FREEDOM FROM MORAL HAZARD: BLESSING AND GUIDANCE OF GOD

Sankarshan Acharya
Founder, Pro-Prosperity.Com
and Citizens for Development

(March towards Constitutional Capitalism, November 7, 2014)

To:       Honorable President Barack Obama

Sub:     Freedom from Moral Hazard; Blessing and guidance of God
Date:   March 26, 2014

Synopsis of this memo

This memo argues that U.S. has been blessed and guided by God defined rationally.[1]  The nation has gained nonpareil prosperity and indubitable power because of its Godly-constitution.  It has, however, faced continual economic crises due to moral hazard in governance, which is un-Godly (Devilish?) and unconstitutional.[2]  Only if the government exorcises moral hazard can it let people enjoy the freedom enshrined in the constitution and achieve greater glory for mankind. 

This memo first argues how moral hazard in governance has stifled individual liberty and depressed the economy periodically.  It then defines God rationally to show that (i) a moral hazard free system (rules) is Godly governance consistent with a Godly Constitution, and (ii) adoption of Godly governance amounts to blessing and guidance by God

Moral Hazard Stifles Liberty

Moral hazard is an academic euphemism for blackmailing.  Moral hazard caused the 2008 financial catastrophe.[3]  Moral hazard keeps the US economy perennially hobbled.  Extricating the economy from moral hazard in governance is the only option left for true liberty of Americans. 

Blackmailing means “extortion or coercion by threats especially of public exposure.”  How does it work?  Privileged private hedge funds owned jointly by privileged banking executives and lawmakers have passed laws to legalize robbery of public and hard-earned private wealth of the vast majority that perseveres to produce and serve.  The vast majority panics when it loses its hard-earned savings which is necessary for liberty.  Lost savings amount to futility of hard work or surreptitious slavery.  Losses force the majority to consume less for survival.  The economy then nosedives, unemployment and underemployment soar and government tax collection falls.  Then many privileged banks running the private hedge funds go broke.  The privileged hedge funds have, however, foisted laws to dictate the Federal Reserve to supply money newly created on the back of people and to channel the savings of panicking households, businesses and small banks at zero interest cost to the bankrupt privileged private banks to recharge the privileged hedge funds. This system guarantees that the privileged few always get richer and more powerful without having to toil for producing anything or serving anyone.  The privileged wealth, defined in monetary units and asset holdings, is nothing but labor of the vast majority of persevering people.   This legalized system of robbery snatches away the hard-earned savings, jobs, homes and dignity of the persevering people.

Rather than dismantling the legalized system of robbery, lawmakers are compelled to pass new laws in the name of reform to fortify legalization of robbery.  It is because they are perennially blackmailed: they would lose their personal wealth invested in the privileged private hedge funds if they ever dismantled the prevailing system of moral hazard. 

Consider, for example, that Goldman Sachs (the largest private hedge fund) heavily short-sold mortgage backed securities to raise the value of its credit default swaps (put options) underwritten by AIG in 2006-2007.   AIG went broke due to an artificial creation of fictitious mortgage securities by GS.  Flooding the market with such securities raised the value of CDS and benefited GS enormously at a huge cost to AIG.  Despite the huge transfers of cash from AIG (profits earned by GS due to its CDS agreement with AIG), GS became broke because its strategy boomeranged: the entire MBS market crashed and GS’ MBS portfolio value nosedived.  Why did the lawmakers agree to rescue a fallen mega short-seller (robber) like Goldman Sachs by converting it overnight to a bank holding company to receive free new money from Federal Reserve at zero interest cost?  Why did lawmakers fund $187B to a bankrupt AIG knowing fully well that most of it would go or had already gone to GS?  One can make an obvious rational inference that Goldman Sachs maintains accounts of privileged government regulators and lawmakers and is, therefore, known as Government Sachs.  

There was considerable reluctance to shut down Drexel Burnham Lambert that bet against the rest of the market including its clients leading to the market crash of 1987.  After Drexel perished, Goldman Sachs became the largest investment bank to bet against the market and its clients to benefit a few privileged executives, government decision makers and pundits.  Why should GS be let off the hook despite the inexorable damage it has caused and still causing?  What is its value to society except robbing the hard-earned wealth of the persevering majority for a privileged few and for sharing the loot to blackmail lawmakers, government decision makers or to lure and coax pundits to toe its philosophy?  The financial shenanigans designed for robbery cause a huge irreparable dead weight loss of accumulated capital, which leads to irreversible economic depression.

