Tuesday, September 16, 2008

Liar Nation: Finally Reaping What We Have Sown

The operant phase of this nation in this decade: "Take the 'con,' Captain!"

It's all too easy to be distracted and confused by the complexity of the financial unraveling which now transfixes our craven media and politicos, but the underlying cause is really very simple: we have become a nation of liars, and no one cares.

We have candidates for the highest office of the land pronouncing their deep religious faith, yet not one candidate has expressed any outrage at the ubiquity, the pervasiveness, the crassness of the nation's reliance on lies or the incalculable harm perpetrated by the lies which have formed the very bedrock of the debt/credit bubble which is now, at long last, finally imploding.

Lying is now accepted as the norm and elicits bored yawns. Hillary ducking machine gun fire as she deplaned--a lie, but oh well, she "misspoke." Now we have Palin and McCain claiming Governor Palin eschewed Federal "earmarked" pork spending, only to read that the Wall Street Journal checked the record and found, ahem, the two candidates "misspoke," i.e. lied.
Palin's Project List Totals $453 Million

Last week, Republican presidential candidate Sen. John McCain said his running mate, Alaska Gov. Sarah Palin, hadn't sought earmarks or special-interest spending from Congress, presenting her as a fiscal conservative. But state records show Gov. Palin has asked U.S. taxpayers to fund $453 million in specific Alaska projects over the past two years.

Here is a brief rundown of the financial implosion sweeping the nation:

1. Appraisers routinely overstated the value of real estate: they lied.
2. Realtors sold properties they knew were overvalued and/or risky to buyers they knew were not qualified: they lied.
3. Mortgage brokers withheld negative information from buyers' mortgage applications to guarantee loan approval: they lied.
4. Applicants exaggerated their income and understated their liabilities on their mortgage applications: they lied.
5. Investment banks gamed the risk assessment guidlines to package risky mortgages as "safe" mortgage-backed securities and derivatives: they lied.
6. In order to earn huge fees, the ratings agencies accepted these fraudulently packaged and represented securities as "safe, low risk" AAA-rated investments: they lied.
7. The investment banks then sold the securities to investors worldwide as "safe" investments: they lied.
8. Banks and other financial institutions "misrepresented" the true risks of their holdings by secreting "level 3" assets and derivatives off their balance sheets or hiding them in footnotes: they lied.
9. Federal regulators claimed their oversight and enforcement was rigorous: they lied.
10. Congresspeople who accepted millions in campaign contributions from Fannie Mae and Freddie Mac stated that their goverance of those two entities was unaffected by these vast pools of lobbying funds: they lied.
11. Former Federal Reserve Chair Alan Greenspan stated repeatedly that the system was robust and safe, even suggesting homeowners choose adjustable-rate mortgages over 30-year fixed-rate mortgages: he lied.

12. CEO after CEO has stated most emphatically that the financial institution which he/she led was financially sound and adequately capitalized: they lied.

13. Investment bankers game the U.S. tax code to save their non-U.S. clientele from the terrible indignity of paying U.S. taxes, and then they claim their scams are "legal": they lied.
I could go on, but you get the point: the entire financial edifice of the U.S. is built on lies, and requires lies at every point and every level to continue generating outsized profits for the real estate, lending and investment banking "industries."

It's all based on lies. All of it. This "prosperity" could not have existed without lies by every player on every level and the "turning a blind eye" to the fraud and lies by our leadership, elected, "spiritual" and financial.

Our mainstream media and political establishment have become expert in the art of cloaking lies with innocent-sounding synonyms and phrases: misspoke, mis-stated, cannot recall, was tired, etc.

This mockery of the truth can be traced back to Watergate and the Reagan administration, which learned the lesson of Watergate all too well: prevaricate, fabricate, claim forgetfulness, mince words, and basically do whatever is necessary to skirt the truth and protect your position: lie, in other words, without appearing too blatantly to be lying.

Even Ronnie claiming that his uniformly dark hair was undyed at 80 years of age was a blatant lie, and though it might be claimed it was merely a lie of vanity, the erosion of the truth starts precisely in the so-called "innocent" or "white" lie.

Note to a supposedly "religious" nation: there are no "innocent" lies. If someone is dying of a dread disease, their family may choose to lie about their approaching fate, but even this well-intentioned lie is not innocent.

I was raised in what now seems a very simplistic religious belief: that a lie was wrong, regardless of the definition of "is." What causes people who claim to be infused with deep religious beliefs to lie, not just once but habitually, as a matter of course, even founding their immensely profitable business on the constant shading, cloaking and manipulation of the truth, without any qualms?
We are constantly brow-beaten by a zealously political "evangelical" movement which bases its authority on its religious beliefs, yet this purportedly "religious" movement has stood by silently as blatant fraud and lies have corroded the nation's character and economy. Many of the most self-congratulatory mega-churches in this nation have effectively cast wealth acquisition into a characteristic more desirable than simple personal integrity.

