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Investing 101 - Mar 12, 2009 - Printable Version
- Killing the Goose that Lays the Golden Eggs
by Mark Faulk
I’ve spent the past five years preaching about a financial system rigged so badly that it was doomed to collapse, and warning Americans that if we allowed the greed and corruption in our system to continue unabated we were facing economic disaster. I and a handful of others continued to voice our concerns while Washington ignored us and the media ridiculed us. Those in the forefront weren’t nationally-known economists; maybe we were simply being alarmists. I kept hoping that we were wrong, that somehow we just didn’t understand the dynamics of a complex economic system. Maybe we were misinterpreting the warning signs. I continued to speak out, writing these words on June 18, 2007, in a Faulking Truth article titled “The Circle of Greed: Watching Rome Burn”: “This is our national disgrace. The built-in fraud, the rigged stock market system that acts as the pipeline for the rich to get richer while the rest of us go deeper into debt, will in the end be our country’s downfall. I believe we have a year, possibly two at the most, to at least begin the process of rebuilding our financial system into one where the game isn’t rigged in favor of the Wall Street casino. I believe that we have to act now to turn our country around, and that if we don’t, then we will be resigned to watch helplessly while the house of credit cards that we have built collapses around us.”
Two weeks later, on July 6, 2007, the SEC eliminated the stock market's uptick rule, making it still easier for hedge funds and other short sellers to manipulate the market at will. Since they could continue to short the market as stock prices kept falling, they could theoretically jump on a falling stock and send it (and the entire market) into a never-ending downward spiral. It didn’t seem to matter. One month almost to the day after I warned (for the hundredth time) of an impending collapse in our financial markets, the Dow Jones Index hit an all-time high of 14,000.
Wall Street and Washington celebrated, oblivious to the obvious warning signs. The SEC ignored us or pretended that the problems either didn’t exist or were at the very least grossly overstated. The elitist financial press ridiculed us. And Congress postured and posed for the cameras while promising to investigate and fix the cracks that had grown into canyons threatening to swallow up our entire country, they ultimately ignored us as well. Finally, in early 2008, I wrote in The Naked Truth: The Stock Play of a Lifetime, these simple words:
“Every day that passes that we don’t address the problems facing our financial markets, the potential fallout becomes worse. Even now we face serious consequences, and unchecked, our country, and by extension the entire world, is facing a potential economic meltdown.”
It was a warning that a growing number of activists had been preaching for years, growing in scope from the realization that the wealthiest in our country and the world at large were systematically picking off smaller public companies and slowly bleeding the middle-class dry to the gut-wrenching fear that our entire way-of-life was at risk. I referred to that uneasy sense on radio shows and in print as “the final money grab”, but it was something that I prayed I was wrong about. It seemed unfathomable that those who live like kings by slowly bleeding the middle class would at some point decide that their lowly subjects were no longer valuable to them. The only comparison I can make that aptly describes the sickening feeling in the pit of my stomach is to a victim of a kidnapping who suddenly realizes his or her life no longer has value. I kept waiting for the ultra-wealthy to release their death-grip on the middle-class, rolling a hundred time tested metaphors around in my head:
“You don’t kill the goose that lays the golden eggs.”
“They’re more valuable alive than dead.”
And so on. But it never happened. By the time I wrote those words in early 2008 I was desperate and despondent, feeling the guilt of being one of the first generations to leave behind a world not just worse off than the one that we came into over 50 years ago, but of passing on to our children and grandchildren a world damaged beyond repair. When the market began to collapse right on cue a year after I said we had “a year, possibly two” to begin the process of fixing a rigged financial system, despondency gave way to severe depression. And as depression began to take hold, I could feel the entire country sink right along with me.
For the past few months, I have watched as Congress has again postured and posed for the cameras, berating the SEC and feigning shock and awe that our economy was collapsing at such an alarming rate. What they don’t acknowledge is that they, and our former Administration, saw it coming a mile away. As long as the money kept flowing, they all did nothing. They all knew about it and were fully aware of the potential consequences, and yet the SEC, Congress, and the Bush Administration all chose to do nothing. I guess it’s possible that our elected representatives in Washington didn’t realize that the SEC was, as Patrick Byrne likes to phrase it, a “captured regulator”. Maybe they missed the calls for reform that naysayers were preaching on a daily basis, or misunderstood the subtle message of advocate Dave Patch’s website, titled investigatethesec.com. I guess it’s possible that when Patch started his website in late 2003 with the self-described intent of petitioning Congress to, well, investigate the SEC, that they simply didn’t get the message. Maybe when I started The Faulking Truth website in March of the following year and began to cover the issue on a regular basis, they were still just ignorant of the issue. Maybe when other advocates, including respected economists and corporate leaders and even a handful of Congressmen, along with thousands of disenfranchised citizens, joined our cause, they just weren’t aware of the magnitude of the problem.
In late 2003 and early 2004 it might have been possible that they were simply ignorant of the built-in loopholes in our financial system that allowed for the most blatant transfer of wealth from the middle-class to the ultra-wealthy in the history of the world, but by mid-2004, they knew. Then Senate Banking Committee Chairman Richard Shelby killed a hearing into the issue of stock market reform originally scheduled for late 2004, and President Bush reportedly received a report on the issue of stock market manipulation around the same time. On June 26, 2004, lobbyist Jack Wynn, then president of the Small Public Company Capital Formation Club, emailed Dave Patch about a policy paper he was preparing for “distribution to the White House (which has requested it) and Members of Congress (who support us)”. He ended his email with the now-chilling words “Hang in there. Bush is aware of this issue and is concerned.”
Since the financial house of cards has collapsed in spectacular slow motion fashion over the past few months, I’ve been at a loss as to what to write next. I have no desire to say “we told you so” as I watch the economic tsunami ravage the lives of millions of Americans and fellow world citizens, and I’m slowly recovering from the temptation to just give up and write one last eulogy for a world that has all but consumed itself in the name of the Almighty Dollar. Instead, I’ve singled out a couple of causes that I can contribute to in a very real and easily discernible way. I want to see results that are tangible, even if only to restore my faith in our country and life in general.
The shear scope of greed that has led us down this path of destruction is unimaginable. It is not fueled by political parties as much as it is driven simply by money. I am working on a commentary about how companies that are deemed “too big to fail” are destroying our nation, using AIG as an example, and yet another article about how the same banking institutions that are taking billions piled upon billions of taxpayers’ money are finding creative new ways to steal even more money from those who are bailing them out (hint: keep a close eye on your credit card interest rates). The greed continues, and it’s up to all of us to continue to expose it and hold our public officials, from the White House to the halls of Congress, accountable for their past inaction and their current and future actions that affect every one of us on a daily basis.
And that, now more than ever, is the Faulking Truth.
Mark Faulk’s first book is entitled The Naked Truth: Investing in the Stock Play of a Lifetime, and is now available at www.thenakedtruthbook.com.
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