There is considerable talk these days about a coming economic collapse.  And for good reason.  There are a number of economic indicators that we will soon pay the piper for the long provision of very low interest rates and the fact that about 10% of our nation’s workforce remains unemployed (see explanation below).

(This phrase “pay the piper” means the following:  

“Be forced to acknowledge and accept an unpleasant consequence of your action. The full expression is “Who pays the piper calls the tune,” which is to say that money calls the shots [“Money makes the mare go” is the same idea].”

We have a stock market that continues to blossom but “main street” underperforms.  The election of Donald Trump was a strong indicator that the Middle Class suffers from underpaying jobs and underemployment (if not downright unemployment).  Indeed, one of the greatest deceptions in our government is the publishing of the “unemployment rate”. It is dramatically understated.  Here is what Trump said recently:

Trump’s complaints about the unemployment numbers have been hyperbolic and have on several occasions insinuated that the numbers are part of an active attempt to deceive the public about the real state of the economy.

Early this year, when the jobless rate was at 5.3 percent (it is now at 4.6 percent), he said, “The number isn’t reflective. I’ve seen numbers of 24 percent — I actually saw a number of 42 percent unemployment. Forty-two percent.” He added, “5.3 percent unemployment — that is the biggest joke there is in this country. The unemployment rate is probably 20 percent, but I will tell you, you have some great economists that will tell you it’s a 30, 32. And the highest I’ve heard so far is 42 percent.” (Retrieved from

The calculation of unemployment and underemployment is actually pretty scientific. Trump does overstate the obvious. There is a good article that provides a chart that traces the numbers over the past 20 years.  Its worth a look.  Citing a key summary statement from the article:

In October 2009, the official unemployment rate (U-3) reached its height of 10.2 percent. There were 15.7 million unemployed among 153.98 million in the labor force. Add to that the 2.4 million marginally attached, including 808,000 discouraged workers, and you get a U-5 rate of 11.6 percent. Then add in the 9.3 million part-time workers who preferred full-time, and you get the U-6 rate of 17.5 percent. That was very high and gave a better sense of unemployment. (Retrieved from


The article states plainly that in the Great Depression of the late 1920s and early 1930s, the rate was 25 percent.  Regardless, the simple and best answer is to take whatever the government tells you is the current unemployment rate and multiply it by 2 plus add another percent or two and the real number will be identified.  Thus, we were as high as 20% unemployed in 2009 and we are now about 10% unemployed.  There are more safely nets now than there were in the depression and that’s why we don’t see food lines and riots in the streets.  But they may be coming in a few short years.  When interest rates stay as low as they have (they are set by the Federal Reserve), the downstream consequences can be disastrous.  A video I reference below explains why.


Some of you may know that I teach entrepreneurship at a major university.  I have spent almost 40 years in industry (and studying theology on night and weekends for about 50 years).  I am also working on a Masters Degree in Finance at another major university.  Currently, I am taking a course on bank management and financial services.  (I’m doing well too so far!)  Just yesterday I wrote a small paper for the course that I thought many might like to read.  It explains why our economy is in the mess that it is.  I don’t say it, but it actually demonstrates and well documents why our true economic system today is not free market capitalism, but is “social democracy” if we wish to be politically correct.  If not so correct, it is really fascism.  Fascism is the “close cooperation” (really collusion) between big corporations and big government.  Throw in a big mainstream media (MSM) that is “in the tank” with these other big fellows and you have the hegemonic system we know and hate today in America. It is the “beast system” speaking figuratively… but it is the essence of the Babylonian Mystery Religion (aka Mystery Babylon — that age-old rebellious alternative to the Kingdom of God).  The only missing element is having a religion that undergirds it.  That actually does exist as well, if you combine our faith in the “god of forces” (the military-industrial complex) and atheistic naturalism our intellectuals profess (which we usually call science).

