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Banker Claims Politicians Need to Stop Catering to Mob Mentality, Warns of ‘Political Collapse’

In a new opinion piece published by Financial Times, Bridgewater Associates founder Ray Dalio claims that America is in the process of “deleveraging” (selling off assets) herself and that political leaders have opted to act on populist mentality rather than make the clear, rational decisions.

In his op-ed titled Risk on the rise as political leaders give in to mob rule, Dalio writes:

Rather than trying to resolve disagreements through thoughtful discourse, people are now trying to grab power to beat and suppress their opponents. Tensions between the rich and the poor, capitalists and socialists, those in and out of power and different factions in each group are now intensifying in a manner that is classic in deleveragings. Politicians who are fighting for power in a political year are fanning the flames and are increasingly willing to do risky things (like shutting down the government) in pursuit of their missions and popular support.

This growing populism will have important implications for monetary, fiscal and trade policies and will significantly increase risks of a markets downturn and a global depression.

And what exactly does this look like?

Mobs are at the doors of bankers and others in the financial system, screaming to politicians to put these people in jail while the vote-seeking politicians are fanning the flames rather than reminding people that the legal system is the way these people should be judged.

Since banks are levered about 15 to 1, it doesn’t take much of a debt problem to cause them solvency problems, and since in deleveragings debt problems are big, there is significant risk banks will run out of equity again and the fury against them will intensify. For these reasons risks to the global banking system are much greater than normal.

Read The Full Article Here.

Comments (51)

1 2
  • Atokaite
    Posted on October 31, 2011 at 9:49am

    “Since banks are levered about 15 to 1”..
    Cloward Piven in action, per Glenns disertations.
    Once the Pillars of Capitalism are effectively stormed, AKA France 1889, then the restoration of the US Fundamental Transformation will enter the last phase.
    Recall the European result of 1889. Years of turmoil, wars, and civil unrest. Not a pretty picture.
    Folks, unless we place our sacred Honor, on the line, we face just that.
    end
    Semper Fi

    Report Post » Atokaite  
  • GENE BLISTER
    Posted on October 26, 2011 at 12:58pm

    Please read Gustave Le Bon’s THE CROWD The Study of the Popular Mind and, for a more modern and admittedly easier to read presentation, Ann Coulter’s DEMONIC How the Liberal Mob is Endangering America.

    “By the mere face that an individual forms part of a (mob), his intellectual standard is immediately and considerably lowered.” -Le Bon.
    “To understand mobs is to understand liberals.” -Coulter.

    @detroit paperboy is correct. It will fall quickly. Bullets, Beans, Band-Aids and Bullion, folks. To depend on anyone other than yourself for anything will leave you, at best, disenchanted.

    Report Post » GENE BLISTER  
    • V-MAN MACE
      Posted on October 27, 2011 at 3:20pm

      The Robber Barons ought to be scared.

      They’re days are numbered, and they know it.

      Report Post » V-MAN MACE  
  • barrycooper
    Posted on October 25, 2011 at 9:20pm

    I posted this over there:

    Surely the salient question is why they are leveraged 15 to 1 in the first place? Is anyone here unclear that what that means has happened is that the banks have used a legally privileged place in the system to do something none of us are allowed to do: counterfeit money. They create it ex nihilo, by lending out money that is supposed to be in the vault. Small wonder we have financial problems. Our financial system is a house of cards, where ordinarly people ALWAYS lose over time, sharing none of the benefits, and directly or indirectly all of the losses.

    What we need is 100% reserve banking. This would be the only form of banking in which actual CAPITAL is lent out, and thus the only system consistent with Capitalism as a whole. Our current system is NOT Capitalism. It is precisely BECAUSE of the failings of this system that there is unemployment and poverty in our own nation, and combined with lack of property rights, Socialist restrictions on the economy, and political tyranny the reason most of the developing world is not more developed.

