show their strength to threaten other companies. Our bankrupt state, local, and federal governments suck up investment capital in sales of bonds, in order to fund pensions, fulfill current obligations, even repay old debt.
The federal regulations, plus those of some extremist states like California, are designed to make manufacturing harder than it needs to be, and to scare entrepreneurial minds right out of the start-up world. With all the frivolous requirements for environmental impact studies, soil studies, community needs assessments, minimum wage, Davis Bacon… and now, insanely, nationalized health insurance!… it is no wonder that start-ups are down, that existing manufacturers move away or shift production abroad due to their terror of the new American costs and risks of tax collectors and regulators.
Many American companies today – those that haven’t yet fled for more welcoming shores – have ongoing projects, to study their product lines and figure out what’s worth keeping here, and what should be outsourced abroad instead. Manufacturers may want to stay here; they may feel the tug of patriotism… but they also have stockholders to satisfy, payrolls to meet. Too often, continuing to manufacture on US soil is a cost they simply cannot bear.
The problems with our economy can be fixed, but not by bankers, however willing they may be.
Who can cut our crippling tax burden? Congress and the president… plus state and local officials and executives, when those state and local taxes are the killers (as in Illinois, New York, and California).
Who can reduce our crushing regulatory burdens? Congress and the president, again. We have whole agencies that should be shut down, others that should be whittled until they’re half the size. We close light-bulb factories so we can require compact fluorescents; we close plumbing factories so we can end the horrible human tragedy of – um – over-2.5gpm showerheads. We deny a manufacturer the right to build a factory on his own land because some family of rodents or birds lives on it. We forbid a Seattle company from building a plant in South Carolina because some union has convinced the government to favor the one state over the other.
The same situation is repeated in country after country, all over the west. Greece, Italy, Portugal, and Spain all repeat the American error. As our Fed tries to solve a crisis it didn’t create, so too do the IMF and the central planners of Europe try to use interest forgiveness, principal reductions and loan extensions to cobble together a path to safety, when banking issues were never really the problems to begin with.
The solution is simple, and it is the same worldwide: governments and unions and litigious communities need to stop handcuffing industry. It’s as simple as that.
Our finance pages are filled with discussions of banks cobbling together their best attempts at postponing a day of reckoning, when what is needed is action in the capitol buildings to make such financial changes unnecessary. Perhaps the bankers are so egotistical as to believe they really are capable of such magic, or perhaps they are really only trying to find a way to survive another year or two in hopes that the real fix finally occurs on its own.
Either way, they hurt themselves and the world community by these efforts, because every day that the banks stand tall in the saddle as our rescuers, it gives those in government an undeserved break, an out, a way to duck responsibility and continue their inaction.
The banks need to stop saving the day with their tricks of extensions and low interest rates and quantitative easing. They need to lay the blame strictly where it belongs: on the shoulders of government.
It has been government – in Europe, in Mexico, in the United States – that has driven up unemployment, driven down property values, crippled our pension plans. It has been government – at every level from local to national – that has driven manufacturing to Asia and left our people with fewer employment options and a far darker future for our children and grandchildren.
The solution is, very simply, to stop banking on distractions, and to return to the invisible hand of the free market. We must unleash the limitless potential of limited government.
Before it’s too late.
Copyright 2012 John F. Di Leo
John F. Di Leo is a Chicago-based Customs broker and international trade lecturer. A former county chairman of the Milwaukee GOP, he has now been a recovering politician for over fourteen years.
Permission is hereby granted to forward freely, provided it is uncut and the byline and IR URL are included. Follow me on LinkedIn or Facebook!
In the middle ages, long before the social science of capitalism was understood, some misguided church teachings forbade the concept of interest-based savings and loan businesses. The Christian church then believed, and the muslims even today do as well, that earning a profit from money-lending was immoral.
Hundreds of years before the publication of “The Wealth of Nations,” this may have been forgivable. Hundreds of years after, it is most certainly not.