Did the entire edifice of lies metasticize only in godless, heathen liberal havens like San Francisco? No, it blossomed and grew in "conservative" states like Florida, Arizona and Utah, and "conservative" counties in California (Orange County, for instance).

Yet what political or religious leader has chosen to recognize this deep moral rot at the very center of the nation's finances, and speak not just to the lies, fraud and moral bankruptcy of Congress and the banking industry, but of the lies, fraud and moral bankruptcy practiced by many in their own congregations?

The Empire of Fraudulent Debt that is finally unraveling was built not just on the lies of ratings agencies, accountants, tax attorneys and investment bankers, but on the lies of countless home buyers, realtors, appraisers and mortgage brokers--"regular" Americans who consciously threw away any pretence of following the 10 Commandments and sacrificed any pretense of personal honor and intregity by lying, choosing to mask the lies behind the polite screens of "it's only a little lie," "everybody's doing it," "it's just business," etc.

Note to a supposedly religious nation: you cannot parse lies into "acceptable because it's just business" and unacceptable lies (adultery, stealing from the church donations, etc.) A lie is a lie.
My family was and is deeply religious; my father's uncle was a missionary in Africa, where he gave his life to that cause, and my father's siblings were all born in Central America, where his parents served as lay ministers for many years.

The truly religious person is humble about their faith and about their superiority, for they are keenly aware of their faults and sins and do not attempt to mask or hide their failings behind fine-sounding words.

How low we have sunk as nation, not just of Christians, but Jews, Muslims, Hindus, Buddhists and other faiths that so few community, political and financial leaders of any faith have spoken directly and openly to the moral rot at the very center of the American financial system.
Even if a person has no religious faith, there are deep moral, philosophic and even practical reasons to value personal integrity and the trust which is built on the truth and only the truth, unmediated by lies, prevarications, footnotes, excuses, half-truths, exaggerations, faulty memory, and convoluted legalistic definitions of simple moral concepts like telling the truth or lying.

Note to a supposedly religious nation: if you're really pious and religious, keep the pronouncements to yourself and act out your faith by telling the truth in all things and in all times and places. Live your faith by denouncing lies wherever you find them in public life, even if the liar claims to share your beliefs, and even if you stand to benefit financially from the lies being foisted off as "the truth, sort of."

In a simple phrase: shut up about how moral you are and stop lying: on your taxes, and on everything else, too. Don't just accept, but celebrate the collapse of a national financial system based solely and precariously on systemic lies and cloaking of the truth. Then tell us how religious you are.

As the rotten, morally corrupt financial edifice that is the U.S. financial system collapses under the groaning weight of our collective lies and our silence in the face of those lies, it is a good time to ponder Lincoln's Second Inaugural speech. Though he spoke of the great sin of slavery, his words could just as well describe the coming cost of our financial perfidy:

Yet, if God wills that it continue, until all the wealth piled by the bond-man's two hundred and fifty years of unrequited toil shall be sunk, and until every drop of blood drawn with the lash, shall be paid by another drawn with the sword, as was said three thousand years ago, so still it must be said "the judgments of the Lord, are true and righteous altogether".

It is unpopular to "call out" financial lies because we have all benefitted, if not directly then tangentally, from the House of Lies being "sold" as trustworthy; our own properties have risen (until recently) greatly in nominal value, our 401K and public pension funds have grown, our bond funds have swollen as Bill Gross begged and pleaded for a public bailout of his private capital, our mortgage rate dropped, and so on, ad nauseum.

There will be a cost to perpetrating a national House of Lies and bailing it out with taxpayer's money: the default of the U.S. government. It can't happen, you say? The gummit has to send me my Social Security checks, pay my Medicare bills and send me the interest on my T-Bills. No, it doesn't. Check in again in October 2012 and let's see how the Empire of Lies and Debt is doing.
Remember, there are myriad ways to default. One way is to magically reconstitute a "new dollar" which is worth 5% of its previous value. On Friday, your $20 is worth whatever $20 will buy; on Monday, it will buy 95% less. But there was no default. That's how the Empire of Lies and Debt "works." Rest assured, we shall reap what we have sown.

New essay on leadership by Chris Sullins: First, Do No Harm

Reader Comments

Harun I.

