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Posted by on Oct 15, 2011 in TG Roundup

Tea Party vs. Occupy Wall Street

Karl Denninger on RT:

Karl Denninger was one of the founders of the Tea Party back just a few years ago when some concerned conservatives wanted to fire back at the government for what they said was unjust practices.

Today, similar sentiments are being echoed by the Occupy Wall Street movement.

Is it right to make comparisons between the two groups? Denninger says that, yes, to some degree the comparisons are indeed accurate. The Occupy movement, however, can learn from some of the mistakes that he says the Tea Party succumbed to.

“The problem with protests and the political process is that it is very easy, no matter how big the protests is, for the politicians to simply wait for the people to go home,” says Denninger. “Then they can ignore you.”

With the problems posing Americans as big as they are though, said Denninger, it makes sense that so many citizens are joining the movement. Denninger acknowledged that much of America has lost jobs and homes and seen the stock market crash twice in only a matter of years. “People are saying, ‘You know what? I know I’ve gotten screwed by all of this but I don’t know how I got screwed. I just know that it happened. And it all came from New York and Washington DC.”

With the Occupy movement as broad as it is, some critics say the chaos and lack of a solid plan will be the downfall of the movement. Denninger says, though, that that could actually give the group leverage. And as the movement spreads from coast-to-coast and now abroad, perhaps he is exactly right.

“One of the things that the Occupy movement seems to have going for it is it has not turned around and issued a set of formal demands,” said Denninger. “This is a good thing, not a bad thing. Everyone is looking for a set of demands.” Denninger added that once the protesters formally approach the banks and government with a list of demands, “then somebody is going to say, ‘Well, we gave you 70 percent. Now go home.’”



  1. Thanks for a very educative discussion on this. I am learning more facts.

    It is the fate of this country that and possibly the world that Obama, in spite of his promise to ‘change’ things utterly failed to bring in anything resembling change. please check this interview of Prof. Jeffrey Sachs of Columbia Univ. by Charlie Rose on how he failed (from around 21 mins into the video, the first part is also a good one with Dr. Jim Yong Kim).

  2. Fantastic discussion on the relevance of FinEng and I couldn’t agree more with Mr.Volcker. Being an Eng from IITK and then MBA myself, this whole crisis is so personal to me that my moral compass made me resign from a very successful financial career (not the wallstreet casino kind 🙂 ) after I realized that there is no room for integrity and honesty in the industry anymore. That said, one can not completely rule out the contributions of good traditional financing innovations with the exception of the tech bubble ex: Syndicated loans, Mezanine capital structures, IPOs, Private Equity deals etc. which really helped many “real corporations with real products/services” to raise capital to expand their businesses and hire people. The spreading of risk across many investor classes allowed such huge capital raisings possible at affordable rates for debt capital and also huge equity capital. However, I never liked the Black-Scholes option pricing model and I will go so far as to say that this single Nobel prize winning idea has ruined the financial markets and made the blatant speculation possible in the first place. Added to that the demand for quarterly profits from the investors (gamblers) made the CEOs push the envelope and cut corners to show profits qtr after qtr through cooking up numbers in an incompetent FASB and GAAP accounting regulatory regime and of course for huge bonuses for themselves. At the same time the finance wizards from Ivy’s cooked up derivative recipes even they never cared to test fully for their systemic risk and couterparty risks in their hurry to launch globally for a quick bonus. I can go on and on but, the point is that so much creative talent is misused/abused by the greedy CEOs of these banks in peddling non-economic value added activities/products that make any LasVegas casino blush looking at the almost guaranteed odds of winning that too 50X scale. I sincerely hope the occupy wallstreet movement humbles the CEO clan of all industries especially the big banks so that their internal moral compass point them in the right direction and give them courage to clean up their acts by coming up with long term focus and reasonable compensation structures based on true incentives of value/job creation that is lasting.

  3. Good parallels drawn with advice on how to sustain the ‘occupy’ movement so it can hopefully bring about the much needed change for greater accountability and fairness to all. The sad part is average Joe doesn’t know how he got screwed (for that matter a doctorate from a non-finance field may not know) so that he can learn lessons not to get screwed again in the future. Instead, the average person has no choice but to outsource their security and wellbeing to the elected officials. But as we all know the political class is owned by vested interests and corporations who can’t guarantee fairness to average Joe. Thanks to the right wing extremists who misinterpreted true free market principles especially after Regan era which created an environment in which untamed dog-eat-dog animal spirits thrived for the last three decades and allowed the greatest shift of wealth to top 1% for whom the ‘money makes money’ by engaging in non-economic value added activities such as 50x leveraged gambling casinos called wall street.

    • I agree. The world needs more engineers. Financial engineering is an oxymoron, just as “financial industry” is! I wrote a scathing piece some time ago about “financial engineering.”

      At times Karl can sound idiotic, bitter and caustic. But, I am in agreement with him on various issues. Here he articulated the essence of the movement very well.

      I love the part when he talked about the 70k debt taken-up by a student who studied history major. If that is a bad investment for the student, it should also be a bad investment for the bank who loaned him that money.

      The Bankruptcy protection act passed by Bush admin only makes the borrower accountable, not the lender. This is a very subtle and very important point the rightwing nut jobs continue to miss.