Bankers make it possible to own homes, to start businesses, to hire, and plan, and grow. Banks are a business just like any other – they exist to provide a product the public wants at a fair price – but they are more important than most.
How many of us could afford a house without a loan? How many could afford a college education, a car, a business start-up, entirely from savings? The banking community isn’t more or less moral, more or less proper than any other sector, but they are more important to the rest of us than most. Without banks, your job and mine likely would not exist, no matter how far removed we may think our sector is from that one.
The bank isn’t the most important piece of the puzzle, of course. We still need a job, to make the payments on the loan, but the bank is there, as an important tool in the toolbox of an active economy. Just as it shouldn’t be dismissed as an unnecessary tool, it also shouldn’t be viewed as the only tool, or even the main tool. Banks hold and loan the funding for a free market; without that market of other goods and services, however, the banks have nothing to contribute. The size of that free market is what counts, above and beyond the size of the bank.
The Jeffersonian Tradition
Just as all bigots are inclined to distrust or dislike that which they do not understand, American Democrats have a long tradition of misunderstanding, disliking, and abusing banks. Back in the complicated days of 18th Century British rule, Southern plantation owners had to send their produce to English factors (middlemen) who would pay the import taxes on them, sell the goods on the southerners’ behalf, and fill their orders for china, glassware, books, equipment, clothing… whatever the Virginians, Georgians, and Carolinians could not procure at home.
After taxes, damage, spoilage, breakage, and the factors’ fees were taken into account, the often acquisitive Virginians, who tended to have an inflated estimation of the value of their own produce and a lesser appreciation of the value of others’, tended to land themselves in constant debt. The experience led some of the men of the plantations to distrust and dislike the merchants and bankers of the cities, a distrust that came to a head during President George Washington’s first term.
Alexander Hamilton proposed a national bank, a power not specifically mentioned in the Constitution, and the battle was on. From the Jefferson-Hamilton fights of the 1790s, to the Jackson-Biddle fights of the 1830s, and on to our own time today, the Democrats have portrayed banks and bankers as wicked elitists, bent on controlling, even subjugating, the American public. Oddly, one strain of libertarians (many followers of Rep. Ron Paul) have joined them in this irrational and misplaced fury.
The envy of the left, with their suspicion of Wall Street, and their bigotry against Jews and WASPs and the better-educated, has most recently manifested itself as the Occupy movement. Young communists, environmentalists, and the soap-averse have spent a year directing their ire at the world of finance, as they strive to spread their class envy among the population at large.
Just as Jefferson and Jackson, envious of the more leisurely lives of deskbound city folk, demonized bankers as the villains of their day, the Obama administration and the Occupy protesters they control have tried to convince the public that all our ills today remain the fault of this same wicked permanent criminal class.
They should have expected it.
To be fair, we should remember that bankers have been asking for it.
No, not two hundred years ago, but lately, banks have presented themselves as the potential saviors for all the troubled, from individuals to communities to whole nations.
The investment bankers of New York began to contribute to politicians, Democrats in particular… they installed a revolving door between Goldman Sachs in New York and the Old Executive Office Building in Washington… they started being photographed together, as if the Framers had actually intended for yesterday’s Treasury Secretary to become tomorrow’s million-dollar bank executive with a thousand percent annual bonus, stock options, and retirement parachute… or vice versa.
Banks have gone on TV and radio saying “We’ll help you get that mortgage” and “We’ll help you go to college” and “We’ll help you get that car”… whether you could afford the payments or not, whether you belonged in college or not, whether you needed a car or not. They advertised.
There’s nothing wrong with advertising, but gullible people now say the bankers talked them into it, as if bankers were sitting there with a gun to your head as you bought twice the house or car you needed, or took out a loan to give your kid two overpriced and underuseful degrees so that he could wind up flipping burgers… because there are no jobs for underwater basketweavers, pop art historians, and multicultural perspectivists.
