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Dear Maestro
by Jon Springer

Dear Maestro,

You are an incredible genius. You have created the most perfect and opaque financial disaster this world has ever been graced by.

You managed to take the problems of the 1920s—rampant consumerism, rampant credit, rampant margin, rampant speculation—and amplify them to heights never seen. Moreover, you didn't do it when the U.S. was the world's leading manufacturer, but when we were the world's leading importer.

You hailed "rising productivity" by:
a) manipulating government reports to report inflation falsely lower than it was;
b) concluding companies that produce ideas and produce websites and provide frivolous services we could live without actually add value to the economy;
c) ignoring that the wage of the average American was driven down by the double-headed dragon of misreported inflation (causing wages that adjust for inflation to not keep up with profits) and the export of factory jobs (jobs that once paid an average American well) replaced by jobs in the service industry (including fast food) which you deemed "productive" under expansive ideas about "b";

One could ask how the American worker can experience "rising productivity" when they produce less and less tangible goods? For examples: all Levi's are manufactured outside of the U.S., York Peppermint Patties are about to be manufactured in this country for the last time, and most of our Viagra is produced in France. However, you found some way to calculate "productivity" that no longer required us making actual products. By similar calculations, I suppose all American adults and children in the U.S. could be calculated to have "rising intelligence." For example, you could replace questions measuring intelligence about global geography with questions measuring intelligence about Hollywood gossip. It is still a type of intelligence, just like your analysis still provides a notion of productivity.

You lobbied successfully to remove all the regulations that were brought about in the 1930s to mediate the effects of the 1920s by pointing out they were outdated. You further pointed out that they were so outdated, they need not be replaced either by new regulations or by people who enforced the few regulations left on the books.

You pointed out that the great creative power of "the markets" had raised productivity to the new heights you yourself created on the grounds of your own disingenuous statistics and intentional failings at analysis.

When those same creative markets would show you that they were not the sterling children you claimed them to be, you doted upon them like a loving father. If they were low on money, you printed more, or simply gave it to them. You used other "markets" and "transactions" to do so in the name of all people in the American economy. You treated your Wall Street children like a child who accidentally drops their ice cream cone just outside the shop, so you, dear father, bought them the whole ice cream shop, with all the ice cream they could ever dream of.

Meanwhile, as you gave all the ice cream to wealthy Americans they could ever want, you clandestinely raised the cost of ice cream for average Americans with those false statements about inflation and productivity. The question was: how could you make the average American believe it? The answer was encouraging them to join in with Wall Street in rampant speculation leading to rampant asset inflation and a rampant false sense of wealth.

As Hemingway noted: "The first panacea for a mismanaged nation is inflation of the currency..."

Yet, you were not done. In the face of one collapse after another, you found new ways to inflate new bubbles. You advised people to accumulate large amounts of debt (mortgages, as it were) in products that would adjust with adjustments you and your successors would make in the interest rate when you yourself had placed interest rates at the lowest rate they had been at in 50 years. In other words, you advised people to take on debt that would, in fact, have to become more costly to pay down over time unless you intended for the economy to be so bad that you would have to lower interest rates even further. Assuming you didn't intentionally wish to drive interest rates down further, one can only conclude you were once again encouraging asset inflation by way of people assuming greater debt so they would feel better about themselves, and thus consume more goods, which would in turn be good for your wealthy friends with all the ice cream.

Yet, it was not over. Deregulation. Rampant speculation. Bail outs for the wealthy. Wrongly reported inflation to drive down wage growth for average Americans and increase profits for the wealthy. Rampant asset inflation to cover up the inflation/profiteering story. This was not the end.

On your watch, you saw the final and amazing beauty of the creative markets gone wild that you encouraged and fostered by giving them all the ice cream (that is, dollars) they wanted.

Wall Street found a way to gamble on poor people. And, as we know, there are more poor people than there are wealthy people, so this was a lot of gambling to be had. We created an excellent web of agreements with all those mortgages you encouraged with your low interest rates. Mortgages were sliced and diced faster by Wall Street operatives than the workings of a Ginzu knife infomercial.

The best part was they used borrowed money to bet on whether people could pay back borrowed money. That's so creative!

Of course, you did not realize any of this happened. We are to believe you were doing your best to control inflation (through statistical management) and to preserve the value of the dollar (by ensuring the wealthy were making enough money on all the leverage (aka borrowed money, margin, credit) you gave them to be able to keep up with real inflation).

Even though the Federal Reserve has huge departments gathering information on all financial institutions to analyze the stability of the markets, you probably did not know the financial institutions were keeping large portions of their money legally off their books in SIVs. Even though the Federal Reserve has huge departments gathering information on all financial institutions to analyze the stability of the markets, you probably could not know that assets financial institutions calculated as Level 3 assets were basically all valued based on what the financial institutions hoped those assets were worth, even though the concept of Level 3 assets is that financial institutions can value those assets at any price they "believe" is correct. Even though the Federal Reserve has huge departments gathering information on all financial institutions to analyze the stability of the markets, you probably had no way to know the full extent of how much leverage (aka margin, credit, money people do not actually have but they are gambling with) was in the markets and were artificially inflating markets. Even though the Federal Reserve has huge departments gathering information on all financial institutions to analyze the stability of the markets, you probably could not have possibly analyzed the data sufficiently to realize that millions of people were being loaned money in a manner that they could not repay. Even though the Federal Reserve has huge departments gathering information on all financial institutions to analyze the stability of the markets, you probably could not see that widespread and deeply entangled leveraged investment vehicles carried as Level 3 assets or in SIVs that invested in other people's leverage and ability to pay back that leverage might ultimately be problematic.

Even though the Federal Reserve has huge departments gathering information on all financial institutions to analyze the stability of the markets, we should believe that you could not see huge spikes up in stock valuations, huge spikes up in real estate valuations, or huge spikes upward in the amount of leverage (aka imaginary money) in the global and U.S. economy and/or could not perceive that these were abnormalities that could potentially be problematic. Could we question why the Federal Reserve has huge departments gathering information on all financial institutions to analyze the stability of the markets if it is, as you say, impossible to predict problems in the financial system?

Hemingway finished:
"The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists."

To mix metaphors dear Maestro, you were your own private mafia. You collected money from the majority of people in the neighborhood (you stole from average American's via inflation) and then you were a loan shark to the wealthy (and gave them all the printed paper money they wanted). The weird thing was, you were the benevolent loan shark. You just wanted to give. If they made money, you gave them more. If they lost money, you gave them more. Occasionally, you'd take back a little so people in the neighborhood didn't make fun of you, but then you'd go back to giving at the first whiff of complaints from your gambling buddies.

We fast forward to now, and they're all paying you back by giving you lots of money to speak to them and tell them that none of today's problems were anyone's fault really, and certainly not yours. They pay you to tell them that what you did for them and what they did was right and just and good. And moreover, if they're worried, you're there to reassure them, they'll always get all the ice cream they want no matter what the cost to the rest of the world.

The most excellent genius of your scheme though is that by the time the massive mess you created unwinds and is available for proper historical analysis; you will be peacefully resting six feet below the earth with the adulations of all the kids you gave free ice cream to the last words in your head. While historians blame the political figureheads at the time for the flaws you built into and compounded into the system, you will be left in the memories of your ice cream owning friends summed up in two words: Thanks Maestro.

As scandalized as I am, as injured as I am by your actions, one cannot help but admire how very grandiose this is, your sham.