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4/9/09

Eric Margolis: The Axis of Sleaze - by Eric Margolis

For the complete report from The Huffington Post click on this link

The Axis of Sleaze - by Eric Margolis

In spite of all the cheery talk about spending our way out of the financial crisis, America will not claw its way back to growth and prosperity until it forces the financial industry to come clean about its huge, hidden losses. So far, that is not happening. None of our politicians have the courage to tell the public that America has too long lived above its means and indulged in reckless, debt-fueled consumerism. The bloated US economy was probably a third too large and must go on a painful diet.

The US financial industry has grown far too powerful. Today, finance is America's leading industry at about 24% of GDP. Manufacturing has shrunken to 12%. Wall Street's `Masters of the Universe' grew so rich they were able to buy or manipulate most politicians and government regulators. Investment banks like Bear Sterns, Lehman, and Goldman Sachs routinely borrowed $20-30 billion daily, and lent out US $35-50 per dollar of assets they owned (commercial banks generally were restricted to a 10:1 ratio). In what became known as the `carry trade,' banks borrowed money at 1% and invested in billions worth of fraudulent sub-prime mortgages at 4-7%, netting huge profits for simply passing around paper. Money was made from money, not productivity.

Note EU-Digest: If the US does not take some real action to remedy the disastrous situation Europe should take the initiative and decouple itself from the defunct Anglo Saxon financial system and seek new partners to solve the crises.

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