Bailing out Wall Street with the People's Money....
Amazing that the "People," that word attached to the names of so many Communist states we held in contempt, are now being asked to buy up the bad debt of banks, not the banks themselves which have failed spectacularly (which would amount to nationalization of course), but simply their bad loans. This is a horrible irony. For years American bankers and talking heads told us that our "flexible" financial system was the envy of the world. We witnessed accounting firms like Anderson collapse under bad "flexible" practices and still nothing happened. Nothing was done.
Now, after being told for months that the problem would be "contained," as in only the 'People' would suffer... thrown out of their homes etc, now the bankers and their "flexible" banks are in trouble. Please. They are the same ones who said welfare for the "People" was a drag on their State, their Capitalism, and now they are begging for a welfare program for their businesses that would dwarf any welfare program ever enacted to help the "People." They want $700 billion (no doubt the conservative estimate as these things always cost more... see the Iraq was which was supposed to be "FREE" of charge) to buy their debt so that free of that debt and with the People's cash in hand they can begin making loans again. Who would spend the People's money and buy this debt, why Private Contractors, the same guys who've done so well in Iraq for us?
Let us look a little deeper into this program. All this money would only be used to purchase the debt of US companies, leaving all those foreign creditors, by far the majority of our creditors, stuck with nothing. Let them suffer for bailing out the US, and wasting their capital keeping us solvent these last few stupidly wasteful years. Frankly I am none too sympathetic to them, but what this plan amounts to is a paydown to US-bank-owned debt while leaving a virtual default on foreign debt. You know, a default, the thing President Bush condemned Argentina for doing a few years ago and which Russia did a few years before that. Sadly this might not be the worst part of the program. China owns a big chunk of our debt (Japan too) and they have been a bit too cocky of late. We can help crash their banks by defaulting, which would be fun. Also the strong growth of Russia and Argentina since their defaults suggests that a default isn't all that bad. This of course brings me to a second and related point. If Russia and Argentina have done so well after their defaults, why don't we just default on everyone's debt?! Sure we'll lose a few banks (and more than a few bankers one would hope) but in the end we'd end up with banks who loan wisely and are more guarded in their assets. This is the Natural Selection law of capitalism (thanks Wharton School), invisible hand stuff. Banks with bad practices fail while those which operate wisely grow and prosper. Our currency might collapse naysayers would say. It already is I would answer.
Frankly we are the greediest nation on Earth- the biggest consumers. We are constantly taught that defaulting leads to creditors not wanting to loan us money. Garbage. We are the United States. Everyone will continue to loan us money because they have no other choice. Does China want to punish us by not lending us money? Well then I guess we won't have money to buy all those Chinese goods.... ahhh.... so yes China will continue loaning us money no matter what. They have no choice. In other words we can actually use the greed and selfishness that got us into this mess to get us out of it. It is not an ethical solution, but then again we aren't an ethical nation and well, China and Russia are far worse than us so who cares if we screw them over?! Realpolitik. Kissinger would be proud except of course he sits on the Board of a lot of the banks that are going to tank. Oh well. Kissinger taught us we shouldn't be sentimentally attached anyway so I am more than willing to bankrupt Kissinger for the good of the nation. Maybe he'll write more interesting books like Diplomacy if he is bankrupt and has to start working again for a living.
Labels: bailout greed China default Russia debt realpolitik banks
posted by travellinguist @ 7:34 AM
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