The following paper begins with a reference to a 3-hour CSPAN video one can find (I won’t even bother referencing it… you wouldn’t want to watch it) of the CEOs of the major banks testifying before Congress within a few months of the collapse in September of 2008.  I do encourage you to watch the movies instead that I mention (they are a great lesson in way the U.S. economy works and why today it is truly fascist in nature).  I also encourage you to watch the 15-minute TEDx talk by Brian Wesbury I cite in the paper below.  All the links are intact so it should be easy to connect.

From my Master’s paper yesterday (December 12, 2016):

There is something distasteful to me about listening to the top banking CEOs discuss how to fix a system that they built as a house of cards.  The C-SPAN testimony was not a pleasant experience.  I would recommend a much more intriguing way to tell the story.  A movie entitled, Inside Job, narrated by Matt Damon.  I mentioned it in another posting several weeks ago.  It goes into considerable detail regarding Credit Default Swaps and Collateralized Debt Obligations, making them understandable and why they played such a major part in the debacle we know as the Great Recession. As to why it is that they are difficult to regulate, I will just provide this bit of supposition:  they are complex, they are convoluted, and they appear to convert those that engage in them on a massive scale into corruption.  Covering up their excesses likely adds to the challenge of controlling them.

I must admit that listening to the CEOs of the nation’s largest financial insitutions testify before congress not long after the crash of 2008, is akin to listening to the CEOs of the tobacco companies all raise their right hands in 1994 and swear that they do not believe that tobacco causes cancer or that niccotine is addictive.  The movie, The Insider, was the story of Jeffrey Wigand, played by Russell Crowe (a movie for which he was nominated for an Academy Award for best actor).  (I encourage you to check out that movie too.  Here is Wigand’s web site for his perspective on what happened in 1994 at the Waxman Committee when the tobacco CEOs swore thatn cigarette smoking is not harmful to your health.

Allow me to be a provocateur.  It should make for an interesting post and perhaps a lively discussion.  And know up front, that I actually believe that capitalism is the best economic system generating the greatest amount of wealth for the largest majority of people.  But there are many difficulties in making it fair and mutually beneficial to all concerned.

Unfortunately, there is a charade that is played between the U.S. government and the largest corporations including large financial institutions.  That charade is that free markets are desired by the largest corporations and that government officials take seriously as their primary duty looking out for the citizens of our great land.  Neither is actually true.  Free markets exist in entrepreneurial settings primarily when markets are nascent.  But as soon as a market is proven and if there are enormous profits to be made, investments will pour into that market either to support the number one player or to identify and finance the likely next-best contender. As George Gilder, the intellectual behind Reagannomics argued back in 1980 (yep, I’m that old, I read his book Wealth and Poverty) in the ideology that came to be called “Supply-side Economics”, corporations do not seek free markets.  They seek monopolies for as long as they can be sustained.   Monopolies are what produce insane profits.  Ultimately, if competitors do not arise that can break the monopoly than governments eventually must — at some point this is going to happen — but not too soon mind you. Lobbyists will do their best to ensure that government regulators do not call a halt to the monopoly too quickly.  That is their job.  Lobbyists are paid by these corporations to delay, distract, and to cut deals to keep the monopoly going as long as it can, in whatever form they can configure.  Furthermore, the government officials are generally inclined to leave government as soon as a new “regulated” monopoly has been created by them and join the corporations that they regulated (think Dick Cheney and Haliburton post-Iraq War and after leaving the Vice-Presidency). Likewise, the game can be played from another direction.  Instead of directly joining the corporation, the regulators can set themselves up as consultants and lobby the government, usually just months after they left their regulating post.  We’ve heard Trump talk about this issue in the last couple of days.

Likewise, governments are composed of politicians who, in our system, must spend almost 60% of their time raising money to get elected and then re-elected.  Governing is their second priority.  Their first priority is raising funds to be elected.  From whom you may ask?  Large corporations of course.  Regulators are paid by corporations to get into office.  Then regulators are asked to regulate those who gave them thousands if not millions of dollars.  This couldn’t possibly produce bad outcomes for the denizens of such a country.  Some would call this a vicious cycle.  But they would be cynics.  Do I sound cynical right now?