The banks thought that people understood how advertising works. The banks thought that, just as a pizza commercial doesn’t mean you should eat three 4000-calory pizzas a day, and a Caribbean vacation commercial doesn’t mean you should take a $2000 vacation every weekend, surely you must understand that an advertisement for a great rate and a new toaster still doesn’t mean that you should buy a house you can’t afford. Some of the burden for determining what’s good for you ought to be done by… you.
But the bankers didn’t count on these past few hundred years of people thinking of banking as some magical alchemistic society, whose wizards can make money either tumble out of a cornucopia for free or dry up like a field of tumbleweeds, all according to their whim. Too many people still don’t absorb that banks are like any other business, subject to the same laws of nature as manufacturing, retail, and services.
The pedestal on which people have placed the banks is foolish and unjustified, but it was partially built by the banks themselves, so while the prejudice against them is unjustified, it is at least partially their own fault.
Riding in on a Great White Horse
Most unwise of all has been the banking community since Bretton Woods. For over sixty years, international banking behemoths The World Bank and The International Monetary Fund have practically promised to be the omnipotent saviors of civilization – the funding sources that will wipe out poverty, racism, malaria… seemingly everything from homelessness to split ends.
More recently, the Federal Reserve has become ever more aggressive in its offers to fix the problems of the American economy. Not just to ensure a stable dollar, but more than that – the Fed too has offered to ride into town on a gleaming palomino, distributing stimulus money and dirt cheap interest rates, generous payment terms and easy credit, to transform a sad nation in economic crisis into a blissful nation of prosperity and full employment. The Fed offers it weekly; practically every time there’s bad news in the economy, you can be sure that the Fed Chairman will offer to make it all right, with the actions of his proud bank. You can almost see the cape flying behind him in the breeze. Ridiculous though it may be, the Fed seemingly promises to fix the economy with a simple announcement abound interest rates. As if interest rates were the only issue involved, and he could just snap his fingers to make all the trouble go away.
And why is Wall Street on pins and needles these days, in particular? Because Greece is refusing to nicely drink the glass of hemlock that its colleagues in the European Union have prescribed, throwing their plans for economic unity into chaos. The EU thought that a monetary union, based on the management of bankers, would be enough to ensure prosperity until the end of time, but they were dismally mistaken. First Greece, then Ireland, Italy, Portugal, Spain, and others across Europe have each started to tumble, as the EU rules of monetary unity have proven insufficient to stabilize a community of nations so amazingly different. Seemingly every week, the bankers propose some improvement, and the locals declare it hogwash and refuse to play along. If there’s a solution, the central bankers and planners in Brussels certainly don’t know what it is.
An Error of Priorities
The central banks have been trying for decades to prop up western civilization. Every time unemployment spikes, the currency fluctuates, or the trade balance tips in the wrong direction, the central banks step in. They tinker with the money supply; they ease credit or toughen it; they give speeches about “being there to help” Greece, or Mexico, or Portugal, or Italy, whatever the failure of the week may be.
The problem isn’t that the banks aren’t doing it right, or that the banks are mismanaged or misdirected. The problem is that the banks are attempting too much; decades of advertizing themselves as superheroes have perhaps caused them to believe their own propaganda.
When people can’t afford college, it’s not the banks’ fault. Perhaps it’s that the colleges are overpriced. Perhaps it’s that the student doesn’t belong in that school, or that program, or that state. Perhaps it’s that we have too many students going to college in a society that’s not creating anywhere near enough new jobs that require college. Perhaps it’s that our high taxing, high regulating national government has so warped the economy that college isn’t as appropriate for as many people as it ought to be. Yes, college funding is in crisis nationwide; but no, it’s not something to blame on the states.
Similarly, when people can’t afford their house payments, it’s not the banks’ fault. Your interest rate is known, certainly within half a point, when you apply for your mortgage. Housing is in crisis because home values are down, all over the country. People are unemployed, not briefly but for months or years. People aren’t buying homes at the rates they used to, because they’re not getting the promotions and transfers that allow or even necessitate those steps up the ladder. All that’s not the banks’ fault.
