In 2010 April 3, Michael Burry asked “I saw the crisis coming. Why did not the Fed?” His question was, in a sense, answered in the next two weeks.
In 2005 November, about four months after Michael Burry started betting his business by making big bets against mortgage backed securities, I said of the real estate market, and the easy money mortgages that were propping it up: “Now is the time to panic!”
At that time, among over mortgaged white people speculating in real estate in San Francisco, there was a mad rush to the exits, to get the hell out. In some cases this involved picking up some illegal immigrant from Home Depot, and inducing him with a pile of cash and a bottle of whiskey to sign a pile of papers he could not read , and then presenting him with the keys to a house mortgaged far beyond its worth, thus transferring a million dollar mortgage from a white guy, who it was politically and financially possible to persecute for not paying his mortgage, to a no-hablo-English mestizo with no job and no assets who was immune from getting into trouble for failure to pay, who did not even know that he now had a million dollar mortage, and would not have cared had he known.
The mortgages that Michael Burry was betting would fail rested on that mestizo making his payments, payments he could not possibly make and probably did not even know he was supposed to make. Back in 2005, I figured that this was bound to become noticeable quite soon, and was repeatedly astonished by how long the government managed to delay the day of reckoning with maneuvers ever more extreme and desperate. We all, we white speculators in the Bay area, figured that next week or next month, it would suddenly cease to be possible to unload over mortgaged real estate on no-hablo-English unemployed wetbacks, but it just went on, and on, and on. Similarly, Michael Burry was repeatedly astonished by how it continued to be possible to pretend that the mortgages he had bet against were still good. It just did not stop. Until it did stop.
That which cannot continue, will not.
Greenspan told us that he sat through innumerable meetings at the Fed with crack economists, and not one of them warned of the problems that were to come.
Immediately after making this op ed, Michael Bury was investigated by the FBI, and all his financial activities were audited by the usual alphabet soup.
From which we should conclude that if any of those crack economists had warned of the problems that were to come, and Greenspan had ratted him out for speaking too plainly, that crack economist would have been similarly investigated and audited, and unless squeaky clean, would have gone to jail.
This illustrates the left singularity. Everyone is required to believe in lies and delusion, and the ruling elite required to be more deluded than anyone else. The closer one is to the center of power, the further from reality one must be.
In the beginning of the video, Michael Burry gives a one sentence summary of the cause of the continuing crisis:
when the entitled elect themselves, the party accelerates, and the brutal hangover is inevitable
So, to end the crisis, either have to end democracy altogether, or drastically restrict the franchise.
At fourteen minutes into the video, he tells us what happened when he asked questions that should not be asked, and mentioned facts that should not be mentioned.
In my letters to investors, I described a downturn that would be unprecedented, with no counterpart in the modern era. Wall Street’s risk models would fall all at once, and every single CEO and every single politician would be disastrously wrong.
I put my money where my mouth was. At its peak I was short 8.4 billion dollars worth of subrpime mortgages … and at first we did lose. It was a negative carry trade. Investors, business partners, and even employees questioned strategy. Lawsuits were threatened, our distress was reported in the press, and Wall Street tried to squeeze our short.
I had bet against America, and won.
In 2010 I posted an op-ed in the New York times, posing what I thought was a valid question of the Federal Reserve, Congress and the President:
I saw the crisis coming, why did not the Fed?
Never did any member of Congress, any member of Government for that matter, reach out to me for an open collegial discussion of what went wrong, or what could be done. Rather, within two weeks all six of my defunct funds were audited. The Congressional Financial Crisis Inquiry Commission demanded all my emails and a list of people with whom I had conversed going back to 2003
And a little later the FBI showed up.
A million in legal and accounting costs and thousands of hours wasted, all because I asked questions.
Clearly the chief mission of the Congressional Financial Crisis Inquiry Commission was to conceal, rather than reveal the cause of the crisis – the underlying cause of the crisis being the government giving out easy money to voting blocks, in particular to non Asian minorities, something no one close to power can say, or even think.
Only one thing in this video will surprise anyone who reads this blog. It will all be old news to you except for the startling fact, appearing at 14 minutes into the video, that if someone is sufficiently a member of the establishment that he is entitled to give New York Times op eds, speaking plainly about the crisis will get him in very big trouble. I thought that the elite were pre-approved, that no one got into the elite who was inclined to rock the boat. Evidently, on the contrary, the closer you are to power, the more you have to watch your step, much as the outer party in Orwell’s “1984″ had even less political freedom than the proles, and inner party even less than the outer party. They don’t rock the boat because they are scared spitless.
This has the effect of making piety, hypocrisy, and the bare faced endorsement of transparent lies high status, because it is what high status people do. High status people act scared spitless, so everyone else acts as if they were scared spitless, without the need for the direct repression and violence needed to make everyone else actually scared spitless.
It is an efficient use of repression, but means that the elite is further out of contact with reality than anyone else, thus that they are never going to realize that franchise has to be restricted, or else democracy ended. The change is going to have to come from outside the present elite, after the crisis becomes so severe that it becomes impossible to continue on the present course, and simultaneously impossible to change course.
Tags: left singularity