The issue is not Drexel or GS or any other company or any lawmaker or government decision maker or expert.  The issue is the legalized system of robbery and the underlying moral hazard that subjugates everyone, ultimately. An empire, propped by a persevering vast majority can suddenly crush if the props are continually disemboweled and, thus, made inefficient to produce and serve.  See, how Americans do not now want to fight wars for an empire robbing their hard-earned wealth surreptitiously!  The presumption that printing oodles of new dollars would solve the problem because dollar is the reserve currency of the world is pure hubris of the type that prevailed before other empires fell.

Could God preserve America?

Leaders have invariably ended their speeches with “God bless America.” They have never articulated God rationally.  They have presumed to have the blessing of God underlying every Act and rule they pass.  The system of governance in US is presumed to be blessed by God, though no one has defined God rationally. 

Emperors of fallen empires had invoked God to foist their diktats on their subjects without articulating God rationally.[4] Keep aside for a moment the notion of God rationally articulated in a recently published a paper, “A Unifying Philosophy of Governance [Universal Religion and God],” in the Journal of Governance and Regulation (2012).  Let’s focus on the notion of God in governance, because God is invariably invoked in political speeches and during passage of Acts of Congress. 

Most people believe that God is omnipotent, omniscient and omnipresent and is the epitome of Truth: 

  1. Factually, human gene is the most sophisticated element of nature.  The human gene has survived the onslaught of mighty dinosaurs.  It has overcome the fury of nature. It has uncovered mysteries of nature and solved most arduous problems.  The human gene is conceivably the most potent element of nature.  Given its ability to see and uncover boundless new knowledge, the human gene is the most omniscient element known.  By being in everybody, the human gene is the most omnipresent element of nature. One can thus articulate the set of all attributes of all possible random combinations of human genes as a rational definition of God.  This set may be a proper subset of the set of all unknown elements of the universe, defined earlier as God in “A Unifying Philosophy of Governance.”  No human now could have all the conceivable genetic attributes that would be generated through random combinations in future.  The entire humanity at no time could have all possible random combinations of genetic attributes that would be created through breeding in time.  The human knowledge has expanded almost boundlessly as the human gene pool keeps uncovering more and more of heretofore unknown mysteries of nature.  It is, therefore, reasonable to believe that all possible future human genes can eventually uncover every conceivable mystery of nature.  The randomly evolving human gene pool (all of which has not formed yet) can thus be construed as omnipotent, omniscient and omnipresent.  This gene pool may well contain the set of all unknowns, which I had previously called rational God.
  2. How can one reconcile the notion of God (Almighty) articulated above as Truth, which by definition must be ratified with facts?  Humans have constructed the notion of ratification with facts as Truth.  When one observes something (physical or metaphysical), its photographic image compares with the memory of facts stored in the pool of genes comprising the observer.  If a tally between the observation and memory of facts occurs, Truth is established by the observer.  All the randomly conceivable pools of human genes (all of which is yet to come into being) is, thus, the Repertoire of Truth or God, defined rationally.   

America has become the most prosperous and indomitable power on earth.  It feels shaky now.  This raises two fundamental questions:

  1. Did God (rationally articulated above) uniquely guide or bless America to be more glorious than every other country?
  2. Is the same God not guiding and not blessing America any longer?

The answer to the two above questions is ‘Yes.’  In simple language, the common will of people–defined as unanimously agreeable rationale of governance–is consistent with God, rationally articulated above.[5]  ‘Consistency with God’ is Godly.  Governance based on the common will of people is Godly

The only unanimously agreeable rationale of governance is to not take away public wealth or hard-earned private wealth, even surreptitiously, through any Act, rule, policy or practice for a privileged few including the government decision makers.  This is the common will of people.  This is Godly.  Americans went to a war to found a new nation (USA) based on this Godly rule of law, which the founding fathers scripted in the form of a constitution for the government to guarantee every individual’s right to property, life, liberty and pursuit of happiness.  Whenever the rulers transgressed the Godly rule of governance through a system of moral hazard, the economy crashed and social turmoil ensued, like the market crash and then civil war in 1860’s, and banking panics and Great Depression during 1907-1940, the financial catastrophe in 2008 and the ensuing economic turmoil.  