And then there is the case of Hank Paulson who when asked by George Bush to head up the Treasury Department was allowed to sell $500 million in Goldman Sach’s stock (he was the CEO there before becoming Secretary of the Treasury).  This was necessary of course so that there wouldn’t be a conflict of interest.  To facilitate his appointment, the rules allowed Paulson to sell his stock without any taxes due.  Later, when the Great Recession happened, Paulson claimed that it wasn’t his fault.  He was just playing the hand he was dealt.  And it was a very nice hand.  The Economist estimated that it saved him $200 million in income taxes for his tenure of three years.  Nice work if you can get it.  (See this article for others that share my incredulity:

What is the point of my rant?  Well, I was asked to react to the event.

However, allow me to provide a Tedx talk that proposes that the real issue about regulations and the government interference in the “free markets” by creating TARP (Troubled Asset Relief Program) and Quantitative Easing (QE 1 & 2) is that its real benefit is likely to be experienced over the next few years.  By creating a yet larger collapse due to the fact that interest rates from the Fed have been practically zero for several years running. Low interest creates false economic growth that eventually collapses in on itself.  This happened in the 1970s and led to chaos in the 1980s.  And the low interest wasn’t as low as it is now and wasn’t nearly as long in duration.  Brian Wesbury points this out in this 15 minute talk (See  Wesbury also points out that Timothy Geitner, Henry Paulson, and Ben Bernake claim they are responsible — not for the problem — but for the solution to the problem. TARP and QE. However, let me encourage those who have the time to consider what he claims is the real problem that caused the collapse.  It was not a sub-prime mortgage market collapse valued at $300 billion, since the U.S. economy is a $15 trillion annual enterprise.  It was an accounting rule that he contends has been settled (but I don’t think that it fully is resolved from what we’ve studied).  I’d tell you what it is, but then it would be a spoiler to the talk.  (See below for my explanation of what the spoiler is… I won’t say it here so I don’t spoil it for you).

Anyway.  Thanks for the forum to allow me to share my thoughts on why gigantic banks (investment, commerical or the hybrids we have now) and are not the best things to stimulate democracy, free markets, and good government.  I hope to hear some feedback!

And I’d enjoy your feedback as well on my Facebook page where this post appears.  You can find me at

If you enjoy my writing, please buy a book.  If you are not familiar with my work, you can pick up a copy of UNCOMMON SENSE for $0.99 (ninety-nine cents) on Kindle.  It is priced so low because it is a summation of many themes I write about. It might be “the best of S Douglas Woodward”… but it is meant to be an introduction to my point of view.  The most popular book currently is REVISING REALITY:  A BIBLICAL LOOK IN TO THE COSMOS, VOLUME 1, co-written with three other great guys.  It is currently the # 2 book in Eschatology on Amazon.  So it’s a genuine best-seller.

Here is the link to my author page at Amazon where all my books are listed.
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Explanation of the spoiler:

(for those who want to know)…

The spoiler is known in accounting as “mark to market”.  It is how accountants attempt to validate what your company (or your portfolio) is really worth.  It amounts to pricing your assets based upon what the current market says they are worth at this moment rather than what you paid for them originally.  In a highly volatile market, mark to market can exacerbate the balance sheets of banks drastically from “sitting pretty” to “pretty pathetic” to “time to panic”.  Mark-to-market was key to ENRON’s success and its failure too.  Wesbury argues that this accounting treatment was the hidden reason why so many big banks were collapsing and why they had to be bailed out. The Government poured at least one trillion dollars into the banks to bolster their assets and “fix” the ratios that banks must maintain to operate (like cash and asset to debt and equity to debt ratios).  The accounting stuff is tricky and indeed can be tricked up.  Trust me I know.  I was a partner at Ernst & Young at one time.


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