So who, exactly, are the people protecting the nation’s rights in these areas, sitting in on the talks? What’s that you say, there aren’t any? Oh, I see. No wonder the house and the senate are sending protest letters to the President that even they – the elected representatives of this democratic republic – such as they and it are – don’t know what’s going on.

No wonder Mitt Romney says sign it right now! And President Obama says….???? I’m sure glad that important issues get discussed in the Presidential campaigns in this….democratic republic (of “free” trade without representation.)

Best regards

Mr. Bredbånd
http://www.pris-paa-bredbaand.dk/

America, with bipartisan support, chose ultra highly leveraged FINANCIAL ENGINEERING as a post-industrial era “industrial policy”, and in the last 15 years has staked the policy with the full faith and credit of the nation, and the best minds the country can offer. Bloomberg reported the size of the derivatives casino reaching US$700 TRILLION (50 times the American GDP) by June 2011. When you consider that the American banking sector has only $16 Trillion in total balance sheet assets, gambling at this level of $700 Trillion (about 44 TIMES assets) is RECKLESS. And yet Washington acts as if the irresponsibility is a good thing. This festering financial cancer is affecting not only America, but the entire world.

The world’s economic malady since 2008 was basically caused by an American decision about 15 years ago, to enable massive OTC derivatives trading, as the nation’s industrial policy in a post industrial world. The policy is imposed on the rest of the world through FREE TRADE, which eventually led to the 2008 debacle.

Today, American banking is synonymous with “trading”, mostly in unregulated OTC derivatives. I believe it was reported that B of A made 90% of its profits in 2010 on trading; the number of SBA loans made also dropped by about 90% from previous levels. American banks don’t bank (lend) anymore, they trade. They are not really banks anymore, but malignant forms of their former selves.

On its face, as a grand national strategy, derivatives look brilliant: not constrained by natural resources, not limited by labor, “new products” galore come forth from the “ingenuity” of the new-fangled breed of financial engineers, and growth looks unlimited, basically constrained only by the salesmen’s ability to sell.

The “minor detail” is that unlike most other business endeavors, derivatives do not produce anything. $700 Trillion in derivatives did not produce a shirt, a tire, or even a single hamburger. It is purely redistributive – one side wins, and the other loses, with the croupier (banker) taking a cut as intermediary. Derivatives, in other words, is PURE GAMBLING. Or is it rigged gambling? The “contracts” are typically crafted by the best Wall Street prospectus writers, and not even the salesmen can really explain them. The suspicion is unavoidable that if they are truthfully explained, nobody would buy them. The products are typiclaly sold on the age old “confidence” basis – “Hey, this is a sophisticated business instrument coming from one of the world’s largest financial institutions, what can possibly go wrong? Just trust me.” It is also a VERY profitable export. Foreign central bankers and major insurance houses, sick and tired of 2.5% returns on Treasuries, are prime customers (victims).

There is no sign of abatement, even after the 2008 debacle. With the American mutual funds industry now (year end 2011) pushing for massive adoption of derivatives, and the Commodities Commission promulgating regulations to allow the small guys to join the fun, the derivatives casino is going to be US$1.5 QUADRILLION in no time. That would be 100 times the size of the American GDP, and more than the entire world’s total GDP!! That is sheer MADNESS. What is scary is that many in Washington believe that there is method (and good) in that madness.

2008 complicated things a bit. The world witnessed how even 100 year old financial houses can go belly up overnight. Lehman Bros. had $60 Billion of derivatives on its books, lost 3% or $2 Billion, which wiped out its equity. WHAT is the significance of that? 3% of $700 Trillion is $21 Trillion, which is more than the TOTAL equity of ALL American financial companies. AND you would never know when it would hit, or even which bank it might hit. MF Global is just the latest example – total wipeout with very little prior warning.

You think that would stabilize the world economy?

2008 complicated things, as I said. Both Germany and China ordered their banks to stop massive gambling in derivatives. Both of their economies recovered. America bet the farm, and counted on EXPANDING the scope of the casino, betting heavily that (a) in the name of FREE TRADE or other trade arrangements (such as TPP), other countries will be forced to open their markets to this contagion, and (b) the American banks would always win HUGE against foreigners, as they did in the decade before.

The $7.77 TRILLION in subsidies (in the form of no cost or very low cost loans) to the American banking industry also complicated things (Bloomberg reported the practice after 2 years of FOIA requests). Now the foreigners are going to point to that as an violation of WTO rules, and refuse to allow the American banks to come in and maraud.

As an aside, against that backdrop, disputes over merchandise trade (a billion here, a few hundred millions there) are rather irrelevant. The real economic “battleground” in this 21st century is going to be over industrial policies in a post industrial world – mostly over the financial industry. It is absolutely necessary to discuss and compare risks in various nations’ banking and financial systems, to identify systemic risks and frauds that could infect the whole world.

It is clear that TPP goes way beyond balancing merchandise trade, as it seeks to take away sovereignty as protection for nations’ industries, be they financial or manufacturing or farming, and substitute them with rules written to benefit special interests. It is not in America’s national interest to see multiple Asia Pacific nations impoverished. But if the American banksters have their way, and successfully destroy national financial defenses in the name of trade negotiations, Asia Pacifics and the world would be the poorer.