    Please read this treatise on money creation, how our financial markets are stabilized (some of it will shock you), what the Fed does, what inflation is and how it transfers your wealth to others, and finally a solution to our collective financial problems:

    http://www.goodnessmovement.com/Page23.html

    Report Post »  
    • Absalom
      Posted on October 25, 2011 at 10:29pm

      . It is called a money multiplier, and it is not counterfeiting. What you are advocating is a sharp decline in available money; that my friend will only result in a depression. Look at what the Basel I regulations did to Japan in 1988 when it required an 8% reserve, a 15 year economic depression. In 2004 we had Basel II; of which the capital valuation standards of Basel II were implemented by the U.S. in November 2007, and what did we get from that? By December of 2007 we had a market collapse and our credit began drying up and banks started withholding loans. This is what happens when you reduce money.(Now we have Basel III, so get ready)

      I will agree with you though…The Fed must go. First thing first: Government has a monopoly on our money. Money is nothing more than a commodity. A monopoly, even a government controlled one, is never good for a capitalist system, or for that matter any system (Soviet Russia is a prime example). Let’s get real; the central banks are not smarter than the markets. If the government insists on maintaining its monopoly then we should go back to the Gold Standard. However, I think F.A. Hayek has a point in denationalizing money…let the markets compete.

      Report Post »  
    • davidwjohnson
      Posted on October 25, 2011 at 10:53pm

      It’s ironic you want the government to punish the banking system when it is the government itself that sets all the banking rules.

      Banks do what the government wants them to do. I was on the board of directors for a community credit union for 12 years and you would not believe the regulations we had to adhere to not only from the FED, but also the state.

      The banks are holding on to money because regulation forces them to keep capital reserves for potential mortgage failures, which they still hold billions worth.

      The bankers didn’t make bad loans because they wanted to. They made bad loans because the FED forced them to.

      If you’re not aware, instruments of debt are assets that can be sold. Banks have been bundling and selling mortgages as investments for a long time. Don’t forget, the FED gave them the authority to do so.

      You want a 1:1 loan to deposit ratio. Good luck on that one. The biggest offenders are governments. Let’s not forget our government has 60+ trillion dollars in unfunded obligations.

      If you allow the government to nationalize the banks, then they control the flow of money in its entirety. You can then say goodbye to the poor, middle, and upper class for the government will create one class.

      You only need to look as far as Cuba to see the affects. The government maintains just enough sufficiency to keep everyone in line. On the other hand, as with all socialist, marxist, and communist rule, the ruling class maintains the lifestyle of a

      Report Post »  
  • RighteousTyrant
    Posted on October 25, 2011 at 8:14pm

    lol at this:

    “Mobs are at the doors of bankers and others in the financial system, screaming to politicians to put these people in jail while the vote-seeking politicians are fanning the flames rather than reminding people that the legal system is the way these people should be judged.”

    That the “mobs” want the bankers in jail and aren‘t beating down the doors themselves pretty much shows that they don’t need reminding that the legal system is the way that these people should be judged.

    Report Post »  
  • h20sue
    Posted on October 25, 2011 at 7:47pm

    If I could make one wish and knew it would come true, it would be the following banks would go under!
    A: Bank of America
    B: J. P. Morgan Chase and associates
    C: Wells Fargo
    D: First Financial
    E: Citi

    BOA is far worse then the others, but the others are pushing their luck. Taxpayers bailed them out, and they continue to screw us. What’s worse….our government is allowing it to take place!
    Obama has spend more in three years then Bush spent in eight years! Not to mention Michelle and her Enterage’ Too many vacations, and not enough time in the Oval office. Too much campainging on the taxpayer dime and making us pay the air fare. this is total non-sense. If Obama wants to run again, he needs to use his own jet and his own fuel. Maybe this would cut the nonsense!

    Report Post »  
    • mr.goodvibe
      Posted on October 25, 2011 at 8:18pm

      BOA was forced to take fed money. They still suck though.

      Report Post » mr.goodvibe  
    • PGMike
      Posted on October 26, 2011 at 9:54am

      Sue,
      Be very carefull what you wish for. If these 5 banks go under millions and millions of people will be hurt. Banks are filled with workers: tellers, cashiers, loan officers. What about their families? What about all of the depositors? FDIC is broke. If these banks go under the government will have to come to the people to pay back the depositors. It is simply irresponsible to wish for these kinds of things.
      I do not understand the hatred for banks in this country. Banks offer a service. They loan us money at historically low interest rates (We are not required to borrow by the way, we choose to) They give us easy access to our money through check writing priveleges, expensive branches and ATM’s. They provide interactive websites for online banking. They offer all of these services and when people borrow too much and cannot pay it back, or if they need to charge a fee to counter act a regulation to make a profit, who do people blame….the bank. It is ridiculous. Banks have every right to make a profit. Nobody complains about Hollywood, Athletes, or colleges making huge profits (Hello $5 for small bag of popcorn at the movies?). They only complain about the banks. You have bought into the liberal trap of blaming the productive. Sad, Sue, very sad.

