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Tuesday, February 5, 2013

A culture of cheating

It's a business platitude that there is no business without trust.

If you suspect that anyone and everyone with whom you do business will cheat you - if they have any reasonable expectation of getting away with it - eventually all trust dies.  And all business suffers.

In sports we are outraged that Lance Armstrong cheated his whole life.  But then, we say, everybody in cycling is doping.

We are now outraged that Alex Rodriguez was cheating his whole Yankee career - but then we say - everybody in baseball is doping.

Jamie Dimon was on CNBC commenting on Lance Armstrong: "Can you imagine" he said, "What would happen to a Bank's reputation, if it behaved like Lance Armstrong."  Or an insurance company?  Or a car salesman?  Or a pharmaceutical company?  Or  a petroleum company?

Gee, we can only imagine.  Would would happen if a bank bundled junk mortgages, got the bundle graded AAA, then sold the bundles to smaller institutions, then shorted the bundles?   And the entire economy collapsed.  Wow, can you imagine if that happened?

Or how about this?  Can you imagine if the US taxpayer "lent" an insurance company (AIG) 3 trillion dollars, then the insurance company turned around and sued the US taxpayer (AIG).  Can you imagine that?

At the same time we love to call China currency cheaters.  And they are.  Just like we are.  Because the biggest cheating game in the world right now is currency manipulation (cheating).  Here's a list a banks currently engaged in open currency manipulation (cheating):

The United States (We admit to buying 90 percent of all of our own newly issued debt)  We also printed 19 trillion dollars to "support" our banks.
Japan: Openly admits to buying its own debt to weaken the yen.
Switzerland; Openly claims to pegging the SFR to the Euro.
Brazil: Openly claims to be protecting the Real from US currency manipulation through a financial operations tax.
China: Official policy of pegging the Yuan.

That leaves only the ECB - which is printing trillions to support their banks, but does not yet have a facility to openly buy their own debt.

So - Who do you trust?

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