I have been watching the Rescue of the Rich with great interest since the House and Senate abrogated their responsibility to the American people last week. The initial hit to the economic future of Main Street was the $700 billion of "YOUR MONEY", but it didn't stop there.
Barely had the wheels on the Wealth Welfare Wagon stopped rolling from that sortie than "Robbing Peter To Pay" Paulson ratcheted up the tally by giving away another $900 billion of "YOUR MONEY" to supposedly unstop the plugged commercial credit markets. A plunger might work better there, Paulson! The Fed also lowered its interest rate in concert with several other central banks, and the markets still dropped through the floor. It's getting so bad that the G7 is to meet today in an effort to turn things around.
Whatever they come up with, it can't work. The scam was allowed to run far too long and the destruction is too widespread. There is only one way out of this dilemma, and that is to inflate the money in order to have enough to pay off the staggering debts.
The evidence is that preparations are underway to do this very thing. But to do so would hurt rich people, since only they have much to lose anymore. The fabulously wealthy could become merely well-to-do if this strategy were followed. Why else would the Fed be giving away so much of our money to firms owned by such folk that only continue to abuse their faith and credit with the corporate representatives of the tax payers?
AIG got busted over an executive bacchanal to be thrown at a cost of almost a half million dollars only to be found to be planning another such event right after being given another $37 billion dollar loan (this new loan was granted when the AIG execs cried that the first $85 billion loan was running out). The Wealth Socialists at Wachovia - despite their company being in the process of experiencing annihilation by bigger fiscal sharks - will be soothing their fevered brows with a cruise to the Greek Isles, likely paid for with more of "YOUR MONEY".
Meanwhile, only the Sheriff of Cook County, Illinois appears to recognize that Main Street is in serious pain. This brave act, taken in defiance of the Satanic Verses of economics in favor of true Christian Values, is likely to cause him to suffer the slings and arrows of outraged fortunes when they attack him for not defending their economic interests against the downtrodden.
Article comments
1 - Baritone
Real,
Does "Let them eat cake." fit in here somewhere?
Good article.
B
2 - Nathaniel Downes
Someone is very behind the curve. The Greek Cruise you mention was cancelled long before this blog was posted. Please, stay on the ball.
3 - Dave Nalle
Just for the record, Realist. You do realize, don't you that it was overwhelmingly Republicans who represent the wealthy class you so revile who voted to try to stop the bailout which you also oppose, right?
Dave
4 - Realist
The politics of the participants has nothing to do with my post. But since you bring it up, Dave, those Republicans who stood against this bill were by and large from the Southwest who still think in terms of the Old West and not Old Money. They had my support for their reasons to halt the bailout, and I thought that their demand that private monies solve the problem instead of public funds was a good idea. I was willing to support their proposed tax changes PROVIDED it was limited to private funds expended EXCLUSIVELY in this effort and not an across-the-board tax cut which helped to create this problem in the first place.
But when our creditor nations come to claim their due, everyone with assets is going to pay the bill. You can learn what to expect by reading the WWI reparations plan, which described the specific privately-held assets which were going to be assigned as a part of the payment of the national indemnity. I hear the Chinese are expecially fond of stainless steel mobile housing.
5 - Dave Nalle
I'd love to hear your explanation of how tax cuts contributed to the crisis. That's got to take some pretty convoluted logic.
And it wasn't just Republicans from the Southwest who opposed the bailout. A lot of Republicans from other states were and are right with them.
Your familiarity with mobile housing is sadly lacking, btw. The stainless steel ones are RVs and are a mark of affluence. It's the wood and vinyl single and doublewide pre-fabs which are the true home of the redneck proletariat.
Dave
6 - Dan(Miller)
Here is the text of a letter sent by Senator McCain and nineteen other senators (all of them Republican) back in May of 2006 demanding action by the Senate to
Nothing happened. Why?Dan(Miller)
7 - Heloise
Heloise already answered that one about McCain's call to fix Fannie: it was a case of "look the other way" while I do my thing and you do yours.
