Poverty is a Weapon of Mass Destruction - Part II

Poverty isn't something you choose. No one chooses to live on less than it takes to survive. No one chooses to remain in poverty and watch their loved ones suffer. Poverty is done to you.

It has always been that way.
Curious who does it and what the cost will be?  

For a recent example from the financial crash of '07/'08, the world's poor began to die at the hand of our financial behemoths. The death toll is still rising.

Lehman Brothers and other firms took the world to the brink of economic collapse. Richard Fuld, head of Lehman Brothers admitted to congress that he'd taken $300 million in pay... while leading the firm to a $600 billion (600 BILLION $) bankruptcy that helped precipitate the disaster. The biggest failure in history.

Goldman-Sachs, which bears a portion of responsibility through GSAMP, paid record staff bonuses during the collapse and after. For creating, selling, spinning off, and then short-selling bad mortgage instruments as they defaulted. The $182 Billion bailout of AIG was followed by millions for AIG staff bonuses which are a scandal all on their own.

The global downturn/recession hit the poor the hardest, as always. It is tough enough on the poor in America, but developing-country families lost around 20% of their income, dropping millions of households below the extreme poverty level. The poorest began to die quickly and continue to do so now more than three years later.

A UNESCO study highlights wider human development impacts of the '08 financial crisis specifically, including the prospect of an increase of between 200,000 and 400,000 in infant mortality. Child malnutrition, already a rising trend, will be one of the main drivers of higher child death rates. "Millions of children face the prospect of long-term irreversible cognitive damage as a result of the financial crisis," says Montjourides. A few thousand folks did it all.

"Now a child born in sub-Saharan Africa faces an under-five mortality rate that is 24 times higher than in the industrialized nations." When you live on $2 a day and spend half on food, an increase in the price of food is deadly.

Long before this summer's political debt ceiling fiasco and subsequent financial turmoil worldwide, the International Monetary Fund said the world's 22 poorest countries might need an additional $25bn aid this year to cope with the financial crisis. If the crisis is worse than the IMF expects, though, that could hit $140bn. To keep folks from dying by the tens, perhaps hundreds of thousands.

The crisis is now officially worse, and the poor continue to die as a direct result of US and EU economic policy.

So, a few hundred Wall Street decision makers and a few hundred elected representatives have put their nation and the world at risk, to the point where people are dying by the thousands; that pretty much makes them culpable, doesn't it? Manslaughter, perhaps. Like the drunk who didn't set out to smash the school bus, but was selfishly indifferent enough to once again try driving while intoxicated.

There's plenty of blame to go around. There were foolish, perhaps irresponsible, even arrogantly incompetent folks involved over the last decade. Wall Street, Congress, the White House, and the intravenously attached lobbyists ... The worst of it; they don't any longer represent the rest of us Americans.

And it extends internationally to similar activities in the EU and beyond, of course. Greek and Icelandic insolvency, French protests over benefits, Japanese debt downgraded, India's financial corruption scandals. Weak fiscal governance is a world problem with the developed nations carrying the largest responsibility.

These folks, the key players in the collapse, don't deserve their bonuses or their offices. They deserve to stand in a village center among the surviving members of the families of the now tens of thousands who've died and the eventual hundreds of thousands who will likely die because of their actions, and there give an account. They will, of course, ... stand and give an account, I mean. We all will.

In recent days, as our US lawmakers managed to compound the matter, deepening and extending the impact on the poor, we find ourselves being the world's great curse.

Want a better world? Yea, me too.

The United States Senate issuing the Levin–Coburn Report found “that the '07/'08 crisis was not a natural disaster, but the result of high risk, complex financial products; undisclosed conflicts of interest; and the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street.”[1]

Following a quick review, it appears that the Levin-Coburn report lays primary blame for the financial collapse at the feet of reckless Wall Street executives, federal regulators “who cast a blind eye,” and out-of-control credit rating agencies who downplayed the serious risks of “crap” mortgage backed securities and collateralized debt obligations in order to maintain record breaking fees collected from the very entities requesting the ratings. Megabanks like Washington Mutual and Countrywide also aggressively shifted their sales from lower risk fixed rate loans to subprime adjustable loans, flooding the market seeking greater profit margins. Senator Levin pointed out that “rampant conflicts of interest are the threads that run through every chapter of this sordid story.”

This report was issued by congress earlier this year, just a few months before their own handling of the US debt issue hit the international economies yet again.

UNICEF Reports
International Monetary Fund report
United Nations reports
UN Standing Committee on Nutrition
and an interesting study from Stanford University on a Sovereign (National) Fiscal Responsibility Index

In 2007, a whopping 91% of AAA-rated mortgage securities were downgraded to junk status, meaning they were now the riskiest kind of security. From 'best investment' to 'worst investment' in one step. Truth was, they were junk all along but were fraudulently misrepresented by the players.

"Looking back, if any single event can be identified as the immediate trigger of the 2007 financial crisis, it would be the mass downgrades," said Levin. "Those downgrades hit the market like a hammer, making it clear that [they] had been a colossal mistake."  No, not a mistake; they were fraud.

What makes it worse, said Levin, is that credit raters and the banks knew that what they were giving to investors was junk.  Note it was not a mistake; it wasn't accidental.  The securities were knowingly sold as AAA by folks who knew they were junk; it was deliberate fraud.

20110804 Update: The US and international debt squabble has tanked the global market place.

20110822 Update: The price of maize (corn) in the Horn of Africa has doubled over the last year, the World Bank has said. Families on the edge can no longer feed their children.

The world economy remains vulnerable and fragile despite almost 5 years of post-crash efforts. As is usually the case, the poor suffer most.

When we think of the poor, we think in broad strokes.
The voices of the poor are often unheard, and the
individuals themselves, forgotten.

It only took about a decade of Wall Street sponsored Federal deregulation to produce the Great Recession. "If you put the federal government in charge of the Sahara Desert, in five years there'd be a shortage of sand."

--Milton Friedman, American economist and Nobel Prize recipient

Accountability? Citizens and the world deserve the backing of law. Wall Street should be held accountable like anyone else who wields a deadly weapon.