This morning’s key headlines from GenerationalDynamics.com
- Kofi Annan asks for Iran’s help in Syria
- Jordan opens new refugee camps for Syrians
- Lebanon sends troop reinforcements to the border with Syria
- Eurozone approves bank bailout for Spain
- Peregrine Financial Group — Another case of massive fraud
- John Kenneth Galbraith and Embezzlement
Kofi Annan asks for Iran’s help in Syria
Kofi Annan, left, shakes hands with secretary of Iran’s Supreme National Security Council, Saeed Jalili, on Tuesday (AP)
Like Cain, the homeless wanderer of the Old Testament, Kofi Annantravels from country to country, trying to find a home for onehopeless “Syria Peace Plan” after another, but always failing.According to Annan, after speaking to Iran’s Foreign Minister AliAkbar Salehi:
“Iran has a role to play. And my presence hereexplains that I believe in that. I have received encouragementand cooperation with the minister and the [Iranian]government.”
As one commentator has pointed out, Annan was UN’s directorof peacekeeping operations in 1994, and did nothing with respectto the Rwandan genocide except talk. When the Darfur genocidebroke out in 2003, Annan was U.N. Secretary-General, but didnothing but talk. With regard to the current situation inSyria, Annan says one inane thing after another. As I’vepointed out many times, he’s actually responsible increasingthe violence in Syria, because his inanities provide a coverfor Syria’s Bashar al-Assad regime, with the full cooperationand enthusiatic support of Iran and Russia, to massacre, maim,and slaughter innocent Sunni Arabs.
Now Annan is in Iran, saying he’s received “encouragement andcooperation” from the government. I mean really, is this guy forreal? But it’s good news for al-Assad, who can continue hisextermination policy another day, with the world’s attention focusednot on him, but on the moronic statements of Kofi Annan. Daily Star (Beirut) and Jerusalem Post
Jordan opens new refugee camps for Syrians
Because of a quadrupling in size in recent weeks of the stream ofrefugees from Syria and pouring into Jordan, Jordan has opened a newrefugee camp, and is preparing two new camps, if they becomenecessary. Jordan has been reluctant to open refugee camps forSyrians, for fear of incurring the wrath of Bashar al-Assad, and uptill now has used housing compounds in border communities. But withthe flow of refugees growing into a flood, the pressure has increased.AP and Jordan Times
Lebanon sends troop reinforcements to the border with Syria
As we’ve been reporting, residentsof northern Lebanon are fleeing their villages “in a state of panicand fear” because of artillery shells being fired from Syria, killingpeople. As a result, Lebanon is sending troop reinforcements to theborder with Syria, and expects the operation to take 7-10 days tocomplete. Hurriyet (Turkey)
Eurozone approves bank bailout for Spain
The EuroGroup of eurozone finance ministers, working into the weehours of Tuesday morning, approved a package of up to €100 billion forSpanish banks, with €30 billion of urgent funding approved for the endof the month. Yesterday we referenced a Reuters article that quotedan European Commission official who said that even though the bailoutmoney was being loaned to Spain’s banks, the government of Spain wouldhave to provide a “sovereign guarnatee” that the money would berepaid, effectively putting the loan on Spain’s books. However, onTuesday, Eurogroup chairman Jean-Claude Juncker, who is not alwaysknown for his veracity, denied that there was any sovereign guaranteerequirement. So this question is still open. The new bailout issupposed to give Spain’s economy a chance to grow, but with Spain’shuge real estate bubble having years of collapse ahead, the economywill not grow. Telegraph
Peregrine Financial Group — Another case of massive fraud
Some $200 million dollars in customer funds cannot be found among theassets of futures brokerage Peregrine Financial Group Inc., accordingto an investigation that was triggered when the firm’s found, RussellWasendorf Sr., attempted suicide. According to the investigation,Peregrine “may have falsified bank records.” Bloomberg
John Kenneth Galbraith and Embezzlement
As these stories keep pouring out, one after the other, of fraud andembezzlement, I’d like to repeat something that I first quoted in 2007. Here, JohnKenneth Galbraith described what happened — and what will happenagain — in his 1954 book, The Great Crash – 1929, as follows:
“In many ways the effect of the crash on embezzlementwas more significant than on suicide. To the economistembezzlement is the most interesting of crimes. Alone among thevarious forms of larceny it has a time parameter. Weeks, months,or years may elapse between the commission of the crime and itsdiscovery. (This is a period, incidentally, when the embezzler hashis gain and the man who has been embezzled, oddly enough, feelsno loss. There is a net increase in psychic wealth.) At any giventime there exists an inventory of undiscovered embezzlement in –or more precisely not in — the country’s businesses andbanks. This inventory — it should perhaps be called the bezzle –amounts at any moment to many millions of dollars. It also variesin size with the business cycle. In good times people arerelaxed, trusting, and money is plentiful. But even though moneyis plentiful, there are always many people who need more. Underthese circumstances the rate of embezzlement grows, the rate ofdiscovery falls off, and the bezzle increases rapidly. Indepression all is reversed. Money is watched with a narrow,suspicious eye. The man who handles it is assumed to be dishonestuntil he proves himself otherwise. Audits are penetrating andmeticulous. Commercial morality is enormously improved. Thebezzle shrinks.
The stock market boom and the ensuing crash caused a traumaticexaggeration of these normal relationships. To the normal needsfor money, for home, family and dissipation, was added, during theboom, the new and overwhelming requirement for funds to play themarket or to meet margin calls. Money was exceptionallyplentiful. People were also exceptionally trusting. A bankpresident who was himself trusting Kreuger, Hopson, and Insull wasobviously unlikely to suspect his lifelong friend the cashier. Inthe late twenties the bezzle grew apace.
Just as the boom accelerated the rate of growth, so the crashenormously advanced the rate of discovery. Within a few days,something close to universal trust turned into something akin touniversal suspicion. Audits were ordered. Strained orpreoccupied behavior was noticed. Most important, the collapsein stock values made irredeemable the position of the employee whohad embezzled to play the market. He now confessed.
After the first week or so of the crash, reports of defaultingemployees were a daily occurrence. They were far more commonthan the suicides. On some days comparatively brief accountsoccupied a column or more in the Times. The amounts werelarge and small, and they were reported from far and wide. …
Each week during the autumn more such unfortunates were reveledin their misery. Most of them were small men who had taken aflier in the market and then become more deeply involved. Laterthey had more impressive companions. It was the crash, and thesubsequent ruthless contraction of values which, in the end,exposed the speculation by Kreuger, Hopson, and Insull with themoey of other people. Should the American economy ever achievepermanent full employment and prosperity, firms should look wellto their auditors. One of the uses of depression is the exposureof what auditors fail to find. Bagehot once observed: “Every greatcrisis reveals the excessive speculations of many houses which noone before suspected.” [pp. 132-35]
Galbraith’s point was that there were many criminal activities goingon before the 1929 crash, but nobody cared, as long as everyone wasmaking money. But once the crash occurred, any irregularity wasviewed with suspicion and led to an investigation. Theseinvestigations turned up many cases of embezzlement — people who hadstock market, and then got caught in the crash.
That’s exactly what’s happening today, and it’s far from over.