Chart of the Week: Wagging the Dow

Who runs the world? Leaders of powerful nations; a cabal of multi-national corporate CEOs; military establishments? US Person says speculators run the world because all of the above react to the wiggly lines speculators make on the financial markets. Case in point:

Each one of the radiative warning signs marks an inflection point correlating with headlines from the Fukushima multiple meltdown. At 11am ET the head of the EU energy ministry ominously warns of a "possible catastrophe" within hours. He retracts his statement, but the market still goes down on news fuel rods are exposed.  At 2pm the US Energy Secretary says a partial meltdown has already occurred, and then the NRC chair says radiation levels are "extremely high". Markets rebound on news an emergency power line is close to being competed (as of Friday the 18th the line is still not working). At 3pm TEPCo says it cannot tell when the power line will be working, only that it will be as soon as possible. That news does not satisfy speculators because the market drops lower to a close.

A fundamental truth is that the worldwide financial crisis of 2007 was caused by speculation in mortgage derivatives, and it could happen again. Roughly $1.4 trillion worth of subprime loans were originated, but nearly $14 trillion worth of securitized products were created on top of those loans. This is why the government had to put up $17.5 trillion to prevent the Ponzi scheme from collapsing and taking the country's economy with it. The Dodd-Frank financial reform bill passed by the last Congress is hardly the end all to regulation. After three decades of dismantling the regulatory framework governing finance, one bill shot with exemptions and loopholes is hardly going to prevent speculation on Wall Street. As the New York Federal Reserve bank put it, "Regulatory arbitrage was the root motivation for many shadow banks to exist." Banks can still give mortgages to unqualified customers, and produce securitized debt instruments without retaining adequate reserves. Federal agencies still cannot force banks to increase their reserve capital. Moreover, Obamacon knows where his campaign finance is coming from--Wall Street bankers.