I’m no economist, much less a banker, but the sums of money being thrown at the “liquidity crisis” in the banking sector look pretty scary to me. $200 Billion dollars in one go just recently. That’s a lot of liquidity.
Meanwhile Bush says that the housing market meltdown was caused by too many houses being built. Tell that to the people made homeless by foreclosures on their Mortgages and who are now living in tent cities throughout the land. Surely the real “liquidity crisis” is with the 99.9% of the population who have seen no real increases in their wages over the past 30 years, and many of whom have seen their real living standards decline?
$200 Billion dollars spread over a million homeless people would buy every one a $200,000 dollar house – support the construction industry and help to create a much more stable housing market. But somehow it seems to be morally wrong to give money to the poor whilst there is no moral hazard in giving the same money to the rich bankers who helped to impoverish the poor in the first place.
But what I find really galling is that none of the Presidential candidates appears to be able to say so. You would have thought that promising $200 Billion in housing, health, welfare, and education services available to all would make for a pretty good vote catching platform, not to mention the huge boost it would provide to the American economy.
But somehow that would be irresponsible, it would be inflationary, it would be socialism, it would create a “nanny state”, it would interfere with people’s freedom, it would undermine the work ethic etc. etc. etc.
Funny how the same money given to the rich – who have walked off with all the profits in the good times – seems to have none of the above deleterious effects on their moral character nor on the welfare of the nation.
So why are none of the candidates raising this issue? All seem to have been fulsome in their praise of Bernanke’s handling of the crisis. None seem to have a problem with the huge sums of money involved, not to mention the risk guarantees provided to JP Morgan to take over Bear Sterns for a song.
Maybe I have gotten this all wrong, and we are really talking about “funny money” here – the Central bank just printing more Dollar notes to free up the credit markets and provide much needed credit funding for productive enterprises in the real economy. If it were simply a case of short term loans which will be repaid in due course, perhaps I could buy that scenario.
But risk is risk, and the US taxpayer seems to be carrying the can. If you do happen to be in the unfortunate position of requiring a sub-prime mortgage to fund your home you will certainly know all about it. You will be paying penal rates of interest and the threats of legal action won’t be long in coming if you fall behind on your payments.
So why doesn’t the state simply nationalise those banks which have been irresponsible in their lending practices – much like the loan sharks were put out of business? Why shouldn’t the bankers and their shareholders carry the full consequences of their profligacy – much like the irresponsible home owner who can’t make the mortgage repayments because he has gambled his money away?
If you object to the state running banks as a matter of principle or ideology, they can always be sold back to investors when the situation has stabilised. If the taxpayer has shouldered the risk, surely he should also be able to profit from the sale of those banks back into a healthier market? This is what seems to have happened in Sweden in the 1990’s when they had a similar banking crisis.
But surely the biggest lessons of all should have been learned after the Great Depression when Roosevelt’s New Deal rescued the US from the robber barons and speculators who had run the country into the ground?
And yet the candidates don’t seem to invoke his memory all that often. Have the American people forgotten? Do they not realise what it took to fix the country last time around. Are the candidates correctly judging the mood of the electorate when they rule out such a Rooseveltian discourse as part of their campaign strategy?
If so, the American people only have themselves to blame. They have been taken for a monumental ride and seem to glory in being taken for fools. Obama has just spoken very movingly on the race issue, but is that what US politics is still really all about? Can you still be disqualified from mainstream discourse if you advocate an end to public squalor and private wealth?
I’m sure McCain is a very fine man. But he hasn’t distanced himself in any meaningful way from the economic policies which have driven the US to the brink of bankruptcy. Bush inherited record surpluses from Clinton and in a few short years squandered the lot. Now America may never again achieve the economic ascendancy it enjoyed at the turn of the millennium. Empires rise and fall but are the American people still being bought off with bread and circuses whilst Nero fiddles, and Rome burns?
It is difficult to see how any serious politician could be elected to power in any major European Country with such a blatant disregard for economic performance and social justice. Berlusconi, Aznar, and Blair, had their moments, but none have impoverished their nations in the way Bush has done.
That any Republican, no matter how heroic, could still be running neck and neck with the leading Democrat contenders is a matter for shock and awe. It is not about McCain personally, but about the people who are funding his candidacy, and who will be running his administration should he be elected.
Even Clinton and Obama don’t appear to be proposing radically different economic programmes. The issues are about gender and race, about values and patriotism, about national security and foreign policy, about globalisation and the effects of free trade.