      Report Post »  
  • fexpress
    Posted on October 25, 2011 at 4:52pm

    What nobody seems to bring up with the Bank bailouts is the fact that to date, all of the “Banks” have paid bank the TRAP loans plus BILLIONS in interest!!!!! Unlike GM, Freddie and Fannie and all of the Government owned companies. The Banks were the BEST investment the Government has made in Generations!!! Leave the Banks alone and focus on the Companies that have NO capability of paying the taxpayers back.

    Report Post »  
    • JRook
      Posted on October 25, 2011 at 5:13pm

      Well perhaps Reagan, Bush Sr. and Bush Jr. should have considered this when they ran up $10 trillion of the current national debt.

      Report Post »  
    • Absalom
      Posted on October 25, 2011 at 6:21pm

      @JROOK,

      You are hyperbolic. While debt has increased under those Presidents you mentioned, what you fail to mention is that Federal Debt held by the public increased under Clinton (as well as it did under Reagan) and has increased even more dramatically under Obama. Federal debt held by the public actually fell under Bush Jr.

      You fail to provide a clear picture behind your rhetoric.

      Abzz

      Report Post »  
    • Tomr
      Posted on October 25, 2011 at 6:48pm

      JRook

      What took Reagan, Bush Sr. and Bush Jr. 20 years to do in debt, Barry Hussein did it in less than 3.

      Report Post »  
    • Absalom
      Posted on October 25, 2011 at 7:23pm

      @TOMR,

      Not to mention Reagan won the Cold War at the same time he reduced unemployment, grew productivity, and grew the GDP. Minus the Cold War, the same still cannot be said about Obama.

      Report Post »  
  • affinnity
    Posted on October 25, 2011 at 4:10pm

    Banks are putting the new dollars they create with our deposits into monetary investments rather than the real human consumption economy. Obama bailed out the banks and continuously encourages the bankers and investors to do this. The real economy cannot grow without a growing money supply.

    Report Post » affinnity  
  • Ron Staiger
    Posted on October 25, 2011 at 4:06pm

    Politicians are fomenting the violence and crime associated with this movement. The acts of the left are all in concert towards one end- a marxist utopia where everything earned is shared with those who have never worked because they are “entitled”. Their actions are seditious and for that they should be impeached and imprisoned!

    Report Post »  
  • Absalom
    Posted on October 25, 2011 at 3:20pm

    I do not think we are in the position to be deleveraging banks at the moment. It will only serve to destroy liquidity when liquidity is exactly what we need to increase spending. I can understand the mentality of wanting to make banks safer, but that is never going to take place when government holds a monopoly on money. Remove that monopoly first and we will have taken a step forward towards resolving our inflationary and deflationary history. We need a competitive system between banking systems to keep politicians from profiting off inflation and interest-free monetary float…

    Do your research people, politicians have been taking us to the bank, and laughing all the way, for well over 60 years now. The OWS crowd wants to blame the banking institutions, but the problem lies with the greedy politicians who make the rules. It is time our monies were allowed to compete on the market like other commodities.

    Abzz

    Report Post »  
  • JDF10487
    Posted on October 25, 2011 at 3:19pm

    Wait until they start executing bankers.The bankers are just the scapegoats, it is groups like Acorn that forced the banks to make all those bad loans which in turn collapsed the housing market.

    Report Post »  
  • progressiveslayer
    Posted on October 25, 2011 at 2:40pm

    Democracy is mob rule and the Marxist in chief is in his final phase to cancel the election and seize power just like his buddy Chavez did.Obama engages in class warfare,blame the rich,they’re not paying their fair share,he foments unrest hoping for violence so he can declare martial law,the Marxist in chief learned well from Alinsky and we’re seeing it played out right before our eyes,the death of capitalism,that‘s Barry’s ‘fundamental transformation of America’.

    Report Post » progressiveslayer  
  • obxned
    Posted on October 25, 2011 at 2:02pm

    The ‘Occupy’ mobs are part of the leftists Plan B, in case (or when) it becomes obvious that no amount of thuggery, voter fraud, or slush fund money will be able to re-elect their Chosen One. Create enough riots, chaos, disruption to normal life, and martial law could be declaired and the elections postponed. The Governor of North Carolina already suggested that this would be a good idea.