The economic gurus of the academy and their top disciples in industry and government known as Masters of the Universe did not admit in their testimonies before the Financial Crisis Inquiry Commission that the un-Godly [Devilish?] system they had established was the cause of the 2008 financial crisis.  They told the FCIC that the financial crisis of 2008 was an act of some god because [sic] no one in the industry, government or academy saw the crisis coming.  They had actually blocked (through blind review) path-breaking research on essentially a Godly [moral hazard free] system of governance,[6] first mimeographed at the Federal Reserve Board in 1991 and then communicated in plain English to Congress in 2003,[7] with follow-up memos to Congressional leaders and Presidents.[8]  They even published a book by Oxford University Press authored by a Yale professor to portray the 2008 financial crisis as an act of god without defining god rationally.  By then the Congress had already enforced elements of the Godly system of governance on an ad hoc basis–consolidated minimum capital requirement for bank holding companies and safe central banking[9]–to stem the domino of crashing markets and stabilize the system.  The FCIC was thus impelled to accept the Truth that the cause of the crisis was the un-Godly [moral hazard prone] system founded by the failed the gurus and disciples controlling the academy, industry and government.  The failure was really deliberate through suppression of papers on the Godly system of governance, motivated by self enrichment and aggrandizement.

Yes, God can still bless and guide America only if the government of We the People adheres to the Godly system of governance by repealing all existing un-Godly rules and not passing new ones by presuming as if the 2008 financial crisis was not due to such un-Godly rules of governance.  Consider, for example, the following:

  1. It is un-Godly to suppress the Truth that Fannie Mae and Freddie Mac were taken over by a government conservatorship to use them for funneling taxpayer funds to privileged private banks via purchase at par of toxic, fictitious and worthless mortgage assets generated by these banks. 
  2. It is un-Godly to suppress the Truth that the massive creation of toxic mortgage assets to sell them at par to Fannie and Freddie and other investors was un-Godly
  3. It is un-Godly to blame Fannie and Freddie for the 2008 crisis. 
  4. Collecting billions of dollars in fines for mortgage fraud from private banks is a step forward for enforcing a Godly system.  But a surreptitious imposition of a profit sweep agreement (between Treasury and FHFA) to take away the lawful residual claims of stakeholders of Fannie and Freddie (chartered as private shareholder-owned private companies guided by corporate law that guarantees such residual claims) is un-Godly.
  5. Keeping Fannie and Freddie under government conservatorship with frequent threats to wind them down for transferring their assets at discounts and for giving away their profits freely to the private banks that did all un-Godly acts is un-Godly.   
  6. What about suppressing the Truth about the existence of an author of the Godly-system of governance and the economic repression meted to him by the proponents of the un-Godly system? 

America or any other nation cannot take the blessing and guidance of God for granted while it is being governed by an un-Godly system. 

As the author of the Godly system of governance, however, I do not want to be even erroneously associated with any god nebulously portrayed in ancient times to indulge people in worshipping of such god by offering all their hard-earned produce and service for salvation, while the then emperors and their gendarmes (who propagated such nebulously portrayed god) arrogated themselves as reincarnations or children of god to basically usurp the hard-earned offerings indolently. 

The proponents of the un-Godly system may still wish people to believe in some nebulous god, at least invisible hands, taking away their hard-earned produce and service.  Unfortunately for them, however, the U.S. Congress has already blamed their un-Godly shenanigans for the 2008 Great Recession which the Federal Reserve has correctly termed as worse than the Great Depression.  The next step for the Congress and you is to proceed decisively towards a rational Godly system of governance on the footsteps of American founding fathers and not regress towards any other sophistry to continue the un-Godly system.

With profound regards,
SankarshanAcharya     
Founder, Citizens for Development and Pro-Prosperity.Com

[1] Acharya, S. (2012) defines God rationally in “A Unifying Philosophy of Governance [Universal Religion and God],” Journal of Governance and Religion, available at http://pro-prosperity.com/A-Unifying-Philosophy-of-Governance.html.  This memo builds a rational definition of God from the common notion of almighty and sees a convergence of both definitions, presented later.  
[2] http://pro-prosperity.com/Research/moralhazardliberty.pdf
[3] http://pro-prosperity.com/Root%20Cause%20of%20Financial%20Meltdown.html
[4] Keep aside for a moment the rational articulation of the notion of God, done in a recently published a paper, “A Unifying Philosophy of Governance [Universal Religion and God],” in the Journal of Governance and Regulation (2012). 
[5] http://pro-prosperity.com/Unanimously%20Agreeable%20Rationale%20of%20Governance.html
[6] http://pro-prosperity.com/Research/moralhazardliberty.pdf
[7] http://pro-prosperity.com/Global%20Economy%20Chatterbox/Warning-USCongress-In-2003-On-Home-Mortgage-Debacle.html
[8] http://pro-prosperity.com/USPresident013105.html
[9] http://pro-prosperity.com/usa/safe%20Banking.pdf