growing disparity in wealth in particular, and wrote a book talking about the new Gilded Age, iirc. Predicted dire results of not correcting the imbalance. And he was roundly ignored by the Villagers and the Big Banker Boyz and their sycophants. He was on public radio and TV, but angered the Repubs as a turncoat and was not adopted by the Dems, afaik. (He's also an Obama skeptic, as of last I heard him.)

Now, re: those fiscal landmines, the dreaded CDS's (Credit Default Swaps), Bernhard once again writes about the need to just write them off the books as they will be lurking there for years to threaten our fiscal system.

In a new post up at Moon of AL, he notes that if the Big Three auto makers fail, there are incredible amounts tied up in CDS's related to GM and Ford. And if those start unraveling, the banking system may totally break down.

I can't open the link to Institutional Risk Adviser right now, so will quote it from Bernhard's post:

As Bloomberg News reported in August: "A default by one of the automakers would trigger writedowns and losses in the $1.2 trillion market for collateralized debt obligations that pool derivatives linked to corporate debt… Credit-default swaps on GM and Ford were included in more than 80 percent of CDOs created before they lost their investment-grade debt rankings in 2005, according to data compiled by Standard & Poor's."
...
Any bank with a large derivatives trading book is likely to be mortally wounded as the CDS markets finally collapse. We don't see problems with interest rate or currency contracts, by the way, only the great CDS Ponzi scheme is at issue - hopefully, if authorities around the world act with purpose on rendering extinct CDS contracts as they exist today. Call it a Christmas present to the entire world. (My emphasis)

Note that dire warning if for only one auto maker failing.

Oh, and our Chinese money lenders* are not amused--per Bernhard:

But now a really big investor joins the small chorus [about CDS dangers]. Gao Xiqing is president of the China Investment Corporation, which manages $200 billion of the country’s foreign assets. James Fellows recently interviewed him for The Atlantic. Gao Xiqing opinion on derivatives (which includes CDS'):

If you look at every one of these [derivative] products, they make sense. But in aggregate, they are bullshit. They are crap. They serve to cheat people.
...
I think we should do an overhaul and say, “Let’s get rid of 90 percent of the derivatives.” Of course, that’s going to be very unpopular, because many people will lose jobs. (Emphasis in Bernhard's post)

Lots of good stuff over at Moon--and link to IRA should be working soon, I hope. Plus, I always enjoy the commenters over there.

The Gilded Age, the era of the robber barons and lawless buiness practices, is a very apt comparison to what' going on now. Far more romantic than the Enron comparison--and some of those bad guys did some good, which distinguishes them from the Enron robbers.

List of books by Kevin Phillips

*Somewhere I read the Chinese are talking about not investing here--too risky. Must search, but now more leaves....

said yesterday no way he'd be investing in U.S. because of the "uncertainty" as to what our finance officials are going to do. Hard to tell exactly what that means. I know there's the what he said, but is it genuine, testing the waters, or sending a quiver of fear to his own advantage?

Can we ask Gao Xiqing to please go on US TV and say what he just said re: these derivatives? I'll ask him if you have his email address.

You may be right regarding just wiping out these---I don't even know what to call them. I'm going with IRA: a Euro bank (probably French who are in a pissing war with China now anyway) will call a moratorium on CDS's (and they're related crap). I say end of the first quarter 2009 (don't remember what IRA says), everyone will whine how the French screwed us over again, but the CDS's are kaputnik. The fallout will be real and painful, but might be over faster. Loss of ficitonal wealth does ripple across nonficitonal wealth and assets, so how big a tidal wave will hit us?

Where did I put my water wings?

(I also agree about a failure of any of the Big 3 automakers, which says to me the CEOs will eat shit for another week or so and then get the money. Or not. GM is perilously close to the edge and the political theater may finally do them in.)

It's all very simple really - when you sell nothing for something there's fraud going on. At some point someone knew these things weren't worth anything because that's why they were made so "complex." To keep the purchasers from seeing through the schemes. There's nothing new here. Taking shit and disguising it as diamonds is older than Wall Street. It's what the old medicine hawkers used to do to sell their magical elixirs. It's what used car dealers do. It's what scam artists always do. That we are treating it like it's some exotic event or unprecedented is ridiculous. People repackaged nothing and sold it for something. The can use all the big words they want it's still fraud.