    Report Post »  
    • GhostOfJefferson
      Posted on October 25, 2011 at 3:06pm

      Under which provision in the Constitution will they declare Martial Law pray tell?

      Report Post » GhostOfJefferson  
    • OhioRifleman
      Posted on October 25, 2011 at 5:32pm

      @ Ghost

      Doesn’t matter if they lack constitutional justification to do it, they will do it anyways. When they are in the throes of absolute control, they will not be stopped by something so ‘trivial’ as constitutional authority.

      Report Post » OhioRifleman  
  • steveh931
    Posted on October 25, 2011 at 1:55pm

    Ray Dalio,

    How much does your bank have invested in OTC and ETD derivatives? Me, I’m your average citizen that has dealt with financial institutions through checking, savings, home loan and occasionally some stock. AIG was going broke due to 8 billion dollars in trade gone wrong, then our Federal Government bails them out with 80+ billion so they can handle what? Maybe the banks need to focus on the type of business transactions that they were built on, instead of new gimmicks meant to create wealth and crashing markets when they don’t succeed! Let’s not talk about the 999,000,000,000,000.00 in derivative contracts which are basically bets being placed on futures, thanks Glen, talk about scary!

    Report Post » steveh931  
  • Bill Rowland
    Posted on October 25, 2011 at 1:02pm

    Sure its orchestrated. SEIU, CPUSE, Unions, these demonstrators are not well organized but they are well financed. A disorganized mob is scarier than an unorganized one because they are unpredictable, it only takes a few agigtators to start a riot. A riot with no real purpose and therefor easily led. As for financing, it takes money for the tents, sleeping bags and food for these leeches.
    This is whar Obumbler and the left want – can you say Martial Law? Why do you think they are testing their ability to cut off radio and TV? I hate to sound paranoid but it doesn’t look good right now.

    OMG

    Report Post »  
  • Hawke17
    Posted on October 25, 2011 at 1:01pm

    American police firing bullets at peaceful demonstrators in Oakland. Even if you dont agree with the demonstrators they have a right to peaceful protest. Rubber bullets, Flash Grenades and Tear Gas. Is this America or is it a fascist state afraid of its own people so it attacks them.

    Report Post »  
    • mtcountrygrl
      Posted on October 25, 2011 at 3:12pm

      Sorry Hawke17 you are wrong. These “protestors” are not protesting they are living on public land and comitting crimes. I have been saying for weeks that the police needs to ask them to leave, then make them leave. A protest is peaceful and respectful to neighbors in the community and has an obvious cause, a goal, and an end point. These people are nothing but organized mobs. They have no cause, no goal and no end in sight. As far as anyone can see they are just there to create chaos and they are costing taxpayers MILLIONS. It is time to put an end to it.

      Report Post »  
  • mikellyusabr
    Posted on October 25, 2011 at 12:14pm

    After this vicious OWS stuff blows over, if I were a banker, I would start to examine the wisdom of leveraging my company 15 to 1.

    Socially and market-wise, this is a crack in the dam.

    The simple fact is that 15 to 1 leverage (which should be called a liability for paying out 15 times the money you own) does not give any wiggle-room for a surge like a run on a bank.

    Isn’t good banking all about risk management? Well, here’s a risk that honks.

    What good is making profits on the 15 if you lose everything when the 1 goes down the drain because the formula is inadequate for sound business?

    Report Post »  
    • J.C. McGlynn
      Posted on October 25, 2011 at 12:41pm

      None of the “Occupy Whatevers” care about that.Banks would not be in that bind if they did mortgages the they should be done. 20% down and fixed payments is stable. OWS only wants everything for free (taxpayer paid) and bankers in jail instead of those who caused the problem (Congress).

      Report Post » J.C. McGlynn  
    • mikellyusabr
      Posted on October 25, 2011 at 3:05pm

      JC,

      Basically, I agree with what you wrote.

      I was merely commenting on Dalio’s concern about 15 to 1 leverage being so fragile that not “much of a debt problem” will result in “solvency problems,“ and ”debt problems“ get real big with ”deleveragings” (which means giving folks back their money).

      This banker basically says that banks don’t have enough money to pay folks back (which he calls “run out of equity”) and the risk is that “fury against them will intensify.”

      That sounds an awful lot like a risk that needs to be managed to me, especially by a risk management professional.