But why is no one challenging the hand-outs to the rich? The hugely inflationary policies which will destroy the American economy and cost the dollar its preeminent position in the world? Do Americans not know that the wealthy are taking their wealth elsewhere? That they are being treated like the citizens of a banana republic/dictatorship with no more control over their own destiny than the average peasant whose land has been stolen for “development?”
Money spent on bail-outs for bankers and tax cuts for the rich can just as well be spirited abroad or spent on conspicuous consumption on largely imported products. Money spent on housing, health and education creates good jobs and retains that wealth within the country. Ultimately it increases the productive capacity of the nation.
The American people are conniving in the underdevelopment of their own country. The means their masters have used to undermine and under-develop many third world countries are now being turned on their own people. The world has learned the lessons of imperialism. It seems the American people have some catching up to do.
This covers a couple of other things, but it may be pretty much what you are saying…
Maybe this Don guy is right, and Jim Kramer should go. But the reality is…what’s ‘going’ is the entire, contemporary capitalist structure, because it’s castles in the sand. Kramer didn’t cause this, and he’s sticking up for the companies, and capitalist system he believes in.
I no longer believe in this system…
“Kramerica” was more a small part of the bigger story this Harrold dude was talking about. JP Morgan (one of the “owners” of the Federal Reserve Bank) just got the Federal Reserve to subsidize their buyout of a company that just, likely, made a whole circle jerk with our money to their corporations’ benefit and the average American taxpayers and invetors’ loss.
There is little reason to believe in or trust the “capitalist” system anymore. It is rigged in the elites’ favor and even when it doesn’t work for them they will put in the fix and screw us in the process. (IMHO)
I couldn’t believe it – the Courage Campaign in California just said that, although CA is facing a severe budget crisis, there’s an offer on the table to give tax breaks to Yacht owners.
Alms for the rich, indeed. Disgusting.
Many thanks for all your recommendations guys. I should have said I also posted this on the European Tribune where I do most of my blogging. However I thought you might be interested in a European take on what is currently going on in the US. Frankly, we can’t believe our eyes. Conservatives were supposed to be opposed to big Government and yet they are throwing many billions of taxpayers money at big business – while ordinary people go homeless. And your going to vote another republican into power?
Thanks for posting the ET view. I agree, there’s nothing conservative at all about this group.
Americans are good at scratching their heads, but terrible at realizing the obvious. Being, that they continue to vote against their own best interests. And we’re not just talking about McCain here. The name brand, company store approved democrats are just as bad, if not worse. Worse because they play at being populist and on the side of the little guy when all along there’s little if anything to differentiate them in substance and origin from republicans. Ralph Nader is not all wrong.
I’ve just lost my house. Though, it was more complicated than just falling for a sub-prime mortgage, which I didn’t. It was a perfect storm of negative, overwhelmingly negative, outside influences and matters of chance bad luck that sunk me. The problem was that there was no conceivable way out for me. no real avenue to take that would allow someone like me, a lifelong hardworking reliable person, to save my assets. Not even enough room to breathe and formulate a strategic retreat where i could regroup, retool, downsize and start over. My life was, has been, and still is full of financial predators. All looking to feed and feast. I was forced to declare myself bankrupt. Otherwise i would have been at the mercy of my debtors for the rest of my natural life. Even then, I’m sure there would be a wild west style run against my kids after i took my leave.
To me, there are fundamental steps that Americans could take that would signify that they are ready to free themselves from the yoke. Chiefly that, they might actually vote for candidates that really do have thier interests at heart. The three mainstream candidates are NOT IT! But woe to those who speak of such heresy. It’s those who are fed up and done with status quo wolves in sheep’s clothing who are further marginalized and attacked for doing something so radical as voting for a candidate whao actually endeavors to lift and carry the banner of the ordinary American in deeds, rather than words and lullabies.
To be perfectly real about the American future, it’s bleak. And it is that way mainly for the sole reason that American citizens, themselves, have forgotten their creed and are actively participating in their own national and individual deaths.
Good riddance, I say.
I’m really sorry to hear of your financial difficulties. That any hard working citizen in an advanced economy could lose their house beggers belief in this day and age. In most of western Europe you would qualify for social housing if that were the case – and such housing would be of good quality and wouldn’t carry a social stigma.
But this isn’t a Europe versus America thing. It is an American elite versus their own people thing. The American elite – having devoured many foreign countries, are now devouring their own. Many other countries have emerged from the shackles of imperialism. It is time for a new revolution where the American people can reclaim their political and economic freedom.
I wouldn’t be quite so pessimistic and you seem to be – perhaps for good personal reasons. I think Obama and Clinton would be a distinct improvement on Cheney/Bush, and sometimes even a long journey has to begin with a single step.
I wish you the best of luck in your future endeavours.