I found this quote from one of your readers interesting: “Palin is attractive because she comes across as honest and principled.” This is vaporous soliloquy. This is tantamount to saying she seems like a nice person. Every despotic dictator who has dragged the world down through the muck and mire of war truly believed themselves to honest and principled. Memories are short. Bush Jr. too seemed honest and principled but his extreme ideological views have not yielded anything remotely conservative or republican. His honest and principled ideologically driven persona has yielded the worst consequence of character in a person wielding great power in a very complex and fluid environment: inflexibility.

If voters truly wanted real change in terms of small government and fiscal responsibility and a regard for Constitutional law then Ron Paul would be on the Republican ticket. Choosing the aptly assessed Palin/McCain ticket is a vote for the same or worse. It is absolutely sickening and pathetic that McCain will for the most part make no appearances on without her. Obama is truly running against Palin!

We have had over 19 months to gain some perspective about Obama’s quality of character and his ideas on important issues but there was one telling moment: Beside the fact that he thought the better of the Iraq war, his response to the Georgia/Russian conflict was thoughtful and measured.

In contrast McCain who has been around for 25 years responded with threats. Palin’s response merely parrots the party line. Most Americans were not served well by the media during this brief conflict because they thought they knew that Russia drew first blood, this is not true. But I digress; in contrast to Obama what is known and what will be known about Palin will have to be assessed in a few short weeks. I really do not care much about experience. One never knows how he or his teammates will perform in combat. I do care about her responses to questions on important issues and so far those answers are unacceptable to truly discerning people.

In this complex world economics and foreign policy need to be a President’s strong points. Diplomacy is prime; war is the last resort. Emotion and rhetoric are not primitive limbic responses, they are tools used carefully to bring about a desired affect. Having an ideology that sees things as black and white, good and evil is counterproductive and potentially dangerous as we have found out with the sitting President.

Neither ticket has the answers so the question becomes who would you rather see take the fall?

John S.

I also agree with you that unless the American public in general feels the pain in their daily lives, there will not be much of an action to speak of. Although I am afraid that it will be too late by then.... I like your advise of taking care of our financial situation to prepare our self of the pending economic crisis.

I think you are giving Palin too much credit and too little credit to John McCain. I truly believe he is a Maverick and is going along with the show to get into the white house. Once there, I think he will pursue what is right in his mind not the party's. If he can endure 5 years of POW imprisonment, he can pretty much endure anything...

Also as an afterthought, how knowledgeable are you of the Soviet Union's downfall? Here is a prime example I wonder if any lessons can be learned from the Soviet's in the last decade.... Just a thought.

Good points, Harun and John, thank you.
There is an interesting book on the parallels, real and imagined, between the USSR and the US: Reinventing Collapse: The Soviet Example and American Prospects by Dmitri Orlov

I also recommend two excellent descritions of the culture of fraud and lying in our financial system:
Greed, Fraud & Ignorance: A Subprime Insider's Look at the Mortgage Collapse Richard Bitner

Fiasco: The Inside Story of a Wall Street Trader

New Book Notes: My new "little book of big ideas," Weblogs & New Media: Marketing in Crisis is now available on amazon.com for $10.99.
"Charles Hugh Smith's Weblogs & New Media: Marketing in Crisis is one of the most important business analyses I have ever read. It is the first to squarely face converging global crises from a business perspective: peak oil, climate change, resource depletion, and the junction of key social cycles will radically alter the business landscape in coming decades...."

An excerpt from Weblogs & New Media: Marketing in Crisis :

3. The Kondratieff Cycle suggests that the global asset bubbles which are just starting to deflate have a long way to go before the next cycle of financially healthy/stable growth can begin.

The Kondratieff Cycle captures the cyclical nature of debt accumulation through excessive borrowing, and the inevitability of debt repudiation as the end-state of that extreme leverage/euphoria, which is then renounced in a lengthy crash/depression that lays the foundation for a new cycle of productive growth.

What is truly unprecedented is that this low point (which typically corresponds to global depression) coincides with a global crisis in energy supply and a demographic time-bomb in which the retired/elderly are so numerous that there will soon be only two or three workers for every retiree in an era of double-digit growth in healthcare costs.

No asset class which has experienced a bubble--real estate, stocks, non-energy commodities and even bonds--will be spared from severe depreciation as assets are sold to fund retirements and as the global "glut of savings"/low-cost lending of surplus dollars dries up in a global consumer recession/depression.

Pensions both public and private which were once considered well-funded will be revealed as woefully underfunded and unable to pay out the benefits and pensions which were expected.
As capital pools and consumer spending both contract, government's ability to borrow or raise ever-larger sums from taxation will decline even as demands for promised entitlements increases sharply in both developed and developing nations.

Thank you, David H. ($50), for your outrageously generous contribution to this site. I am greatly honored by your support and readership.

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