I had a thought last night about the "stimulus" package of 700 billion. If the economy is like the nervous system and it needs to be settled then often the way to settle it is to "over-stimulate" rather than merely stimulate. That would mean another trillion dollars to fix what's broken, provided anyone really wants to fix what's broken.
An over stimuli can have a calming effect on the nervous system. That said, it is truly not going to happen. Why, because Bush and the "new world order" want to break the global bank in order to control it.
Heloise
8 - bliffle
"I'd love to hear your explanation of how tax cuts contributed to the crisis. That's got to take some pretty convoluted logic."
Not convoluted at all. Just ordinary macroeconomics and known econometrics.
In truth, there is no such thing as tax cuts if fiscal expenditures are not reduced. All that happens are tax shifts. So, when you cut taxes for a segment of society it automatically increases taxes for the non-segment. Cut taxes for the rich and it increases taxes for the non-rich.
Shifting after-tax discretionary income from non-rich to rich reduces net money velocity (discretionary money shifts from high Economic Multiplier to low Economic Multiplier), so society gets poorer.
It's a spiral: as net money velocity decreases, net tax revenues decrease, and society becomes even poorer. The dollar devalues, etc.
That's what happened with the Bush tax shifts. And that's why I took one foot out of the Bush camp in 2001 because it's financially irresponsible.
9 - bliffle
FNMA and GNMA are secondary markets, they do not make loans to homeowners. They respond to securitised bond packages offered by primary lenders as evaluated by assessors like Moodys, etc.
If assessors overrate the bonds then FNMA may make poor investments. Just as a single homeowner may suffer if a home appraiser overvalues a house.
10 - Ruvy
I'm waiting to see when the dollar crashes. A crazshng dollar may not be reflected in foreign exchange rates. Our currency may go right down the toilet with yours - especially since Stan Fisher (the former CFR Governor of the Bank of Israel [CFR members have to be American citizens]) appears to be the loyal rag-sheeeny buying up junk dollars to keep their value stable....
In the meantime, one solution seems to be having the government approve all loans.
This is starting to get interesting....
11 - Bennett
Great article, and GREAT comment/rebuttal by those above.
Thanks!
12 - DaveNalle
Bliffle, #8 is utter twaddle. There's no equilibrium within the tax system. Jesus. What orrifice do you pull this garbage out of?
The correct answer, such as it is, is that when you cut taxes without cutting spending, the money comes from somewhere else, not necessarily from raising taxes on some other group - which did not happen with the Bush tax cuts - but from devaluation of the dollar, increase in the debt, or potentially from an increase in the tax base.
The idea of the Bush tax cut was to cut taxes and cover it out of an increase in the tax base caused by a growth in GDP. That likely would have worked, had spending not increased so dramatically because of the war. You can cut taxes and have a moderate increase in spending if the GDP grows and the tax revenue with it. You can't cut taxes and spend huge whopping shitloads of extra money and not run into trouble.
Dave
13 - bliffle
Excuses and scapegoating. the far right always believes that if they have more power things will get better, then, when they dominate the legislature, the presidency and the supreme court and they can do anything they want and then things fail, instead of taking responsibility and changing their dogma they start looking for scapegoats. Usually, since they've managed to subdue domestic opposition, they blame everything on foreigners.
Dodgers. Alibi inventors. Demonisers. Cowards.
14 - Christopher Rose
"The idea of the Bush tax cut was to cut taxes and cover it out of an increase in the tax base caused by a growth in GDP."
So in other words, Bush had a financial plan based upon one scenario but immediately invalidated by doing something outside the budget.
That sounds beyond stupid to me, not to say totally irresponsible.
15 - Joanne Huspek
I'm just shaking my head.
This is a problem not caused by one party or the other (both are culpable) and has been building a head of steam for the last 15 years. Add to the mix a bunch of bureaucrats with their collective heads in the sand (or up an orifice), and a culture of entitlement, and this is what you get. Multiply that by the number of nations in the world who act the same way, and you have something rather insurmountable, because the problem is so interwoven.
The dollar is already not worth what it was only a few short years ago. When people on this side of the border take Canadian money because it's worth more (and they've been doing that for a while), you know that the tide has shifted.