      The danger is even worse than it looks on the surface, too. If a run on banks happens and there is no money to pay clients, the OWS people will win a victory they did not seek, do not deserve, and never imagined they would get: good ordinary people will join them without first needing to be duped by propaganda.

      Report Post »  
  • Walkabout
    Posted on October 25, 2011 at 12:11pm

    Michelle Bachmann was right. No Tarp. Let the bankers go bankrupt, then we wouldn’t need to deleverage would we? Would you rather have a banker collect unemployment (or jump) or lose everything to inflation?

    Housing stock in the U.S. was worth 11 trillion. The derivatives for mortgages were worth around 600 trillion. That is a leverage ratio of ~55 to 1.

    Why did Barack “Insane” Obama vote for TARP? To protect his banker buddies.

    Barack Insane Obama got 1 million from Goldman Sachs during the 2008 presidential election cycle.

    http://www.opensecrets.org/pres08/contrib.php?cid=N00009638

    Report Post »  
    • gladRocks
      Posted on October 25, 2011 at 1:29pm

      What do you think would cost more, TARP, or the government paying off depositors through the deposit insurance program? That’s what happens if the banks go bankrupt. Or maybe you don’t care about that because you have no money in the bank.

      Report Post »  
    • GhostOfJefferson
      Posted on October 25, 2011 at 3:17pm

      Or, alternately, there was nothing that actually required the panic that TARP was passed to “fix”. Suddenly it was screaming, from unknown parties, a quick vote and then the money disappeared. But hey, if it feels better to think this helped somebody, well, I guess whatever gets you to sleep at night, wot?

      Report Post » GhostOfJefferson  
  • heyjim55
    Posted on October 25, 2011 at 12:08pm

    People still don‘t see it no matter how many clues we are given no one see’s it, so let me try to respectfully point it out to everyone. THEY ARE DOING THIS ON PURPOSE ! it‘s not attempt to save our system it’s an effort to take it down gradually and keep it down after that so they can get their Global Government. The president wants civil unrest he just doesn’t want to get caught or accused of starting trouble, he wants to use it to declare a emergency abd cancel the elections.

    Report Post »  
  • lovemynation
    Posted on October 25, 2011 at 12:04pm

    Is everyone finally understanding that this is what the left wanted? Its the same reason that America isn’t recovering from the greedy Wall St. “tsunami” co-sponsered by our leftist Dem “elected”. And what better way to deflect criticism and gain votes than to sic the “intellectual idiots” and pinko squads on the financial people? This all is part of the Code Pink playbook. Did we expect any different?

    Report Post »  
  • smithclar3nc3
    Posted on October 25, 2011 at 11:47am

    ‘Since banks are levered about 15 to 1, it doesn’t take much of a debt problem to cause them solvency problems, and since in deleveragings debt problems are big, there is significant risk banks will run out of equity again and the fury against them will intensify’

    Giving that FACT does anyone think forcing Banks to give risky loans had anything do with the financial meltdown. A bank leveraged 15 to 1 being forced to write 18% in risky loans sounds like a recipe for disaster. That’s just what Bill Clinton did with his write in on the gramm leach bailey act.

    Report Post »  
  • CottonMPG
    Posted on October 25, 2011 at 11:31am

    This is insane!!! Our government was willing to sell us into debt we may never escape from to save us from economic collapse but won’t protect our citizens from mobs. They threw money at banks to keep us financially stable but won’t control violent gangs from attacking those same banks. How backwards is that!?

    Report Post » CottonMPG  
    • Jaycen
      Posted on October 25, 2011 at 12:43pm

      It’s not backwards. It’s “the plan”. Most of this was intentional. I don‘t think it’s been carefully orchestrated, but making sure you capitalize on failures is easy enough to do.

      Report Post » Jaycen  
  • Uncurable wound
    Posted on October 25, 2011 at 11:17am

    get some…

    Report Post »  
    • Detroit paperboy
      Posted on October 25, 2011 at 11:36am

      This is gonna fall overnight, without warning…. Stock up now people !!! Our own CIA didnt even see tthe impending collapse of the former soviet union…. We will have zero warning.

      Report Post »  
  • smithclar3nc3
    Posted on October 25, 2011 at 11:15am

    And they are realizing this now. Most politicains have been using a populist mentality instead of rational thought for decades. That’s what makes term limits all the more necessary. We need to get rid of the perpetual campaigners and get people in whos want to truely help the country…Not their re-election chances.

    Report Post »  

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