Our economy is in crisis – and has been since 2007 – not because banks gave loans that the Community Reinvestment Act forced them to make, or because banks are so greedy they’d rather sell a bad loan for the filing fees then responsibly turn the applicant away. These are problems, but they’re not the causes of the recession.
Our economy is in crisis because it is shedding jobs, simple as that. It is in crisis because our nation has been driving businesses away for fifty years. Our corporate income tax is the highest in the industrialized world. Our unions are empowered by law to destroy companies in order to show their strength to threaten other companies. Our bankrupt state, local, and federal governments suck up investment capital in sales of bonds, in order to fund pensions, fulfill current obligations, even repay old debt.
The federal regulations, plus those of some extremist states like California, are designed to make manufacturing harder than it needs to be, and to scare entrepreneurial minds right out of the start-up world. With all the frivolous requirements for environmental impact studies, soil studies, community needs assessments, minimum wage, Davis Bacon… and now, insanely, nationalized health insurance!… it is no wonder that start-ups are down, that existing manufacturers move away or shift production abroad due to their terror of the new American costs and risks of tax collectors and regulators.
Many American companies today – those that haven’t yet fled for more welcoming shores – have ongoing projects, to study their product lines and figure out what’s worth keeping here, and what should be outsourced abroad instead. Manufacturers may want to stay here; they may feel the tug of patriotism… but they also have stockholders to satisfy, payrolls to meet. Too often, continuing to manufacture on US soil is a cost they simply cannot bear.
The problems with our economy can be fixed, but not by bankers, however willing they may be.
Who can cut our crippling tax burden? Congress and the president… plus state and local officials and executives, when those state and local taxes are the killers (as in Illinois, New York, and California).
Who can reduce our crushing regulatory burdens? Congress and the president, again. We have whole agencies that should be shut down, others that should be whittled until they’re half the size. We close light-bulb factories so we can require compact fluorescents; we close plumbing factories so we can end the horrible human tragedy of – um – over-2.5gpm showerheads. We deny a manufacturer the right to build a factory on his own land because some family of rodents or birds lives on it. We forbid a Seattle company from building a plant in South Carolina because some union has convinced the government to favor the one state over the other.
The same situation is repeated in country after country, all over the west. Greece, Italy, Portugal, and Spain all repeat the American error. As our Fed tries to solve a crisis it didn’t create, so too do the IMF and the central planners of Europe try to use interest forgiveness, principal reductions and loan extensions to cobble together a path to safety, when banking issues were never really the problems to begin with.
The solution is simple, and it is the same worldwide: governments and unions and litigious communities need to stop handcuffing industry. It’s as simple as that.
Our finance pages are filled with discussions of banks cobbling together their best attempts at postponing a day of reckoning, when what is needed is action in the capitol buildings to make such financial changes unnecessary. Perhaps the bankers are so egotistical as to believe they really are capable of such magic, or perhaps they are really only trying to find a way to survive another year or two in hopes that the real fix finally occurs on its own.
Either way, they hurt themselves and the world community by these efforts, because every day that the banks stand tall in the saddle as our rescuers, it gives those in government an undeserved break, an out, a way to duck responsibility and continue their inaction.
The banks need to stop saving the day with their tricks of extensions and low interest rates and quantitative easing. They need to lay the blame strictly where it belongs: on the shoulders of government.
It has been government – in Europe, in Mexico, in the United States – that has driven up unemployment, driven down property values, crippled our pension plans. It has been government – at every level from local to national – that has driven manufacturing to Asia and left our people with fewer employment options and a far darker future for our children and grandchildren.
The solution is, very simply, to stop banking on distractions, and to return to the invisible hand of the free market. We must unleash the limitless potential of limited government.
Before it’s too late.
Copyright 2012 John F. Di Leo
John F. Di Leo is a Chicago-based Customs broker and international trade lecturer. A former county chairman of the Milwaukee GOP, he has now been a recovering politician for over fourteen years.
Permission is hereby granted to forward freely, provided it is uncut and the byline and IR URL are included. Follow me on LinkedIn or Facebook!
